SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
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California Water Service Group
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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previously. Identify the previous filing by registration statement number,
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California Water Service Group
Notice of 1998 Annual Meeting
and Proxy Statement
A Plain English Field Guide
[LOGOS]
We are dedicated to being the leader in providing communities and customers with
traditional and innovative utility services.
[LOGO] CALIFORNIA WATER SERVICE GROUP
CALIFORNIA WATER SERVICE COMPANY o CWS UTILITY SERVICES
1720 NORTH FIRST STREET o SAN JOSE, CA 95112-4598 o (408) 367-8200
March 11, 1998
Dear Shareholder:
You are cordially invited to attend our Annual Meeting of Shareholders at 10:00
A.M. on Wednesday, April 15, 1998, at the executive offices of California Water
Service Group (the "Group"), 1720 North First Street, San Jose, California. At
the Annual Meeting, we will review our 1997 performance and answer your
questions.
With this letter, we are including the notice for the Annual Meeting, the proxy
statement, the proxy card and the 1997 annual report.
As you may be aware, we have completed the formation of the holding company,
California Water Service Group. The Group currently has two operating
subsidiaries: California Water Service Company, which will continue to operate
as a regulated utility, and CWS Utility Services, which will be responsible for
non-regulated business activities.
Because this is the Group's first proxy statement, we've taken this opportunity
to write it in jargon-free "plain English." We hope you find its simplified
format helpful and we welcome your comments.
When you thumb through this proxy statement, you may want to keep a couple of
things in mind. First, you will be deciding who will serve as the Group's
directors until the next Annual Meeting. The directors also will serve on the
boards of the Group's two subsidiaries. Second, because the Group became
effective at the end of 1997, the financial information included in the proxy
statement refers to California Water Service Company, rather than to the Group.
I look forward to seeing you on April 15. However, regardless of whether you
plan to attend, please return your completed proxy in the envelope provided as
soon as possible. Your vote is important.
Sincerely,
/s/ ROBERT W. FOY
- ---------------------
Robert W. Foy
Chairman of the Board
CALIFORNIA WATER SERVICE GROUP
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
APRIL 15, 1998
The Annual Meeting of Shareholders of California Water Service Group (the
"Group"), a California corporation, will be held, as provided in its bylaws, at
10:00 A.M. on Wednesday, April 15, 1998, at the Group's executive offices at
1720 North First Street, San Jose, California, for the following purposes:
1. To elect a nine-person Board of Directors to serve until the 1999 Annual
Meeting;
2. To consider and act upon ratification of KPMG Peat Marwick, LLP, as
independent auditors; and
3. To transact any other business properly coming before the Annual
Meeting.
In accordance with the bylaws of the Group, only shareholders of record at the
close of business on Tuesday, February 17, 1998, or those with a valid proxy
from a brokerage firm or another similar organization, which held the shares on
that date, will be able to vote at this meeting.
WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE SIGN, DATE AND RETURN YOUR PROXY IN
THE ENVELOPE PROVIDED AS SOON AS POSSIBLE SO THAT YOUR SHARES CAN BE VOTED IN
ACCORDANCE WITH YOUR INSTRUCTIONS.
BY THE ORDER OF THE BOARD OF DIRECTORS
Paul G. Ekstrom
Corporate Secretary
San Jose, California
March 11, 1998
TABLE OF CONTENTS
Questions and Answers 2
Proposals to be Voted Upon 5
Brief Biographies of Nominees for Directors 6
Board Committees 8
Compensation of Non-Employee Directors 9
Beneficial Ownership of Director-Nominees 10
Performance Graph 11
Compensation of Executive Officers 12
Report of the Compensation Committee 14
Largest Principal Shareholders and Security Ownership of Management 16
Other Information 17
FOR DIRECTIONS TO THE ANNUAL MEETING, PLEASE REFER TO THE MAP ON PAGE 18.
CALIFORNIA WATER SERVICE GROUP.
1
QUESTIONS AND ANSWERS
WHAT HAPPENED TO CALIFORNIA WATER SERVICE COMPANY?
On December 31, 1997, the California Water Service Group (the "Group") became
the holding company for California Water Service Company (the "Company") and CWS
Utility Services. At the same time, shareholders of the Company became
shareholders of the Group. The business of the Company was not affected by this
reorganization. The Company and CWS Utility Services are now operating
subsidiaries of the Group.
WHAT AM I VOTING ON?
o Election of nine directors to serve until the 1999 Annual
Meeting; and
o Ratification of KPMG Peat Marwick, LLP, as the Group's
independent auditors.
Those elected to serve as the Group's directors also will serve as the directors
of the Group's two subsidiaries.
WHO MAY ATTEND THE ANNUAL MEETING?
All Group shareholders may attend.
WHO IS ENTITLED TO VOTE?
Shareholders of record at the close of business on February 17, 1998 (the
"Record Date"), or those with a valid proxy from a brokerage firm or another
similar organization which held the shares on the Record Date.
HOW MANY VOTES DO I GET?
Each share of Common Stock is entitled to one vote. Each share of Preferred
Stock is entitled to 16 votes. As described below, if there is cumulative voting
for the election of directors, you will be entitled to cast a proportionately
greater number of votes.
HOW ARE THE DIRECTORS ELECTED?
The nine nominees receiving the highest number of votes are elected to the
Board.
WHO ARE THE BOARD NOMINEES?
The nominees are Robert W. Foy, Edward D. Harris, Jr., M.D., Robert K. Jaedicke,
Richard P. Magnuson, Linda R. Meier, Peter C. Nelson, C. H. Stump, George A.
Vera and J. W. Weinhardt. All the nominees are current Board members, except for
Mr. Vera. See pages 6 and 7 for biographical information, including the
nominees' current directorships in other publicly held companies.
HOW CAN VOTES BE CUMULATED?
Shareholders or persons holding a valid proxy may cumulate their votes for the
election of
CALIFORNIA WATER SERVICE GROUP
2
directors in certain circumstances. When cumulative voting applies, shareholders
may give one candidate nine votes for each Common Share owned (that is, one vote
for each director to be elected) or they may distribute their votes on the same
principle among as many candidates as they desire. Because each Group Preferred
Share is entitled to 16 votes, Group Preferred shareholders may cumulate 144
votes (16 x 9) for each share owned.
Cumulative voting applies when at least one shareholder gives notice of his or
her intention to cumulate votes prior to the voting at the Annual Meeting. If
any shareholder gives notice, all shareholders may cumulate their votes for the
candidates. However, shareholders or persons holding valid proxies may not
cumulate votes unless their candidates are nominated prior to the voting. The
Board is soliciting discretionary authority to cumulate votes if cumulative
voting rights are invoked.
HOW DO I VOTE?
The simplest way to vote is to sign and date each proxy card you receive and
return it in the postage-prepaid envelope. The shares represented by a signed
and dated proxy will be voted in accordance with the directions given by the
shareholder on the proxy. If you return a signed and dated proxy without marking
any selections, your proxy card will be voted in favor of the two proposals. You
may revoke your proxy any time before the meeting by 1) notifying the Group's
corporate secretary or 2) returning a later-dated proxy. Of course, you also may
revoke your proxy by attending the Annual Meeting and voting in person.
WHAT HAPPENS IF I ABSTAIN?
If you (or the person holding your proxy) attend the Annual Meeting and abstain
from voting on any proposal, this abstention will have the same effect as a vote
against the proposal.
WHAT HAPPENS IF MY SHARES ARE HELD UNDER THE NAME OF A BROKERAGE FIRM?
If you hold your shares in "street name" at a brokerage firm and do not instruct
it on how to vote, the brokerage firm may not vote for you in certain
circumstances. This is known as a "broker non-vote." Broker non-votes will be
counted for quorum purposes. However, broker non-votes will have no effect on
the election of directors or any other proposal.
WHO WILL COUNT THE VOTE?
Representatives of Boston EquiServe, the Group's transfer agent, will serve as
the inspector of the election and count the votes.
WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
It may indicate that your shares are registered under more than one name. Please
sign and return all proxy cards to ensure that all your votes are counted.
CALIFORNIA WATER SERVICE GROUP
3
WHAT CONSTITUTES A QUORUM?
At the Record Date, there were approximately 11,000 shareholders of record.
There were 12,619,140 shares of Group Common Stock outstanding and entitled to
vote at the Annual Meeting and 139,000 shares of Group Preferred Stock
outstanding and entitled to vote at the Annual Meeting.
A majority of the outstanding shares - present at the Annual Meeting or
represented by persons holding valid shareholder proxies - constitutes a quorum
for the Annual Meeting. If you submit a valid proxy card, you will be considered
part of the quorum.
Without a quorum, no business may be transacted at the Annual Meeting. However,
whether or not a quorum exists, a majority of the voting power of those present
at the Annual Meeting may adjourn the Annual Meeting to another date, time and
place.
WHAT PERCENTAGE OF STOCK DO THE DIRECTORS AND OFFICERS OWN?
Together, they own less than one percent of our Common and Preferred Stock as of
the Record Date. However, Director Weinhardt is chairman of the board and chief
executive officer of SJW Corp., which owns 8.7 percent of Group Common Stock.
See pages 10 and 16 for more details.
WHO ARE THE LARGEST PRINCIPAL SHAREHOLDERS?
On January 1, 1998, the largest principal shareholders were:
o SJW Corp. (1,099,952 shares of Common Stock, representing 8.7
percent of our Common Stock);
o Employees Savings Plan of California Water Service Company, a
company-sponsored 401(k) plan (646,286 shares of Common Stock,
representing 5.1 percent of our Common Stock); and
o First Colony Life Insurance (36,610 shares of Series C Preferred
Stock, representing 26.3 percent of our Preferred Stock). See
page 16 for more details.
WHEN ARE SHAREHOLDER PROPOSALS DUE?
To be eligible for inclusion in next year's proxy statement, shareholder
proposals must be submitted in writing by November 11, 1998, to Paul Ekstrom,
Corporate Secretary, California Water Service Group, 1720 North First Street,
San Jose, CA 95112-4598.
HOW CAN A SHAREHOLDER PROPOSE A NOMINEE FOR THE BOARD?
A shareholder may recommend any person as a nominee for director by writing to
the Board of Directors, 1720 North First Street, San Jose, CA 95112-4598.
Recommendations for directors serving in 1999 must be received by November 11,
1998, and must be accompanied by a notarized statement from the nominee
indicating his or her willingness to serve if elected and disclosing principal
occupations or employment during the past five years. Shareholders also may
nominate any person for director at the Annual Meeting.
CALIFORNIA WATER SERVICE GROUP
4
PROPOSALS TO BE VOTED UPON
1. ELECTION OF DIRECTORS (ITEM 1 ON PROXY CARD)
The nine directors of the Group are elected annually. All 1998 nominees, except
for Mr. Vera, are current directors of the Group. The Board recommends a vote
FOR these nominees. The term of office for directors elected at the 1998 Annual
Meeting will expire upon the election of the new directors at the 1999 Annual
Meeting. (See page 6 for biographical information on the Board nominees and page
10 for the number of shares of Group Common Stock and Preferred Stock
beneficially owned by the nominees.)
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(ITEM 2 ON PROXY CARD)
Shareholders will vote on the ratification of KPMG Peat Marwick, LLP (KPMG),
certified public accountants, to audit the Group's books, records and accounts
for the year ending December 31, 1998. KPMG has acted as independent auditors
for California Water Service Company since 1939. Following the recommendation of
the Audit Committee, the Board recommends a vote FOR the adoption of this
proposal. Representatives of KPMG will be present at the meeting to answer
questions. If the shareholders do not ratify this appointment, the Board will
reconsider the selection of the auditors.
CALIFORNIA WATER SERVICE GROUP
5
NOMINEES FOR DIRECTORS(1)
Robert W. Foy [PHOTOGRAPH]
Edward D. Harris, Jr., M.D. [PHOTOGRAPH]
Robert K. Jaedicke [PHOTOGRAPH]
Richard P. Magnuson [PHOTOGRAPH]
Linda R. Meier [PHOTOGRAPH]
ROBERT W. FOY(2) DIRECTOR SINCE 1977
Mr. Foy, age 61, is chairman of the board of California Water Service Group and
its two subsidiaries. He was formerly president and chief executive officer of
Pacific Storage Company, a diversified transportation and warehousing company
serving Stockton, Modesto, Sacramento and San Jose. He has served as chairman of
California Water Service Company since January 1, 1996.
EDWARD D. HARRIS, JR., M.D.(2),(3) DIRECTOR SINCE 1993
Dr. Harris, age 60, is the George DeForest Barnett professor of medicine at
Stanford University Medical Center, where he is the director of the Center for
Musculoskeletal Diseases and the medical director of the International Medicine
Service. He is a director of the Genentech Research and Educational Foundation.
ROBERT K. JAEDICKE(3),(4) DIRECTOR SINCE 1974
Professor Jaedicke, age 69, is professor emeritus of accounting and former dean
at the Stanford University Graduate School of Business. Professor Jaedicke also
is a director of Boise Cascade Corporation, Enron Corp., GenCorp, Inc., Wells
Fargo Bank and State Farm Insurance Companies.
RICHARD P. MAGNUSON(4) DIRECTOR SINCE 1996
Mr. Magnuson, age 42, is a private venture capitalist. From 1984 to 1996, he was
a general partner of Menlo Ventures, a venture capital firm. He also is a
director of OrCAD, Inc., Rogue Wave Software, Inc. and several other privately
held companies.
LINDA R. MEIER(3),(4) DIRECTOR SINCE 1994
Ms. Meier, age 57, is a director of Comerica Bank - California, the Peninsula
Community Foundation and the National Advisory Board of the Haas Public Service
Center. She also is a member of the Board of Trustees of the California Academy
of Sciences and the former chair of the Stanford University Hospital Board of
Directors (1992-1997).
CALIFORNIA WATER SERVICE GROUP
6
NOMINEES FOR DIRECTORS(1)
Peter C. Nelson [PHOTOGRAPH]
C. H. Stump [PHOTOGRAPH]
George A. Vera [PHOTOGRAPH]
J. W. Weinhardt [PHOTOGRAPH]
PETER C. NELSON(2) DIRECTOR SINCE 1996
Mr. Nelson, age 50, is president and chief executive officer of California Water
Service Group and its two subsidiaries. Before joining California Water Service
Company in 1996, he was vice president, division operations (1994-1995), and
region vice president (1989-1994) of Pacific Gas & Electric Company.
C. H. STUMP(2),(4) DIRECTOR SINCE 1976
Mr. Stump, age 72, was California Water Service Company's chairman of the board
(1991-1996), president (1981-1991) and chief executive officer (1986-1992).
GEORGE A. VERA NEW NOMINEE FOR 1998
Mr. Vera, age 54, is director of finance and administration of the David and
Lucile Packard Foundation. Until 1997, he was an audit partner with Arthur
Andersen LLP.
J. W. WEINHARDT(2),(3) DIRECTOR SINCE 1994
Mr. Weinhardt, age 66, is chairman of the board and chief executive officer of
SJW Corp. and chairman of the board of its subsidiary San Jose Water Company, an
investor-owned water utility. He also is a director of SJW Land Company.
(1) No nominee has any family relationship with any other nominee or with
any executive officer of the Group. "Director since" date refers to the
year the nominee first was elected to the Board of California Water
Service Company or California Water Service Group, as appropriate.
(2) Member of Executive Committee
(3) Member of Audit Committee
(4) Member of Compensation Committee
CALIFORNIA WATER SERVICE GROUP
7
BOARD COMMITTEES
AUDIT: Reviews the Group's auditing, accounting, financial reporting and
internal audit functions. Also recommends the selection of independent auditors
to the Board. All members are non-employee directors.
COMPENSATION: Reviews California Water Service Company and the Group's executive
compensation and employee benefit plans and programs, including their
establishment, modification and administration. All members are non-employee
directors.
EXECUTIVE: Has limited powers to act on behalf of the Board whenever it is not
in session. This Committee meets only as needed.
During 1997, there were 12 regular meetings of the Board, one meeting of the
Compensation Committee, two meetings of the Audit Committee and no meetings of
the Executive Committee. Each of the director-nominees who served on the Board
of California Water Service Company in 1997 attended at least 83 percent of all
Board meetings. Collectively, they attended an average of 87 percent of all of
the Board and applicable committee meetings.
CALIFORNIA WATER SERVICE GROUP
8
COMPENSATION OF NON-EMPLOYEE DIRECTORS
COMPENSATION. In 1997, Directors Harris, Jaedicke, Magnuson, Meier, Stump and
Weinhardt received an annual retainer of $15,000. Edwin E. van Bronkhorst, who
retired as a director on December 18, 1997, also was paid an annual retainer of
$15,000. Director Stump is paid an annual consulting fee of $30,000 in addition
to his annual retainer. Effective January 1, 1998, directors are paid $850 for
each Board or committee meeting attended (which is an increase from the previous
amount of $750). The committee chairs are paid $1,700 for each committee meeting
attended.
DEFERRED COMPENSATION PLAN. Effective January 1, 1998, the Group established a
Directors Deferred Compensation Plan, an unfunded deferred compensation program
for non-employee directors. This plan succeeded the California Water Service
Company Directors Deferred Compensation Plan, which originally became effective
on January 1, 1988. As under the predecessor plan, participants may defer up to
100 percent of their annual retainer fees, with a minimum annual contribution of
$5,000. Amounts deferred are fully vested, recorded by Group as general
liabilities and adjusted as if invested in an investment selected by the
participant. Distribution is made at the earlier of (1) the time selected by the
participant (subject to a minimum length of deferral), or (2) when the
participant ceases to be a director (unless the participant becomes an employee
of Group, in which case, distribution will be made upon termination of
employment). Distributions also are available upon a showing of hardship.
Amounts remaining undistributed at death are distributed to a designated
beneficiary or beneficiaries. The Group is under no obligation to make any
investment or otherwise fund the plan. Participants are general, unsecured
creditors of the Group.
RETIREMENT PLAN. Effective January 1, 1998, the Group established a Directors
Retirement Plan to succeed the retirement plan of the Company. The Group's plan
operates in the same manner as the prior Company plan. Any director who retires
after serving on the Board for a total of five or more years (including service
on the Company Board prior to January 1, 1998) will receive a benefit equal to
the annual retainer paid to the Group's non-employee directors at the time of
the director's retirement. This benefit will be paid annually for the number of
years the director served on the Board, up to a maximum of 10 years.
CALIFORNIA WATER SERVICE GROUP
9
BENEFICIAL OWNERSHIP OF DIRECTOR - NOMINEES
COMMON AND PREFERRED STOCK OWNERSHIP AS OF JANUARY 1, 1998
=======================================================================================
NAME SHARES OWNED PERCENT OF CLASS(1)
- ---------------------------------------------------------------------------------------
Robert W. Foy
Director and Executive Officer 4,538 Less than 1%
- ---------------------------------------------------------------------------------------
Edward D. Harris, Jr., M.D.
Director 936 Less than 1%
- ---------------------------------------------------------------------------------------
Robert K. Jaedicke
Director 2,023 Less than 1%
- ---------------------------------------------------------------------------------------
Richard P. Magnuson
Director 2,000 Less than 1%
- ---------------------------------------------------------------------------------------
Linda R. Meier
Director 3,000 Less than 1%
- ---------------------------------------------------------------------------------------
Peter C. Nelson
Director and Executive Officer 2,416 Less than 1%
- ---------------------------------------------------------------------------------------
C. H. Stump 14,134
Director 400(2) Both less than 1%
- ---------------------------------------------------------------------------------------
George A. Vera
Nominee 0 Not applicable
- ---------------------------------------------------------------------------------------
J. W. Weinhardt
Director 0(3) Not applicable
- ---------------------------------------------------------------------------------------
Directors and executive officers
as a group 53,244(4)
400(2) Both less than 1%
=======================================================================================
(1) Except for Mr. Stump (see note 2), no nominee or officer owns any shares
of Group Preferred Stock. Directors Foy, Harris, Jaedicke, Magnuson,
Meier, Nelson and Stump have sole voting and investment power with
respect to their shares (or share such powers with their spouses).
(2) Series C Preferred Stock.
(3) Does not include 1,099,952 shares (representing 8.7 percent of the
Common Stock) beneficially owned by SJW Corp., of which Mr. Weinhardt is
chairman of the board and chief executive officer. Mr. Weinhardt
disclaims beneficial ownership of all the shares owned by SJW Corp.
(4) Common Stock includes 21,269 shares held in the Employees Savings Plan
for the benefit of executive officers who are not directors and 2,928
other shares owned beneficially by executive officers.
CALIFORNIA WATER SERVICE GROUP
10
PERFORMANCE GRAPH
The graph below shows a five-year comparison of cumulative total returns from an
initial $100 investment in California Water Service Company, the S&P 500 Index
and the Edward Jones Water Utility Average.
[GRAPH]
PERFORMANCE GRAPH DATA
1992 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------------
California Water Service Company $100 $128 $108 $118 $160 $236
Edward Jones Water Utility Average 100 114 106 134 163 200
S&P 500 Index 100 110 112 153 188 251
Past stock performance is not necessarily indicative of future performance.
CALIFORNIA WATER SERVICE GROUP
11
COMPENSATION OF EXECUTIVE OFFICERS
California Water Service Company
COMPENSATION. The following table discloses the compensation of the president
and chief executive officer and the four other most highly paid executive
officers of California Water Service Company for the three years ending December
31, 1997.
=============================================================================================
NAME AND PRINCIPAL POSITION YEAR SALARY(1) ALL OTHER COMPENSATION
- ---------------------------------------------------------------------------------------------
Peter C. Nelson 1997 $316,214 $14,086(2)
President and Chief Executive Officer 1996 252,787 12,486
- ---------------------------------------------------------------------------------------------
Robert W. Foy 1997 175,673 38,336(3)
Chairman of the Board 1996 151,154 13,136
- ---------------------------------------------------------------------------------------------
Gerald F. Feeney 1997 160,616 5,086(4)
Vice President, 1996 149,759 5,086
Chief Financial Officer and Treasurer 1995 139,612 4,631
- ---------------------------------------------------------------------------------------------
Francis S. Ferraro 1997 150,579 5,086(4)
Vice President, 1996 142,621 5,086
Regulatory Matters 1995 135,650 4,836
- ---------------------------------------------------------------------------------------------
Raymond H. Taylor 1997 147,566 5,086(4)
Vice President, 1996 144,113 5,086
Operations 1995 131,052 4,346
=============================================================================================
(1) The amounts listed in the column, "Salary," include annual earnings
reported on the employee's W2 form, including amounts deferred under
the Employees Savings Plan and compensation associated with the
non-business use of a Company automobile, except for Mr.
Nelson, who does not have a Company automobile.
(2) Figure includes director fees of $9,000, Employees Savings Plan
contributions on behalf of Mr. Nelson of $4,750 and annual life
insurance premiums of $336. Effective February 1, 1996, Mr. Nelson was
elected president and chief executive officer. For meetings in 1998,
Director Nelson will be paid $850 for each Board meeting attended, but
will not be paid for attending committee meetings.
(3) Figure includes an annual consulting fee of $25,000, director fees of
$8,250, Employees Savings Plan contributions on behalf of Mr. Foy of
$4,750 and annual life insurance premiums of $336. Effective January 1,
1996, Mr. Foy was elected chairman of the board. For meetings in 1998,
Chairman Foy will be paid $850 for each Board meeting attended, but
will not be paid for attending committee meetings.
(4) Figure includes Employees Savings Plan contributions of $4,750 and life
insurance premiums of $336.
CALIFORNIA WATER SERVICE GROUP
12
PENSION PLANS. The table(+) that follows shows the estimated annual benefits
payable upon retirement to named executive officers under the Company's Pension
and Supplemental Executive Retirement plans.
==========================================================================================
THREE HIGHEST CONSECUTIVE YEARS
AVERAGE COMPENSATION* 15 YEARS 20 YEARS 25 YEARS 30 YEARS
- ------------------------------------------------------------------------------------------
$125,000 37,500 $50,000 $56,250 $62,500
- ------------------------------------------------------------------------------------------
150,000 45,000 60,000 67,500 75,000
- ------------------------------------------------------------------------------------------
175,000 52,000 70,000 78,750 87,500
- ------------------------------------------------------------------------------------------
200,000 60,000 80,000 90,000 100,000
- ------------------------------------------------------------------------------------------
225,000 67,500 90,000 101,250 112,500
- ------------------------------------------------------------------------------------------
250,000 75,000 100,000 112,500 125,000
- ------------------------------------------------------------------------------------------
275,000 82,500 110,000 123,750 137,500
- ------------------------------------------------------------------------------------------
300,000 90,000 120,000 135,000 150,000
- ------------------------------------------------------------------------------------------
325,000 97,500 130,000 146,250 162,500
==========================================================================================
+ The pension table above sets forth estimated annual retirement benefits,
payable as a straight life annuity, assuming retirement at age 60, using
the normal form of benefit under the above plans. The benefits listed
are not subject to any deduction for social security or other offset
amounts.
* Compensation includes salary plus all other compensation. The number of
years of credited service on December 31, 1997, for officers named in
the Compensation table is as follows: Mr. Nelson, 2, Mr. Foy, 2, Mr.
Feeney, 21, Mr. Ferraro, 8, and Mr. Taylor, 15.
CALIFORNIA WATER SERVICE GROUP
13
REPORT OF THE COMPENSATION COMMITTEE
OF CALIFORNIA WATER SERVICE COMPANY
WHAT IS THIS REPORT?
The Securities and Exchange Commission requires that public companies disclose
all procedures and mechanisms that are used to establish officer compensation.
This report explains the criteria that the Company used to determine the
compensation of its officers in 1997.
WHAT ARE THE COMPENSATION COMMITTEE'S RESPONSIBILITIES?
The Committee is responsible for establishing and implementing policies and
programs to compensate Company executives. Each November, the Committee reviews
and recommends compensation levels for all executive officers for the 12-month
period beginning January 1. The Committee submits its recommendations to the
entire Board for approval. In 1997, the Board adopted the Committee's
recommendations without modification.
HOW DOES THE FORMATION OF THE GROUP AFFECT THE COMPENSATION COMMITTEE?
Beginning in 1998, the Compensation Committee will report to the Group rather
than to the Company. However, the purpose and philosophy of the Committee will
remain the same.
WHAT IS OUR COMPENSATION PHILOSOPHY?
The primary objectives of our executive compensation program are:
1) To attract, retain and motivate talented and experienced
executives,
2) To reward excellent job performance and contributions to future
success, and
3) To provide fair and reasonable compensation.
The Compensation Committee believes that compensating executives on this basis
leads to excellent executive performance, which benefits shareholders and
ratepayers alike. When making its recommendations, the Committee takes into
account that the California Public Utilities Commission (CPUC) reviews the
compensation decisions of the Company's officers for reasonableness.
Furthermore, as a regulated utility, the Company's financial performance is to a
large extent dependent upon CPUC ratemaking decisions and other factors beyond
management's control, such as weather. Therefore, the Committee's decisions
largely are determined by factors other than the Company's most recent financial
performance.
WHO SERVES ON THE COMPENSATION COMMITTEE?
The Compensation Committee consists of directors who are not current employees
of the Company. In 1997, the Committee was composed of Ms. Meier, Mr. Jaedicke,
Mr. Magnuson and Mr. Stump.
CALIFORNIA WATER SERVICE GROUP
14
HOW IS EXECUTIVE COMPENSATION DETERMINED?
When examining the annual compensation of individual executives, the Committee
considers the officer's duties, performance and contribution to the Company's
current and future success. The Committee also considers the officer's
experience, tenure, value to the Company, prior salary adjustments and the
inflation rate.
In order to set salaries for the Company's officers at competitive and
reasonable levels, the Committee annually reviews the compensation of officers
of other major water companies. The Committee factors into its analysis the
Company's comparatively low number of officers and its limited methods of
compensation.
MR. NELSON'S COMPENSATION. In November 1996, the Committee reviewed the
compensation for Peter C. Nelson, president and chief executive officer. The
Committee determined Mr. Nelson's 1997 compensation using the same factors that
it used to set the compensation of the other Company executives.
WILL EXECUTIVE OFFICERS OF CALIFORNIA WATER SERVICE COMPANY RECEIVE ADDITIONAL
COMPENSATION FOR SERVING AS EXECUTIVE OFFICERS OF THE GROUP AND CWS UTILITY
SERVICES?
No. Company officers will not receive additional compensation for serving as
officers of the Group and CWS Utility Services.
HOW HAVE WE RESPONDED TO IRS LIMITS ON DEDUCTIBILITY OF COMPENSATION?
The Committee has reviewed the Company's compensation structure in light of
Section 162(m) of the Internal Revenue Code, which limits the amount of
compensation that the Company may deduct in determining its taxable income for
any year to $1,000,000 for any of its five most highly compensated executive
officers. In 1997, no executive officer's compensation exceeded the limitation
set by Section 162(m).
COMPENSATION COMMITTEE
Linda R. Meier, Committee Chair
Robert K. Jaedicke
Richard P. Magnuson
C. H. Stump
CALIFORNIA WATER SERVICE GROUP
15
LARGEST PRINCIPAL SHAREHOLDERS
The following table shows the beneficial owners of more than five percent of any
class of the Group's voting securities on January 1, 1998:
==================================================================================================
CLASS BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS
- --------------------------------------------------------------------------------------------------
SJW Corp.(1)
Common 374 W. Santa Clara Street 1,099,952 8.7%
San Jose, CA 95196
- --------------------------------------------------------------------------------------------------
California Water Service Company
Employees Savings Plan (a 401(k) plan)
Common 1720 N. Firtst Street 646,286 5.1%
San Jose, CA 95196
- --------------------------------------------------------------------------------------------------
First Colony Life Insurance Company(2)
Series C Prefered 700 Main Street 36,610 26.3%
Lynchburg, VA 24504
==================================================================================================
(1) SJW Corp. has sole voting and investment power with respect to these
shares. Director Weinhardt is chairman of the board and chief executive
officer of SJW Corp. Mr. Weinhardt disclaims beneficial ownership of all
the shares owned by SJW Corp.
(2) First Colony Life Insurance Company has sole voting and investment power
with respect to these shares.
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the beneficial ownership of shares of Group's equity
securities by Messrs. Feeney, Ferraro and Taylor on January 1, 1998. For
information on employee directors and total director beneficial ownership of
Group shares, refer to the table entitled "Beneficial Ownership of Directors" on
page 10.
=================================================================
NAME(1) SHARES OWNED PERCENT OF CLASS(2)
- ------------------------------------------------------------------
Gerald F. Feeney 6,791(3) Less than 1%
- ------------------------------------------------------------------
Francis S. Ferraro(*) 737(4) Less than 1%
- ------------------------------------------------------------------
Raymond H. Taylor(*) 2,816(4) Less than 1%
==================================================================
(1) Messrs. Feeney, Ferraro and Taylor have sole voting and investment power
with respect to their shares (or share such powers with their spouses).
(2) All are Common Stock.
(3) Includes 3,865 shares held in the Employees Savings Plan.
(4) All shares held in the Employees Savings Plan.
*Executive officers of California Water Service Company only.
CALIFORNIA WATER SERVICE GROUP
16
OTHER INFORMATION
ADJOURNMENT. Notice of the adjournment need not be given if the date, time and
place thereof are announced at the Annual Meeting at which the adjournment is
taken. However, if the adjournment is for more than 45 days, or if a new record
date is fixed for the adjourned Annual Meeting, a notice of the adjourned Annual
Meeting shall be given to each shareholder entitled to vote at the Annual
Meeting. At adjourned Annual Meetings, any business may be transacted which
might have been transacted at the original Annual Meeting.
COST OF PROXY SOLICITATION. The Group will bear the entire cost of preparing,
assembling, printing and mailing these proxy statements, the proxies and any
additional materials which may be furnished by the Board to shareholders. The
solicitation of proxies will be made by the use of the U.S. postal service and
also may be made by telephone or personally, by directors, officers and regular
employees of the Group, who will receive no extra compensation for such
services. Morrow & Co. was hired to assist in the distribution of proxy
materials and solicitation of votes for $6,000, plus out-of-pocket expenses. The
Group will reimburse brokerage houses and other custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and
solicitation materials to shareholders.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Based solely on its
review of the copies of forms furnished to the Group, or written representations
that no annual forms (SEC Form 5) were required, the Group believes that during
1997, all SEC filings of the officers, directors and 10-percent shareholders of
the Group and its two subsidiaries complied with requirements for reporting
stock ownership.
OTHER MATTERS. The Board is not aware of any matters to come before the Annual
Meeting other than the proposals for the election of directors and the
ratification of the selection of independent auditors. If any other matters
should be brought before the Meeting, or any adjournment thereof, upon which a
vote properly may be taken, the shares represented by the proxies solicited by
the Board will be voted with respect thereto in accordance with the discretion
of the proxy holders insofar as such proxies are not limited to the contrary.
CALIFORNIA WATER SERVICE GROUP
17
[MAP]
CALIFORNIA WATER SERVICE GROUP
1720 North First Street
San Jose, California 95112
(408) 367-8200 o http://www.calwater.com
18
CALIFORNIA WATER SERVICE GROUP
1720 North First Street
San Jose, California 95112
(408) 367-8200 o http://www.calwater.com
[LOGOS]
CALIFORNIA WATER SERVICE GROUP
PROXY SOLICITED BY THE BOARD OF DIRECTORS
PETER C. NELSON and PAUL G. EKSTROM, and each of them with full power of
substitution, are hereby authorized to vote, as designated on the reverse side,
all the shares of Group Common and Preferred Stock of the undersigned at the
Annual Meeting of Shareholders of California Water Service Group to be held at
1720 N. First Street, San Jose, California on Wednesday, April 15, 1998 at
10:00 a.m., or at any adjournment thereof.
PLEASE DATE, SIGN AND MAIL AS SOON AS POSSIBLE IN THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side)
x Please mark votes as in this example.
- ---
If not otherwise directed, this proxy will be voted FOR the election of
directors and FOR ratification of the appointment of KPMG Peat Marwick, LLP, as
independent auditors. The Board of Directors recommends voting in favor of
these matters.
1. ELECTION OF DIRECTORS
NOMINEES: Robert W. Foy, Edward D. Harris, Jr., M.D., Robert K. Jaedicke,
Richard P. Magnuson, Linda R. Meier, Peter C. Nelson, C.H. Stump,
George A. Vera and J.W. Weinhardt.
FOR ALL NOMINEES WITHHELD FROM ALL NOMINEES
- --- ---
FOR ALL NOMINEES EXCEPT AS NOTED:
- ---
2. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK, LLP, as the
independent auditors of the Group. FOR AGAINST ABSTAIN
--- --- ---
3. IN THEIR DISCRETION, OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
Mark here for address change and note at left
---
NOTE: Please sign exactly as name appears hereon. If signing as attorney,
executor, administrator, trustee, guardian or the like, please give your full
title as such. If signing for a corporation, please give your title. In the
case of shares standing in the name of two or more persons, California law
permits the voting of such shares under a proxy signed by any one of such
persons if none of the others is present in person or represented by proxy.
PLEASE DATE, SIGN AND RETURN PROMPTLY.
Signature Date
---------------------------------- ----------------
Signature Date
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