(Pictured above left to right)

John D. Conroy
President
Xcelecom, Inc.

Nathaniel D. Woodson
Chairman, President and Chief Executive Officer
UIL Holdings Corporation

Anthony J. Vallillo
President and Chief Operating Officer
The United Illuminating Company

Our Company had a good year in 2004. UIL delivered another year of strong consolidated earnings of $2.57 per share from continuing operations, a two and one-half percent increase over our 2003 performance. We maintained our annual dividend of $2.88 per share, resulting in a yield of over five percent at year-end. The next quarterly dividend in April 2005 will mark thirty-seven consecutive quarters during which the Company has returned a dividend to its shareowners at this level, a point of pride for your UIL management and a demonstration of our tenacious commitment to you, our shareowners. In addition, with its strong yield, the value of our stock is magnified by today’s lower taxes on dividends. We remain focused on our stock, and we are driven to achieve the highest level of shareowner value. Our management team is continuously working on our core business model – efficiently and effectively managing the utility to achieve its allowed returns, while managing our non-utility business for profitability and longer-term value.

In 2004, UIL stock appreciation, combined with dividends, provided you with a total return on investment of more than twenty percent.

Your Companies; Investing in Infrastructure; Building for Tomorrow
UIL’s companies are linked through their focus on infrastructure improvement and a common, disciplined project-management approach to their work. This philosophy is pervasive in the energy infrastructure work performed by The United Illuminating Company (UI), in United Capital Investment’s participation in the Cross-Sound Cable project, and in our investment approach to United Bridgeport Energy. It is equally important to Xcelecom’s projects from Massachusetts to Florida.

In 2004, as we emerged from the last recession and the economy grew, UI’s kilowatt-hour sales increased, averaging three percent by year-end as compared to one-half to one percent historically. This growing demand for electricity is occurring as a result of major downtown redevelopment initiatives, including several large-scale residential projects now underway in the largest cities in our service territory, New Haven and Bridgeport, and as a result of commercial and retail business growth in these urban centers. UI’s sales from the residential sector have also increased, reflecting both growth in new home construction and increased usage on a per-home basis. UIL remains an important contributor to the economic development of our region. We will continue to play a positive, active role in making the cities and towns we serve attractive places in which to live and work.

Recognizing that the utility remains UIL’s core business, our long-standing philosophy has been to reinvest prudently in the utility to maintain our electric infrastructure and provide reliable service to our customers, and to achieve the allowed returns on these investments. In the years to come, UIL will strategically invest additional capital in the utility. Future growth relies upon these investments. They allow us to maintain and grow the rate base of the utility on which we can earn an allowed return on equity.

Within the distribution division of the utility, we have projects underway to replace or upgrade aging utility poles and other distribution equipment. Substantial future earnings growth, however, will come from the transmission division. UI has a responsibility to maintain and upgrade the transmission infrastructure within the communities we serve, not only to ensure continued reliable service to our customers, but because we have overarching responsibilities to the greater regional electric grid. We are working with our neighboring utility, The Connecticut Light and Power Company, to enhance the electric transmission infrastructure in the Southwest region of Connecticut. Upgrading the infrastructure is crucial to meeting the current and future energy demands of that region and will help ensure that Connecticut’s portion of the Northeast/New England electric grid is capable of handling twenty-first century demands.