##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transaction period from  to
 Commission File Number: 0-25248
 CONSOLIDATED WATER CO. LTD.
  CAYMAN ISLANDS
    
    N/A(State or other jurisdiction of incorporation or
    
    (I.R.S. Employer Identification No.)organization)Regatta Office ParkWindward Three, 4th Floor, West Bay RoadP.O. Box 1114 GTGrand Cayman, KY1-1102, Cayman Islands
    
    N/A(Address of principal executive offices)
    
    (Zip Code)
 (345) 945-4277
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class:
    
    Name of each exchange on which registered:Common Stock, $.60 Par Value
    
    The NASDAQ Stock Market LLC (NASDAQ GlobalSelect Market)
 Securities registered pursuant to Section 12(g) of the Act: None
 o þ
 o þ
 þ o
   o þ o o
 o þ
  ,
 DOCUMENTS INCORPORATED BY REFERENCE: None




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##### 



TABLE OF CONTENTS
 Section
    
    Description
    
    PageCautionary Note Regarding Forward-Looking StatementsPART IItem 1.
    
    Business
    
    1Item 1A.
    
    Risk Factors
    
    16Item 1B.
    
    Unresolved Staff Comments
    
    22Item 2.
    
    Properties
    
    23Item 3.
    
    Legal Proceedings
    
    25Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    25PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    26Item 6.
    
    Selected Financial Data
    
    28Item 7.
    
    Managements Discussions and Analysis of Financial Condition and Results of Operations
    
    29Item 7A.
    
    Quantitative and Qualitative Disclosure about Market Risk
    
    42Item 8.
    
    Financial Statements and Supplementary Data
    
    43Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    81Item 9A.
    
    Controls and Procedures
    
    81PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    82Item 11.
    
    Executive Compensation
    
    87Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    99Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    101Item 14
    
    Principal Accounting Fees and Services
    
    102PART IVItem 15
    
    Exhibits, Financial Statement Schedules
    
    103SIGNATURES
    
    
    
    104EX-10.27.2 First Amendment to the Distributorship AgreeementEX-10.27.3 Amended and Restated Distributorship AgreementEX-21.1 SUBSIDIARIES OF THE REGISTRANTEX-23.1 CONSENT OF RACHLIN LLP - CONSOLIDATED WATER CO.EX-23.2 CONSENT OF RACHLIN LLP - OCEAN CONVERSION (BVI) LTDEX-31.1 CERTIFICATION OF CEOEX-31.2 CERTIFICATION OF CFOEX-32.1 CERTIFICATION OF CEOEX-32.2 CERTIFICATION OF CFO




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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
     Note Regarding Currency and Exchange Rates.




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PART I
 
 ITEM 1. BUSINESS
 Overview
  
    
    Retail Water Operations.We produce and supply water to end-users, including residential,
commercial and government customers in the Cayman Islands and a resort in the Bahamas. In
the Cayman Islands, we operate under an exclusive retail license issued by the government to
provide water in two of the most populated and rapidly developing areas in the Cayman
Islands. In 2007, our retail water operations generated approximately 40% of our
consolidated revenues.
    
    Bulk Water Operations.We produce and supply water to government-owned distributors in
the Cayman Islands, Belize and the Bahamas. In 2007, our bulk water operations generated
approximately 45% of our consolidated revenues.
    
    Services Operations.We provide engineering and management services for desalination
projects, including designing and constructing desalination plants and managing and
operating desalination plants owned by other companies. In 2007, our services operations
generated approximately 15% of our consolidated revenues.
    
    Affiliate Operations.Our affiliate, Ocean Conversion (BVI) Ltd. (OC-BVI), produces and
supplies bulk water to the British Virgin Islands Water and Sewerage Department. We account
for our interests in OC-BVI using the equity method of accounting and do not consolidate
OC-BVIs operating results in our financial statements. Our affiliate Consolidated Water
(Bermuda) Limited is presently constructing a plant on behalf of the Bermuda government
which we expect will be completed in 2008. We will manage this plant on behalf of the
Bermuda government for a period of not less than 12 months after its construction is
completed.
  Location
    
    Plants
    
    Capacity(1)Cayman Islands
    
    
    6
    
    
    
    7.6Bahamas
    
    
    3
    
    
    
    10.0Belize
    
    
    1
    
    
    
    0.5British Virgin Islands
    
    
    2
    
    
    
    1.7
    (2)Total
    
    
    12
    
    
    
    19.8
 
 (1)
    
    In millions of U.S. gallons per day.(2)
    
    Owned and operated by OC-BVI. Does not include OC-BVIs recently constructed Bar Bay plant
that is currently not in use. Strategy
  
    
    little or no naturally occurring fresh water;
    
    limited regulations and taxes allowing for higher returns;
    
    a large proportion of tourist properties, which historically have generated higher volume
sales than residential properties; and
    
    growing populations and tourism levels.
 
 1




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##### Table of Contents




    
    Maximizing the benefits of our exclusive retail license on Grand Cayman.We plan to
continue to increase operations within our exclusive retail license service area through
organic growth and possible further investments, if opportunities become available.
    
    Expanding our existing operations in the Cayman Islands, Belize and The Bahamas.We plan
to continue to seek new water supply agreements and licenses and focus on renewing our
existing service contracts with extended terms and greater production levels.
    
    Penetrating new markets where there is demand for potable water and where we believe
production would be profitable.We plan to continue to seek opportunities to expand our
operations into new markets including, but not limited to, markets throughout the Caribbean
basin, Central America and South America. We may pursue these opportunities either on our
own or through joint ventures and strategic alliances.
    
    Broadening our existing and future operations into complementary services.We continue to
consider and pursue opportunities to leverage our water-related expertise to enter
complementary service industries, such as wastewater management.
 Our Company
  
 
    
    Consolidated Water (Belize) Limited (or CW-Belize).In 2000, we acquired CW-Belize,
(formerly Belize Water Limited), which has an exclusive contract to provide bulk water to
Belize Water Services Ltd., a water distributor that serves residential, commercial and
tourist properties in Ambergris Caye, Belize.
    
    Cayman Water Company Limited (or Cayman Water).In 1998, we established Cayman Water,
which operates under an exclusive retail license granted by the Cayman Islands government to
provide water to customers within a prescribed service area, on Grand Cayman that includes
the Seven Mile Beach and West Bay areas, two of the three most populated areas in the Cayman
Islands. The only non government owned public water utility on Grand Cayman, Cayman Water
owns and operates three desalination plants on Grand Cayman.
 2




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
    
    Ocean Conversion (Cayman) Limited (or OC-Cayman).We acquired OC-Cayman which provides
bulk water under various licenses and agreements to the Water Authority-Cayman, a
government-owned utility and regulatory agency, which distributes the water to properties
located outside our exclusive retail license service area in Grand Cayman. OC-Cayman
operates three desalination plants owned by Water Authority-Cayman.
    
    Consolidated Water (Bahamas) Limited (or CW-Bahamas).We acquired a 90.9% equity interest
in CW-Bahamas (formerly Waterfields Company Limited), which provides bulk water under a
long-term contract to the Water and Sewerage Corporation of The Bahamas, a government
agency. CW-Bahamas second desalination plant, our largest, was substantially completed in
July 2006. CW-Bahamas pays fees to two of our other subsidiaries for certain administrative
services.
    
    Aquilex, Inc.In 2005, we established Aquilex, a United States company, which provides
financial, engineering and supply chain management support services to our subsidiaries and
affiliates.
    
    Ocean Conversion (BVI) Ltd. (or OC-BVI). We own 50% of the voting stock of our affiliate,
OC-BVI, a British Virgin Islands company, which sells bulk water on a month-to-month basis
to the Government of The British Virgin Islands Water and Sewage Department. We own an
overall 43.5% equity interest in OC-BVIs profits and certain profit sharing rights that
raise our effective interest in OC-BVIs profits to approximately 45%. OC-BVI also pays us
fees for providing certain engineering and administrative services.
    
    DesalCo Limited (or DesalCo).We acquired DesalCo, a Cayman Islands company, which
provides management, engineering and construction services for desalination projects and is
the exclusive Caribbean distributor of the DWEER energy recovery system, an advanced
technology used to recapture energy from the discharged brine that is a by-product of the
reverse osmosis desalination process.
    
    Consolidated Water (Bermuda) Limited (or CW-Bermuda).In January 2007, our affiliate,
Consolidated Water (Bermuda) Limited (CW-Bermuda) entered into a design, build and
operate agreement with the Government of Bermuda for a desalination plant located on Tynes
Bay along the northern coast of Bermuda. Under the agreement, CW-Bermuda, will construct
the plant and operate it for a minimum of 12 months after its commissioning. We are loaning
CW-Bermuda the funds to construct the plant and we will manage the plants operations. We
expect construction of the Tynes Bay plant to be completed in June 2008. Although we own
only 40% of the common shares of CW-Bermuda, we include its amounts in our consolidated
financials statements as we are its primary financial beneficiary.
 Our Operations
   Retail Water Operations
  3




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Retail Water Operations in the Cayman Islands
     Facilities
     4




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Customers
     Cayman Islands  Retail Water Customer Connections and Volume of Water Sold
 2007
    
    2006
    
    2005
    
    2004
    
    2003Number of Customer Connections
    
    
    4,600
    
    
    
    4,300
    
    
    
    3,800
    
    
    
    3,600
    
    
    
    3,300Volume of Water Sold (U.S. Gallons, In Thousands):Commercial
    
    
    554,087
    
    
    
    562,702
    
    
    
    427,439
    
    
    
    451,609
    
    
    
    429,013Residential
    
    
    202,988
    
    
    
    173,665
    
    
    
    157,924
    
    
    
    122,699
    
    
    
    107,528Government
    
    
    45,623
    
    
    
    12,789
    
    
    
    8,929
    
    
    
    7,584
    
    
    
    6,164Total
    
    
    802,698
    
    
    
    749,156
    
    
    
    594,292
    
    
    
    581,892
    
    
    
    542,705
   5




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Retail Water Operations in The Bahamas
  Facilities
  Customers
   Retail Water Demand and Average Sales Prices
  Retail Water Total Volume by Quarter
 2007
    
    2006
    
    2005
    
    2004
    
    2003First Quarter
    
    
    217,263
    
    
    
    209,334
    
    
    
    146,461
    
    
    
    176,346
    
    
    
    141,575Second Quarter
    
    
    221,453
    
    
    
    213,570
    
    
    
    159,745
    
    
    
    175,813
    
    
    
    144,134Third Quarter
    
    
    189,734
    
    
    
    175,971
    
    
    
    137,881
    
    
    
    123,512
    
    
    
    125,510Fourth Quarter
    
    
    182,531
    
    
    
    156,640
    
    
    
    154,972
    
    
    
    110,754
    
    
    
    134,957Total
    
    
    810,981
    
    
    
    755,515
    
    
    
    599,059
    
    
    
    586,425
    
    
    
    546,176
  Retail Water Average Sales Prices
 2007
    
    2006
    
    2005Average Sales Price Per 1,000 U.S. Gallons
    
    $
    23.66
    
    
    $
    23.82
    
    
    $
    22.32
 Bulk Water Operations
  6




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Bulk Water Operations in the Cayman Islands
  Facilities
  Customers
     Bulk Water Operations in Belize
  Facilities
   7




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Customers
    Bulk Water Operations in The Bahamas
  Facilities
    Customers
   
    
    extend the term for an additional five years at a reduced rate specified in the
agreement;
    
    exercise a right of first refusal to purchase any materials, equipment and facilities
that CW-Bahamas intends to remove from the site, and negotiate a purchase price with
CW-Bahamas; or
    
    require CW-Bahamas to remove all materials, equipment and facilities from the site.
  8




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
    
    extend the term for an additional five years at a reduced rate specified in the
agreement;
    
    exercise a right of first refusal to purchase any materials, equipment and facilities
that CW-Bahamas intends to remove from the site, and negotiate a purchase price with
CW-Bahamas; or
    
    require CW-Bahamas to remove all materials, equipment and facilities from the site.
   Bulk Water Demand and Average Sales Prices
  Bulk Water Total Volume By Quarter
 2007
    
    2006
    
    2005
    
    2004
    
    2003First Quarter
    
    
    1,101,720
    
    
    
    585,297
    
    
    
    441,498
    
    
    
    438,851
    
    
    
    133,682Second Quarter
    
    
    1,079,858
    
    
    
    684,452
    
    
    
    456,625
    
    
    
    458,455
    
    
    
    208,107Third Quarter
    
    
    1,070,677
    
    
    
    1,040,096
    
    
    
    442,404
    
    
    
    424,665
    
    
    
    345,307Fourth Quarter
    
    
    1,112,370
    
    
    
    1,044,701
    
    
    
    506,892
    
    
    
    424,434
    
    
    
    414,404Total
    
    
    4,364,625
    
    
    
    3,354,546
    
    
    
    1,847,419
    
    
    
    1,746,405
    
    
    
    1,101,500
  Bulk Water Average Sales Prices
 2007
    
    2006
    
    2005Average Sales Price Per 1,000 U.S. Gallons
    
    $
    5.06
    
    
    $
    5.46
    
    
    $
    6.35
 9




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Services Operations
  Engineering and Management Services Operations
    Affiliate Operations
    Customer
  10




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Facilities
   Reverse Osmosis Technology
   Raw Materials and Sources of Supply
  Seasonal Variations in Our Business
  Government Regulations, Custom Duties and Taxes
  The Cayman Islands
  11




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
 
   The Bahamas
   Belize
   12




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The British Virgin Islands
   Market and Service Area
      .
  13




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Competition
 Cayman Islands.
 Belize.
 The Bahamas.
 British Virgin Islands.
 14




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Environmental Matters
 Cayman Islands.
  Belize, The Bahamas, British Virgin Islands.
  Employees
  Available Information
    15




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ITEM 1A. RISK FACTORS
  Our exclusive license to provide water to retail customers in the Cayman Islands may not be renewed
in the future.
  We rely on fixed-term water supply and/or service agreements with our bulk customers in the Cayman
Islands, Belize and The Bahamas, which may not be renewed or may be renewed on terms less favorable
to us.
  The water supply agreement between the British Virgin Islands Water and Sewerage Department and our
affiliate, OC-BVI, is on a month-to-month basis and could be cancelled or renegotiated on less
favorable terms.
  16




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The British Virgin Islands government has asserted a purported right of ownership of OC-BVIs
Baughers Bay plant. If this right is found to be enforceable and is exercised by the government,
OC-BVI will lose ownership of the Baughers Bay plant.
  Our income from OC-BVI may be reduced if OC-BVI continues to experience difficulty in collecting
the amounts it invoices to the BVI government.
  We do not have sole control over our affiliate, OC-BVI. A divergence of our interests and the
interests of OC-BVIs other voting shareholder may adversely affect the operations of OC-BVI and in
turn decrease the value of our investment in OC-BVI.
  17




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The profitability of our plants is dependent upon our ability to accurately estimate the costs of
their construction and operation.
  A significant portion of our consolidated revenues are derived from two customers. A loss of, or a
less favorable relationship with either of these customers would adversely affect our results of
operations.
  If OC-BVI does not obtain a contract with the BVI Government to sell water to be produced at its
Bar Bay plant, it may not be able to recover the cost of its investment in the plant, which could
adversely affect its operations and in turn decrease the value of our investment in OC-BVI.
  Our operations are affected by tourism and are subject to seasonal fluctuations which could affect
demand for our water and impact our revenues and results of operations.
  We may have difficulty accomplishing our growth strategy within and outside of our current
operating areas
  
    
    regulatory risks, including government relations difficulties, local regulations and
currency controls;
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
    
    receiving and maintaining necessary permits, licenses and approvals;
    
    risks related to operating in foreign countries, including political instability,
reliance on local economies, environmental problems, shortages of materials, immigration
restrictions and limited skilled labor;
    
    risks related to development of new operations, including inaccurate assessment of the
demand for water, engineering difficulties and inability to begin operations as scheduled;
and
    
    risks relating to greater competition in these new territories, including the ability of
our competitors to gain or retain market share by reducing prices.
  Continued production shortfalls under our Windsor supply contract could result in further rate
decreases or cancellation of the contract.
  Our operations could be harmed by hurricanes or tropical storms.
  Contamination of our processed water may cause disruption in our services and adversely affect our
revenues
  Potential government decisions, actions and regulations could negatively affect our operations.
 19




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
    
    restricting foreign ownership of us;
    
    providing for the expropriation of our assets by the government;
    
    providing for nationalization of public utilities by the government;
    
    providing for different water quality standards;
    
    unilaterally changing or renegotiating our licenses and agreements;
    
    restricting the transfer of U.S. currency; or
    
    causing currency exchange fluctuations/devaluations or making changes in tax laws.
  The rates we charge our retail customers in the Cayman Islands are subject to regulation. If we are
unable to obtain government approval of our requests for rate increases, or if approved rate
increases are untimely or inadequate to cover our projected expenses, our results of operations may
be adversely affected.
  We rely on the efforts of key employees. Our failure to retain these employees could adversely
affect our results of operations.
  We are exposed to credit risk through our relationships with several customers and our affiliate.
  We are exposed to the risk of variations in currency exchange rates.
  20




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We may enter new markets in the future in which we do not have a contractual commitment for our
products or existing customers.
  Future sales of our ordinary shares may depress the market price of our ordinary shares
  We may not pay dividends in the future. If dividends are paid, they may be in lesser amounts than
past dividends
  Service of process and enforcement of legal proceedings commenced against us in the United States
may be difficult to obtain.
    Low trading volume of our stock may limit your ability to sell your shares at or above the price
you pay for them.
  21




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Competition may threaten the sustainability and growth of our current operations and impede the
expansion of our operations into new areas.
  We are subject to anti-takeover measures that may discourage, delay or prevent changes of control
of Consolidated Water Co. Ltd.
 Classified Board of Directors
 Option Deed
  Restrictive covenants in our credit facilities and trust deeds could adversely affect our business
by limiting our flexibility; our failure to comply with these covenants could cause foreclosure on
our assets.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  22




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ITEM 2. PROPERTIES
 Cayman Island Properties
 Governors Harbour Plant
  West Bay Plant
  Britannia Plant
  Distribution System
  Leased Properties
  OC-Cayman Properties
  Red Gate Road Plant
  23




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Lower Valley Plant
    North Sound Plant
  Belize Properties
  Bahamas Properties
    24




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U.S. Property
  
 ITEM 3. LEGAL PROCEEDINGS
   
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  25




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PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
 Market Information
  High
    
    LowFirst Quarter 2007
    
    $
    27.75
    
    
    $
    23.71Second Quarter 2007
    
    
    30.03
    
    
    
    23.61Third Quarter 2007
    
    
    36.10
    
    
    
    27.70Fourth Quarter 2007
    
    
    34.38
    
    
    
    24.60First Quarter 2006
    
    $
    28.40
    
    
    $
    19.85Second Quarter 2006
    
    
    31.32
    
    
    
    23.40Third Quarter 2006
    
    
    28.09
    
    
    
    21.13Fourth Quarter 2006
    
    
    28.62
    
    
    
    23.51
        Holders
  26




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Dividends
    First Quarter 2007
    
    $
    0.0650
    
    
    Per ShareSecond Quarter 2007
    
    
    0.0650
    
    
    Per ShareThird Quarter 2007
    
    
    0.0650
    
    
    Per ShareFourth Quarter 2007
    
    
    
    
    
    Per ShareFirst Quarter 2006
    
    $
    0.0600
    
    
    Per ShareSecond Quarter 2006
    
    
    0.0600
    
    
    Per ShareThird Quarter 2006
    
    
    0.0600
    
    
    Per ShareFourth Quarter 2006
    
    
    0.0600
    
    
    Per Share
 Exchange Controls and Other Limitations Affecting Security Holders
  Taxation
    27




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ITEM 6. SELECTED FINANCIAL DATA
  Year Ended December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003Statement of Income Data:Revenue
    
    $
    49,149,847
    
    
    $
    38,229,208
    
    
    $
    26,187,205
    
    
    $
    23,281,413
    
    
    $
    19,054,205Net Income
    
    
    11,387,651
    
    
    
    7,521,126
    
    
    
    5,514,258
    
    
    
    6,197,383
    
    
    
    4,177,081Balance Sheet Data:Total Assets
    
    
    149,330,884
    
    
    
    138,961,343
    
    
    
    88,365,191
    
    
    
    70,825,049
    
    
    
    68,562,126Long Term Debt Obligations
    
    
    23,500,593
    
    
    
    24,654,660
    
    
    
    19,378,212
    
    
    
    12,856,226
    
    
    
    16,633,437Redeemable Preferred Stock
    
    
    12,650
    
    
    
    14,983
    
    
    
    19,382
    
    
    
    16,705
    
    
    
    16,302Dividends Declared Per Share
    
    $
    0.195
    
    
    $
    0.24
    
    
    $
    0.24
    
    
    $
    0.23
    
    
    $
    0.21Basic Earnings Per Share
    
    $
    0.79
    
    
    $
    0.60
    
    
    $
    0.47
    
    
    $
    0.54
    
    
    $
    0.43Weighted Average Number of Shares
    
    
    14,404,732
    
    
    
    12,440,195
    
    
    
    11,767,573
    
    
    
    11,474,264
    
    
    
    9,834,366Diluted Earnings Per Share
    
    $
    0.79
    
    
    $
    0.59
    
    
    $
    0.45
    
    
    $
    0.53
    
    
    $
    0.42Weighted Average Number of Shares
    
    
    14,495,364
    
    
    
    12,737,486
    
    
    
    12,161,407
    
    
    
    11,759,010
    
    
    
    10,075,060
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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
    Comparative Operations2007
    
    2006Location
    
    Plants
    
    Capacity(1)
    
    Location
    
    Plants
    
    Capacity(1)Cayman Islands
    
    
    6
    
    
    
    7.6
    
    
    Cayman Islands
    
    
    6
    
    
    
    5.9Bahamas
    
    
    3
    
    
    
    10.0
    
    
    Bahamas
    
    
    3
    
    
    
    10.0Belize
    
    
    1
    
    
    
    0.5
    
    
    Belize
    
    
    1
    
    
    
    0.5Barbados
    
    
    
    
    
    
    
    
    
    Barbados
    
    
    1
    
    
    
    1.3British Virgin Islands
    
    
    2
    
    
    
    1.7
    (2)
    
    British Virgin Islands
    
    
    2
    
    
    
    1.7
    (2)Total
    
    
    12
    
    
    
    19.8
    
    
    Total
    
    
    13
    
    
    
    19.4
 
 (1)
    
    In millions of U.S. gallons per day.(2)
    
    Owned and operated by our affiliate OC-BVI. Does not include OC-BVIs recently constructed
700,000 U.S. gallon per day plant at Bar Bay, Tortola that is currently not in use. Cayman Islands
  Belize
  29




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##### Table of Contents



Bahamas
   British Virgin Islands
  Critical Accounting Policies
  Use of estimates :
 Basis of consolidation:
 Goodwill and other intangible assets
 30




---



##### Table of Contents



Plant construction revenue and cost of plant construction revenue:
 Property, plant and equipment
 Buildings
    
    5 to 40 yearsPlant and equipment
    
    4 to 40 yearsDistribution system
    
    3 to 40 yearsOffice furniture, fixtures and equipment
    
    3 to 10 yearsVehicles
    
    3 to 10 yearsLeasehold improvements
    
    lesser of 5 years or operating lease termLab equipment
    
    5 to 10 years
  Construction in progress:
 Trade accounts receivable
 31




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##### Table of Contents



Quarterly Results of Operations
  For the year ended December 31, 2007First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    QuarterTotal revenue
    
    $
    12,734,610
    
    
    $
    11,964,380
    
    
    $
    11,919,463
    
    
    $
    12,531,394Gross profit
    
    
    5,303,355
    
    
    
    4,484,296
    
    
    
    4,320,275
    
    
    
    4,576,300Net income
    
    
    3,587,478
    
    
    
    2,621,537
    
    
    
    2,509,164
    
    
    
    2,669,472Diluted earnings per share
    
    
    0.25
    
    
    
    0.18
    
    
    
    0.17
    
    
    
    0.18
 For the year ended December 31, 2006First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    QuarterTotal revenue
    
    $
    9,243,564
    
    
    $
    9,626,979
    
    
    $
    10,010,365
    
    
    $
    9,348,300Gross profit
    
    
    4,773,348
    
    
    
    4,409,485
    
    
    
    3,808,822
    
    
    
    2,622,151Net income
    
    
    3,078,011
    
    
    
    2,522,029
    
    
    
    1,247,040
    
    
    
    674,046Diluted earnings per share
    
    
    0.24
    
    
    
    0.20
    
    
    
    0.10
    
    
    
    0.05
 32




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##### Table of Contents



Results of Operations
  Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
 Consolidated Results
     Results by Segment
 Retail Segment:
    Bulk Segment:
    33




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##### Table of Contents



Services Segment:
    Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
 Consolidated Results
    34




---



##### Table of Contents



Results by Segment
 Retail Segment:
    Bulk Segment:
   35




---



##### Table of Contents



.
  Services Segment:
    LIQUIDITY AND CAPITAL RESOURCES
 Overview
     Cash Flows for the Year Ended December 31, 2007
  Cash Flows from Operating Activities
  36




---



##### Table of Contents



Cash Flows Used in Investing Activities
  Cash Flows from Financing Activities
  Financial Position
    Borrowings Outstanding
  5.95% Secured Bonds
  37




---



##### Table of Contents



CW-Bahamas Series A Bonds
  CW-Bahamas Credit Facility
    Material Commitments, Expenditures and Contingencies
 OC-BVI Contract Dispute
     38




---



##### Table of Contents



39




---



##### Table of Contents



Material
Expenditures and Commitments
  2015 andTotal
    
    2008
    
    2009 - 2011
    
    2012 - 2014
    
    ThereafterSecured
5.95% bonds
(1)(2)
    
    $
    18,410,350
    
    
    $
    2,104,040
    
    
    $
    6,312,120
    
    
    $
    6,312,120
    
    
    $
    3,682,070Series A bonds (1)
    
    
    15,625,000
    
    
    
    750,000
    
    
    
    2,250,000
    
    
    
    2,250,000
    
    
    
    10,375,000Employment agreements
    
    
    1,989,349
    
    
    
    961,500
    
    
    
    1,027,849
    
    
    
    0
    
    
    
    0Operating leases
    
    
    1,027,830
    
    
    
    302,167
    
    
    
    725,663
    
    
    
    0
    
    
    
    0Other
    
    
    352,660
    
    
    
    242,660
    
    
    
    0
    
    
    
    60,000
    
    
    
    50,000
 
 (1)
    
    Includes interest costs to be incurred.(2)
    
    Secured 5.95% bonds are shown gross of discount.  40




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##### Table of Contents



CW-Bahamas Performance Bonds
  CW-Bermuda Financing
  Frank
Sound Contract
  Dividends
      Dividend Reinvestment and Common Stock Purchase Plan .
  Impact of Inflation
  41




---



##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 Credit Risk
  Interest Rate Risk
  Foreign Exchange Risk
  42




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 CONSOLIDATED WATER CO. LTD.
 PageINDEX TO CONSOLIDATED FINANCIAL STATEMENTSReport of Independent Registered Public Accounting Firm
    
    
    44Consolidated Balance Sheets as of December 31, 2007 and 2006
    
    
    45Consolidated Statements of Income for the Years Ended December 31, 2007, 2006 and 2005
    
    
    46Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2007, 2006 and 2005
    
    
    47Consolidated Statements of Cash Flows for the Years Ended December 31, 2007, 2006 and 2005
    
    
    48Notes to Consolidated Financial Statements
    
    
    49OCEAN CONVERSION (BVI) LTD.INDEX TO CONSOLIDATED FINANCIAL STATEMENTSReport of Independent Registered Public Accounting Firm
    
    
    69Consolidated Balance Sheets as of December 31, 2007 and 2006
    
    
    70Consolidated Statements of Income for the Years Ended December 31, 2007, 2006 and 2005
    
    
    71Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2007, 2006 and 2005
    
    
    72Consolidated Statements of Cash Flows for the Years Ended December 31, 2007, 2006 and 2005
    
    
    73Notes to Consolidated Financial Statements
    
    
    74
 43




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      /s/
Rachlin LLP
 Fort Lauderdale, Florida
March 17, 2008
 44




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 
 CONSOLIDATED BALANCE SHEETS
  December 31,
    
    
    December 31,2007
    
    
    2006ASSETSCurrent assetsCash and cash equivalents
    
    $
    38,529,383
    
    
    $
    37,310,699Accounts receivable, net
    
    
    9,828,529
    
    
    
    6,093,894Inventory
    
    
    3,649,991
    
    
    
    2,794,892Prepaid expenses and other current assets
    
    
    1,411,231
    
    
    
    1,099,619Current portion of loans receivable
    
    
    947,854
    
    
    
    735,632Total current assets
    
    
    54,366,988
    
    
    
    48,034,736Property, plant and equipment, net
    
    
    59,981,514
    
    
    
    60,229,358Construction in progress
    
    
    4,989,779
    
    
    
    3,339,011Loans receivable
    
    
    2,329,262
    
    
    
    1,697,648Investment in and loan to affiliate
    
    
    17,501,848
    
    
    
    15,595,704Intangible assets, net
    
    
    2,881,900
    
    
    
    3,670,559Goodwill
    
    
    3,587,754
    
    
    
    3,587,754Other assets
    
    
    3,691,839
    
    
    
    2,806,573Total assets
    
    $
    149,330,884
    
    
    $
    138,961,343LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable and other current liabilities
    
    $
    4,996,728
    
    
    $
    5,498,209Dividends payable
    
    
    60,719
    
    
    
    970,081Current portion of long term debt
    
    
    1,142,255
    
    
    
    1,154,067Total current liabilities
    
    
    6,199,702
    
    
    
    7,622,357Long term debt
    
    
    22,358,338
    
    
    
    23,500,593Other liabilities
    
    
    476,136
    
    
    
    497,985Minority interest in subsidiary
    
    
    1,392,254
    
    
    
    1,495,753Total liabilities
    
    
    30,426,430
    
    
    
    33,116,688Stockholders equityControlling interests:Redeemable preferred stock, $0.60 par value. Authorized 200,000 shares;
issued and outstanding 21,082 and 24,971 shares, respectively
    
    
    12,650
    
    
    
    14,983Class A
common stock, $0.60 par value. Authorized 19,655,000 shares;
issued and outstanding 14,507,486 and 14,132,860 shares, respectively
    
    
    8,704,492
    
    
    
    8,479,716Class B
common stock, $0.60 par value. Authorized 145,000 shares;
none issued or outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    79,771,093
    
    
    
    76,071,710Retained earnings
    
    
    29,853,720
    
    
    
    21,278,246118,341,955
    
    
    
    105,844,655Non-controlling interests
    
    
    562,499
    
    
    
    Total stockholders equity
    
    
    118,904,454
    
    
    
    105,844,655Total liabilities and stockholders equity
    
    $
    149,330,884
    
    
    $
    138,961,343
  45




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 
 CONSOLIDATED STATEMENTS OF INCOME
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Retail water revenues
    
    $
    19,522,504
    
    
    $
    18,003,456
    
    
    $
    13,372,103Bulk water revenues
    
    
    22,096,635
    
    
    
    18,303,479
    
    
    
    11,724,438Services revenues
    
    
    7,530,708
    
    
    
    1,922,273
    
    
    
    1,090,664Total revenues
    
    
    49,149,847
    
    
    
    38,229,208
    
    
    
    26,187,205Cost of retail revenues
    
    
    7,227,675
    
    
    
    6,635,879
    
    
    
    5,369,550Cost of bulk revenues
    
    
    17,855,001
    
    
    
    14,878,731
    
    
    
    9,832,109Cost of services revenues
    
    
    5,382,945
    
    
    
    1,100,792
    
    
    
    631,149Total cost of revenues
    
    
    30,465,621
    
    
    
    22,615,402
    
    
    
    15,832,808Gross profit
    
    
    18,684,226
    
    
    
    15,613,806
    
    
    
    10,354,397General and administrative expenses
    
    
    9,478,308
    
    
    
    8,432,073
    
    
    
    6,143,065Income from operations
    
    
    9,205,918
    
    
    
    7,181,733
    
    
    
    4,211,332Other income (expense):Interest income
    
    
    1,911,303
    
    
    
    304,945
    
    
    
    208,375Interest expense
    
    
    (1,856,277
    )
    
    
    (1,886,518
    )
    
    
    (885,628
    )Profit sharing income from affiliate
    
    
    445,308
    
    
    
    507,849
    
    
    
    485,193Other income
    
    
    470,585
    
    
    
    241,338
    
    
    
    76,904Loss on early extinguishment of debt
    
    
    
    
    
    
    (240,728
    )
    
    
    Equity in earnings of affiliate
    
    
    1,662,613
    
    
    
    1,402,249
    
    
    
    1,390,314Other income (expense), net
    
    
    2,633,532
    
    
    
    329,135
    
    
    
    1,275,158Income before non-controlling and minority interests
    
    
    11,839,450
    
    
    
    7,510,868
    
    
    
    5,486,490Income attributable to non-controlling and minority interests
    
    
    451,799
    
    
    
    (10,258
    )
    
    
    (27,768
    )Net income
    
    $
    11,387,651
    
    
    $
    7,521,126
    
    
    $
    5,514,258Basic earnings per common share
    
    $
    0.79
    
    
    $
    0.60
    
    
    $
    0.47Diluted earnings per common share
    
    $
    0.79
    
    
    $
    0.59
    
    
    $
    0.45Dividends declared per common share
    
    $
    0.195
    
    
    $
    0.24
    
    
    $
    0.24Weighted average number of common shares used in the
determination ofBasic earnings per share
    
    
    14,404,732
    
    
    
    12,440,195
    
    
    
    11,767,573Diluted earnings per share
    
    
    14,495,364
    
    
    
    12,737,486
    
    
    
    12,161,407
  46




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
  Redeemable preferred
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    
    
    
    

    
    
    
    Totalstock
    
    
    Common stock
    
    
    paid-in
    
    
    Retained
    
    

    Non-controlling
    
    
    stockholdersShares
    
    
    Dollars
    
    
    Shares
    
    
    Dollars
    
    
    capital
    
    
    earnings
    
    

interest
    
    
    equityBalance at December 31, 2004
    
    
    27,842
    
    
    $
    16,705
    
    
    
    11,506,970
    
    
    $
    6,904,183
    
    
    $
    27,302,474
    
    
    $
    14,148,532
    
    
    
    
    
    
    $
    48,371,894Public offering of common
shares, net of issuance costs
    
    
    
    
    
    
    
    
    
    
    404,770
    
    
    
    242,862
    
    
    
    6,476,000
    
    
    
    
    
    
    
    
    
    
    
    6,718,862Issue of share capital
    
    
    8,644
    
    
    
    5,187
    
    
    
    265,856
    
    
    
    159,511
    
    
    
    1,429,792
    
    
    
    
    
    
    
 
    
    
    
    1,594,490Conversion of preferred shares
    
    
    (4,182
    )
    
    
    (2,510
    )
    
    
    4,182
    
    
    
    2,510
    
    
    
    
    
    
    
    
    
    
    
 
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,514,258
    
    
    
 
    
    
    
    5,514,258Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,795,196
    )
    
    
 
    
    
    
    (2,795,196
    )Issue of options and share grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    158,771
    
    
    
    
    
    
    
 
    
    
    
    158,771Balance at December 31, 2005
    
    
    32,304
    
    
    
    19,382
    
    
    
    12,181,778
    
    
    
    7,309,066
    
    
    
    35,367,037
    
    
    
    16,867,594
    
    
    
 
    
    
    
    59,563,079Public offering of common
shares, net of issuance costs
    
    
    
    
    
    
    
    
    
    
    1,725,000
    
    
    
    1,035,000
    
    
    
    39,104,899
    
    
    
    
    
    
    
 
    
    
    
    40,139,899Issue of share capital
    
    
    (12,244
    )
    
    
    (7,346
    )
    
    
    12,244
    
    
    
    7,346
    
    
    
    
    
    
    
    
    
    
    
 
    
    
    
    Conversion of preferred shares
    
    
    4,911
    
    
    
    2,947
    
    
    
    213,838
    
    
    
    128,304
    
    
    
    1,458,606
    
    
    
    
    
    
    
 
    
    
    
    1,589,857Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,521,126
    
    
    
 
    
    
    
    7,521,126Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,110,474
    )
    
    
 
    
    
    
    (3,110,474
    )Issue of options and share grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141,168
    
    
    
    
    
    
    
 
    
    
    
    141,168Balance at December 31, 2006
    
    
    24,971
    
    
    
    14,983
    
    
    
    14,132,860
    
    
    
    8,479,716
    
    
    
    76,071,710
    
    
    
    21,278,246
    
    
    
 
    
    
    
    105,844,655Conversion of preferred shares
    
    
    (5,698
    )
    
    
    (3,418
    )
    
    
    5,698
    
    
    
    3,418
    
    
    
    
    
    
    
    
    
    
    
 
    
    
    
    Issue of share capital
    
    
    1,809
    
    
    
    1,085
    
    
    
    368,928
    
    
    
    221,358
    
    
    
    3,666,117
    
    
    
    
    
    
    
 
    
    
    
    3,888,560Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,387,651
    
    
    
 
    
    
    
    11,387,651Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,812,177
    )
    
    
 
    
    
    
    (2,812,177
    )Issue of options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,266
    
    
    
    
    
    
    
 
    
    
    
    33,266Capital
contributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,200
    
    
    
    7,200Net income from non-controlling
interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    555,299
    
    
    
    555,299Balance at December 31, 2007
    
    
    21,082
    
    
    $
    12,650
    
    
    
    14,507,486
    
    
    $
    8,704,492
    
    
    $
    79,771,093
    
    
    $
    29,853,720
    
    

    $
    562,499
    
    
    $
    118,904,454
  47




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Cash flows provided by operating activitiesNet income
    
    $
    11,387,651
    
    
    $
    7,521,126
    
    
    $
    5,514,258Add (deduct) items not affecting cash
Depreciation and amortization
    
    
    5,921,871
    
    
    
    4,777,868
    
    
    
    3,188,063Stock compensation on share grants
    
    
    125,843
    
    
    
    372,425
    
    
    
    256,032Loss on early extinguishment of debt
    
    
    
    
    
    
    240,728
    
    
    
    Net (profit)/loss on disposal of fixed assets
    
    
    (807,781
    )
    
    
    433,834
    
    
    
    37,585Undistributed income from affiliate
    
    
    (2,253,619
    )
    
    
    (1,910,098
    )
    
    
    (1,875,508
    )Minority interest (recovery)
    
    
    (103,499
    )
    
    
    (10,258
    )
    
    
    (27,768
    )Expense
attributable to non-controlling interests
    
    
    562,499
    
    
    
    
    
    
    
    Increase in accounts receivable
    
    
    (3,734,635
    )
    
    
    (571,743
    )
    
    
    (780,565
    )Decrease in insurance claim receivable
    
    
    
    
    
    
    
    
    
    
    1,932,905(Increase) in inventory
    
    
    (855,099
    )
    
    
    (762,683
    )
    
    
    (402,861
    )(Increase) in prepaid expenses and other assets
    
    
    (906,700
    )
    
    
    (336,626
    )
    
    
    (233,307
    )(Decrease) increase in accounts payable and other liabilities
    
    
    (123,921
    )
    
    
    1,819,452
    
    
    
    215,738Net cash provided by operating activities
    
    
    9,212,610
    
    
    
    11,574,025
    
    
    
    7,824,572Cash flows provided by (used in) investing activitiesAdditions to property, plant and equipment and construction in progress
    
    
    (7,756,533
    )
    
    
    (25,887,620
    )
    
    
    (18,172,679
    )Distribution of income from affiliate
    
    
    222,475
    
    
    
    757,500
    
    
    
    1,628,625Proceeds from sale of minority interest in subsidiary, net
    
    
    
    
    
    
    652,756
    
    
    
    Loans to affiliate
    
    
    
    
    
    
    (2,200,000
    )
    
    
    (800,000
    )Collections of loans receivable
    
    
    1,019,163
    
    
    
    770,276
    
    
    
    887,789Net cash provided by (used in) investing activities
    
    
    (6,514,895
    )
    
    
    (25,907,088
    )
    
    
    (16,456,265
    )Cash flows provided by (used in) financing activitiesDividends paid
    
    
    (3,721,538
    )
    
    
    (3,110,473
    )
    
    
    (2,750,341
    )Net proceeds from issuance of common shares
    
    
    
    
    
    
    40,139,899
    
    
    
    6,718,862Net proceeds from issuance of 5.95% bonds
    
    
    
    
    
    
    14,445,720
    
    
    
    Proceeds from issuance of redeemable preference shares
    
    
    9,564
    
    
    
    18,191
    
    
    
    31,035Proceeds from exercises of stock options
    
    
    3,535,042
    
    
    
    1,244,280
    
    
    
    1,321,155Borrowings under line of credit
    
    
    
    
    
    
    5,659,608
    
    
    
    Line of credit repayment
    
    
    
    
    
    
    (5,659,608
    )
    
    
    Net proceeds from issuance of Series A bonds
    
    
    
    
    
    
    
    
    
    
    9,788,491Principal repayments of long term debt
    
    
    (1,302,099
    )
    
    
    (13,049,444
    )
    
    
    (3,738,828
    )Net cash provided by (used in) financing activities
    
    
    (1,479,031
    )
    
    
    39,688,173
    
    
    
    11,370,374Net increase in cash and cash equivalents
    
    
    1,218,684
    
    
    
    25,355,110
    
    
    
    2,738,681Cash and cash equivalents at beginning of year
    
    
    37,310,699
    
    
    
    11,955,589
    
    
    
    9,216,908Cash and cash equivalents at end of year
    
    $
    38,529,383
    
    
    $
    37,310,699
    
    
    $
    11,955,589Supplemental disclosure of cash flow informationInterest paid in cash (net of capitalized interest of $nil, $375,000 and
$nil in 2007, 2006 and 2005, respectively)
    
    $
    1,845,426
    
    
    $
    1,427,908
    
    
    $
    777,262Interest received in cash
    
    $
    1,953,177
    
    
    $
    95,032
    
    
    $
    197,584
  48




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Principal activity
  2. Accounting policies
 Basis of preparation:
 Use of estimates:
 Basis of consolidation:
 Foreign currency:
  Cash and cash equivalents:
 Trade accounts receivable and allowance for doubtful accounts:
 Inventory:
  49




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Loans receivable:
 Property, plant and equipment:
 Buildings
    
    5 to 40 yearsPlant and equipment
    
    4 to 40 yearsDistribution system
    
    3 to 40 yearsOffice furniture, fixtures and equipment
    
    3 to 10 yearsVehicles
    
    3 to 10 yearsLeasehold improvements
    
    Shorter of 5 years or operating lease term outstandingLab equipment
    
    5 to 10 years
  Construction in progress :
 Goodwill and intangible assets:
 Investments:
 Other assets:
  50




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Other liabilities:
 Income taxes:
 Shares repurchased:
 Stock and stock option incentive plans:
    Net income, as reported
    
    $
    5,514,258Add stock-based employee compensation expense included in reporting net income
    
    
    256,032Deduct total stock-based employee compensation expense determined under
fair-value-based method for all awards
    
    
    (330,308
    )Pro forma net income
    
    $
    5,439,982Earnings per share:Basic  as reported
    
    $
    0.47Basic  pro forma
    
    $
    0.46Diluted  as reported
    
    $
    0.45Diluted  pro forma
    
    $
    0.45
  51




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Plant construction revenue and cost of plant construction revenue:
 Revenue and cost of sales:
   Comparative figures:
 3. Cash and cash equivalents
  December 31,2007
    
    
    2006Bank accountsUnited States dollar
    
    $
    1,387,158
    
    
    $
    4,298,418Cayman Islands dollar
    
    
    3,079,161
    
    
    
    2,014,485Bahamian dollar
    
    
    534
    
    
    
    664,626Belize dollar
    
    
    452,827
    
    
    
    228,806Barbadian dollar
    
    
    554,594
    
    
    
    104,364Bermudian dollar
    
    
    344,246
    
    
    
    5,818,520
    
    
    
    7,310,699Short term depositsUnited States dollar
    
    
    30,000,000
    
    
    
    30,000,000Call Deposit  United States dollar
    
    
    2,710,863
    
    
    
    32,710,863
    
    
    
    30,000,000Total cash and cash equivalents
    
    $
    38,529,383
    
    
    $
    37,310,699
 4. Accounts receivable
 December 31,2007
    
    
    2006Trade accounts receivable
    
    $
    8,397,990
    
    
    $
    5,212,827Revenues earned in excess of amounts billed
    
    
    988,394
    
    
    
    Receivable from affiliate
    
    
    660,156
    
    
    
    861,344Other accounts receivable
    
    
    146,860
    
    
    
    181,84410,193,400
    
    
    
    6,256,015Allowance for doubtful accounts
    
    
    (364,871
    )
    
    
    (162,121
    )$
    9,828,529
    
    
    $
    6,093,894
  52




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  December 31,2007
    
    
    2006Opening allowance for doubtful accounts
    
    $
    162,121
    
    
    $
    207,230Provision for doubtful accounts
    
    
    278,092
    
    
    
    130,202Accounts written off during the year
    
    
    (75,342
    )
    
    
    (175,311
    )Ending allowance for doubtful accounts
    
    $
    364,871
    
    
    $
    162,121
  5. Inventory
 December 31,2007
    
    
    2006Water stock
    
    $
    41,933
    
    
    $
    48,104Consumables stock
    
    
    482,482
    
    
    
    407,313Spare parts stock
    
    
    3,125,576
    
    
    
    2,339,475$
    3,649,991
    
    
    $
    2,794,892
 6. Loans receivable
 December 31,2007
    
    
    2006Due from Water Authority-Cayman: Original loan
of $1,216,000, non-interest bearing, in monthly
installments of $14,476 to November 30, 2008.
Loan secured by Red Gate plant, machinery and
equipment
    
    $
    159,238
    
    
    $
    332,952Due from Water Authority-Cayman: Two loans
originally aggregating $1,738,000, bearing
interest at 5% per annum, receivable in
combined monthly installments of principal and
interest of $24,565 to March 2014, and secured
by North Sound Road, machinery and equipment
    
    
    1,579,467
    
    
    
    Due from
Water Authority-Cayman: Two non-interest bearing loans originally
aggregating $3,129,000, receivable in monthly
installments of $37,250 to November 2009, and
secured by North Sound Road plant, machinery
and equipment
    
    
    856,750
    
    
    
    1,303,750Due from Water Authority-Cayman: Two loans
originally aggregating $897,000, bearing
interest at 5% per annum, receivable in
combined monthly installments of principal and
interest of $12,678 to January 2013, and
secured by Lower Valley plant, machinery and
equipment
    
    
    681,661
    
    
    
    796,578Total loans receivable
    
    
    3,277,116
    
    
    
    2,433,280Less current portion
    
    
    947,854
    
    
    
    735,632Loans receivable, excluding current portion
    
    $
    2,329,262
    
    
    $
    1,697,648
 
  53




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 7. Property, plant and equipment and construction in progress
 December 31,2007
    
    
    2006Land
    
    $
    2,515,810
    
    
    $
    1,081,045Buildings
    
    
    11,861,214
    
    
    
    11,686,321Plant and equipment
    
    
    44,723,010
    
    
    
    42,364,299Distribution system
    
    
    19,743,075
    
    
    
    19,244,035Office furniture, fixtures and equipment
    
    
    1,817,214
    
    
    
    1,608,082Vehicles
    
    
    1,026,566
    
    
    
    1,014,408Leasehold improvements
    
    
    202,592
    
    
    
    202,592Lab equipment
    
    
    28,855
    
    
    
    26,70581,918,336
    
    
    
    77,227,487Less accumulated depreciation
    
    
    21,936,822
    
    
    
    16,998,129Property, plant and equipment, net
    
    $
    59,981,514
    
    
    $
    60,229,358Construction in progress
    
    $
    4,989,779
    
    
    $
    3,339,011
  8. Investment in affiliate
     December 31,2007
    
    
    2006Current assets
    
    $
    8,804,073
    
    
    $
    4,212,588Non-current assets
    
    
    11,136,583
    
    
    
    10,557,481Total assets
    
    $
    19,940,656
    
    
    $
    14,770,069
  54




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31,2007
    
    
    2006Current liabilities
    
    $
    2,697,453
    
    
    $
    4,477,184Non-current liabilities
    
    
    5,500,256
    
    
    
    2,145,188Total liabilities
    
    $
    8,197,709
    
    
    $
    6,622,372
 Year Ended December 31,2007
    
    
    2006Water sales
    
    $
    8,955,491
    
    
    $
    8,047,783Cost of water sales
    
    $
    2,909,889
    
    
    $
    3,251,740Income from operations
    
    $
    3,559,324
    
    
    $
    2,922,317Net income
    
    $
    3,914,000
    
    
    $
    3,171,160
  December 31,2007
    
    2006Equity investment (including profit sharing rights)
    
    $
    14,626,848
    
    
    $
    12,595,704Loan receivable  Bar Bay plant construction
    
    
    2,875,000
    
    
    
    3,000,000$
    17,501,848
    
    
    $
    15,595,704
  Baughers Bay dispute:
      55




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     9. Consolidated Water (Bermuda) Limited
     56




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10. Intangible assets
      December 31,2007
    
    
    2006CostNon-amortizable intangible asset management service agreement
    
    $
    856,356
    
    
    $
    856,356Amortizable intangible assets
DWEERTM distribution agreement
    
    
    337,149
    
    
    
    337,149Operations agreement with Sandy Lane
    
    
    
    
    
    
    104,050Cayman water production and supply agreements
    
    
    4,385,496
    
    
    
    4,385,496Belize water production and supply agreement
    
    
    1,522,419
    
    
    
    1,522,4197,101,420
    
    
    
    7,205,470Accumulated amortizationDWEERTM distribution agreement
    
    
    (242,702
    )
    
    
    (193,339
    )Operations agreement with Sandy Lane
    
    
    
    
    
    
    (104,050
    )Cayman water production and supply agreements
    
    
    (3,650,088
    )
    
    
    (2,976,985
    )Belize water production and supply agreement
    
    
    (326,730
    )
    
    
    (260,537
    )(4,219,520
    )
    
    
    (3,534,911
    )Intangible assets, net
    
    $
    2,881,900
    
    
    $
    3,670,559
  57




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Amortization for each of the next five years is expected to be as follows:2008
    
    
    
    
    
    $
    639,2512009
    
    
    
    
    
    
    234,8542010
    
    
    
    
    
    
    154,3262011
    
    
    
    
    
    
    66,1922012
    
    
    
    
    
    
    66,192Thereafter
    
    
    
    
    
    
    864,729
 11. Goodwill
   12. Dividends
  2007
    
    2006
    
    2005March 31,
    
    $
    0.0650
    
    
    $
    0.0600
    
    
    $
    0.0575June 30
    
    
    0.0650
    
    
    
    0.0600
    
    
    
    0.0600September 30
    
    
    0.0650
    
    
    
    0.0600
    
    
    
    0.0600December 31
    
    
    
    
    
    
    0.0600
    
    
    
    0.0600
  
  58




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 13. Long term debt
 December 31,2007
    
    
    2006Fixed rate bonds bearing interest at a
rate of 5.95%; repayable in quarterly
installments of $526,010; secured
through an inter-creditor agreement with
the Republic Bank & Trust by
substantially all of the Companys
assets. Redeemable in full at any time
after August 4, 2009 at a premium of
1.5% of the outstanding principal and
accrued interest on the bonds on the
date of redemption
    
    $
    14,270,995
    
    
    $
    15,480,595Royal Bank of Canada loan due in 2007,
bearing interest at Nassau Prime Lending
Rate plus 1.5%; payable in quarterly
installments of principal and Interest
(7.0% as of December 31, 2006)
    
    
    
    
    
    
    92,498Series A bonds bearing interest at the
annual fixed rate of 7.5%, payable
quarterly; maturing on June 30, 2015
    
    
    10,000,000
    
    
    
    10,000,000Total long term debt
    
    
    24,270,995
    
    
    
    25,573,093Less discount
    
    
    770,402
    
    
    
    918,433Less current portion
    
    
    1,142,255
    
    
    
    1,154,067Long term debt, excluding current portion
    
    $
    22,358,338
    
    
    $
    23,500,593
        2008
    
    $
    1,142,2552009
    
    
    1,229,0712010
    
    
    1,322,4832011
    
    
    1,422,9912012
    
    
    1,531,134Thereafter
    
    
    16,852,659$
    23,500,593
  59




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14. Share capital and additional paid-in capital and stock split
   
 15. Cost of Revenues and General and Administrative Expenses
 Year
Ended December 31,2007
    
    
    2006
    
    
    2005Cost of revenues consist of:Water purchases
    
    $
    52,020
    
    
    $
    167,839
    
    
    $
    93,433Depreciation
    
    
    4,581,375
    
    
    
    3,490,929
    
    
    
    2,033,464Amortization of intangible assets
    
    
    788,659
    
    
    
    820,943
    
    
    
    929,880Employee costs
    
    
    3,866,813
    
    
    
    3,383,892
    
    
    
    2,857,676Fuel oil
    
    
    6,404,945
    
    
    
    4,565,862
    
    
    
    2,244,204Royalties
    
    
    1,407,367
    
    
    
    1,256,257
    
    
    
    930,602Electricity
    
    
    3,761,003
    
    
    
    3,018,311
    
    
    
    3,015,037Insurance
    
    
    1,243,136
    
    
    
    840,201
    
    
    
    670,339Maintenance
    
    
    2,339,341
    
    
    
    3,135,004
    
    
    
    2,063,985Cost of plant sales
    
    
    4,547,122
    
    
    
    
    
    
    
    Other
    
    
    1,473,840
    
    
    
    1,936,164
    
    
    
    994,188$
    30,465,621
    
    
    $
    22,615,402
    
    
    $
    15,832,808General and administrative expenses consist of:Employee costs
    
    $
    4,316,922
    
    
    $
    3,680,386
    
    
    $
    2,230,891Depreciation
    
    
    316,574
    
    
    
    282,267
    
    
    
    104,911Professional fees
    
    
    1,173,465
    
    
    
    1,172,685
    
    
    
    1,328,272Insurance
    
    
    661,954
    
    
    
    537,011
    
    
    
    368,172Directors fees and expenses
    
    
    796,443
    
    
    
    622,750
    
    
    
    515,546Maintenance
    
    
    57,000
    
    
    
    105,909
    
    
    
    84,914Other
    
    
    2,155,950
    
    
    
    2,031,065
    
    
    
    1,510,359$
    9,478,308
    
    
    $
    8,432,073
    
    
    $
    6,143,065
  60




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 16. Earnings per share
   2007
    
    
    2006
    
    
    2005Net income
    
    $
    11,387,651
    
    
    $
    7,521,126
    
    
    $
    5,514,258Less: Dividends paid and earnings attributable on preferred shares
    
    
    (5,509
    )
    
    
    (6,461
    )
    
    
    (9,128
    )Net income available to common shares in the determination of basic
earnings per common share
    
    $
    11,382,142
    
    
    $
    7,514,665
    
    
    $
    5,505,130Weighted average number of common shares in the determination of basic
earnings per ordinary share
    
    
    14,404,732
    
    
    
    12,440,195
    
    
    
    11,767,573Plus:Weighted average number of preferred shares outstanding during the year
    
    
    22,488
    
    
    
    28,502
    
    
    
    27,757Potential dilutive effect of unexercised options
    
    
    68,144
    
    
    
    268,789
    
    
    
    366,077Weighted average number of shares used for determining diluted
earnings per common share
    
    
    14,495,364
    
    
    
    12,737,486
    
    
    
    12,161,407
  61




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 17. Segment information
 As of and for the year ended December 31, 2007Retail
    
    
    Bulk
    
    
    Service
    
    
    Other
    
    
    TotalTotal revenues
    
    $
    19,522,504
    
    
    $
    22,096,635
    
    
    $
    7,530,708
    
    
    $
    
    
    
    $
    49,149,847Total cost of sales
    
    
    7,227,675
    
    
    
    17,855,001
    
    
    
    5,382,945
    
    
    
    
    
    
    
    30,465,621Gross profit
    
    
    12,294,829
    
    
    
    4,241,634
    
    
    
    2,147,763
    
    
    
    
    
    
    
    18,684,226General & administrative expenses
    
    
    7,822,592
    
    
    
    1,437,896
    
    
    
    217,820
    
    
    
    
    
    
    
    9,478,308Income from operations
    
    
    4,472,237
    
    
    
    2,803,738
    
    
    
    1,929,943
    
    
    
    
    
    
    
    9,205,918Other income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,633,532
    
    
    
    2,633,532Income attributable to non-controlling and minority interest
    
    
    
    
    
    
    (103,500
    )
    
    
    555,299
    
    
    
    
    
    
    
    451,799Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    11,387,651Property plant and equipment, net
    
    $
    23,102,174
    
    
    $
    34,619,902
    
    
    $
    2,259,438
    
    
    $
    
    
    
    $
    59,981,514Construction in progress
    
    
    3,273,108
    
    
    
    1,716,671
    
    
    
    
    
    
    
    
    
    
    
    4,989,779Total assets
    
    
    89,064,139
    
    
    
    54,585,753
    
    
    
    5,680,992
    
    
    
    
    
    
    
    149,330,884
 As of and for the year ended December 31, 2006Retail
    
    
    Bulk
    
    
    Service
    
    
    Other
    
    
    TotalTotal revenues
    
    $
    18,003,456
    
    
    $
    18,303,479
    
    
    $
    1,922,273
    
    
    $
    
    
    
    $
    38,229,208Total cost of sales
    
    
    6,635,879
    
    
    
    14,878,731
    
    
    
    1,100,792
    
    
    
    
    
    
    
    22,615,402Gross profit
    
    
    11,367,577
    
    
    
    3,424,748
    
    
    
    821,481
    
    
    
    
    
    
    
    15,613,806General & administrative expenses
    
    
    7,086,511
    
    
    
    1,232,435
    
    
    
    113,127
    
    
    
    
    
    
    
    8,432,073Income from operations
    
    
    4,281,066
    
    
    
    2,192,313
    
    
    
    708,354
    
    
    
    
    
    
    
    7,181,733Other income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    329,135
    
    
    
    329,135Income attributable to non-controlling and minority interest
    
    
    
    
    
    
    (10,258
    )
    
    
    
    
    
    
    
    
    
    
    (10,258
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    7,521,126Property plant and equipment, net
    
    $
    20,812,109
    
    
    $
    36,850,558
    
    
    $
    2,566,691
    
    
    $
    
    
    
    $
    60,229,358Construction in progress
    
    
    1,990,079
    
    
    
    1,121,762
    
    
    
    227,170
    
    
    
    
    
    
    
    3,339,011Total assets
    
    
    97,097,587
    
    
    
    36,075,509
    
    
    
    5,788,247
    
    
    
    
    
    
    
    138,961,343
 As of and for the year ended December 31, 2005Retail
    
    
    Bulk
    
    
    Service
    
    
    Other
    
    
    TotalTotal revenues
    
    $
    13,372,103
    
    
    $
    11,724,438
    
    
    $
    1,090,664
    
    
    $
    
    
    
    $
    26,187,205Total cost of sales
    
    
    5,369,550
    
    
    
    9,832,109
    
    
    
    631,149
    
    
    
    
    
    
    
    15,832,808Gross profit
    
    
    8,002,553
    
    
    
    1,892,329
    
    
    
    459,515
    
    
    
    
    
    
    
    10,354,397General & administrative expenses
    
    
    5,320,301
    
    
    
    772,043
    
    
    
    50,721
    
    
    
    
    
    
    
    6,143,065Income from operations
    
    
    2,682,252
    
    
    
    1,120,286
    
    
    
    408,794
    
    
    
    
    
    
    
    4,211,332Other income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,275,158
    
    
    
    1,275,158Income attributable to non-controlling and minority interest
    
    
    
    
    
    
    (27,768
    )
    
    
    
    
    
    
    
    
    
    
    (27,768
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5,514,258Property plant and equipment, net
    
    $
    21,938,568
    
    
    $
    7,919,173
    
    
    $
    2,809,874
    
    
    $
    
    
    
    $
    32,667,615Construction in progress
    
    
    166,924
    
    
    
    12,005,478
    
    
    
    
    
    
    
    
    
    
    
    12,172,402Total assets
    
    
    54,209,101
    
    
    
    29,502,302
    
    
    
    4,653,788
    
    
    
    
    
    
    
    88,365,191
  62




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     18. Related party transactions
     63




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  19. Commitments and contingencies
    2008
    
    $
    302,1672009
    
    
    311,4942010
    
    
    314,3632011
    
    
    99,805
        
    64




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 20. Stock Based Compensation
  Employee Share Incentive Plan (Preferred Shares)
  Employee Share Option Plan (Common Stock Options)
  Non-Executive Directors Share Plan
  Directors and Senior Management Stock Compensation
     65




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2007
    
    2006
    
    2005Risk free interest rate
    
    
    4.82
    %
    
    
    5.05
    %
    
    
    3.79
    %Expected option life
    
    2.00 years
    
    2.90 years
    
    2.49 yearsExpected volatility
    
    
    37.44
    %
    
    
    33.66
    %
    
    
    30.81
    %Expected dividend yield
    
    
    0.91
    %
    
    
    0.90
    %
    
    
    1.22
    %
  Weighted AverageRemainingWeighted Average
    
    
    Contractual Life
    
    
    Aggregate IntrinsicOptions
    
    
    Exercise Price
    
    
    (Years)
    
    
    Value (1)Outstanding at beginning of year
    
    
    376,754
    
    
    $
    10.34Granted
    
    
    3,590
    
    
    
    24.41Exercised
    
    
    (357,749
    )
    
    
    9.91Forfeited
    
    
    (1,130
    )
    
    
    19.77Outstanding at end of year
    
    
    21,465
    
    
    $
    19.50
    
    
    1.77 years
    
    $
    122,159Exercisable at end of year
    
    
    0
    
    
    $
    
    
    
    
    
    
    
    $
    0
 
 (1)
    
    The intrinsic value of a stock option represents the amount by which the fair value of the
underlying stock, measured by reference to the closing price of the ordinary shares of $25.19
in the Nasdaq Global Select Market on December 31, 2007, exceeds the exercise price of the
option.   2007
    
    2006
    
    2005Options granted with an exercise price below market price on the date of grant:Employees  preferred share options
    
    $
    6.65
    
    
    $
    15.93
    
    
    $
    10.35Overall weighted average
    
    $
    6.65
    
    
    $
    15.93
    
    
    $
    10.35Options granted with an exercise price at market price on the date of grant:Management employees
    
    $
    
    
    
    $
    
    
    
    $
    Employees  ordinary share options
    
    $
    10.49
    
    
    $
    8.08
    
    
    $
    5.39Overall weighted average
    
    $
    10.49
    
    
    $
    8.08
    
    
    $
    5.39Total intrinsic value of options exercised
    
    $
    5,082,472
    
    
    $
    4,252,174
    
    
    $
    2,754,336
  66




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##### Table of Contents



21. Pension benefits
  22. Financial instruments
 Credit risk:
  Interest rate risk:
  Foreign exchange risk:
  Fair values:
  23. Non cash transactions:
  2007
    
    2006
    
    2005Note received for plant facility sold
    
    $
    1,738,000
    
    
    $
    897,000
    
    
    $
    Issuance of
11,346, 2,135 and 8,970,
respectively, of common shares for
services rendered
    
    
    251,377
    
    
    
    43,326
    
    
    
    150,716Issuance of
2,600, 3,587 and 5,544,
respectively, of redeemable preferred
shares for services rendered
    
    
    47,856
    
    
    
    130,078
    
    
    
    111,434Issuance of 9,364 of common shares
issued under senior management
employment agreements in lieu of cash
bonuses
    
    
    
    
    
    
    
    
    
    
    145,040Conversion
of 5,698, 12,244 and 4,182
shares in 2007, 2006 and 2005,
respectively, of redeemable preferred
shares to common shares
    
    
    3,419
    
    
    
    7,346
    
    
    
    2,510Dividends declared but not paid
    
    
    
    
    
    
    849,470
    
    
    
    828,709
  67




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##### Table of Contents



24. Impact of recent accounting standards pronouncements
 Adoption of New Accounting Standards :
 Share-Based Payment
   Accounting for Uncertainty in Income Taxes -
an interpretation of FASB Statement No. 109
 Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements ( ),
 Effect of Newly Issued But Not Yet Effective Accounting Standards :
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Business Combinations .
 Noncontrolling Interests in Consolidated Financial
Statements.
   68




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     /s/
Rachlin LLP
 Fort Lauderdale, Florida
March 17, 2008
 69




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##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 
 CONSOLIDATED BALANCE SHEETS
 DECEMBER 31, 2007 and 2006
  2007
    
    
    2006ASSETSCurrent assetsCash and cash equivalents
    
    $
    102,163
    
    
    $
    1,353,105Accounts receivable
    
    
    8,177,090
    
    
    
    2,399,575Inventory
    
    
    467,359
    
    
    
    425,222Prepaid expenses and other assets
    
    
    57,461
    
    
    
    34,686Total current assets
    
    
    8,804,073
    
    
    
    4,212,588Property, plant and equipment, net
    
    
    10,297,970
    
    
    
    2,929,953Construction in progress
    
    
    196,113
    
    
    
    7,627,528Other Assets
    
    
    642,500
    
    
    
    Total assets
    
    $
    19,940,656
    
    
    $
    14,770,069LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts
payable and other liabilities
    
    $
    2,072,453
    
    
    $
    1,477,184Current portion of long term debt
    
    
    625,000
    
    
    
    3,000,000Total current liabilities
    
    
    2,697,453
    
    
    
    4,477,184Long term debt
    
    
    2,250,000
    
    
    
    Profit sharing obligation
    
    
    3,250,256
    
    
    
    2,111,412Minority interest in JVD Ocean Desalination Ltd.
    
    
    
    
    
    
    33,776Total liabilities
    
    
    8,197,709
    
    
    
    6,622,372Commitments
    
    
    
    
    
    
    Stockholders equityClass A, voting shares, $1 par value.
Authorized 600,000 shares: issued and
outstanding 555,000 shares in 2007 and 2006
    
    
    555,000
    
    
    
    555,000Class B, voting shares, $1 par value.
Authorized 600,000 shares: issued and
outstanding 555,000 shares in 2007 and 2006
    
    
    555,000
    
    
    
    555,000Class C, non-voting shares, $1 par value.
Authorized 600,000 shares: issued and
outstanding 165,000 in 2007 and 2006
    
    
    165,000
    
    
    
    165,000Additional paid-in capital
    
    
    225,659
    
    
    
    225,659Retained earnings
    
    
    10,242,288
    
    
    
    6,647,038Total stockholders equity
    
    
    11,742,947
    
    
    
    8,147,697Total liabilities and stockholders equity
    
    $
    19,940,656
    
    
    $
    14,770,069
  70




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##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 
 CONSOLIDATED STATEMENTS OF INCOME
 YEARS ENDED DECEMBER 31, 2007, 2006 and 2005
  2007
    
    
    2006
    
    
    2005Water sales
    
    $
    8,955,491
    
    
    $
    8,047,783
    
    
    $
    7,715,827Cost of water sales
    
    
    (2,909,889
    )
    
    
    (3,251,740
    )
    
    
    (3,003,920
    )Gross profit
    
    
    6,045,602
    
    
    
    4,796,043
    
    
    
    4,711,907General and administrative expenses
    
    
    (2,486,278
    )
    
    
    (1,873,726
    )
    
    
    (1,818,229
    )Income from operations
    
    
    3,559,324
    
    
    
    2,922,317
    
    
    
    2,893,678Other income (expense)Interest income
    
    
    579,373
    
    
    
    363,420
    
    
    
    202,428Interest expense
    
    
    (259,038
    )
    
    
    (114,065
    )
    
    
    (62,150
    )Other income
    
    
    565
    
    
    
    
    
    
    
    111320,900
    
    
    
    249,355
    
    
    
    140,389Income before minority interest
    
    
    3,880,224
    
    
    
    3,171,672
    
    
    
    3,034,067Minority interest
    
    
    33,776
    
    
    
    (512
    )
    
    
    (14,739
    )Net income
    
    $
    3,914,000
    
    
    $
    3,171,160
    
    
    $
    3,019,328
  71




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##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 YEARS
ENDED DECEMBER 31, 2005, 2006 and 2007
  Additional
    
    
    
    
    
    
    TotalCommon stock
    
    
    paid-in
    
    
    Retained
    
    
    stockholdersShares
    
    
    Dollars
    
    
    capital
    
    
    earnings
    
    
    equityBalance at December 31, 2004
    
    
    1,275,000
    
    
    $
    1,275,000
    
    
    $
    225,659
    
    
    $
    4,472,971
    
    
    $
    5,973,630Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,019,328
    
    
    
    3,019,328Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,741,421
    )
    
    
    (2,741,421
    )Balance at December 31, 2005
    
    
    1,275,000
    
    
    
    1,275,000
    
    
    
    225,659
    
    
    
    4,750,878
    
    
    
    6,251,537Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,171,160
    
    
    
    3,171,160Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,275,000
    )
    
    
    (1,275,000
    )Balance at
December 31, 2006
    
    
    1,275,000
    
    
    
    1,275,000
    
    
    
    225,659
    
    
    
    6,647,038
    
    
    
    8,147,697Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,914,000
    
    
    
    3,914,000Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (318,750
    )
    
    
    (318,750
    )Balance at December 31, 2007
    
    
    1,275,000
    
    
    $
    1,275,000
    
    
    $
    225,659
    
    
    $
    10,242,288
    
    
    $
    11,742,947
  72




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##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 YEARS ENDED DECEMBER 31, 2007, 2006 and 2005
  2007
    
    
    2006
    
    
    2005Cash flows from operating activitiesNet income
    
    $
    3,914,000
    
    
    $
    3,171,160
    
    
    $
    3,019,328Add(deduct) items not affecting cashDepreciation
    
    
    399,442
    
    
    
    403,255
    
    
    
    713,687Amortization of bank fees
    
    
    
    
    
    
    3,837
    
    
    
    7,564Profit sharing
    
    
    1,240,094
    
    
    
    1,007,697
    
    
    
    970,386Minority interest
    
    
    (33,776
    )
    
    
    512
    
    
    
    14,739(Increase) decrease in accounts receivable
    
    
    (5,770,794
    )
    
    
    1,012,626
    
    
    
    (543,934
    )(Increase) decrease in inventory
    
    
    (42,137
    )
    
    
    (80,874
    )
    
    
    5,478(Increase) decrease in other assets
    
    
    (671,996
    )
    
    
    (3,248
    )
    
    
    5Increase in accounts payable and accrued liabilities
    
    
    595,269
    
    
    
    363,090
    
    
    
    278,506Net cash provided by (used in) operating activities
    
    
    (369,898
    )
    
    
    5,878,055
    
    
    
    4,465,759Cash flows from investing activitiesPurchase of property, plant and equipment
    
    
    (28,232
    )
    
    
    (132,590
    )
    
    
    (17,010
    )Expenditures for construction in progress
    
    
    (307,812
    )
    
    
    (4,201,934
    )
    
    
    (1,785,413
    )Proceeds from sale of assets
    
    
    
    
    
    
    
    
    
    
    52,288Net cash provided by (used in) investing activities
    
    
    (336,044
    )
    
    
    (4,334,524
    )
    
    
    (1,750,135
    )Cash flows from financing activitiesProfit sharing rights paid
    
    
    (101,250
    )
    
    
    (405,000
    )
    
    
    (870,750
    )Proceeds from loan from affiliate
    
    
    
    
    
    
    800,000
    
    
    
    800,000Principal repayments of long term debt
    
    
    (125,000
    )
    
    
    (255,000
    )
    
    
    (250,000
    )Dividends paid
    
    
    (318,750
    )
    
    
    (1,275,000
    )
    
    
    (2,741,421
    )Net cash provided by (used in) in financing activities
    
    
    (545,000
    )
    
    
    (1,135,000
    )
    
    
    (3,062,171
    )Net increase (decrease) in cash and cash equivalents
    
    
    (1,250,942
    )
    
    
    408,531
    
    
    
    (346,547
    )Cash and cash equivalents at the beginning of the year
    
    
    1,353,105
    
    
    
    944,574
    
    
    
    1,291,121Cash and cash equivalents at the end of the year
    
    $
    102,163
    
    
    $
    1,353,105
    
    
    $
    944,574Interest paid in cash
    
    $
    154,314
    
    
    $
    17,851
    
    
    $
    19,088Interest received in cash
    
    $
    
    
    
    $
    283,236
    
    
    $
    184,389
  73




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##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 1. Principal activity
    2. Accounting policies
 Basis of preparation:
 Basis of consolidation:
 Use of estimates:
 Cash and cash equivalents:
 Trade accounts receivable:
 Interest income:
 Inventory:
 74




---



##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 Impairment of long-lived assets:
 Property, plant and equipment:
 Plant and equipment
    
    
    4 to 40 yearsOffice furniture, fixtures and equipment
    
    
    3 to 10 yearsVehicles
    
    
    3 to 10 yearsLab equipment
    
    
    3 to 10 years
  Construction in progress :
 Water sales and cost of water sales:
 Repairs and maintenance:
 Comparative amounts:
 3. Dispute with BVI Government
    75




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##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
      76




---



##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
  4. Inventory
  December 31,2007
    
    
    2006Consumables stock
    
    $
    83,490
    
    
    $
    55,543Spare parts stock
    
    
    383,869
    
    
    
    369,679Total
    
    $
    467,359
    
    
    $
    425,222
 5. Property, plant and equipment and construction in progress
  December 31,2007
    
    
    2006Plant and equipment
    
    $
    9,545,707
    
    
    $
    9,517,475Office furniture, fixtures and equipment
    
    
    61,363
    
    
    
    61,363Vehicles
    
    
    71,600
    
    
    
    71,600Tools & test equipment
    
    
    18,431
    
    
    
    18,4319,697,101
    
    
    
    9,668,869Accumulated depreciation
    
    
    (7,138,358
    )
    
    
    (6,738,916
    )Property, plant and equipment, net of Bar Bay plant and equipment
    
    
    2,558,743
    
    
    
    2,929,953Bar Bay plant and equipment
    
    
    7,739,227
    
    
    
    Property, plant and equipment, net
    
    $
    10,297,970
    
    
    $
    2,929,953Construction in progress
    
    $
    196,113
    
    
    $
    7,627,528
  6. Long term debt
 December 31,2007
    
    
    2006CWCO loan bearing interest at three month
LIBOR plus 3.5% (8.20% at December 31, 2007) per annum, with interest
calculated daily and payable quarterly.
The loan is payable in eight (8)
quarterly principal payments of $125,000
commencing on August 31, 2007, plus a
final principal payment of $2,000,000 due
on August 31, 2009, plus quarterly
payments of accrued interest
    
    $
    2,875,000
    
    
    $
    3,000,000Total long term debt
    
    
    2,875,000
    
    
    
    3,000,000Less current portion
    
    
    (625,000
    )
    
    
    (3,000,000
    )Long term debt, excluding current portion
    
    $
    2,250,000
    
    
    $
    
  77




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##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 7. Commitments
    2008
    
    $
    63,0752009
    
    
    63,0752010
    
    
    63,0752011
    
    
    63,0752012
    
    
    63,075Thereafter
    
    
    1,179,897
  8. Expenses
 Year Ended December 31,2007
    
    
    2006
    
    
    2005Cost of water sales consist of:Fuel oil
    
    $
    990,188
    
    
    $
    658,938
    
    
    $
    625,316Electricity
    
    
    331,456
    
    
    
    820,134
    
    
    
    529,905Maintenance
    
    
    278,673
    
    
    
    558,653
    
    
    
    436,104Depreciation
    
    
    398,336
    
    
    
    402,150
    
    
    
    712,582Employee costs
    
    
    469,759
    
    
    
    446,126
    
    
    
    381,613Insurance
    
    
    80,529
    
    
    
    78,822
    
    
    
    80,138Other direct costs
    
    
    360,948
    
    
    
    286,917
    
    
    
    238,262$
    2,909,889
    
    
    $
    3,251,740
    
    
    $
    3,003,920General and administrative expenses consist of:Profit sharing
    
    $
    1,240,094
    
    
    $
    1,007,698
    
    
    $
    970,386Management fees, related parties
    
    
    713,119
    
    
    
    620,448
    
    
    
    561,605Directors fees and expenses
    
    
    63,711
    
    
    
    65,456
    
    
    
    67,091Professional fees
    
    
    266,366
    
    
    
    33,418
    
    
    
    29,980Employee costs
    
    
    50,431
    
    
    
    50,622
    
    
    
    36,686Maintenance costs
    
    
    1,265
    
    
    
    160
    
    
    
    991Depreciation
    
    
    1,105
    
    
    
    1,105
    
    
    
    1,105Other indirect costs
    
    
    150,187
    
    
    
    94,819
    
    
    
    150,385$
    2,486,278
    
    
    $
    1,873,726
    
    
    $
    1,818,229
 78




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##### Table of Contents



OCEAN CONVERSION (BVI) LTD.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 9. Related party transactions
    10. Profit sharing obligation
 December 31,2007
    
    
    2006Opening balance
    
    $
    2,111,412
    
    
    $
    1,508,714Additions
    
    
    1,240,094
    
    
    
    1,007,698Distributions
    
    
    (101,250
    )
    
    
    (405,000
    )Ending balance
    
    $
    3,250,256
    
    
    $
    2,111,412
   
 79




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##### Table of Contents



11. Taxation
  12. Pension plan
  13. Financial instruments
 Credit risk:
  Interest rate risk:
  Fair values:
  80




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##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Internal Control Over Financial Reporting
  MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
  
    
    pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the Company;
    
    provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made only in
accordance with authorizations of management and directors of the Company; and
    
    provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Companys assets that could have a material effect
on the financial statements.
  Internal ControlIntegrated
Framework
       81




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Our Directors and Executive Officers
  Name
    
    Age
    
    PositionJeffrey M. Parker
    
    
    63
    
    
    Director, Chairman of the Board of DirectorsFrederick W. McTaggart
    
    
    45
    
    
    Director, President, Chief Executive OfficerDavid W. Sasnett
    
    
    51
    
    
    Director, Executive Vice President & Chief Financial
OfficerGregory S. McTaggart
    
    
    44
    
    
    Vice President of Cayman OperationsRobert B. Morrison
    
    
    54
    
    
    Vice President of Purchasing and Information TechnologyGerard J. Pereira
    
    
    37
    
    
    Vice President of EngineeringRamjeet Jerrybandan
    
    
    39
    
    
    Vice President of Overseas OperationsWilliam T. Andrews
    
    
    59
    
    
    DirectorBrian E. Butler *
    
    
    59
    
    
    DirectorSteven A. Carr *
    
    
    57
    
    
    DirectorCarson K. Ebanks *
    
    
    52
    
    
    DirectorRichard L. Finlay *
    
    
    49
    
    
    DirectorClarence B. Flowers, Jr. *
    
    
    52
    
    
    DirectorWilmer F. Pergande *
    
    
    68
    
    
    DirectorLeonard J. Sokolow*
    
    
    51
    
    
    DirectorRaymond Whittaker *
    
    
    54
    
    
    Director
 
 *
    
    The Board of Directors has determined that each of such persons is an independent director
under the corporate governance rules of The NASDAQ Stock Market LLC (NASDAQ) Jeffrey M. Parker
 Frederick W. McTaggart
 David W. Sasnett
 Gregory S. McTaggart
 82




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##### Table of Contents



Robert B. Morrison
 Gerard J. Pereira
 Ramjeet Jerrybandan
 William T. Andrews
 Brian E. Butler
 Steven A. Carr
 Carson K. Ebanks
 83




---



##### Table of Contents



Richard L. Finlay
 Clarence B. Flowers, Jr.
 Wilmer F. Pergande
 Leonard J. Sokolow
 Raymond Whittaker
 Composition of the Board of Directors
  Group 1
    
    Group 2
    
    Group 3William T. Andrews
    
    Carson K. Ebanks, JP
    
    Wilmer F. PergandeBrian E. Butler
    
    Richard L. Finlay
    
    Raymond WhittakerSteven A. Carr
    
    Clarence B. Flowers, Jr.
    
    David W. SasnettFrederick W. McTaggart
    
    Leonard J. SokolowJeffrey M. Parker
   84




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##### Table of Contents



Governance of the Company
     Committees of the Board of Directors
  Executive Committee
  Compensation Committee
    Audit Committee
   85




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##### Table of Contents



Nominations Committee
    Section 16(a) Beneficial Ownership Reporting Compliance
  86




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##### Table of Contents



ITEM 11. EXECUTIVE COMPENSATION
 COMPENSATION DISCUSSION & ANALYSIS
  Overview of Compensation Program
  Compensation Philosophy and Objectives
   Setting Executive Compensation
     87




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##### Table of Contents



Role of Chief Executive Officer in Compensation Decisions
  2007 Executive Compensation Components
  
    
    base salary;
    
    equity-based compensation;
    
    incentive-based compensation;
    
    retirement and other benefits; and
    
    perquisites and other personal benefits.
 Base Salary
   Equity-Based Compensation
    Incentive-Based Compensation
 Annual Bonus.
 88




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##### Table of Contents



Equity
Incentives.
    Pension Plan
    
    
    Receive a cash payout if the employees retirement savings is less than $6,000;
    
    Transfer the retirement savings to a life annuity for investment by a life insurance
company and payment of a regular income stream to the employee for the remainder of the
employees life (and the employees spouses life if the employee is married at the time of
retirement); or
    
    Transfer the retirement savings to a Retirement Savings Arrangement account with an
approved provider or bank and receive regular income payments until the account is depleted.
 89




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##### Table of Contents



Perquisites and Other Personal Benefits
  Termination-Based Compensation
 Termination
  i.
    
    the death of the Named Executive Officer;ii.
    
    the Named Executive Officer being adjudicated bankrupt;iii.
    
    the Named Executive Officer giving six months notice of termination; andiv.
    
    the Named Executive Officer being unable to discharge his duties due to physical or
mental illness for a period of more than 60 days.
     Severance
  Change in Control
  90




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##### Table of Contents




    
    Incentives to remain with us despite uncertainties while a transaction is under
consideration or pending; and
    
    Assurance of compensation for terminated employees after a Change in Control.
   Compensation Committee Report
  Compensation Committee
Carson K. Ebanks
Clarence B. Flowers, Jr.
Wilmer F. Pergande
Leonard J. Sokolow 91




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##### Table of Contents



Summary Compensation Table
  Non-EquityOption
    
    Incentive PlanName and Principal
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock
    
    Awards
    
    Compensation
    
    All OtherPosition
    
    Year
    
    Salary ($)
    
    Bonus ($)
    
    Awards($)
    
    ($)
    
    ($)
    
    Compensation ($)
    
    Total($)(a)
    
    (b)
    
    (c)
    
    (d)(1)
    
    (e)(2)
    
    (f)(3)
    
    (g)(4)
    
    (i)(5)
    
    (j)Frederick W. McTaggart
Chief Executive Officer
    
    
    2007
    
    
    
    230,000
    
    
    
    312,508
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,600
    
    
    
    549,1082006
    
    
    
    223,416
    
    
    
    175,379
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,600
    
    
    
    405,395David W. Sasnett (6)
Executive VP & Chief
Financial Officer
    
    
    2007
    
    
    
    202,500
    
    
    
    50,625
    
    
    
    40,000
    
    
    
    
    
    
    
    
    
    
    
    9,000
    
    
    
    302,1252006
    
    
    
    155,000
    
    
    
    67,500
    
    
    
    20,000
    
    
    
    
    
    
    
    
    
    
    
    8,400
    
    
    
    250,900Jeffrey M. Parker
Chairman
    
    
    2007
    
    
    
    190,000
    
    
    
    713,337
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,600
    
    
    
    906,9372006
    
    
    
    184,318
    
    
    
    272,484
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,600
    
    
    
    460,402Gregory S. McTaggart
VP Cayman Operations
    
    
    2007
    
    
    
    128,750
    
    
    
    51,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,600
    
    
    
    183,8502006
    
    
    
    125,000
    
    
    
    35,816
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,600
    
    
    
    164,416Robert B. Morrison
VP IT & Purchasing
    
    
    2007
    
    
    
    128,750
    
    
    
    51,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,600
    
    
    
    183,8502006
    
    
    
    125,000
    
    
    
    35,867
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,600
    
    
    
    164,467
 
 1)
    
    Bonus amounts have been determined pursuant to the bonus terms outlined in our Named
Executive Officers respective employment agreements.2)
    
    Under the terms of Mr. Sasnetts employment
agreement effective for 2007, he was entitled to receive the
equivalent in value of $40,000 of our ordinary shares annually. Such shares vest quarterly in
increments of 12.5% over a two-year period beginning on the date of grant.3)
    
    There were no option awards during 2007 to Executive Management.4)
    
    There was no non-equity incentive plan compensation during 2007 to Executive Management.5)
    
    Represents (i) pension plan contributions of $3,600 for each of Frederick and Gregory
McTaggart, Jeffrey Parker and Robert Morrison, (ii) car allowance of $9,000 (2006:$8,400) for
Mr. Sasnett; and (iii) the cost to us in the amount of $3,000 for the automobile used by
Frederick McTaggart.6)
    
    Mr. Sasnett assumed the position of Chief Financial Officer effective June 3, 2006. The 2006
information presented herein represents annualized compensation amounts paid for the period
from June 2, 2006 to December 31, 2006. 92




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##### Table of Contents



Grants of Plan-Based Awards
  Employment Agreements
 Frederick W. McTaggart-President and Chief Executive Officer
 st
 st
    Jeffrey M. Parker-Chairman of the Board of Directors
 st
 93




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##### Table of Contents



st
    David W. Sasnett-Executive Vice President & Chief Financial Officer
     94




---



##### Table of Contents



Gregory S. McTaggart-Vice President of Cayman Operations
     Robert B. Morrison-Vice President of Purchasing and Information Technology
      Outstanding Equity Awards at Fiscal Year-End
  95




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##### Table of Contents



Option Exercises and Stock Vested
  Option Awards
    
    Stock AwardsNumber ofShares
    
    
    
    
    
    Number ofAcquired on
    
    Value Realized
    
    Shares Acquired
    
    Value RealizedName
    
    Exercise (#)
    
    on Exercise ($)
    
    on Vesting (#)
    
    on Vesting ($)Frederick W. McTaggart
    
    
    87,580
    
    
    
    1,198,532
    
    
    
    
    
    
    
    David W. Sasnett
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Jeffrey M. Parker
    
    
    90,194
    
    
    
    1,245,128
    
    
    
    
    
    
    
    Gregory S. McTaggart
    
    
    63,444
    
    
    
    872,672
    
    
    
    
    
    
    
    Robert B. Morrison
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Pension Benefits
  Non-Qualified Deferred Compensation
  Potential Payments Upon Termination or Change of Control
  Termination
  
    
    the death of the Named Executive Officer;
    
    the Named Executive Officer being adjudicated bankrupt;
    
    the Named Executive Officer giving six months notice of termination; and
    
    the Named Executive Officer being unable to discharge his duties due to physical or
mental illness for a period of more than 60 days.
    96




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##### Table of Contents



Medical
    
    Pension Fund
    
    TotalSalary
    
    Insurance
    
    Contribution
    
    CompensationName
    
    ($)
    
    ($)
    
    ($)
    
    ($)Frederick W. McTaggart
    
    
    2,000
    
    
    
    22,368
    
    
    
    7,200
    
    
    
    31,568David W. Sasnett (1)
    
    
    2,000
    
    
    
    16,716
    
    
    
    
    
    
    
    18,716Jeffrey M. Parker
    
    
    2,000
    
    
    
    7,386
    
    
    
    7,200
    
    
    
    16,586Gregory S. McTaggart
    
    
    2,000
    
    
    
    7,386
    
    
    
    7,200
    
    
    
    16,586Robert B. Morrison
    
    
    2,000
    
    
    
    16,744
    
    
    
    7,200
    
    
    
    25,944
 
 1)
    
    At the present time Mr. Sasnett is not participating in our health insurance plan.  Severance
  Change in Control
  
    
    Incentives to remain with us despite uncertainties while a transaction is under
consideration or pending; and
    
    Assurance of compensation for terminated employees after a Change in Control.
   Director Compensation
  97




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##### Table of Contents



Fees Earned orPaid in Cash
    
    Stock Awards
    
    TotalName
    
    ($)
    
    ($)
    
    ($)Jeffrey M. Parker
    
    
    
    
    
    
    
    
    
    
    Frederick W. McTaggart
    
    
    
    
    
    
    
    
    
    
    David W. Sasnett
    
    
    
    
    
    
    
    
    
    
    William T. Andrews
    
    
    26,800
    
    
    
    10,200
    
    
    
    37,000Brian E. Butler *
    
    
    28,500
    
    
    
    12,000
    
    
    
    40,500Steven A. Carr *
    
    
    31,600
    
    
    
    14,400
    
    
    
    46,000Carson K. Ebanks *
    
    
    16,400
    
    
    
    6,600
    
    
    
    23,000Richard L. Finlay *
    
    
    34,000
    
    
    
    18,000
    
    
    
    52,000Clarence B. Flowers, Jr. *
    
    
    28,700
    
    
    
    13,800
    
    
    
    42,500Wilmer F. Pergande *
    
    
    42,600
    
    
    
    20,400
    
    
    
    63,000Leonard J. Sokolow*
    
    
    44,350
    
    
    
    20,400
    
    
    
    64,750Raymond Whittaker *
    
    
    34,600
    
    
    
    14,400
    
    
    
    49,000
 
 *
    
    The Board of Directors has determined that each of such persons is an independent director
under the corporate governance rules of The NASDAQ Stock Market LLC (NASDAQ) Director Compensation Policy
   Compensation Committee Interlocks and Insider Participation in Compensation Decisions
  98




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##### Table of Contents



ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS
MATTERS
  
    
    each person or entity that we know beneficially owns more than 5% of our ordinary shares
or redeemable preference shares;
    
    each of our directors;
    
    our Chief Executive Officer and each person who served as our Chief Financial Officer
during the year ended December 31, 2007, and the three other most highly compensated
executive officers who were serving as executive officers on December 31, 2007; and
    
    all of our executive officers and directors as a group.
 Identity of
    
    Amount
    
    PercentageTitle of Class
    
    Person or Group
    
    Owned
    
    of ClassOrdinary Shares
    
    KBC Asset Management Ltd. (1)
    
    
    1,336,760
    
    
    
    9.21
    %Ordinary Shares
    
    AMVESCAP PLC (2)
    
    
    1,310,105
    
    
    
    9.03
    %Ordinary Shares
    
    PowerShares ExchangeTraded Fund Trust (3)
    
    
    1,238,251
    
    
    
    8.54
    %Ordinary Shares
    
    Pictet Asset Management SA (4)
    
    
    1,127,100
    
    
    
    7.77
    %Ordinary Shares
    
    Thomson, Horstmann, &Bryant, Inc. (5)
    
    
    574,600
    
    
    
    3.96
    %Ordinary Shares
    
    Jeffrey M. Parker,Director, Chairman of theBoard of Directors (6)
    
    
    456,984
    
    
    
    3.15
    %Ordinary Shares
    
    Frederick W. McTaggart,Director, President and ChiefExecutive Officer
    
    
    110,855
    
    
    
    *Ordinary Shares
    
    David W. Sasnett,Director, Executive VicePresident and Chief Financial Officer
    
    
    3,328
    
    
    
    *Ordinary Shares
    
    Gregory S. McTaggart,Vice President of CaymanOperations
    
    
    107,082
    
    
    
    *Ordinary Shares
    
    Robert B. Morrison,Vice President of Purchasingand IT (7)
    
    
    6,313
    
    
    
    *Ordinary Shares
    
    William T. Andrews,Director
    
    
    2,305
    
    
    
    *Ordinary Shares
    
    Brian E. Butler,Director
    
    
    43,744
    
    
    
    *Ordinary Shares
    
    Steven A. Carr,Director (8)
    
    
    73,094
    
    
    
    *Ordinary Shares
    
    Carson K. Ebanks,Director
    
    
    531
    
    
    
    *Ordinary Shares
    
    Richard L. Finlay,Director
    
    
    10,658
    
    
    
    *
 99




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##### Table of Contents



Identity of
    
    Amount
    
    PercentageTitle of Class
    
    Person or Group
    
    Owned
    
    of ClassOrdinary Shares
    
    Clarence B. Flowers, Jr.,Director
    
    
    14,206
    
    
    
    *Ordinary Shares
    
    Wilmer F. Pergande,Director
    
    
    14,160
    
    
    
    *Ordinary Shares
    
    Leonard J. Sokolow,Director
    
    
    975
    
    
    
    *Ordinary Shares
    
    Raymond Whittaker,Director
    
    
    12,352
    
    
    
    *Ordinary Shares
    
    Directors and ExecutiveOfficers as a Group (9)
    
    
    856,577
    
    
    
    5.9
    %Redeemable Preference Shares
    
    Margaret Julier,Officer Manager
    
    
    1,132
    
    
    
    5.37
    %Redeemable Preference Shares
    
    Ramjeet Jerrybanden,VP Overseas Operations
    
    
    1,209
    
    
    
    5.73
    %Redeemable Preference Shares
    
    Robert B. Morrison,Vice President of Purchasingand IT
    
    
    1,130
    
    
    
    5.36
    %Redeemable Preference Shares
    
    Marinus Barendsen,General Manager, C-W Bahamas
    
    
    1,300
    
    
    
    6.17
    %Redeemable Preference Shares
    
    Gregory S. McTaggart,Vice President of CaymanOperations
    
    
    978
    
    
    
    4.64
    %
 
 *
    
    Indicates less than 1%**
    
    Unless otherwise indicated, to our knowledge, the persons named in the table above have sole
voting and investment power with respect to the shares listed. In computing the number of
shares beneficially owned by a person and the percentage ownership of that person, shares
issuable under stock options exercisable within 60 days after March 9, 2007 are deemed
outstanding for that person but are not deemed outstanding for computing the percentage of
ownership of any other person.(1)
    
    On August 28, 2007, KBC Asset Management Ltd filed a Schedule 13G (Schedule 13G) with the
Securities and Exchange Commission. The Schedule 13G states that KBC Asset Management Ltd. has
sole voting power over 1,336,760 shares of common stock and sole dispositive power over
1,336,760. The address of the KBC Asset Management Ltd. is Joshua Dawson House, Dawson Street,
Dublin 2, Ireland.(2)
    
    On March 9, 2007, AMVESCAP PLC, on its own behalf and on behalf of its subsidiary,
PowerShares Capital Management LLC, filed an amended Schedule 13G (Schedule 13G) with the
Securities and Exchange Commission. The Schedule 13G states that PowerShares Capital
Management LLC has sole voting power over 1,310,105 shares of common stock and sole
dispositive power over 1,310,105 shares. The address of AMVESCAP PLC is 30 Finsbury Square,
London, EC2A 1AG, England.(3)
    
    On February 14, 2008, PowerShares Capital Management, as investment adviser to PowerShares
Exchange  Traded Fund Trust, filed an amended Schedule 13G (Schedule 13G) with the
Securities and Exchange Commission. The Schedule 13G states that PowerShares Exchange  Traded
Fund Trust has sole voting power over 1,238,251 shares of common stock and sole dispositive
power over 1,238,251 shares. The address of PowerShares Capital Management is 301 West
Roosevelt Road, Wheaton, Illinois 60187.(4)
    
    On January 11, 2008, Pictet Asset Management SA filed an amended Schedule 13G (Schedule
13G) with Securities and Exchange Commission. The Schedule 13G states that Pictet Asset
Management SA has sole voting power over 1,127,100 shares of common stock and sole dispositive
power over 1,127,100 shares. The address of Pictet Asset Management SA is 60 Route des
Acacias, Geneva 73, Switzerland, CH-12 11.(5)
    
    On February 6, 2008 Thomson Horstmann & Bryant, Inc. filed a Schedule 13G (Schedule 13G)
with the Securities and Exchange Commission. The Schedule 13G states that Thomson Horstmann &
Bryant, Inc. has sole voting power over 328,250 shares of common stock and sole dispositive
power over 572,600 shares. The address of the Thomson Horstmann & Bryant, Inc. is Park 80
West, Plaza One, Saddle Brook, NJ 07663.(6)
    
    Of the 456,984 ordinary shares owned by Mr. Parker, all are owned by the Parker Settlement
Trust (the Trust). Mr. Parker disclaims beneficial ownership of the shares owned by the
Trust. Of the shares owned by the Trust, 201,430 have been pledged.(7)
    
    Of the 6,313 ordinary shares owned by Mr. Morrison, 4,983 have shared investment power.(8)
    
    Of the 73,094 ordinary shares owned by Mr. Carr, 70,000 are in a trust, for which Mr. Carr
indirectly owns the shares as co trustee.(9)
    
    Of the 856,577 ordinary shares owned by the Directors and executive officers as a group,4,983
have shared investment power, 70,000 are indirectly owned, 456,984 have been disclaimed as
beneficially owned and 201,430 are pledged. 100




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##### Table of Contents



Equity Compensation Plan Information
  
    
    all compensation plans previously approved by our security holders; and
    
    all compensation plans not previously approved by our security holders.
 Number of securitiesNumber of
    
    
    
    
    
    
    remaining available forsecurities
    
    
    
    
    
    
    future issuance underto be issued upon
    
    
    Weighted-average
    
    
    equity compensationexercise of
    
    
    exercise price of
    
    
    plans (excludingoutstanding options,
    
    
    outstanding options,
    
    
    securitieswarrants and rights
    
    
    warrants and rights
    
    
    reflected in column (a))Plan category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation plans approved by security holders
    
    
    
    
    
    $
    
    
    
    
    *Equity compensation plans not approved by security holders
    
    
    21,465
    **
    
    $
    19.50
    
    
    
    *Total
    
    
    21,465
    
    
    $
    19.50

    
    

    
    *
 
 *
    
    Our equity compensation plans do not have any limits on the amount of shares reserved for
issuance under the plans.**
    
    All of the 21,465 shares are issuable pursuant to our Employee Share Option Plan. See Note 20
to the Notes to Consolidated Financial Statements. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 Transactions With Related Persons
   101




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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  2007
    
    
    2006Audit
    
    $
    357,963
    
    
    $
    502,885Audit-Related
    
    
    86,167
    
    
    
    63,320Tax
    
    
    6,000
    
    
    
    All Other
    
    
    
    
    
    
    Total
    
    
    450,130
    
    
    
    566,205
     102




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES
    2.
    
    Financial Statement Schedules
    103




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##### Table of Contents



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

Jeffrey M. Parker
    
    Chairman
of the Board of Directors
    
    March 17, 2008By:
    
    /s/ Frederick W. McTaggart

Frederick W. McTaggart
    
    Director,
Chief Executive Officer
and President (Principal
Executive Officer)
    
    March 17, 2008By:
    
    /s/ David W. SasnettDavid W. Sasnett
    
    Director, Executive Vice President & Chief
Financial Officer (Principal Financial and
Accounting Officer)
    
    March 17, 2008By:
    
    /s/ William T. AndrewsWilliam T. Andrews
    
    Director
    
    March 17, 2008By:
    
    /s/ Brian E. ButlerBrian E. Butler
    
    Director
    
    March 17, 2008By:
    
    /s/ Steven A. CarrSteven A. Carr
    
    Director
    
    March 17, 2008By:
    
    /s/ Carson K. EbanksCarson K. Ebanks
    
    Director
    
    March 17, 2008By:
    
    /s/ Richard L. FinlayRichard L. Finlay
    
    Director
    
    March 17, 2008By:
    
    /s/ Clarence B. Flowers, Jr.Clarence B. Flowers, Jr.
    
    Director
    
    March 17, 2008By:
    
    /s/ Wilmer F. PergandeWilmer F. Pergande
    
    Director
    
    March 17, 2008By:
    
    /s/ Leonard J. SokolowLeonard J. Sokolow
    
    Director
    
    March 17, 2008By:
    
    /s/ Raymond WhittakerRaymond Whittaker
    
    Director
    
    March 17, 2008
 104




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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
 INDEX TO EXHIBITS FILED WITH 10-K
 Number
    
    Exhibit Description2.1.1
    
    Share Sale Agreement dated October 4, 2002 among Consolidated Water Co. Ltd. And William T. Andrews
and Margaret D. Andrews (incorporated herein by reference to Exhibit 2.1 filed as a part of our Form
8-K dated February 13, 2003, Commission File No. 0-25248)2.1.2
    
    Agreement to Amend Share Sale Agreement dated November 29, 2002 between the Company and William T.
Andrews and Margaret D. Andrews (incorporated herein by reference to Exhibit 2.2 filed as a part of
our Form 8-K dated February 13, 2003, Commission File No. 0-25248)2.1.3
    
    Second Agreement to Amend Share Sale Agreement dated December 30, 2002 between the Company and
William T. Andrews and Margaret D. Andrews (incorporated herein by reference to Exhibit 2.3 filed as
a part of our Form 8-K dated February 13, 2003, Commission File No. 0-25248)2.1.4
    
    Third Agreement to Amend Share Sale Agreement dated January 31, 2003 between the Company and William
T. Andrews and Margaret D. Andrews (incorporated herein by reference to Exhibit 2.4 filed as a part
of our Form 8-K dated February 13, 2003, Commission File No. 0-25248)2.1.5
    
    Share Sale Agreement dated October 4, 2002 among Consolidated Water Co. Ltd., North American Mortgage
& Finance Corporation and Transcontinental Finance Corporation Ltd. (incorporated herein by reference
to Exhibit 2.5 filed as a part of our Form 8-K dated February 13, 2003, Commission File No. 0-25248)2.2.1
    
    Agreement to Amend Share Sale Agreement dated November 29, 2002 among the Company North-American
Mortgage & Finance Corporation and Transcontinental Finance Corporation Limited (incorporated herein
by reference to Exhibit 2.6 filed as a part of our Form 8-K dated February 13, 2003, Commission File
No. 0-25248)2.2.2
    
    Second Agreement to Amend Share Sale Agreement dated December 30, 2002 among the Company
North-American Mortgage & Finance Corporation and Transcontinental Finance Corporation Limited
(incorporated herein by reference to Exhibit 2.7 filed as a part of our Form 8-K dated February 13,
2003, Commission File No. 0-25248)2.2.3
    
    Third Agreement to Amend Share Sale Agreement dated January 31, 2003 among the Company North-American
Mortgage & Finance Corporation and Transcontinental Finance Corporation Limited (incorporated herein
by reference to Exhibit 2.8 filed as a part of our Form 8-K dated February 13, 2003, Commission File
No. 0-25248)2.3.1
    
    Agreement dated October 8, 2002 between Consolidated Water Co. Ltd. And Sage Water Holdings (BVI)
Limited (incorporated herein by reference to Exhibit 2.9 filed as a part of our Form 8-K dated
February 13, 2003, Commission File No. 0-25248)2.3.2
    
    Amending Agreement dated November 15, 2002 between the Company and Sage Water Holdings (BVI) Limited
(incorporated herein by reference to Exhibit 2.10 filed as a part of our Form 8-K dated February 13,
2003, Commission File No. 0-25248)2.3.3
    
    Second Amending Agreement dated December 18, 2002 between the Company and Sage Water Holdings (BVI)
Limited (incorporated herein by reference to Exhibit 2.11 filed as a part of our Form 8-K dated
February 13, 2003, Commission File No. 0-25248)2.3.4
    
    Third Amending Agreement dated January 28, 2003 between the Company and Sage Water Holdings (BVI)
Limited (incorporated herein by reference to Exhibit 2.12 filed as a part of our Form 8-K dated
February 13, 2003, Commission File No. 0-25248)2.4
    
    Share Sale Agreement dated December 16, 2002 between Consolidated Water Co. Ltd. And Bacardi & Co.
Ltd. (incorporated herein by reference to Exhibit 2.14 filed as a part of our Form 8-K dated February
13, 2003, Commission File No. 0-25248)




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##### Table of Contents



Number
    
    Exhibit Description2.5
    
    Registration Rights Agreement dated February 7, 2003 between Consolidated Water Co. Ltd. And North
American Mortgage & Finance Corporation (incorporated herein by reference to Exhibit 2.15 filed as a
part of our Form 8-K dated February 13, 2003, Commission File No. 0-25248)3.1
    
    Amended and Restated Memorandum of Association of Consolidated Water Co. Ltd. Dated August 17, 2005
(incorporated by reference to Exhibit 4.1 filed as part of our Form F-3 filed October 12, 2006,
Commission File No. 333-137970)3.2
    
    Amended and Restated Articles of Association of Consolidated Water Co. Ltd. Dated May 10, 2006
(incorporated by reference to Exhibit 4.2 filed as part of our Form F-3 filed October 12, 2006,
Commission File No. 333-137970)3.3
    
    Amendment to Articles of Association of Consolidated Water Co. Ltd. dated May 11, 2007 (incorporated
by reference to Exhibit 3.1 filed as part of our Form 8-K filed May 14, 2007, Commission File No.
0-25248)4.1
    
    Option Deed, dated August 6, 1997, between Cayman Water Company Limited and American Stock Transfer &
Trust Company (incorporated herein by reference to the exhibit filed on our Form 6-K, dated August 7,
1997, Commission File No. 0-25248)4.2
    
    Deed of Amendment of Option Deed dated August 8, 2005 (incorporated herein by reference to Exhibit
4.2 filed as a part of our Form 8-K dated August 11, 2005, Commission File No. 0-25248)4.3
    
    Second Deed of Amendment of Option Deed, dated September 27, 2005 (incorporated herein by reference
to the exhibit filed as a part of our Form 8-K dated October 3, 2005, Commission File No. 0-25248)4.4
    
    Third Deed of Amendment to Option Deed, dated May 30, 2007 (incorporated herein by reference to
Exhibit 4.3 filed as part of our Form 8-K filed June 1, 2007, Commission File No. 0-25248)10.1.1
    
    License Agreement dated July 11, 1990 between Cayman Water Company Limited and the Government of the
Cayman Islands (incorporated herein by reference to the exhibit filed as a part of our Form 20-F
dated December 7, 1994, Commission File No. 0-25248)10.1.2
    
    First Amendment to License Agreement dated September 18, 1990 between Cayman Water Company Limited
and the Government of the Cayman Islands. (incorporated herein by reference to the exhibit filed as a
part of our Form 20-F dated December 7, 1994, Commission File No. 0-25248)10.1.3
    
    Second Amendment to License Agreement dated February 14, 1991 between Cayman Water Company Limited
and the Government of the Cayman Islands. (incorporated herein by reference to the exhibit filed as a
part of our Form 20-F dated December 7, 1994, Commission File No. 0-2524810.1.4
    
    Third Amendment to a License to Produce Potable Water dated August 15, 2001 between Consolidated
Water Co. Ltd. by the Government of the Cayman Islands (incorporated herein by reference to Exhibit
10.4 filed as a part of our Form 10-K for the fiscal year ended December 31, 2001, Commission File
No. 0-25248)10.1.5
    
    Fourth Amendment to a License to Produce Potable Water dated February 1, 2003 between Consolidated
Water Co. Ltd. by the Government of the Cayman Islands (incorporated herein by reference to Exhibit
10.5 filed as a part of our Form 10-K for the fiscal year ended December 31, 2002, Commission File
No. 0-25248)10.2
    
    Agreement dated December 19, 2002 between Consolidated Water Co. Ltd. (formerly Cayman Water Company
Limited) and Safe Haven Ltd. (incorporated herein by reference to Exhibit 10.6 filed as a part of our
Form 10-K for the fiscal year ended December 31, 2002, Commission File No. 0-25248)10.3
    
    Water Supply Agreement dated December 18, 2000 between Consolidated Water Co. Ltd. and South Bimini
International Ltd. (incorporated herein by reference to Exhibit 10.2 filed as a part of our Form 10-K
for the fiscal year ended December 31, 2000, Commission File No. 0-25248)10.4*
    
    Employment contract dated September 30, 2003 between Peter Ribbins and Consolidated Water Co. Ltd.
(incorporated herein by reference to Exhibit 10.12 filed as a part of our Form 10-K for the fiscal
year ended December 31, 2003, Commission File No. 0-25248)




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##### Table of Contents



Number
    
    Exhibit Description10.5.1*
    
    Employment contract dated December 5, 2003 between Jeffrey Parker and Consolidated Water Co. Ltd.
(incorporated herein by reference to Exhibit 10.16 filed as a part of our Form 10-K for the fiscal
year ended December 31, 2003, Commission File No. 0-25248)10.5.2*
    
    Amendment of Engagement Agreement dated September 14, 2007 between Jeffrey Parker and Consolidated
Water Co. Ltd. (incorporated herein by reference to Exhibit 10.1 to our Form 8-K filed September 19,
2007, Commission File No. 0-25248)10.6.1*
    
    Employment contract dated December 5, 2003 between Frederick McTaggart and Consolidated Water Co.
Ltd. (incorporated herein by reference to Exhibit 10.18 filed as a part of our Form 10-K for the
fiscal year ended December 31, 2003, Commission File No. 0-25248)10.6.2*
    
    Amendment of Engagement Agreement dated September 14, 2007 between Frederick W. McTaggart and
Consolidated Water Co. Ltd. (incorporated herein by reference to Exhibit 10.2 to our Form 8-K filed
September 19, 2007, commission File No. 0-25248)10.7.1*
    
    Engagement Agreement dated May 22, 2006 between David Sasnett and Consolidated Water Co. Ltd.
(incorporated herein by reference to Exhibit 10.1 filed as part of our Form 8-K filed May 26, 2006,
Commission File No. 0-25248)10.7.2*
    
    Amended and restated Engagement Agreement dated March 29, 2007 between David Sasnett and Consolidated
Water Co. Ltd. (incorporated herein by reference to Exhibit 10.1 filed as part of our Form 8-K filed
April 14, 2007, Commission File No. 0-25248)10.7.3*
    
    Engagement Agreement dated January 15, 2008 between David Sasnett and Consolidated Water Co. Ltd.
(incorporated herein by reference to Exhibit 10.1 filed as part of our Form 8-K filed January 22,
2008, Commission File No. 0-25248)10.8*
    
    Employment contract dated January 18, 2005 between Gregory McTaggart and Consolidated Water Co. Ltd.
(incorporated herein by reference to Exhibit 10.55 filed as a part of our Form 8-K dated January 14,
2005, Commission File No. 0-25248)10.9*
    
    Employment contract dated January 14, 2005 between Gerard Pereira and Consolidated Water Co. Ltd.
(incorporated herein by reference to Exhibit 10.57 filed as a part of our Form 8-K dated January 14,
2005, Commission File No. 0-25248)10.10*
    
    Employment contract dated January 17, 2005 between Robert Morrison and Consolidated Water Co. Ltd.
(incorporated herein by reference to Exhibit 10.56 filed as a part of our Form 8-K dated January 14,
2005, Commission File No. 0-25248)10.11
    
    Consultancy Agreement dated January 1, 2006 between Mr. Wilmer F. Pergande and Consolidated Water Co.
Ltd. (incorporated herein by reference to Exhibit 10.64 filed as a part of our Form 10-K for the
fiscal year ended December 31, 2005, Commission File No. 0-25248)10.12
    
    Consulting Agreement dated November 17, 1998 between Cayman Water Company Limited and R.J. Falkner &
Company, Inc. (incorporated herein by reference to Exhibit 10.30 filed as part of our Registration
Statement on Form F-2 dated May 17, 2000, Commission File No. 333-35356)10.13
    
    Specimen Service Agreement between Cayman Water Company Limited and consumers (incorporated herein by
reference to the exhibit filed as part of our Registration Statement on Form F-1 dated March 26,
1996)10.14*
    
    Summary Share Grant Plan for Directors (incorporated herein by reference to Exhibit 10.24 filed as
part of our Registration Statement on Form F-2 dated May 17, 2000, Commission File No. 333-35356)10.15*
    
    Employee Share Option Plan (incorporated herein by reference to Exhibit 10.26 filed as a part of our
Form 10-K for the fiscal year ended December 31, 2001, Commission File No. 0-25248)




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##### Table of Contents



Number
    
    Exhibit Description10.16
    
    Purchase and Sale Agreement, dated December 10, 2001, among Consolidated Water Co. Ltd., Cayman Hotel
and Golf Inc., Ellesmere Britannia Limited and Hyatt Britannia Corporation Ltd. (incorporated herein
by reference to Exhibit 10.30 filed as part of our Form 10-K for the fiscal year ended December 31,
2001, Commission File No. 0-25248)10.17
    
    Agreement dated February 1, 2002 between Consolidated Water Co. Ltd. and Cayman Hotel and Golf Inc.
(incorporated herein by reference to Exhibit 10.52 filed as a part of our Form 10-K for the fiscal
year ended December 31, 2001, Commission File No. 0-25248)10.18
    
    Agreement dated July 24, 1995 between Cayman Water Company Limited and Galleon Beach Resort Limited
(incorporated herein by reference to Exhibit 10.33 filed as part of our Registration Statement on
Form F-2 dated May 17, 2000, Commission File No. 333-35356)10.19
    
    Agreement dated February 9, 1994 between Cayman Water Company Limited and Widar Ltd. (incorporated
herein by reference to Exhibit 10.33 filed as part of our Registration Statement on Form F-2 dated
May 17, 2000, Commission File No. 333-35356)10.20
    
    Lease of Part dated October 13, 2000 between Consolidated Water Co. Ltd. and Colmar Ltd.
(incorporated herein by reference to Exhibit 10.49 filed as a part of our Form 10-K for the year
ended December 31, 2000, Commission File No. 0-25248)10.21
    
    Lease of Part dated March 1, 2003 between Consolidated Water Co. Ltd. and Colmar Ltd. (incorporated
herein by reference to Exhibit 10.32 filed as a part of our Form 10-K for the fiscal year ended
December 31, 2003, Commission File No. 0-25248)10.22
    
    Lease of Part dated July 1, 2003 between Consolidated Water Co. Ltd. and Colmar Ltd. (incorporated
herein by reference to Exhibit 10.33 filed as a part of our Form 10-K for the fiscal year ended
December 31, 2003, Commission File No. 0-25248)10.23
    
    Lease dated December 10, 2001 between Cayman Hotel and Golf Inc. and Consolidated Water Co. Ltd.
(incorporated herein by reference to Exhibit 10.52 filed as a part of our Form 10-K for the fiscal
year ended December 31, 2001, Commission File No. 0-25248)10.24.1
    
    Lease dated April 27, 1993 signed July 18, 2001 between Government of Belize and Belize Water Limited
(incorporated herein by reference to Exhibit 10.53 filed as a part of our Form 10-K for the fiscal
year ended December 31, 2001, Commission File No. 0-25248)10.24.2
    
    Amended lease dated April 27, 1993 signed January 2, 2004 between Government of Belize and Belize
Water Limited (incorporated herein by reference to Exhibit 10.36 filed as a part of our Form 10-K for
the fiscal year ended December 31, 2003, Commission File No. 0-25248)10.25
    
    Loan Agreement dated February 7, 2003 between Consolidated Water Co. Ltd. and Scotiabank (Cayman
Islands) Ltd. (incorporated herein by reference to Exhibit 10.1 filed as a part of our Form 8-K dated
February 13, 2003, Commission File No. 0-25248)10.26.1
    
    Distributorship Agreement dated September 24, 2002 between DWEER Technology Ltd. and DesalCo Limited
(incorporated herein by reference to Exhibit 10.58 filed as a part of our Form 10-K for the fiscal
year ended December 31, 2002, Commission File No. 0-25248)10.26.2
    
    Amendment to the Distributorship Agreement dated September 24, 2002 between DWEER Technologies Ltd.
and DesalCo Limited (incorporated herein by reference to Exhibit 10.43 filed as a part of our Form
10-K for the fiscal year ended December 31, 2003, Commission File No. 0-25248)10.27.1
    
    Distributorship Agreement dated February 26, 2004 between Calder AG and DesalCo Limited (incorporated
herein by reference to Exhibit 10.44 filed as a part of our Form 10-K for the fiscal year ended
December 31, 2003, Commission File No. 0-25248)10.27.2
    
    First Amendment to the Distributorship Agreement dated August 30, 2005 among Calder AG, DesalCo
Limited and DWEER Technologies Ltd.




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##### Table of Contents



Number
    
    Exhibit Description10.27.3
    
    Amended and Restated Distributorship Agreement dated August 30, 2005 between Calder AG and DesalCo
Limited10.28
    
    Loan Agreement dated May 25, 2005 between Ocean Conversion (BVI), Ltd. and Consolidated Water Co.
Ltd. (incorporated herein by reference to Exhibit 99.1 filed as a part of our Form 8-K dated June 1,
2005, Commission File No. 0-25248)10.29
    
    Trust Deed dated August 4, 2006 between Consolidated Water Co. Ltd. and Dextra Bank & Trust Co. Ltd.
(incorporated herein by reference to Exhibit 10.1 filed as a part of our Form 8-K filed August 9,
2006, File No. 0-25248)10.30
    
    Subscription Agreement dated August 4, 2006 between Consolidated Water Co. Ltd. and Scotiatrust and
Merchant Bank Trinidad & Tobago Limited (incorporated herein by reference to Exhibit 10.2 filed as a
part of our Form 8-K filed August 9, 2006, File No. 0-25248)10.31
    
    Deed of Second Debenture dated August 4, 2006 between Consolidated Water Co. Ltd. and Dextra Bank &
Trust Co. Ltd. (incorporated herein by reference to Exhibit 10.5 filed as a part of our Form 8-K
filed August 9, 2006, File No. 0-25248)10.32
    
    Deed of Second Collateral Debenture dated August 4, 2006 between Cayman Water Company Limited and
Dextra Bank & Trust Co. Ltd. (incorporated herein by reference to Exhibit 10.6 filed as a part of our
Form 8-K filed August 9, 2006, File No. 0-25248)10.33
    
    Equitable Charge of Shares dated August 4, 2006 between Consolidated Water Co. Ltd. and Dextra Bank &
Trust Co. Ltd. (incorporated herein by reference to Exhibit 10.7 filed as a part of our Form 8-K
filed August 9, 2006, File No. 0-25248)10.34
    
    Intercreditor Deed dated August 4, 2006 among Scotiabank & Trust (Cayman) Ltd., Dextra Bank & Trust
Co. Ltd., Consolidated Water Co. Ltd. and Cayman Water Company Limited (incorporated herein by
reference to Exhibit 10.8 filed as a part of our Form 8-K filed August 9, 2006, File No. 0-25248)10.35
    
    Cayman Islands Collateral Charge, West Bay Beach South Property, Block 12D, Parcel 79REM1/2
(incorporated herein by reference to Exhibit 10.9 filed as a part of our Form 8-K filed August 9,
2006, File No. 0-25248)10.36
    
    Cayman Islands Collateral Charge, West Bay Beach North, Block 11D, Parcel 40 (incorporated herein by
reference to Exhibit 10.10 filed as a part of our Form 8-K filed August 9, 2006, File No. 0-25248)10.37
    
    Cayman Islands Collateral Charge, West Bay Beach North, Block 11D, Parcel 8 (incorporated herein by
reference to Exhibit 10.11 filed as a part of our Form 8-K filed August 9, 2006, File No. 0-25248)10.38
    
    Cayman Islands Collateral Charge, West Bay North East, Block 9A, Parcel 8 (incorporated herein by
reference to Exhibit 10.12 filed as a part of our Form 8-K filed August 9, 2006, File No. 0-25248)10.39
    
    Cayman Islands Collateral Charge, West Bay North East, Block 9A, Parcel 469 (incorporated herein by
reference to Exhibit 10.13 filed as a part of our Form 8-K filed August 9, 2006, File No. 0-25248)10.40
    
    Loan Agreement dated as of October 4, 2006, by and between Royal Bank of Canada and Consolidated
Water (Bahamas) Ltd. (incorporated herein by reference to Exhibit 10.1 filed as a part of our Form
8-K filed October 6, 2006, File No. 0-25248)21.1
    
    Subsidiaries of the Registrant23.1
    
    Consent of Rachlin LLP  Consolidated Water Co. Ltd.23.2
    
    Consent of Rachlin LLP  Ocean Conversion (BVI) Ltd.31.1
    
    Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002




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##### Table of Contents



Number
    
    Exhibit Description31.2
    
    Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, Section 906 of the
Sarbanes-Oxley Act of 200232.2
    
    Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, Section 906 of the
Sarbanes-Oxley Act of 2002
 
 *
    
    Indicates a management contract or compensatory plan.