HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS We go beyond California Water Service Group 2018 Annual Report HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS California Water Service Group (NYSE: CWT) is the third-largest publicly traded water utility in the United States, providing high-quality water and wastewater services to about two million people through four regulated subsidiaries: California Water Service (Cal Water), Hawaii Water Service (Hawaii Water), New Mexico Water Service (New Mexico Water), and Washington Water Service (Washington Water). We are committed to improving the quality of life for our customers, communities, employees, and stockholders. We do this by living our core values and delivering on our promise to provide quality, service, and value. Table of Contents 01 We Go Beyond 19 Letter to Stockholders 22 CWT 20-Year Total Return on Investment 23 Eight-Year Financial Review 25 Our Service Areas 27 California Districts and Communities 29 Board of Directors 31 Corporate Officers 33 Corporate Information HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS When our customers turn on their taps, they get the water that touches every aspect of their lives, from their morning coffee to their evening showers. Parents getting kids ready for school, firefighters responding to a call, and workers making everything from beer to gasoline all expect the same thing: clean, safe water where they need it, when they need it. And we deliver that. But we also go beyond what’s expected of us, whether we’re investing in infrastructure, responding to emergencies, taking care of the environment, serving our customers, or giving back to our communities. Why? Because by going beyond, we make life better. It’s as simple as that. WE GO BEYOND | PAGE 1 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Beyond the pipes Water pipes are the unsung heroes of infrastructure. Sure, bridges are flashy, and highways are important. But the underground pipelines that carry water from the source to the tap are essential to ensuring a reliable, uninterrupted supply. That’s why we have a strategic and methodical plan for replacing aging water pipes and other water infrastructure that most people never see, including wells, pumps, treatment plants, and computer monitoring and control systems. Rather than waiting for equipment to fail, we take a proactive approach to preventing problems for our customers and communities—problems like sinkholes, road and property damage, water-quality issues, and water outages. We invested $271.7 million in water infrastructure in 2018, including $63.8 million to replace 143,175 feet of water pipe. This benefits customers, who receive safe water whenever and wherever they need it, and stockholders, who earn a return on the investment. WE GO BEYOND | PAGE 2 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS The Waze app. Stables for horses. Sound barriers. When we began a project to install seven miles of new water pipe as part of our Palos Verdes Peninsula Water Reliability Project, we knew it would be critical to go above and beyond to minimize the impact of the massive project on the community. R WE GO BEYOND | PAGE 3 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Palos Verdes Peninsula Water Reliability Project “ I am in awe of the planning and coordination, manpower, sensitivity to the equestrians in the area, and traffic control for all, plus the coordinated updates via text. You guys are doing an amazing job . . . Many thanks for your work under these challenging conditions.” Madeline Ryan, Resident News Flash We’re providing residents with regular updates via text, email, and social media, and real-time detour information via Google Maps, Apple Maps, and Waze. Hello, Neighbor We’re going door-to-door to discuss the construction timeline and route and answer customer questions. Get Out the Shovel When construction was scheduled close to a beloved earpod tree, we hand-dug a trench around its base to keep it safe. Sweet Relief We scheduled construction at Dapplegray Elementary School during summer break and thanked the PTA for its support by providing popsicles for students and staff. WE GO BEYOND | PAGE 4 Beyond the pipes No Horsing Around For horse owners and local equestrian groups, we are tempo- rarily relocating and boarding horses for their comfort and safety. Let’s Meet We’ve held more than 130 community meetings with residents, businesses, and schools to discuss upcoming construction. Room Service We scheduled night work to minimize traffic impacts and offered hotel rooms to those most affected by the sound of construction. HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Beyond the source If serving our customers were as simple as finding a water source and moving that water from point A to point B, our job would be easy. But it’s also our responsibility to find the most economical source of water to help keep customer bills as low as possible. That’s why, in many communities, we maximize the use of local water supplies, which are generally less expensive than purchasing water from outside the service area. Once we’ve identified the best local source for water, we take good care of it. For example, we engage in a range of conservation programs and actively participate in the implementation of California’s Sustainable Groundwater Management Act. Then, before delivering a drop, we analyze the water quality and use the best available treatment technology to ensure the water is clean and safe to drink. We recognize the importance of protecting the environment around our water sources. We go to great lengths to be good stewards and make a positive impact on our surroundings wherever we operate. WE GO BEYOND | PAGE 5 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Steelhead trout. Adjustable dam. Fish ladder. When we determined that our use of the Bear Gulch Creek could be inhibiting the ability of steelhead trout to migrate and spawn, we partnered with the California Department of Fish and Wildlife and the National Marine Fisheries Service to come up with a plan to allow us to continue drawing water from the source while ensuring optimum flows for the fish. R WE GO BEYOND | PAGE 6 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Bear Gulch Fish Ladder Smart Source We built a structure called a fish ladder that gives threatened steelhead trout the chance to thrive at every life stage—while allowing us to continue to use water from the creek. On the Move Before construction began, we hired a biologist to move 200 fish to another part of the creek so they wouldn’t be harmed by the project. “ The careful planning and thoughtful design that went into this project are truly impressive. The project also showcases your environmental stewardship, and we are fortunate to have Cal Water as a partner in our efforts to recover steelhead in the San Francisquito Watershed. Stellar job with the Upper Bear Gulch fish passage project.” Gary Stern, NOAA WE GO BEYOND | PAGE 7 Nice Working with You We worked closely with our neighbors on this project to get the necessary easements, make the site aesthetically pleasing, and, most importantly, retain our friendships. R-E-S-P-E-C-T Bear Gulch Creek is a habitat for threat- ened and endangered species, including the Dusky-Footed Woodrat, Central California Coast Steelhead, California Red-Legged Frog, San Francisco Garter Snake, and the Western Pond Turtle, so we carefully surveyed for them. Beyond the source Let It Flow To keep the creek bed in optimum condition, we built an adjustable dam that allows gravel and sediment to move downstream naturally. Let’s Make This Happen To successfully complete the fish ladder, we forged partnerships with the Town of Woodside, San Mateo County, California Department of Fish and Wildlife, Regional Water Quality Control Board, National Oceanic and Atmospheric Administration (NOAA), U.S. Army Corps of Engineers, and the U.S. Fish and Wildlife Service. HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Beyond the hydrant When firefighters need water, we deliver, thanks to the diligent investments we make in our infrastructure. That’s because the equipment we use to meet our customers’ daily needs is the same equipment that provides water for fire protection. During a fire emergency, we must be able to meet higher-than-normal demand for water and be ready to face potential power outages and evacuations. Being prepared for these challenges takes careful planning, which begins by designing our water systems the right way and working with local fire agencies to test and improve our fire-flow capabilities. Then, when a fire emergency occurs, we put our emergency response training to good use. This means activating our Emergency Operations Center and bringing in operational, engineering, water quality, and other statewide experts and resources—including portable generators, booster pumps, and emergency response trailers— to keep water flowing. But sometimes it’s the actions we take after the emergency has passed that mean the most, whether we’re suspending billing and collections activities for customers, raising funds to help those affected, or being there to step in and help provide whatever the community needs. WE GO BEYOND | PAGE 8 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Air purifiers. Computer technology. Food and water. Our response to the Mendocino Complex Fire—the largest recorded wildfire in California history — showcased our preparedness, emergency response capabilities, and tireless dedication to serving our customers. R WE GO BEYOND | PAGE 9 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Mendocino Complex Fire Let’s Get It Done In order to be as helpful as possible, we deployed people from many departments — engineering, operations, government relations— and from many locations around the state. Remote Operation While the fires burned, we used com- puter technology to control our water system and treatment plant from our Emergency Operations Center about 85 miles away. “ I would consider Cal Water to be a teammate. The water they supply for us allows us to go in and fight fires safely and effectively.” Ken Pensavento, Firefighter Beyond the hydrant Care Stations As soon as the evacuation order was lifted, we set up two care stations to provide returning residents with food and water. We’re in This Together After the fire, we gave bill credits to customers to cover water that was used to protect their properties during the fire and to flush their pipes after their return. Smooth Operators With a mandatory evacuation order in place, a team of treatment plant operators was escorted back to the plant by law enforcement to ensure that firefighters had suffi- cient water supplies and pressure to fight the blaze. Clean Air, Please To combat the poor air quality caused by smoke from the fire, we donated face masks and air purifiers to local shelters. WE GO BEYOND | PAGE 10 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Beyond the call Our team members continually “answer the call” and go above and beyond what’s expected of them, both literally and figuratively. Our customer service professionals, whose job it is to answer incoming customer calls, nearly always pick up within 30 seconds and satisfy customers’ needs on the first attempt—just two of the metrics we use to ensure our service is better than the industry standard. But no matter their job title, all of our employees are dedicated to providing exceptional customer service whenever and however they can, from the meter reader who takes time to help an elderly customer carry her groceries into the house to the treatment plant operator who sees a stranded car, sets up traffic control, and helps to change a flat tire. Of course, many customers never call us because they’re already getting everything they need: an uninterrupted supply of clean water, convenient bill-paying options, a user-friendly website and customer service portal, and a variety of conservation programs and rebates. But when they do call, we are committed to making that personal interaction count. WE GO BEYOND | PAGE 11 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Hamburgers. Elevated tanks. Hardship grants. While most customer calls are straightforward, such as requests to make payment arrangements or start service at a new address, others present an opportunity for us to show what it really means to go beyond. R WE GO BEYOND | PAGE 12 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Answering the Call Water on Wheels When our foreman got a call about a leak at the local hamburger stand, he knew he needed to make the repair without impacting the restaurant’s lunch service to hungry high school students. So he brought in “Water on Wheels,” a portable water supply that was the result of an employee-driven Continuous Improvement project. It’s used to make repairs and water systems upgrades without interrupting water service. Help Responding to a report of water waste at a home in Bakersfield, our employee heard someone calling for help. He went to a window and found a woman who had fallen the night before and couldn’t get up. After calling 911, he talked to the woman until help arrived. WE GO BEYOND | PAGE 13 Responding to Community Input When we made plans to remove some elevated water tanks due to earthquake safety concerns, the Chico Heritage Association asked us to reconsider. Turns out the community loved the tanks, so we went out of our way to keep the two oldest while ensuring safety. Going the Distance When an elderly customer called about a higher-than-usual water bill, our customer service rep discovered the customer’s usage had tripled. After sending out a service person to rule out leaks, the rep kept looking for answers. Eventually, she determined that the customer had a new irrigation system, which turned out to be the problem. Hearing that the customer was on a fixed income, the rep helped to get her assistance from the Cal Water Cares Grant Program. Beyond the call Lost and Found One of our meter readers found a wallet filled with cash, credit cards, and a driver’s license, and immediately went to the address on the license to return it to the owner. Thankful Indeed One of our service people located and repaired a leak at 11:30 p.m. the night before Thanksgiving so our customer could host her family’s dinner the next day. HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Beyond the water “To enhance the quality of life for our customers, communities, employees, and stockholders.” Some might say that’s a pretty lofty purpose for a water utility. We say it’s just right. Why? Because we deliver the lifeblood of every community we serve and literally keep our customers clean, safe, and healthy. But there’s more to it than that. The fact is, we care about people as much as we care about pipes. We care about our customers, so we do more than provide high-quality water and service—we also offer assistance to low-income customers and have established a stockholder-funded hardship grant program to help those in need. We care about our employees, so we provide competitive pay and benefits, professional-development opportunities, and safety training. We care about our stockholders, so we work hard to provide them with a steady, reliable return on their investment. And we care about our communities, so we contribute time and resources to make life better for everybody in it. WE GO BEYOND | PAGE 14 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS H2O Challenge. Walk 4 Water. Operation Gobble. We collect coats for the homeless, mentor at-risk youth, raise funds for veterans, and construct wells in Third World countries. Basically, we do good … every day, in every community we serve, and beyond. R WE GO BEYOND | PAGE 15 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Making Life Better in Our Communities Reaching Higher Our scholarship program assists students in our communities who plan to continue their education in college or vocational school. Water I.Q. Our H2O Challenge is a project-based, environmentally focused competition for grades 4–6 that’s designed to help kids better understand water as a local and global resource. Grand Prize: a tent-camping trip to Yosemite National Park for the winning class! Grab a Bucket For Chico’s Walk 4 Water fund- raiser, employees fill a bucket of water from the Chico Creek and walk a 2K or 5K to help African villages gain access to clean water. Helping Our Furry Friends Employees from our Salinas District regularly volunteer at the ASPCA, and Selma District employees volunteer at a local animal shelter. Beyond the water A Meal and a Smile Employees from the Stockton District volunteer at St. Mary’s Dining Room, an organization that provides nutritious meals to the community’s homeless and working poor populations. Hope During the Holidays For 30 years, we’ve contributed hundreds of thousands of holiday meals to those in need through Operation Gobble, which supports charities that serve the most vulnerable in our communities. Giving the Gift of Life Our Livermore District employ- ees give back to the community by holding quarterly blood drives through the American Red Cross. Toys, Toys, Toys Every year, hundreds of kids find toys under their Christmas trees that might not otherwise be there, thanks to our participation in the California Highway Patrol’s annual toy drive in East Los Angeles. WE GO BEYOND | PAGE 16 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Letter to Stockholders Dear Fellow Stockholder, What does it mean to “go beyond”? For us, it means doing everything our customers, communities, employees, and stockholders expect us to do, and then some. It means pulling out all the stops. It means going all out. That’s why we make every business decision with our purpose in mind: to improve the quality of life for our customers, communities, employees, and stockholders. Executing our strategy meant focusing on three major areas in 2018: our emergency preparedness and response, California General Rate Case, and infrastructure investment program. WE GO BEYOND | PAGE 17 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Emergency Preparedness & Response In 2018, the Mendocino Complex, Woolsey, and Camp Fires put our emergency preparedness and response to the test. Thanks to our robust training program, our teams were able to jump into action and partner with other first responders to activate emergency operations centers and provide the services our communities needed. As illustrated on previous pages, the Mendocino Complex Fire necessitated evacuation of our Lucerne, California, service area. As the fire approached our facilities, we provided the only local water supply available to fight the fire, thanks in part to the brave water treatment plant operators who went back into the fire zone to make the adjustments needed to keep our water system running. In the end, the Mendocino Complex Fire burned over 410,203 acres. The Woolsey and Camp Fires, which both began on November 8, 2018, were more damaging for our customers, communities, and employees, together injuring six firefighters and taking the lives of 89 people. The only one of the three fires to actually burn into our service area, the Woolsey Fire tested our water system. Fortunately, we quickly brought personnel and equipment in from our other districts to keep the water flowing. In the end, the Woolsey Fire burned 96,949 acres in Ventura and Los Angeles Counties, destroying 1,500 structures and damaging 341 more. The historically destructive and deadly Camp Fire hit even harder, devastating the Town of Paradise, neighbor to our Chico service area and home to many of our Chico-based employees. It burned 153,336 acres and destroyed 18,793 structures, including 11 of our employees’ homes. In addition to providing immediate assistance to our employees, we part- nered with the Utility Workers Union of America to set up a corporate-match fundraiser that brought in more than $300,000 to assist people affected by the disaster. At this writing, we continue to provide emergency aid to Paradise Irrigation District in an effort to restore water service to Paradise. California General Rate Case If you’ve owned stock in our company for any length of time, you probably know that the rates for our largest subsidiary, California Water Service, are established through a triennial proceeding of the California Public Utilities Commission called a General Rate Case. In 2018, we began the three-year process with an initial filing in July. Recognizing the public’s growing interest in the cost of water and the importance of maintaining a strong brand, we conducted research to better understand how to effectively communicate the value of the services we provide. The result of that undertaking is a campaign called “Reliability Runs Deep,” which uses videos, infographics, and interviews with Financial Highlights (Dollars in thousands, except per common share data) Year ended December 31 2018 2017 1 2016 2015 2014 Market price at year end Book value per share Earnings per share (diluted) Dividend per share Operating Revenue Net Income $47.66 $15.19 $1.36 $0.750 $698,196 $65,584 $45.35 $14.56 $1.52 $0.720 $676,113 $72,940 $33.90 $13.75 $1.01 $0.690 $23.27 $13.41 $0.94 $0.670 $24.61 $13.11 $1.19 $0.650 $609,370 $588,368 $597,499 $48,675 $45,017 $56,738 1 The 2017 reported financial data was adjusted to reflect an immaterial computational error that resulted in an understatement of operating revenue, net income, and earnings per share. WE GO BEYOND | PAGE 18 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Looking Back, Moving Forward A few personal notes before we conclude: Director George A. Vera retired in 2018 after 20 years of service on the Board. We dearly miss him and his insightful leadership, and we wish him all the best. Shelly M. Esque joined the Board in June 2018 and has already proven a valuable addition; we are so pleased to have someone with her unique perspective and expertise at the table. In addition, at the beginning of 2019, two new officers joined our leadership team: Michael S. Mares, Jr. became Vice President, California Operations, and Greg A. Milleman assumed the role of Vice President, California Rates. We also updated the Group logo and added the tagline, “Investing for Life.” (See it on the back cover.) Though our customers and most other stakeholders know us under the brands of our subsidiary utility service companies, the new corporate logo will be used to identify the company with stockholders and partners who conduct business with our parent company. It’s been an eventful year, and we’re excited about all the future holds for us. We thank you for your continued support and investment in California Water Service Group. Martin A. Kropelnicki President and Chief Executive Officer Peter C. Nelson Chairman of the Board front-line employees to educate customers about our infrastructure improvement program and how critical it is for fire protection, health and safety, and quality of life. This ongoing campaign has helped to lay a foundation for our public discussions about the General Rate Case, which we refer to publicly as our Infrastructure Improvement Plan and Budget Filing. In the filing itself, we focused on three main areas: increasing infrastructure investment, reducing expenses, and designing rates for affordability. We proposed $828.5 million in new capital investments over three years and included expense reductions resulting from lower costs related to employee health and pension plans and savings resulting from the Tax Cuts and Jobs Act. And, to improve affordability, we proposed to reduce the cost for the first units of water used and increase the cost for higher tiers of usage. We also proposed an additional rate consolidation for districts in the central part of the state, which helps mitigate increases in smaller service areas. Overall, we requested an additional $115.2 million in operating revenue, while holding first-year monthly increases to $5 or less for the average residential customers in 75% of our districts. According to the published schedule, the Commission plans to issue a decision on the filing in the fourth quarter of 2019 with new rates becoming effective in January 2020. Infrastructure Investment Program The cornerstone of our growth is our capital investment program, because it is the basis of our stockholder return. In 2018, we continued to focus on investing diligently in the infrastructure that is critical to provid- ing our customers a reliable, high-quality water supply. The two largest capital projects in 2018 were the 36 treatment plants constructed to meet the new water quality standard for 1,2,3-trichloropropane, which were completed in the first quarter of 2018, and the Palos Verdes Peninsula Water Reliability Project, which is still underway. In total, we invested $271.7 million in capital projects in 2018, completing a variety of projects to improve reliability, safety, and quality, including water quality treatment facilities, wells, and new pipelines in California, Washington, Hawaii, and New Mexico. WE GO BEYOND | PAGE 19 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Fast Track to Compliance Our Engineering, Operations, and Water Quality teams planned, designed, constructed, and installed 36 treatment plants in order to meet the new standard for 1,2,3-trichloropropane (TCP), with most of the work taking place before the new limit was even established. PLANNING FOR THE UNKNOWN Well before the State of California set a new standard for TCP, Cal Water certified its water quality lab to detect TCP at lower levels and began the planning process. MASSIVE PROJECT GETS UNDERWAY In August 2016, we began a massive effort to conduct site surveys, establish monitoring protocols, design treatment plants, purchase equipment, and obtain necessary permits. One year later, we started construction on 36 treatment plants—all before the new standard was even set. COMPANY MEETS COMPLIANCE DEADLINE The State set the new standard in December 2017, and just one month later, Cal Water began monitoring for TCP. AWARDS FOLLOW The project received awards from the American Society of Civil Engineers and the National Association of Water Companies. Increasing Infrastructure Investments $300,000,000 $250,000,000 $200,000,000 $150,000,000 $100,000,000 $50,000,000 $0 WE GO BEYOND | PAGE 20 2014 2015 2016 2017 2018 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS CWT 20-Year Total Return on Investment (On $100 stock purchase on December 31, 1998, with dividends reinvested) = S&P 500 = CWT $0 $100 $200 $300 $400 $500 $600 $700 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 WE GO BEYOND | PAGE 21 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Eight-Year Financial Review (Dollars in thousands, except per common share and other data) Summary of Operations Operating revenue 1 Operating expenses 1,2 Interest expense, other income and expenses, net 2 Net income 1 2018 2017 2016 2015 $698,196 $676,113 $609,370 $588,368 $587,656 $569,030 $526,734 $506,803 $44,956 $65,584 $34,143 $33,961 $36,548 $72,940 $48,675 $45,017 Common Share Data Earnings per share (diluted) 1 Dividend declared Dividend payout ratio Book value Market price at year end Common shares outstanding at year end (in thousands) Return on average common stockholders’ equity Long-term debt interest coverage $1.36 $0.750 55% $15.19 $47.66 48,065 9.2% 3.57 $1.52 $1.01 $0.720 $0.690 47% $14.56 $45.35 48,012 10.7% 4.58 68% $13.75 $33.90 47,965 7.5% 3.45 $0.94 $0.670 71% $13.41 $23.27 47,875 7.1% 3.67 Balance Sheet Data Net utility plant Total assets $2,232,723 $2,047,965 $1,859,277 $1,701,768 $2,837,704 $2,744,710 $2,411,745 $2,241,253 Long-term debt, including current portion $814,938 $531,713 $557,953 $514,045 Capitalization ratios: Common stockholders’ equity Long-term debt 47.3% 52.7% 56.8% 43.2% 54.2% 45.8% 55.5% 44.5% Other Data Water production (in million gallons) Customers at year end, including Hawthorne and Commerce New customers added Operating revenue per customer Utility plant per customer Employees at year end 107,589 517,500 3,200 $1,394 $6,240 1,184 104,986 514,300 2,800 $1,315 $5,775 1,176 99,096 98,899 511,500 509,000 2,500 $1,191 $5,312 1,163 2,900 $1,156 $4,925 1,155 1 The 2017 reported financial data was adjusted to reflect an immaterial computational error that resulted in an understatement of operating revenue, operating expenses, net income, and earnings per share. WE GO BEYOND | PAGE 22 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Eight-Year Financial Review (cont’d) (Dollars in thousands, except per common share and other data) Summary of Operations Operating revenue 1 Operating expenses 1,2 2018 2014 2013 2012 2011 $698,196 $597,499 $584,103 $559,966 $501,814 $587,656 $508,631 $510,098 $486,123 $434,647 Interest expense, other income and expenses, net 2 $44,956 $32,130 $26,751 $25,015 $29,455 Net income 1 $65,584 $56,738 $47,254 $48,828 $37,712 Common Share Data Earnings per share (diluted) 1 Dividend declared Dividend payout ratio Book value Market price at year end Common shares outstanding at year end (in thousands) Return on average common stockholders’ equity Long-term debt interest coverage $1.36 $0.750 55% $15.19 $47.66 $1.19 $1.02 $1.17 $0.650 $0.640 $0.630 55% $13.11 $24.61 63% $12.54 $23.07 54% $11.30 $18.35 $0.90 $0.615 68% $10.76 $18.26 48,065 47,806 47,741 41,908 41,817 9.2% 3.57 9.3% 4.29 8.8% 3.42 10.6% 3.45 8.5% 3.11 Balance Sheet Data Net utility plant Total assets $2,232,723 $1,590,431 $1,515,831 $1,457,056 $1,381,119 $2,837,704 $2,182,711 $1,954,741 $1,990,333 $1,848,517 Long-term debt, including current portion $814,938 $421,200 $428,936 $475,659 $482,094 Capitalization ratios: Common stockholders’ equity Long-term debt Other Data 47.3% 52.7% 59.80% 58.30% 49.90% 48.30% 40.20% 41.70% 50.10% 51.70% Water production (in million gallons) 107,589 118,282 126,363 125,892 120,353 Customers at year end, including Hawthorne and Commerce New customers added Operating revenue per customer Utility plant per customer Employees at year end 517,500 506,100 502,900 500,700 499,500 3,200 $1,394 $6,240 1,184 3,200 $1,181 $4,628 1,105 2,200 $1,161 $4,401 1,125 1,200 $1,118 $4,187 1,132 1,600 $1,005 $3,925 1,132 1 The 2017 reported financial data was adjusted to reflect an immaterial computational error that resulted in an understatement of operating revenue, operating expenses, net income, and earnings per share. 2 The five-year financial review for 2017, 2016, 2015, and 2014 reflect the retrospective adoption of new pension accounting requirements (ASU 2017-07). The Company adopted this guidance on January 1, 2018. WE GO BEYOND | PAGE 23 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Our Service Areas California Districts • Bakersfield • Bay Area Region • Bear Gulch • Chico • Commerce • Dixon • Dominguez • East Los Angeles • Hawthorne • Hermosa- Redondo • Kern River Valley • Livermore • Los Altos • Los Angeles County Region • Marysville • Monterey Region • Oroville • Selma • Stockton • Visalia • Westlake • Willows New Mexico Operations/Customer Centers • Elephant Butte • Rio Communities Serving the communities of Meadow Lake, Cypress Gardens, Rio Communities, Rio Del Oro, Elephant Butte, Sandia Knolls, Indian Hills, Woodland Hills, Squaw Valley, and Cedar Crest in the counties of Sierra, Valencia, Torrance, and Bernalillo CUSTOMER CONNECTIONS 2018 486,900 CUSTOMER CONNECTIONS 2018 8,200 2017 484,900 2017 8,100 Including Hawthorne and Commerce operation and maintenance agreements WE GO BEYOND | PAGE 24 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Our Service Areas Hawaii Operations/Customer Centers • Ka`anapali (Maui) • Waikoloa (Hawaii) Serving the communities of Ka`anapali, Pukalani, Waikoloa, North Kona Coast, and Kohala Coast on the islands of Maui and Hawaii Washington Operations/Customer Centers • Olympia (S.W. Regional Office) • Gig Harbor (N.W. Regional Office and Customer Center) • Sequim • Issaquah • Orcas Island (Field Offices) Serving more than 425 neighborhoods and small communities in the counties of Clallam, Jefferson, Kitsap, Mason, Pierce, King, San Juan, and Thurston CUSTOMER CONNECTIONS 2018 4,800 CUSTOMER CONNECTIONS 2018 17,600 2017 4,500 2017 16,800 WE GO BEYOND | PAGE 25 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS California Districts and Communities Bakersfield Bay Area Region South San Francisco, Colma, Broadmoor, San Mateo, San Carlos, Lucerne, Duncans Mills, Guerneville, Dillon Beach, Noel Heights, and portions of Santa Rosa Bear Gulch Atherton, Woodside, Portola Valley, and a portion of Menlo Park Chico Hamilton City Dixon Dominguez Carson and portions of Compton, Harbor City, Long Beach, Los Angeles County, and Torrance East Los Angeles Portions of Montebello, Commerce, Monterey Park, and Vernon Hawthorne and Commerce (Operation and maintenance agreements) Hermosa-Redondo Hermosa Beach, Redondo Beach, and a portion of Torrance Kern River Valley Bodfish, Kernville, Lakeland, Mountain Shadows, Onyx, Squirrel Valley, South Lake, and Wofford Heights WE GO BEYOND | PAGE 26 2018 2017 71,900 71,600 55,800 55,700 18,900 18,900 30,100 29,700 3,000 2,900 34,200 34,100 26,800 26,800 7,600 7,600 27,000 26,900 3,900 4,000 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS 2018 2017 25,600 25,600 18,800 18,800 19,000 19,000 3,800 3,800 31,400 31,300 3,600 6,500 3,600 6,400 44,200 44,000 45,300 44,700 7,100 7,100 2,400 2,400 California Districts and Communities Los Angeles County Region Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills, Rolling Hills Estates, Fremont Valley, Lake Hughes, Lancaster, and Leona Valley Livermore Los Altos Portions of Cupertino, Los Altos Hills, Mountain View, and Sunnyvale Marysville Monterey Region Salinas and King City Oroville Selma Stockton Visalia Westlake Westlake Village and a portion of Thousand Oaks Willows WE GO BEYOND | PAGE 27 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Board of Directors Gregory E. Aliff Former Vice Chairman and Senior Partner of U.S. Energy & Resources, Deloitte LLP Director since 2015. Member of the following committees: Audit and Finance/Risk Management. Terry P. Bayer Former Chief Operating Officer, Molina Healthcare, Inc. Director since 2014. Member of the following committees: Organization/Compensation, Nominating/Corporate Governance, and Audit. Shelly M. Esque Former Vice President and Global Director of Corporate Affairs, Intel Corporation Director since 2018. Edwin A. Guiles Former Chairman/CEO of San Diego Gas & Electric Company and Southern California Gas Company, Sempra Energy Utilities Director since 2008. Member of the following committees: Organization/ Compensation, Finance/Risk Management, and Audit. WE GO BEYOND | PAGE 28 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Board of Directors Martin A. Kropelnicki President and Chief Executive Officer Director since 2013. Thomas M. Krummel, M.D. Professor and Chair Emeritus, Surgery Department, Stanford University School of Medicine Director since 2010. Member of the following committees: Nominating/ Corporate Governance and Organization/Compensation. Richard P. Magnuson Lead Director and Private Venture Capital Investor Director since 1996. Member of the following committees: Audit, Finance/ Risk Management, and Nominating/ Corporate Governance. Peter C. Nelson Chairman of the Board Director since 1996. Carol M. Pottenger Principal and Owner of CMP Global, LLC, and Retired U.S. Navy Vice Admiral Director since 2017. Member of the following committee: Nominating/ Corporate Governance. NOT PICTURED Lester A. Snow Former Director of the California Department of Water Resources Director since 2011. Member of the following committees: Organization/ Compensation and Finance/Risk Management. WE GO BEYOND | PAGE 29 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Corporate Officers Shannon C. Dean Vice President, Corporate Communications and Community Affairs David B. Healey Vice President, Controller and Assistant Treasurer Martin A. Kropelnicki President and Chief Executive Officer Robert J. Kuta Vice President, Engineering and Environmental Affairs WE GO BEYOND | PAGE 30 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Corporate Officers Michael B. Luu Vice President, Customer Service and Chief Information Officer Lynne P. McGhee Vice President, General Counsel Michelle R. Mortensen Corporate Secretary Elissa Y. Ouyang Chief Procurement and Lead Continuous Improvement Officer Gerald A. Simon Chief Safety and Emergency Preparedness Officer Thomas F. Smegal, III Vice President, Chief Financial Officer and Treasurer Paul G. Townsley Vice President, Regulatory Matters and Corporate Development Timothy D. Treloar Vice President, Water Quality and Chief Utility Operations Officer Ronald D. Webb Vice President, Human Resources WE GO BEYOND | PAGE 31 HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS Corporate Information Computershare Investor Services 462 South 4th Street Suite 1600 Louisville, KY 40202 To Transfer Stock A change of ownership of shares (such as when stock is sold or gifted or when owners are deleted from or added to stock certificates) requires a transfer of stock. To transfer stock, the owner must complete the assignment on the back of the certifi- cate and sign it exactly as his or her name appears on the front. This signature must be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations, and credit unions with membership in approved signature medallion programs) pursuant to SEC Rule 17Ad-15. A notary’s acknowledgment is not acceptable. This certificate should then be sent to Computershare Investor Services (Computershare) by registered or certified mail with complete transfer instructions. Alternatively, the Direct Registration System can be utilized, which allows electronic share transactions between your broker or dealer and Computershare. Bond Registrar U.S. Bank Trust, N.A. One California Street San Francisco, CA 94111-5402 415.273.4580 WE GO BEYOND | PAGE 32 Annual Meeting The Annual Meeting of Stockholders will be held on Wednesday, May 29, 2019, at 9:30 a.m. at the Company’s Executive Office, located at 1720 North First Street in San Jose, California. Details of the business to be transacted during the meeting will be contained in the proxy material, which will be mailed to stockholders on or about April 17, 2019. Anticipated Dividend Dates for 2018 QUARTER DECLARATION RECORD DATE First January 30 February 11 PAYMENT DATE February 22 Second April 24 May 6 May 17 Third July 31 August 12 August 23 Fourth October 30 November 11 November 22 Annual Report for 2018 on Form 10-K A copy of the Company’s report for 2018 filed with the Securities and Exchange Commission (SEC) on Form 10-K is available and can be obtained by any stockholder at no charge upon written request to the address below. The Company’s filings with the SEC can be viewed via the link to the SEC’s EDGAR system on the Company’s website. Executive Office and Stockholder Information California Water Service Group Attn: Stockholder Relations 1720 North First Street San Jose, CA 95112-4508 408.367.8200 or 800.750.8200 www.calwatergroup.com HOME HIGHLIGHTS LETTER FINANCIAL REVIEW SERVICE AREAS DIRECTORS ™ 1720 North First Street, San Jose, California 95112-4508 408.367.8200 www.calwatergroup.com NYSE: CWT WE GO BEYOND | PAGE 33