## To Our Stockholders 

What does it mean to be the refreshingly clear choice? To us, it means being the company that stockholders choose because we offer value. It means being the company that customers trust because we provide the high- est quality service and the highest quality product. And it means being the company that attracts the best water professionals in the industry because we expect and reward excellent performance. 

INDUSTRY OVERVIEW 

2002 FINANCIAL RESULTS 

California Water Service Group is the largest investor-owned water utility west of the Mississippi, and the second largest in the United States. After a period of considerable consolidation, only 12 investor-owned water utilities remain in our country. Investors continue to like the industry because it is regulated and subject to lower business cycle risk than non-regulat- ed industries, its earnings drivers are straightforward, it has a long record of paying dividends, and it provides a life-sustaining, essential product, the demand for which continues to grow. So what sets an industry leader apart from the rest of the pack? What makes California Water Service Group the refreshingly clear choice? 

In our estimation, leaders emerge in the most challenging of times. Last year, we reported on the significant challenges facing the industry– most notably, the tough regulatory climate in California and cool, wet weather. We laid out our strategy for tackling these challenges, which included pursu- ing growth in new and existing service areas, initiating a comprehensive plan to counteract unfair delays in regulatory decisions, and continuing to be dili- gent in our efforts to reduce expenses and increase our efficiency. 

We are pleased to report that our strategy has yielded success, as reflected in our improved financial results for 2002. We posted earnings per share of $1.25, a 29% increase over 2001 earnings per share of $0.97. Net income increased to $19,073,000 in 2002, compared to net income of $14,965,000 in 2001. And revenue rose to $263,151,000, a 7% increase over last year. While our results are significantly better than they were in 2001, we recognize that we must continue executing our strategy to deliver even better results in the coming years. 

