BIW Biw Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

BIW Limited (BIW or the Company) is the parent company of (i) Birmingham Utilities, Inc. and its wholly-owned subsidiary Eastern Connecticut Regional Water Company, Inc. (Eastern Division), (collectively BUI or Birmingham Utilities), a regulated public water service company that provides water service to customers in various cities and towns in Connecticut and (ii) Birmingham H2O Services, Inc. (BHS or H2O Services), which provides non-regulated water-related services to other water utilities, municipalities, contractors and individuals throughout Connecticut.

Birmingham Utilities is subject to the jurisdiction of the Connecticut Department of Public Utility Control (DPUC) as to accounting, financing, ratemaking, disposal of property, the issuance of long-term securities and other matters affecting its operations. The Connecticut Department of Public Health (the Health Department or DPH) has regulatory powers over BUI under state law with respect to water quality, sources of supply, and the use of watershed land. The Connecticut Department of Environmental Protection (DEP) is authorized to regulate BUI's operations with regard to water pollution abatement, diversion of water from streams and rivers, safety of dams and the location, construction and alteration of certain water facilities. BUI's activities are also subject to regulation with regard to environmental and other operational matters by federal, state and local authorities, including, without limitation, zoning authorities.

In addition, Birmingham Utilities is subject to regulation of its water quality under the Federal Safe Drinking Water Act (SDWA). The United States Environmental Protection Agency has granted to the Health Department the primary enforcement responsibility in Connecticut under the SDWA. The Health Department has established regulations containing maximum limits on contaminants, which have or may have an adverse effect on health.

NOTE 1 - QUARTERLY FINANCIAL DATA

The accompanying consolidated financial statements of BIW Limited have been prepared in accordance with accounting principles generally accepted in the United States of America, without audit, except for the Balance Sheet for the year ended December 31, 2006, which has been audited. The interim financial information conforms to the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and, as applied in the case of rate-regulated public utilities, complies with the Uniform System of Accounts and ratemaking practices prescribed by the DPUC. In management's opinion, these consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods presented. Certain information and footnote disclosures required by

accounting principles generally accepted in the United States of America have been omitted, pursuant to such rules and regulations; although the Company believes that the disclosures are adequate to make the information presented not misleading.

In the first quarter of 2006, the Company adopted Statement of Financial Accounting Standards No. 123R, "Share-Based Payment" (SFAS 123R) using the modified prospective method. Under the modified prospective method, compensation cost is recognized for all share-based payments granted after the adoption of SFAS 123R and for all awards granted to employees prior to the adoption date of SFAS 123R that were unvested on the adoption date. Accordingly, no restatements were made to prior periods. Prior to the adoption of SFAS 123R, the Company applied Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" (SFAS 123) to account for its stock option plans. As permitted by SFAS 123, the Company had chosen to apply Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" in accounting for its employee stock compensation plans. Accordingly, no compensation expense was recognized for its employee stock option issuances, as stock options were issued with an exercise price at least equal to the closing price at the date of grant.

In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an Amendment of FASB Statements No. 87, 88, 106, and 132(R)" (SFAS 158). SFAS 158 requires companies to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its balance sheet and to recognize changes in the funded status in the year in which the changes occur through comprehensive income. SFAS 158 also requires the funded status of a plan to be measured as of the balance sheet date. The Company adopted the provisions of SFAS 158 effective December 31, 2006. The adoption of SFAS 158 did not have a material impact on the Company's financial statements.

For further information, refer to the financial statements and accompanying footnotes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2006.

Birmingham Utilities' business of selling water is to a certain extent seasonal because water consumption normally increases during the warmer summer months. Another factor affecting the comparability of various accounting periods includes the timing of rate increases. In addition, H2O Services' business activities slow in the winter months. Accordingly, annualization of the results of operations for the three and nine months ended September 30, 2007 and 2006 would not necessarily accurately forecast the annual results of each year.

NOTE 2 - PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of BIW Limited and its wholly owned subsidiaries Birmingham Utilities, Inc. and Birmingham H2O Services, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

NOTE 3 - PLAN OF MERGER

On June 29, 2007, BIW Limited entered into an Agreement and Plan of Merger with South Central Connecticut Regional Water Authority (RWA) and RWA 21, Ltd. The Agreement and Plan of Merger provides that, upon the terms and subject to the conditions set forth in the Agreement and Plan of Merger, RWA 21, Ltd. will merge with and into BIW Limited, and BIW Limited will become a wholly-owned subsidiary of RWA. At the effective time and as a result of the merger, each share of BIW Limited common stock that is outstanding at the effective time of the merger will be converted into the right to receive $23.75 in cash, resulting in aggregate consideration of approximately $40 million. On June 29, 2007, in connection with the Agreement and Plan of Merger, BIW, Eastern Connecticut Regional Water Company, Inc. (ECRWC), an indirect, wholly-owned subsidiary of BIW Limited, and The Connecticut Water Company (CWC) entered into an Asset Purchase Agreement pursuant to which CWC agreed to purchase certain assets and to assume certain liabilities of ECRWC including assets that RWA is not lawfully permitted to acquire in connection with the merger. The purchase price for these assets is $3,490,000 to be paid in cash. The closing of the sale of assets pursuant to the Asset Purchase Agreement is conditioned upon the simultaneous consummation of the merger pursuant to the Agreement and Plan of Merger. On July 13, 2007, the Company filed a joint application with RWA and CWC to the DPUC requesting approval of the transaction. The transaction was approved by the Company's shareholders on September 26, 2007, and by the Representative Policy Board of RWA on September 20, 2007. The DPUC issued a Draft Decision on October 23, 2007 approving the transaction. A final decision is expected to be issued on November 16, 2007. The merger transaction is scheduled to close on or about January 15, 2008.

NOTE 4- WATER SERVICE RATE INCREASE

On November 27, 2006, the DPUC granted Birmingham Utilities a 16.2 percent water service rate increase designed to provide a $1,172,148 annual increase in revenues and a 10.2 percent ratemaking cost of common equity. The rate order allowed BUI to combine its Ansonia and Eastern divisions for ratemaking purposes.

In October 2005, the Ansonia division of Birmingham Utilities filed an application with the DPUC for a 4.4%, $258,655 water service rate increase to account specifically for increases in purchased water costs and property taxes. This limited rate filing is allowed under Section 16-32c of the Connecticut General Statutes. The DPUC granted BUI's request in its entirety in January 2006.

 Nine Months Ended Three Months Ended
 9/30/07 9/30/06 9/30/07 9/30/06
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Weighted average shares outstanding
 for earnings per share, basic 1,675,971 1,666,163 1,678,709 1,672,786

Incremental shares from assumed
 conversion of stock options 8,833 11,579 14,302 7,663
 --------- --------- --------- ---------
Weighted average shares outstanding
 for earnings per share, diluted 1,684,804 1,677,742 1,693,011 1,680,449
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 Pension Benefits Postretirement Benefits
 for the nine months for the nine months
 ended September 30, ended September 30,
 2007 2006 2007 2006
 -------- -------- -------- --------
Components of net periodic benefit cost:
 Service cost $ 55,263 $ 51,996 $ 21,909 $ 21,837
 Interest cost 90,801 89,211 35,853 33,369
 Expected return on plan assets (78,369) (68,550) (39,441) (34,542)
Amortization of unrecognized
 transition obligation 4,404 4,404 19,035 19,035
Amortization of unrecognized
 prior service cost 3,879 3,879 -- --
Recognized net actuarial loss (gain) -- 2,859 -- (147)
 -------- -------- -------- --------
Net periodic benefit cost $ 75,978 $ 83,799 $ 37,356 $ 39,552
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NOTE 7 - CONTINGENCIES

In the ordinary course of business, the Company is subject to claims and legal proceedings. In the opinion of management, these matters will not have a material adverse impact on the operations of the Company.