Watlington Waterworks Issues Director's Report For The Interim Period Ending 30 June 2003

The Company's performance through the first six months of this year was on target to meet corporate objectives this year. Demand for our products and services remained consistently high through the first half of the year. With the amortization of Goodwill completed at the end of 2002, and a decrease in depreciation charges for desalination equipment, there has been a significant increase in net earnings for the half year.

The forecast for the remainder of this year and the first Quarter of the next year has been scaled back significantly. Although the summer drought raised the demand for the Company's products and services to the limit of the Company's ability to produce, Hurricane Fabian has completely changed the outlook. Sales are expected to drop significantly in the aftermath of the hurricane as major hotel properties have been forced to close for repairs and tourism in general is expected to suffer as a consequence. It is thought this will cause a substantial short term dip in cash flow over the next six months.

A longer term view is being taken to balance the short term negative effects in the aftermath of Fabian with the Company's long term capital investment schedule to strengthen infrastructure for growth. This may lead the Company in the short term to adopt a more conservative fiscal policy

Additionally, the following summary information is extracted from the Company's Consolidated Financial Statement which are unaudited: Total revenue was $3,768,060 in 2003 up from $3,465,707 in 2002; Income attributable to shareholders was $719,092 in 2003 up from $455,164; Net earnings per share were $0.63 in 2003 versus $0.40 in 2002.