For 2001, Rio Grande had gross revenue of $1,485,000. Its gross utility plant in service at December 31, 2001, was $12,458,000 and net utility plant in service was $9,153,000.The regulatory deci- sion authorizing the purchase included an authorization to increase annual water rates by $115,000. 

NATIONAL UTILITIES CORPORATION. In June 2002, New Mexico Water signed an agreement to purchase National Utilities Corporation for approximately $700,000. National Utilities serves 700 water customers located adjacent to the Rio Grande water system and another 1,000 water customers located 150 miles south of Albuquerque, New Mexico.The purchase will entitle New Mexico Water to purchase up to 2,000 acre-feet of water annually as required for its operations.The purchase is subject to the approval of the New Mexico Public Regulation Commission. Regulatory approval is expected in the third quarter of 2003. National Utilities had 2002 revenue of $554,000 and total assets of $1,410,000. Its net utility plant in service at December 31, 2001, was $1,178,000. 

KAANAPALI WATER CORPORATION. In August 2002, the Company agreed to acquire the Kaanapali Water Corporation for $7.7 million in cash. Kaanapali Water provides water utility services to 500 customers on the island of Maui in Hawaii, including 10 resorts and eight condominium projects. It posted 2001 revenues of $3.3 million, and has net plant of approximately $7.3 million and current assets of $0.4 million.The trans- action is subject to approval of the Hawaii Public Utilities Commission, and an application requesting approval was filed in October 2002. A decision is expected by mid-2003. 

NISH WATER SYSTEMS. On January 25, 2001, the CPUC approved the Company’s acquisition of the Nish water systems in Visalia.The four systems serve 1,100 customers and had annual revenue of $0.2 million.The Company issued 36,180 shares of its common stock valued at $0.9 million and assumed debt of $0.3 million to complete the transaction, which was accounted for as a pooling of interests.The effect of pooling was deemed not to be material; therefore, prior year financial statements have not been restated and pro forma disclosures were not considered significant.The net equity of Nish was recorded as an adjustment to retained earnings as of January 1, 2001. 

WASHINGTON WATER. In 2002,Washington Water purchased the assets of eight water compa- nies that serve 181 customers and generate $0.1 million in annual revenue. The combined purchase price was $0.1 million. During 2001,Washington Water purchased the assets of seven water companies that serve 681 customers and generate about $0.3 million in annual revenue. The combined purchase price was $0.7 million. 

Real Estate Program. The Company’s subsidiaries own more than 900 real estate parcels. Certain parcels are not necessary for or used in water utility operations. Most surplus properties have a low cost basis. A program has been developed to realize the value of certain surplus properties through sale or lease of those properties.The program will be ongoing for a period of several years. During the next four years, the Company estimates that gross property transactions totaling over $10 million could be completed. During 2002, the Company completed four sales totaling $3.0 million in pretax proceeds. In 2001, $4.0 mil- lion in pretax sales were completed through two sales. 

Stockholder Rights Plan. As explained in Note 7 to the Consolidated Financial Statements, in January 1998, the Board of Directors adopted a Stockholder Rights Plan (Plan). In connection with the Plan, a dividend distribution of one right for each common share to purchase preferred stock under certain circumstances was also authorized.The Plan is designed to protect stockholders and maximize stockholder value in the event of an unsolicited takeover proposal by encouraging a prospective acquirer to negotiate with the Board. 

## FINANCIAL RISK MANAGEMENT 

The Company does not participate in hedge arrangements, such as forward contracts, swap agreements, options or other contractual agreements relative to the impact of market fluctuations on its assets, liabilities, production or contractual commitments.The Company operates only in the United States, and therefore, is not subject to foreign currency exchange rate risks. 

