PENNICHUCK CORP
424B1, 1998-11-19
WATER SUPPLY
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      This filing is made pursuant to Rule 424(b)(1) under the Securities Act 
of 1933 in connection with Registration Statement No. 333-65527.

Prospectus

                                   [LOGO]


                           PENNICHUCK CORPORATION

                       420,000 Shares of Common Stock
                              $19.50 per share
                                _____________

Pennichuck Corporation                   We operate regulated water utility 
4 Water Street                           companies in central and southern 
Nashua, New Hampshire 03060              New Hampshire, a non-regulated water 
                                         services company and a real estate 
                                         development company.



The Offering                             We are a public company. Our common 
                                         stock is quoted on the Nasdaq National
                                         Market System under the symbol
                 Per Share     Total     "PNNW." On November 16, 1998, the last
                 ---------     -----     reported sale price was $21.50.
Public Price      $19.50     $8,190,000
Underwriter
 Discounts        $  .975    $  409,500
Proceeds to
 Company          $18.525    $7,780,500

We have granted the Underwriters a
30 day option on the same terms
and conditions set forth above
to purchase up to 63,000 
additional shares of common stock
to cover over-allotments, if any.


<PAGE>  1
                            ____________________

An investment in the common stock involves certain risks.  See "Risk 
Factors" beginning on page ____.

Neither the Securities and Exchange Commission nor any state securities 
commission has approved or disapproved of these securities, or determined if 
this Prospectus is truthful or complete.  Any representation to the contrary 
is a criminal offense.

                            ____________________


These shares are offered subject to prior sale, when, as and if delivered to
and accepted by the Underwriters, subject to approval of counsel, the right
to reject any order in whole or in part and certain other conditions.  It is
expected that the delivery of certificates representing the shares of
common stock will be made at the offices of Edward D. Jones & Co., L.P. in
St. Louis, Missouri, on or about November 23, 1998.


                         Edward D. Jones & Co., L.P.


                 This Prospectus is dated November 17, 1998



                              TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                Page
                                                                ----
<S>                                                             <C>
Summary

Risk Factors

Use of Proceeds and Capital Expenditures


Capitalization


Selected Financial Information

The Company

Management's Discussion and Analysis
 of Financial Condition and Results of Operations

Management of the Company

Security Ownership of Management

Description of Company Capital Stock


<PAGE>  2
Market Prices and Dividend Information

Underwriting

Legal Matters

Experts

Where You Can Find More Information

Incorporation of Certain Documents by Reference

Index to Consolidated Financial Statements                      F-1

</TABLE>

      IN CONNECTION WITH AN UNDERWRITTEN OFFERING, THE SEC RULES PERMIT THE 
UNDERWRITERS TO ENGAGE IN TRANSACTIONS THAT STABILIZE THE PRICE OF OUR 
COMMON STOCK.  THESE TRANSACTIONS MAY INCLUDE PURCHASES FOR THE PURPOSE OF 
FIXING OR MAINTAINING THE PRICE OF THE COMMON STOCK AT A LEVEL THAT IS 
HIGHER THAN THE MARKET WOULD DICTATE IN THE ABSENCE OF SUCH TRANSACTIONS.

      IN CONNECTION WITH THIS OFFERING THE UNDERWRITERS AND SELLING GROUP 
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET 
MAKING TRANSACTIONS IN THE COMPANY'S COMMON STOCK ON NASDAQ IN ACCORDANCE 
WITH RULE 103 UNDER THE SECURITIES ACT OF 1933.  SEE "UNDERWRITING".


                         [Map of Service Territory
                      served by our water operations]

                                   SUMMARY

      This summary highlights selected information from this document and 
may not contain all the information that is important to you.  We have 
adjusted all information in this Prospectus to reflect the 3-for-2 stock 
split of the common stock that occurred on September 1, 1998.  Unless 
otherwise indicated, we have assumed in presenting information about 
outstanding shares of common stock, including per share information, that
the Underwriters' over-allotment option will not be exercised.  To 
understand the offering fully and for a more complete description of the 
legal terms of the offering, you should read carefully this entire document, 
including the "Risk Factors" section, and the documents we have referred you 
to.  See "Where You Can Find More Information."  (Page ___).

                                 The Company

      Our primary business is gathering and distributing water as regulated 
public utilities in the central and southern portions of the state of New 
Hampshire.  We also provide non-regulated water-related services.  We also 
own, develop and manage real estate.  Our regulated water utility 
subsidiaries furnish water services to over 26,000 customers.  When we refer 
to the Company in this document, we generally mean Pennichuck Corporation 
and its subsidiaries:  Pennichuck Water Works, Inc. ("Pennichuck"), 
Pennichuck East Utility, Inc. ("Pennichuck East"), Pittsfield Aqueduct 
Company, Inc. ("Pittsfield"), Pennichuck Water Service Corporation ("Service 
Corporation") and The Southwood Corporation ("Southwood"). Our principal 
office is located at 4 Water Street, Nashua, New Hampshire 03060 and our
telephone number is (603) 882-5191.
<PAGE>  3

                                Our Strategy

      We plan to continue our strategy to increase our customer base through 
expansion within our existing service areas and we will continue to consider 
acquisitions of other water utility systems in new areas when opportunities 
arise.  We anticipate continuing our non-regulated activities in the areas 
of operating and maintaining water systems and real estate development and 
we plan to pursue new activities in these areas when and if attractive 
opportunities present themselves.  We are not currently involved in any 
negotiations to acquire other utility systems.

                             Recent Developments

      We increased our customer base by 20% in 1998 by acquiring Pennichuck 
East  and Pittsfield.  Each of these companies is regulated by the New 
Hampshire Public Utilities Commission ("NHPUC") as a public water utility.  
The Service Corporation also began this year to provide operations and 
maintenance contract services to the Town of Hudson, a large municipal water 
system located in southern New Hampshire.  Southwood has recently formed a 
joint venture to develop a residential community in southern New Hampshire.

                                The Offering

<TABLE>
<S>                                     <C>
Common stock offered                    420,000 shares(1)


Common stock to be outstanding
after offering                          1,641,523(2)

Nasdaq National Market System symbol    PNNW

Latest 52-week range of sales
 prices (through November 16, 1998)     $12.00 to $26.625

Annualized dividend rate                $.88 per share(3)

Use of proceeds                       We will use the funds received in the 
                                      offering to retire short-term bank 
                                      borrowings and to pay-down our revolving 
                                      credit facility.  We incurred this debt to 
                                      partially pay for our recent acquisition of 
                                      utility properties, and for utility plant 
                                      construction.  Remaining proceeds will be 
                                      used for future capital expenditures, 
                                      working capital and general corporate 
                                      purposes.


Risk factors                          You should read the "Risk Factors" section, 
                                      beginning on page ____, as well as other 
                                      cautionary statements throughout this 
                                      Prospectus, to ensure you understand the 
                                      risks associated with an investment in our 
                                      common stock.


<PAGE>  4
<FN>
___________________

<F1>  Assumes the Underwriters' over-allotment option is not exercised.
<F2>  Excludes shares issued after September 30, 1998 pursuant to the 
      Company's Dividend Reinvestment and Common Stock Purchase Plan (the 
      "Reinvestment Plan") and the Company's Employee Stock Option Plan (the 
      "Option Plan"). Pursuant to the Company's Reinvestment Plan, the 
      Company registered 200,000 shares of its common stock; as of September 
      30, 1998, there were 124,313 shares still available for issue. On 
      September 30, 1998, employees of the Company held options to purchase 
      a total of 46,688 shares of common stock under the Option Plan.
<F3>  Based on the quarterly dividend of $.22 per share. See "Market Prices 
      and Dividend Information."

</FN>
</TABLE>


Summary Financial and Operating Information
(In thousands, except per share amounts) (1)

<TABLE>
<CAPTION>

                              Nine Months Ended
                                September 30,                 Twelve Months Ended
                             ------------------      ---------------------------------
                              1998        1997         1997         1996         1995
                              ----        ----         ----         ----         ----

<S>                          <C>         <C>         <C>          <C>          <C>
Income Statement Data:

Operating Revenues:
Utility Revenues             $11,136     $8,652      $11,415      $10,908      $11,003
Real Estate and Other          2,157        416          640        1,509          697

Operating Income             $ 4,645     $2,964      $ 3,717      $ 3,708      $ 3,577

Net Income                   $ 1,795     $1,037      $ 1,207      $ 1,289      $ 1,148

Per Share Data:
Basic Earnings Per Share     $  1.46     $  .87      $  1.01      $  1.09      $  1.00
Dividends Per Share          $   .57     $  .51      $   .68      $   .65      $   .57
Book Value Per Share         $ 12.99     $12.08      $ 12.07      $ 11.78      $ 11.33

Operating Data:

Total Water Pumpage 
 (millions of gallons)         3,694      3,589        4,576        4,490        4,669

Total Customers               26,443     20,902       21,037       20,805       20,622






<PAGE>  5
<FN>
___________________
<F1>  Prior year amounts have been re-stated for the Pittsfield  
      merger which has been accounted for under the pooling-of-interests
      method.
</FN>
</TABLE>

                                RISK FACTORS

      You should carefully consider the following factors, any one of which 
could have a material adverse effect on the Company's business, financial 
condition and results of operations.

Water Business

      Our main sources of revenues and earnings are our water utility 
operations.  The water supply and distribution industry is subject to 
regulations and uncertainties which affect the Company and our stock price 
in varying degrees.


      Rate Regulation.  Pennichuck, Pennichuck East and Pittsfield 
are regulated by the NHPUC with respect to the rates we charge our 
customers for water and the amount of our capital and debt financing.  The 
profitability of our water operations is largely dependent on the timeliness 
and adequacy of rate relief allowed by the NHPUC.


      Regulatory Lag.  The NHPUC generally provides our water utilities with 
the opportunity to earn a rate of return on our capital invested in property 
used to serve our customers.  However, a delay, known as "regulatory lag" 
normally occurs between the time capital is invested and the effective date 
of increased water rates which reflect that investment.

      Water Quality Concerns; Changes in Regulatory Standards.  Water 
utility companies are always subject to certain water quality risks related 
to environmental contamination.  Our water systems have water treatment and 
alternate water source and storage facilities available as short-term 
sources of supply in the event of contamination of one of our water sources.  
While our treated water currently meets or exceeds all standards set by 
federal and state authorities, it is possible that new or stricter standards 
could be imposed that will raise our operating costs significantly.  
Although these costs would likely be recovered in the form of higher rates, 
there can be no assurance that the NHPUC would approve a rate increase to 
recover such costs.

      Impact of Weather and Seasonal Demands.  The demand for our water and 
our revenues is impacted by weather and is seasonal in nature.  Normally, 
our most profitable quarters are the second and third calendar year quarters 
due to increased water consumption during the late spring and summer months.  
Demand is normally lower during cool, wet springs and summers than it is 
during warm, hot springs and summers.

      Dependence on Certain Industrial Customers.  Approximately 27% of our 
operating revenues are derived from commercial and industrial customers.  
Pennichuck's largest water customer is responsible for about 13% of its 


<PAGE>  6
daily average demand.  In the short term, our profitability would be 
adversely impacted were that customer to significantly reduce its water 
requirements in the future or if our other commercial and industrial 
customers materially reduce their use of our water.  In this case, we would 
seek the approval of the NHPUC to increase the rates of our remaining 
customers to recover any lost revenues from the loss of such major 
industrial customers.  Any increase in our rates and improvement in our 
profitability from a loss of a major customer could take at least 12 months 
to realize, an example of regulatory lag.  In addition, there can be no 
assurance that the NHPUC would approve such a rate increase request.


Real Estate Business

      Development Risks.  Southwood, our real estate subsidiary, owns 
approximately 201 acres of real estate which is planned for development.  
The demand and prices for Southwood's real estate are dependent upon 
interest rates and construction costs as well as general economic 
conditions.


      Carrying Costs.  Real estate assets are subject to ongoing maintenance 
costs and property taxes.  Reductions in demand for our properties may cause 
us to continue to incur operating costs without any offsetting income.


Dividends

      Limitations on Our Ability to Pay Dividends.  Our ability to pay 
dividends is materially dependent on the earnings of our operating 
subsidiaries, principally our water operations.  We have paid
dividends each year since at least 1915.  The amount of dividends paid per
common share has increased each year since 1993.  The amount of future
dividends is at the discretion of our Board of Directors and principally
depends upon the Company's earnings, financial condition, the capital
requirements of our operating subsidiaries and other factors, including
the adequacy of rate relief granted by the NHPUC to the Company's water
utility subsidiaries.  Certain bond and note agreements involving Pennichuck,
the Company's principal subsidiary, among other things, impose restrictions
on the payment of declarations of dividends by Pennichuck to the Company.
Under Pennichuck's most restrictive covenant, approximately $3.7 million of
Pennichuck's retained earnings was unrestricted for payment or declaration
of common dividends to the Company at December 31, 1997.  There is no 
assurance that the Company will continue to pay dividends on shares of
common stock, and if paid, the timing and amount of such dividends.

Operations

      Year 2000.  We continue to review our computer systems and those of 
our vendors to determine our level of readiness for the next century.  We 
have identified our critical applications and implemented a plan to replace 
or upgrade necessary hardware or software, including our financial 
accounting, billing, customer service and meter management services.  We are 
currently identifying those vendors who provide date dependent information 
and customers who are material to our operations to ensure they have taken 
steps to comply with this issue.  We intend to develop a disaster recovery 
plan detailing alternatives available in the event a vendor or user of 


<PAGE>  7
Company information or a significant customer is not compliant with Year 
2000 issues.  There can be no assurance of the adequacy of the manner in 
which third parties have addressed this issue.  Although we do not 
anticipate material problems in complying with Year 2000 issues, we cannot 
provide assurance that we will be in compliance by January 1, 2000.


USE OF PROCEEDS AND CAPITAL EXPENDITURES


      Our net proceeds from the sale of the 420,000 shares of common stock 
is estimated to be $7,590,000 ($8,748,000 if the Underwriters' option to 
purchase additional shares of common stock is exercised in full) after 
deducting the expenses of the offering.  We plan to use $5.5 million of 
these proceeds to reduce our short-term note payable and to pay-down our 
revolving loan facility, which at September 30, 1998 were $3.0 million and 
$2.5 million, respectively.  We will use the remaining proceeds for future 
capital expenditures, working capital and general corporate purposes.


      We used the short-term note payable for our purchase of certain water 
utility assets for Pennichuck East.  The note is subject to an interest rate 
swap agreement, bears a fixed interest rate of 6.20%, and is due in April 
2000.

      We use our revolving credit facility to provide funds for general 
operating purposes and to fund our capital expenditures on an interim basis.  
The capital expenditures were primarily for ongoing replacement and 
upgrading of existing facilities, system extensions and acquisition and 
development of a new water utility system.  Our capital expenditures were 
approximately $6.0 million, $3.2 million and $2.7 million in fiscal years 
1997, 1996 and 1995, respectively.  We estimate capital expenditures for 
fiscal 1998 will be approximately $3.6 million.  We estimate our capital 
expenditures for fiscal 1999 at approximately $4.5 million and these funds 
will be primarily used for replacing our aging infrastructure, new main 
extensions and improvement of our treatment plant facilities.

      Capital expenditures are financed through internally generated funds 
and short-term borrowings.  Such short-term borrowings have traditionally 
been replaced from time to time with long-term debt financings, the amount 
and types of which depend upon our capital needs and market conditions.


                               CAPITALIZATION


      The following table sets forth the capitalization of the Company as of 
September 30, 1998 and as adjusted to give effect to the sale of the common 
stock and the application of net proceeds as described under "USE OF 
PROCEEDS."  The following should be read in conjunction with the Financial 
Statements and the Notes thereto of the Company which are included in this 
Prospectus.  See "INDEX TO CONSOLIDATED FINANCIAL STATEMENTS."







<PAGE>  8
<TABLE>
<CAPTION>

                                                       As of September 30, 1998
                                    ---------------------------------------------------------
                                           Actual                 As Adjusted
                                    ----------------------      -------------------------------
                                    Amount         Percent      Amount                Percent
                                    ------         -------      ------                -------



<S>                                 <C>             <C>       <C>                     <C>
Long-term Debt, excluding
 current portion:
  Fleet, Revolving Loan Facility    $ 2,500,000               $         -
  Fleet, 6.20% Note, due 4-1-00       3,000,000                         -
  Other Long-Term Debt               27,950,995                27,950,995
                                    -----------               -----------
      Total Long-Term Debt,
       excluding current portion     33,450,995     67.8%     $27,950,995(1)           54.4%
Common Equity:
  Common Stock                        1,225,957                 1,645,957(2)
  Additional Paid in Capital          5,407,020                12,577,020(2)
  Retained Earnings                   9,293,424                 9,293,424
  Treasury Stock                        (59,240)                  (59,240)
                                    -----------               -----------
    Total Common Equity              15,867,161     32.2%      23,457,161              45.6%

Total Capitalization                $49,318,156    100.0%     $51,408,156             100.0%
                                    ===========    =====      ===========             =====
<FN>
___________________
<F1>  Reflects repayment of Fleet debt with net proceeds from the sale of the 
      common stock.
<F2>  Reflects the sale of 420,000 common shares at an offering price 
      of $19.50 per share, less estimated offering costs of $600,000.
</FN>
</TABLE>



                                 THE COMPANY

Overview

      We are a holding company based in Nashua, New Hampshire.  Our 
principal operating subsidiaries are engaged primarily in the collection, 
storage, treatment, distribution and sale of potable water throughout 
southern and central New Hampshire.  These subsidiary corporations, 
Pennichuck, Pennichuck East and Pittsfield, are each engaged in business as 
a regulated public utility, subject to the jurisdiction of the NHPUC.  We 
collectively serve approximately 24,300 residential and 2,000 commercial and 
industrial customers.  We were formed in 1983 following the reorganization 
of  Pennichuck Water Works, which was first established in 1852, into a 
dedicated water utility.  At the same time several tracts of land, formerly 
held for watershed protection purposes, were transferred to Southwood.  


<PAGE>  9
Southwood is involved in the development of commercial and residential real 
estate.  We also conduct non-regulated, water-related management services 
and contract operations through another subsidiary, the Service Corporation.


Forward Looking Statements


      This Prospectus contains and each document incorporated by reference 
herein may contain "forward-looking" statements, as defined in the Private 
Securities Litigation Reform Act of 1995, that are based on current 
expectations, estimates and projections.  Statements that are not historical 
facts, including statements about our beliefs and expectations are forward-
looking statements.  These statements are subject to potential risks and 
uncertainties and, therefore, actual results may differ materially.  We 
undertake no obligation to update publicly any forward-looking statements 
whether as a result of new information, future events or otherwise.

Our Water Business

      Pennichuck is franchised by the NHPUC to gather and distribute 
water in the City of Nashua, New Hampshire and in portions of the towns 
of Amherst, Bedford, Derry, Epping, Hollis, Merrimack, Milford and 
Plaistow, New Hampshire.  Pennichuck has transmission mains which 
directly interconnect its core system in Nashua with the surrounding 
towns of Amherst, Hudson, Merrimack and Milford.  Our core system, which 
services 19,972 customers, accounts for 97% of Pennichuck's revenues and 
96% of its combined plant in service. Its franchises in the remaining 
towns consist of stand-alone satellite water systems serving 1,065 
customers. Pennichuck has no competition in its core franchise area. 
Currently, approximately 25% of its water revenues are derived from 
commercial and industrial customers and approximately 54% from 
residential customers, with the balance being derived from fire 
protection and other billings to municipalities, principally the City of 
Nashua.

      Pennichuck East was organized in 1998 to acquire certain water 
utility assets from the Town of Hudson, New Hampshire, following Hudson's 
acquisition of those assets from an investor-owned water utility which 
previously served the Town of Hudson and surrounding communities.  
Pennichuck East is franchised to gather and distribute water in the New 
Hampshire towns of Litchfield, Pelham, Windham, Londonderry, Derry, 
Raymond and Hooksett, which are areas adjacent to the service franchise 
served by Pennichuck.  The water utility assets owned by Pennichuck East 
consist principally of water transmission and distribution mains, 
hydrants, wells, pump stations and pumping equipment, water services and 
meters, easements and certain tracts of land.  Pennichuck East serves 
approximately 3,600 customers and annual revenues are estimated to be 
$2.3 million.

      Pittsfield serves approximately 650 customers in and around 
Pittsfield, New Hampshire with anticipated annual revenues of 
approximately $405,000.

Regulation

      Our water utilities are regulated by the NHPUC with respect to 
their rates, securities issues and service.  New Hampshire law provides 

<PAGE>  10
that utilities are entitled to charge rates which permit them to earn a 
reasonable return on the cost of the property employed in serving its 
customers, less accrued depreciation and contributed capital ("Rate 
Base").  The cost of capital permanently employed by a utility in its 
utility business marks the minimum rate of return which a utility is 
lawfully entitled to earn on its Rate Base. Pennichuck's currently 
approved water rates are based on a March 1998 NHPUC order resulting from 
its latest approved rate case. Pennichuck is authorized an overall rate 
of return of 8.34% on an approved rate base of approximately $34.61 
million.  Pennichuck East is authorized an overall rate of return of 
8.37% on an approved rate base of approximately $7.5 million.  Pittsfield 
is authorized an overall rate of return of approximately ten percent on 
an approved rate base of approximately $1.6 million.

      Our utilities are subject to the water quality regulations issued 
by the United States Environmental Protection Agency ("EPA"). The EPA is 
required to periodically set new maximum contaminant levels for certain 
chemicals as required by the federal Safe Drinking Water Act ("SDWA"). 
The quality of our treated water currently meets or exceeds all standards 
set by the EPA and we do not anticipate that any significant capital 
expenditures for regulatory compliance will be required in the next three 
years given the present water quality standards set by the SDWA. The 
reauthorization  of the SDWA by Congress in 1996 may lead to stricter 
monitoring standards which may require additional operating costs for the 
Company. It is expected that any additional monitoring and testing costs 
arising from EPA mandates should eventually be recouped through water 
rates.

Other Operations

      The Company formed the Service Corporation to conduct its non-
regulated, water-related activities. Its activities include providing 
contract operations and maintenance, water testing and billing services 
to municipalities.  In 1998, the Service Corporation entered into an 
agreement with the Town of Hudson, New Hampshire to provide operations 
and maintenance contract services to the Town with respect to the water 
utility assets it acquired from an investor-owned water utility.


      Southwood, the Company's real estate subsidiary, was organized for 
the purpose of owning, developing, selling and managing approximately 
1,340 acres of undeveloped land in Nashua and Merrimack, New Hampshire 
formerly owned by Pennichuck Water Works for watershed protection purposes.


      Since 1988, Southwood has been involved in the planning and 
development of two major office parks, Southwood Business Park and 
Southwood Corporate Park, located in Nashua, New Hampshire.  At the end 
of 1996, Southwood sold its last remaining lot in the Southwood Business 
Park to the State of New Hampshire.  Southwood still owns approximately 
47 acres of land in the Southwood Corporate Park which is zoned for 
commercial use.  In July 1995, Southwood entered into an option agreement 
with a regional real estate developer ("the Developer") for the remaining 
acreage in Southwood Corporate Park. Under that agreement, the Developer 
pays to Southwood an option fee each year equal to the annual carrying 
costs associated with that land. The option agreement is for a minimum 
term of five years.


<PAGE>  11
      In September 1997, Southwood and the Developer formed Westwood Park 
LLC ("Westwood"), to develop a 404 acre tract of land in northwest Nashua 
presently zoned for park-industrial use.  Southwood conveyed the land to 
Westwood in exchange for a 60% interest in Westwood.  In April 1996, 
Southwood entered into a joint venture known as Bowers Pond LLC 
("Bowers") for the development of a 46 unit residential development.  
Under the terms of the joint venture agreement, Southwood conveyed the 
related land parcel to Bowers in exchange for a non-interest bearing note 
secured by a second mortgage on the real estate conveyed.  Southwood holds 
a 50% interest in this joint venture.  As of September 30, 1998, 41 homes had
been constructed and sold; 4 of the remaining lots are subject to purchase 
contracts.  Southwood has recently formed a joint venture to develop and 
build another joint venture, Heron Cove, an 87-unit, single-family community 
located in Merrimack, New Hampshire.

Our Properties

Office Buildings

      The Company owns a three story, 11,616 square foot building located 
in downtown Nashua, New Hampshire which it and its subsidiaries occupy.  
We also own a separate building in Nashua which serves as an operations 
center and storage facility for our construction and maintenance 
activities.

Water Supply Facilities

      Pennichuck's principal properties are located in Nashua, New 
Hampshire, with the exception of several source-of-supply land tracts 
which are located in the towns of Amherst, Merrimack and Hollis, New 
Hampshire. In addition, Pennichuck owns four impounding dams which are 
situated on the Nashua and Merrimack border.

      The location and general character of Pennichuck's principal plant 
and other materially important physical properties are as follows:

      1.  Holt Pond, Bowers Pond, Harris Pond and Supply Pond and related 
impounding dams comprise the chief source of water supply in Nashua and 
Merrimack, New Hampshire.

      2.  An Infilco Degremont treatment plant using physical chemical 
removal of suspended solids and sand filtration with a rated capacity of 
35 million gallons per day, located in Nashua, New Hampshire.

      3.  A water intake plant and pumping facility located on the 
Merrimack River in Merrimack.  This 20 million gallon per day supplemental 
water supply source provides an additional source of water 
during dry summer periods and will provide a long-term supply for 
Pennichuck's service area.

      4.  Approximately 672 acres of land located in Nashua and Merrimack 
which are owned and held for watershed and reservoir purposes.

      5.  Ten water storage reservoirs having a total storage capacity of 
23.1 million gallons, six of which are located in Nashua, two in Amherst, 
one in Bedford and one in Hollis, New Hampshire.



<PAGE>  12
      The source of supply for Pennichuck East is a well system owned by 
the Town of Hudson in Litchfield, New Hampshire.  Pennichuck East has 
entered into a long-term water supply agreement to obtain water from this 
well system.

      Pittsfield owns Berry Pond located in the vicinity of its water 
treatment facility in Pittsfield, New Hampshire, which serves as its 
source of supply.

Water Distribution Facilities


      The distribution facilities of our regulated water companies 
consist of the following:

<TABLE>
<CAPTION>

                              Pennichuck    Pennichuck East    Pittsfield
                              ----------    ---------------    ----------

<S>                             <C>              <C>               <C>
Transmission & Distribution
 Mains (in miles)                  315             103              13
Services                        21,037           4,108             615
Meters                          21,145           3,511             614
Hydrants                         2,124             333              70
</TABLE>

Land Held for Future Development

      Following Pennichuck Water Works' reorganization in 1984 into a 
holding company structure, approximately 1,088 acres were transferred to 
Southwood. Since 1984, Southwood has sold or transferred approximately 
779 acres of land to third parties or to participating joint ventures.  
The Company has transferred 499 acres of watershed protection land to 
Pennichuck  since 1984 and currently holds 425 acres of land which have 
not been transferred to Pennichuck or Southwood due to access limitations 
which restrict the ability to subdivide and transfer that land. Of that 
acreage, approximately 242 acres are available for buffer and alternate 
use.


      Based on vegetation, topographical, wetland and hydrological 
studies, Southwood has subdivided its remaining 309 acres into buffer 
(non-developable) and alternate use (developable) designations, resulting 
in an approximate breakout of 108 and 201 acres, respectively. Of the 
approximately 201 acres of alternate use land, 102 acres are located 
primarily in the northwestern section of Nashua, New Hampshire and 99 acres
are located in the western and southerly portions of Merrimack, New Hampshire.
The following table summarizes of the current approved zoning for Southwood's
alternate use land:


<TABLE>
<CAPTION>
                            Nashua, NH    Merrimack, NH    Total
                            ----------    -------------    -----

<PAGE>  13

<S>                            <C>             <C>          <C>
Residential                     55             --            55
Industrial                      47             99           146
                               ---             --           ---
Total Alternate Use Acreage    102             99           201
                               ===             ==           ===
</TABLE>


      Presently, 47 acres of Southwood's alternative-use land in Nashua are
available for immediate development.  The remainder of Southwood's
landholdings in both Nashua and Merrimack are classified under "Current Use"
status, which means that we pay property taxes based on the property's actual
use and not its highest or best use.

Our Employees

      We employ 65 full-time and four part-time employees.  Of these, 
there are 34 management and clerical employees who are non-union.  The 
remaining employees are members of the United Steelworkers Union.  Our 
union contract was re-negotiated in February 1997, and has been extended 
through February 2002. In the opinion of management, employee relations 
are satisfactory.


                      SELECTED FINANCIAL INFORMATION

      The following table sets forth selected consolidated historical data
regarding the Company's operating results and financial position for and 
at the periods indicated.  This financial data should be read in conjunction 
with the Company's consolidated financial statements and the notes thereto
appearing elsewhere in this Prospectus.


<TABLE>
<CAPTION>
                                    Nine Months Ended
                                      September 30,                           Twelve Months Ended December 31, 
                                -------------------------   -------------------------------------------------------------------
                                    1998          1997          1997          1996          1995          1994          1993
                                    ----          ----          ----          ----          ----          ----          ----

<S>                             <C>           <C>           <C>           <C>           <C>           <C>           <C>
Income Statement Data:
Operating revenues              $13,293,149   $ 9,068,254   $12,055,517   $12,417,216   $11,700,480   $10,429,960   $ 9,903,631
Net income                        1,795,306     1,037,235     1,207,023     1,289,018     1,147,603       997,919       849,505

Net income aplicable to
 common stock                     1,795,306     1,037,235     1,207,023     1,289,018     1,147,603       965,842       771,130

Earnings per share:
  Basic                         $      1.46   $      0.87   $      1.01   $      1.09   $      1.00   $      0.84   $      0.67
  Diluted                       $      1.44   $      0.86   $      1.00   $      1.09   $      0.99   $      0.84   $      0.67

Weighted average shares:
  Basic                           1,229,604     1,198,207     1,200,287     1,178,883     1,148,610     1,146,240     1,143,663
  Diluted                         1,242,801     1,212,273     1,207,173     1,183,455     1,152,110     1,151,572     1,145,939

<PAGE>  14
Dividends per common share      $      0.57   $      0.51   $      0.68   $      0.65   $      0.57   $      0.48   $      0.41

Balance Sheet Data:
Total Assets                    $66,991,338   $56,829,404   $57,240,449   $51,357,135   $49,136,429   $47,718,718   $46,609,472
Utility plant, net               56,676,070    47,920,328    48,290,696    43,721,028    41,779,771    40,314,725    39,021,087
Total common equity              15,867,161    14,554,722    14,589,345    14,048,337    13,058,213    12,614,050    12,044,809
Redeemable preferred stock                -             -             -             -             -             -       681,000
Long-term debt including
 current portion                 33,550,995    25,860,163    26,677,618    21,945,603    21,028,011    17,031,530    17,262,699

<FN>
___________________
<F1>  Prior year amounts have been restated for Pittsfield which has
      been accounted for under the pooling-of-interests method.
</FN>
</TABLE>

         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                          AND RESULTS OF OPERATIONS

Introduction

      In Management's Discussion and Analysis we explain the general 
financial condition and the results of operations for the Company and its 
operating subsidiaries including:

      *    What factors affect our business,

      *    What our earnings and costs were in the first nine months of 1998 
           and in 1997 and 1996,

      *    Why those earnings and costs were different from the year before,
      *    Where our earnings come from,
      *    How all of this affects our overall financial condition,

      *    What our expenditures for capital projects were in 1996 and 1997 
           and what we expect them to be in 1998, and

      *    Where cash will come from to pay for future capital expenditures.

      As you read Management's Discussion and Analysis, please refer to our 
Consolidated Financial Statements contained in this Prospectus.


Results of Operations

      In this section, we discuss our interim 1998 and our 1997,1996 and 
1995 results of operations and the factors affecting them.  We begin with 
a general overview of our earnings per share (EPS) generated by our 
businesses and a discussion of an accounting change we recently made that 
affects our historical financial statements.

                  Total Earnings per Share of Common Stock






<PAGE>  15
<TABLE>
<CAPTION>

                            Nine Months Ended     Twelve Months Ended
                               September 30           December 31
                            1998        1997     1997     1996     1995
                            -----------------    ----------------------

<S>                         <C>          <C>     <C>      <C>      <C>
Water Utility Operations    $1.22        $.75    $ .83    $ .91    $1.19
Real Estate and
 other Operations             .24         .12      .18      .18     (.19)
                            -----------------    -----------------------
Consolidated EPS            $1.46        $.87    $1.01    $1.09    $1.00
                            =================    =======================

</TABLE>




Restatement for Merger with Pittsfield
- --------------------------------------

      On January 30, 1998, we merged with Pittsfield by exchanging 49,428 of 
our shares for substantially all of the outstanding common stock of 
Pittsfield.  We used the pooling-of-interests method to account for this 
merger. This methodology requires us to add Pittsfield's historical 
financial statements with our historical financial statements for all 
periods which are shown prior to January 30, 1998. As you read Management's 
Discussion and Analysis of Financial Condition and Results of Operations and 
the Consolidated Financial Statements, you should understand that all of the 
previous financial reports that we have issued have been restated to include 
the effect of Pittsfield for those years.

      You will notice that our consolidated net income and earnings per 
share actually decreased from $1.09 in 1996 to $1.01 in 1997, which is not 
indicative of the expected trend in future earnings of our Company. That 
decrease is primarily because of a one-time charge of approximately $.07 per 
share against our 1997 earnings per share. That charge related to certain 
merger and other one-time costs of Pittsfield which were written off in the 
fourth quarter of 1997. The inclusion of Pittsfield's financial data did not 
have a material impact on any other aspects of the consolidated financial 
statements of our Company.


Nine Months Ended September 30, 1998 Compared to Nine Months Ended 
 September 30, 1997
- -------------------------------------------------------------------

      In this section, we discuss the factors that affected our earnings for 
the first nine months of 1998 and 1997. Our consolidated revenues are 
generally seasonal due to the overall significance of the water sales of our 
water utility business as a percent of consolidated revenues. Water revenues 
are typically at their lowest point during the first and fourth quarters of 
the calendar year. However, water revenues in the second and third quarters 
tend to be greater because of increased water consumption by our residential 


<PAGE>  16
customers during the late spring and summer months. In addition, our 
consolidated revenues are significantly affected by sales of major real 
estate parcels which may occur from time to time (see discussion below).


      For the nine month period that ended on September 30, 1998, our 
consolidated net income was nearly $1.8 million, or $1.46 per common share 
compared to $1.04 million or $.87 per common share for the same period in 
1997. The consolidated revenues from all of our business activities thus far 
in 1998 were $13.3 million, representing a $4.23 million, or 46.6%, increase 
over last year. As we discuss below, that increase in consolidated operating 
revenues is principally attributable to:


      *    our water utility operations which now include the operating 
           activities of Pennichuck and our two new subsidiaries, Pennichuck 
           East and Pittsfield; and

      *    a major land sale which occurred in the third quarter of 1998.

Water Utility Operations


      The operating revenues from our water utility operations totaled $11.1 
million for the first nine months of 1998. Compared to the same period in 
1997, this represents a $2.5 million increase in water revenues. There are 
several reasons for that increase:

      *    First, our largest water utility, Pennichuck, was granted a 
           permanent rate increase of approximately 16.8% by the NHPUC 
           effective on April 1, 1998. Beginning on that date, we were 
           authorized to increase our rates on water billings to our 
           customers.  Through the first nine months of 1998, our water 
           utility revenues include approximately $950,000 relating to
           that rate increase. 

      *    Second, Pittsfield's revenues more than doubled from $160,000 in 
           1997 to $352,000 thus far in 1998. The 120% increase in 
           Pittsfield's revenues resulted from a 101% rate increase which 
           was approved by the NHPUC in December 1997. We were granted that 
           increase in rates principally to allow us to recover the costs 
           associated with a $900,000 water treatment facility completed in 
           October 1997. 

      *    The third major factor affecting our increased water revenues 
           was the addition of our newly created water subsidiary, 
           Pennichuck East. As we discuss in more detail in "Note H - 
           Subsequent Event -- Acquisition" in the Notes to Consolidated 
           Financial Statements, Pennichuck East was formed in April 1998 
           and serves approximately 3,600 customers in southern New 
           Hampshire. Pennichuck East contributed approximately $1.24 million 
           in water revenues during its first six months of operations in 1998.

The actual expenses of operating our water utility businesses include such 
broad categories as: 




<PAGE>  17
      *    water treatment and purification,
      *    pumping and other distribution system functions,
      *    general and administrative functions,
      *    depreciation on existing operating assets, and
      *    taxes other than income taxes.

      On a combined basis, those utility operating expenses increased by 
$1.2 million to $7.2 million for the nine months ended September 30, 1998. 
The principal reasons for that increase were:

      *    $691,000 relating to the addition of Pennichuck East during the 
           second and third quarters of 1998,
      *    $210,000 of additional depreciation expense resulting from a 
           higher composite depreciation rate which we began using on April 1,
           1998 (from 2.15% to 2.44%) and nearly $6 million of new plant
           assets, and
      *    $156,000 of additional water  treatment and miscellaneous 
           administrative expenses incurred in the first nine months of 1998 
           over the same period in 1997.

Contract Operations

      In April 1998, the Service Corporation signed a five year contract 
with the neighboring Town of Hudson, New Hampshire ("Hudson"). We will 
provide certain operations and maintenance functions for Hudson in exchange 
for a fixed monthly fee as agreed upon by us and Hudson. So far in 1998, 
revenues from this contract and other non-regulated operating activities 
have totaled $295,000. For the same period in 1997, revenues from our 
Service Corporation were approximately $57,000 consisting of $43,000 from 
contract operations and $14,000 of sundry leases and rents. 

Real Estate Operations 

      For the nine months ended September 30, 1998 and 1997, we recognized 
revenues from our real estate business activities of $1.82 million and 
$312,000, respectively. Real estate revenues in the third quarter of 1998 
include $1.3 million from the sale of land by Westwood Park LLC, of which 
Southwood is a 60% owner. In addition, Southwood has recognized $442,000 in 
revenues earned through its Bowers Pond LLC joint venture and $66,000 of 
option fee income earned under a development option agreement with a regional 
developer.


      The operating expenses associated with our real estate activities have 
increased from $107,000 in 1997 to $1.23 million in 1998. Of that increase, 
approximately $1.1 million relates to the allocable land and infrastructure 
costs for the major land parcel that we sold in the third quarter of 1998. 
The remaining expenses are primarily for property taxes on Southwood's real 
estate holdings which for the first nine months of 1998 were $57,000 compared 
to $75,000 in same period of 1997.


Results of Operations - 1997 Compared to 1996
- ---------------------------------------------

      For the year ended December 31, 1997, our restated consolidated net 
income was $1.2 million, or $1.01 per share, compared to $1.3 million, or 


<PAGE>  18
$1.09 per share, in 1996. That decline was a result of certain one-time 
merger costs recorded by Pittsfield and the write-off of certain Pittsfield 
deferred charges during the fourth quarter of 1997. We also had two major 
real estate sales in 1996 which provided us with $1.0 million of real estate 
revenues and we did not have any such major land sales in 1997.

Water Utility Operations

      Our water utility businesses provided us with operating revenues of 
$11.4 million for 1997 which is a 4.7% increase over 1996.  This increase 
resulted primarily from:

      *    a 5.1% temporary rate increase granted to Pennichuck,
      *    a 3.6% increase in water consumption, and
      *    a 1.1% increase in new customers.

The increase in consumption reflects a drier and warmer than normal third 
quarter which we experienced in 1997 compared to 1996 and a 3.6% increase in 
industrial and commercial consumption within Pennichuck's core system.

      In May 1997, we filed a petition with the NHPUC requesting authority 
to increase Pennichuck's water rates by approximately 18%. We believed that 
this was necessary because Pennichuck's actual overall rate of return had 
declined below its then authorized rate of return of 8.81%. Our rate of 
return declined primarily because:

      *    $4.5 million in additional investment in operating assets has 
           been made since our last rate increase in 1994, and
      *    We experienced increased operating costs totaling nearly 
           $300,000 for property taxes and water treatment expenses 
           incurred in 1996 and 1997.

      In August 1997, the NHPUC granted Pennichuck's request for a temporary 
rate increase resulting in approximately $175,000 of additional revenues 
which we realized in 1997.  In February 1998, the NHPUC approved a permanent 
rate increase of 16.8% which we expect will provide approximately $1.7 
million of additional revenues on an annualized basis.

      In December 1997, the NHPUC granted a 101% increase in Pittsfield's 
water rates to recover the operating and capital costs associated with the 
construction of its new water treatment facility which became operational in 
October 1997.  On an annualized basis, that rate increase represents 
approximately $200,000 of additional revenues which are expected to be 
billed and collected during calendar year 1998.

      The operating expenses of our water utility businesses increased 5.5% 
from $7.7 million in 1996 to $8.1 million in 1997.    The increased 
operating expenses were principally due to:

      *    A $211,000 increase in additional treatment and production costs 
           incurred at Pennichuck's main water treatment facility in 
           Nashua, New Hampshire,

      *    A tripling in unit rates charged by the City of Nashua for the 
           treatment plant by-products and sludge generated by the plant and 
           ultimately introduced into the City's sewer treatment system 
           ($154,000 in 1997 compared to $89,000 in 1996),


<PAGE>  19
      *    Electrical and other power costs associated with Pennichuck's 
           treatment plant and outlying pumping stations increased by 
           nearly $39,000 over 1996, reflecting a 5.25% increase in per 
           kilowatt charges incurred during 1997, and
      *    Depreciation and property taxes related to $5.3 million of new 
           investment increased by $75,000 and $32,000 for calendar years 
           1997 and 1996, respectively.

      In addition, during the fourth quarter of 1997, the NHPUC disallowed 
approximately $88,000 of deferred expenses and miscellaneous studies which 
Pittsfield had incurred. Since those costs will not be recoverable through 
future rates, they were written off in December 1997.

Contract Operations

      The Service Corporation was a 50% partner in a joint venture with a 
regional water engineering firm from July 1, 1995 to June 30, 1998.  The 
purpose of the joint venture was to provide water-related operations and 
maintenance contract services to municipalities, especially those which may 
have financial difficulty complying with the required provisions of the 
SDWA. Contract operation and public-private partnerships provide viable 
alternatives for such municipalities. During 1997, the joint venture 
provided operations and maintenance contract services to the Town of 
Cohasset, Massachusetts which included the operation of  its water treatment 
plant and distribution system. Although the revenues from this partnership 
were not material, the joint venture was not successful in renewing this 
three year contract, which expired on June 30, 1998.  For the twelve months 
ended December 31, 1997, the Service Corporation had revenues of 
approximately $66,000 resulting in pretax income of $19,000.

Real Estate Operations

      Southwood generated revenues of $514,000 for the year ended December 
31, 1997 which was a significant decrease of $806,533 from 1996. Results in 
1996 included sales of Southwood's last two parcels in Southwood Business 
Park totaling $1.0 million.  Southwood did not have any major land sales in 
1997.

      Southwood is a 50% partner in Bowers Pond LLP -- a joint venture for 
the construction and sale of 46 homes. We recorded approximately $408,000 of 
revenues in 1997 for this project compared to $208,000 in 1996. At the end 
of 1997, there were 22 lots still unsold in that development, of which we 
expect to sell 17 in 1998.

      Other revenues from our real estate-related activities during 1997 
included approximately $92,000 of option income earned under a September 
1995 development agreement with a regional developer with respect to 47 
acres in the Southwood Corporate Park.

      The operating expenses of Southwood totaled $198,000 for 1997, a 
$784,000 decrease from 1996.  In 1996, we recorded $730,000 of 
infrastructure costs attributable to the 1996 Southwood Business Park land 
sales discussed above. The major components of Southwood's operating 
expenses are property taxes and property management costs. In 1997, those 
expenses were approximately $80,000 and $23,000, respectively. Property 
taxes for 1997 increased $24,000 over 1996 principally due to the receipt of 
certain tax abatements from the City of Nashua during 1996. There were no 
significant adjustments to Southwood's property assessments during 1997.

<PAGE>  20
Results of Operations - 1996 Compared to 1995
- ---------------------------------------------

The following table compares our consolidated net income for 1996 to 1995:

<TABLE>
<CAPTION>

                                    1996            1995
                                    ----            ----

          <S>                   <C>             <C>
          Net income            $1.3 million    $1.1 million

          Earnings per share    $1.09           $1.00
</TABLE>

      For 1996, our consolidated revenues increased to $12.4 million, which 
was a 6.1% increase over the previous year.  Water revenues decreased by 
$96,000 in 1996 compared to 1995, while revenues from our real estate and 
other operations increased by $812,000 for reasons discussed in further 
detail below.

Water Utility Operations


      Water revenues from our utility businesses in 1996 decreased to $10.9 
million, representing almost a 1% decline from 1995 primarily because of:

      *    a 3.1% decline in water consumption within Pennichuck's core 
           system,
      *    damper and cooler conditions experienced during 1996,
      *    a 3% decline in industrial consumption reflecting a weak economy 
           in the manufacturing sector during that year.

Total rainfall in our franchise territory in 1996 exceeded rainfall in all 
but three years since 1900.  Consistent with recent years, Pennichuck 
realized a modest 1.2% growth rate in new customers within its core and 
community water system franchises.

      For the twelve months ended December 31, 1996, Pennichuck's operating 
expenses were  $7.7 million, a 6.1% increase over 1995. Our costs for 
treatment and production totaled $1.7 million for 1996,  which was a $57,000 
increase from 1995. That was caused primarily by an $83,000 increase in 
chemical and sludge removal costs. Those increased production costs, 
however, were partially offset by $67,000 in reduced power costs as a result 
of a 3.8% decrease in 1996 pumpage. Our distribution and maintenance 
expenses in 1996 increased by $103,000 over 1995 reflecting an aggressive 
preventive maintenance program for services and gate valves which we 
undertook in 1996. Other significant changes in operating costs included a 
$77,000 increase in depreciation expense reflecting our increased investment 
in operating assets and a $104,000 increase in property taxes resulting from 
reassessments of Pennichuck 's property during 1995 and additional taxable 
property placed in service during 1996. 

Real Estate and Other Operations 



<PAGE>  21
      For the twelve months ended December 31, 1996, revenues from our real 
estate and other activities increased to $1.5 million compared to $697,000 
in 1995. That increase is attributable to several  significant real estate 
transactions which occurred during 1996 as discussed further below.

      Our 1996 revenues included two major land sales in Southwood Business 
Park for a total of $1.0 million, net of commissions.  Also included in real 
estate revenues for 1996 was approximately $208,000 from the sale of 
residential homes by the Bowers Pond LLC joint venture. There were no such 
residential partnership activities during 1995.

      Southwood's operating expenses were approximately $982,000 in 1996 and 
included $730,000 of allocable infrastructure costs associated with the two 
land sales discussed previously. Also included in real estate operating 
expenses are property taxes totaling $56,000 and $187,000 in 1996 and 1995, 
respectively. Gross real estate taxes levied on Southwood's landholdings in 
1996 totaled approximately $106,000 but were offset by the receipt of 
approximately $50,000 from the City of Nashua relating to the settlement of 
the prior year's property tax abatements. In addition, we obtained a $1.8 
million reduction in the assessed valuation of Southwood's property located 
in Southwood Corporate Park from the City of Nashua.

      In May 1996, NYNEX Corporation ("NYNEX"), which had been a partner 
with Southwood in 555 Aeyers Mills Associates, sold its one half interest in 
that partnership to us for $204,000. That partnership was originally formed 
to develop, construct and lease an office building on a 7 acre site owned by 
the partnership. The entire ownership interest in that parcel is now shared 
equally between Southwood and the Company and the total investment in that 
parcel is $319,000. That parcel is also included within the 47 acres under 
the development option agreement discussed earlier and is classified under 
"Deferred land costs" in the accompanying Consolidated Balance Sheets.

Liquidity and Financial Condition


      In the following paragraphs, we discuss the financial condition of the 
Company and its wholly-owned subsidiaries. This discussion focuses primarily 
on the changes in our consolidated balance sheet accounts from December 31, 
1997 to September 30, 1998 and on the adequacy of capital needed for our 
business activities.

      The primary source of cash which we need for normal operating 
activities, capital projects and dividend payments to our shareowners is the 
operating cash flow which we generate from day to day activities. However, 
during those periods where operating cash flow is not sufficient, we borrow 
funds under a revolving loan facility (the "Loan Agreement") with our bank, 
Fleet Bank-NH ("Fleet"). The Loan Agreement allows us to borrow up to $4.5 
million at interest rates tied to Fleet's cost of funds or LIBOR, whichever 
is lower. At September 30, 1998, we had borrowed $2.5 million under the Loan 
Agreement and the average interest rate of those borrowings was 6.93%. The 
maturity date of all amounts borrowed under the Loan Agreement, or to be 
borrowed in the next 14 months, is June 30, 2000. As a result, we have 
classified our outstanding bank borrowings at September 30, 1998 under the 
caption of  "Long Term Debt" in the Consolidated Balance Sheets.


      During the first quarter of 1998, we refinanced a $1.1 million 
mortgage note issued by Pittsfield to a local bank using the Loan Agreement.

<PAGE>  22
On April 24, 1998, we refinanced $1.5 million of outstanding indebtedness 
under the Loan Agreement into a seven year note. The note is payable interest 
only for seven years at a fixed rate of 6.50% and is secured by, among other 
things, the guarantees of Southwood and the Service Corporation.


      As we discuss in Note H - Subsequent Event -- Acquisition in the Notes 
to the Consolidated Financial Statements, we purchased Pennichuck East's 
assets with the proceeds of two bank loans totaling $7.5 million. Those 
loans of $4.5 million and $3.0 million are for terms of 7 years and 2 years, 
respectively, and are classified as "Long term Debt" in the Consolidated 
Balance Sheet at September 30, 1998. In connection with these two notes, we 
entered into certain interest rate swap agreements which fix the interest 
rates at 6.50% and 6.20%, respectively, for the term on these notes.


      Our capital expenditures totaled $6.0 million and $3.2 million in 1997 
and 1996, respectively.  For 1998, we expect that our total expenditures for 
capital projects will be approximately $3.6 million. Practically all of our 
planned capital expenditures in 1998 are for projects relating to our water 
utility business. Those projects include:

      *    the replacement of 8,800 linear feet of pre-1900 distribution 
           mains,
      *    the addition of more efficient motor starters on Pennichuck's 
           major electric pumps at its treatment plant,
      *    the reconstruction of one of Pennichuck's dams, and
      *    the relocation of distribution mains to accommodate ongoing 
           State highway construction projects.

The remaining items in the Company's 1998 capital budget reflect 
expenditures for ongoing, routine investment in new meters, services, 
distribution mains and hydrants.


      For the first nine months of 1998, we have invested nearly $2.65 million 
in capital projects. That amount does not include the purchase of $7.5 million 
water utility assets by Pennichuck East in April 1998. For the rest of 1998, 
we expect that the cash flow from our normal operating activities, together 
with available short-term borrowings from our bank, will be sufficient to 
fund the remaining planned capital expenditures.

      The Consolidated Balance Sheet at September 30, 1998 also reflects a 
line item captioned "Minority interest" totaling $314,000. This represents a 
40% interest held by a third party in Westwood Park LLC ("Westwood"), a real 
estate development venture. Southwood owns the remaining 60% majority 
interest in Westwood, whose financial statements are included in the 
accompanying consolidated financial statements at September 30, 1998. In May 
1998, Westwood sold a tract of land to a third party for approximately $1.3 
million. The terms of that sale required Westwood to use the sales proceeds 
to construct the necessary access road and infrastructure for the purchaser. 
The gain from this sale was recognized in the third quarter of 1998 when the 
infrastructure work was completed. We have recorded the unexpended cash from 
this sale in the line item captioned "Restricted Cash" at September 30, 1998.


      We offer a Dividend Reinvestment and Common Stock Purchase program 
which is available to our shareholders and our residential New Hampshire 

<PAGE>  23
customers. Under this program, our shareholders may reinvest all or a 
portion of their common dividends into shares of common stock at a 5% 
discount from prevailing market prices. We also accept optional cash 
payments to purchase additional shares at 100% of the prevailing market 
prices.  Since its inception in 1993, this program has provided us with 
$840,000 of additional common equity.

Environmental Matters

      Our water utility subsidiaries are subject to the water quality 
regulations set forth by the United States Environmental Protection Agency 
("EPA") and the New Hampshire Department of Environmental Services. The EPA 
is required to periodically set new maximum contaminant levels for certain 
chemicals as required by the federal Safe Drinking Water Act ("SDWA"). The 
quality of our treated water currently meets or exceeds all standards set by 
the EPA and we do not anticipate that any significant capital expenditures 
for regulatory compliance will be required in the next three years given the 
present water quality standards set by the SDWA. However, the re-
authorization of the SDWA by Congress in 1996 will lead to increased 
monitoring standards which may require additional operating costs for us. It 
is expected that any additional monitoring and testing costs arising from 
EPA mandates should eventually be recouped through water rates.

Year 2000 Issue


      We have performed an exhaustive review of our hardware and software 
systems in order to determine the level of readiness to meet the next 
millenium. Because we own some operating assets which pre-date 1900, we have 
been aware of the potential Year 2000 problem well before the recent 
publicity and in fact, 8 digit dates have been a requirement for all in-
house software developed since 1987. The Year 2000 issue has also been 
addressed and included in all computer migration and upgrades since 1990. 

      As part of our Year 2000 project planning, the Company identified 
mission-critical applications and implemented a 5 year plan in early 1994 to 
replace or upgrade both hardware and software. Our central computer 
platform, consisting primarily of minicomputer servers, is not completely
Year 2000 ready. However, those servers that are not Year 2000 ready are
expected to be retired and replaced with Year 2000 ready servers within the
next 12 months.


      Additionally, all of our software applications have been evaluated to 
identify any Year 2000 problems, their importance to our operations and 
efficiencies to be gained with newer and updated software. A software 
development schedule has been created based on this risk assessment with the 
most critical applications being implemented first. At this time, our NT 
network, financial accounting, billing, customer service information and 
meter management, human resources and SCADA management systems are Year 2000 
ready.  Our remaining software systems for work orders, inventory control, 
and various maintenance programs are 90% compliant and are expected to be 
fully ready by the end of 1998.


      We are currently in the process of identifying all external vendors 
who provide and/or require date dependent information and those customers 


<PAGE>  24
who are material to our operations to ensure that they will be in compliance 
with the Year 2000 issue. Once identified, we will contact each vendor and 
significant customer to determine its Year 2000 status. For any vendors or 
customers who are determined to be critical to our operations, we will 
develop a disaster recovery plan containing alternative action plans in the 
event of vendor non-compliance. We anticipate having all critical resource 
alternative plans in place by May 1999.


New Accounting Standards

      We adopted Statement of Financial Accounting Standards ("SFAS") No. 
128, "Earnings Per Share" for the year ended December 31, 1997. This 
accounting statement replaces primary earnings per share with basic earnings 
per share. Basic earnings per share is calculated by dividing earnings 
available to common shareholders by the weighted average shares outstanding. 
SFAS No. 128 also requires us to present diluted earnings per share, which 
is calculated similarly to fully-diluted earnings per share.

      During the second quarter of 1997, the Financial Accounting Standards 
Board issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 
131, "Disclosures About Segments of an Enterprise and Related Information." 
Although adoption of these two Statements is not required until fiscal years 
beginning after December 15, 1997, we do not believe that our Company will 
be materially affected by the new reporting standards set forth in those 
Statements.

      In June 1998, the Financial Accounting Standards Board also issued 
SFAS No. 133, "Accounting for Derivative Instruments and Hedging 
Activities." Although SFAS No. 133 is effective for fiscal years beginning 
after June 15, 1999, we have not yet evaluated or determined the impact, 
timing or method of adoption of this accounting statement.

Effects of Inflation

      The effects of inflation on the utility operations of the consolidated 
group are not material since the NHPUC allows most prudent and reasonable 
cost increases to be recouped through increased water rates. It should be 
noted that a regulatory lag exists from the time that the utility incurs 
higher costs to the time that it is allowed to bill revenues sufficient to 
cover these cost increases. In times of high inflation, this lag could have 
a detrimental effect on the profitability of our water utility companies and 
the Company. Conversely, during periods of lower inflation and lower 
interest rates, the rates of return granted by the NHPUC have tended to be 
reduced reflecting that lower inflation and interest rate environment.  
There can be no assurance that the NHPUC will approve rate increases to 
recover any future increased operational costs.

Legal Proceedings

      We are involved in ordinary and routine litigation or rate making 
proceedings incidental to our business.  We believe that the resolution of 
these matters will not adversely affect our business, consolidated financial 
condition or our operating results.

                          MANAGEMENT OF THE COMPANY



<PAGE>  25
Directors

      Our Board of Directors consists of nine members.  The Articles of 
Incorporation classify the directors into three classes, each serving for 
three years, with one class being elected each year.

      The following table sets forth information concerning the nine persons 
serving on the Board of Directors.

<TABLE>
<CAPTION>
                                                              Other
                                Director      Year Present    Position
                                of Company    Term Will       With
Name (1)                 Age    Since         Expire          Company
- ----------------------------------------------------------------------

<S>                      <C>    <C>           <C>             <S>
Maurice L. Arel          61     1984          2000            President and
                                                              Chief Executive
                                                              Officer
Joseph A. Bellavance     59     1983          2000            --
Charles E. Clough        68     1968          2001            --
Stephen J. Densberger    48     1986          1999            Executive
                                                              Vice President
Robert P. Keller         60     1983          2000            --
John R. Kreick           54     1998          2001            --
Hannah M. McCarthy       52     1994          1999            --
Martha E. O'Neill        41     1998          2001            --
Charles J. Staab         49     1986          1999            Vice President-
                                                              Treasurer

<FN>
___________________
<F1>  Except for Messrs. Densberger and Staab, all directors are also 
      directors of the Company's wholly-owned subsidiaries, Pennichuck and 
      Southwood. Mr. Densberger is a director of Pennichuck.  Messrs. Arel, 
      Densberger and Staab are also directors and officers of the Company's 
      other wholly-owned subsidiaries, Pennichuck East, Pittsfield and the 
      Service Corporation.
</FN>
</TABLE>

      The business experience of each of the directors of the Company during 
the last five years, and certain other pertinent information, is as follows:


      Maurice L. Arel - Mr. Arel has served as President, Chief Executive 
Officer and a director of the Company since October 1984.  Mr. Arel also 
serves as President, Chief Executive Officer and a director of Pennichuck, 
Southwood and Service Corporation. He is Chairman and a director of 
Pittsfield.  He is the former Mayor of the City of Nashua, having served 
from 1977 to 1984.  He received his Bachelor of Arts degree in Chemistry 
from St. Anselm College and his Master of Science degree in Physical 
Chemistry from St. John's University.  He is a Commissioner of the Nashua 
Police Department, a director of Fleet Bank - NH and Blue Cross/Blue Shield 
of New Hampshire, a Trustee of St. Anselm College of Manchester, New 


<PAGE>  26
Hampshire and a member of the Board of Trustees of the Public Library of 
Nashua.  He serves as a member of the National Drinking Water Advisory 
Council to the Administrator of the federal Environmental Protection Agency.  
He is a member of the National Association of Water Companies, the American 
Chemical Society, the American Water Works Association and the New England 
Water Works Association.

      Joseph A. Bellavance - Mr. Bellavance is President and General Manager 
of Bellavance Beverage Company, Inc. and President of Bellavance Realty 
Corporation, both of Nashua.  He received his Bachelor of Science degree in 
Business Administration from the University of New Hampshire.  He is a 
director of the New Hampshire Wholesale Beverage Association, "New Hampshire 
The Beautiful," and a member of the American Legion and the Nashua Rotary 
Club.

      Charles E. Clough - Mr. Clough is currently President of Freedom 
Partners, LLC.  He holds a Master of Business Administration degree from the 
Amos Tuck School of Business and was affiliated with Nashua Corporation from 
1957 until 1995.  Mr. Clough also serves as a director of Hitchiner 
Manufacturing Company, Inc. of Milford, New Hampshire.


      Stephen J. Densberger - Mr. Densberger is Executive Vice President of 
the Company and has been affiliated with the Company since 1974.  Mr. 
Densberger was the Treasurer of the Company from 1978 to 1983.  He holds a 
Master of Business Administration degree from the Whittemore School of 
Business and Economics of the University of New Hampshire.  He is past 
President of the New Hampshire Water Works Association, past President of 
the New England Water Works Association, and is a member of the City of 
Nashua Board of Aldermen.  Mr. Densberger also serves as Executive Vice 
President of Pennichuck and as Vice President of Southwood and Service 
Corporation. He is a director and President of Pittsfield and of Pennichuck 
East and a director of Service Corporation.

      Robert P. Keller - Mr. Keller is a Certified Public Accountant.  From 
April 27, 1990 until October 10, 1991 he served as President and Chief 
Executive officer of Dartmouth Bank of Manchester, New Hampshire and from 
October 10, 1991 until June 6, 1994, as President and Chief Executive 
Officer of New Dartmouth Bank, also of Manchester, New Hampshire.  From 
August 22, 1994 until March 15, 1995, he served as President and Chief 
Executive Officer of Independent Bancorp of Arizona, Inc. of Phoenix, 
Arizona and Chairman and Chief Executive Officer of Caliber Bank, also of 
Phoenix, Arizona.  Since June 1995, he has served as President and Chief 
Executive Officer of Dartmouth Capital Group, Inc., and since September 30, 
1995, as  President and Chief Executive Officer of Eldorado Bancshares, Inc. 
and Chairman, President and Chief Executive Officer of Eldorado Bank of 
Laguna Hills, California.  He is also a director of  White Mountains 
Holdings, Inc. and Haverford Industries, Inc.

      John R. Kreick - Dr. Kreick served as President of Sanders Associates 
and as a vice president of the Lockheed Martin Corporation from January 1988 
until March 1998. Dr. Kreick received his Bachelor of Science degree in 
physics from the University of Michigan in 1965. As a Rackman graduate 
fellow, he worked at University's Space Physics Research Laboratory and 
received his Masters of Science degree in physics in 1966. He received his 
Ph.D. in theoretical physics from the University of Michigan in 1969 and he 
holds eight patents in infrared and electro-optical technology. Dr. Kreick 


<PAGE>  27
is a member of the National Research Council's Commission of Physical 
Sciences, Mathematics and Applications; a trustee of Rivier College; a 
member of the board of directors of the New England Council; and has served 
on numerous Department of Defense panels and committees. In 1993, Dr. Kreick 
received the Electronic Warfare Association's highest award - the Gold Medal 
of Electronic Warfare and a recipient of Aviation Week magazine's Aerospace 
Laurels Award for his long-term contributions to electronic warfare. 


      Hannah M. McCarthy - Ms. McCarthy is President of Daniel Webster 
College in Nashua, New Hampshire, a position which she has held since June, 
1980.  She earned her BA at Simmons College, and has done graduate work at 
Rivier College and New Hampshire College.  Ms. McCarthy serves as a director 
of the New Hampshire College and University Council and the Boys & Girls 
Club of Nashua.

      Martha E. O'Neill - Ms. O'Neill has been practicing as an attorney 
with the law firm of Clancy & O'Neill, P. A. in Nashua since 1982. She is a 
graduate of Wellesley College and Georgetown University Law Center. Ms. 
O'Neill serves on the Rivier College Board of Trustees, Rivier College 
Paralegal Department Advisory Board, Mary A. Sweeney Home Board of Trustees, 
Charles H. Nutt Surgical Hospital Board and the Boys & Girls Club of 
Greater Nashua, Inc. Charitable Foundation Board of Trustees.

      Charles J. Staab - Mr. Staab is Vice President, Treasurer and Chief 
Financial Officer of the Company and has been Treasurer since 1983.  He 
holds a Master of Business Administration degree from Rivier College, and is 
a Certified Public Accountant.  He is a member of the Finance Committee of 
the National Association of Water Companies, a member of the Board of 
Directors of the Nashua YMCA and the Nashua Center for Economic Development.  
He is a past director of the Nashua Children's Association and the United 
Way of Greater Nashua, and former President of the Northern New England 
chapter of the Financial Executives Institute. Mr. Staab also serves as Vice 
President and Treasurer of Pennichuck and Southwood. He is treasurer and a 
director of the Service Corporation, Pennichuck East and Pittsfield. 

Executive Officers

      The following sets forth the business experience and certain other 
pertinent information concerning our executive officers who do not serve on 
our Board of Directors.


      Bonalyn J. Hartley - Ms. Hartley has been with the Company since 1979 
and was elected Vice President-Controller of the Company, Pennichuck and 
Southwood in 1991.  She is also Controller and a director of the Service 
Corporation, Pennichuck East and Pittsfield. She is a graduate of Rivier 
College with a Bachelor of Science degree in Business Management.  Ms. 
Hartley serves as a trustee of the Southern New Hampshire Regional Medical 
Center and as a director of the Rivier College Alumni Association.  She is 
also a director of the New England Chapter of the National Association of 
Water Companies and a member of the New England Water Works Association. Ms. 
Hartley is 53 years old.


      Donald L. Ware - Mr. Ware is Vice President of Engineering for the 
Company. He joined the Company in April 1995 and also serves as the Vice 


<PAGE>  28
President of Engineering for Pennichuck and Southwood. He is also a vice 
president and director of Service Corporation, Pennichuck East and 
Pittsfield. Prior to joining the Company, Mr. Ware was the general manager 
of the Augusta Water District in Augusta, Maine. He holds a Bachelor of 
Science degree in Civil Engineering from Bucknell University and is a 
licensed professional engineer in New Hampshire, Massachusetts and Maine. 
Mr. Ware is 41 years old.

                      SECURITY OWNERSHIP OF MANAGEMENT

      The following table sets forth information with respect to shares of 
the Company's common stock beneficially owned by each director, and by all 
directors and officers as a group, as of September 30, 1998:

<TABLE>
<CAPTION>

                                  Amount and         % of Common
                                  Nature of          Stock Out-
                                  Beneficial         standing (if
      Name of Beneficial Owner    Ownership(1)(3)    more than (1%)(2)
      ------------------------    ---------------    -----------------

      <S>                             <C>                  <C>
      Maurice L. Arel(3)(5)            28,159              2.2%
      Joseph A. Bellavance(3)(4)        9,912               --
      Charles E. Clough                15,871              1.3%
      Stephen J. Densberger(3)(5)      10,680               --
      Robert P. Keller                  1,168               --
      John R. Kreick (3)                  153               --
      Hannah M. McCarthy                  150               --
      Martha E. O'Neill(6)             17,026              1.3%
      Charles J. Staab(3)(5)            9,330               --

      All directors and
      officers as a group
      (12 persons) (3)(5)             103,916              8.2%

<FN>
___________________
<F1>  Shares beneficially owned means shares over which a person exercises 
      sole or shared voting or investment power or shares of which a person 
      has the right to acquire beneficial ownership within 60 days of 
      September 30, 1998.  Unless otherwise noted, the individuals and group 
      above have sole voting and investment power with respect to shares 
      beneficially owned.

<F2>  Calculation of percentages is based upon a total of 1,268,231 shares, 
      which total includes shares outstanding and entitled to vote of 
      1,221,523, plus 46,688 shares which have not been issued but which may 
      be issued within 60 days of September 30, 1998 if persons having 
      rights to exercise stock options within such period exercise such 
      rights.

<F3>  The individuals and group noted above have sole voting and investment 
      power with respect to shares beneficially owned, except as stated in 
      notes (4) through (6) below and except that voting and investment 


<PAGE>  29
      power is shared as follows: Mr. Arel - 3,761 shares, Mr. Bellavance -
      4,179 shares, Mr. Densberger - 1,905 shares, Mr. Kreick - 153 shares, 
      Mr. Staab - 2,130 shares, and non-director officers as a group - 1,514 
      shares.

<F4>  Mr. Bellavance disclaims beneficial ownership of 1,483 of these 
      shares.

<F5>  Includes shares subject to previously granted but unexercised stock 
      options which officers have a right to acquire within 60 days of 
      September 30, 1998.  Mr. Arel holds options to acquire 12,000 shares, 
      Mr. Densberger holds options to acquire 7,500 shares, Mr. Staab holds 
      options to acquire 6,300 shares and the officers of the Company as a 
      group hold options to acquire a total of 34,650 shares within 60 days 
      of September 30, 1998.

<F6>  Includes 8,217 shares owned by the Charles H. Nutt Surgical Hospital 
      Trust, of which Ms. O'Neill is a trustee. Ms. O'Neill shares voting 
      and investment power with the other Trustees over these shares. Ms. 
      O'Neill disclaims beneficial ownership of these shares.
</FN>
</TABLE>


                    DESCRIPTION OF COMPANY CAPITAL STOCK

General

      The Company is authorized to issue 2,400,000 shares of common stock, 
par value $1.00 per share; and, 15,000 shares of preferred stock, par value 
$100.00 per share, and 100,000 shares of preferred stock, no par value 
(collectively, "Preferred Stock").  On September 30, 1998, 1,221,523 shares 
of common stock were issued and outstanding, options to acquire 46,688 
shares of common stock were outstanding, and no shares of Preferred Stock 
were issued and outstanding.

Common Stock

      Each holder of common stock is entitled to one vote per share for all 
purposes and does not have the right to cumulate his votes in the election 
of directors.  Subject to preferences that may be applicable to any 
outstanding Preferred Stock, each holder of common stock is entitled to 
receive such dividends as may be declared by the Board of Directors in its 
discretion from funds that are legally available for the payment of 
dividends.  In the event of a liquidation, dissolution or winding up of the 
Company, each holder of common stock will be entitled to share in the assets 
of the Company pro rata in accordance with his holdings, after payment of 
liabilities and the liquidation preference of any outstanding Preferred 
Stock.  The common stock has no preemptive rights.  Except as otherwise 
determined by the Board of Directors or by applicable law, all voting rights 
are presently vested exclusively in the holders of the common stock.


Preferred Stock

      The Company's Board of Directors is authorized to issue shares of 
Preferred Stock in one or more series and to fix the voting powers, 


<PAGE>  30
designations, preferences or other rights of the shares of each such series 
and the qualifications, limitations and restrictions thereon.

Certain Anti-takeover Provisions

      Certain provisions of the Company's Articles of Incorporation and 
Bylaws may be considered to have an "anti-takeover" effect.  A discussion of 
these provisions follows.

      Classified Board of Directors.  Pursuant to the Articles of 
Incorporation and Bylaws, the Board of Directors is divided into three 
classes with staggered terms, each class comprising approximately one third 
of the members of the Board.  The classification of directors will have the 
effect of making it more difficult for shareholders to change the 
composition of the Board in a relatively short period of time.  At least two 
annual meetings of shareholders, instead of one, will generally be required 
to effect a change in a majority of the Board.  This delay will provide the 
Board with additional time to evaluate proposed takeover efforts and other 
extraordinary corporate transactions, to consider appropriate alternatives 
to such proposals and to act in what it believes to be the best interests of 
the shareholders.  The classification of directors could have the effect of 
discouraging a third party from making a tender offer or otherwise 
attempting to obtain control of the Company.

      Authorized Shares.  The Articles of Incorporation authorizes the 
issuance of 2,400,000 shares of common stock and 115,000 shares of Preferred 
Stock.  The shares of common stock and Preferred Stock were authorized in an 
amount greater than intended to be issued to provide the Company's Board of 
Directors with as much flexibility as possible to effect, among other 
transactions, financings, acquisitions, stock dividends, stock splits and 
employee stock options.  However, these additional authorized shares may 
also be used by the Board of Directors to deter future attempts to gain 
control of the Company.  The Board of Directors has sole authority to 
determine the terms of any one or more series of Preferred Stock, including 
voting rights, conversion rates, and liquidation preferences.  As a result 
of the ability to fix voting rights for a series of Preferred Stock, the 
Board has the power to issue a series of Preferred Stock to persons friendly 
to management in order to attempt to block a post-tender offer merger or 
other transaction by which a third party seeks control, and thereby assist 
management to retain its control of the Company.

Dividend Reinvestment

      The Company has a Dividend Reinvestment and Common Stock Purchase Plan 
("DRIP") under which participating shareholders may have cash dividends on 
all or a portion of their shares of common stock automatically reinvested in 
newly issued shares of common stock and may invest at the same time up to an 
additional $12,000 per calendar year in newly issued shares of common stock 
as outlined in the DRIP.  Under the DRIP, participating shareholders may 
purchase shares of common stock at 95% of market value with reinvested 
dividends and at 100% of market value for additional purchases.  No 
commission or service charge is paid by participants in connection with any 
of their purchases under the DRIP.

                   MARKET PRICES AND DIVIDEND INFORMATION




<PAGE>  31
      The common stock is traded on the Nasdaq National Market System ("NMS")
under the symbol "PNNW." The common stock traded on the over-the-counter
market and was quoted on the OTC Bulletin Board from December 1997 until
October 1998, on the Nasdaq NMS from May 1996 until December 1997 and on the
Nasdaq Small Cap Market prior to May 1996.

      The following table sets forth the high and low sales prices per share 
of common stock as reported on the Nasdaq NMS, the OTC Bulletin Board or 
the Nasdaq Small Cap Market and the dividends per share declared by the 
Company during those periods.


<TABLE>
<CAPTION>

                                                           Dividends
Period                                  High     Low       Declared
- --------------------------------------------------------------------

<S>                                    <C>       <C>         <C>
1998
- --------------------------------------------------------------------

Fourth Quarter (through November 16)   $26.63    $19.75      $.22

- --------------------------------------------------------------------
Third Quarter                           20.50     15.00       .19
- --------------------------------------------------------------------
Second Quarter                          16.00     15.00       .19
- --------------------------------------------------------------------
First Quarter                           16.00     12.00       .19
- --------------------------------------------------------------------


1997
- --------------------------------------------------------------------
Fourth Quarter                         $13.33    $12.09      $.17
- --------------------------------------------------------------------
Third Quarter                           13.50     12.00       .17
- --------------------------------------------------------------------
Second Quarter                          13.00     10.33       .17
- --------------------------------------------------------------------
First Quarter                           12.00     10.33       .17
- --------------------------------------------------------------------

1996
- --------------------------------------------------------------------
Fourth Quarter                         $13.25    $10.33      $.17
- --------------------------------------------------------------------
Third Quarter                           13.92     12.00       .17
- --------------------------------------------------------------------
Second Quarter                          14.00     11.33       .16
- --------------------------------------------------------------------
First Quarter                           14.67     11.50       .15
- --------------------------------------------------------------------




<PAGE>  32
1995
- --------------------------------------------------------------------
Fourth Quarter                         $13.67    $11.33      $.15
- --------------------------------------------------------------------
Third Quarter                           11.50      9.17       .14
- --------------------------------------------------------------------
Second Quarter                          10.33      8.83       .14
- --------------------------------------------------------------------
First Quarter                           10.67     10.00       .14
- --------------------------------------------------------------------
</TABLE>


      On November 16, 1998 the last reported sales price for the common stock 
on the Nasdaq NMS was $21.50 per share.  On November 2, 1998, there 
were approximately 750 holders of record of the 1,221,523  shares of common 
stock outstanding.

      The Company has paid dividends each year since at least 1915.  The 
current annualized dividend rate is $.88 per share, based upon the quarterly 
dividend of $.22 per share declared on October 9, 1998.  The amount of 
dividends paid per share has been increased each year since 1993.  The 
amount of future dividends will be at the discretion of the Company's Board 
of Directors and will depend upon the Company's earnings, financial 
condition, capital requirements, certain limitations and rights and other 
factors, including adequacy of rate relief granted by the NHPUC to the 
Company's water utility subsidiaries.

      Certain bond and note agreements involving Pennichuck require, 
among other things, restrictions on the payment or declaration of dividends 
by Pennichuck to the Company.  Under Pennichuck's most restrictive covenant,
approximately $3,745,000 of Pennichuck's retained earnings was unrestricted
for payment or declaration of common dividends to the Company at
December 31, 1997.



                                UNDERWRITING


      Subject to the terms and conditions set forth in the Underwriting
Agreement, the form of which is filed as an exhibit to the Registration
Statement, the Company has agreed to sell to each of the Underwriters
listed below, and the Underwriters, for whom Edward D. Jones & Co., L.P.
is acting as representative (the "Representative"), have severally
agreed to purchase from the Company, the respective number of shares of
common stock set forth opposite their names below.

Underwriters                                     Number of Shares
- ------------                                     ----------------

Edward D. Jones & Co., L.P.                           320,000
Advest, Inc.                                          100,000
                                                      -------
      Total                                           420,000
                                                      =======



<PAGE>  33
      The Underwriting Agreement provides that the obligations of the 
several Underwriters to pay for and accept delivery of the common stock are 
subject to the approval of certain legal matters by counsel and to certain 
other conditions.  The Underwriters are obligated to take and pay for all of 
the shares of the common stock offered hereby if any are taken (other than 
shares of common stock covered by the over-allotment option described 
below).

      The Representative has advised the Company that the Underwriters 
propose to offer the common stock being purchased by them directly to the 
public at the initial public offering price set forth on the cover page of 
this Prospectus and may offer the common stock to certain dealers at such
price, less a concession of not in excess of $0.585 per share and that the 
Underwriters and such dealers may reallow a concession of not in excess of
$0.10 per share to certain brokers or other dealers.  The public offering
price and concessions and reallowances to dealers may be changed by the
Representative after the commencement of the offering.

      The offering of the common stock is made for delivery when, as and if 
accepted by the Underwriters and subject to prior sale and to withdrawal, 
cancellation or modification of the offer without notice. The Underwriters 
reserve the right to reject any order for the purchase of common stock in 
whole or in part.

      The Company has granted to the Underwriters an option for 30 days to 
purchase (at the common stock Public Price less the Underwriter Discounts 
shown on the cover page of this Prospectus) up to 63,000 additional shares 
of common stock.  The Underwriters may exercise such option only to cover 
over-allotments of shares of common stock made in connection with the sale 
of the shares offered hereby.

      In connection with this offering and in compliance with applicable
law, the Underwriters may over-allot (i.e., sell more common stock than is
set forth on the cover page of this Prospectus) and may effect transactions
which stabilize, maintain or otherwise affect the market price of the common
stock at levels above those which might otherwise prevail in the open
market.  Such transactions may include placing bids for the common stock
or effecting purchases of the common stock for the purpose of pegging,
fixing or maintaining the price of the common stock or for the purpose of
reducing a short position created in connection with the offering.  A short
position may be covered by exercise of the over-allotment option described
above in lieu of or in addition to open market purchases.  The Underwriters
are not required to engage in any of these activities and any such activities,
if commenced, may be discontinued at any time.

      Neither the Company nor the Underwriters make any representation or 
prediction as to the direction or magnitude of any effect that the 
transactions described above may have on the price of the common stock.  In 
addition, neither the Company nor the Underwriters make any representation 
that the Underwriters will engage in such transactions or that such 
transactions, once commenced, will not be discontinued without notice.

      The Company has agreed to indemnify the Underwriters and persons who 
control the Underwriters against certain liabilities that may be incurred in 
connection with the offering contemplated hereby, including liabilities 
under the Securities Act of 1933, as amended, or to contribute to payments 
the Underwriters may be required to make in respect thereof.


<PAGE>  34
                                LEGAL MATTERS

      Certain legal matters in connection with the validity of the common 
stock offered hereby will be passed upon for the Company by Gallagher, 
Callahan & Gartrell, P.A., Concord, New Hampshire.  Certain legal matters 
will be passed upon for the Underwriters by Armstrong, Teasdale, Schlafly & 
Davis, St. Louis, Missouri.


                                   EXPERTS

      The financial statements of the Company included in this Prospectus 
and the financial statement schedule included in the Registration Statement 
of which this Prospectus forms a part, have been audited by Arthur Andersen 
LLP, independent public accountants, to the extent and for the periods as 
indicated in their reports with respect thereto, and are included herein in 
reliance upon the authority of said firm as experts in giving said reports.


                     WHERE YOU CAN FIND MORE INFORMATION


      Our Company files annual, quarterly and current reports, proxy 
statements and other information with the Commission.  You may read and copy 
any reports, statements or other information we file at the Commission's 
public reference room at the offices of the Commission, Judiciary Plaza, 450 
Fifth Street, N.W., Washington, D.C. 20549.  You can request copies of these 
documents, upon payment of a duplicating fee, by writing to the Commission.  
Please call the Commission at 1-800-SEC-0330 for further information on the 
operation of the public reference rooms.  Our filings with the Commission 
are also available to the public on the Commission Internet site 
(http://www.sec.gov.).


      The Company filed a Registration Statement on Form S-2 to register 
with the Commission the common stock offered hereby.  This Prospectus is 
part of that Registration Statement.  As allowed by Commission rules, this 
Prospectus does not contain all the information you can find in the 
Registration Statement or the exhibits to the Registration Statement.

      The Company also maintains a site on the Internet 
(http://www.pennichuck.com) which contains information about the Company and 
its subsidiaries.

               INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

      The Commission allows us to "incorporate by reference" information 
into this Prospectus, which means that we can disclose important information 
to you by referring you to another document filed separately with the 
Commission.  The information incorporated by reference is deemed to be part 
of this Prospectus, except for any information superseded by information in 
this Prospectus.  This Prospectus incorporates by reference the documents 
set forth below that we have previously filed with the Commission.  These 
documents contain important information about our Company and its finances.





<PAGE>  35
<TABLE>
<CAPTION>

Company Filings (File No. 0-18552)     Period
- ---------------------------------      ------

<S>                                    <C>
Annual Report on Form 10-KSB           Year ended December 31, 1997
Quarterly Reports on Form 10-QSB       Quarters ended March 31, 1998; 
                                       June 30, 1998 and September 30, 1998
Current Reports on Form 8-K            Filed April 24, 1998; June 19, 1998 
                                       and August 20, 1998

</TABLE>

      If you are a stockholder, we have sent you some of the documents 
incorporated by reference, but you can obtain any of them through us or the 
Commission.  Documents incorporated by reference are available from us 
without charge, excluding all exhibits unless we have specifically 
incorporated by reference an exhibit in this Prospectus.  Stockholders may 
obtain documents incorporated by reference in this Prospectus by requesting 
them in writing or by telephone at the following address:

                  Stockholder Relations
                  Pennichuck Corporation
                  4 Water Street
                  P.O. Box 448
                  Nashua, New Hampshire  03061
                  Telephone number (603) 882-5191



               PENNICHUCK CORPORATION AND SUBSIDIARY COMPANIES

                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                    Page
                                                                    ----

<S>                                                                 <C>
Report of Independent Public Accountants                            F-2

Consolidated Balance Sheets as of September 30, 1998 (unaudited)
 and December 31, 1997 and 1996 (audited)                           F-3

Consolidated Statements of Income for the Nine Months Ended
 September 30, 1998 and 1997 (unaudited) and the Fiscal Years 
 Ended December 31, 1997, 1996 and 1995 (audited)                   F-5

Consolidated Statements of Stockholders' Equity for the
 Nine Months Ended September 30, 1998 (unaudited) and the
 Fiscal Years Ended December 31, 1997, 1996 and 1995
 (audited)                                                          F-6

Consolidated Statements of Cash Flows for the Nine Months
 Ended September 30, 1998  and 1997 (unaudited) and the Fiscal
 Years Ended December 31, 1997, 1996 and 1995 (audited)             F-7
<PAGE>  36
Notes to Consolidated Financial Statements                          F-8

</TABLE>

REPORT OF ARTHUR ANDERSEN LLP, INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of Pennichuck Corporation:

We have audited the accompanying consolidated balance sheets of Pennichuck 
Corporation and subsidiaries (a New Hampshire corporation) as of December 
31, 1997 and 1996, and the related consolidated statements of income, 
stockholders' equity and cash flows for each of the three years in the 
period ended December 31, 1997. These financial statements are the 
responsibility of the Company's management. Our responsibility is to express 
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, 
in all material respects, the consolidated financial position of Pennichuck 
Corporation and subsidiaries at December 31, 1997 and 1996, and the 
consolidated results of their operations and their cash flows for each of 
the three years in the period ended December 31, 1997, in conformity with 
generally accepted accounting principles.

                                       /s/ ARTHUR ANDERSEN LLP

Boston, Massachusetts
February 3, 1998 (except with respect 
to the matter discussed in Note I, as 
to which the date is September 1, 1998)


CONSOLIDATED BALANCE SHEETS
PENNICHUCK CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                              September 30           December 31
                                                  1998           1997           1996
                                              ------------------------------------------
                                               (unaudited)

ASSETS

<S>                                            <C>            <C>            <C> 
Property, Plant and Equipment
  Land                                         $ 1,329,636    $   424,421    $   422,417
  Buildings                                     22,287,541     19,539,208     15,869,343


<PAGE>  37
  Equipment                                     53,225,490     45,414,514     43,063,562
  Construction work in progress                    511,551        139,511        298,905
                                               -----------------------------------------
                                                77,354,218     65,517,654     59,654,227
  Less accumulated depreciation                (19,963,333)   (16,561,266)   (15,244,953)
                                               -----------------------------------------
                                                57,390,885     48,956,388     44,409,274
Current Assets
  Cash                                             529,110        447,921        345,978
  Restricted cash                                  874,694        905,768             --
  Accounts receivable, net of reserves of
   $25,000 in 1998, 1997 and 1996                1,358,088        671,086      1,211,544
  Unbilled revenue                               1,465,000      1,083,800      1,015,000
  Refundable income taxes                                          12,971         62,848
  Materials and supplies, at cost                  360,515        207,832        244,391
  Prepaid expenses and other current assets        101,755        484,429        387,721
                                               -----------------------------------------
                                                 4,689,162      3,813,807      3,267,482

Other Assets
  Deferred land costs                            2,304,935      2,408,321      2,412,374
  Deferred charges and other assets              2,187,383      1,751,722      1,114,313
  Investment in real estate partnerships           418,973        310,211        153,692
                                               -----------------------------------------
                                                 4,911,291      4,470,254      3,680,379

                                               $66,991,338    $57,240,449    $51,357,135
                                               =========================================

Stockholders' Equity and Liabilities
Stockholders' Equity
  Common stock-$1 par value - authorized
   2,400,000 shares; issued 1,225,957 shares
   in 1998, 1,213,001 shares in 1997 and
   1,196,841 shares in 1996                    $ 1,225,957    $ 1,213,001    $ 1,196,841
  Additional paid in capital                     5,407,020      5,229,727      5,104,477
  Retained earnings                              9,293,424      8,199,557      7,799,959
                                               -----------------------------------------
                                                15,926,401     14,642,285     14,101,277

  Less cost of 4,434 shares of
   common stock in treasury in 1998 and
   3,962 shares in 1997 and 1996                   (59,240)       (52,940)       (52,940)
                                               -----------------------------------------
                                                15,867,161     14,589,345     14,048,337
Minority Interest                                  313,959             --             --

Preferred stock, no par value, 100,000 
 shares authorized, no shares issued in 
 1998, 1997 and 1996                                    --             --

Long-Term Debt, Less Current Portion            33,450,995     26,577,618     21,126,853

Current Liabilities
  Current portion of long-term debt                100,000        100,000        818,750
  Accounts payable                                 404,070        408,022        278,943
  Accrued interest payable                         481,062        350,597        329,951


<PAGE>  38
  Other current liabilities                      1,781,978        927,378        774,740
                                               -----------------------------------------
                                                 2,767,110      1,785,997      2,202,384

Commitments and Contingencies

Deferred Credits and Other Reserves
  Deferred income taxes                          2,831,079      2,763,579      2,280,074
  Deferred investment tax credits                1,139,577      1,164,354      1,197,390
  Regulatory liability                           1,217,040      1,217,040      1,247,756
  Customer advances and other liabilities          291,750        162,951        244,487
                                               -----------------------------------------
                                                 5,479,446      5,307,924      4,969,707

Contributions in Aid of Construction             9,112,667      8,979,565      9,009,854
                                               -----------------------------------------

                                               $66,991,338    $57,240,449    $51,357,135
                                               =========================================
</TABLE>

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


CONSOLIDATED STATEMENTS OF INCOME
PENNICHUCK CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>

                                    Nine Months Ended September 30             Year Ended December 31
                                          1998          1997          1997           1996           1995
                                    ------------------------------------------------------------------------
                                             (unaudited)

<S>                                   <C>            <C>           <C>            <C>            <C>
Revenues
  Water utility operations            $11,136,224    $8,652,431    $11,415,065    $10,907,679    $11,003,037
  Real estate and other operations      2,156,925       415,823        640,452      1,509,537        697,443
                                      ----------------------------------------------------------------------
                                       13,293,149     9,068,254     12,055,517     12,417,216     11,700,480

Operating expenses
  Water utility operations              7,194,130     5,994,743      8,148,894      7,726,897      7,283,463
  Real estate and other operations      1,453,844       109,213        189,817        982,293        839,622
                                      ----------------------------------------------------------------------
                                        8,647,974     6,103,956      8,338,711      8,709,190      8,123,085

Operating Income                        4,645,175     2,964,298      3,716,806      3,708,026      3,577,395

Other income                               28,771        34,916         42,277          9,183          6,876
Interest expense                       (1,680,900)   (1,325,177)    (1,812,091)    (1,645,254)    (1,719,720)
                                      ----------------------------------------------------------------------

Income Before Provision for
 Income Taxes                           2,993,047     1,674,037      1,946,992      2,071,955      1,864,551


<PAGE>  39
Provision for Income Taxes              1,157,244       636,802        739,969        782,937        716,948
                                      ----------------------------------------------------------------------

Net Income Before Minority Interest     1,835,803     1,037,235      1,207,023      1,289,018      1,147,603

Minority Interest in Earnings of
 Westwood Park LLC                        (40,497)           --             --             --             --
                                      ----------------------------------------------------------------------
Net Income                            $ 1,795,306    $1,037,235    $ 1,207,023    $ 1,289,018    $ 1,147,603
                                      ======================================================================

Earnings Per Common Share:
  Basic                               $      1.46    $      .87    $      1.01    $      1.09    $      1.00
  Diluted                             $      1.44    $      .86    $      1.00    $      1.09    $       .99


Weighted Average Shares Outstanding
  Basic                                 1,229,604     1,198,207      1,200,287      1,178,883      1,148,610
  Diluted                               1,242,801     1,212,273      1,207,173      1,183,455      1,152,110


</TABLE>

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


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
PENNICHUCK CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                    Common        Common     Additional
                                    Stock-        Stock-     Paid - in      Retained     Treasury
                                    Shares        Amount      Capital       Earnings       Stock
                                   --------------------------------------------------------------
<S>                                <C>          <C>          <C>           <C>           <C>
Balances at
 December 31, 1994                 1,149,353    $1,149,353   $4,693,327    $6,789,874    $(18,504)

Net income                                                                  1,147,603
Dividend reinvestment plan             7,591         7,591       67,128
Common dividends
 declared - $.57 per share                                                   (661,169)
Common equity issuance costs                                    (84,915)
Exercise of stock options                 60            60          440
Repurchase of 3,037
 common shares                                                                            (32,575)
                                   --------------------------------------------------------------
Balances at
 December 31, 1995                 1,157,004     1,157,004    4,675,980     7,276,308     (51,079)
Net income                                                                  1,289,018
Dividend reinvestment plan            39,327        39,327      426,337
Common dividends
 declared - $.65 per share                                                   (765,367)
Common equity issuance costs                                     (1,770)
Exercise of stock options                510           510        3,930
Repurchase of 153 common shares                                                            (1,861)
                                   --------------------------------------------------------------
<PAGE>  40

Balances at December 31, 1996      1,196,841     1,196,841    5,104,477     7,799,959     (52,940)
Net income                                                                  1,207,023
Dividend reinvestment plan            14,585        14,585      147,625

Common dividends declared --
 $.68 per share                                                              (807,425)

Common equity issuance costs                                    (34,300)
Exercise of stock options              1,575         1,575       11,925
                                   --------------------------------------------------------------


Balances at December 31, 1997      1,213,001    $1,213,001   $5,229,727    $8,199,557    $(52,940)
Net income                                                                  1,795,306
Dividend reinvestment plan             9,170         9,170      129,084
Common dividends declared --
       $.57 per share                                                        (701,439)
Exercise of stock options              4,328         4,328       33,085                    (6,300)
Retirement of repurchased shares        (465)         (465)      (5,248)
Directors' deferred
 compensation plan                                               20,372
                                   --------------------------------------------------------------
Balances at September 30, 1998
 (unaudited)                       1,225,957    $1,225,957   $5,407,020    $9,293,424    $(59,240)
                                   ==============================================================
</TABLE>

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


CONSOLIDATED STATEMENTS OF CASH FLOWS 
PENNICHUCK CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>

                                           Nine Months Ended September 30             Year Ended December 31
                                                 1998          1997          1997          1996            1995
                                           -----------------------------------------------------------------------
                                              (unaudited)

<S>                                           <C>           <C>           <C>           <C>           <C>
Operating Activities
  Net income                                  $1,795,306    $1,043,182    $1,207,023    $1,289,018    $1,147,603
  Adjustments to reconcile net
   income to net cash provided
   by operating activities:
  Depreciation and amortization                1,331,156     1,013,862     1,486,655     1,246,410     1,162,899

  Amortization of deferred
   investment tax credits                        (24,777)      (24,777)      (33,036)      (33,036)      (33,036)
  Provision for deferred
   income taxes                                   67,500        70,200       483,505       493,293       245,025




<PAGE>  41
  Changes in assets and liabilities:
    Accounts receivable and
     unbilled revenue                         (1,068,204)       97,651       470,458      (384,858)     (356,818)
    Refundable income taxes                       26,469        72,011        36,499       (48,757)       35,087
    Materials and supplies                      (152,684)       10,246        36,559        (4,606)      (19,123)
    Prepaid expenses                             382,674       275,439       (83,330)        7,067          (268)
    Deferred charges and
     other assets                               (750,949)     (505,423)     (824,553)     (253,658)     (365,971)
    Accounts payable and 
     accrued expenses                            926,854     1,052,609       282,663      (247,680)      717,308
    Other                                        171,557       (95,710)      (91,352)      311,438       745,885
                                              ------------------------------------------------------------------
Net cash provided by operating activities      2,704,902     3,009,290     2,971,091     2,374,631     3,278,591
Investing Activities:
  Purchase of property & equipment            (9,767,416)   (5,218,442)   (5,974,194)   (3,224,742)   (2,668,840)
  Contributions in aid of construction           234,186       101,384       101,665       467,577       537,134
  (Increase) decrease in restricted cash          31,074    (1,252,293)     (905,768)           --            --
  (Increase) decrease in investment in real
   estate partnerships                           210,597       (61,674)     (156,851)      (36,877)        7,489
                                              ------------------------------------------------------------------
Net cash used in investing activities         (9,291,559)   (6,431,025)   (6,935,148)   (2,794,042)   (2,124,217)
Financing Activities:
  Proceeds from long-term borrowings           9,212,439     5,035,163     5,197,618     8,000,000            --
  Payments on long-term debt                  (1,159,062)     (850,603)     (950,603)   (6,124,635)     (156,338)
  Increase in minority interest                  313,959            --            --            --            --
  Net (decrease) increase in notes payable
   to bank                                    (1,180,000)     (270,000)      485,000    (1,100,000)     (350,000)
  Dividends paid                                (701,439)     (597,450)     (807,425)     (765,367)     (661,169)
  Proceeds from dividend reinvestment
   plan and other, net                           181,949        96,141       141,410       466,474       (42,272)
                                              ------------------------------------------------------------------
  Net cash provided by (used in)
   financing activities                        6,667,846     3,413,251     4,066,000       476,472    (1,209,779)
Increase (decrease) in cash                       81,189        (8,484)      101,943        57,061       (55,405)
Cash at beginning of period                      447,921       345,978       345,978       288,917       344,322
                                              ------------------------------------------------------------------
Cash at end of period                         $  529,110    $  337,494    $  447,921    $  345,978    $  288,917
                                              ==================================================================

</TABLE>

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



PENNICHUCK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INCLUDING NOTES APPLICABLE TO UNAUDITED PERIODS)

NOTE A - SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies of Pennichuck Corporation and subsidiaries 
are as follows:

Basis of Presentation: The financial statements include the accounts of 
Pennichuck Corporation, an investor-owned holding company (the "Company") 


<PAGE>  42
and its subsidiaries, Pennichuck Water Works, Inc. ("Pennichuck"), 
Pittsfield Aqueduct Company, Inc. ("Pittsfield"), The Southwood Corporation 
("Southwood") and Pennichuck Water Service Corporation (the "Service 
Corporation").


Interim Financial Statements: The financial statements as of September 30,
1998 and for the nine month periods ended September 30, 1998 and 1997 are 
unaudited but, in the opinion of management, reflect all adjustments of a 
normal recurring nature necessary for a fair presentation of results for 
these interim periods. The results of operations for the nine month period 
ended September 30, 1998 are not necessarily indicative of the results to be 
expected for the entire year due to, among other things, the seasonal nature 
of the water business and the effect of timing of the real estate transactions.


Nature of Operations: Pennichuck and Pittsfield (collectively referred to as 
the "Company's utility subsidiaries") are engaged principally in the 
gathering and distribution of potable water to approximately 26,400 
customers in southern and central New Hampshire. Southwood owns, manages and 
develops real estate. PWSC is involved in non-regulated, water-related 
services and operations.

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

Property, Plant and Equipment: Property, plant and equipment, which includes 
principally the water utility assets of the Company's utility subsidiaries, 
is recorded at cost plus an allowance for funds used during construction 
("AFUDC") on major additions. The provision for depreciation is computed on 
the straight-line method over the estimated useful lives of the assets 
including property funded with contributions in aid of construction. The 
useful lives range from six to ninety years and the average composite 
depreciation rate was 2.29% and 2.21% in 1997 and 1996, respectively.

Maintenance, repairs and minor improvements are charged to expense as 
incurred. Improvements which significantly increase the value of property, 
plant and equipment are capitalized.

Allowance for Funds Used During Construction ("AFUDC"): AFUDC represents a 
non-cash credit to income with a corresponding charge to plant in service. 
AFUDC amounts reflect the cost of borrowed funds and, if applicable, equity 
capital when used to fund major plant construction projects. Such AFUDC 
amounts were immaterial for 1997, 1996 and 1995.

Revenues: Standard charges for water utility services to customers are 
recorded as revenue, based upon meter readings. Estimates of unbilled 
service revenues are recorded in the period the services are provided. 
Provision is made in the financial statements for estimated uncollectible 
accounts.

Deferred Charges and Other Assets: Deferred charges include certain 
regulatory assets and costs of obtaining debt financing. Regulatory assets 

<PAGE>  43
are amortized over periods being recovered through authorized rates. Debt 
expenses are amortized over the term of the related bonds and notes.

Regulatory Assets: The Company's utility subsidiaries are subject to the 
provisions of Statement of Financial Accounting Standard ("SFAS") 71, 
"Accounting for the Effects of Certain Types of Regulations". Pennichuck and 
Pittsfield have recorded certain regulatory assets in cases where the New 
Hampshire Public Utilities Commission (the "NHPUC") has permitted, or is 
expected to permit, recovery of these costs over future periods. Included in 
deferred charges and other assets are regulatory assets totaling $541,714 
and $268,385 at December 31, 1997 and 1996, respectively.

In March 1995, the Financial Accounting Standards Board issued SFAS 121, 
"Accounting for the Impairment of Long Lived Assets and Long Lived Assets to 
be Disposed of." This statement imposes a stricter criterion for regulatory 
assets by requiring that such assets be probable of recovery at each balance 
sheet date. The Company adopted this standard on January 1, 1996 and the 
adoption did not have a material impact on the financial position or the 
results of operations based on the current regulatory structure under which 
the Company's utility subsidiaries operate.

Deferred Land Costs: Included in deferred land costs are Southwood's 
original basis in its landholdings and developmental costs for its Corporate 
Park. Deferred land costs are stated at the lower of cost or market.

Investment in Partnership: Southwood is a 50 percent general partner in a 
land development project and has sold a certain parcel of land to the 
partnership in exchange for a promissory note. Revenues relating to the sale 
of this parcel are deferred until the lots are ultimately sold to third 
parties. Real estate transactions are presented using the cost recovery 
method. Under this method, any deferred gain and related note receivable are 
offset for financial statement purposes. Southwood's investment in this 
partnership is recorded using the equity method of accounting. As of 
December 31, 1997 and 1996, that note receivable balance was $440,000 and 
$540,000, respectively, which was offset by the deferred gain of 
approximately $433,000 and $532,000 in 1997 and 1996, respectively.

Income Taxes: The provision for federal and state income taxes is based on 
income reported in the financial statements, adjusted for items not 
recognized for income tax purposes. Provisions for deferred income taxes are 
recognized for accelerated depreciation and other temporary differences. 
Investment credits previously realized for income tax purposes are amortized 
for financial statement purposes over the life of the property giving rise 
to the credit.

Customer Advances and Contributions in Aid of Construction ("CIAC"): Under 
construction contracts with real estate developers and others, Pennichuck 
receives advances for the costs of new main installation. In accordance with 
its tariff provisions, Pennichuck makes refunds on a portion of the advances 
as new customers attach to the main over periods generally not exceeding 
five years. Customer advances which are no longer refundable are transferred 
to the CIAC account. The CIAC account and related plant asset are amortized 
over the life of the property. Pennichuck also credits to CIAC the fair 
market value of developer installed mains and any excess of fair market 
value over the cost of community water systems purchased from developers.

Earnings Per Share:


<PAGE>  44
The following is a reconciliation of the numerators and denominators of the 
basic and diluted earnings per share for the twelve months ended December 
31, 1997, 1996 and 1995.

<TABLE>
<CAPTION>

                                                          Twelve Months Ended
                                                    1997          1996          1995
                                                 --------------------------------------
<S>                                              <C>           <C>           <C>   
Basic earnings per share                         $     1.01    $     1.09    $     1.00
Dilutive effect of unexercised stock options           (.01)            -          (.01)
                                                 --------------------------------------
Diluted earnings per share                       $     1.00    $     1.09    $      .99
                                                 ======================================

Numerator:
Basic net income                                 $1,207,023    $1,289,018    $1,147,603
                                                 ======================================
Diluted net income                               $1,207,023    $1,289,018    $1,147,603
                                                 ======================================

Denominator:
Basic weighted average shares outstanding         1,200,287     1,178,883     1,148,610
Dilutive effect of unexercised stock options          6,886         4,572         3,500
                                                 --------------------------------------
Diluted weighted average shares outstanding       1,207,173     1,183,455     1,152,110
                                                 ======================================
</TABLE>

NOTE B - INCOME TAXES

The components of the federal and state income tax provision at December 31 
are as follows:

<TABLE>
<CAPTION>

                                            1997        1996        1995
                                          --------------------------------

<S>                                       <C>         <C>         <C>
Federal                                   $599,533    $642,444    $573,501
State                                      173,472     173,529     176,483
Amortization of investment tax credits     (33,036)    (33,036)    (33,036)
                                          --------------------------------
                                          $739,969    $782,937    $716,948
                                          ================================

Currently payable                         $245,139    $341,942    $504,590
Deferred                                   494,830     440,995     212,358
                                          --------------------------------
                                          $739,969    $782,937    $716,948
                                          ================================
</TABLE>
The following is a reconciliation between the statutory federal income tax 
rate and the effective income tax rate for 1997, 1996 and 1995:

<PAGE>  45

<TABLE>
<CAPTION>

                                          1997     1996     1995
                                          -----------------------
<S>                                       <C>      <C>      <C>
Statutory federal rate                    34.0%    34.0%    34.0%
State tax rate, net of federal benefit     5.6      5.6      6.3
Amortization of investment tax credits    (1.6)    (1.8)    (1.9)
                                          -----------------------

Effective tax rate                        38.0%    37.8%    38.4%
                                          =======================

</TABLE>

The Company made income tax payments of $353,000, $403,000 and $435,000 in 
1997, 1996 and 1995, respectively.

The Company has $384,289 and $344,144 of alternative minimum tax credits 
available at December 31, 1997 and 1996, respectively. These credits may be 
carried forward indefinitely to offset future regular tax and are recorded 
as a reduction to accumulated deferred income taxes.

The Company has a regulatory liability related to income taxes of $1,217,040 
and $1,247,756 at December 31, 1997 and 1996, respectively. This represents 
the amount of deferred taxes recorded at rates higher than currently enacted 
rates and the impact of deferred investment tax credits on future revenue. 
The liability is being amortized consistent with the Company's ratemaking 
treatment.

The temporary items that give rise to the net deferred tax liability at 
December 31, 1997 and 1996 are as follows:

<TABLE>
<CAPTION>

                                            1997          1996
                                         ------------------------
<S>                                      <C>           <C>
Liabilities:
Property related                         $4,899,468    $4,483,590
Other                                       254,542       192,792
                                         ------------------------
                                          5,154,010     4,676,382
Assets:
Investment tax credits                      710,343       741,059
Regulatory liability                        197,282       197,282
Alternative minimum tax carry forward       384,289       344,144
Prepaid taxes on contributions in aid
 of construction                            912,328       940,154
Other                                       204,234       188,114
                                         ------------------------
                                          2,408,476     2,410,753

Net Deferred Tax Liabilities             $2,745,534    $2,265,629
                                         ========================
</TABLE>
<PAGE>  46

NOTE C - DEBT

Long-term debt at December 31 consists of the following:

<TABLE>
<CAPTION>

                                              1997           1996
                                           --------------------------

<S>                                        <C>            <C>
Unsecured notes payable to various
 insurance companies:
  9.10%, due April 1, 2005                 $ 3,500,000    $ 3,500,000
  7.40%, due March 1, 2021                   8,000,000      8,000,000
  8.95% due August 1, 1997                          --        718,750

Unsecured Industrial Development
 Authority Revenue Bond (1988 Series),
 7.50%, due July 1, 2018                     1,300,000      1,300,000

Unsecured Business Finance Authority
 1994 Revenue Bond (Series A), 6.35%,
 due December 1, 2019                        3,060,000      3,120,000

Unsecured Business Finance Authority
 1994 Revenue Bond (Series B), 6.45%,
 due December 1, 2016                        1,940,000      1,980,000

Unsecured Business Finance Authority
 1997 Revenue Bond, 6.30%, due
 May 1, 2022                                 4,000,000             --

Unsecured notes payable and line of
 credit revolving loan facility at
 rates ranging from 7.44% to 8.50%
 due May 31, 1999                            3,680,000      3,195,000

Mortgage note payable to bank, 10% due
 December 6, 2004                                   --        131,853

Mortgage note payable to bank, 10%, due 
 January 31, 2008                            1,141,792             --

Capitalized lease obligation                    55,826             --
                                           --------------------------
                                            26,677,618     21,945,603
Less current portion                           100,000        818,750
                                           --------------------------
                                           $26,577,618    $21,126,853
                                           ==========================

</TABLE>

The 1994 Series A and B Bonds are not subject to optional redemption until 
2004 at which time they may be redeemed in whole or in part at a premium not 


<PAGE>  47
to exceed 2% and may be redeemed at par on or after December 1, 2008. The 
notes and bonds payable require periodic interest payments (either monthly 
or semi-annually) which are based on the outstanding principal balances. The 
aggregate principal payment requirements subsequent to December 31, 1997 are 
as follows:

<TABLE>

                   <S>                    <C>
                   1998                   $   100,000
                   1999                     3,863,000
                   2000                       333,000
                   2001                       333,000
                   2002                       316,826
                   2003 and thereafter     21,731,792

</TABLE>

The note and bond agreements require, among other things, the maintenance of 
certain financial ratios and restrict the payment or declaration of 
dividends by Pennichuck. Under Pennichuck's most restrictive covenant, 
cumulative common dividend payments or declarations by Pennichuck subsequent 
to December 31, 1989 are limited to cumulative net income earned after that 
date plus $1,000,000. At December 31, 1997, approximately $3,745,000 of 
Pennichuck's retained earnings was unrestricted for payment or declaration 
of common dividends.

During 1997, 1996 and 1995, the Company paid interest of $1,759,000, 
$1,482,000 and $1,697,000, respectively.

The Company has available a $4,500,000 unsecured, revolving credit facility 
with a bank, of which $3,680,000 was outstanding at December 31, 1997. 
Outstanding borrowings under this facility are due on June 30, 2000. The 
interest rates on the outstanding borrowings are based on the bank's cost of 
funds and LIBOR, as defined, and ranged from 7.44% to 8.50% at December 31, 
1997. During 1997, the weighted average interest rate on borrowings under 
this facility of the Company was 7.75% and 7.74% during 1996.

NOTE D - FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of certain financial instruments included in the accompanying 
Consolidated Balance Sheet as of December 31, 1997 is as follows:


<TABLE>
<CAPTION>
                  Carrying Value    Fair Value
                  ----------------------------

<S>                <C>              <C>
Long-term debt     $26,677,618      $28,121,416
</TABLE>

There are no quoted market prices for the Company's various long-term debt 
issues and thus, their fair values have been determined based on quoted 
market prices for securities similar in nature and in remaining maturities. 



<PAGE>  48
The fair values shown above do not purport to represent the amounts at which 
those obligations would be settled.

The carrying values of the Company's cash, restricted cash, notes payable 
and line of credit to the bank at December 31, 1997 approximate their fair 
values because of the short maturity dates of those financial instruments.

NOTE E - BENEFIT PLANS

Pension Plan

The Company has a defined benefit pension plan covering substantially all 
full-time employees. The benefits are formula-based, giving consideration to 
both past and future service. The Company's funding policy is to contribute 
annually up to the maximum amount deductible for federal tax purposes. 
Contributions are intended to provide not only for benefits attributed to 
service to date but also for those expected to be earned in the future.

The following table sets forth the plan's funded status and amounts 
recognized in the Company's consolidated balance sheets at December 31:

<TABLE>
<CAPTION>

                                                        1997           1996
                                                     --------------------------
<S>                                                  <C>            <C>
Actuarial present value of benefit obligations:
  Accumulated benefit obligation,
   including vested benefits of
   $2,014,577 in 1997 and
   $1,789,383 in 1996                                $ 2,023,847    $ 1,796,966
                                                     ==========================
Projected benefit obligation for service
 rendered to date                                    $(2,451,150)   $(2,185,580)
Plan assets at a fair value (insurance contracts)      2,656,625      2,228,687
                                                     --------------------------
Plan assets in excess of projected
 benefit obligation                                      205,475         43,107
Prior service costs                                        8,306          9,091
Unrecognized net loss from past
 experience different from that
 assumed and effects of changes
 in assumptions                                           64,854        161,450
Unrecognized net transition asset                       (124,679)      (138,486)
                                                     --------------------------
Prepaid pension cost included in
  Deferred charges and other assets                  $   153,956    $    75,162
                                                     ==========================
</TABLE>


Net pension cost for 1997, 1996 and 1995 includes the following components:






<PAGE>  49
<TABLE>
<CAPTION>

                                    1997        1996        1995
                                  --------------------------------
<S>                               <C>         <C>         <C>
Service cost - benefits earned
 during the period                $138,996    $126,933    $114,948
Interest cost on projected
 benefit obligation                163,290     145,325     126,765
Actual return on plan assets      (200,193)   (149,411)   (152,954)
Amortization of (gains)
 and deferrals                     (11,596)    (47,956)    (13,022)
                                  --------------------------------
Net periodic pension cost         $ 90,497    $ 74,891    $ 75,737
                                  ================================

</TABLE>

For the years ended December 31, 1997 and 1996, the actuarial present value 
of the projected benefit obligation was determined using a discount rate of 
7.5 percent and an assumed rate of increase in future compensation levels of 
5 percent in 1997 and 1996. The expected long-term rate of return on plan 
assets was 9 percent in 1997, 1996 and 1995.

Salary Deferral Plan

In addition, the Company has a salary deferral plan covering substantially 
all full-time employees. Under this plan, the Company matches 100% of the 
first 3% of the employee's salary contributed to the plan. The matching 
employer's contributions were $68,103, $61,882 and $62,287, respectively, 
for 1997, 1996 and 1995.

Other Postretirement Benefits

The Company provides postretirement medical benefits to current and retired 
employees, which are payable upon reaching normal retirement date. Future 
benefits payable to current employees are capped based on the actual 
percentage of wage and salary increases earned from the plan inception date 
to normal retirement date. The accumulated benefit obligation, unrecognized 
transition obligation and net periodic postretirement benefit cost for the 
years ended December 31, 1997 and 1996 are as follows:

<TABLE>
<CAPTION>

                                            1997          1996
                                         -----------------------

<S>                                      <C>           <C>
Accumulated postretirement benefit
 obligation:
  Current active employees               $(300,339)    $(268,303)
  Retirees                                (198,457)     (192,853)
                                         -----------------------
    Total                                 (498,796)     (461,156)
Plan assets at fair value                        0             0
                                         -----------------------

<PAGE>  50
Funded status (underfunded)               (498,796)     (461,156)
Unrecognized net (gain)                   (124,289)     (129,883)
Unrecognized prior service cost            139,100       153,600
Unrecognized transition obligation         153,500       184,400
                                         -----------------------
Accrued postretirement
 benefit cost                            $(330,485)    $(253,039)
                                         =======================

Service cost                             $  22,478     $  22,129
Interest cost                               33,928        31,452
Amortization of prior service cost          14,500        14,500
Amortization of transition obligation       30,900        30,900
Amortization of unrecognized (gains)        (4,385)       (4,282)
                                         -----------------------
                                         $  97,421     $  94,699
                                         =======================

</TABLE>

The Company is presently allowed to recover a portion of the postretirement 
benefits relating to active employees and retirees in its rates. To 
calculate the estimated accumulated benefit obligation for 1997 and 1996, 
the Company has assumed a discount rate of 7.5 percent and a maximum medical 
care cost trend rate of 5 percent, which is the projected annual increase in 
future compensation levels. A one percent increase in the assumed health 
care cost trend rate would have increased the postretirement benefit cost by 
$14,495 and the accumulated postretirement benefit obligation by $92,550 in 
1997.

NOTE F - STOCK BASED COMPENSATION PLANS

The Company has a stock option plan for officers and key employees which 
provides for incentive options. The Company accounts for the plan under APB 
Opinion No. 25, under which no compensation cost has been recognized in the 
Consolidated Statements of Income. On a pro forma basis, the Company's net 
income and earnings per share would have been reduced to the following 
amounts had compensation cost for the plan been determined consistent with 
SFAS No. 123, "Accounting for Stock Based Compensation." 

<TABLE>
<CAPTION>

                          1997          1996
                       ------------------------
<S>                    <C>           <C>
Net income:
  As reported          $1,207,023    $1,289,018
  Pro forma            $1,200,626    $1,277,778
Earnings per share:
  As reported          $     1.01    $     1.09
  Pro forma            $     1.00    $     1.08

</TABLE>

Because the methodology proscribed by SFAS 123 has not been applied to 
options granted prior to January 1, 1995, the resulting pro forma 


<PAGE>  51
compensation cost may not be representative of that to be expected in future 
years. At December 31, 1997, all options which had been granted were 
exercisable and 75,000 share were available for future grants under the plan 
as shown in the following table:

<TABLE>
<CAPTION>

                                Reserved      Options       Price Per 
                                 Shares     Outstanding       Share
                                ---------------------------------------

<S>                             <C>           <C>          <C>
Balance at December 31, 1994     41,160       16,950       $8.33-$10.00
  Granted                                     12,000             $10.00
  Expired                       (41,160)
  Exercised                                      (60)            $ 8.33
  Additional shares reserved     75,000          -0-
                                --------------------
Balance at December 31, 1995     75,000       28,890       $8.33-$10.00
  Granted                                      6,788             $11.50
  Expired
  Exercised                                     (510)      $8.33-$11.50
                                --------------------
Balance at December 31, 1996     75,000       35,168       $8.33-$11.50
  Granted                                      6,788             $10.83
  Expired                                         --
 Exercised                                    (1,575)      $8.33-$10.83
                                --------------------
Balance at December 31, 1997     75,000       40,381       $8.33-$11.50
                                              ======

</TABLE>

Of the 40,381 options outstanding at December 31, 1997, 4,290 have an 
exercise price of $8.33 and a remaining contractual life of less than one 
year; 22,725 shares have an exercise price of $10.00 and a remaining life of 
1 to 2 years; 6,728 shares have an exercise price of $11.50 and a remaining 
life of 8 years; and 6,638 shares have an exercise price of $10.83 and a 
remaining life of 9 years. Shares acquired pursuant to such options are 
subject to a restriction against transfer for a period of twelve months 
after acquisition by the employee. The fair value of each option grant is 
estimated on the date of grant using the Black-Sholes option pricing model 
with the following assumptions used for grants in 1997 and 1996, 
respectively: risk-free interest rates of 6.3% and 5.5%; expected dividend 
yields of 5.4% and 5.2%; expected lives of 5 years; and expected volatility 
of 22% and 34%.

In September 1997, the Company amended its deferred compensation plan for 
its directors. Under the terms of the amended plan, directors may elect to 
receive their directors' fees in common shares of the Company or in cash 
upon either attaining age 70 or retirement from the board of directors. As 
of December 31, 1997, 12,779 common shares of the Company had been reserved 
for issuance under this plan.

NOTE G - Merger of the Company and Pittsfield Aqueduct Company 



<PAGE>  52
On January 30, 1998, Pittsfield Aqueduct Company ("Pittsfield") was merged 
with and into the Company through the issuance of 49,428 shares of 
Pennichuck Corporation which were exchanged for substantially all of the 
outstanding common shares of Pittsfield. The merger has been accounted for 
as a pooling-of-interests. Accordingly, the Company's financial statements 
have been restated to include the results of Pittsfield for all periods 
presented.

The combined and separate results of the Company and Pittsfield during the 
periods preceding and after the merger were as follows:

<TABLE>
<CAPTION>

                                        Consolidated
                                        Pennichuck
                                        Corporation    Pittsfield     Combined
                                        ----------------------------------------
<S>                                     <C>             <C>          <C>

Nine months ended September 30, 1998:
  Operating revenues                    $12,940,867     $352,282     $13,293,149
  Net income                            $ 1,734,963     $ 60,343     $ 1,795,306


Year ended December 31, 1997:
  Operating revenues                    $11,840,700     $214,817     $12,055,517
  Net income                            $ 1,290,091     $(83,068)    $ 1,207,023

Year ended December 31, 1996:
  Operating revenues                    $12,202,688     $214,528     $12,417,216
  Net income                            $ 1,238,485     $ 50,533     $ 1,289,018

Year ended December 31, 1995:
  Operating revenues                    $11,486,183     $214,297     $11,700,480
  Net income                            $ 1,094,970     $ 64,903     $ 1,147,603

</TABLE>

NOTE H - SUBSEQUENT EVENT-ACQUISITION


On November 5, 1997, the Company entered into an Agreement of Purchase and 
Sale of Assets with the Town of Hudson, New Hampshire (the "Town") whereby 
the Company agreed to purchase from the Town certain water utility assets 
located outside of the Town's municipal jurisdiction for $7.5 million. This 
purchase occurred in April 1998 once those assets, in addition to certain 
water utility assets located within the Town, were purchased by the Town 
from an investor-owned water utility currently serving the Town and certain 
surrounding communities. Those assets purchased by the Company were 
transferred into a new, wholly-owned, operating subsidiary of the Company, 
Pennichuck East Utility, Inc. which is regulated entity similar to 
Pennichuck and Pittsfield. As a result of this purchase, the Company has 
added approximately 3,600 customers to its existing customer base and the 
annual revenues from these added customers is estimated to be $2.3 million. 
All regulatory approvals relating to this transaction have been received at 
this time.


<PAGE>  53
In order to fund this purchase from the Town, the Company obtained permanent 
debt financing from its bank. The $7.5 million financing consists of two 
notes with maturities of 2 and 7 years. In connection with this debt, the 
Company has entered into two interest rate swap agreements which fix the 
interest rates at 6.20% and 6.50%, respectively. These notes are secured 
by the operating assets of the new operating subsidiary.


In addition, the Service Corporation and the Town entered into a long-term
contract whereby the Service Corporation will provide certain operations and
maintenance functions for the Town in exchange for an annual fee. The initial
term of this agreement is for five years with options to renew thereafter.


NOTE I - STOCK SPLIT

On August 7, 1998, the Company's Board of Directors declared a three for two 
stock split effected in the form of a stock dividend payable on September 1, 
1998 to shareholders of record on August 18, 1998. The Company's retained 
earnings have been charged for the aggregate par value of the shares issued 
as a dividend and such aggregate par value has been transferred to the 
Company's common stock account for all periods presented in the financial 
statements.

NOTE J - BUSINESS SEGMENT INFORMATION

Pennichuck Corporation's operating activities are grouped into two primary 
business segments as follows:

Water utility - Involved in the collection, treatment and distribution of 
potable water for domestic, industrial, commercial and fire protection 
service in the City of Nashua and certain surrounding communities in 
southern and central New Hampshire.

Real estate - Involved in the ownership, development, management and sale of 
industrial and residential property in Nashua and Merrimack, New Hampshire.

The tables below present information about Pennichuck Corporation's two 
primary business segments for the years ended December 31, 1997, 1996 and 
1995. The "Other" category includes the sundry activities of the Company and 
the Service Corporation.

<TABLE>
<CAPTION>

                                             1997           1996           1995
                                          -----------------------------------------
<S>                                       <C>            <C>            <C>
Operating revenues:
  Water utility                           $11,415,065    $10,907,679    $11,003,037
  Real Estate                                 514,143      1,320,676        631,181
  Other                                       126,309        188,861         66,262
                                          -----------------------------------------
Total operating revenues                  $12,055,517    $12,417,216    $11,700,480
                                          =========================================




<PAGE>  54
Operating income (loss):
  Water utility                           $ 3,266,171    $ 3,180,782    $ 3,684,726
  Real estate                                 316,411        421,025       (190,425)
  Other                                       134,224        106,219         83,094
                                          -----------------------------------------
Total operating income                    $ 3,716,806    $ 3,708,026    $ 3,577,395
                                          =========================================

Capital additions:
  Water utility                           $ 5,974,194    $ 3,205,211    $ 2,650,100
  Real estate                                      --             --             --

  Other                                                       19,531         18,740
                                          -----------------------------------------
Total capital additions                   $ 5,974,194    $ 3,224,742    $ 2,668,840
                                          =========================================

Identifiable assets:
  Water utility                           $53,331,333    $45,894,108    $45,058,034
  Real estate                               2,554,608      3,223,048      3,036,524
  Other                                     1,354,508      2,239,979      1,041,871
                                          -----------------------------------------
Total identifiable assets                 $57,240,449    $51,357,135    $49,136,429
                                          =========================================

Depreciation and amortization expense:
  Water utility                           $ 1,452,757    $ 1,217,038    $ 1,132,833
  Real estate                                   4,385             --             --
  Other                                        29,513         29,372         30,066
                                          -----------------------------------------
Total depreciation and
 amortization expense                     $ 1,486,655    $ 1,246,410    $ 1,162,899
                                          =========================================

</TABLE>

The operating revenues within each business segment are sales to 
unaffiliated customers. Operating income (loss) is defined as segment 
revenues less operating expenses including allocable Parent Company expenses 
attributable to each business segment as shown below.

<TABLE>
<CAPTION>

                                     1997        1996        1995
                                   --------------------------------

<S>                                <C>         <C>         <C>
Allocated parent expenses:
  Water utility                    $345,785    $273,983    $308,130
  Real estate and other              50,970      39,823      23,507
                                   --------------------------------

Total allocated parent expenses    $396,755    $313,806    $331,637
                                   ================================
</TABLE>



<PAGE>  55
Within the water utility business segment, one customer accounted for over 
10 percent of total operating revenues. During 1997, 1996, and 1995, Pennichuck
recorded $1,693,000, $1,685,000, and $1,683,000, respectively, in water
revenues which were derived from fire protection and other billings to the
City of Nashua.


NOTE K - QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>

                       First        Second         Third        Fourth
                      Quarter       Quarter       Quarter       Quarter
                      ---------------------------------------------------
                      (In thousands of dollars, except per share amounts)

<S>                   <C>           <C>           <C>           <C>
1998

Operating Revenues    $2,916        $3,973        $6,404
Operating Income         849         1,411         2,385
Net Income               236           510         1,049

Earnings Per Share    $  .29        $  .32        $  .85



1997

Operating Revenues    $2,551        $2,946        $3,571        $2,988
Operating Income         593           961         1,411           752
Net Income               122           326           589           170

Earnings Per Share    $  .10        $  .27        $  .49        $  .15


1996

Operating Revenues    $2,961        $2,780        $3,161        $3,515
Operating Income         546           948         1,049         1,165
Net Income                79           347           396           467

Earnings Per Share    $  .07        $  .29        $  .33        $  .40


</TABLE>







                               420,000 Shares


                           Pennichuck Corporation

<PAGE>  56

                                Common Stock
                         (Par Value $1.00 Per Share)




                                 PROSPECTUS





                         Edward D. Jones & Co., L.P.



                              November 17, 1998




      No person is authorized with any offering made hereby to give any 
information or to make any representation not contained in this Prospectus, 
and if given or made, such information or representation must not be relied 
upon as having been authorized by the Company or the Underwriters.  This 
Prospectus does not constitute an offer to sell or a solicitation of an 
offer to buy any security other than the common stock offered hereby, nor 
does it constitute an offer to sell or a solicitation of an offer to buy any 
of the securities offered hereby to any person in any jurisdiction in which 
it is unlawful to make such an offer or solicitation to such person.   
Neither the delivery of this Prospectus nor any sale made hereunder shall 
under any circumstances create any implication that the information 
contained herein is correct as of any date subsequent to the date hereof.





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