##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549




FORM 10-K/A
(Amendment No. 3)




(Mark One)

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|  |  |                                                                                         
|  |  | For the fiscal year ended December 31, 2002                                             
|  |  |                                                                                         
|  |  | OR                                                                                      
|  |  |                                                                                         
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  |  |                                                                                         
|  |  | For the transition period from _______________ to _______________                       

Commission File Number: 0-25248

CONSOLIDATED WATER CO. LTD.

---

|                                                                      |  |                                     
|--------------------------------------------------------------------- |  | ------------------------------------
|CAYMAN ISLANDS                                                        |  | N/A                                 
|                                                                      |  |                                     
|(State or other jurisdiction of
incorporation or organization)        |  | (I.R.S. Employer Identification No.)
|                                                                      |  |                                     
|Trafalgar Place, West Bay Road, P.O.
Box 1114GT, Grand Cayman, B.W.I. |  | N/A                                 
|                                                                      |  |                                     
|(Address of principal executive offices)                              |  | (Zip Code)                          

Registrants Telephone number, including area code: (345) 945-4277

Securities registered pursuant to Section 12(b) of the Act: None

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

ORDINARY SHARES, PAR VALUE CI$1.00

---



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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this 10-K or any amendments to this
Form 10-K. [Not Applicable]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act. Yes o No x

The aggregate market value of common stock held by non-affiliates of the
registrant, based on the closing sales price for the registrants ordinary
shares, as reported on the Nasdaq National Market on June 25, 2003,
was $47,691,472.




As at June 26, 2003, there were
4,275,568 shares of the registrants
ordinary shares outstanding.








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TABLE OF CONTENTS



|                                                                                                                      |                                                                            |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------- |  |  |  |  |  |  | 
|Item 8. Financial Statements and Supplementary Data                                                                  
|INDEPENDENT AUDITORS REPORT                                                                                         
|CONSOLIDATED BALANCE SHEETS                                                                                          
|CONSOLIDATED STATEMENTS OF INCOME                                                                                    
|CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY                                                                      
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                                
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                           
|PART IV                                                                                                              
|                                                                                                                      | Item 15. Exhibits, Financial Statements Schedules, and Reports on Form 8-K
|SIGNATURES                                                                                                           
|CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
|CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
|EX-99.1 Certification of Chief Executive Officer                                                                     
|EX-99.2 Certification of Chief Financial Officer                                                                     



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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
2002 FORM 10-K/A ANNUAL REPORT
TABLE OF CONTENTS

|                                                                                                                                                  |  |  |    | 
|------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | -- | 
|Item 8. Financial Statements and
Supplementary Data                                                                                               |  |  | 1  | 
|                                                                                                                                                  |  |  |    | 
|Item 15. Exhibits, Financial Statements
Schedules, and Reports on Form 8-K                                                                        |  |  | 24 | 
|                                                                                                                                                  |  |  |    | 
|Signatures                                                                                                                                        |  |  | 25 | 
|                                                                                                                                                  |  |  |    | 
|Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section
1350 as Adopted Pursuant to Section 302 of the 
Sarbanes-Oxley Act of 2002 |  |  | 26 | 
|                                                                                                                                                  |  |  |    | 
|Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section
1350 as Adopted Pursuant to Section 302 of the 
Sarbanes-Oxley Act of 2002 |  |  | 28 | 

Explanatory Note

This annual report on Form 10-K/A
is being filed to amend Item 8. Financial Statements and
Supplementary Data. Accordingly, pursuant to Rule 12b-15 under the
Securities Act of 1934, as amended, this Form 10-K/A contains the complete text
of Item 8. Financial Statements and
Supplementary Data. as amended.

i



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##### Table of Contents






Item
8.     Financial Statements and
Supplementary Data

CONSOLIDATED WATER CO. LTD.

INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

|                                                                                                                      |  |      |   | 
|--------------------------------------------------------------------------------------------------------------------- |  | ---- | - | 
|                                                                                                                      |  | Page
|                                                                                                                      |  |     
|Independent Auditors Report                                                                                          |  |      | 2 | 
|Consolidated Balance Sheets as at
    December 31, 2002 and 2001                                                      |  |      | 3 | 
|Consolidated Statements of Income for each of the
    years ended December 31, 2002, 2001, and 2000                   |  |      | 4 | 
|Consolidated Statements of Stockholders
    Equity for each of the years ended December 31, 2002, 2001,
    and 2000 |  |      | 5 | 
|Consolidated Statements of Cash Flows for each of
    the years ended December 31, 2002, 2001, and 2000               |  |      | 6 | 
|Notes to Consolidated Financial Statements                                                                            |  |      | 7 | 

1



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##### Table of Contents






INDEPENDENT AUDITORS REPORT

The Board of Directors and Stockholders

Consolidated Water Co. Ltd


We have audited the accompanying consolidated
balance sheets of Consolidated Water Co. Ltd. and subsidiaries
(the Company) as of December 31, 2002 and 2001,
and the related consolidated statements of income,
stockholders equity and cash flows for each of the years
in the three-year period ended December 31, 2002. These
consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.

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

In our opinion, the consolidated financial
statements referred to above present fairly, in all material
aspects, the financial position of Consolidated Water Co. Ltd.
and subsidiaries as of December 31, 2002 and 2001, and the
results of their operations and cash flows for each of the three
years in the three-year period ended December 31, 2002, in
conformity with accounting principles generally accepted in the
United States of America.

/s/ KPMG Chartered Accountants

George Town, Cayman Islands

March 18, 2003 except for notes 2, 8, 10, 12 and 21
which are dated June 26, 2003


2



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##### Table of Contents



CONSOLIDATED WATER CO. LTD.




CONSOLIDATED BALANCE SHEETS

(Expressed in United States dollars)


|                                               |                                                                                                                                                          |              |            |           |  |   |            |           | 
|---------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------ | ---------- | --------- |  | - | ---------- | --------- | 
|                                               |                                                                                                                                                          |             
|                                               |                                                                                                                                                          | December 31,
|                                               |                                                                                                                                                          |             
|                                               |                                                                                                                                                          | 2002         |            | 2001     
|                                               |                                                                                                                                                          |              |            |          
|ASSETS                                        
|Current assets                                 |                                                                                                                                                          |              |            |           |  |   |            |          
|                                               | Cash and cash equivalents (Note 3)                                                                                                                       |              | $          | 568,304   |  |   | $          | 516,446   | 
|                                               | Accounts receivable (Note 4)                                                                                                                             |              |            | 1,406,947 |  |   |            | 1,323,156 | 
|                                               | Inventory                                                                                                                                                |              |            | 388,131   |  |   |            | 319,511   | 
|                                               | Prepaid expenses and other assets                                                                                                                        |              |            | 370,429   |  |   |            | 319,900   | 
|                                               | Deferred expenditures (Note 21)                                                                                                                          |              |            | 887,856   |  |   |            |          | 
|                                               |                                                                                                                                                          |              |            |           |  |   |            |          
|Total current assets                           |                                                                                                                                                          |              | 3,621,667  |           |  |   | 2,479,013  |          
|Property, plant and equipment(Note 5)          |                                                                                                                                                          |              | 20,253,646 |           |  |   | 18,414,935 |          
|Intangible asset(Note 6)                       |                                                                                                                                                          |              | 1,619,874  |           |  |   | 1,814,780  |          
|Investment                                     |                                                                                                                                                          |              | 12,450     |           |  |   | 12,450     |          
|                                               |                                                                                                                                                          |              |            |           |  |   |            |          
|Total assets                                   |                                                                                                                                                          | $            | 25,507,637 |           |  | $ | 22,721,178 |          
|                                               |                                                                                                                                                          |              |            |           |  |   |            |          
|LIABILITIES AND STOCKHOLDERS
    EQUITY      
|Current liabilities                            |                                                                                                                                                          |              |            |           |  |   |            |          
|                                               | Dividends payable (Note 7)                                                                                                                               |              |            | 508,444   |  |   |            | 499,383   | 
|                                               | Accounts payable and other liabilities                                                                                                                   |              |            | 1,143,850 |  |   |            | 1,087,470 | 
|                                               | Current portion of long term debt (Note 8)                                                                                                               |              |            | 518,275   |  |   |            | 355,840   | 
|                                               |                                                                                                                                                          |              |            |           |  |   |            |          
|Total current liabilities                      |                                                                                                                                                          |              | 2,170,569  |           |  |   | 1,942,693  |          
|Long term debt(Note
    8)                     |                                                                                                                                                          |              | 2,074,609  |           |  |   | 1,213,804  |          
|Security deposits                              |                                                                                                                                                          |              | 100,959    |           |  |   | 52,763     |          
|Advances in aid of construction                |                                                                                                                                                          |              | 35,276     |           |  |   | 37,494     |          
|                                               |                                                                                                                                                          |              |            |           |  |   |            |          
|Total liabilities                              |                                                                                                                                                          |              | 4,381,413  |           |  |   | 3,246,754  |          
|                                               |                                                                                                                                                          |              |            |           |  |   |            |          
|Stockholders equity                           |                                                                                                                                                          |              |            |           |  |   |            |          
|                                               | Redeemable preferred stock, $1.20 par value.
    Authorized 100,000 shares; issued and outstanding 19,740 shares
    in 2002 and 25,195 shares in 2001   |              |            | 23,688    |  |   |            | 30,234    | 
|                                               | Class A common stock, $1.20 par value.
    Authorized 9,870,000 shares; issued and outstanding 3,993,419
    shares in 2002 and 3,920,064 shares in 2001 |              |            | 4,792,103 |  |   |            | 4,704,077 | 
|                                               | Class B common stock, $1.20 par value.
    Authorized 30,000 shares; issued and outstanding nil shares for
    2002 and nil shares for 2001              |              |            |          |  |   |            |          | 
|                                               | Stock and options earned but not issued                                                                                                                  |              |            | 424,841   |  |   |            | 210,324   | 
|                                               | Additional paid-in capital                                                                                                                               |              |            | 7,354,395 |  |   |            | 6,896,753 | 
|                                               | Retained earnings                                                                                                                                        |              |            | 8,531,197 |  |   |            | 7,633,036 | 
|                                               |                                                                                                                                                          |              |            |           |  |   |            |          
|Total stockholders equity                     |                                                                                                                                                          |              | 21,126,224 |           |  |   | 19,474,424 |          
|                                               |                                                                                                                                                          |              |            |           |  |   |            |          
|Commitments (Note 14)                          |                                                                                                                                                          |              |            |           |  |   |            |          
|Total liabilities and stockholders
    equity |                                                                                                                                                          | $            | 25,507,637 |           |  | $ | 22,721,178 |          
|                                               |                                                                                                                                                          |              |            |           |  |   |            |          

The accompanying notes are an integral part of
these financial statements.

3



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CONSOLIDATED WATER CO. LTD.






CONSOLIDATED STATEMENTS OF INCOME


(Expressed in United States dollars)


|                                                                           |                                      |                                 |            |           |   |      |            |           |   |   |            |           |  
|-------------------------------------------------------------------------- | ------------------------------------ | ------------------------------- | ---------- | --------- | - | ---- | ---------- | --------- | - | - | ---------- | --------- | -
|                                                                           |                                      |                                
|                                                                           |                                      | For the Year Ended December 31,
|                                                                           |                                      |                                
|                                                                           |                                      | 2002                            |            | 2001      |   | 2000
|                                                                           |                                      |                                 |            |           |   |     
|Water sales                                                                |                                      | $                               | 12,154,689 |           |   | $    | 11,248,105 |           |   | $ | 9,795,751  |          
|Cost of water sales (Note 10)                                              |                                      |                                 | (6,882,177 | )         |   |      | (6,109,117 | )         |   |   | (5,423,297 | )        
|                                                                           |                                      |                                 |            |           |   |      |            |           |   |   |            |          
|Gross profit                                                               |                                      |                                 | 5,272,512  |           |   |      | 5,138,988  |           |   |   | 4,372,454  |          
|Indirect expenses (Note 10)                                                |                                      |                                 | (2,644,004 | )         |   |      | (2,500,060 | )         |   |   | (2,061,722 | )        
|                                                                           |                                      |                                 |            |           |   |      |            |           |   |   |            |          
|Income from operations                                                     |                                      |                                 | 2,628,508  |           |   |      | 2,638,928  |           |   |   | 2,310,732  |          
|                                                                           |                                      |                                 |            |           |   |      |            |           |   |   |            |          
|Other income (expenses)                                                    |                                      |                                 |            |           |   |      |            |           |   |   |            |          
|                                                                           | Interest income                      |                                 |            | 14,711    |   |      |            | 28,584    |   |   |            | 32,314    |  
|                                                                           | Interest expense                     |                                 |            | (103,986  | ) |      |            | (99,956   | ) |   |            | (135,847  | )
|                                                                           | Other income                         |                                 |            | 37,077    |   |      |            | 197,017   |   |   |            | 197,621   |  
|                                                                           |                                      |                                 |            |           |   |      |            |           |   |   |            |          
|                                                                           |                                      |                                 | (52,198    | )         |   |      | 125,645    |           |   |   | 94,088     |          
|                                                                           |                                      |                                 |            |           |   |      |            |           |   |   |            |          
|Net income                                                                 |                                      | $                               | 2,576,310  |           |   | $    | 2,764,573  |           |   | $ | 2,404,820  |          
|                                                                           |                                      |                                 |            |           |   |      |            |           |   |   |            |          
|Basic earnings per share (Note 11)                                         |                                      | $                               | 0.65       |           |   | $    | 0.71       |           |   | $ | 0.68       |          
|                                                                           |                                      |                                 |            |           |   |      |            |           |   |   |            |          
|Diluted earnings per share (Note 11)                                       |                                      | $                               | 0.63       |           |   | $    | 0.69       |           |   | $ | 0.67       |          
|                                                                           |                                      |                                 |            |           |   |      |            |           |   |   |            |          
|Weighted average number of common shares used in
    the determination of: |                                      |                                 |            |           |   |      |            |           |   |   |            |          
|                                                                           | Basic earnings per share (Note 11)   |                                 |            | 3,969,861 |   |      |            | 3,897,969 |   |   |            | 3,532,501 |  
|                                                                           |                                      |                                 |            |           |   |      |            |           |   |   |            |          
|                                                                           | Diluted earnings per share (Note 11) |                                 |            | 4,087,532 |   |      |            | 3,999,691 |   |   |            | 3,616,271 |  
|                                                                           |                                      |                                 |            |           |   |      |            |           |   |   |            |          

The accompanying notes are an integral part of
these financial statements.

4



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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, 2002


(Expressed in United States dollars)


|                                                                  |  |                      |         |              |  |            |         |            |  |            |           |               |  |          |           |        |  |   |          |   |  |   |           |   |  |   |            |   |  |   |            |  
|----------------------------------------------------------------- |  | -------------------- | ------- | ------------ |  | ---------- | ------- | ---------- |  | ---------- | --------- | ------------- |  | -------- | --------- | ------ |  | - | -------- | - |  | - | --------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                                                  |  |                      |         |              |  |            |         |            |  |            |           |               |  |         
|                                                                  |  | Redeemable Preferred |         |              |  | Stock and  |         |            |  |            |           |              
|                                                                  |  | Stock                |         | Common Stock |  | options    |         | Additional |  |            |           | Total        
|                                                                  |  |                      |         |              |  | earned but |         | Paid-in    |  | Retained   |           | Stockholders
|                                                                  |  | Shares               |         | Dollars      |  | Shares     |         | Dollars    |  | not issued |           | Capital       |  | Earnings |           | Equity
|                                                                  |  |                      |         |              |  |            |         |            |  |            |           |               |  |          |           |       
|Balance at December 31, 1999                                      |  |                      | 41,058  |              |  | $          | 49,270  |            |  |            | 3,051,715 |               |  | $        | 3,662,058 |        |  | $ | 338,006  |   |  | $ | 2,765,407 |   |  | $ | 5,301,564  |   |  | $ | 12,116,305 |  
|Public offering of ordinary shares, $7.05, net of
    issue costs |  |                      |        |              |  |            |        |            |  |            | 773,000   |               |  |          | 927,600   |        |  |   |          |   |  |   | 4,035,131 |   |  |   |            |   |  |   | 4,962,731  |  
|Issue of share capital                                            |  |                      | 3,415   |              |  |            | 4,098   |            |  |            | 106,890   |               |  |          | 128,269   |        |  |   | (81,928  | ) |  |   | 325,666   |   |  |   |           |   |  |   | 376,105    |  
|Conversion of preferred shares                                    |  |                      | (10,639 | )            |  |            | (12,767 | )          |  |            | 10,639    |               |  |          | 12,767    |        |  |   |          |   |  |   |          |   |  |   |           |   |  |   |           |  
|Redemption of preferred shares                                    |  |                      | (200    | )            |  |            | (240    | )          |  |            |          |               |  |          |          |        |  |   |          |   |  |   |          |   |  |   |           |   |  |   | (240       | )
|Repurchase and cancellation of ordinary shares                    |  |                      |        |              |  |            |        |            |  |            | (79,100   | )             |  |          | (94,920   | )      |  |   |          |   |  |   | (399,455  | ) |  |   |           |   |  |   | (494,375   | )
|Net income                                                        |  |                      |        |              |  |            |        |            |  |            |          |               |  |          |          |        |  |   |          |   |  |   |          |   |  |   | 2,404,820  |   |  |   | 2,404,820  |  
|Dividends declared                                                |  |                      |        |              |  |            |        |            |  |            |          |               |  |          |          |        |  |   |          |   |  |   |          |   |  |   | (1,262,675 | ) |  |   | (1,262,675 | )
|Issue of options and shares grants                                |  |                      |        |              |  |            |        |            |  |            |          |               |  |          |          |        |  |   | 124,772  |   |  |   |           |   |  |   |           |   |  |   | 124,772    |  
|                                                                  |  |                      |         |              |  |            |         |            |  |            |           |               |  |          |           |        |  |   |          |   |  |   |           |   |  |   |            |   |  |   |            |  
|Balance at December 31, 2000                                      |  |                      | 33,634  |              |  | $          | 40,361  |            |  |            | 3,863,144 |               |  | $        | 4,635,774 |        |  | $ | 380,850  |   |  | $ | 6,726,749 |   |  | $ | 6,443,709  |   |  | $ | 18,227,443 |  
|Issue of share capital                                            |  |                      | 5,821   |              |  |            | 6,985   |            |  |            | 67,860    |               |  |          | 81,431    |        |  |   | (340,125 | ) |  |   | 411,599   |   |  |   |           |   |  |   | 159,890    |  
|Conversion of preferred shares                                    |  |                      | (14,260 | )            |  |            | (17,112 | )          |  |            | 14,260    |               |  |          | 17,112    |        |  |   |          |   |  |   |          |   |  |   |           |   |  |   |           |  
|Repurchase and cancellation of ordinary shares                    |  |                      |        |              |  |            |        |            |  |            | (25,200   | )             |  |          | (30,240   | )      |  |   |          |   |  |   | (241,595  | ) |  |   |           |   |  |   | (271,835   | )
|Net income                                                        |  |                      |        |              |  |            |        |            |  |            |          |               |  |          |          |        |  |   |          |   |  |   |          |   |  |   | 2,764,573  |   |  |   | 2,764,573  |  
|Dividends declared                                                |  |                      |        |              |  |            |        |            |  |            |          |               |  |          |          |        |  |   |          |   |  |   |          |   |  |   | (1,575,246 | ) |  |   | (1,575,246 | )
|Issue of options and shares grants                                |  |                      |        |              |  |            |        |            |  |            |          |               |  |          |          |        |  |   | 169,599  |   |  |   |           |   |  |   |           |   |  |   | 169,599    |  
|                                                                  |  |                      |         |              |  |            |         |            |  |            |           |               |  |          |           |        |  |   |          |   |  |   |           |   |  |   |            |   |  |   |            |  
|Balance at December 31, 2001                                      |  |                      | 25,195  |              |  | $          | 30,234  |            |  |            | 3,920,064 |               |  | $        | 4,704,077 |        |  | $ | 210,324  |   |  | $ | 6,896,753 |   |  | $ | 7,633,036  |   |  | $ | 19,474,424 |  
|Issue of share capital                                            |  |                      | 3,330   |              |  |            | 3,996   |            |  |            | 67,456    |               |  |          | 80,947    |        |  |   | (227,980 | ) |  |   | 490,889   |   |  |   |           |   |  |   | 347,852    |  
|Conversion of preferred shares                                    |  |                      | (8,083  | )            |  |            | (9,700  | )          |  |            | 8,083     |               |  |          | 9,700     |        |  |   |          |   |  |   |          |   |  |   |           |   |  |   |           |  
|Redemption of preferred shares                                    |  |                      | (702    | )            |  |            | (842    | )          |  |            |          |               |  |          |          |        |  |   |          |   |  |   | (2,999    | ) |  |   |           |   |  |   | (3,841     | )
|Repurchase and cancellation of ordinary shares                    |  |                      |        |              |  |            |        |            |  |            | (2,184    | )             |  |          | (2,621    | )      |  |   |          |   |  |   | (30,248   | ) |  |   |           |   |  |   | (32,869    | )
|Net income                                                        |  |                      |        |              |  |            |        |            |  |            |          |               |  |          |          |        |  |   |          |   |  |   |          |   |  |   | 2,576,310  |   |  |   | 2,576,310  |  
|Dividends declared                                                |  |                      |        |              |  |            |        |            |  |            |          |               |  |          |          |        |  |   |          |   |  |   |          |   |  |   | (1,678,149 | ) |  |   | (1,678,149 | )
|Issue of options and shares grants                                |  |                      |        |              |  |            |        |            |  |            |          |               |  |          |          |        |  |   | 442,497  |   |  |   |           |   |  |   |           |   |  |   | 442,497    |  
|                                                                  |  |                      |         |              |  |            |         |            |  |            |           |               |  |          |           |        |  |   |          |   |  |   |           |   |  |   |            |   |  |   |            |  
|Balance at December 31, 2002                                      |  |                      | 19,740  |              |  | $          | 23,688  |            |  |            | 3,993,419 |               |  | $        | 4,792,103 |        |  | $ | 424,841  |   |  | $ | 7,354,395 |   |  | $ | 8,531,197  |   |  | $ | 21,126,224 |  
|                                                                  |  |                      |         |              |  |            |         |            |  |            |           |               |  |          |           |        |  |   |          |   |  |   |           |   |  |   |            |   |  |   |            |  

The accompanying notes are an integral part of
these financial statements.

5



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##### Table of Contents



CONSOLIDATED WATER CO. LTD.




CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in United States dollars)


|                                                        |                                                              |                                 |            |            |   |      |            |            |   |   |            |            |  
|------------------------------------------------------- | ------------------------------------------------------------ | ------------------------------- | ---------- | ---------- | - | ---- | ---------- | ---------- | - | - | ---------- | ---------- | -
|                                                        |                                                              |                                
|                                                        |                                                              | For the Year Ended December 31,
|                                                        |                                                              |                                
|                                                        |                                                              | 2002                            |            | 2001       |   | 2000
|                                                        |                                                              |                                 |            |            |   |     
|                                                        | Net income                                                   |                                 | $          | 2,576,310  |   |      | $          | 2,764,573  |   |   | $          | 2,404,820  |  
|Adjustments to reconcile net income to net
    cash     |                                                              |                                 |            |            |   |      |            |            |   |   |            |           
|                                                        | Depreciation                                                 |                                 |            | 1,269,126  |   |      |            | 1,113,041  |   |   |            | 1,071,455  |  
|                                                        | Amortization of intangible asset                             |                                 |            | 194,906    |   |      |            | 193,703    |   |   |            | 64,979     |  
|                                                        | Stock compensation on share grants                           |                                 |            | 175,330    |   |      |            | 289,174    |   |   |            | 51,579     |  
|                                                        | Loss on sale of fixed assets                                 |                                 |            |           |   |      |            | 7,702      |   |   |            |           |  
|                                                        | (Increase) decrease in accounts receivable                   |                                 |            | (83,791    | ) |      |            | 165,573    |   |   |            | (56,259    | )
|                                                        | (Increase) decrease in inventory                             |                                 |            | (68,620    | ) |      |            | (165,278   | ) |   |            | 20,043     |  
|                                                        | (Increase) decrease in prepaid expenses and other
    assets |                                 |            | (50,529    | ) |      |            | (20,401    | ) |   |            | 1,647      |  
|                                                        | Increase in accounts payable and other liabilities           |                                 |            | 56,380     |   |      |            | 19,956     |   |   |            | 320,183    |  
|                                                        | Increase in security deposits                                |                                 |            | 48,196     |   |      |            |           |   |   |            |           |  
|                                                        | Decrease in advances in aid of construction                  |                                 |            | (2,218     | ) |      |            | (3,596     | ) |   |            | (3,994     | )
|                                                        |                                                              |                                 |            |            |   |      |            |            |   |   |            |           
|Net cash provided by operating activities               |                                                              |                                 | 4,115,090  |            |   |      | 4,364,447  |            |   |   | 3,874,453  |           
|                                                        |                                                              |                                 |            |            |   |      |            |            |   |   |            |           
|Cash flows from investing activities                    |                                                              |                                 |            |            |   |      |            |            |   |   |            |           
|                                                        | Deferred expenditures                                        |                                 |            | (460,886   | ) |      |            |           |   |   |            |           |  
|                                                        | Purchase of property, plant and equipment                    |                                 |            | (3,107,837 | ) |      |            | (1,892,147 | ) |   |            | (2,301,759 | )
|                                                        | Proceeds from sale of property, plant and
    equipment      |                                 |            |           |   |      |            | 360        |   |   |            |           |  
|                                                        | Purchase of investment                                       |                                 |            |           |   |      |            | (12,450    | ) |   |            |           |  
|                                                        | Purchase of subsidiary, net of cash acquired                 |                                 |            |           |   |      |            |           |   |   |            | (3,966,979 | )
|                                                        |                                                              |                                 |            |            |   |      |            |            |   |   |            |           
|Net cash used in investing activities                   |                                                              |                                 | (3,568,723 | )          |   |      | (1,904,237 | )          |   |   | (6,268,738 | )         
|                                                        |                                                              |                                 |            |            |   |      |            |            |   |   |            |           
|Cash flows from financing activities                    |                                                              |                                 |            |            |   |      |            |            |   |   |            |           
|                                                        | Deferred expenditures                                        |                                 |            | (426,970   | ) |      |            |           |   |   |            |           |  
|                                                        | Dividends paid                                               |                                 |            | (1,669,088 | ) |      |            | (1,477,828 | ) |   |            | (1,127,295 | )
|                                                        | Proceeds from credit facility                                |                                 |            | 1,500,000  |   |      |            | 500,000    |   |   |            |           |  
|                                                        | Principal repayments of long term debt                       |                                 |            | (476,760   | ) |      |            | (281,922   | ) |   |            | (885,355   | )
|                                                        | Net proceeds from issuance of stock                          |                                 |            | 615,019    |   |      |            | 40,075     |   |   |            | 5,417,204  |  
|                                                        | Payment to acquire common stock                              |                                 |            | (32,869    | ) |      |            | (271,595   | ) |   |            | (494,375   | )
|                                                        | Payment to acquire redeemable preferred shares               |                                 |            | (3,841     | ) |      |            |           |   |   |            |           |  
|                                                        | (Decrease) increase in bank overdraft                        |                                 |            |           |   |      |            | (703,331   | ) |   |            | 32,938     |  
|                                                        | Principal payments under water purchase agreement            |                                 |            |           |   |      |            |           |   |   |            | (320,141   | )
|                                                        |                                                              |                                 |            |            |   |      |            |            |   |   |            |           
|Net cash (used in) provided by financing
    activities |                                                              |                                 | (494,509   | )          |   |      | (2,194,601 | )          |   |   | 2,622,976  |           
|                                                        |                                                              |                                 |            |            |   |      |            |            |   |   |            |           
|Net increase in cash and cash
    equivalents           |                                                              |                                 | 51,858     |            |   |      | 265,609    |            |   |   | 228,691    |           
|Cash and cash equivalents at beginning of
    year      |                                                              |                                 | 516,446    |            |   |      | 250,837    |            |   |   | 22,146     |           
|                                                        |                                                              |                                 |            |            |   |      |            |            |   |   |            |           
|Cash and cash equivalents at end of
    year            |                                                              | $                               | 568,304    |            |   | $    | 516,446    |            |   | $ | 250,837    |           
|                                                        |                                                              |                                 |            |            |   |      |            |            |   |   |            |           

The accompanying notes are an integral part of
these financial statements.

6



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##### Table of Contents



CONSOLIDATED WATER CO. LTD.




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     Principal
Activity

Consolidated Water Co. Ltd. and its wholly-owned
subsidiaries (together the Company) use reverse
osmosis technology to produce fresh water from seawater. The
Company processes and supplies water to its customers in Grand
Cayman, Cayman Islands; Ambergris Caye, Belize; and South
Bimini, Bahamas. The Companys exclusive license in Grand
Cayman allows it to process and supply water to certain areas of
Grand Cayman for a period of twenty years from July 11,
1990 in addition to having a right of first refusal on the
extension or renewal thereof. The Company has a contract with
Belize Water Services Ltd. (BWSL) of Belize,
formally known as Water and Sewerage Authority of Belize, to
supply water to BWSL in Ambergris Caye expiring in 2011. At the
expiry of the contract, BWSL may at its option extend the term
of the agreement or purchase the plant outright. In addition, on
July 11, 2001 the Company commenced supplying water under a
ten year agreement to South Bimini International Ltd., a
Bahamian company that owns and operates resort properties on
South Bimini Island, Bahamas. The base price of water supplied
by the Company, and adjustments thereto, are generally
determined by the terms of the license and contracts, which
provide for adjustments based upon the movement in the
government price indices specified in the license and contracts
respectively, as well as monthly adjustments for changes in the
cost of energy.

2.     Accounting
Policies

Basis of
preparation:The financial statements
presented are prepared in accordance with the accounting
principles generally accepted in the United States of America.

Use of estimates:The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.

The Companys significant accounting
policies are:

Basis of
consolidation:The consolidated
financial statements include the accounts of the Companys
wholly-owned subsidiaries Belize Water Limited, Hurricane
Hide-A-Way Ltd. and Cayman Water Company Limited. The operating
results of Belize Water Limited have been included in the
financial statements since the date of the acquisition being
July 21, 2000. All inter-company balances and transactions
have been eliminated. There are no operating results for
Hurricane Hide-A-Way Ltd. and Cayman Water Company Limited as
these companies have been dormant since inception and have no
assets and liabilities.

Foreign currency:The functional currency of the Company and its foreign
subsidiaries are their respective local currencies. The
consolidated operations are reported in United States dollars.
The exchange rates between the Cayman Islands dollar, the Belize
dollar and the Bahamian dollar have been fixed to the United
States dollar during all periods presented.

Monetary assets and liabilities denominated in
foreign currencies are translated at the rates of exchange
ruling at the balance sheet date. Foreign currency transactions
are translated at the rate ruling on the date of the
transaction.

Cash and cash
equivalents:Cash and cash equivalents
comprise cash at bank on call and highly liquid deposits with an
original maturity of three months or less.

Trade accounts
receivable:Trade accounts receivable
are recorded at invoiced amounts based on meter readings. The
allowance for doubtful accounts is the Companys best
estimate of the amount of probable credit losses in the
Companys existing accounts receivable balance. The Company
determines the allowance for doubtful accounts based on
historical write-off experience and monthly review of delinquent
accounts. Past

7



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##### Table of Contents



CONSOLIDATED WATER CO. LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



2.     Accounting
Policies  (continued)


due balances are reviewed individually for
collectibility and disconnection. Account balances are charged
off against the allowance for doubtful accounts after all means
of collection have been exhausted and the potential for recovery
is considered by management to be remote.

Inventory:Inventory
primarily includes replacement spares and parts that are valued
at the lower of cost and net realizable value on a first-in,
first-out basis. Inventory also includes potable water held in
the Companys reservoirs. The value of the water inventory
is the lower of the average cost of producing and purchasing
water during the year and net realizable value.

Deferred
expenditures:Deferred expenditures
represent direct costs incurred in connection with planned
business combinations and financing transactions.

Property, plant and
equipment:Property, plant and
equipment are stated at cost less accumulated depreciation.
Depreciation is calculated using a straight line method with an
allowance for estimated residual values. Rates are determined
based on the estimated useful lives of the assets as follows:

|                                         |  |                                                            
|---------------------------------------- |  | -----------------------------------------------------------
|Buildings                                |  | 5 to 40 years                                              
|Plant and equipment                      |  | 4 to 25 years                                              
|Distribution system                      |  | 3 to 40 years                                              
|Office furniture, fixtures and equipment |  | 3 to 10 years                                              
|Vehicles                                 |  | 3 to 10 years                                              
|Leasehold improvements                   |  | Shorter of 5 years and operating lease term
    outstanding
|Lab Equipment                            |  | 3 to 10 years                                              

Additions to property, plant and equipment are
comprised of the cost of the contracted services, direct labour
and materials. Assets under construction are recorded as
additions to property, plant and equipment upon completion of
the projects. Depreciation commences in the month of addition.

During the year ended December 31, 2001, the
Company carried out an extensive engineering analysis of its
potable water production and distribution equipment in Grand
Cayman. The Companys analysis concluded that certain
assets would not need to be replaced or relocated as early as
previously planned. As a result of these circumstances,
management considered it appropriate to reassess the estimated
useful economic life of these assets. The reassessment of the
useful economic lives of these assets resulted in decreased
depreciation expense on an annual basis in the amount of
$197,472, which increased basic and fully diluted earnings per
share by $0.05 for the year ended December 31, 2001.

Intangible asset:The Company adopted the provisions of SFAS No. 142,
Goodwill and Other Intangible Assets, as of
January 1, 2002. Goodwill and intangible assets acquired in
a purchase business combination and determined to have an
indefinite useful life are not amortized, but instead tested for
impairment at least annually in accordance with the provisions
of SFAS No. 142. SFAS No. 142 also requires that
intangible assets with estimable useful lives be amortized over
their respective estimated useful lives to their estimated
residual values, and reviewed for impairment in accordance with
SFAS No. 144, Accounting for Impairment or Disposal
of Long-Lived Assets. The adoption of SFAS No. 142
had no impact on the Companys consolidated financial
statements.

Prior to the adoption of SFAS No. 142, the
intangible asset recorded by the Company was amortized on a
straight-line over the remaining period of the contract. The
impairment of the intangible asset, if any, was measured based
on projected discounted future operating cash flows using a
discount rate reflecting the Companys average cost of
funds.

8



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##### Table of Contents



CONSOLIDATED WATER CO. LTD.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



2.     Accounting
Policies  (continued)


Investment:Investments are recorded at cost. The Company recognizes an
impairment loss on declines in value that are other than
temporary.

Security deposits:Security deposits are received from large customers as security
for trade receivables.

Advances in aid of
construction:The Company recognizes a
liability when advances are received from condominium developers
in the licensed area to help defray the capital expenditure
costs of the Company. These advances do not represent loans to
the Company and are interest free. However, the Company allows a
discount of ten percent on future supplies of water to these
developments until the aggregate discounts allowed are
equivalent to advances received. Discounts are charged against
advances received.

Shares repurchased:Under Cayman Islands law, ordinary shares repurchased must be
cancelled upon redemption. The Companys issued share
capital is reduced by the par value of those shares, with the
difference being adjusted to additional paid in capital.

Stock and stock option incentive
plans:The Company issues stock under
incentive plans that form part of employees and non-executive
Directors remuneration and grants options to purchase
ordinary shares as part of remuneration for certain long-serving
employees and the executive officers.

The Company applies the intrinsic-value-based
method of accounting prescribed by APB Opinion No. 25
Accounting for Stock Issued to Employees, and
related interpretations to account for its fixed-plan stock
options. Under this method, compensation expense is recorded on
the date of grant only if the current market price of the
underlying stock exceeds the exercise price. SFAS No. 123
Accounting for Stock-Based Compensation established
accounting and disclosure requirements using a fair-valued-based
method of accounting for stock-based employee compensation
plans. As allowed by SFAS No. 123, the Company continues to
apply the intrinsic-value method of accounting described above
and has adopted the disclosure requirements of SFAS
No. 123. The following table illustrates the effect on net
income if the fair-value-based method has been applied to all
outstanding and unvested awards in each period.

|                                                                                                                    |                       |      |           |      |  |      |           |      |  |   |           |      | 
|------------------------------------------------------------------------------------------------------------------- | --------------------- | ---- | --------- | ---- |  | ---- | --------- | ---- |  | - | --------- | ---- | 
|                                                                                                                    |                       | 2002 |           | 2001 |  | 2000
|                                                                                                                    |                       |      |           |      |  |     
|Net income, as reported                                                                                             |                       | $    | 2,576,310 |      |  | $    | 2,764,573 |      |  | $ | 2,404,820 |     
|Add stock-based employee compensation expense
    included in reporting net income                                  |                       |      | 442,497   |      |  |      | 169,599   |      |  |   | 124,772   |     
|Deduct total stock-based employee compensation
    expense determined under fair-value-based method for all rewards |                       |      | (622,702  | )    |  |      | (645,290  | )    |  |   | (417,837  | )   
|                                                                                                                    |                       |      |           |      |  |      |           |      |  |   |           |     
|Pro forma net income                                                                                                |                       | $    | 2,396,105 |      |  | $    | 2,288,882 |      |  | $ | 2,111,755 |     
|                                                                                                                    |                       |      |           |      |  |      |           |      |  |   |           |     
|Earnings per share:                                                                                                 |                       |      |           |      |  |      |           |      |  |   |           |     
|                                                                                                                    | Basic  as reported   |      | $         | 0.65 |  |      | $         | 0.71 |  |   | $         | 0.68 | 
|                                                                                                                    | Basic  pro forma     |      | $         | 0.60 |  |      | $         | 0.59 |  |   | $         | 0.59 | 
|                                                                                                                    | Diluted  as reported |      | $         | 0.63 |  |      | $         | 0.69 |  |   | $         | 0.67 | 
|                                                                                                                    | Diluted  pro forma   |      | $         | 0.58 |  |      | $         | 0.57 |  |   | $         | 0.58 | 

The cost of stock options granted to employees is
recorded in stockholders equity and is expensed to the consolidated
statements of income based on the vesting period of the options. On issue of options, proceeds up to the par value of the stock
issued are credited to ordinary share capital; any proceeds in
excess of the par value of the stock issued are credited to
additional paid in capital in the period in which the options
are exercised.

9



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##### Table of Contents



CONSOLIDATED WATER CO. LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



2.     Accounting
Policies  (continued)


Water sales and cost of water
sales:Customers are billed monthly
based on meter readings performed at or near each month end and
in accordance with agreements which stipulate minimum monthly
charges for water service. An accrual, where necessary, is made
for water delivered but unbilled at year end when readings are
not performed at the year end date. The accrual is matched with
the direct costs of producing, purchasing and delivering water.

Repairs and
maintenance:All repair and
maintenance costs are expensed as incurred.

Reclassifications:The Company has included amounts accrued under the non-executive
Directors share plan and directors and senior management stock
compensation plans in stockholders equity. In prior years,
these amounts had been recorded as a current liability, however,
management determined it more appropriate to reflect these amounts in
stockholders equity based on the nature of the amounts and the related
plans. The effect of this reclassification was an increase in
stockholders equity and a decrease in current liabilities of
$424,841 and $210,324 at December 31, 2002 and 2001,
respectively. There is no impact on earnings per share since the
Company had always included these amounts in the statements of
operations and its determination of earnings per share.




The Company has included meter rental charges, water
sales by truck, and connection and re-connection charges in water
sales. In prior years, these amounts had been recorded as other
income, however, management determined it more appropriate to reflect
these amounts as water sales based on the nature of the amounts and
their association with water sales. The effect of this
reclassification was an increase in water sales and a decrease in
other income of $243,969, $221,182, and $218,792 for the years
ended December 31, 2002, 2001, and 2000, respectively. There is no
impact on earnings per share since the Company had always included
these amounts in the statements of operations and its determination
of earnings per share.







The Company has included interest expense in other
income and expenses. In prior years, these amounts had been recorded
as indirect expenses, however, management determined it more
appropriate to reflect these amounts as other expenses based on the
nature of the amounts. The effect of this reclassification was a
decrease in indirect expenses and other income and expenses of
$103,986, $99,956, and $135,847 for the years ended December 31,
2002, 2001, and 2000, respectively. There is no impact on earnings
per share since the Company had always included these amounts in the
statements of operations and its determination of earnings per share.




3.     Cash and Cash
Equivalents

Cash and cash equivalents are not restricted as
to withdrawal or use. At December 31, 2002, the equivalent
of $395,897 (2001: $372,688) is denominated in Belize dollars.
The Company has a guarantee from the Government of Belize to
repatriate any and all of the Belize Water Limited earnings in
United States dollars.

4.     Accounts
Receivable

Accounts receivable comprise receivables from
customers and are shown net of an allowance for doubtful
accounts of $12,000 (2001: $12,000). Significant concentrations
of credit risk are disclosed in Note 18.

5.     Property,
Plant and Equipment

|                                         |  |              |            |      |  |   |            |  
|---------------------------------------- |  | ------------ | ---------- | ---- |  | - | ---------- | -
|                                         |  |             
|                                         |  | December 31,
|                                         |  |             
|                                         |  | 2002         |            | 2001
|                                         |  |              |            |     
|Cost:                                    |  |              |            |      |  |   |            |  
|Land                                     |  | $            | 475,679    |      |  | $ | 475,679    |  
|Buildings                                |  |              | 2,211,200  |      |  |   | 2,147,417  |  
|Plant and equipment                      |  |              | 11,288,460 |      |  |   | 9,531,739  |  
|Distribution system                      |  |              | 13,237,043 |      |  |   | 13,007,223 |  
|Office furniture, fixtures and equipment |  |              | 715,539    |      |  |   | 675,450    |  
|Vehicles                                 |  |              | 607,230    |      |  |   | 580,213    |  
|Leasehold improvements                   |  |              | 39,480     |      |  |   | 39,480     |  
|Lab equipment                            |  |              | 41,035     |      |  |   | 37,909     |  
|Assets under construction                |  |              | 1,202,058  |      |  |   | 284,906    |  
|                                         |  |              |            |      |  |   |            |  
|                                         |  |              | 29,817,724 |      |  |   | 26,780,016 |  
|Accumulated depreciation                 |  |              | (9,564,078 | )    |  |   | (8,365,081 | )
|                                         |  |              |            |      |  |   |            |  
|Net book value                           |  | $            | 20,253,646 |      |  | $ | 18,414,935 |  
|                                         |  |              |            |      |  |   |            |  

At December 31, 2002, the Company had
outstanding capital commitments of $1,080,000 (2001:
$1,620,000). It is the Companys policy to maintain
adequate insurance for loss or damage to all fixed assets that
in managements assessment may be susceptible to loss. The
Company does not insure the costs of its underground
distribution system which total $9,806,663 (2001: $9,471,931) or
plant and equipment insured by third parties with a total cost
of $3,633,997 (2001: $3,633,997).

10



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##### Table of Contents



CONSOLIDATED WATER CO. LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

6.     Intangible
Asset

On July 21, 2000, the Company acquired all
of the issued and outstanding capital stock of Seatec Belize
Ltd., a company organized under the laws of Belize, for a total
purchase price, less cash and cash equivalents acquired, of
$3,966,979. Of this amount, $2,073,462 was attributed to the
water purveyor contract (the contract) that the
acquired company had with Belize Water Services Ltd. Seatec
Belize Ltd., now renamed Belize Water Limited, owns and operates
a reverse osmosis plant in Ambergris Caye, Belize. This
acquisition was accounted for by the purchase method and the
intangible asset is being amortized on a straight line basis
over the remaining period of the contract, which expires in
April 2011.

|                         |  |              |           |      |  |   |           |  
|------------------------ |  | ------------ | --------- | ---- |  | - | --------- | -
|                         |  |             
|                         |  | December 31,
|                         |  |             
|                         |  | 2002         |           | 2001
|                         |  |              |           |     
|Intangible asset         |  | $            | 2,073,462 |      |  | $ | 2,073,462 |  
|Accumulated amortisation |  |              | (453,588  | )    |  |   | (258,682  | )
|                         |  |              |           |      |  |   |           |  
|Net book value           |  | $            | 1,619,874 |      |  | $ | 1,814,780 |  
|                         |  |              |           |      |  |   |           |  

Amortization for each of the next five years is
estimated to be $195,000 per year.

7.     Dividends

Quarterly interim dividends were declared in
respect of Class A common stock and preference shares as
follows:

|             |  |      |       |      |  |      |      |  |  |   |      | 
|------------ |  | ---- | ----- | ---- |  | ---- | ---- |  |  | - | ---- | 
|             |  | 2002 |       | 2001 |  | 2000
|             |  |      |       |      |  |     
|March 31     |  | $    | 0.105 |      |  | $    | 0.10 |  |  | $ | 0.08 | 
|June 30      |  | $    | 0.105 |      |  | $    | 0.10 |  |  | $ | 0.08 | 
|September 30 |  | $    | 0.105 |      |  | $    | 0.10 |  |  | $ | 0.08 | 
|December 31  |  | $    | 0.105 |      |  | $    | 0.10 |  |  | $ | 0.10 | 

Interim dividends for the first three quarters
were paid during each respective year. The interim dividend for
the fourth quarter was declared by the Board of Directors in
October of each respective year. These quarterly interim
dividends are subject to no further ratification and
consequently the fourth quarter interim dividends have been
recorded as a liability in each respective year. Included in
dividends payable at December 31, 2002 are unclaimed
dividends of $85,671 (2001: $100,160).

8.     Long Term
Debt

|                                                                                                                                                                    |  |              |           |      |  |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | ---- |  | - | --------- | -
|                                                                                                                                                                    |  |             
|                                                                                                                                                                    |  | December 31,
|                                                                                                                                                                    |  |             
|                                                                                                                                                                    |  | 2002         |           | 2001
|                                                                                                                                                                    |  |              |           |     
|European Investment Bank loan bearing interest at
    3.36%, repayable in semi annual installments, due June 20,
    2006                                           |  | $            | 905,384   |      |  | $ | 1,132,144 |  
|Royal Bank of Canada loan bearing interest at six
    month LIBOR plus 1.5%, repayable in semi annual installments of
    $62,500 plus interest, due April 27, 2005 |  |              | 312,500   |      |  |   | 437,500   |  
|Royal Bank of Canada loan bearing interest at
    monthly LIBOR plus 1.5%, repayable in monthly installments of
    $12,500 plus interest, due February 2, 2007     |  |              | 1,375,000 |      |  |   |          |  
|                                                                                                                                                                    |  |              |           |      |  |   |           |  
|Total long term debt                                                                                                                                                |  |              | 2,592,884 |      |  |   | 1,569,644 |  
|Less current portion                                                                                                                                                |  |              | (518,275  | )    |  |   | (355,840  | )
|                                                                                                                                                                    |  |              |           |      |  |   |           |  
|Long term debt, excluding current portion                                                                                                                           |  | $            | 2,074,609 |      |  | $ | 1,213,804 |  
|                                                                                                                                                                    |  |              |           |      |  |   |           |  

11



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##### Table of Contents



CONSOLIDATED WATER CO. LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



8.     Long Term
Debt   (continued)


At December 31, 2002, the total lending
facility made available by the Royal Bank of Canada comprised:
a) a revolving line of credit with a limit of $1,000,000,
bearing interest at New York Prime plus 1%, which is convertible
in $100,000 increments into a monthly revolving LIBOR note,
bearing interest at LIBOR plus 1.5%, and b) term loans with
a limit of $3,500,000, bearing interest at LIBOR plus 1.5%. Any
amounts drawn down under the line of credit and any term loans
are collateralised by a fixed and floating charge of $3,000,000.
The fixed charge covers land owned by the Company and the
floating charge covers all other assets of the Company, except a
reverse osmosis plant charged in connection with the water
purchase agreement.

The European Investment Bank loan is guaranteed
by the Overseas Development Administration (ODA) of
the Foreign and Commonwealth Office of the Government of the
United Kingdom. The Government of the Cayman Islands has, for a
fee of 1% per annum, provided a counter guarantee to the ODA.
The Company, with the approval of the Royal Bank of Canada has
agreed to secure the counter guarantee by a second charge over
all assets of the Company.

The above loans and other credit facilities are
subject to certain restrictive covenants, the most restrictive of
which are as follows:

Royal Bank of
Canada loan:



| |                                                                           
| | --------------------------------------------------------------------------
| | (a) The Companys debt to equity ratio shall not exceed 0.85;             
|
| | (b) The Company must maintain a debt-servicing ratio of not
less than 1.25

European
Investment Bank loan:



| |     |                                                                                                                                                                                                                                           
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | The Company shall not take any shareholding in
    any company without the prior written consent of the bank, and
    shall not grant any loans or advances except for granting credit
    to its employees such as it customarily grants.



| |                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------
| | In event of default, the bank may
    immediately withdraw any remaining credit, and demand immediate
    repayment of all amounts outstanding.
|
| | During the year ended 2002 and for the years
    ended December 31, 2001 and 2000, the Company was in
    compliance with these covenants.     

The aggregate capital repayment obligations
over the next five years are as follows:

|     |  |   |           | 
|---- |  | - | --------- | 
|2003 |  | $ | 518,276   | 
|2004 |  |   | 530,286   | 
|2005 |  |   | 480,564   | 
|2006 |  |   | 288,758   | 
|2007 |  |   | 150,000   | 
|     |  |   |           | 
|     |  | $ | 1,967,884 | 
|     |  |   |           | 

9.     Share Capital
and Additional Paid in Capital

Redeemable preferred stock (preference
shares) is issued under the Companys Employee Share
Incentive Plan as discussed in Note 15 and carries the same
voting and dividend rights as ordinary shares of common stock
(ordinary share). Preference shares vest over four
years and convert to common stock on a share for share basis on
the fourth anniversary of each grant date. Preference shares are
only redeemable with the Companys agreement. Upon
liquidation preference shares rank in preference to the ordinary
shares to the extent of the par value of the preference shares
and any related additional paid in capital.

The Company has a Class B stock
option plan designed to deter coercive takeover tactics.
Pursuant to this plan, holders of ordinary shares and preference
shares were granted options which entitle them to purchase 1/100
of a share of Class B stock at an exercise
price of $37.50 if a person or group acquires or commences a
tender offer for 20% or more of the Companys ordinary
shares. Option holders (other than the acquiring person or
group) will also be entitled to buy, for the $37.50 exercise
price, ordinary shares with a then market value of $75.00 in the
event a person or group actually acquires 20% or more of the
Companys ordinary shares. Options may be redeemed at $0.01
under certain circumstances. 30,000 of the Companys
authorized but unissued ordinary shares have been reserved for
issue as Class B stock. The
Class B stock ranks pari passu with ordinary
shares for dividend and voting rights. No
Class B stock options have been exercised or
redeemed up to December 31, 2002.

12



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##### Table of Contents



CONSOLIDATED WATER CO. LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

10.     Expenses

|                                                |  |                                 |           |      |  |      |           |  |  |   |           | 
|----------------------------------------------- |  | ------------------------------- | --------- | ---- |  | ---- | --------- |  |  | - | --------- | 
|                                                |  |                                
|                                                |  | For the Year Ended December 31,
|                                                |  |                                
|                                                |  | 2002                            |           | 2001 |  | 2000
|                                                |  |                                 |           |      |  |     
|Cost of water sales comprise the
    following: |  |                                 |           |      |  |      |           |  |  |   |           | 
|Water purchases                                 |  | $                               | 1,952,331 |      |  | $    | 2,074,759 |  |  | $ | 2,062,582 | 
|Depreciation                                    |  |                                 | 1,175,349 |      |  |      | 1,018,541 |  |  |   | 992,410   | 
|Amortisation of intangible asset (Note 6)       |  |                                 | 194,906   |      |  |      | 193,703   |  |  |   | 64,979    | 
|Employee costs                                  |  |                                 | 1,042,192 |      |  |      | 939,976   |  |  |   | 741,789   | 
|Fuel oil                                        |  |                                 | 179,275   |      |  |      | 91,842    |  |  |   | 81,102    | 
|Royalties (Note 14)                             |  |                                 | 737,064   |      |  |      | 694,351   |  |  |   | 641,428   | 
|Electricity                                     |  |                                 | 710,168   |      |  |      | 534,919   |  |  |   | 316,135   | 
|Insurance                                       |  |                                 | 124,404   |      |  |      | 89,808    |  |  |   | 64,160    | 
|Other direct costs                              |  |                                 | 766,488   |      |  |      | 471,218   |  |  |   | 458,712   | 
|                                                |  |                                 |           |      |  |      |           |  |  |   |           | 
|                                                |  | $                               | 6,882,177 |      |  | $    | 6,109,117 |  |  | $ | 5,423,297 | 
|                                                |  |                                 |           |      |  |      |           |  |  |   |           | 
|Indirect expenses comprise the
    following:   |  |                                 |           |      |  |      |           |  |  |   |           | 
|Employee costs                                  |  |                                 | 1,427,182 |      |  |      | 1,299,877 |  |  |   | 1,045,244 | 
|Depreciation                                    |  |                                 | 93,777    |      |  |      | 94,500    |  |  |   | 79,045    | 
|Professional fees                               |  |                                 | 278,433   |      |  |      | 280,297   |  |  |   | 275,589   | 
|Insurance                                       |  |                                 | 141,650   |      |  |      | 89,328    |  |  |   | 34,829    | 
|Directors fees and expenses                    |  |                                 | 157,877   |      |  |      | 107,184   |  |  |   | 104,149   | 
|Other indirect costs                            |  |                                 | 545,085   |      |  |      | 628,874   |  |  |   | 522,866   | 
|                                                |  |                                 |           |      |  |      |           |  |  |   |           | 
|                                                |  | $                               | 2,644,004 |      |  | $    | 2,500,060 |  |  | $ | 2,061,722 | 
|                                                |  |                                 |           |      |  |      |           |  |  |   |           | 

13



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##### Table of Contents



CONSOLIDATED WATER CO. LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

11.     Earnings Per
Share

Basic earnings per share is calculated by
dividing the net profit attributable to common stockholders by
the weighted average number of ordinary shares in issue during
the year.

The net income, weighted average number of
ordinary shares and potential ordinary shares figures used in
the determination of the basic and diluted earnings per ordinary
share are summarized as follows:

|                                                                                                                 |  |      |           |      |  |      |           |   |  |   |           |  
|---------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- |  | ---- | --------- | - |  | - | --------- | -
|                                                                                                                 |  | 2002 |           | 2001 |  | 2000
|                                                                                                                 |  |      |           |      |  |     
|Net income                                                                                                       |  | $    | 2,576,310 |      |  | $    | 2,764,573 |   |  | $ | 2,404,820 |  
|Less:                                                                                                            |  |      |           |      |  |      |           |   |  |   |           |  
|Dividends declared and earnings attributable on
    preference shares                                            |  |      | (8,913    | )    |  |      | (10,794   | ) |  |   | (14,220   | )
|                                                                                                                 |  |      |           |      |  |      |           |   |  |   |           |  
|Net income available to holders of ordinary
    shares in the determination of basic earnings per ordinary share |  | $    | 2,567,397 |      |  | $    | 2,753,779 |   |  | $ | 2,390,600 |  
|                                                                                                                 |  |      |           |      |  |      |           |   |  |   |           |  
|Weighted average number of ordinary shares in the
    determination of basic earnings per ordinary share         |  |      | 3,969,861 |      |  |      | 3,897,969 |   |  |   | 3,532,501 |  
|Plus:                                                                                                            |  |      |           |      |  |      |           |   |  |   |           |  
|Weighted average number of preference shares
    outstanding during the year                                     |  |      | 23,801    |      |  |      | 31,213    |   |  |   | 37,145    |  
|Potential dilutive effect of unexercised options
    and warrants                                                |  |      | 93,870    |      |  |      | 70,509    |   |  |   | 46,625    |  
|                                                                                                                 |  |      |           |      |  |      |           |   |  |   |           |  
|Weighted average number of shares used for
    determining diluted earnings per ordinary share                   |  |      | 4,087,532 |      |  |      | 3,999,691 |   |  |   | 3,616,271 |  
|                                                                                                                 |  |      |           |      |  |      |           |   |  |   |           |  

12.     Segmented
Information

The supply of water to the Cayman Islands, Belize
and Bahamas are considered by management as separate business
segments. The basis of measurement of segment information is
similar to that adopted for the financial statements.

Water sales from Belize Water Limited for the
three years ending December 31, 2002 were earned from one
customer.

14



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##### Table of Contents



CONSOLIDATED WATER CO. LTD.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

12.     Segmented
Information  (continued)




|                                                 |              |                                               |            |           |           |   |            |             |  |   |            |           |  |      |           |         |      |   |           |         |  |   |           |        |  |      |           |        |      |   |           |        |  |   |         |   |  |   |            |           |  |   |            |           |  |   |            |           | 
|------------------------------------------------ | ------------ | --------------------------------------------- | ---------- | --------- | --------- | - | ---------- | ----------- |  | - | ---------- | --------- |  | ---- | --------- | ------- | ---- | - | --------- | ------- |  | - | --------- | ------ |  | ---- | --------- | ------ | ---- | - | --------- | ------ |  | - | ------- | - |  | - | ---------- | --------- |  | - | ---------- | --------- |  | - | ---------- | --------- | 
|                                                 |              |                                              
|                                                 |              | As at December 31 and for the Year then Ended |           
|                                                 |              |                                               |           
|                                                 |              |                                               |            |           |           |   |            |            
|                                                 |              | Cayman Islands                                |            |           | Belize(*) |   |            | Bahamas(**) |  |   | Total      |          
|                                                 |              |                                               |            |           |           |   |            |             |  |   |            |          
|                                                 |              | 2002                                          |            |           | 2001      |   |            | 2000        |  |   | 2002       |           |  | 2001 |           |         | 2000 |   |           | 2002    |  |   | 2001      |        |  | 2000 |           |        | 2002 |   |           | 2001   |  |   | 2000    |  
|                                                 |              |                                               |            |           |           |   |            |             |  |   |            |           |  |      |           |         |      |   |           |         |  |   |           |        |  |      |           |        |      |   |           |        |  |   |         |  
|Water sales                                      |              | $                                             | 10,565,567 |           |           | $ | 9,990,997  |             |  | $ | 9,330,823  |           |  | $    | 1,471,098 |         |      | $ | 1,230,775 |         |  | $ | 464,928   |        |  | $    | 118,024   |        |      | $ | 26,333    |        |  | $ |        |   |  | $ | 12,154,689 |           |  | $ | 11,248,105 |           |  | $ | 9,795,751  |          
|Other income (expenses)                          |              |                                               | (60,492    | )         |           |   | 96,739     |             |  |   | 94,088     |           |  |      | 8,290     |         |      |   | 28,463    |         |  |   |          |        |  |      | 4         |        |      |   | 443       |        |  |   |        |   |  |   | (52,198    | )         |  |   | 125,645    |           |  |   | 94,088     |          
|Cost of water sales                              |              |                                               | 5,871,118  |           |           |   | 5,344,370  |             |  |   | 5,172,945  |           |  |      | 862,455   |         |      |   | 718,121   |         |  |   | 250,352   |        |  |      | 148,604   |        |      |   | 46,626    |        |  |   |        |   |  |   | 6,882,177  |           |  |   | 6,109,117  |           |  |   | 5,423,297  |          
|Indirect expenses                                |              |                                               | 2,409,440  |           |           |   | 2,305,112  |             |  |   | 2,028,300  |           |  |      | 225,627   |         |      |   | 190,822   |         |  |   | 33,422    |        |  |      | 8,937     |        |      |   | 4,126     |        |  |   |        |   |  |   | 2,644,004  |           |  |   | 2,500,060  |           |  |   | 2,061,722  |          
|Cost of water sales and direct expenses include: |              |                                               |            |           |           |   |            |             |  |   |            |           |  |      |           |         |      |   |           |         |  |   |           |        |  |      |           |        |      |   |           |        |  |   |         |   |  |   |            |          
|                                                 | Depreciation |                                               |            | 1,043,397 |           |   |            | 932,029     |  |   |            | 1,009,420 |  |      |           | 180,105 |      |   |           | 160,825 |  |   |           | 62,035 |  |      |           | 45,624 |      |   |           | 20,187 |  |   |         |  |  |   |            | 1,269,126 |  |   |            | 1,113,041 |  |   |            | 1,071,455 | 
|Net income (loss)                                |              |                                               | 2,224,517  |           |           |   | 2,438,254  |             |  |   | 2,223,666  |           |  |      | 391,306   |         |      |   | 350,295   |         |  |   | 181,154   |        |  |      | (39,513   | )      |      |   | (23,976   | )      |  |   |        |   |  |   | 2,576,310  |           |  |   | 2,764,573  |           |  |   | 2,404,820  |          
|Property, plant and equipment                    |              |                                               | 17,698,944 |           |           |   | 15,770,560 |             |  |   | 15,735,330 |           |  |      | 1,440,673 |         |      |   | 1,541,795 |         |  |   | 1,601,166 |        |  |      | 1,114,029 |        |      |   | 1,102,580 |        |  |   | 307,395 |   |  |   | 20,253,646 |           |  |   | 18,414,935 |           |  |   | 17,643,891 |          
|Total assets                                     |              |                                               | 22,214,167 |           |           |   | 21,595,627 |             |  |   | 19,421,195 |           |  |      | 2,160,107 |         |      |   | 2,310,772 |         |  |   | 2,117,082 |        |  |      | 1,133,363 |        |      |   | 1,125,551 |        |  |   | 307,395 |   |  |   | 25,507,637 |           |  |   | 22,721,178 |           |  |   | 21,845,672 |          






---



|    |                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------
|(*) | The Company acquired 100% of the outstanding
    shares in Belize Water Limited and began operations on
    July 21, 2000.



|     |                                                                                                                                                        
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|(**) | On December 18, 2000, the Company entered
    into a water supply agreement with South Bimini International
    Ltd. Operations began on July 11, 2001.

15



---



##### Table of Contents



13.     Related Party
Transactions

A professional service firm, of which a Director
is a partner, provided professional services during the year
ended December 31, 2002 for which it charged $225,400
(2001: $275; 2000: $12,916).

14.     Commitments

The Company has committed to purchase a 13.5%
equity interest in Waterfields Company Limited, a Bahamian
company, from Bacardi and Company Ltd. for approximately
BAH$1.4 million. Completion of this purchase is subject to
the fulfillment of certain conditions, including the receipt of
government approvals and the commitment of at least 51% of
Waterfields shareholders to sell their shares to the
Company. In furtherance of this purchase agreement, on
December 20, 2002, the Company made a tender offer of
BAH$690 per share to the remaining shareholders of Waterfields.
This tender offer, which is contingent on completion of the
share purchase agreement with Bacardi and Company Ltd., closed
on January 31, 2003, by which time the Company had received
acceptances from another 64.7% of Waterfields shareholders.

The Company has committed to sell 165,000
Class C shares in Ocean Conversion (BVI) Ltd., a
British Virgin Islands company, to Sage Water Holdings
(BVI) Ltd. for approximately US$2.1 million. The
Company acquired these shares on February 7, 2003 as
disclosed in Note 22.

The Company is party to a water purchase
agreement with Ocean Conversion (Cayman) Limited
(OCL) under which an annual minimum amount of water
is required to be purchased. At December 31, 2002, accounts
payable includes $208,556 (2001: $192,340) outstanding under the
agreement. Water purchases for the three years ended
December 31, 2002 are disclosed in Note 10.

From the acquisition date of Belize Water Limited
in the year ended December 31, 2000, the Company has been
under contract to supply a minimum of 135,000 US Gallons of
water per day to BWSL of Belize. The price of water is adjusted
annually based on government indices. Water sales under this
contract for the three years ended December 31, 2002
comprise total sales as disclosed in Note 12.

The Company is obligated to supply water, where
feasible, to customers in the Cayman Islands within its licence
area in accordance with the terms of the licence. Royalties are
paid to the Government of the Cayman Islands at the rate of 7.5%
of gross water sales.

The Company has committed to lease premises in
the Cayman Islands for a period of one year from
February 1, 2003 to January 31, 2004 at approximately
$82,000 per annum.

15.     Stock
Compensation

The Company operates various stock compensation
plans that form part of employees remuneration. Stock
compensation expense of $442,497 (2001: $169,599; 2000:
$124,772) is recorded in accordance with APB Opinion No. 25
and included within employee costs. Had compensation cost for
the Companys stock based compensation plans been
determined based on the fair value at the grant dates for awards
under those

16



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##### Table of Contents



CONSOLIDATED WATER CO. LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



15.     Stock
Compensation  (continued)


plans consistent with the method of
SFAS 123, the Companys net income and earnings per
share would have been reduced to the pro forma amounts below:

|                                                      |  |                                 |           |      |  |      |           |  |  |   |           | 
|----------------------------------------------------- |  | ------------------------------- | --------- | ---- |  | ---- | --------- |  |  | - | --------- | 
|                                                      |  |                                
|                                                      |  | For the Year Ended December 31,
|                                                      |  |                                
|                                                      |  | 2002                            |           | 2001 |  | 2000
|                                                      |  |                                 |           |      |  |     
|Net income  As reported                              |  | $                               | 2,576,310 |      |  | $    | 2,764,573 |  |  | $ | 2,404,820 | 
|Net income  Pro Forma                                |  | $                               | 2,396,105 |      |  | $    | 2,288,882 |  |  | $ | 2,111,755 | 
|Basic earnings per ordinary share  As
    reported   |  | $                               | 0.65      |      |  | $    | 0.71      |  |  | $ | 0.68      | 
|Basic earnings per ordinary share  Pro
    Forma     |  | $                               | 0.60      |      |  | $    | 0.59      |  |  | $ | 0.59      | 
|Diluted earnings per ordinary share 
    As reported |  | $                               | 0.63      |      |  | $    | 0.69      |  |  | $ | 0.67      | 
|Diluted earnings per ordinary share 
    Pro Forma   |  | $                               | 0.58      |      |  | $    | 0.57      |  |  | $ | 0.58      | 

In calculating the fair value for these options
under SFAS 123 the Black-Scholes model was used with the
following weighted average assumptions:

Options granted with an exercise price below
market price on the date of grant:

|                        |  |      |            |      |  |      |            |   |  |   |           |  
|----------------------- |  | ---- | ---------- | ---- |  | ---- | ---------- | - |  | - | --------- | -
|                        |  | 2002 |            | 2001 |  | 2000
|                        |  |      |            |      |  |     
|Exercise price          |  | $    | 12.17      |      |  | $    | 10.55      |   |  | $ | 6.70      |  
|Grant date market value |  | $    | 14.71      |      |  | $    | 10.97      |   |  | $ | 6.97      |  
|Risk free interest rate |  |      | 2.24       | %    |  |      | 3.93       | % |  |   | 6.56      | %
|Expected life           |  |      | 3.23 years |      |  |      | 3.21 years |   |  |   | 3.0 years |  
|Expected volatility     |  |      | 42.91      | %    |  |      | 52.79      | % |  |   | 62.64     | %
|Expected dividend yield |  |      | 2.85       | %    |  |      | 3.67       | % |  |   | 4.59      | %

Options granted with an exercise price above
market price on the date of grant:

|                        |  |      |   |      |  |      |   |  |  |   |           |  
|----------------------- |  | ---- | - | ---- |  | ---- | - |  |  | - | --------- | -
|                        |  | 2002 |   | 2001 |  | 2000
|                        |  |      |   |      |  |     
|Exercise price          |  |      |  |      |  |      |  |  |  | $ | 7.10      |  
|Grant date market value |  |      |  |      |  |      |  |  |  | $ | 7.00      |  
|Risk free interest rate |  |      |  |      |  |      |  |  |  |   | 5.0       | %
|Expected life           |  |      |  |      |  |      |  |  |  |   | 3.2 years |  
|Expected volatility     |  |      |  |      |  |      |  |  |  |   | 62.57     | %
|Expected dividend yield |  |      |  |      |  |      |  |  |  |   | 4.57      | %



| |                                                      
| | -----------------------------------------------------
| | Employee Share Incentive Plan (Preference
    shares)

The Company awards preference shares for $nil
consideration under the Employee Share Incentive Plan as part of
compensation for eligible employee services, excluding Directors
and Executive Officers, that require future services as a
condition to the delivery of the ordinary shares. In addition
options are granted to purchase preference shares at a fixed
price, determined annually, which will typically represent a
discount to the market value of the ordinary shares. In
consideration for preference shares, the Company issues ordinary
shares on a share for share basis. Under the plan the conversion
is conditional on the grantees satisfying requirements
outlined in the award agreements. Preference shares are only
redeemable with the Companys agreement.

17



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##### Table of Contents



CONSOLIDATED WATER CO. LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



15.     Stock
Compensation  (continued)


The details of preferred shares and preferred
share options granted and exercised under the Employee Share
Incentive Plan is as follows:

|                        |  |         |      |         |  |        |       |           |  |         |      |  |  |  |       |  |  |  |       | 
|----------------------- |  | ------- | ---- | ------- |  | ------ | ----- | --------- |  | ------- | ---- |  |  |  | ----- |  |  |  | ----- | 
|                        |  | Year of |      |         |  | Strike |       | Options   |  | Options
|                        |  | Grant   |      | Granted |  | Price  |       | Exercised |  | Expired
|                        |  |         |      |         |  |        |       |           |  |        
|Preferred shares        |  |         | 2000 |         |  |        | 2,279 |           |  | $       | nil  |  |  |  | N/A   |  |  |  | N/A   | 
|                        |  |         | 2001 |         |  |        | 3,963 |           |  | $       | nil  |  |  |  | N/A   |  |  |  | N/A   | 
|                        |  |         | 2002 |         |  |        | 2,713 |           |  | $       | nil  |  |  |  | N/A   |  |  |  | N/A   | 
|Preferred share options |  |         | 2000 |         |  |        | 2,279 |           |  | $       | 5.47 |  |  |  | 1,136 |  |  |  | 1,143 | 
|                        |  |         | 2001 |         |  |        | 3,963 |           |  | $       | 5.32 |  |  |  | 1,858 |  |  |  | 2,105 | 
|                        |  |         | 2002 |         |  |        | 2,713 |           |  | $       | 8.13 |  |  |  | 617   |  |  |  | 2,096 | 

Each employees option to purchase preferred
shares must be exercised within 40 days of the annual
general meeting of the Company following the date of grant.

Employee
Share Option Plan (Ordinary Stock Options)

In 2001, the Company introduced an employee stock
option plan for certain long-serving employees of the Company.
Under the plan these employees are granted in each calendar
year, as long as the employee is a participant in the Employee
Share Incentive Plan, options to purchase ordinary shares. The
price at which the option may be exercised will be the closing
market price on the grant date, which is 40 days after the
date of the Companys annual general meeting. The number of
options each employee is granted is equal to five times the sum
of (i) the number of preference shares which that employee
receives for $nil consideration and (ii) the number of
preference share options which that employee exercises in that
given year. Options may be exercised during the period
commencing on the fourth anniversary of the grant date and
ending on the thirtieth day after the fourth anniversary of the
grant date.

Non-Executive
Directors Share Plan

In 1999, the Company introduced a stock grant
plan, which forms part of Directors remuneration. Under
the plan Directors receive a combination of cash and ordinary
shares in consideration of remuneration for their participation
in Board meetings. All Directors are eligible except Executive
Officers, who are covered by individual employment contracts and
the Government elected board member. Ordinary shares granted are
calculated with reference to a strike price that is set by the
Board of Directors on October 1 of the year preceding the
grant. Stock granted during the year ended December 31,
2002 totaled 6,305 shares (2001: 7,860) at a strike price of
$10.70 (2001: $7.25).

Directors and
senior management stock compensation

Certain members of senior management are entitled
to receive, as part of the compensation for their services to
the Company, options to purchase ordinary shares. One other
director was granted options as remuneration for services
rendered to the Company during the year ended December 31,
2001. In addition, another member of senior management is
entitled to receive, as part of compensation for services to the
Company, ordinary shares of the Company. As at December 31,
2002, 2,405 shares (2001: 3,172) were due to this employee.

Non-employee

As part of an agreement for market
representation, the Company issued options to purchase ordinary
shares to an investment company for $nil consideration. These
options had an expiry date of one year

18



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##### Table of Contents



CONSOLIDATED WATER CO. LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



15.     Stock
Compensation  (continued)


commencing on the termination of the agreement,
which management formally terminated on April 3, 2002. The
fair value of these options was determined by management to be
$30,000, based on the fair value of the services to be received.
The Company also issued warrants in conjunction with a private
placement in 1995. These warrants were exercised in full in
January and February 2000.

The following table summarizes information about
the Companys stock option plans as of December 31,
2002, 2001 and 2000, and changes during the years ended on those
dates.

|                                           |  |        |         |          |  |        |       |          |  |        |         |          |  |   |       |  |  |  |         |   |  |   |      | 
|------------------------------------------ |  | ------ | ------- | -------- |  | ------ | ----- | -------- |  | ------ | ------- | -------- |  | - | ----- |  |  |  | ------- | - |  | - | ---- | 
|                                           |  |        |         |          |  |       
|                                           |  | 2002   |         | 2001     |  | 2000  
|                                           |  |        |         |          |  |       
|                                           |  |        |         | Exercise |  |        |       | Exercise |  |        |         | Exercise
|                                           |  | Number |         | Price    |  | Number |       | Price    |  | Number |         | Price   
|                                           |  |        |         |          |  |        |       |          |  |        |         |         
|Outstanding at beginning of year           |  |        | 341,136 |          |  | $      | 8.59  |          |  |        | 243,045 |          |  | $ | 5.73  |  |  |  | 127,786 |   |  | $ | 4.58 | 
|Granted                                    |  |        | 114,086 |          |  | $      | 12.17 |          |  |        | 162,054 |          |  | $ | 10.55 |  |  |  | 117,538 |   |  | $ | 6.98 | 
|Exercised                                  |  |        | (58,596 | )        |  | $      | 5.94  |          |  |        | (61,858 | )        |  | $ | 2.58  |  |  |  | (1,136  | ) |  | $ | 5.47 | 
|Forfeited                                  |  |        | (2,096  | )        |  | $      | 8.14  |          |  |        | (2,105  | )        |  | $ | 5.32  |  |  |  | (1,143  | ) |  | $ | 5.47 | 
|                                           |  |        |         |          |  |        |       |          |  |        |         |          |  |   |       |  |  |  |         |   |  |   |      | 
|Outstanding and exercisable at end of year |  |        | 394,530 |          |  | $      | 10.02 |          |  |        | 341,136 |          |  | $ | 8.59  |  |  |  | 243,045 |   |  | $ | 5.73 | 
|                                           |  |        |         |          |  |        |       |          |  |        |         |          |  |   |       |  |  |  |         |   |  |   |      | 

The following summarizes the weighted average
grant-date fair value of options granted during the year:

|                                                                                    |  |                    |      |      |  |      |      |  |  |   |      | 
|----------------------------------------------------------------------------------- |  | ------------------ | ---- | ---- |  | ---- | ---- |  |  | - | ---- | 
|                                                                                    |  |                   
|                                                                                    |  | For the Year Ended
|                                                                                    |  | December 31,      
|                                                                                    |  |                   
|                                                                                    |  | 2002               |      | 2001 |  | 2000
|                                                                                    |  |                    |      |      |  |     
|Options granted with an exercise price below
    market price on the date grant:    |  |                    |      |      |  |      |      |  |  |   |      | 
|Senior management                                                                   |  | $                  | 4.93 |      |  | $    | 3.78 |  |  |   |     | 
|Non executive Director                                                              |  |                    |     |      |  | $    | 3.89 |  |  | $ | 2.69 | 
|Employees  preferred shares                                                        |  | $                  | 5.72 |      |  | $    | 3.88 |  |  | $ | 2.66 | 
|Employees  ordinary share options                                                  |  | $                  | 4.41 |      |  | $    | 3.08 |  |  |   |     | 
|Overall weighted average                                                            |  | $                  | 4.89 |      |  | $    | 3.71 |  |  | $ | 2.69 | 
|Options granted with an exercise price above
    market price on the date of grant: |  |                    |      |      |  |      |      |  |  |   |      | 
|Senior management                                                                   |  |                    |     |      |  |      |     |  |  | $ | 2.57 | 

Summary of Options Outstanding at
December 31, 2002

At December 31, 2002, the range of exercise
prices on outstanding options was $6.75  $14.69.
Accordingly the following information is presented on options
outstanding, which are all exercisable, at December 31,
2002:

|                                                       |  |               |            |                 |  |   |            | 
|------------------------------------------------------ |  | ------------- | ---------- | --------------- |  | - | ---------- | 
|                                                       |  | Exercise      |            | Exercise Prices
|                                                       |  | Prices from   |            | from           
|                                                       |  | $6.75  $9.20 |            | $10.84  $14.69
|                                                       |  |               |            |                
|Number of options outstanding at
    December 31, 2002 |  |               | 147,671    |                 |  |   | 246,859    | 
|Weighted average exercise price                        |  | $             | 7.51       |                 |  | $ | 11.52      | 
|Weighted average remaining contractual life            |  |               | 1.13 years |                 |  |   | 2.64 years | 

19



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##### Table of Contents



CONSOLIDATED WATER CO. LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



15.     Stock
Compensation  (continued)


The weighted average fair value per share under
SFAS 123 for shares issued during the year below market price on
the date of grant follows:

|                              |  |        |        |          |  |        |       |          |  |        |        |          |  |   |      |  |  |  |       |  |  |   |      | 
|----------------------------- |  | ------ | ------ | -------- |  | ------ | ----- | -------- |  | ------ | ------ | -------- |  | - | ---- |  |  |  | ----- |  |  | - | ---- | 
|                              |  |        |        |          |  |       
|                              |  | 2002   |        | 2001     |  | 2000  
|                              |  |        |        |          |  |       
|                              |  |        |        | Weighted |  |        |       | Weighted |  |        |        | Weighted
|                              |  |        |        | Average  |  |        |       | Average  |  |        |        | Average 
|                              |  |        |        | Exercise |  |        |       | Exercise |  |        |        | Exercise
|                              |  | Number |        | Price    |  | Number |       | Price    |  | Number |        | Price   
|                              |  |        |        |          |  |        |       |          |  |        |        |         
|Employee Share Incentive Plan |  |        | 2,713  |          |  | $      | 13.88 |          |  |        | 3,963  |          |  | $ | 9.00 |  |  |  | 2,279 |  |  | $ | 7.00 | 
|Directors Share Plan          |  |        | 6,056  |          |  | $      | 10.70 |          |  |        | 7,860  |          |  | $ | 7.25 |  |  |  | 6,889 |  |  | $ | 7.13 | 
|Senior management             |  |        | 3,172  |          |  | $      | 9.55  |          |  |        |       |          |  |   |     |  |  |  |      |  |  |   |     | 
|Overall weighted average      |  |        | 11,941 |          |  | $      | 11.12 |          |  |        | 11,456 |          |  | $ | 7.86 |  |  |  | 9,168 |  |  | $ | 7.09 | 

16.     Taxation

Under current laws of the Cayman Islands, there
are no income, estate, corporation, capital gains or other taxes
payable by the Company. The Company has received a tax exemption
with respect to its Belize operations. The exemption expires in
2006 and is renewable in accordance with the provisions of the
BWSL contract. Services to the customer in the Bahamas are
provided by the Company, which is a Cayman Islands company that
is not subject to taxation in the Commonwealth of the Bahamas.

17.     Pension
Benefits

A staff pension plan is offered to all employees.
The plan is administered by the Cayman Islands Chamber of
Commerce and is a defined contribution plan whereby the Company
matches the contribution of the first 5% of each participating
employees salary. The total amount recognized as an
expense under the plan during the year ended December 31,
2002 was $70,210 (2001: $63,740; 2000: $67,760).

18.     Financial
Instruments

Credit
Risk:

The Company is not exposed to significant credit
risk on the vast majority of customer accounts as the policy is
to cease supply of water to customers accounts that are
more than 45 days overdue. The Companys exposure to
credit risk is concentrated on receivables from one customer in
Belize. The balance from this customer is current as at
December 31, 2002 and management does not anticipate any
losses on this concentration.

Interest Rate
Risk:

The interest rates and terms of the
Companys loans are presented in Note 8 of these financial
statements. The Company is subject to interest rate risk to the
extent that LIBOR changes.

Foreign
Exchange Risk:

All relevant foreign currencies have fixed
exchange rates to the United States dollar as detailed under the
foreign currency accounting policy note. If any of these fixed
exchange rates become floating exchange rates, the
Companys results of operations could be adversely affected.

20



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##### Table of Contents



CONSOLIDATED WATER CO. LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



18.     Financial
Instruments   (continued)


Fair
Values:

At December 31, 2002 and 2001, the carrying
amounts of cash and cash equivalents, accounts receivable,
accounts payable and other liabilities and dividends payable
approximate fair values due to the short term maturities of
these assets and liabilities. The Directors consider that the
carrying amount for long term debt due to Royal Bank of Canada
approximates fair value. The fair value for long term debt due
to European Investment Bank is approximately $840,720 (2001:
$1,041,000) although this does not necessarily indicate that the
Company could extinguish this debt for an amount lower than the
carrying value. Fair value of this long term debt for which no
market value is readily available is determined by the Company
using predetermined future cash flows discounted at an estimated
current incremental rate of borrowing for a similar liability.
In establishing an estimated incremental rate, the Company has
evaluated the existing transactions, as well as comparable
industry and economic data and other relevant factors such as
pending transactions, subsequent events and the amount the
Company would have to pay a credit worthy third party to assume
the liability, with the creditors legal consent.

19.     Non-Cash
Transactions

The Company made the following non-cash
transactions:

|                                                                                                         |  |      |         |      |  |      |         |  |  |   |         |  
|-------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | -
|                                                                                                         |  | 2002 |         | 2001 |  | 2000
|                                                                                                         |  |      |         |      |  |     
|Redemption of preference shares and issue of
    replacement ordinary shares at $nil consideration       |  | $    | 9,700   |      |  | $    | 17,112  |  |  | $ | 12,767  |  
|                                                                                                         |  |      |         |      |  |      |         |  |  |   |         |  
|Preference shares issued to employees at $nil
    consideration (Note 15)                                |  | $    | 3,256   |      |  | $    | 4,756   |  |  | $ | 2,735   |  
|Redemption of preference shares at $nil
    consideration                                                |  |      |        |      |  |      |        |  |  |   | (240    | )
|Ordinary shares issued under the Non-executive
    Directors Share Plan at $nil consideration (Note 15)  |  |      | 66,600  |      |  |      | 56,998  |  |  |   | 49,084  |  
|Ordinary shares issued under senior management
    employment agreements at $nil consideration (Note 15) |  |      | 30,303  |      |  |      |        |  |  |   |        |  
|Additional paid in capital from exercise of stock
    options                                            |  |      | 75,171  |      |  |      | 227,420 |  |  |   |        |  
|                                                                                                         |  |      |         |      |  |      |         |  |  |   |         |  
|                                                                                                         |  | $    | 175,330 |      |  | $    | 289,174 |  |  | $ | 51,579  |  
|                                                                                                         |  |      |         |      |  |      |         |  |  |   |         |  
|Reduction in ordinary shares and additional paid
    in capital from cancellation of shares repurchased  |  | $    | 36,710  |      |  | $    | 271,595 |  |  | $ | 494,375 |  
|                                                                                                         |  |      |         |      |  |      |         |  |  |   |         |  
|Dividends declared but not paid (Note 7)                                                                 |  | $    | 508,444 |      |  | $    | 499,383 |  |  | $ | 401,965 |  
|                                                                                                         |  |      |         |      |  |      |         |  |  |   |         |  

20.     Impact of
Recent Issued Accounting Standards

The Financial Accounting Standards Board issued
four standards and one interpretation that affect the Company. A
summary of these standards and interpretation is given below:

In June 2001, the FASB issued SFAS No. 143,
Accounting for Assets Retirement Obligations. SFAS
No. 143 requires the Company to record the fair value of an
asset retirement obligation as a liability in the period in
which it incurs a legal obligation associated with the
retirement of tangible long-lived assets that result from the
acquisition, construction, development and/or normal use of the
assets. The Company also records a corresponding asset that is
depreciated over the life of the asset. Subsequent to the
initial measurement of the asset retirement obligation, the
obligation will be adjusted at the end of each period to reflect
the passage of time and changes in the estimated future cash
flows underlying the obligation. The

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##### Table of Contents



CONSOLIDATED WATER CO. LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



20.     Impact of
Recent Issued Accounting Standards  
(continued)


Company is required to adopt SFAS No. 143 on
January 1, 2003. The Company adopted SFAS No. 143
early during the year ended December 31, 2001. The adoption
did not have a material effect on the Companys financial
statements.

In April 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13 and Technical
Corrections. SFAS No. 145 amends existing guidance on
reporting gains and losses from extinguishment of debt to
prohibit the classification of the gain or loss as
extraordinary, as the use of such extinguishments have become
part of the risk management strategy of many companies. SFAS
No. 145 also amends FASB Statement No. 13 to require
sale-leaseback accounting for certain lease modifications that
have economic effects similar to sale-leaseback transactions.
The provisions of the Statement related to the rescission of
Statement No. 4 is applied in fiscal years beginning after
May 15, 2002. Earlier application of these provisions is
encouraged. The provisions of the Statement related to Statement
No. 13 were effective for transactions occurring after
May 15, 2002, with early application encouraged. The
adoption of SFAS No. 145 is not expected to have a material
effect on the Companys financial statements.

In June 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or
disposal activities and nullifies EITF Issue 94-3
Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity. The
provisions of this Statement are effective for exit or disposal
activities that are initiated after December 31, 2002, with
early application encouraged. The adoption of SFAS No. 146
is not expected to have a material effect on the Companys
financial statements.

In November 2002, the FASB issued Interpretation
No. 45 Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others, as interpretation of FASB Statements
No. 5, 57 and 107 and a rescission of FASB Interpretation
No. 34. This Interpretation elaborates on the
disclosures to be made by a guarantor in its interim and annual
financial statements about its obligations under guarantees
issued. The Interpretation also clarifies that a guarantor is
required to recognized, at inception of a guarantee, a liability
for the fair value of the obligation undertaken. The disclosure
requirements are effective for financial statements of interim
or annual periods ending after December 15, 2002. The
initial recognitions and measurement provisions of the
Interpretation are applicable to guarantees issued or modified
after December 31, 2002 and are not expected to have a
material effect on the Companys financial statements.

In December 2002, the FASB issued SFAS
No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, an amendment
of FASB Statements No. 123. This Statement amends
FASB Statement No. 123 Accounting for Stock-Based
Compensation, to provide alternative methods of transition
for voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition
the Statement amends the disclosure requirements of Statement
No. 123 to require prominent disclosures in both annual and
interim financial statements. Certain of the disclosure
modifications are required for fiscal years ending after
December 15, 2002 and are included in the notes to these
consolidated financial statements.

21.     Deferred
Expenditures

Costs associated with the acquisitions disclosed in
note 22 and the financing thereof have been capitalized in the
amounts of $426,970
and $460,886,
respectively, as these transactions had not closed at the balance sheet date. Acquisition
related costs are taken into account in the purchase price allocation
upon the completion of transactions and financing costs are amortized
over the term of the related debt.

22.     Subsequent
Events

The following events occurred subsequent to
December 31, 2002:

On February 7, 2003, the Company purchased
interests in the following companies: DesalCo Limited, its
wholly owned subsidiary DesalCo (Barbados) Limited, Ocean
Conversion (Cayman) Limited, Ocean Conversion (BVI) Ltd.
and Waterfields Company Limited. The purchase has provided the
Company with a desalination facility management and engineering
services firm, as well as facilities and contracts to supply

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##### Table of Contents



CONSOLIDATED WATER CO. LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



22.     Subsequent
Events  (continued)


additional potable water services in the Cayman
Islands, the Bahamas, Barbados and the British Virgin Islands.
The total consideration under the purchase agreements was
$27,800,000, comprised of $25,500,000 in cash and 185,714
ordinary shares of the Company.

The following table summarizes the unaudited
condensed balance sheets of the acquired entities as of
December 31, 2002:

|                               |  |             |           |             |  |             |           |             |  |   |           |   |  |   |           |  
|------------------------------ |  | ----------- | --------- | ----------- |  | ----------- | --------- | ----------- |  | - | --------- | - |  | - | --------- | -
|                               |  |             |           | Ocean       |  |             |           |            
|                               |  |             |           | Conversion  |  | Waterfields |           | Ocean      
|                               |  | DesalCo     |           | (Cayman)    |  | Company     |           | Conversion 
|                               |  | Limited     |           | Limited     |  | Limited     |           | (BVI) Ltd. 
|                               |  |             |           |             |  |             |           |            
|                               |  | (Unaudited) |           | (Unaudited) |  | (Unaudited) |           | (Unaudited)
|Current assets                 |  | $           | 1,798,068 |             |  | $           | 3,023,479 |             |  | $ | 1,912,344 |   |  | $ | 3,867,233 |  
|Property, plant and equipment  |  |             | 14,849    |             |  |             | 1,234,962 |             |  |   | 7,764,895 |   |  |   | 3,608,175 |  
|Other non-current assets       |  |             | 1,571,131 |             |  |             | 4,313,291 |             |  |   |          |   |  |   |          |  
|Total assets                   |  |             | 3,384,048 |             |  |             | 8,571,732 |             |  |   | 9,677,239 |   |  |   | 7,475,408 |  
|Current liabilities            |  |             | 174,924   |             |  |             | 2,712,862 |             |  |   | 246,985   |   |  |   | 1,636,007 |  
|Long term debt and liabilities |  |             |          |             |  |             | 1,180,000 |             |  |   | 1,884,293 |   |  |   | 1,739,379 |  
|                               |  |             |           |             |  |             |           |             |  |   |           |   |  |   |           |  
|Total liabilities assumed      |  |             | 174,924   |             |  |             | 3,892,862 |             |  |   | 2,131,278 |   |  |   | 3,375,386 |  
|Net assets                     |  | $           | 3,209,124 |             |  | $           | 4,678,870 |             |  | $ | 7,545,961 |   |  | $ | 4,100,002 |  
|                               |  |             |           |             |  |             |           |             |  |   |           |   |  |   |           |  
|% of equity acquired           |  |             | 100       | %           |  |             | 100       | %           |  |   | 12.7      | % |  |   | 56.5      | %
|% of voting shares acquired    |  |             | 100       | %           |  |             | 100       | %           |  |   | 12.7      | % |  |   | 50.0      | %

In order to finance the purchase, the Company
entered into a credit facility with Scotiabank (Cayman Islands)
Ltd. for a term loan of $20,000,000, an operating line of credit
of $2,000,000 and a bridge financing loan of $17,100,000.
Scotiabank was given a fixed and floating charge on all assets
for $22,000,000. In conjunction with the receipt of this
financing, the Royal Bank of Canada credit facilities were
extinguished, the loans were fully repaid and the fixed and
floating charges held by the bank were released. The second
charge held by the Government of the Cayman Islands, as
described in Note 8, was cancelled and replaced with a
$1,000,000 letter of credit from Scotiabank.

The Company also cancelled the remaining term of
the water purchase agreement with Ocean Conversion (Cayman)
Limited as a result of the purchase.

The Government of the Cayman Islands amended the
Companys license to remove a five percent restriction on
share ownership and transfer. As part of the amended license,
the Company is required to comply with certain aesthetic quality
improvements in the water supplied to the customers in the
Cayman Islands. Management estimates that the capital cost of
complying with the new water quality requirements in accordance
with the amended license will amount to approximately $500,000.

23



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##### Table of Contents






PART IV






|         |                                                                      
|-------- | ---------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statements Schedules,
    and Reports on Form 8-K

(a) 1. Financial Statements

The financial statements found in ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA for the year
ended December 31, 2002 is incorporated herein by reference.

2. Financial Statement Schedules

None

3. Exhibits

|        |      |                     |  |                                                                                              
|------- | ---- | ------------------- |  | ---------------------------------------------------------------------------------------------
|Exhibit |      |                    
|Number  |      | Exhibit Description
|        |      |                    
|        | 99.1 |                     |  | Chief Executive Officer Certification under
    Section 906 of the Sarbanes-Oxley Act of 2002
|       
|        | 99.2 |                     |  | Chief Financial Officer Certification under
    Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

None.

24



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SIGNATURES

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




|                     |  |                                                                                                               
|-------------------- |  | --------------------------------------------------------------------------------------------------------------
|                     |  | CONSOLIDATED WATER CO. LTD.                                                                                   
|                    
|                     |  | By: /s/  Frederick McTaggartFrederick McTaggart
President, Chief Operating Officer
and Chief Financial Officer
|                    
|Dated: June 27, 2003 |  |                                                                                                               

25






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##### Table of Contents






CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Consolidated Water Co. Ltd. (the
Company) on Form 10-K/A for the year ended December 31, 2002, as filed with
the Securities and Exchange Commission on the date hereof, I, Jeffrey M.
Parker, the Chief Executive Officer of the Company, certify, pursuant to and
for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002, that:

1.     I have reviewed this annual report on Form 10-K/A of the Company;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based
on my knowledge, the financial statements and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;

4.     The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



| |                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;



| |                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the Evaluation Date); and



| |                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5.     The registrants other certifying officer and I have disclosed, based
on our most recent evaluation,to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants ability
to record, process, summarize and report financial data and have
identified for the registrants auditors any material weakness in
internal controls; and

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| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and

6.     The registrants other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.




|                    |  |                                                                                 
|------------------- |  | --------------------------------------------------------------------------------
|Date: June 27, 2003 |  | By: /s/ Jeffrey M. Parker
Name: Jeffrey M. Parker
Title: Chief Executive Officer

27






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##### Table of Contents






CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Consolidated Water Co. Ltd. (the
Company) on Form 10-K/A for the year ended December 31, 2002, as filed with
the Securities and Exchange Commission on the date hereof, I, Frederick
McTaggart, the Chief Financial Officer of the Company, certify, pursuant to and
for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002, that:

1.     I have reviewed this annual report on Form 10-K/A of the Company;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based
on my knowledge, the financial statements and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;

4.     The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



| |                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
|
| | b) evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the Evaluation Date); and                                                                                                  
|
| | c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants ability
to record, process, summarize and report financial data and have
identified for the registrants auditors any material weakness in
internal controls; and

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| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.




|                    |  |                                                                                     
|------------------- |  | ------------------------------------------------------------------------------------
|Date: June 27, 2003 |  |                                                                                     
|                   
|                    |  | By: /s/ Frederick McTaggart
Name: Frederick McTaggart
Title: Chief Financial Officer

29