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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 December 31, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
  0-25248
 CONSOLIDATED WATER CO. LTD.
 
  CAYMAN ISLANDS
    
    N/A(State or other jurisdiction of incorporation or
organization)
    
    (I.R.S. Employer Identification No.)Regatta Office ParkWindward Three, 4th Floor, West Bay RoadP.O. Box 1114 GTGrand Cayman, Cayman Islands
    
    N/A(Address of principal executive offices)
    
    (Zip Code)
 (345) 945-4277
 None
  COMMON STOCK, PAR VALUE $.60 (CI$0.50)




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 ̈ x
  ̈ x
  x o
 Not Applicable
 x o
  o x
 ,
 ,
 DOCUMENTS INCORPORATED BY REFERENCE : None
 EXCHANGE RATES




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##### 



TABLE OF CONTENTS
 Section
    
    Description
    
    PagePART IItem 1.
    
    Business
    
    
    1Item 1A.
    
    Risk Factors
    
    
    21Item 1B.
    
    Unresolved Staff Comments
    
    
    26Item 2.
    
    Properties
    
    
    27Item 3.
    
    Legal Proceedings
    
    
    29Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    29PART IIItem 5.
    
    Market for Registrants Common Equity and Related Stockholder Matters
    
    
    30Item 6.
    
    Selected Financial Data
    
    
    33Item 7.
    
    Managements Discussions and Analysis of Financial Condition and Results of Operations
    
    
    34Item 7A.
    
    Quantitative and Qualitative Disclosure about Market Risk
    
    
    46Item 8.
    
    Financial Statements and Supplementary Data
    
    
    47Item 9.
    
    Changes In and Disagreements with Accountants on Accounting and Financial Disclosures
    
    
    95Item 9A.
    
    Controls and Procedures
    
    
    95PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    102Item 11.
    
    Executive Compensation
    
    
    109Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    117Item 13.
    
    Certain Relationships and Related Transactions
    
    
    120Item 14
    
    Principal Accounting Fees and Services
    
    
    121PART IVItem 15
    
    Exhibits and Financial Statement Schedules
    
    
    122SIGNATURES
    
    
    131Employee share option notice letter/Billy BankerEmployee share option notice letter/Chet RitchEmployee share option notice letter/David HookerEmployee share option notice letter/E. TrianaEmployee share option notice letter/H. RodriguezEmployee share option notice letter/Ivan TaboraEmployee share option notice letter/Luis WoodEmployee share option notice letter/Maggie JulierLoan AgreementConsultant AgreementSubsidiaries of the RegistrantConsent of Rachlin Cohen & Holta LLPConsent of Rachlin Cohen & Holtz LLPConsent of KPMGConsent of KPMGSection 302 CEO CertificationSection 302 CFO CertificationSection 906 CEO CertificationSection 906 CFO Certification




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Forward-Looking Statements




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PART I
 
 ITEM 1. BUSINESS
 Introduction
    TM TM
   
    
    continuing to develop our production and distribution infrastructure and providing high
quality potable water to our licensed area in the Cayman Islands;
    
    expanding our existing operations in Belize, Barbados, The British Virgin Islands and The
Commonwealth of The Bahamas;
    
    extending our operations to other markets outside our current areas of operation where
there is a need for potable water; and
    
    broadening our existing and future operations into complimentary services, such as
wastewater management.
  1




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Financial Information about Business Segments
  Business Combinations
   RETAIL WATER OPERATIONS
  Retail Water Operations in the Cayman Islands
     2




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3




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2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Number of Customers
    
    
    3,800
    
    
    
    3,600
    
    
    
    3,300
    
    
    
    3,100
    
    
    
    2,999Metered Sales:Commercial
    
    
    427,439
    
    
    
    451,609
    
    
    
    429,013
    
    
    
    405,545
    
    
    
    358,711Residential
    
    
    157,924
    
    
    
    122,699
    
    
    
    107,528
    
    
    
    103,661
    
    
    
    104,002Government
    
    
    8,929
    
    
    
    7,584
    
    
    
    6,164
    
    
    
    13,789
    
    
    
    11,425Total Metered Sales
    
    
    594,292
    
    
    
    581,892
    
    
    
    542,705
    
    
    
    522,995
    
    
    
    474,138
     4




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Retail Water Operations in the Bahamas
     5




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Retail Water Demand and Average Sales Price
   2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001First Quarter
    
    
    146,461
    
    
    
    176,346
    
    
    
    141,575
    
    
    
    141,559
    
    
    
    119,115Second Quarter
    
    
    159,745
    
    
    
    175,813
    
    
    
    144,134
    
    
    
    146,488
    
    
    
    129,305Third Quarter
    
    
    137,881
    
    
    
    123,512
    
    
    
    125,510
    
    
    
    120,201
    
    
    
    119,182Fourth Quarter
    
    
    154,972
    
    
    
    110,754
    
    
    
    134,957
    
    
    
    119,231
    
    
    
    107,536Total
    
    
    599,059
    
    
    
    586,425
    
    
    
    546,176
    
    
    
    527,479
    
    
    
    475,138
  2005
    
    
    2004
    
    
    2003Average Sales Price Per 1,000 U.S. Gallons
    
    $
    22.32
    
    
    $
    20.62
    
    
    $
    19.69
 BULK WATER OPERATIONS
  Bulk Water Operations in the Cayman Islands
   6




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Bulk Water Operations in Belize
      7




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Bulk Water Operations in the British Virgin Islands
       8




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Bulk Water Operations in The Bahamas
     
    
    extend the term for an additional five years at a reduced rate specified in the
agreement;
    
    exercise a right of first refusal to purchase any materials, equipment and facilities
that WCL intends to remove from the site, and negotiate a purchase price with Waterfields;
or
    
    require WCL to remove all materials, equipment and facilities from the site.
     9




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##### Table of Contents



Bulk Water Demand and Average Sales Price
   2005
    
    
    2004
    
    
    2003
    
    
    2002First Quarter
    
    
    441,498
    
    
    
    438,851
    
    
    
    133,682
    
    
    
    24,751Second Quarter
    
    
    456,625
    
    
    
    458,455
    
    
    
    208,107
    
    
    
    30,206Third Quarter
    
    
    442,404
    
    
    
    424,665
    
    
    
    345,307
    
    
    
    30,028Fourth Quarter
    
    
    506,892
    
    
    
    424,434
    
    
    
    414,404
    
    
    
    27,552Total
    
    
    1,847,419
    
    
    
    1,746,405
    
    
    
    1,101,500
    
    
    
    112,537
  2005
    
    
    2004
    
    
    2003Average Sales Price Per 1,000 U.S. Gallons
    
    $
    6.35
    
    
    $
    5.90
    
    
    $
    6.97
 SERVICE OPERATIONS
  Engineering and Management Services Operations
  10




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Service Operations in Barbados
     The Government in the Cayman Islands, Customs Duties and Taxes
  11




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
    
    we do not pay import duty or taxes on reverse osmosis (RO) membranes, electric pumps and
motors and chemicals, but we do pay duty at the rate of 10% of the cost, including insurance and
transportation to the Cayman Islands, of other plant and associated materials and equipment to
manufacture or supply water in the Seven Mile Beach or West Bay areas; and
    
    Ocean Conversion (Cayman) Limited pays all customs duties up to 10% in respect of materials
and supplies imported for the Red Gate plant and is reimbursed amounts in excess of this
percentage by Water Authority-Cayman.
   12




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The Government in The Bahamas, Customs Duties, and Taxes
   The Government in Belize, Customs Duties and Taxes
   The Government in the British Virgin Islands, Customs Duties and Taxes
  13




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The Government in Barbados, Customs, Duties and Taxes
   Government Regulation
   Market and Service Area
   14




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15




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Growth Strategy
   
    
    We intend to continue to develop our production and distribution infrastructure and
provide high quality potable water to our licensed area in the Cayman Islands. We have
increased our share of the potable water market in the Cayman Islands as a result of
our purchase of the Britannia plant and acquisition of Ocean Conversion (Cayman). We
also intend to explore the feasibility of either acquiring or obtaining the license
from the Cayman Islands government to operate Water Authority-Cayman, which supplies
water to parts of Grand Cayman and Cayman Brac and has the right to supply water in
Little Cayman.
    
    We intend to expand our existing operations in the Cayman Islands, Belize, Barbados,
The British Virgin Islands and the Commonwealth of The Bahamas. For example, through
negotiations with Belize Water Services Limited, we have extended the term of our
agreement to 23 years and increased the guaranteed minimum quantities supplied. We
intend to seek new water supply agreements for other areas in Belize. Similarly, as the
development of resort properties in Bimini continues, we expect to sell more water to
additional customers
 16




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
    
    We intend to expand our operations to other markets outside of our current areas of
operation where there is need for potable water. In addition to our acquisitions, we
are currently involved in preliminary discussions to operate water-making plants and to
supply water in other new markets and may pursue these opportunities either on our own
or through joint ventures and strategic alliances, such as the agreement with Newwater
Incorporated previously described. So far, we have focused on various locations
throughout the Caribbean basin and Central America.
    
    We intend to broaden our existing and future operations into complementary services.
Prior to the installation of a central wastewater system by the Cayman Islands
government, we provided wastewater services on Grand Cayman. We may reenter this field
in the Cayman Islands and intend to provide such services outside of the Cayman
Islands.
 Reverse Osmosis Technology
    17




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Raw Materials and Sources of Supply
  Licenses, Franchises and Concessions
      Seasonal Variations in Our Business
  18




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Competition
       Environmental Matters
  19




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Employees
    20




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ITEM 1A. RISK FACTORS
  Our exclusive license for our service area in the Cayman Islands may not be renewed in the future
and requires that we obtain prior approval for any rate increase for reasons other than inflation .
   We rely on water supply and/or service agreements with our customers in the Cayman Islands, Belize,
The Bahamas and Barbados which, upon their expiration, may not be renewed or may be renegotiated on
less favorable terms to us.
  The British Virgin Islands Water and Sewerage Department has taken the position that our water
supply agreement is operating on a month-to-month basis.
  21




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Our business is affected by tourism, weather, the economies of the locations where we provide
service and the U.S. and European economies.
  We may have difficulty accomplishing our growth strategy within and outside of our current
operating areas .
    
    
    regulatory risks, including government relations difficulties, local regulations and
currency controls;
 22




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
    
    risks related to operating in foreign countries, including political instability, reliance
on local economies, environmental or geographical problems, shortages of materials,
immigration restrictions and limited skilled labor;
    
    risks related to development of new operations, including assessing the demand for water,
engineering difficulties and inability to begin operations as scheduled; and
    
    risks relating to greater competition in these new territories, including the ability of
our competitors to gain or retain market share by reducing prices.
  The Windsor Contract may not be renewed in the future.
  The Blue Hills Plant is larger than any other single desalination plant that we have built
previously and revenue from this plant is substantially derived from fixed unit prices.
   23




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We do not own a majority interest in Ocean Conversion (BVI) Ltd.
  Our operations could be harmed by hurricanes.
   Contamination to our processed water may cause disruption in our services and adversely affect our
revenues .
   24




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Potential government actions and regulations could negatively affect us.
  
    
    restricting foreign ownership of our Company;
    
    providing for the expropriation of our assets by the government;
    
    providing for nationalization of public utilities by the government;
    
    providing for different water quality standards;
    
    unilateral changes to or renegotiations of our exclusive licenses; or
    
    causing currency exchange fluctuations or devaluations or changes in tax laws.
 We rely on the efforts of several key employees.
  We are exposed to credit risk.
  We are exposed to interest rate risk in several countries.
  Provisions in our Articles of Association and an Option Deed adopted by our Board of Directors may
discourage a change in control of our Company.
  25




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There may be a risk of variation in currency exchange rates.
  Service of process and enforcement of legal proceedings commenced against us in the United States
may be difficult to obtain.
    
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  26




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ITEM 2. PROPERTIES
 Cayman Island Properties
 Governors Harbour Plant
  West Bay Plant
  Britannia Plant
  Distribution System
  Leased Properties
  27




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Ocean Conversion (Cayman) Limited Properties
  Red Gate Road Plant
  Lower Valley Plant
    North Sound Plant
  28




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Belize Properties
  Bahamas Properties
   U.S. Property
  
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  29




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PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 Market Information
  High
    
    
    LowFirst Quarter 2005
    
    $
    17.00
    
    
    $
    14.20Second Quarter 2005
    
    
    19.87
    
    
    
    16.40Third Quarter 2005
    
    
    22.24
    
    
    
    18.15Fourth Quarter 2005
    
    
    20.70
    
    
    
    15.30First Quarter 2004
    
    $
    10.46
    
    
    $
    8.75Second Quarter 2004
    
    
    14.88
    
    
    
    9.48Third Quarter 2004
    
    
    13.23
    
    
    
    10.14Fourth Quarter 2004
    
    
    15.49
    
    
    
    10.76
       30




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Holders
  Dividends
   31




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First Quarter 2005
    
    $0.0575 Per ShareSecond Quarter 2005
    
    0.0600 Per ShareThird Quarter 2005
    
    0.0600 Per ShareFourth Quarter 2005
    
    0.0600 Per ShareFirst Quarter 2004
    
    $0.0575 Per ShareSecond Quarter 2004
    
    0.0575 Per ShareThird Quarter 2004
    
    0.0575 Per ShareFourth Quarter 2004
    
    0.0575 Per Share
 Exchange Controls and Other Limitations Affecting Security Holders
  Taxation
    32




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ITEM 6. SELECTED FINANCIAL DATA
    Year Ended December 31,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Statement of Income Data:Revenue
    
    $
    26,187,205
    
    
    $
    23,281,413
    
    
    $
    19,054,205
    
    
    $
    12,154,689
    
    
    $
    11,248,105Net Income
    
    
    5,514,258
    
    
    
    6,197,383
    
    
    
    4,177,081
    
    
    
    2,576,310
    
    
    
    2,764,573Balance Sheet Data:Total Assets
    
    
    88,365,191
    
    
    
    70,825,049
    
    
    
    68,562,126
    
    
    
    25,507,637
    
    
    
    22,721,178Long Term Debt Obligations
    
    
    19,378,212
    
    
    
    12,856,226
    
    
    
    16,633,437
    
    
    
    2,074,609
    
    
    
    1,213,804Redeemable Preferred Stock
    
    
    19,382
    
    
    
    16,705
    
    
    
    16,302
    
    
    
    23,688
    
    
    
    30,234Dividends Declared Per Share
    
    
    0.24
    
    
    
    0.23
    
    
    
    0.21
    
    
    
    0.21
    
    
    
    0.20Basic Earnings Per Share
    
    $
    0.47
    
    
    $
    0.54
    
    
    $
    0.43
    
    
    $
    0.33
    
    
    $
    0.36Weighted Average Number of
Shares
    
    
    11,767,573
    
    
    
    11,474,264
    
    
    
    9,834,366
    
    
    
    7,939,722
    
    
    
    7,795,938Diluted Earnings Per Share
    
    $
    0.45
    
    
    $
    0.53
    
    
    $
    0.42
    
    
    $
    0.32
    
    
    $
    0.35Weighted Average Number of
Shares
    
    
    12,161,407
    
    
    
    11,759,010
    
    
    
    10,075,060
    
    
    
    8,175,064
    
    
    
    7,999,382
 33




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
     2005
    
    
    2004Location
    
    Plants
    
    
    Capacity*
    
    
    Location
    
    Plants
    
    
    Capacity*Cayman Islands
    
    
    6
    
    
    
    5.5
    
    
    Cayman Islands
    
    
    6
    
    
    
    5.3Bahamas
    
    
    2
    
    
    
    4.2
    
    
    Bahamas
    
    
    2
    
    
    
    2.7Belize
    
    
    1
    
    
    
    0.4
    
    
    Belize
    
    
    1
    
    
    
    0.4Barbados
    
    
    1
    
    
    
    1.3
    
    
    Barbados
    
    
    1
    
    
    
    1.3British
Virgin Islands
    
    
    1
    
    
    
    1.7
    
    
    British
Virgin Islands
    
    
    1
    
    
    
    1.2Total
    
    
    11
    
    
    
    13.1
    
    
    Total
    
    
    11
    
    
    
    10.9
   Cayman Islands
  34




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Belize
  Bahamas
   Barbados
  British Virgin Islands
  Critical Accounting Policies
  35




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Goodwill and other intangible assets
 Property, plant and equipment
 Buildings
    
    5 to 40 yearsPlant and equipment
    
    4 to 40 yearsDistribution system
    
    3 to 40 yearsOffice furniture, fixtures and equipment
    
    3 to 10 yearsVehicles
    
    3 to 10 yearsLeasehold improvements
    
    Lesser of 5 years or operating lease termLab equipment
    
    5 to 10 years
  36




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Construction in progress:
 Trade accounts receivable
 Quarterly Results of Operations
  For the year ended December 31, 2005First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterTotal revenue
    
    $
    6,057,485
    
    
    $
    6,552,868
    
    
    $
    6,204,386
    
    
    $
    7,372,466Gross profit
    
    
    2,397,860
    
    
    
    2,782,229
    
    
    
    2,202,414
    
    
    
    2,971,894Net income
    
    
    1,374,051
    
    
    
    1,481,359
    
    
    
    1,009,349
    
    
    
    1,649,499Diluted earnings per share
    
    
    0.12
    
    
    
    0.12
    
    
    
    0.08
    
    
    
    0.13
 For the year ended December 31, 2004First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterTotal revenue
    
    $
    6,337,697
    
    
    $
    6,409,364
    
    
    $
    5,279,054
    
    
    $
    5,255,298Gross profit
    
    
    2,907,223
    
    
    
    2,849,545
    
    
    
    1,942,423
    
    
    
    1,910,509Net income
    
    
    1,923,922
    
    
    
    1,764,040
    
    
    
    424,032
    
    
    
    2,085,389Diluted earnings per share
    
    
    0.17
    
    
    
    0.15
    
    
    
    0.04
    
    
    
    0.17
 Results of Operations
 Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
 Revenue
   37




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Cost of Sales
     Gross Profit
  38




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General and Administrative Expense
     Other Income (Expense)
   Net Income
  Year Ended December 31, 2004 Compared to Year Ended December 31, 2003
 Revenue
   39




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Other Income (Expenses)
   Cost of Sales
  40




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Gross Profit
  General and Administrative Expenses
    41




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Net insurance recovery from Hurricane Ivan
    Net Income
  Liquidity and Capital Resources
 Overview
   42




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Operating Activities
  Investing Activities
   Financing Activities
    Material Commitments, Expenditures and Contingencies
  2013 andTotal
    
    
    2006
    
    
    2007 - 2009
    
    
    2010 -2012
    
    
    ThereafterLong term debt
    
    $
    12,850,542
    
    
    $
    3,472,331
    
    
    $
    8,663,929
    
    
    $
    714,282
    
    
    $
    Series A bond
    
    
    10,000,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000,000Employment
agreements
    
    
    2,694,700
    
    
    
    1,160,800
    
    
    
    1,533,900
    
    
    
    
    
    
    
    Operating leases
    
    
    1,027,416
    
    
    
    317,189
    
    
    
    583,878
    
    
    
    126,349
    
    
    
    Other
    
    
    349,628
    
    
    
    96,809
    
    
    
    202,819
    
    
    
    
    
    
    
    50,000
  43




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Dividends
     Dividend Reinvestment and Common Stock Purchase Plan .
  45




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Impact of Inflation
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 Credit Risk
  Interest Rate Risk
   Foreign Exchange Risk
  46




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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 CONSOLIDATED WATER CO. LTD.
 PageINDEX TO CONSOLIDATED FINANCIAL STATEMENTSReport of Independent Registered Public Accounting Firm
    
    
    48Report of
Independent Registered Public Accounting Firm
    
    
    49Consolidated Balance Sheets as of December 31, 2005 and 2004
    
    
    50Consolidated Statements of Income for each of the years ended December 31, 2005, 2004 and 2003
    
    
    51Consolidated Statements of Stockholders Equity for each of the years ended December 31, 2005, 2004 and 2003
    
    
    52Consolidated Statements of Cash Flows for each of the years ended December 31, 2005, 2004 and 2003
    
    
    53Notes to Consolidated Financial Statements
    
    
    54
 OCEAN CONVERSION (BVI) LTD.
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTSReport of Independent Registered Public Accounting Firm
    
    
    81Independent Auditors Report
    
    
    82Consolidated Balance Sheets as of December 31, 2005 and 2004
    
    
    83Consolidated Statements of Income for the years ended December 31, 2005, 2004 and 2003
    
    
    84Consolidated Statements of Stockholders Equity for the years ended December 31, 2005, 2004 and 2003
    
    
    85Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003
    
    
    86Notes to Consolidated Financial Statements
    
    
    87
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Report of Independent Registered Public Accounting Firm
 
      
 48




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Report of Independent Registered Public Accounting Firm
 
      
 49




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CONSOLIDATED WATER CO. LTD.
 CONSOLIDATED BALANCE SHEETS
  December 31,2005
    
    
    2004ASSETSCurrent assetsCash and cash equivalents
    
    $
    11,955,589
    
    
    $
    9,216,908Accounts receivable, net
    
    
    5,659,975
    
    
    
    4,879,410Insurance claim receivable
    
    
    
    
    
    
    1,932,905Inventory
    
    
    2,032,209
    
    
    
    1,629,348Prepaid expenses and other current assets
    
    
    858,870
    
    
    
    625,563Current portion of loans receivable
    
    
    669,855
    
    
    
    924,020Total current assets
    
    
    21,176,498
    
    
    
    19,208,154Loans receivable , including $800,000 from affiliate in 2005
    
    
    2,436,702
    
    
    
    2,270,326Property, plant and equipment, net
    
    
    32,667,615
    
    
    
    27,218,589Construction in progress, including interest of $375,000 and $nil in
2005 and 2004, respectively
    
    
    12,172,402
    
    
    
    1,642,813Other assets
    
    
    534,368
    
    
    
    424,564Investment in affiliates
    
    
    11,317,731
    
    
    
    11,070,848Intangible assets, net
    
    
    4,491,501
    
    
    
    5,421,381Goodwill
    
    
    3,568,374
    
    
    
    3,568,374Total assets
    
    $
    88,365,191
    
    
    $
    70,825,049LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesDividends payable
    
    $
    828,709
    
    
    $
    783,854Accounts payable and other liabilities
    
    
    3,939,538
    
    
    
    3,860,511Current portion of long term debt
    
    
    3,472,330
    
    
    
    3,733,144Total current liabilities
    
    
    8,240,577
    
    
    
    8,377,509Long term debt, including Series A bond issue of $10,000,000
    
    
    19,378,212
    
    
    
    12,856,226Security deposits and other liabilities
    
    
    349,628
    
    
    
    357,957Minority Interest in Waterfields Company Limited
    
    
    833,695
    
    
    
    861,463Total liabilities
    
    
    28,802,112
    
    
    
    22,453,155Commitments
    
    
    
    
    
    
    Stockholders equityRedeemable preferred stock, $0.60 par value. Authorized 200,000
shares; issued and outstanding 32,304 shares in 2005 and 27,842
shares in 2004
    
    
    19,382
    
    
    
    16,705Class A common stock, $0.60 par value. Authorized 19,680,000
shares; issued and outstanding 12,181,778 shares in 2005 and
11,506,970 shares in 2004
    
    
    7,309,066
    
    
    
    6,904,183Class B common stock, $0.60 par value. Authorized 120,000
shares; issued and outstanding $nil shares for 2005 and $nil shares
for 2004
    
    
    
    
    
    
    Stock and options earned but not issued
    
    
    28,802
    
    
    
    20,746Additional paid-in capital
    
    
    35,338,235
    
    
    
    27,281,728Retained earnings
    
    
    16,867,594
    
    
    
    14,148,532Total stockholders equity
    
    
    59,563,079
    
    
    
    48,371,894Total liabilities and stockholders equity
    
    $
    88,365,191
    
    
    $
    70,825,049
  50




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 CONSOLIDATED STATEMENTS OF INCOME
  For the year ended December 31,2005
    
    
    2004
    
    
    2003Retail water sales
    
    $
    13,372,103
    
    
    $
    12,089,491
    
    
    $
    10,918,151Bulk water sales
    
    
    11,724,438
    
    
    
    10,303,074
    
    
    
    7,045,761Services revenue
    
    
    1,090,664
    
    
    
    888,848
    
    
    
    1,090,293Total revenues
    
    
    26,187,205
    
    
    
    23,281,413
    
    
    
    19,054,205Retail cost of sales
    
    
    5,369,550
    
    
    
    5,250,372
    
    
    
    4,972,300Bulk cost of sales
    
    
    9,832,109
    
    
    
    7,798,225
    
    
    
    5,776,555Services cost of sales
    
    
    631,149
    
    
    
    623,116
    
    
    
    491,593Total cost of sales
    
    
    15,832,808
    
    
    
    13,671,713
    
    
    
    11,240,448Gross profit
    
    
    10,354,397
    
    
    
    9,609,700
    
    
    
    7,813,757General and administrative expenses
    
    
    6,145,211
    
    
    
    5,138,182
    
    
    
    3,775,357Net insurance recovery from Hurricane Ivan
    
    
    
    
    
    
    591,404
    
    
    
    Income from operations
    
    
    4,209,186
    
    
    
    5,062,922
    
    
    
    4,038,400Other income (expense):Interest income
    
    
    208,375
    
    
    
    81,560
    
    
    
    82,334Interest expense
    
    
    (885,628
    )
    
    
    (682,744
    )
    
    
    (1,163,637
    )Other income
    
    
    562,097
    
    
    
    533,974
    
    
    
    438,022Equity in earnings of affiliate
    
    
    1,390,314
    
    
    
    1,284,080
    
    
    
    826,029Other income, net
    
    
    1,275,158
    
    
    
    1,216,870
    
    
    
    182,748Income before income taxes and minority interest
    
    
    5,484,344
    
    
    
    6,279,792
    
    
    
    4,221,148Provision for income taxes benefit (expense)
    
    
    2,146
    
    
    
    (30,150
    )
    
    
    (23,743
    )Minority interest recovery (expense)
    
    
    27,768
    
    
    
    (52,259
    )
    
    
    (20,324
    )Net income
    
    $
    5,514,258
    
    
    $
    6,197,383
    
    
    $
    4,177,081Basic earnings per common share
    
    $
    0.47
    
    
    $
    0.54
    
    
    $
    0.42Diluted earnings per common share
    
    $
    0.45
    
    
    $
    0.53
    
    
    $
    0.41Weighted average number of common shares
used in the determination of:Basic earnings per share
    
    
    11,767,573
    
    
    
    11,474,264
    
    
    
    9,834,366Diluted earnings per share
    
    
    12,161,407
    
    
    
    11,759,010
    
    
    
    10,075,060
  51




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2005
  Stock andRedeemable preferred stock
    
    
    Common stock
    
    
    options
    
    
    Additional
    
    
    
    
    
    
    Totalearned but
    
    
    paid-in
    
    
    Retained
    
    
    stockholdersShares
    
    
    Dollars
    
    
    Shares
    
    
    Dollars
    
    
    not issued
    
    
    capital
    
    
    earnings
    
    
    equityBalance at December 31, 2002
    
    
    39,480
    
    
    $
    23,688
    
    
    
    7,986,838
    
    
    $
    4,792,103
    
    
    $
    424,841
    
    
    $
    7,354,395
    
    
    $
    8,531,197
    
    
    $
    21,126,224Public offering of common shares,
net of issuance costs
    
    
    
    
    
    
    
    
    
    
    2,784,300
    
    
    
    1,670,580
    
    
    
    
    
    
    
    16,118,254
    
    
    
    
    
    
    
    17,788,834Issue of share capital
    
    
    7,674
    
    
    
    4,604
    
    
    
    582,926
    
    
    
    349,756
    
    
    
    (544,756
    )
    
    
    3,300,838
    
    
    
    
    
    
    
    3,110,442Conversion of preferred shares
    
    
    (19,956
    )
    
    
    (11,973
    )
    
    
    19,956
    
    
    
    11,973
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Redemption of preferred shares
    
    
    (28
    )
    
    
    (17
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (145
    )
    
    
    
    
    
    
    (162
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,177,081
    
    
    
    4,177,081Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,095,301
    )
    
    
    (2,095,301
    )Issue of options and share grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141,409
    
    
    
    
    
    
    
    
    
    
    
    141,409Balance at December 31, 2003
    
    
    27,170
    
    
    
    16,302
    
    
    
    11,374,020
    
    
    
    6,824,412
    
    
    
    21,494
    
    
    
    26,773,342
    
    
    
    10,612,977
    
    
    
    44,248,527Issue of share capital
    
    
    5,448
    
    
    
    3,269
    
    
    
    128,174
    
    
    
    76,905
    
    
    
    (95,568
    )
    
    
    508,386
    
    
    
    
    
    
    
    492,992Conversion of preferred shares
    
    
    (4,776
    )
    
    
    (2,866
    )
    
    
    4,776
    
    
    
    2,866
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,197,383
    
    
    
    6,197,383Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,661,828
    )
    
    
    (2,661,828
    )Issue of options and share grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    94,820
    
    
    
    
    
    
    
    
    
    
    
    94,820Balance at December 31, 2004
    
    
    27,842
    
    
    
    16,705
    
    
    
    11,506,970
    
    
    
    6,904,183
    
    
    
    20,746
    
    
    
    27,281,728
    
    
    
    14,148,532
    
    
    
    48,371,894Public offering of common shares,
net of issuance costs
    
    
    
    
    
    
    
    
    
    
    404,770
    
    
    
    242,862
    
    
    
    
    
    
    
    6,476,000
    
    
    
    
    
    
    
    6,718,862Issue of share capital
    
    
    8,644
    
    
    
    5,187
    
    
    
    265,856
    
    
    
    159,511
    
    
    
    (150,715
    )
    
    
    1,580,507
    
    
    
    
    
    
    
    1,594,490Conversion of preferred shares
    
    
    (4,182
    )
    
    
    (2,510
    )
    
    
    4,182
    
    
    
    2,510
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,514,258
    
    
    
    5,514,258Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,795,196
    )
    
    
    (2,795,196
    )Issue of options and share grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    158,771
    
    
    
    
    
    
    
    
    
    
    
    158,771Balance at December 31, 2005
    
    
    32,304
    
    
    $
    19,382
    
    
    
    12,181,778
    
    
    $
    7,309,066
    
    
    $
    28,802
    
    
    $
    35,338,235
    
    
    $
    16,867,594
    
    
    $
    59,563,079
  52




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  For the year ended December 31,2005
    
    
    2004
    
    
    2003Cash flows provided by (used in) operating activitiesNet income
    
    $
    5,514,258
    
    
    $
    6,197,383
    
    
    $
    4,177,081Add (deduct) items not affecting cashDepreciation
    
    
    2,156,478
    
    
    
    2,079,475
    
    
    
    1,699,140Amortization of intangible assets and bank fees
    
    
    1,031,585
    
    
    
    1,017,207
    
    
    
    1,318,102Stock compensation on share grants
    
    
    256,032
    
    
    
    155,388
    
    
    
    138,750Net loss on disposal of fixed assets
    
    
    37,585
    
    
    
    1,331,563
    
    
    
    Undistributed income from affiliates
    
    
    (1,875,508
    )
    
    
    (1,718,338
    )
    
    
    (1,060,188
    )Minority interest (recovery)
    
    
    (27,768
    )
    
    
    52,259
    
    
    
    20,324Increase in accounts receivable
    
    
    (780,565
    )
    
    
    (1,019,914
    )
    
    
    (82,939
    )(Increase) decrease in insurance claim receivable
    
    
    1,932,905
    
    
    
    (1,932,905
    )
    
    
    Increase in inventory
    
    
    (402,861
    )
    
    
    (83,163
    )
    
    
    (10,088
    )(Increase) decrease in prepaid expenses and
other assets
    
    
    (233,307
    )
    
    
    (29,177
    )
    
    
    60,041Increase in other assets
    
    
    
    
    
    
    (9,239
    )
    
    
    Increase (decrease) in accounts payable and
other liabilities
    
    
    224,067
    
    
    
    1,788,267
    
    
    
    230,725Increase (decrease) in other liabilities
    
    
    (8,329
    )
    
    
    5,462
    
    
    
    15,878Net cash provided by operating activities
    
    
    7,824,572
    
    
    
    7,834,268
    
    
    
    6,506,826Cash flows provided by (used in) investing activitiesPurchase of property, plant and equipment
    
    
    (6,246,251
    )
    
    
    (1,101,030
    )
    
    
    (1,726,667
    )Construction in progress
    
    
    (11,926,428
    )
    
    
    (1,614,857
    )
    
    
    (433,193
    )Business combinations, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (19,495,005
    )Investment in affiliate
    
    
    1,628,625
    
    
    
    681,750
    
    
    
    (8,961,622
    )Loan to affiliate
    
    
    (800,000
    )
    
    
    
    
    
    
    Collection of loans receivable
    
    
    887,789
    
    
    
    1,098,732
    
    
    
    970,492Proceeds from sale of property, plant and
equipment
    
    
    
    
    
    
    20,000
    
    
    
    Net cash provided by (used in) investing activities
    
    
    (16,456,265
    )
    
    
    (915,405
    )
    
    
    (29,645,995
    )Cash flows provided by (used in) financing activitiesNet proceeds from credit facility
    
    
    
    
    
    
    
    
    
    
    27,187,035Dividends declared and paid
    
    
    (2,750,341
    )
    
    
    (2,564,092
    )
    
    
    (1,924,067
    )Net proceeds from issuance of stock
    
    
    8,071,052
    
    
    
    432,424
    
    
    
    19,037,034Net proceeds from issuance of Series A bonds
    
    
    9,788,491
    
    
    
    
    
    
    
    Principal repayments of long term debt
    
    
    (3,738,828
    )
    
    
    (3,807,211
    )
    
    
    (13,492,213
    )Net cash provided by (used in) financing activities
    
    
    11,370,374
    
    
    
    (5,938,879
    )
    
    
    30,807,789Net increase in cash and cash equivalents
    
    
    2,738,681
    
    
    
    979,984
    
    
    
    7,668,620Cash and cash equivalents at beginning of year
    
    
    9,216,908
    
    
    
    8,236,924
    
    
    
    568,304Cash and cash equivalents at end of year
    
    $
    11,955,589
    
    
    $
    9,216,908
    
    
    $
    8,236,924Interest paid in cash
    
    $
    1,152,262
    
    
    $
    591,795
    
    
    $
    770,438Interest received in cash
    
    $
    197,584
    
    
    $
    81,560
    
    
    $
    81,836Incomes taxes paid
    
    $
    14,138
    
    
    $
    14,281
    
    
    $
    40,090
  53




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Principal activity
  2. Accounting policies
 Basis of preparation:
 Use of estimates:
 Basis of consolidation:
 Foreign currency:
  Cash and cash equivalents:
 54




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2. Accounting policies (continued)
 Trade accounts receivable:
 Inventory:
 Loans receivable:
 Property, plant and equipment:
 Buildings
    
    5 to 40 yearsPlant and equipment
    
    4 to 40 yearsDistribution system
    
    3 to 40 yearsOffice furniture, fixtures and equipment
    
    3 to 10 yearsVehicles
    
    3 to 10 yearsLeasehold improvements
    
    Shorter of 5 years or operating lease term outstandingLab Equipment
    
    5 to 10 years
   Construction in progress :
 55




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2. Accounting policies (continued)
 Goodwill and intangible assets:
 Investments:
 Other assets:
 Other liabilities:
 Shares repurchased:
 56




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2. Accounting policies (continued)
 Stock and stock option incentive plans:
   2005
    
    
    2004
    
    
    2003Net income, as reported
    
    $
    5,514,258
    
    
    $
    6,197,383
    
    
    $
    4,177,081Add stock-based employee compensation expense included
in reporting net income
    
    
    256,032
    
    
    
    155,388
    
    
    
    138,750Deduct total stock-based employee compensation expense
determined under fair-value-based method for all rewards
    
    
    (330,308
    )
    
    
    (216,346
    )
    
    
    (950,147
    )Pro forma net income
    
    $
    5,439,982
    
    
    $
    6,136,425
    
    
    $
    3,365,684Earnings per share:Basic  as reported
    
    $
    0.47
    
    
    $
    0.54
    
    
    $
    0.42Basic  pro forma
    
    $
    0.46
    
    
    $
    0.53
    
    
    $
    0.34Diluted  as reported
    
    $
    0.45
    
    
    $
    0.53
    
    
    $
    0.41Diluted  pro forma
    
    $
    0.45
    
    
    $
    0.52
    
    
    $
    0.33
  57




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2. Accounting policies (continued)
 Revenue and cost of sales:
    Repairs and maintenance:
 Comparative figures:
 3. Acquisitions
    58




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3. Acquisitions (continued)
  Current assets
    
    $
    7,187,798Property, plant and equipment, net
    
    
    8,947,932Investments in affiliates
    
    
    12,069,998Intangible assets
    
    
    5,766,886Goodwill
    
    
    3,395,752Other assets
    
    
    4,190,883Total assets acquired
    
    
    41,559,249Current liabilities
    
    
    1,877,490Long term debt and liabilities
    
    
    2,266,784Total liabilities assumed
    
    
    4,144,274Less: Minority interest in Waterfields Company Limited
    
    
    785,836Net assets acquired
    
    $
    36,629,139
  Year ended December 31,2003Pro forma revenue
    
    $
    21,841,916Pro forma net income
    
    $
    4,704,114Pro forma earnings per share:Basic
    
    $
    0.42Diluted
    
    $
    0.41
 59




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 4. Cash and cash equivalents
  December 31,2005
    
    
    2004Bank accountsUnited States dollar
    
    $
    2,303,660
    
    
    $
    1,980,944Cayman Islands dollar
    
    
    930,228
    
    
    
    4,413,496Bahamian dollar
    
    
    1,356
    
    
    
    466,193Belize dollar
    
    
    126,354
    
    
    
    83,157Barbadian dollar
    
    
    88,824
    
    
    
    95,0653,450,422
    
    
    
    7,038,855Short term depositsUnited States dollar
    
    
    
    
    
    
    1,521,188Bahamian dollar
    
    
    8,505,167
    
    
    
    493,699Belize dollar
    
    
    
    
    
    
    163,1668,505,167
    
    
    
    2,178,053Total cash and cash equivalents
    
    $
    11,955,589
    
    
    $
    9,216,908
 5. Accounts receivable
 December 31,2005
    
    
    2004Trade accounts receivable
    
    $
    5,777,190
    
    
    $
    4,939,985Other accounts receivable
    
    
    90,015
    
    
    
    104,7675,867,205
    
    
    
    5,044,752Allowance for doubtful accounts
    
    
    (207,230
    )
    
    
    (165,342
    )$
    5,659,975
    
    
    $
    4,879,410
  December 31,2005
    
    
    2004Opening allowance for doubtful accounts
    
    $
    165,342
    
    
    $
    74,867Provision for doubtful accounts
    
    
    41,888
    
    
    
    90,475Accounts written off during the year
    
    
    
    
    
    
    Ending allowance for doubtful accounts
    
    $
    207,230
    
    
    $
    165,342
  60




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CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 6. Insurance claim receivable
     7. Inventory
 December 31,2005
    
    
    2004Water stock
    
    $
    44,624
    
    
    $
    33,659Consumables stock
    
    
    318,945
    
    
    
    194,307Spare parts stock
    
    
    1,668,640
    
    
    
    1,401,382$
    2,032,209
    
    
    $
    1,629,348
 8. Loans receivable
  December 31,2005
    
    
    2004Due from Water Authority Cayman: Original loan of $1,216,000,
non-interest bearing, in monthly installments of $14,476
to November 30, 2008. Loan secured by Red Gate plant, machinery
and equipment.
    
    $
    506,667
    
    
    $
    680,381Due from Water Authority Cayman: Two loans originally aggregating
$1,819,920, bearing interest at 5% per annum, receivable in combined
monthly installments of principal and interest of $25,721 to March 2005, and
secured by Lower Valley plant, machinery and equipment.
    
    
    
    
    
    
    76,529
 61




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 8. Loans receivable (continued)
 December 31,2005
    
    
    2004Due from Water Authority Cayman: Two loans originally aggregating
$1,168,600, bearing interest at 5% per annum, receivable in combined
monthly installments of principal and interest of $16,516 to March 2006, and
secured by Lower Valley plant, machinery and equipment.
    
    
    49,140
    
    
    
    239,686Due from Water Authority Cayman: Two non-interest bearing loans
originally aggregating $3,129,000, receivable in monthly installments of
$37,250 to November 2009, and secured by North Sound Road plant,
machinery and equipment.
    
    
    1,750,750
    
    
    
    2,197,750Due from affiliate: loan bearing interest at LIBOR plus 3.5%.
Interest is payable quarterly and the principal is due June 1, 2007.
    
    
    800,000
    
    
    
    Total loans receivable
    
    
    3,106,557
    
    
    
    3,194,346Less current portion
    
    
    669,855
    
    
    
    924,020Loans receivable, excluding current portion
    
    $
    2,436,702
    
    
    $
    2,270,326
 9. Property, plant and equipment and construction in progress
 December 31,2005
    
    
    2004CostLand
    
    $
    475,679
    
    
    $
    475,679Buildings
    
    
    4,388,100
    
    
    
    4,373,382Plant and equipment
    
    
    20,279,578
    
    
    
    14,209,510Distribution system
    
    
    18,560,540
    
    
    
    18,278,146Office furniture, fixtures and equipment
    
    
    1,272,159
    
    
    
    551,911Vehicles
    
    
    812,609
    
    
    
    556,825Leasehold improvements
    
    
    186,387
    
    
    
    Lab equipment
    
    
    21,700
    
    
    
    20,87745,996,752
    
    
    
    38,466,330Less accumulated depreciation
    
    
    13,329,137
    
    
    
    11,247,741Property, plant and equipment, net
    
    $
    32,667,615
    
    
    $
    27,218,589Construction in progress
    
    $
    12,172,402
    
    
    $
    1,642,813
  62




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10. Investment in affiliates
     December 31,2005
    
    
    2004Current assets
    
    $
    4,736,398
    
    
    $
    4,552,059Non-current assets
    
    
    5,226,212
    
    
    
    4,189,764Total assets
    
    $
    9,962,610
    
    
    $
    8,741,823Current liabilities
    
    $
    1,369,094
    
    
    $
    1,085,589Non-current liabilities
    
    
    2,341,979
    
    
    
    1,682,604Total liabilities
    
    $
    3,711,073
    
    
    $
    2,768,193
 December 31,2005
    
    
    2004Water sales
    
    $
    7,715,827
    
    
    $
    6,872,366Cost of water sales
    
    $
    3,003,920
    
    
    $
    2,475,304Income from operations
    
    $
    2,893,678
    
    
    $
    2,754,200Net income
    
    $
    3,019,328
    
    
    $
    2,771,198
 63




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11. Intangible assets
       64




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##### Table of Contents



11. Intangible assets (continued)
 December 31,2005
    
    
    2004CostNon-amortizable intangible asset
Management service agreement
    
    $
    856,356
    
    
    $
    856,356Amortizable intangible assets
DWEERTMdistribution agreement
    
    
    337,149
    
    
    
    337,149Operations agreement with Sandy Lane
    
    
    104,050
    
    
    
    104,050Cayman water production and supply agreements
    
    
    4,385,496
    
    
    
    4,385,496Belize water production and supply agreement
    
    
    1,522,419
    
    
    
    1,522,4197,205,470
    
    
    
    7,205,470Accumulated amortizationDWEERTMdistribution agreement
    
    
    (143,976
    )
    
    
    (94,613
    )Operations agreement with Sandy Lane
    
    
    (101,160
    )
    
    
    (66,476
    )Cayman water production and supply agreements
    
    
    (2,274,488
    )
    
    
    (1,494,847
    )Belize water production and supply agreement
    
    
    (194,345
    )
    
    
    (128,153
    )(2,713,969
    )
    
    
    (1,784,089
    )Intangible assets, net
    
    $
    4,491,501
    
    
    $
    5,421,381
  2006
    
    
    
    
    
    $
    820,9432007
    
    
    
    
    
    
    788,6592008
    
    
    
    
    
    
    639,2492009
    
    
    
    
    
    
    234,8552010
    
    
    
    
    
    
    154,327Thereafter
    
    
    
    
    
    
    997,112
 65




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 12. Goodwill
   Retail
    
    
    Bulk
    
    
    ServicesSegment
    
    
    Segment
    
    
    Segment
    
    
    TotalBalance as of December 31, 2003
    
    $
    1,170,511
    
    
    $
    2,136,524
    
    
    $
    88,717
    
    
    $
    3,395,752Goodwill acquired during the year
    
    
    
    
    
    
    172,622
    
    
    
    
    
    
    
    172,622Balance as of December 31, 2004
    
    
    1,170,511
    
    
    
    2,309,146
    
    
    
    88,717
    
    
    
    3,568,374Goodwill acquired during the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance as of December 31, 2005
    
    $
    1,170,511
    
    
    $
    2,309,146
    
    
    $
    88,717
    
    
    $
    3,568,374
   13. Dividends
  2005
    
    
    2004
    
    
    2003March 31
    
    $
    0.0575
    
    
    $
    0.0575
    
    
    $
    0.0525June 30
    
    
    0.0600
    
    
    
    0.0575
    
    
    
    0.0525September 30
    
    
    0.0600
    
    
    
    0.0575
    
    
    
    0.0525December 31
    
    
    0.0600
    
    
    
    0.0575
    
    
    
    0.0525
    66




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14. Long term debt
 December 31,2005
    
    
    2004Scotiabank $20,000,000 term loan bearing interest at an
annually adjusted floating rate of LIBOR plus 1.5% to 3.0%,
depending on the ratio of the Companys consolidated debt to its
consolidated earnings before interest, taxes and depreciation;
payable in quarterly installments of $714,286 plus interest; due
February 6, 2010 (6.11% at December 31, 2005 and 3.68% at
December 31, 2004).
    
    $
    12,142,858
    
    
    $
    15,000,000Scotiabank $1,428,000 term loan bearing interest at 3-month
LIBOR plus 1.5%; payable in semi-annual installments of
$240,000 plus Interest; due December 31, 2007 (6.03% at
December 31, 2005 and 3.61% at December 31, 2004).
    
    
    228,000
    
    
    
    708,000Royal Bank of Canada loan bearing interest at LIBOR plus
1.75%; payable in quarterly installments of principal and
interest; due in 2007 (6.16% at December 31, 2005 and
3.11% at December 31, 2004).
    
    
    251,633
    
    
    
    527,215Royal Bank of Canada loan bearing interest at Nassau Prime
Lending Rate plus 1.5%; payable in quarterly installments of
principal and Interest; due in 2007 (7.00% at December 31, 2005
and 7.50% at December 31, 2004).
    
    
    228,051
    
    
    
    354,155Series A bonds bearing interest at the annual fixed rate of
7.5%; payable quarterly and maturing on June 30, 2015.
    
    
    10,000,000
    
    
    
    Total long term debt
    
    
    22,850,542
    
    
    
    16,589,370Less current portion
    
    
    3,472,330
    
    
    
    3,733,144Long term debt, excluding current portion
    
    $
    19,378,212
    
    
    $
    12,856,226
  67




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14. Long term debt (continued)
      2006
    
    $
    3,472,3302007
    
    
    2,949,6412008
    
    
    2,857,1442009
    
    
    2,857,1442010
    
    
    714,283Thereafter
    
    
    10,000,000
 15. Share capital and additional paid in capital and stock split
    68




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##### Table of Contents



16. Expenses
 For the year ended December 31,2005
    
    
    2004
    
    
    2003Cost of water sales consist of the following:Water purchases
    
    $
    93,433
    
    
    $
    76,399
    
    
    $
    263,586Depreciation
    
    
    2,033,464
    
    
    
    1,945,476
    
    
    
    1,586,217Amortization of intangible assets
    
    
    929,880
    
    
    
    926,739
    
    
    
    954,804Employee costs
    
    
    2,857,676
    
    
    
    2,906,249
    
    
    
    2,351,727Fuel oil
    
    
    2,244,204
    
    
    
    1,536,780
    
    
    
    639,434Royalties
    
    
    930,602
    
    
    
    868,324
    
    
    
    781,632Electricity
    
    
    3,015,037
    
    
    
    2,586,723
    
    
    
    2,499,695Insurance
    
    
    670,339
    
    
    
    516,133
    
    
    
    403,944Maintenance
    
    
    2,063,985
    
    
    
    1,712,673
    
    
    
    1,209,391Other direct costs
    
    
    994,188
    
    
    
    596,217
    
    
    
    550,018$
    15,832,808
    
    
    $
    13,671,713
    
    
    $
    11,240,448General and administrative expenses
consist of the following:Employee costs
    
    $
    2,230,891
    
    
    $
    2,475,511
    
    
    $
    1,904,454Depreciation
    
    
    104,911
    
    
    
    122,932
    
    
    
    112,923Professional fees
    
    
    1,328,272
    
    
    
    961,851
    
    
    
    341,246Insurance
    
    
    368,172
    
    
    
    287,068
    
    
    
    234,968Directors fees and expenses
    
    
    515,546
    
    
    
    348,439
    
    
    
    164,794Maintenance
    
    
    84,914
    
    
    
    28,086
    
    
    
    165,864Other indirect costs
    
    
    1,512,505
    
    
    
    914,295
    
    
    
    851,108$
    6,145,211
    
    
    $
    5,138,182
    
    
    $
    3,775,357
 69




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 17. Earnings per share
   2005
    
    
    2004
    
    
    2003Net income
    
    $
    5,514,258
    
    
    $
    6,197,383
    
    
    $
    4,177,081Less:Dividends paid and earnings attributable on
preferred shares
    
    
    (9,128
    )
    
    
    (7,751
    )
    
    
    (5,706
    )Net income available to common shares in the
determination of basic earnings per ordinary share
    
    $
    5,505,130
    
    
    $
    6,189,632
    
    
    $
    4,171,375Weighted average number of common shares
in the determination of basic earnings per
ordinary share
    
    
    11,767,573
    
    
    
    11,474,264
    
    
    
    9,834,366Plus:Weighted average number of preferred
shares outstanding during the year
    
    
    27,757
    
    
    
    27,148
    
    
    
    39,208Potential dilutive effect of unexercised options
    
    
    366,077
    
    
    
    257,598
    
    
    
    201,486Weighted average number of shares used for
determining diluted earnings per ordinary share
    
    
    12,161,407
    
    
    
    11,759,010
    
    
    
    10,075,060
 18. Segment information
    70




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##### Table of Contents



CONSOLIDATED WATE CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 18. Segment information (continued)
 At December 31 and for the year then endedRetail
    
    
    Bulk
    
    
    Services
    
    
    Reconciliation
    
    
    Total2005
    
    
    2004
    
    
    2003
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2005
    
    
    2004
    
    
    2003Water sales
    
    
    13,372,103
    
    
    
    12,089,491
    
    
    
    10,918,151
    
    
    
    15,083,138
    
    
    
    13,294,615
    
    
    
    9,130,741
    
    
    
    1,090,664
    
    
    
    888,848
    
    
    
    1,090,293
    
    
    
    (3,358,700
    )
    
    
    (2,991,541
    )
    
    
    (2,084,980
    )
    
    
    26,187,205
    
    
    
    23,281,413
    
    
    
    19,054,205Other income
(expense)
    
    
    138,493
    
    
    
    217,140
    
    
    
    (297,793
    )
    
    
    (633,203
    )
    
    
    (590,985
    )
    
    
    (420,445
    )
    
    
    (116,426
    )
    
    
    (90,075
    )
    
    
    (51,694
    )
    
    
    1,886,294
    
    
    
    1,680,790
    
    
    
    952,680
    
    
    
    1,275,158
    
    
    
    1,216,870
    
    
    
    182,748Other income includes:Interest revenue
    
    
    95,404
    
    
    
    15,796
    
    
    
    11,597
    
    
    
    201,088
    
    
    
    90,596
    
    
    
    89,679
    
    
    
    
    
    
    
    
    
    
    
    197
    
    
    
    (88,117
    )
    
    
    (24,832
    )
    
    
    (19,139
    )
    
    
    208,375
    
    
    
    81,560
    
    
    
    82,334Interest expense
    
    
    112
    
    
    
    
    
    
    
    422,510
    
    
    
    441,493
    
    
    
    349,693
    
    
    
    368,462
    
    
    
    120,566
    
    
    
    88,532
    
    
    
    99,281
    
    
    
    323,457
    
    
    
    244,519
    
    
    
    273,384
    
    
    
    885,628
    
    
    
    682,744
    
    
    
    1,163,637Cost of water sales
    
    
    5,369,550
    
    
    
    5,250,372
    
    
    
    4,972,300
    
    
    
    11,139,715
    
    
    
    8,878,939
    
    
    
    6,484,560
    
    
    
    631,149
    
    
    
    623,116
    
    
    
    491,593
    
    
    
    (1,307,606
    )
    
    
    (1,080,714
    )
    
    
    (708,005
    )
    
    
    15,832,808
    
    
    
    13,671,713
    
    
    
    11,240,448General and
Administrative
    
    
    5,320,301
    
    
    
    4,300,916
    
    
    
    2,684,216
    
    
    
    1,144,402
    
    
    
    1,123,086
    
    
    
    1,166,640
    
    
    
    52,867
    
    
    
    50,929
    
    
    
    194,425
    
    
    
    (372,359
    )
    
    
    (336,749
    )
    
    
    (269,924
    )
    
    
    6,145,211
    
    
    
    5,138,182
    
    
    
    3,775,357Net insurance
recovery
    
    
    
    
    
    
    591,404
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    591,404
    
    
    
    Cost of water sales
and general and
administrative
expenses include:Depreciation
    
    
    946,926
    
    
    
    841,562
    
    
    
    1,077,609
    
    
    
    1,506,851
    
    
    
    1,542,093
    
    
    
    835,315
    
    
    
    9,767
    
    
    
    8,439
    
    
    
    5,105
    
    
    
    (307,066
    )
    
    
    (312,619
    )
    
    
    (218,889
    )
    
    
    2,156,478
    
    
    
    2,079,475
    
    
    
    1,699,140Amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    845,834
    
    
    
    842,693
    
    
    
    877,761
    
    
    
    84,046
    
    
    
    84,046
    
    
    
    77,043
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    929,880
    
    
    
    926,739
    
    
    
    954,804Income tax
expense/(benefit)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,146
    
    
    
    (30,150
    )
    
    
    (23,743
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,146
    
    
    
    (30,150
    )
    
    
    (23,743
    )Net income
    
    
    2,820,745
    
    
    
    3,346,747
    
    
    
    2,963,842
    
    
    
    2,187,170
    
    
    
    2,645,635
    
    
    
    1,038,772
    
    
    
    292,368
    
    
    
    94,578
    
    
    
    328,838
    
    
    
    213,975
    
    
    
    110,423
    
    
    
    (154,371
    )
    
    
    5,514,258
    
    
    
    6,197,383
    
    
    
    4,177,081Property, plant and
equipment, net
    
    
    20,640,807
    
    
    
    18,090,702
    
    
    
    19,164,702
    
    
    
    10,610,163
    
    
    
    10,835,142
    
    
    
    11,657,108
    
    
    
    2,809,874
    
    
    
    11,998
    
    
    
    14,095
    
    
    
    (1,393,229
    )
    
    
    (1,719,253
    )
    
    
    (1,802,112
    )
    
    
    32,667,615
    
    
    
    27,218,589
    
    
    
    29,033,793,Construction in
progress
    
    
    166,924
    
    
    
    890,849
    
    
    
    536,485
    
    
    
    12,887,219
    
    
    
    850,636
    
    
    
    297,662
    
    
    
    
    
    
    
    5,879
    
    
    
    
    
    
    
    (881,741
    )
    
    
    (104,551
    )
    
    
    (205,643
    )
    
    
    12,172,402
    
    
    
    1,642,813
    
    
    
    628,504Total assets
    
    
    54,209,101
    
    
    
    48,205,461
    
    
    
    45,028,169
    
    
    
    33,839,026
    
    
    
    22,734,565
    
    
    
    22,224,004
    
    
    
    4,653,788
    
    
    
    3,696,868
    
    
    
    4,255,510
    
    
    
    (4,336,724
    )
    
    
    (3,811,845
    )
    
    
    (2,945,557
    )
    
    
    88,365,191
    
    
    
    70,825,049
    
    
    
    68,562,126
 71




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##### Table of Contents



CONSOLIDATED WATE CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 18. Segment information (continued)
     19. Related party transactions
      20. Commitments
  72




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##### Table of Contents



CONSOLIDATED WATE CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 20. Commitments (continued)
           21. Stock compensation
  73




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##### Table of Contents



CONSOLIDATED WATE CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 21. Stock compensation (continued)
 For the year ended December 31,2005
    
    
    2004
    
    
    2003Net income  as reported
    
    $
    5,514,258
    
    
    $
    6,197,383
    
    
    $
    4,177,081Net income  pro forma
    
    $
    5,439,982
    
    
    $
    6,136,425
    
    
    $
    3,365,684Earnings per share:Basic  as reported
    
    $
    0.47
    
    
    $
    0.54
    
    
    $
    0.42Basic  pro forma
    
    $
    0.46
    
    
    $
    0.53
    
    
    $
    0.34Diluted  as reported
    
    $
    0.45
    
    
    $
    0.53
    
    
    $
    0.41Diluted  pro forma
    
    $
    0.45
    
    
    $
    0.52
    
    
    $
    0.33
  2005
    
    
    2004
    
    
    2003Exercise price
    
    $
    19.52
    
    
    $
    12.14
    
    
    $
    9.80Grant date market value
    
    $
    15.42
    
    
    $
    10.15
    
    
    $
    9.75Risk free interest rate
    
    
    3.79
    %
    
    
    2.65
    %
    
    
    2.37
    %Expected life
    
    2.49 years
    
    2.82 years
    
    3.22 yearsExpected volatility
    
    
    30.81
    %
    
    
    36.28
    %
    
    
    35.55
    %Expected dividend yield
    
    
    1.22
    %
    
    
    1.90
    %
    
    
    2.16
    %
 Employee Share Incentive Plan (Preferred Shares)
  Year of
    
    
    
    
    
    
    
    
    
    
    Options
    
    
    OptionsGrant
    
    
    Granted
    
    
    Strike Price
    
    
    Exercised
    
    
    ExpiredPreferred shares
    
    
    2003
    
    
    
    5,986
    
    
    $nil
    
    
    N/A
    
    
    
    N/A2004
    
    
    
    3,920
    
    
    $nil
    
    
    N/A
    
    
    
    N/A2005
    
    
    
    5,544
    
    
    $nil
    
    
    N/A
    
    
    
    N/APreferred share options
    
    
    2003
    
    
    
    5,986
    
    
    $
    4.48
    
    
    
    1,688
    
    
    
    4,2982004
    
    
    
    3,920
    
    
    $
    6.73
    
    
    
    1,528
    
    
    
    2,3922005
    
    
    
    5,544
    
    
    $
    9.16
    
    
    
    3,100
    
    
    
    2,444
 th
 74




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 21. Stock compensation (continued)
 Employee Share Option Plan (Common Stock Options)  th
 Non-Executive Directors Share Plan
 Directors and Senior Management Stock Compensation
  2005
    
    
    2004
    
    
    2003Exercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    price
    
    
    Shares
    
    
    price
    
    
    Shares
    
    
    priceOutstanding at beginning of year
    
    
    848,402
    
    
    $
    7.51
    
    
    
    958,836
    
    
    $
    6.98
    
    
    
    789,060
    
    
    $
    5.01Granted
    
    
    13,974
    
    
    $
    15.42
    
    
    
    12,400
    
    
    $
    10.15
    
    
    
    366,980
    
    
    $
    9.75Exercised
    
    
    (250,622
    )
    
    $
    5.35
    
    
    
    (120,442
    )
    
    $
    3.59
    
    
    
    ( 192,906
    )
    
    $
    4.26Forfeited
    
    
    (11,104
    )
    
    $
    5.61
    
    
    
    (2,392
    )
    
    $
    6.73
    
    
    
    (4,298
    )
    
    $
    4.48Outstanding at end of year
    
    
    600,650
    
    
    $
    8.63
    
    
    
    848,402
    
    
    $
    7.51
    
    
    
    958,836
    
    
    $
    6.98Exercisable at end of year
    
    
    526,860
    
    
    $
    8.52
    
    
    
    737,832
    
    
    $
    7.64
    
    
    
    856,746
    
    
    $
    7.07
 75




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 21. Stock compensation (continued)
  For the year ended December 31,2005
    
    
    2004
    
    
    2003Options granted with an exercise price below market price on the date of grant:Employees  preferred shares
    
    $
    10.35
    
    
    $
    6.26
    
    
    $
    2.74Overall weighted average
    
    $
    10.35
    
    
    $
    6.26
    
    
    $
    2.74Options granted with an exercise price at market price on the date of grant:Management employees
    
    $
    
    
    
    $
    
    
    
    $
    2.35Employees  ordinary share options
    
    $
    5.39
    
    
    $
    3.33
    
    
    $
    2.06Overall weighted average
    
    $
    5.39
    
    
    $
    3.33
    
    
    $
    2.33
 Summary of options outstanding at December 31, 2005
  Exerciseprices from$5.97 - $10.03Number of options outstanding at December 31, 2005
    
    526,860Weighted average exercise price
    
    $     8.52Weighted average remaining contractual price
    
    0.75 years
  2005
    
    
    2004
    
    
    2003Exercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseNumber
    
    
    price
    
    
    Number
    
    
    price
    
    
    Number
    
    
    priceOverall weighted average
    
    
    14,484
    
    
    $
    18.43
    
    
    
    12,572
    
    
    $
    11.56
    
    
    
    22,934
    
    
    $
    7.26
 76




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 22. Taxation
        23. Pension benefits
  77




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 24. Financial instruments
 Credit risk:
 Interest rate risk:
 Foreign exchange risk:
 Fair values:
 78




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 25. Non-cash transactions
  2005
    
    
    2004
    
    
    2003Redemption of preferred shares and issue of
replacement common shares at $nil consideration
    
    $
    2,509
    
    
    $
    2,866
    
    
    $
    11,974Preferred shares issued to employees at $nil
consideration
    
    $
    3,326
    
    
    $
    2,352
    
    
    $
    3,592Redemption of preferred shares at $nil consideration
    
    
    
    
    
    
    
    
    
    
    (162
    )Common stock issued under the Non-executive
Directors Share Plan at $nil consideration
    
    
    150,716
    
    
    
    95,568
    
    
    
    102,602Common stock issued under senior management
employment agreements in lieu of cash bonuses
    
    
    145,040
    
    
    
    
    
    
    
    Common stock issued under senior management
employment agreements at $nil consideration
    
    
    
    
    
    
    
    
    
    
    28,715Additional paid in capital from exercise of stock
options
    
    
    52,744
    
    
    
    
    
    
    
    37,500$
    351,826
    
    
    $
    97,920
    
    
    $
    172,247Addition of common stock and additional paid-in
capital from issuance of shares in the acquisition
    
    $
    
    
    
    $
    
    
    
    $
    2,291,711Dividends declared but not paid
    
    $
    828,709
    
    
    $
    783,854
    
    
    $
    686,118
 26. Impact of recent accounting standards pronouncements
   79




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 26. Impact of recent accounting standards pronouncements (continued)
     80




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    
 81




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##### Table of Contents



Independent Auditors Report
 
     
 82




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##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 CONSOLIDATED BALANCE SHEETS
 DECEMBER 31, 2005 and 2004
  2005
    
    
    2004ASSETSCurrent assetsCash and cash equivalents
    
    $
    944,574
    
    
    $
    1,291,121Accounts receivable
    
    
    3,418,922
    
    
    
    2,874,989Deferred fees
    
    
    3,837
    
    
    
    11,401Inventory
    
    
    344,348
    
    
    
    349,826Prepaid expenses and other assets
    
    
    24,717
    
    
    
    24,722Total current assets
    
    
    4,736,398
    
    
    
    4,552,059Property, plant and equipment, net
    
    
    3,200,618
    
    
    
    3,949,583Construction in progress
    
    
    2,025,594
    
    
    
    240,181Total assets
    
    $
    9,962,610
    
    
    $
    8,741,823LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable and other liabilities
    
    $
    1,114,094
    
    
    $
    835,589Current portion of long term debt
    
    
    255,000
    
    
    
    250,000Total current liabilities
    
    
    1,369,094
    
    
    
    1,085,589Profit sharing provision
    
    
    1,508,714
    
    
    
    1,409,078Long term
debt, including $800,000 to affiliates in 2005
    
    
    800,000
    
    
    
    255,000Minority interest in JVD Ocean Desalination Ltd.
    
    
    33,265
    
    
    
    18,526Total liabilities
    
    
    3,711,073
    
    
    
    2,768,193Commitments
    
    
    
    
    
    
    Stockholders equityClass A, voting shares, $1 par value. Authorized 600,000 shares:issued and outstanding 555,000 shares in 2005 and 2004
    
    
    555,000
    
    
    
    555,000Class B, voting shares, $1 par value. Authorized 600,000 shares:issued and outstanding 555,000 shares in 2005 and 2004
    
    
    555,000
    
    
    
    555,000Class C, non-voting shares, $1 par value. Authorized 600,000 shares:issued and outstanding 165,000 in 2005 and 2004
    
    
    165,000
    
    
    
    165,000Additional paid-in capital
    
    
    225,659
    
    
    
    225,659Retained earnings
    
    
    4,750,878
    
    
    
    4,472,971Total stockholders equity
    
    
    6,251,537
    
    
    
    5,973,630Total liabilities and stockholders equity
    
    $
    9,962,610
    
    
    $
    8,741,823
  83




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##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 CONSOLIDATED STATEMENTS OF INCOME
 YEARS ENDED DECEMBER 31, 2005, 2004 and 2003
  2005
    
    
    2004
    
    
    2003Water sales
    
    $
    7,715,827
    
    
    $
    6,872,366
    
    
    $
    4,819,605Cost of water sales
    
    
    (3,003,920
    )
    
    
    (2,475,304
    )
    
    
    (2,110,066
    )Gross profit
    
    
    4,711,907
    
    
    
    4,397,062
    
    
    
    2,709,539General and administrative expenses
    
    
    (1,818,229
    )
    
    
    (1,642,862
    )
    
    
    (1,046,186
    )Income from operations
    
    
    2,893,678
    
    
    
    2,754,200
    
    
    
    1,663,353Other income (expense)Interest income
    
    
    202,428
    
    
    
    57,081
    
    
    
    103,225Interest expense
    
    
    (62,150
    )
    
    
    (31,557
    )
    
    
    (28,378
    )Other income
    
    
    111
    
    
    
    
    
    
    
    140,389
    
    
    
    25,524
    
    
    
    74,847Income before minority interest
    
    
    3,034,067
    
    
    
    2,779,724
    
    
    
    1,738,200Minority interest
    
    
    (14,739
    )
    
    
    (8,526
    )
    
    
    Net income
    
    $
    3,019,328
    
    
    $
    2,771,198
    
    
    $
    1,738,200
 .
 84




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##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 YEARS ENDED DECEMBER 31, 2005, 2004 and 2003
  Additional
    
    
    
    
    
    
    TotalCommon stock
    
    
    paid-in
    
    
    Retained
    
    
    stockholdersShares
    
    
    Dollars
    
    
    capital
    
    
    earnings
    
    
    equityBalance at January 1, 2003
    
    
    1,230,000
    
    
    $
    1,230,000
    
    
    $
    165,200
    
    
    $
    2,704,823
    
    
    $
    4,100,023Issuance of Class C stock
    
    
    45,000
    
    
    
    45,000
    
    
    
    60,459
    
    
    
    
    
    
    
    105,459Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,738,200
    
    
    
    1,738,200Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,593,750
    )
    
    
    (1,593,750
    )Balance at December 31, 2003
    
    
    1,275,000
    
    
    
    1,275,000
    
    
    
    225,659
    
    
    
    2,849,273
    
    
    
    4,349,932Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,771,198
    
    
    
    2,771,198Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,147,500
    )
    
    
    (1,147,500
    )Balance at December 31, 2004
    
    
    1,275,000
    
    
    
    1,275,000
    
    
    
    225,659
    
    
    
    4,472,971
    
    
    
    5,973,630Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,019,328
    
    
    
    3,019,328Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,741,421
    )
    
    
    (2,741,421
    )Balance at December 31, 2005
    
    
    1,275,000
    
    
    $
    1,275,000
    
    
    $
    225,659
    
    
    $
    4,750,878
    
    
    $
    6,251,537
 .
 85




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##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 YEARS ENDED DECEMBER 31, 2005, 2004 and 2003
  2005
    
    
    2004
    
    
    2003Cash flows from operating activitiesNet income
    
    $
    3,019,328
    
    
    $
    2,771,198
    
    
    $
    1,738,200Add/(deduct) items not affecting cashDepreciation
    
    
    713,687
    
    
    
    719,163
    
    
    
    502,666Amortization of bank fees
    
    
    7,564
    
    
    
    7,567
    
    
    
    Profit sharing
    
    
    970,386
    
    
    
    868,515
    
    
    
    527,393Minority interest
    
    
    14,739
    
    
    
    8,526
    
    
    
    (Increase) decrease in accounts receivable
    
    
    (543,934
    )
    
    
    (2,178,171
    )
    
    
    1,606,496(Increase) decrease in inventory
    
    
    5,478
    
    
    
    (132,221
    )
    
    
    (38,779
    )(Increase) decrease in other assets
    
    
    5
    
    
    
    
    
    
    
    (18,974
    )Increase in accounts payable and other
liabilities
    
    
    278,506
    
    
    
    78,856
    
    
    
    466,116Net cash provided by operating activities
    
    
    4,465,759
    
    
    
    2,143,433
    
    
    
    4,783,118Cash flows from investing activitiesPurchase of property, plant and equipment
    
    
    (17,010
    )
    
    
    (212,362
    )
    
    
    (1,055,174
    )Expenditures for construction in progress
    
    
    (1,785,413
    )
    
    
    (84,217
    )
    
    
    (451,665
    )Proceeds from sale of assets
    
    
    52,288
    
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (1,750,135
    )
    
    
    (296,579
    )
    
    
    (1,506,839
    )Cash flows from financing activitiesProfit sharing rights paid
    
    
    (870,750
    )
    
    
    (364,500
    )
    
    
    (506,250
    )Minority interest from affiliate
    
    
    
    
    
    
    10,000
    
    
    
    Proceeds from long term debt
    
    
    800,000
    
    
    
    
    
    
    
    880,000Principal repayments of long term debt
    
    
    (250,000
    )
    
    
    (250,000
    )
    
    
    (1,125,000
    )Dividends paid
    
    
    (2,741,421
    )
    
    
    (1,147,500
    )
    
    
    (1,593,750
    )Net cash used in financing activities
    
    
    (3,062,171
    )
    
    
    (1,752,000
    )
    
    
    (2,345,000
    )Net increase (decrease) in cash and cash equivalents
    
    
    (346,547
    )
    
    
    94,854
    
    
    
    931,279Cash and cash equivalents at the beginning of the year
    
    
    1,291,121
    
    
    
    1,196,267
    
    
    
    264,988Cash and cash equivalents at the end of the year
    
    $
    944,574
    
    
    $
    1,291,121
    
    
    $
    1,196,267Interest paid in cash
    
    $
    19,088
    
    
    $
    20,659
    
    
    $
    28,378Interest received in cash
    
    $
    184,389
    
    
    $
    11,013
    
    
    $
    103,225
  86




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##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 1. Principal activity
    2. Accounting policies
 Basis of preparation:
 Basis of consolidation:
 Use of estimates:
 Cash and cash equivalents:
 Trade accounts receivable:
 Interest income:
 87




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##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2. Accounting policies (continued)
 Deferred fees:
 Inventory:
 Impairment of long-lived assets:
 Property, plant and equipment:
 Plant and equipment
    
    
    4 to 40 yearsOffice furniture, fixtures and equipment
    
    
    3 to 10 yearsVehicles
    
    
    3 to 10 yearsLab Equipment
    
    
    3 to 10 years
  Construction in progress :
 Water sales and cost of water sales:
 Repairs and maintenance:
 Comparative amounts:
 3. Cash and cash equivalents
  4. Trade accounts receivable
  88




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##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 5. Inventory
 December 31,2005
    
    
    2004Consumables stock
    
    $
    43,679
    
    
    $
    51,239Spare parts stock
    
    
    300,669
    
    
    
    298,587Total
    
    $
    344,348
    
    
    $
    349,826
 6. Property, plant and equipment and construction in progress
 December 31,2005
    
    
    2004Plant and equipment
    
    $
    9,416,015
    
    
    $
    9,475,811Office furniture, fixtures and equipment
    
    
    37,027
    
    
    
    33,182Vehicles
    
    
    71,600
    
    
    
    71,600Lab equipment
    
    
    11,637
    
    
    
    11,6379,536,279
    
    
    
    9,592,230Accumulated depreciation
    
    
    (6,335,661
    )
    
    
    (5,642,647
    )Property, plant and equipment, net
    
    $
    3,200,618
    
    
    $
    3,949,583Construction in progress
    
    $
    2,025,594
    
    
    $
    240,181
  89




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##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 7. Long term debt
 December 31,2005
    
    
    2004Scotiabank (Cayman Islands) loan bearing interest at three month LIBOR plus
1.5% per annum, with interest calculated daily and payable quarterly. Principal
is repayable in semi-annual intallments of $125,000 through May 31, 2006.
    
    $
    255,000
    
    
    $
    505,000CWCO loan bearing interest at three month LIBOR plus 3.5% per annum, with
interest calculated daily and payable quarterly. Principal is due June 1, 2007.
    
    
    800,000
    
    
    
    Total long term debt
    
    
    1,055,000
    
    
    
    505,000Less current portion
    
    
    (255,000
    )
    
    
    (250,000
    )Long term debt, excluding current portion
    
    $
    800,000
    
    
    $
    255,000
  2006
    
    $
    255,0002007
    
    
    800,000
    8. Commitments
   90




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##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 8. Commitments (continued)
  2006
    
    $
    33,0752007
    
    
    33,0752008
    
    
    33,0752009
    
    
    33,0752010
    
    
    33,075Thereafter
    
    
    390,675
  9. Expenses
 For the year ended December 31,2005
    
    
    2004
    
    
    2003Cost of water sales comprise the following:Fuel oil
    
    $
    625,316
    
    
    $
    532,933
    
    
    $
    356,427Electricity
    
    
    529,905
    
    
    
    151,726
    
    
    
    324,162Maintenance
    
    
    436,104
    
    
    
    296,361
    
    
    
    288,697Depreciation
    
    
    712,582
    
    
    
    718,611
    
    
    
    502,573Employee costs
    
    
    381,613
    
    
    
    468,506
    
    
    
    417,861Insurance
    
    
    80,138
    
    
    
    78,008
    
    
    
    77,790Other direct cost
    
    
    238,262
    
    
    
    229,159
    
    
    
    142,556$
    3,003,920
    
    
    $
    2,475,304
    
    
    $
    2,110,066General and administrative expenses comprise the following:Profit sharing
    
    $
    970,386
    
    
    $
    868,515
    
    
    $
    527,393Management fees
    
    
    561,605
    
    
    
    567,802
    
    
    
    333,904Directors fees and expenses
    
    
    67,091
    
    
    
    79,589
    
    
    
    60,647Professional fees
    
    
    29,980
    
    
    
    24,399
    
    
    
    13,150Employee costs
    
    
    36,686
    
    
    
    25,689
    
    
    
    Maintenance costs
    
    
    991
    
    
    
    474
    
    
    
    709Depreciation
    
    
    1,105
    
    
    
    552
    
    
    
    92Other indirect costs
    
    
    150,385
    
    
    
    75,842
    
    
    
    110,291$
    1,818,229
    
    
    $
    1,642,862
    
    
    $
    1,046,186
 10. Related party transactions
  91




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OCEAN CONVERSION (BVI) LTD.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 10. Related party transactions (continued)
       11. Profit sharing provision
 December 31,2005
    
    
    2004Opening balance
    
    $
    1,409,078
    
    
    $
    905,063Additions
    
    
    970,386
    
    
    
    868,515Distributions
    
    
    (870,750
    )
    
    
    (364,500
    )$
    1,508,714
    
    
    $
    1,409,078
  92




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##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 11. Profit sharing provision (continued)
    12. Taxation
  13. Non-cash transaction
  14. Pension plan
  93




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##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 15. Financial instruments
 Credit risk:
 Interest rate risk:
 Fair values:
 94




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##### Table of Contents



ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.
       
 ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
    95




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##### Table of Contents



Managements Annual Report on Internal Control Over Financial Reporting
  
    
    pertain to the maintenance of records that, in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the Company;
    
    provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles and, that receipts and expenditures of the Company are being made only in
accordance with authorization of management and directors of the Company; and
    
    provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Companys assets that could have a material effect
on the financial statements.
 96




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Remediation Steps to Address Prior Year Control Deficiencies
        97




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Changes in Internal Control Over Financial Reporting
  Report of Independent Registered Public Accounting Firm
 
     98




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##### Table of Contents



99




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Report of Independent Registered Public Accounting Firm
 
      100




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##### Table of Contents



a)
    
    The Company failed to properly track fixed assets and accumulated depreciation,
including work-in-progress accounts.b)
    
    The Company does not have sufficient personnel resources with appropriate accounting
expertise.c)
    
    The Company did not properly track inventory and management did not sufficiently review
the physical count worksheets to the final inventory lists.d)
    
    The Company did not sufficiently review the inter-company eliminations.e)
    
    The Company did not sufficiently document the system access controls around its
financial management information system.
     
 101




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 Our Directors and Executive Officers
  Name
    
    Age
    
    PositionJeffrey M. Parker
    
    
    61
    
    
    Director, Chairman of the Board of DirectorsFrederick W. McTaggart
    
    
    43
    
    
    Director, President, Chief Executive OfficerJoseph Pivinski
    
    
    58
    
    
    Senior Vice President & Chief Financial OfficerKenneth R. Crowley
    
    
    41
    
    
    Vice President of Overseas OperationsGregory S. McTaggart
    
    
    42
    
    
    Vice President of Cayman OperationsRobert B. Morrison
    
    
    52
    
    
    Vice President of Purchasing and Information
TechnologyGerard J. Pereira
    
    
    35
    
    
    Vice President of EngineeringBrent J. Santha
    
    
    35
    
    
    Vice President of Finance, Interim Chief
Financial Officer and Company SecretaryWilliam T. Andrews *
    
    
    57
    
    
    DirectorJ. Bruce Bugg, Jr. *
    
    
    51
    
    
    DirectorBrian E. Butler *
    
    
    56
    
    
    DirectorSteven A. Carr *
    
    
    55
    
    
    DirectorCarson K. Ebanks *
    
    
    50
    
    
    DirectorRichard L. Finlay
    
    
    47
    
    
    DirectorClarence B. Flowers, Jr. *
    
    
    50
    
    
    DirectorWilmer Pergande *
    
    
    66
    
    
    DirectorDavid W. Sasnett *
    
    
    49
    
    
    DirectorRaymond Whittaker *
    
    
    52
    
    
    Director
 
 *
    
    The Board of Directors has determined that each of such persons is an independent
director under the corporate governance rules of The Nasdaq Stock Market, Inc. (Nasdaq) Jeffrey M. Parker
 Frederick W. McTaggart
 102




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##### Table of Contents



Joseph Pivinski
 Kenneth R. Crowley
 Gregory S. McTaggart
 Robert B. Morrison
 Gerard J. Pereira
 Brent J. Santha
 William T. Andrews
 103




---



##### Table of Contents



J. Bruce Bugg, Jr.
 Brian E. Butler
 Steven A. Carr th
 Carson K. Ebanks
 Richard L. Finlay
 104




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##### Table of Contents



Clarence B. Flowers, Jr.
 Wilmer Pergande
 David W. Sasnett
 Raymond Whittaker
 105




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##### Table of Contents



Composition of the Board of Directors
  Group 1
    
    Group 2
    
    Group 3William T. Andrews
    
    Carson K. Ebanks, JP
    
    Wilmer PergandeJ. Bruce Bugg Jr.
    
    Richard Finlay
    
    Raymond WhittakerBrian Butler
    
    Clarence Flowers, Jr.
    
    David W. SasnettSteven A. Carr
    
    Frederick McTaggartJeffrey M. Parker
   Governance of the Company
      106




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Committees of the Board of Directors
          107




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108




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ITEM 11. EXECUTIVE COMPENSATION
  Summary Compensation Table
 Annual Compensation
    
    
    Long-Term CompensationOther Annual
    
    
    Securities Underlying
    
    
    All OtherName and Principal
    
    
    
    Salary
    
    
    Bonus
    
    
    Compensation
    
    
    Options(2)
    
    
    CompensationPosition
    
    Year
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    (#)
    
    
    ($)Frederick W. McTaggart(1)
    
    2003
    
    
    118,006
    
    
    
    185,757
    
    
    
    
    
    
    
    87,580
    
    
    
    Director, President and
    
    2004
    
    
    200,000
    
    
    
    200,482
    
    
    
    
    
    
    
    
    
    
    
    Chief Executive Officer
    
    2005
    
    
    208,800
    
    
    
    104,400
    
    
    
    
    
    
    
    
    
    
    
    Gregory S. McTaggart
    
    2003
    
    
    85,932
    
    
    
    36,408
    
    
    
    
    
    
    
    63,444
    
    
    
    Vice President of Cayman
    
    2004
    
    
    105,000
    
    
    
    42,000
    
    
    
    
    
    
    
    
    
    
    
    Operations
    
    2005
    
    
    109,620
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Robert B. Morrison (3)
    
    2003
    
    
    115,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vice President of
    
    2004
    
    
    100,000
    
    
    
    40,000
    
    
    
    
    
    
    
    
    
    
    
    Purchasing and IT
    
    2005
    
    
    111,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Jeffrey M. Parker (1)
    
    2003
    
    
    95,895
    
    
    
    316,493
    
    
    
    
    
    
    
    90,194
    
    
    
    Chairman of the Board of
    
    2004
    
    
    165,000
    
    
    
    373,840
    
    
    
    
    
    
    
    
    
    
    
    Directors
    
    2005
    
    
    172,260
    
    
    
    68,904
    
    
    
    
    
    
    
    
    
    
    
    Joseph Pivinski (4)
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Senior Vice President and
    
    2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chief Financial Officer
    
    2005
    
    
    145,000
    
    
    
    27,188
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Mr. Parker and Mr. McTaggart served as the Chief Executive Officer and Chief Financial
Officer, respectively, until January 2004.(2)
    
    All options granted to Messrs. Frederick McTaggart, Gregory McTaggart and Jeffrey Parker, 2003
have an exercise price of $10.03 per share.(3)
    
    The 2003 salaries for Mr. Morrison, who joined the Company in February 2003, due to the
acquisition, have been annualized based upon a full year of employment for comparative purposes.(4)
    
    The 2005 salary for Mr. Pivinski, who joined the Company in April 2005, has been annualized
based upon a full year of employment for comparative purposes. 109




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##### Table of Contents



Stock Option Holdings
  Number of Securities
    
    
    Value of UnexercisedUnderlying Unexercised
    
    
    In-The-MoneyShares Acquired
    
    
    Value
    
    
    Options at Fiscal Year End
    
    
    Options at Fiscal Year Endon Exercise
    
    
    Realized
    
    
    Exercisable
    
    
    Unexercisable
    
    
    Exercisable
    
    
    Unexercisable(#)
    
    
    ($)
    
    
    (#)
    
    
    (#)
    
    
    ($)
    
    
    ($)Frederick W. McTaggart
    
    
    57,066
    
    
    
    568,948
    
    
    
    140,434
    
    
    
    
    
    
    
    1,656,142
    
    
    
    Gregory S. McTaggart
    
    
    41,600
    
    
    
    420,160
    
    
    
    102,094
    
    
    
    
    
    
    
    1,204,914
    
    
    
    Robert B. Morrison
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Jeffrey M. Parker
    
    
    57,014
    
    
    
    563,868
    
    
    
    142,514
    
    
    
    
    
    
    
    1,675,297
    
    
    
    Joseph Pivinski
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Incentive Compensation
 Employee Share Incentive Plan
   110




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Employee Share Option Plan
   Non-Executive Directors Share Plan
 st st
 111




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##### Table of Contents



Pension Plan
    
    
    Receive a cash payout if the employees retirement savings is less than $6,000;
    
    Transfer the retirement savings to a life annuity for investment by a life insurance
company and payment of a regular income stream to the employee for the remainder of the
employees life (and the employees spouses life if the employee is married at the time of
retirement); or
    
    Transfer the retirement savings to a Retirement Savings Arrangement account with an
approved provider or bank and receive regular income payments until the account is
depleted.
 Employment Agreements
 Jeffrey
M. ParkerChairman of the Board of Directors
 st
 st
 112




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##### Table of Contents



st
 Frederick
W. McTaggartPresident and Chief Executive Officer
 st
 st
   113




---



##### Table of Contents



st
 Joseph
PivinskiSenior Vice President and Chief Financial Officer
   Brent
J. SanthaVice President of Finance and Company Secretary
     114




---



##### Table of Contents



Gregory
S. McTaggartVice President of Cayman Operations
  st
   Robert
B. MorrisonVice President of Purchasing and Information Technology
   115




---



##### Table of Contents



Gerard
J. PereiraVice President of Engineering
    Compensation Committee Interlocks and Insider Participation in Compensation Decisions
  116




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##### Table of Contents



ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED
                  STOCKHOLDERS MATTERS
  
    
    each person or entity that we know beneficially owns more than 5% of our common
            shares or redeemable preferred shares;
    
    each of our executive officers and directors; and
    
    all of our officers and directors as a group.
 Identity of
    
    Amount
    
    
    Percentage ofTitle of Class
    
    Person or Group (1) (2) (3)
    
    Owned
    
    
    ClassCommon Shares
    
    Thomas C. Barrow (1)
    
    
    740,388
    
    
    
    6.1
    %Common Shares
    
    Thomson, Horstmann, &
Bryant (2)
    
    
    630,050
    
    
    
    5.2
    %Common Shares
    
    Jeffrey M. Parker,
Chairman of the Board of
Directors,
    
    
    563,176
    
    
    
    4.5
    %Common Shares
    
    Frederick W. McTaggart,
Director, President and
Chief Executive Officer
    
    
    200,994
    
    
    
    1.6
    %Common Shares
    
    Gregory S. McTaggart,
Vice President of Cayman
Operations
    
    
    201,732
    
    
    
    1.7
    %Common Shares
    
    Kenneth R. Crowley,
Vice President of Overseas
Operations
    
    
    
    
    
    
    *Common Shares
    
    Robert B. Morrison,
Vice President of
Purchasing and IT
    
    
    3,406
    
    
    
    *Common Shares
    
    Joseph Pivinski,
Senior Vice President and
Chief Financial Officer
    
    
    
    
    
    
    *Common Shares
    
    Gerard J. Pereira,
Vice President of
Engineering
    
    
    3,784
    
    
    
    *Common Shares
    
    Brent J. Santha,
Vice President of Finance,
and Company Secretary
    
    
    23,366
    
    
    
    *Common Shares
    
    J. Bruce Bugg, Jr.,
Director
    
    
    9,086
    
    
    
    *
 117




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##### Table of Contents



Identity of
    
    Amount
    
    
    Percentage ofTitle of Class
    
    Person or Group (1) (2) (3)
    
    Owned
    
    
    ClassCommon Shares
    
    William T. Andrews,
Director
    
    
    875
    
    
    
    *Common Shares
    
    Brian E. Butler,
Director
    
    
    43,744
    
    
    
    *Common Shares
    
    Steven A. Carr,
Director
    
    
    86,250
    
    
    
    *Common Shares
    
    Carson K. Ebanks,
Director
    
    
    
    
    
    
    *Common Shares
    
    Richard L. Finlay,
Director
    
    
    1,403
    
    
    
    *Common Shares
    
    Clarence B. Flowers, Jr.,
Director
    
    
    300,000
    
    
    
    2.5
    %Common Shares
    
    Wilmer Pergande,
Director
    
    
    7,387
    
    
    
    *Common Shares
    
    David W. Sasnett,
Director
    
    
    
    
    
    
    *Common Shares
    
    Raymond Whittaker,
Director
    
    
    25,906
    
    
    
    *Common Shares
    
    Directors and Executive
Officers as a Group
(18 persons)
    
    
    1,461,109
    
    
    
    12.0
    %Redeemable
    
    Margaret Julier,Preferred Shares
    
    Office Manager
    
    
    4,492
    
    
    
    13.9
    %Redeemable
    
    William BankerPreferred Shares
    
    Operations Manager
    
    
    5,056
    
    
    
    15.7
    %Redeemable
    
    Chet RitchPreferred Shares
    
    Operations
    
    
    1,512
    
    
    
    4.7
    %Redeemable
    
    Helbert RodriquezPreferred Shares
    
    Operations
    
    
    1,776
    
    
    
    5.5
    %Redeemable
    
    Ivan TaboraPreferred Shares
    
    Operations
    
    
    1,452
    
    
    
    4.5
    %Redeemable
    
    Elizabeth TrianaPreferred Shares
    
    Customer Service
    
    
    1,658
    
    
    
    5.1
    %
  118




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(1)
    
    On January 20, 2005, Javelin Opportunities LP, Javelin Opportunities Offshore,
Ltd. and Javelin Partners LP (the Javelin Entities) jointly filed a Schedule 13G
(Schedule 13G) with the Securities and Exchange Commission. The Schedule 13G states
that Javelin Opportunities LP has sole voting and investment power over 362,400 common
shares, Javelin Opportunities Offshore, Ltd. has sole voting and investment power over
351,600 shares and Javelin Partners LP has sole voting and investment power over 26,388
shares. Thomas C. Barrow is the managing member of the general partner of each of the
Javelin Entities. The address of the Javelin Entities and Thomas C. Barrow is 7674 W.
Lake Mead Boulevard, Suite 230, Las Vegas, NV 89128.(2)
    
    On January 9, 2006, Thomson Horstmann & Bryant, Inc. filed a Schedule 13G
(Schedule 13G) with the Securities and Exchange Commission. The Schedule 13G states
that Thomson Horstmann & Bryant, Inc. has sole voting power over
380,180 shares of
common stock and sole dispositive power over 630,050 shares. The address of the
Thomson Horstmann & Bryant, Inc. is Park 80 West, Plaza One, Saddle Brook, NJ 07663.(3)
    
    The address for Jeffrey Parker, Frederick McTaggart, Gregory McTaggart, Kenneth
Crowley, Robert Morrison, Gerard Pereira, Brent Santha Margaret Julier, William Banker,
Chet Ritch, Helbert Rodriquez, Ivan Tabora and Elizabeth Triana is as follows: c/o
Consolidated Water Co. Ltd., Regatta Office Park, Windward Three, 4th
Floor, P.O. Box 1114GT, Grand Cayman, Cayman Islands The address for Joseph Pivinski is
Aquilex, Inc., 674 S. Military Trail, Deerfield Beach, FL 33442. The address for each
of J. Bruce Bugg Jr. and Argyle/Cay-Water, Ltd. is c/o Argyle Investment Corp., 1500
Nations Bank Plaza, 300 Convent Street, San Antonio, Texas 78205. The address for
William Andrews is De Salt House, 7 Salt Kettle Lane, Paget PG 01, Bermuda. The
address for Brian Butler is P.O. Box 30864 SMB, Grand Cayman, B.W.I. The address for
Steven A. Carr c/o Carr & Associates, P.O. Box 4689, Bryan, Texas 77805. The address
for Caron Ebanks is Government Administration Building, Georgetown, Grand Cayman,
B.W.I. The address for Richard Finlay is P.O. Box 31442 SMB, Grand Cayman, B.W.I. The
address for Clarence Flowers, Jr. is P.O. Box 2581GT, Grand Cayman, B.W.I. The address
for Wilmer Pergande is 3724 Bengal Road, Gulf Breeze, Florida 32561. The address for
David Sasnett is 16254 SW 67 Court, Fort Lauderdale, Florida 33331. The address for
Raymond Whittaker is P.O. Box 1982GT, Grand Cayman, B.W.I.
  119




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##### Table of Contents



Equity Compensation Plan Information
  
    
    all compensation plans previously approved by our security holders; and
    
    all compensation plans not previously approved by our security holders.
 Number ofsecuritiesremaining availableNumber of
    
    
    
    
    
    
    for future issuancesecurities to be
    
    
    
    
    
    
    under equityissued upon
    
    
    Weighted-average
    
    
    compensation plansexercise of
    
    
    exercise price of
    
    
    (excludingoutstanding
    
    
    outstanding
    
    
    securitiesoptions, warrants
    
    
    options, warrants
    
    
    reflected in columnand rights
    
    
    and rights
    
    
    (a))Plan category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    526,860
    
    
    $
    8.52
    
    
    
    *Equity compensation
plans not approved
by security holders
    
    
    73,790
    **
    
    $
    9.39
    
    
    
    *Total
    
    
    600,650
    
    
    $
    8.63
    
    
    
    *
 *
    
    Our equity compensation plans do not have any limits on the amount of shares reserved for
issuance under the plans.**
    
    All of the 73,790 shares are issuable pursuant to our employee stock option plan. See Note 21
to the Notes to Consolidated Financial Statements.
 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  120




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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  2005
    
    
    2004Audit
    
    $
    397,000
    
    
    $
    537,819Audit-Related
    
    
    
    
    
    
    Tax
    
    
    
    
    
    
    All Other
    
    
    
    
    
    
    Total
    
    $
    397,000
    
    
    $
    537,819
     121




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##### Table of Contents



PART IV
 
 ITEM 15.EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
 (a)1. Financial StatementsThe Consolidated Water Co. Ltd. financial statements found in ITEM 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA for the year ended December 31, 2005 are incorporated herein by
reference.Pursuant to Rule 3-09 of Regulation S-X, when either the first or third condition set forth
in Rule 1-02(w), substituting 20 percent for 10 percent, is met by a 50
percent-or-less-owned person accounted for by the equity method separate financial
statements shall be filed. The Ocean Conversion (BVI) Ltd. financial statements found in
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA for the year ended December 31, 2005 are
incorporated herein by reference.2.
    
    Financial Statement SchedulesNone3.
    
    Exhibits
 ExhibitNumber
    
    Exhibit Description2.1
    
    
    Share Sale Agreement dated October 4, 2002, among Consolidated Water
Co. Ltd. and William T. Andrews and Margaret D. Andrews (incorporated
herein by reference to the exhibit filed as a part of our Form 8-K
dated February 13, 2003, Commission File No. 0-25248)2.2
    
    
    Agreement to Amend Share Sale Agreement dated November 29, 2002
between the Company and William T. Andrews and Margaret D. Andrews
(incorporated herein by reference to the exhibit filed as a part of
our Form 8-K dated February 13, 2003, Commission File No. 0-25248)2.3
    
    
    Agreement to Amend Share Sale Agreement dated December 30, 2002
between the Company and William T. Andrews and Margaret D. Andrews
(incorporated herein by reference to the exhibit filed as a part of
our Form 8-K dated February 13, 2003, Commission File No. 0-25248)2.4
    
    
    Agreement to Amend Share Sale Agreement dated January 31, 2003 between
the Company and William T. Andrews and Margaret D. Andrews
(incorporated herein by reference to the exhibit filed as a part of
our Form 8-K dated February 13, 2003, Commission File No. 0-25248)2.5
    
    
    Share Sale Agreement dated October 4, 2002, among Consolidated Water
Co. Ltd., North American Mortgage & Finance Corporation and
Transcontinental Finance Corporation Ltd. (incorporated herein by
reference to the exhibit filed as a part of our Form 8-K dated
February 13, 2003, Commission File No. 0-25248)
 122




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##### Table of Contents



ExhibitNumber
    
    Exhibit Description2.6
    
    
    Agreement to Amend Share Sale Agreement dated November 29, 2002 among
the Company North-American Mortgage & Finance Corporation and
Transcontinental Finance Corporation Limited (incorporated herein by
reference to the exhibit filed as a part of our Form 8-K dated
February 13, 2003, Commission File No. 0-25248)2.7
    
    
    Agreement to Amend Share Sale Agreement dated December 30, 2002 among
the Company North-American Mortgage & Finance Corporation and
Transcontinental Finance Corporation Limited (incorporated herein by
reference to the exhibit filed as a part of our Form 8-K dated
February 13, 2003, Commission File No. 0-25248)2.8
    
    
    Agreement to Amend Share Sale Agreement dated January 31, 2003 among
the Company North-American Mortgage & Finance Corporation and
Transcontinental Finance Corporation Limited (incorporated herein by
reference to the exhibit filed as a part of our Form 8-K dated
February 13, 2003, Commission File No. 0-25248)2.9
    
    
    Agreement dated October 8, 2002 between Consolidated Water Co. Ltd.
and Sage Water Holdings (BVI) Limited (incorporated herein by
reference to the exhibit filed as a part of our Form 8-K dated
February 13, 2003, Commission File No. 0-25248)2.10
    
    
    Amending Agreement dated November 15, 2002 between the Company and
Sage Water Holdings (BVI) Limited (incorporated herein by reference to
the exhibit filed as a part of our Form 8-K dated February 13, 2003,
Commission File No. 0-25248)2.11
    
    
    Amending Agreement dated December 18, 2002 between the Company and
Sage Water Holdings (BVI) Limited (incorporated herein by reference to
the exhibit filed as a part of our Form 8-K dated February 13, 2003,
Commission File No. 0-25248)2.12
    
    
    Amending Agreement dated January 28, 2003 between the Company and Sage
Water Holdings (BVI) Limited (incorporated herein by reference to the
exhibit filed as a part of our Form 8-K dated February 13, 2003,
Commission File No. 0-25248)2.13
    
    
    Share Sale Agreement dated December 16, 2002 between Consolidated
Water Co. Ltd. and Bacardi & Co. Ltd. (incorporated herein by
reference to the exhibit filed as a part of our Form 8-K dated
February 13, 2003, Commission File No. 0-25248)2.14
    
    
    Registration Rights Agreement dated February 7, 2003 between
Consolidated Water Co. Ltd. and North American Mortgage & Finance
Corporation (incorporated herein by reference to the exhibit filed as
a part of our Form 8-K dated February 13, 2003, Commission File No.
0-25248)4.1
    
    
    Amended and Restated Memorandum of Association of Consolidated Water
Co. Ltd., dated December 4, 1998 (incorporated by reference to the
exhibit filed as part of our Form 20-F for the fiscal year ended
December 31, 1998, Commission File No. 0-25248)
 123




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##### Table of Contents



ExhibitNumber
    
    Exhibit Description4.2
    
    
    Amended and Restated Articles of Association of Consolidated Water Co.
Ltd., dated August 11, 2004. (incorporated by reference to the exhibit
filed as part of our Form 10-K for the fiscal year ended December 31,
1994, Commission File No. 0-25248)10.1
    
    
    License Agreement, dated July 11, 1990, between Cayman Water Company
Limited and the Government of the Cayman Islands (incorporated herein
by reference to the exhibit filed as a part of our Form 20-F dated
December 7, 1994, Commission File No. 0-25248)10.2
    
    
    First Amendment to License Agreement, dated September 18, 1990,
between Cayman Water Company Limited and the Government of the Cayman
Islands. (incorporated herein by reference to the exhibit filed as a
part of our Form 20-F dated December 7, 1994, Commission File No.
0-25248)10.3
    
    
    Second Amendment to License Agreement, dated February 14, 1991 between
Cayman Water Company Limited and the Government of the Cayman Islands.
(incorporated herein by reference to the exhibit filed as a part of
our Form 20-F dated December 7, 1994, Commission File No. 0-25248)10.4
    
    
    An Amendment to a License to Produce Potable Water, dated August 15,
2001, between Consolidated Water Co. Ltd. by the Government of the
Cayman Islands (incorporated herein by reference to the exhibit filed
as a part of our Form 10-K for the fiscal year ended December 31,
2001, Commission File No. 0-25248)10.5
    
    
    Fourth Amendment to a License to Produce Potable Water, dated February
1, 2003 between Consolidated Water Co. Ltd. by the Government of the
Cayman Islands (incorporated herein by reference to the exhibit filed
as a part of our Form 10-K for the fiscal year ended December 31,
2002, Commission File No. 0-25248)10.6
    
    
    Agreement, dated December 19, 2002, between Consolidated Water Co.
Ltd. (formerly Cayman Water Company Limited) and Safe Haven Ltd.
(incorporated herein by reference to the exhibit filed as a part of
our Form 10-K for the fiscal year ended December 31, 2002, Commission
File No. 0-25248)10.9
    
    
    Water Supply Agreement, dated December 18, 2000, between Consolidated
Water Co. Ltd. and South Bimini International Ltd. (incorporated
herein by reference to the exhibit filed as a part of our Form 10-K
dated March 30, 2001, Commission File No. 0-25248)10.10
    
    
    Employment contract dated September 30, 2003 between Peter Ribbins and
Consolidated Water Co. Ltd. (incorporated herein by reference to the
exhibit filed as a part of our Form 10-K for the fiscal year ended
December 31, 2003, Commission File No. 0-25248)10.11
    
    
    Employment contract dated December 5, 2003 between Jeffrey Parker and
Consolidated Water Co. Ltd. (incorporated herein by reference to the
exhibit filed as a part of our Form 10-K for the fiscal year ended
December 31, 2003, Commission File No. 0-25248)
 124




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##### Table of Contents



ExhibitNumber
    
    Exhibit Description10.12
    
    
    Employment contract dated December 5, 2003 between Frederick McTaggart
and Consolidated Water Co. Ltd. (incorporated herein by reference to
the exhibit filed as a part of our Form 10-K for the fiscal year ended
December 31, 2003, Commission File No. 0-25248)10.13
    
    
    Specimen Service Agreement, between Cayman Water Company Limited and
consumers (incorporated herein by reference to the exhibit filed as
part of our Registration Statement on Form F-1 dated March 26, 1996)10.14
    
    
    Summary Share Grant Plan for Directors (incorporated herein by
reference to the exhibit filed as part of our Registration Statement
on Form F-2 dated May 17, 2000, Commission File No. 333-35356)10.15
    
    
    Employee Share Option Plan (incorporated herein by reference to the
exhibit filed as a part of our Form 10-K for the fiscal year ended
December 31, 2001, Commission File No. 0-25248)10.16
    
    
    Option Deed, dated August 6, 1997, between Cayman Water Company
Limited and American Stock Transfer & Trust Company (incorporated
herein by reference to the exhibit filed on our Form 6-K, dated August
7, 1997, Commission File No. 0-25248)10.17
    
    
    Purchase and Sale Agreement, dated December 10, 2001, between
Consolidated Water Co. Ltd., Cayman Hotel and Golf Inc., Ellesmere
Britannia Limited and Hyatt Britannia Corporation Ltd. (incorporated
herein by reference to the exhibit filed as a part of our Form 10-K
for the fiscal year ended December 31, 2001, Commission File No.
0-25248)10.18
    
    
    Agreement, dated February 1, 2002, between Consolidated Water Co. Ltd.
and Cayman Hotel and Golf Inc. (incorporated herein by reference to
the exhibit filed as a part of our Form 10-K for the fiscal year ended
December 31, 2001, Commission File No. 0-25248)10.19
    
    
    Consulting Agreement, dated November 17, 1998, between Cayman Water
Company Limited and R.J. Falkner & Company, Inc. (incorporated herein
by reference to the exhibit filed as part of our Registration
Statement on Form F-2 dated May 17, 2000, Commission File No.
333-35356)10.20
    
    
    Agreement, dated July 24, 1995, between Cayman Water Company Limited
and Galleon Beach Resort Limited (incorporated herein by reference to
the exhibit filed as part of our Registration Statement on Form F-2
dated May 17, 2000, Commission File No. 333-35356)10.21
    
    
    Agreement, dated February 9, 1994, between Cayman Water Company
Limited and Widar Ltd. (incorporated herein by reference to the
exhibit filed as part of our Registration Statement on Form F-2 dated
May 17, 2000, Commission File No. 333-35356)
 125




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##### Table of Contents



ExhibitNumber
    
    Exhibit Description10.22
    
    
    Lease of Part, dated October 13, 2000, between Consolidated Water Co.
Ltd. and Colmar Ltd. (incorporated herein by reference to the exhibit
filed as a part of our Form 10-K dated March 30, 2001, Commission File
No. 0-25248)10.23
    
    
    Lease of Part, dated March 1, 2003, between Consolidated Water Co.
Ltd. and Colmar Ltd. (incorporated herein by reference to the exhibit
filed as a part of our Form 10-K for the fiscal year ended December
31, 2003, Commission File No. 0-25248)10.24
    
    
    Lease of Part, dated July 1, 2003, between Consolidated Water Co. Ltd.
and Colmar Ltd. (incorporated herein by reference to the exhibit filed
as a part of our Form 10-K for the fiscal year ended December 31,
2003, Commission File No. 0-25248)10.25
    
    
    Lease, dated December 10, 2001, between Cayman Hotel and Golf Inc. and
Consolidated Water Co. Ltd. (incorporated herein by reference to the
exhibit filed as a part of our Form 10-K for the fiscal year ended
December 31, 2001, Commission File No. 0-25248)10.26
    
    
    Lease, dated April 27, 1993, signed July 18, 2001 between Government
of Belize and Belize Water Limited (incorporated herein by reference
to the exhibit filed as a part of our Form 10-K for the fiscal year
ended December 31, 2001, Commission File No. 0-25248)10.27
    
    
    Amended lease, dated April 27, 1993, signed January 2, 2004 between
Government of Belize and Belize Water Limited (incorporated herein by
reference to the exhibit filed as a part of our Form 10-K for the
fiscal year ended December 31, 2003, Commission File No. 0-25248)10.28
    
    
    Loan Agreement dated February 7, 2003 between Consolidated Water Co.
Ltd. and Scotiabank (Cayman Islands) Ltd. (incorporated herein by
reference to the exhibit filed as a part of our Form 8-K dated
February 13, 2003, Commission File No. 0-25248)10.29
    
    
    Employment contract dated January 19, 2005 between Kenneth Crowley and
Consolidated Water Co. Ltd. (incorporated herein by reference to the
exhibit filed as a part of our Form 8-K dated January 14, 2005,
Commission File No. 0-25248)10.30
    
    
    Employment contract dated January 18, 2005 between Gregory McTaggart
and Consolidated Water Co. Ltd. (incorporated herein by reference to
the exhibit filed as a part of our Form 8-K dated January 14, 2005,
Commission File No. 0-25248)10.31
    
    
    Employment contract dated January 17, 2005 between Robert Morrison and
Consolidated Water Co. Ltd. (incorporated herein by reference to the
exhibit filed as a part of our Form 8-K dated January 14, 2005,
Commission File No. 0-25248)10.32
    
    
    Employment contract dated January 14, 2005 between Gerard Pereira and
Consolidated Water Co. Ltd. (incorporated herein by reference to the
exhibit filed as a part of our Form 8-K dated January 14, 2005,
Commission File No. 0-25248)
 126




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##### Table of Contents



ExhibitNumber
    
    Exhibit Description10.33
    
    
    Employment contract dated February 1, 2005 between Brent Santha and
Consolidated Water Co. Ltd. (incorporated herein by reference to the
exhibit filed as a part of our Form 8-K dated January 14, 2005,
Commission File No. 0-25248)10.34
    
    
    Employment contract dated April 1, 2005 between Joseph Pivinski and
Consolidated Water Co. Ltd. (incorporated herein by reference to the
exhibit filed as a part of our Form 10-K for the fiscal year ended
December 31, 2004, Commission File No. 0-25248)10.35
    
    
    Distributorship Agreement dated September 24, 2002 between DWEER
Technology Ltd. and DesalCo Limited (incorporated herein by reference
to the exhibit filed as a part of our Form 10-K for the fiscal year
ended December 31, 2002, Commission File No. 0-25248)10.36
    
    
    Amendment to the Distributorship Agreement dated September 24, 2002
between DWEER Technologies Ltd. and DesalCo Limited (incorporated
herein by reference to the exhibit filed as a part of our Form 10-K
for the fiscal year ended December 31, 2003, Commission File No.
0-25248)10.37
    
    
    Distributorship Agreement dated February 26, 2004 between Calder AG
and DesalCo Limited (incorporated herein by reference to the exhibit
filed as a part of our Form 10-K for the fiscal year ended December
31, 2003, Commission File No. 0-25248)10.38
    
    
    Employee share option notice letter dated May 26, 2003 between Abel
Castillo and Consolidated Water Co. Ltd. (incorporated herein by
reference to the exhibit filed as a part of our Form 10-K for the
fiscal year ended December 31, 2003, Commission File No. 0-25248)10.39
    
    
    Employee share option notice letter dated May 26, 2003 between Billy
Banker and Consolidated Water Co. Ltd. (incorporated herein by
reference to the exhibit filed as a part of our Form 10-K for the
fiscal year ended December 31, 2003, Commission File No. 0-25248)10.40
    
    
    Employee share option notice letter dated May 26, 2003 between Chet
Ritch Consolidated Water Co. Ltd. (incorporated herein by reference to
the exhibit filed as a part of our Form 10-K for the fiscal year ended
December 31, 2003, Commission File No. 0-25248)10.41
    
    
    Employee share option notice letter dated May 26, 2003 between David
Hooker and Consolidated Water Co. Ltd. (incorporated herein by
reference to the exhibit filed as a part of our Form 10-K for the
fiscal year ended December 31, 2003, Commission File No. 0-25248)10.42
    
    
    Employee share option notice letter dated May 26, 2003 between
Elizabeth Triana and Consolidated Water Co. Ltd. (incorporated herein
by reference to the exhibit filed as a part of our Form 10-K for the
fiscal year ended December 31, 2003, Commission File No. 0-25248)
 127




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##### Table of Contents



ExhibitNumber
    
    Exhibit Description10.43
    
    
    Employee share option notice letter dated May 26, 2003 between
Helverth Rodriguez and Consolidated Water Co. Ltd. (incorporated
herein by reference to the exhibit filed as a part of our Form 10-K
for the fiscal year ended December 31, 2003, Commission File No.
0-25248)10.44
    
    
    Employee share option notice letter dated May 26, 2003 between Ivan
Tabora and Consolidated Water Co. Ltd. (incorporated herein by
reference to the exhibit filed as a part of our Form 10-K for the
fiscal year ended December 31, 2003, Commission File No. 0-25248)10.45
    
    
    Employee share option notice letter dated May 26, 2003 between Luis
Wood and Consolidated Water Co. Ltd. (incorporated herein by reference
to the exhibit filed as a part of our Form 10-K for the fiscal year
ended December 31, 2003, Commission File No. 0-25248)10.46
    
    
    Employee share option notice letter dated May 26, 2003 between Maggie
Julier and Consolidated Water Co. Ltd. (incorporated herein by
reference to the exhibit filed as a part of our Form 10-K for the
fiscal year ended December 31, 2003, Commission File No. 0-25248)10.47
    
    
    Employee share option notice letter dated July 8, 2004 between Billy
Banker and Consolidated Water Co. Ltd. (incorporated herein by
reference to the exhibit filed as a part of our Form 10-K for the
fiscal year ended December 31, 2004, Commission File No. 0-25248)10.48
    
    
    Employee share option notice letter dated July 8, 2004 between Chet
Ritch Consolidated Water Co. Ltd. (incorporated herein by reference to
the exhibit filed as a part of our Form 10-K for the fiscal year ended
December 31, 2004, Commission File No. 0-25248)10.49
    
    
    Employee share option notice letter dated July 8, 2004 between David
Hooker and Consolidated Water Co. Ltd. (incorporated herein by
reference to the exhibit filed as a part of our Form 10-K for the
fiscal year ended December 31, 2004, Commission File No. 0-25248)10.50
    
    
    Employee share option notice letter dated July 8, 2004 between
Elizabeth Triana and Consolidated Water Co. Ltd. (incorporated herein
by reference to the exhibit filed as a part of our Form 10-K for the
fiscal year ended December 31, 2004, Commission File No. 0-25248)10.51
    
    
    Employee share option notice letter dated July 8, 2004 between
Helverth Rodriguez and Consolidated Water Co. Ltd. (incorporated
herein by reference to the exhibit filed as a part of our Form 10-K
for the fiscal year ended December 31, 2004, Commission File No.
0-25248)10.52
    
    
    Employee share option notice letter dated July 8, 2004 between Ivan
Tabora and Consolidated Water Co. Ltd. (incorporated herein by
reference to the exhibit filed as a part of our Form 10-K for the
fiscal year ended December 31, 2004, Commission File No. 0-25248)
 128




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##### Table of Contents



ExhibitNumber
    
    Exhibit Description10.53
    
    
    Employee share option notice letter dated July 8, 2004 between Luis
Wood and Consolidated Water Co. Ltd. (incorporated herein by reference
to the exhibit filed as a part of our Form 10-K for the fiscal year
ended December 31, 2004, Commission File No. 0-25248)10.54
    
    
    Employee share option notice letter dated July 8, 2004 between Maggie
Julier and Consolidated Water Co. Ltd. (incorporated herein by
reference to the exhibit filed as a part of our Form 10-K for the
fiscal year ended December 31, 2004, Commission File No. 0-25248)10.55
    
    
    Employee share option notice letter dated July 18, 2005 between Billy
Banker and Consolidated Water Co. Ltd.10.56
    
    
    Employee share option notice letter dated July 18, 2005 between Chet
Ritch Consolidated Water Co. Ltd.10.57
    
    
    Employee share option notice letter dated July 18, 2005 between David
Hooker and Consolidated Water Co. Ltd.10.58
    
    
    Employee share option notice letter dated July 18, 2005 between
Elizabeth Triana and Consolidated Water Co. Ltd.10.59
    
    
    Employee share option notice letter dated July 18, 2005 between
Helverth Rodriguez and Consolidated Water Co. Ltd.10.60
    
    
    Employee share option notice letter dated July 18, 2005 between Ivan
Tabora and Consolidated Water Co. Ltd.10.61
    
    
    Employee share option notice letter dated July 18, 2005 between Luis
Wood and Consolidated Water Co. Ltd.10.62
    
    
    Employee share option notice letter dated July 18, 2005 between Maggie
Julier and Consolidated Water Co. Ltd.10.63
    
    

Loan
Agreement dated May 25, 2005 between Ocean Conversion (BVI), Ltd. and Consolidated Water Co. Ltd.10.64
    
    

Consultancy
Agreement dated January 1, 2006 between Mr. Wilmer Pergande and Consolidated Water Co. Ltd.14
    
    
    Code of Business Conduct and Ethics (incorporated herein by reference
to the exhibit filed as a part of our Form 10-K for the fiscal year
ended December 31, 2003, Commission File No. 0-25248)21
    
    
    Subsidiaries of the Registrant23.1
    
    
    Consent of Rachlin Cohen & Holtz LLP  Consolidated Water Co. Ltd.23.2
    
    
    Consent of Rachlin Cohen & Holtz LLP  Ocean Conversion (BVI) Ltd.23.3
    
    
    Consent of KPMG  Consolidated Water Co. Ltd.23.4
    
    
    Consent of KPMG  Ocean Conversion (BVI) Ltd.31.1
    
    
    Certification by the Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification by the Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification by the Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification by the Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, Section 906 of the Sarbanes-Oxley Act of 200299.1
    
    
    Compensation Committee Charter (incorporated herein by reference to
the exhibit filed as a part of our Form 10-K for the fiscal year ended
December 31, 2003, Commission File No. 0-25248)99.2
    
    
    Audit Committee Charter (incorporated herein by reference to the
exhibit filed as a part of our Form 10-K for the fiscal year ended
December 31, 2003, Commission File No. 0-25248)99.3
    
    
    Nominations Committee Charter (incorporated herein by reference to the
exhibit filed as a part of our Form 10-K for the fiscal year ended
December 31, 2003, Commission File No. 0-25248)
 129




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##### Table of Contents



SIGNATURES
  CONSOLIDATED WATER CO. LTD.By:
    /s/ Jeffrey M. ParkerJeffrey M. ParkerChairman of the Board of Directors   Signature
    
    Title
    
    DateBy: /s/  Jeffrey M. Parker

Jeffrey M. Parker
    
    Chairman of th1e Board
of Directors
    
    March 15, 2006By: /s/  Frederick W. McTaggart

Frederick W. McTaggart
    
    Director, Chief
Executive Officer and
President (Principal
Executive Officer)
    
    March 15, 2006By: /s/  Joseph Pivinski

Joseph Pivinski
    
    Senior Vice President &
Chief Financial
Officer (Principal
Financial and
Accounting Officer)
    
    March 15, 2006By: /s/ J. Bruce Bugg, Jr.

J. Bruce Bugg, Jr.
    
    Director
    
    March 15, 2006By: /s/  William T. Andrews

William T. Andrews
    
    Director
    
    March 15, 2006
 130




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##### Table of Contents



Signature
    
    Title
    
    DateBy: /s/  Brian E. Butler

Brian E. Butler
    
    Director
    
    March 15, 2006By: /s/  Steven A. Carr

Steven A. Carr
    
    Director
    
    March 15, 2006By: /s/  Richard L. Finlay

Richard L. Finlay
    
    Director
    
    March 15, 2006By: /s/ Clarence B. Flowers, Jr.

Clarence B. Flowers, Jr.
    
    Director
    
    March 15, 2006By: /s/  Wilmer Pergande

Wilmer Pergande
    
    Director
    
    March 15, 2006By: /s/  David W. Sasnett

David W. Sasnett
    
    Director
    
    March 15, 2006By: /s/  Raymond Whittaker

Raymond Whittaker
    
    Director
    
    March 15, 2006By: /s/  Carson K. Ebanks

Carson K. Ebanks
    
    Director
    
    March 15, 2006
 131




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 INDEX TO EXHIBITS FILED WITH 10-K
 10.55
    
    
    Employee share option notice letter dated July 18, 2005 between Billy
Banker and Consolidated Water Co. Ltd.10.56
    
    
    Employee share option notice letter dated July 18, 2005 between Chet
Ritch Consolidated Water Co. Ltd.10.57
    
    
    Employee share option notice letter dated July 18, 2005 between David
Hooker and Consolidated Water Co. Ltd.10.58
    
    
    Employee share option notice letter dated July 18, 2005 between
Elizabeth Triana and Consolidated Water Co. Ltd.10.59
    
    
    Employee share option notice letter dated July 18, 2005 between
Helverth Rodriguez and Consolidated Water Co. Ltd.10.60
    
    
    Employee share option notice letter dated July 18, 2005 between Ivan
Tabora and Consolidated Water Co. Ltd.10.61
    
    
    Employee share option notice letter dated July 18, 2005 between Luis
Wood and Consolidated Water Co. Ltd.10.62
    
    
    Employee share option notice letter dated July 18, 2005 between Maggie
Julier and Consolidated Water Co. Ltd.10.63
    
    

Loan
Agreement dated May 25, 2005 between Ocean Conversion (BVI) Ltd.
and Consolidated Water Co. Ltd.10.64
    
    

Consultant
Agreement dated January 1, 2006 between Mr. Wilmer Pergande and
Consolidated Water Co. Ltd.21
    
    
    Subsidiaries of the Registrant.23.1
    
    
    Consent of Rachlin Cohen & Holtz LLP  Consolidated Water Co. Ltd.23.2
    
    
    Consent of Rachlin Cohen & Holtz LLP  Ocean Conversion (BVI) Ltd.23.3
    
    
    Consent of KPMG  Consolidated Water Co. Ltd.23.4
    
    
    Consent of KPMG  Ocean Conversion (BVI) Ltd.31.1
    
    
    Certification by the Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification by the Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification by the Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification by the Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, Section 906 of the Sarbanes-Oxley Act of 2002
 132