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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

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. )

Filed by the Registrant x

Filed by a Party other than the Registrant o

Check the appropriate box:

o                   Preliminary Proxy Statement        o Soliciting Material Under Rule 14a-12

o                   Confidential, For Use of the

Commission Only (as

permitted

by Rule 14a-6(e)(2))

x                 Definitive Proxy Statement

Definitive Additional

o                   Materials

AMERICAN STATES WATER COMPANY

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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Directions for Attending the 2015 Annual Meeting

We will hold the 2015 annual meeting at The Langham, 1401 South Oak Knoll Avenue, Pasadena, California 91106.

For shareholders of record, either the detachable portion of your proxy card or your Notice is your ticket to the 2015 annual meeting.  Please present your ticket when you reach the registration area at the 2015 annual meeting.

For shareholders who hold shares through a brokerage firm, bank or other shareholder of record, your admission ticket is the copy of your latest account statement showing your investment in our common shares.  Please present your account statement to one of our representatives at the 2015 annual meeting.  You cannot vote your shares at the 2015 annual meeting unless you have obtained a legal proxy from your broker, bank or other shareholder of record.  A copy of your account statement is not sufficient for this purpose.

Directions to The Langham

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American States Water Company

Proxy Statement for 2015 Annual Meeting

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April 7, 2015

American States Water Company

630 East Foothill Blvd.

San Dimas, California 91773

2015 Proxy Statement

The Securities and Exchange Commission, or SEC, has adopted rules to allow us to elect to use the Internet as our primary means of furnishing our proxy statement, electronic proxy card and our Annual Report on Form 10-K for the year ended December 31, 2014 to our shareholders.  As a result, on or about April 7, 2015, we are mailing to most of our shareholders a Notice of Internet Availability of Proxy Materials referred to herein as the Notice.  The Notice contains instructions on how to access our proxy materials over the Internet at www.proxyvote.com and how to request a paper copy of our proxy materials.  The proxy materials will be posted on the Internet no later than the date we begin mailing the Notice.  On or about April 7, 2015, we are mailing to all remaining shareholders a paper copy of our proxy materials.  We are sending a Notice or proxy materials to each of our shareholders of record in connection with the solicitation by our board of directors of proxies to be voted at our 2015 annual meeting and any adjournments thereof.

We have set the record date for determining the shareholders entitled to vote at the 2015 annual meeting as the close of business on March 25, 2015.  As of March 25, 2015, we had 37,977,279 common shares outstanding.  We do not have any other outstanding equity securities.  Each of our common shares is entitled to one vote.

We will hold our 2015 annual meeting on May 19, 2015 at 10:00 a.m., Pacific Time, at The Langham, 1401 South Oak Knoll Avenue, Pasadena, California 91106.

INFORMATION ABOUT THE 2015 ANNUAL MEETING

What is the purpose of the 2015 annual meeting?

At our 2015 annual meeting, we will ask our shareholders to elect directors to class I who will serve until our annual meeting of shareholders in 2018 or until our shareholders duly elect their qualified successors.  We will also ask shareholders to approve an amendment and extension of our performance incentive plan, and to approve an advisory vote approving the compensation of our named executive officers, commonly referred to as a “say-on-pay” proposal.  In addition, we will ask shareholders to ratify the appointment of PricewaterhouseCoopers LLP as the company’s independent registered public accounting firm and to vote on any other matter which may properly come before the 2015 annual meeting or any adjournment, including any proposal to adjourn the 2015 annual meeting.

Even if you are able to attend the 2015 annual meeting, we encourage you to vote early using the mail, telephone or Internet methods described below.

Who may attend the 2015 annual meeting?

Our shareholders and our representatives may attend our 2015 annual meeting.  If you are a shareholder of record on the record date, you must bring either the detachable portion of your proxy card or your Notice in order to gain admission to our 2015 annual meeting.  You are a shareholder of record if your shares are registered directly in your name.  We mailed this proxy statement or the Notice directly to you if you are a shareholder of record.

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If you are a shareholder who holds shares through a brokerage firm, bank or other shareholder of record on the record date, you must bring a copy of your latest account statement showing your investment in our common shares.  If you are a beneficial owner of our shares, your broker, bank, trustee or nominee sent this proxy statement or the Notice to you.

How may I vote my shares in person at the 2015 annual meeting?

If you are the shareholder of record, you may vote your shares in person at the 2015 annual meeting if you have either the detachable portion of your proxy card or your Notice as proof of identification.  If you are the beneficial owner of shares held in street name, you may vote your shares at the meeting if you obtained a legal proxy from your broker, bank or other shareholder of record.  Participants in Golden State Water Company’s 401(k) plan may not vote their 401(k) shares in person at the 2015 annual meeting since the 401(k) plan trustee is the shareholder of record of these shares.

How may I vote my shares without attending the 2015 annual meeting?

All proxies that shareholders properly sign and return, unless properly revoked, will be voted at the 2015 annual meeting or any adjournment thereof in accordance with the instructions indicated on the proxy.

You may vote your shares without attending the 2015 annual meeting by mail, telephone or Internet.

Voting by Mail

¡                 If you received a paper copy of the proxy materials, you may sign, date and return your proxy card in the pre-addressed, postage-paid envelope provided.

Voting by Telephone

¡                 You may vote by proxy using the toll-free telephone number listed on the proxy card.  Please have your Notice or the proxy card in hand before calling.

¡                 If your shares are held through a brokerage firm, bank or other shareholder of record, you may vote by telephone only if the shareholder of record (broker, bank or other shareholder of record) offers that option to you.

¡                 Votes submitted by telephone must be received by 11:59 p.m., Eastern Time, on May 18, 2015 in order to be voted at the 2015 annual meeting.  Participants in Golden State Water Company’s 401(k) plan may vote their 401(k) plan shares by telephone, but must do so by the date set forth below.

Voting by Internet

¡                 You may also vote by proxy using the Internet.  The Internet address is www.proxyvote.com which is also listed on the Notice and the proxy card.  Please have the proxy card or Notice in hand before going online.  You may also view our proxy statement and 2015 annual report at this website.  If your shares are held through a brokerage firm, bank or other shareholder of record, you may vote by the Internet only if the shareholder of record (broker, bank or other shareholder of record) offers that option to you.

¡                 Votes submitted by Internet must be received by 11:59 p.m., Eastern Time, on May 18, 2015 in order to be voted at the 2015 annual meeting.  Participants in Golden State Water Company’s 401(k) plan may vote their 401(k) plan shares by Internet, but must do so by the date set forth below.

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Regardless of whether or not you attend the 2015 annual meeting in person, we encourage all of our shareholders to vote using one of the methods described above.

Participants in Golden State Water Company’s 401(k) plan may vote their 401(k) plan shares by mail, phone or Internet as described above.  Votes submitted by telephone or using the Internet must be received by 11:59 p.m., Eastern Time, on May 15, 2015 in order for us to forward your instructions to the 401(k) plan trustee.  The trustee will vote 401(k) plan shares as to which no directions are received in the same ratio as 401(k) plan shares with respect to which directions are received from other participants in the 401(k) plan, unless contrary to the Employee Retirement Income Security Act of 1974.

May I change my vote after I submit a proxy?

You may revoke your proxy at any time before the named proxies vote at the 2015 annual meeting by any of the following methods:

¡                 filing with us a written notice of revocation of the proxy bearing a later date,

¡                 attending the 2015 annual meeting and voting in person, or

¡                 presenting a written notice of the revocation of the proxy at the 2015 annual meeting.

If you hold your shares through a broker, bank or other shareholder of record, then you must obtain a legal proxy in order to take any of these actions.

Please bear in mind that your execution of a proxy will not affect your right to attend the 2015 annual meeting or any adjournment thereof and vote in person; however, your attendance at the 2015 annual meeting will not, by itself, revoke your proxy, unless you take one of the actions listed above.

How may I cast my vote?

In the election of directors, you may vote your shares for the nominees in the following manner:

¡                 “FOR ALL” of the nominees,

¡                 “WITHHOLD ALL” (you may withhold your authority to vote for any individual nominee(s) by marking the “For All Except” box and writing the number(s) of the nominee(s) on the line provided), or

¡                 “FOR ALL EXCEPT,” and write the number(s) of the nominee(s) on the line provided for any individual nominee(s) for whom you choose to withhold your authority to vote.

With respect to the advisory vote to approve the compensation of our named executive officers, the vote to approve an amendment and extension of the performance incentive plan and the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm, you may vote your shares in the following manner:

¡                 “FOR,”

¡                 “AGAINST,” or

¡                 “ABSTAIN.”

Each share is entitled to one vote on each of these matters.

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May I cumulate my votes for a director?

You may not cumulate your votes for a director (i.e., cast for any candidate a number of votes greater than the number of common shares that you hold on the record date) unless you or another shareholder:

¡                 places the candidate’s name in nomination prior to the voting, and

¡                 prior to the voting, gives notice of an intention to cumulate votes at the 2015 annual meeting.

If you or any other shareholder gives notice prior to voting of an intention to cumulate votes, then all shareholders may cumulate their votes for candidates who have been nominated.

How does the board recommend that I vote at the 2015 annual meeting?

Our board recommends that you vote your shares:

¡                 “FOR ALL” of the nominees for class I director,

¡                 “FOR” the proposal to approve an amendment and extension of the performance incentive plan,

¡                 “FOR” approval of the compensation of the named executive officers, as disclosed pursuant to the compensation disclosure rules of the SEC, including the compensation discussion and analysis, compensation tables and any related material disclosed in this proxy statement, referred to herein as a “say-on-pay” advisory vote, and

¡                 “FOR” the proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm.

How will the named proxies vote if I send in my proxy without voting instructions?

The named proxies will vote “FOR ALL” of the board’s nominees to be elected as directors, “FOR” the proposal to approve the amendment and extension of the performance incentive plan, “FOR” the approval of the compensation of the named executive officers, as disclosed pursuant to the compensation disclosure rules of the SEC, including the compensation discussion and analysis, compensation tables and any related materials disclosed in this proxy statement, and “FOR” the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm if you send in your proxy without voting instructions.  The named proxies will also vote in favor of such other matters as are incident to the conduct of the 2015 annual meeting, unless otherwise instructed.

How will the named proxies vote if a nominee is unable to serve as director?

In the event any one or more of the nominees is withdrawn from nomination as a director or is unable to serve for any reason, a contingency not now anticipated, the named proxies may vote for a substitute nominee or nominees, unless otherwise instructed by a shareholder on his or her proxy.

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What vote is required to approve each of the proposals?

Proposal 1

Candidates for the board of directors receiving the highest number of affirmative votes of the shares entitled to vote at the 2015 annual meeting in person or by proxy (up to the number of directors to be elected) will be elected.  Votes cast against a candidate or votes withheld will have no legal effect.  Brokers are not authorized to vote on this proposal unless you instruct otherwise.

Proposal 2

Approval of the amendment and extension of the performance incentive plan will be ratified by the affirmative vote of those present in person or by proxy at the 2015 annual meeting and voting, provided that the shares voting affirmatively also constitute at least a majority of the required quorum at the 2015 annual meeting.  Abstentions on this proposal will have the effect of a vote against the proposal.  Brokers are authorized to vote on this proposal unless you instruct otherwise.

Proposal 3

The compensation of the named executive officers, as disclosed pursuant to the compensation rules of the SEC, including the compensation discussion and analysis, compensation tables and any related material disclosed in this proxy statement will be approved upon an affirmative vote of a majority of our common shares represented in person or by proxy and voting, provided that the shares voting affirmatively also constitute at least a majority of the required quorum at the 2015 annual meeting.  Abstentions on this proposal will not be considered as a vote cast for or against this proposal.  Brokers are not authorized to vote on this proposal unless you instruct otherwise.  This vote is advisory and non-binding on the company, the compensation committee and the board.

Proposal 4

The appointment of PricewaterhouseCoopers LLP, as our independent registered public accounting firm, will be ratified by the affirmative vote of those present in person or by proxy and voting, provided that the shares voting affirmatively also constitute at least a majority of the required quorum at the 2015 annual meeting.  Abstentions on this proposal will not be considered as a vote cast for or against this proposal.  Brokers are authorized to vote on this proposal unless you instruct otherwise.

What happens if cumulative voting for directors occurs?

If we conduct voting for directors by cumulative voting, then you may cast a number of votes equal to the number of directors authorized multiplied by the number of shares you have a right to vote.  You may cast your votes for a single candidate or you may distribute your votes on the same principle among as many candidates in whatever proportion you desire.

The accompanying proxy will grant the named proxies discretionary authority to vote cumulatively if cumulative voting applies.  Unless you instruct the named proxies otherwise, the named proxies will vote equally for each of the candidates for the office of director; provided, however, that if sufficient numbers of our shareholders exercise cumulative voting rights to elect one or more candidates, the named proxies will:

¡                 determine the number of directors they may elect,

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¡                 select such number from among the named candidates,

¡                 cumulate their votes, and

¡                 cast their votes for each candidate among the number they are entitled to vote.

What is the quorum requirement for the 2015 annual meeting?

A quorum is present if shareholders holding a majority of shares entitled to vote on the record date are present at the 2015 annual meeting, either in person or by proxy.  We will count shares represented by proxies that reflect abstentions and broker non-votes as present and entitled to vote for purposes of determining the presence of a quorum.  The term “broker non-vote” refers to shares held by brokers or nominees who have not received instructions on how to vote from the beneficial owners or persons entitled to vote if the broker or nominee indicates on the proxy that the broker or nominee does not have discretionary power to vote on the matter.

Who bears the costs of proxy distribution and solicitation?

We will bear the entire cost of preparing, assembling, printing and mailing proxy statements and the costs of any additional materials which the board may furnish to you.  We will solicit proxies by U.S. mail in the case of beneficial owners that own 1,000 or more shares or, in the case of all other shareholders, brokers, banks and other nominees, by mailing a notice containing instructions on how to access our proxy materials and vote.  We have engaged the services of Morrow & Co., LLC, 470 West Avenue, Stamford, Connecticut 06902 for $8,000 to assist us in soliciting proxies.  We may also solicit proxies by telephone, or personally, by directors, officers and regular employees of the company who will receive no extra compensation for performing these services.

What does it mean if I receive more than one proxy or voting instruction card?

It means your shares are either registered differently or appear in more than one account.  Please provide us with voting instructions for all proxy and voting instruction cards that you receive.

Who will serve as inspector of election?

The board of directors has appointed Broadridge Financial Solutions, Inc. to act as the inspector of election.  The inspector of election will count all votes cast, whether in person or by proxy.

How is an annual meeting adjourned?

Shareholders may adjourn an annual meeting by the affirmative vote of a majority of the shares represented at the annual meeting, in person or by proxy, even if a quorum is not present.  If a proposal is made to adjourn the 2015 annual meeting in order to enable management to continue to solicit proxies in favor of a proposal, the proxies will be voted in favor of adjournment, unless otherwise instructed.

In the absence of a quorum at the 2015 annual meeting, no business may be transacted at the 2015 annual meeting other than an adjournment.  We may conduct any business at an adjourned meeting which we could have conducted at the original meeting.

We are not required to give you notice of an adjournment of an annual meeting if we announce the time and place of the adjournment at the annual meeting at which the adjournment takes place.  We must, however, give you notice of the adjourned meeting if the adjournment is for more than 45 days or, if after the adjournment, we set a new record date for the adjourned meeting.

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BOARD STRUCTURE AND COMMITTEES

How is the board of directors structured?

The board of directors currently consists of nine directors, with an independent non-management director serving as its chair.  The board is divided into three classes (class I, class II and class III).  Shareholders elect directors in each class to serve for a three-year staggered term expiring in successive years or until shareholders duly elect their successors.  The term of the class II directors will expire at the 2016 annual meeting.  The term of the class III directors will expire at the 2017 annual meeting.  The term of the directors elected to class I at the 2015 annual meeting will expire at the 2018 annual meeting.

Mr. Lloyd E. Ross, the chair of the board, is a non-voting ex-officio member of all committees of the board, is the presiding director for executive sessions of the board and acts as lead director of the board.  The board holds executive sessions of the board following regularly scheduled meetings and on an as-needed basis.  Some of these sessions are non-management executive sessions.  Currently, Mr. Robert J. Sprowls, who is also president and chief executive officer of the company, is the only employee director that participates in executive sessions of the board.  He does not participate in non-management executive sessions.  The board held four executive sessions of the board in 2014, one of which included a non-management executive session.

The board of directors has determined that Mr. Ross and seven of the other members of the board are independent directors of the company.  The board believes that this leadership structure, in which the chair is an independent director acting as the lead director, ensures a greater role for the other independent directors in the oversight of the company and active participation of the independent directors in setting agendas and establishing priorities and procedures for the board.  The board further believes that this leadership structure is preferred by a significant number of our shareholders.  The board has used this leadership structure since the formation of the company as a holding company in 1998.

What is the board’s role in risk oversight?

The board does not manage risk.  Rather the board oversees enterprise risk management, or ERM, performed under the direction of the chief executive officer and chief financial officer.  The board satisfies this responsibility by obtaining information from each committee chair regarding the committee’s risk oversight activities and from regular reports directly from officers and other key management personnel responsible for risk identification, risk management and risk mitigation strategies.  The reporting processes are designed to provide visibility to the board about the identification, assessment and management of critical risks and management’s risk mitigation strategies. Diana M. Bontá was appointed as a liaison between the board and management with respect to providing additional oversight of the company’s ERM programs.  Dr. Bontá reports to the full board regarding management’s implementation of the company’s ERM program and other matters relevant to the risk oversight responsibilities of the board.

The board has not established a risk oversight committee.  Instead, each committee oversees risks within its area of responsibility.

The audit and finance committee considers financial risks and exposures, particularly financial reporting, tax, accounting, disclosure and internal control over financial reporting, financial policies, investment guidelines, credit and liquidity matters and the company’s retirement plans.  The audit and finance committee receives regular reports from the internal auditor of the company in order to assist it in overseeing financial risks.  The audit and finance committee is not responsible for the oversight of non-financial risks.  The oversight of non-financial risks is performed by the full board and other committees.

The nominating and governance committee considers risks and exposures relating to corporate governance and succession planning for the board and the chief executive officer.  The nominating and

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governance committee is also responsible for making recommendations regarding the delegation of risk oversight responsibilities to committees of the board and the policies and procedures for coordinating the risk oversight responsibilities of the board, the ERM liaison, if any, and each of the committees and the board.

The compensation committee considers risks associated with executive and employee compensation programs.  The ASUS committee oversees the risks and exposures associated with the company’s contracted services operations at American States Utility Services, Inc. and its subsidiaries, or ASUS.

What are the procedures for changing the number of directors?

Under our bylaws, the board of directors may increase the authorized number of directors up to eleven without obtaining shareholder approval so long as we list our common shares on the New York Stock Exchange.  We currently have nine directors on our board.  The board of directors may also decrease the number of authorized directors to no less than six without obtaining shareholder approval.  If the number of authorized directors is decreased to six, then the board will cease to be classified; provided, that the decrease in the number of directors cannot shorten the term of any incumbent director.

Unless otherwise approved by our shareholders, the board of directors will cease to be classified if our common shares are not listed on the New York Stock Exchange.

How are vacancies filled on the board of directors?

The majority of the remaining directors may fill vacancies on the board, except those existing as a result of a removal of a director, though less than a quorum.  If the board consists of only one director, the sole remaining director may fill all vacancies on the board.  Each director so elected will hold office until the end of the term of the director who has been removed, or until the director’s successor has been duly elected and qualified.  Our shareholders also have the right to elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors.

Under what circumstances may a director be removed from the board?

Under California law, a member of the board of directors may be removed:

¡                 by the board of directors as the result of a felony conviction or court declaration of unsound mind,

¡                 by the shareholders without cause, or

¡                 by court order for fraudulent or dishonest acts or gross abuse of authority or discretion.

Generally, shareholders may not remove a director if the votes cast against removal are sufficient to elect the director if voted cumulatively at an election of directors held at the time of removal.  In addition, no director may be removed by shareholders by written consent unless all shareholders vote for removal of the director.

What committees does the board of directors have?

The board has three standing committees:

¡                 an audit and finance committee,

¡                 a nominating and governance committee, and

¡                 a compensation committee.

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Each committee operates under a written charter which identifies the purpose of the committee and its primary functions and responsibilities.  Copies of these committee charters are available on our website at www.aswater.com.

The board has also established two committees, one known as the ASUS committee, to aid in efforts with respect to our contracted services business, and an issuance committee.  The ASUS committee operates under a written charter.  The issuance committee does not operate under a charter.  Instead certain matters are delegated to it from time to time by the board with respect to an issuance of securities.

From time to time, the board establishes special committees or appoints members of the board to serve as liaisons between the board and management with respect to special projects or to work on special projects.  Two members of the board served as a liaison between the board and management in 2014 with respect to special projects and one board member provided assistance to the board on a special project for ASUS.

How often did the board and each of the committees meet during 2014?

During 2014:

¡                 directors met, as a board, ten times,

¡                 the audit and finance committee met six times,

¡                 the nominating and governance committee met four times,

¡                 the compensation committee met seven times,

¡                 the ASUS committee met four times, and

¡                 the issuance committee met once.

No board member in 2014 attended less than 75% of the meetings of the board.  No committee member in 2014 attended less than 75% of the committee meetings of any committee in which he or she was a member.

NOMINATING AND GOVERNANCE COMMITTEE

What are the functions of the nominating and governance committee?

The nominating and governance committee assesses qualifications of candidates to fill vacancies on the board and makes recommendations to the board regarding candidates to fill these vacancies.  The nominating and governance committee also recommends to the board changes in the company’s corporate governance policies and procedures, CEO succession and board training.

How does the nominating and governance committee assess candidates to fill vacancies on the board?

The nominating and governance committee assesses nominees for directors on the basis of a number of qualifications, including:

¡                 a reputation for integrity, honesty and adherence to high ethical standards;

¡                 holding or having held a generally recognized position of leadership;

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¡                 business acumen, business or governmental experience and an ability to exercise sound business judgment in matters that relate to our current and long-term objectives;

¡              an interest and ability to understand the sometimes conflicting interests of our various constituencies, including shareholders, employees, customers, regulators, creditors and the general public;

¡                 an interest and ability to act in the interests of all shareholders;

¡                 an ability to work constructively with groups with diverse perspectives and to tolerate opposing viewpoints;

¡                 a commitment to service on the board, including commitment demonstrated by prior board service; and

¡                 a willingness to challenge and stimulate management.

Each director, other than the chief executive officer of the company, is also expected to satisfy the independence requirements of the board.

In addition to the criteria set forth above, the nominating and governance committee considers how the skills and attributes of each individual candidate or incumbent director work together to create a board that is collegial, engaged and effective in performing its duties.  In order to achieve this objective, the committee believes that the background and qualifications of the directors, considered as a group, should provide a significant mix and diversity of professional and personal experience, knowledge and skills that will allow the board to fulfill its responsibilities.  The committee construes the concept of diversity broadly so as to include a variety of opinions, perspectives, personal experiences and backgrounds and other differentiating characteristics, including gender and ethnicity.

The process used by the committee in assessing candidates for director is a subjective one.  The committee has considered knowledge, skills and experience in the following areas to be helpful to the board in selecting nominees for director:

¡                 finance

¡                 accounting

¡                 engineering

¡                 real estate

¡                 construction

¡                 government contracting

¡                 public utility and/or other regulated industry

¡                 corporate governance

¡                 customer and community service

For information on the specific backgrounds and qualifications of our current directors, see “Proposal 1: Election of Directors.”

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As part of its annual self-assessment process, the board also evaluates itself and/or directors on a variety of criteria, including:

¡                 independence

¡                 commitment, time and energy devoted to service on the board

¡                 overall contributions to the board

¡                 attendance at, and preparation for, board and committee meetings

¡                 effectiveness as chair of the board

¡                 collegiality

¡                 understanding the role of the board and the committees on which he or she serves

¡                 judgment and appropriateness of comments

¡                 skill set relative to board needs

¡                 understanding of the company’s business, industry and risks

¡                 opportunity to engage and stimulate management

The nominating and governance committee considers candidates recommended by board members, professional search firms, shareholders and other persons, in addition to board members whose terms may be expiring.  The manner in which the nominating and governance committee evaluates a new person as a nominee does not differ based on who makes the nomination.

What is the role of the board in the nomination process?

After the board receives the nominating and governance committee’s recommendations on nominees, the board then nominates director candidates the board deems most qualified for election at an annual meeting.

If a vacancy or a newly created board seat occurs between annual meetings, the board is responsible for filling the vacancy or newly created board seat in accordance with our bylaws as described above under the heading, “How are vacancies filled on the board of directors?”

Who are the members of the nominating and governance committee?

Ms. Holloway is the chair of the nominating and governance committee.  Mr. Anderson and Dr. Bontá are members of this committee.  Mr. Ross serves as a non-voting ex-officio member of this committee.

How may a shareholder nominate a person to serve on the board?

You may submit the name of a person for election as a director either by submitting a recommendation to the nominating and governance committee or by directly submitting a name for consideration at a shareholder meeting.  In either event, you must submit the name of the nominee in writing to our corporate secretary at our corporate headquarters between February 19, 2016 and March 5, 2016, in order for your nominee to be considered for election as a director at the 2016 annual meeting.  If we change the 2016 annual meeting date by more than 30 days from the date of our 2015 annual meeting or the date a special meeting is held, you will have another opportunity to submit nominations.  In this case, the corporate secretary must receive your nomination at our corporate headquarters no later than the close of business on the tenth day following the earlier of the date on which we mail you notice of the meeting or we publicly disclose the meeting date.

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Your notice to the corporate secretary must contain:

¡                  all information that the SEC requires us to disclose in our proxy statement about the nominee,

¡                  a consent by the nominee to be named in the proxy statement and to serve as a director if elected,

¡                  the name and address of the record and beneficial owner, if any, of the shares making the nomination, and

¡                  the number of shares held.

If you submit a name for consideration by the nominating and governance committee, we may also ask you to provide other information reasonably related to the recommended individual’s qualifications as a nominee.  The person recommended should be able to, upon request and with reasonable advance notice, meet with one or more members of the nominating and governance committee and/or the board of directors to inquire into the nominee’s qualifications and background and otherwise to be interviewed for purposes of the nomination.

If you plan to submit a name directly for nomination as a director at a shareholder meeting, you must comply with all requirements of the Securities Exchange Act of 1934 in connection with soliciting shareholders to vote for your nominee.

We have made no material changes in 2015 to these procedures for the nomination of directors.

Have we paid fees to any third party to assist us in evaluating or identifying potential nominees to the board?

We have not paid any fees for assistance in identifying potential candidates to fill a vacancy on the board in 2014.

Did we receive any nominations for director from certain large beneficial owners of our common shares?

Since our previous annual meeting, we have not received any nominations from a shareholder or a group of shareholders owning more than 5% of our outstanding common shares.

AUDIT AND FINANCE COMMITTEE

Who are the members of the audit and finance committee?

Ms. Anderson is the chair of the audit and finance committee.  Mr. Fielder and Ms. Wilkins are members of this committee.  Mr. Ross serves as a non-voting ex-officio member of this committee.

Does the audit and finance committee have any audit committee financial experts?

The board of directors determined that all members of the audit and finance committee are:

¡                  financially literate,

¡                  Ms. Anderson and Ms. Wilkins are “audit committee financial experts”, and

¡  all members of the audit and finance committee are independent under the standards set forth in Rule 10A-3 of the Securities Exchange Act of 1934 and the rules of the New York Stock Exchange.

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Audit and Finance Committee Report

Functions of the Audit and Finance Committee

The audit and finance committee:

¡                  reviews significant public documents containing financial statements provided to shareholders and regulatory agencies and reviews all periodic reports filed with the SEC;

¡                  discusses with the company’s independent registered public accounting firm its plans, if any, to use the work of internal auditors;

¡                  reviews the internal audit function, including its competence and objectivity and proposed audit plans for the coming year, including intended levels of support for and coordination with the external audit process;

¡  discusses with the internal auditors and the company’s independent registered public accounting firm, the financial statements and the results of the audit;

¡                  discusses with the company’s independent registered public accounting firm any significant matters regarding internal controls over financial reporting that have come to its attention during the conduct of the audit;

¡                  reviews the qualifications of our independent registered public accounting firm and appoints (and has sole authority to terminate) our independent registered public accounting firm;

¡                  reviews and approves fees charged by our independent registered public accounting firm;

¡                  reviews and evaluates the effectiveness of our process for assessing significant financial risks and the steps management takes to minimize these financial risks;

¡                  reviews and makes recommendations to the board of directors regarding related party transactions;

¡                  reviews accounting and financial human resources;

¡  establishes procedures for the receipt, retention and treatment of complaints that the company receives regarding accounting, internal controls or auditing matters, and the confidential anonymous submission by our employees of concerns regarding questionable accounting or auditing matters or related party transactions;

¡                  reviews the committee’s charter and its own performance annually; and

¡                  oversees the company’s compliance with legal and regulatory requirements.

Management has the primary responsibility for our financial statements, internal controls, disclosure controls and the financial reporting process.  PricewaterhouseCoopers LLP, our registered public accounting firm, is responsible for performing an independent audit of our consolidated financial statements in accordance with generally accepted auditing standards and issuing a report based on its findings.  The audit and finance committee’s responsibility is to monitor and oversee our financial reporting process.  PricewaterhouseCoopers LLP reports directly to the audit and finance committee and, if requested, the board of directors.

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Discussions with Independent Auditors

PricewaterhouseCoopers LLP provided to the audit and finance committee the written disclosures and letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit and finance committee concerning independence, and the audit and finance committee discussed with PricewaterhouseCoopers LLP the independent accountant’s independence.  The audit and finance committee also reviewed and discussed our audited consolidated financial statements with PricewaterhouseCoopers LLP and matters related to the audit required by the Public Company Accounting Oversight Board, including the firm’s evaluation of our internal control over financial reporting and the overall quality of our financial reporting.

Discussions with Management

The committee reviewed and discussed with management the company’s audited consolidated financial statements for 2014.  Management has represented to the audit and finance committee that our internal controls over financial reporting have no material weaknesses and that management prepared the company’s consolidated financial statements in accordance with generally accepted accounting principles.

Recommendation for Inclusion in Form 10-K

Based upon the audit and finance committee’s discussions with management and PricewaterhouseCoopers LLP, the audit and finance committee’s review of the representations of management and the reports and presentations of PricewaterhouseCoopers LLP to the audit and finance committee, the audit and finance committee recommended that the board of directors include the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC.

This report is submitted by:

Sarah J. Anderson, Chair

John R. Fielder, Member

Janice F. Wilkins, Member

COMPENSATION COMMITTEE

What are the functions of the compensation committee?

Our compensation committee, which consists entirely of independent directors:

¡                  reviews the performance of our executive officers in January of each year and at the time of the hiring or promotion of an executive officer;

¡                  selects a compensation consultant to assist the committee in evaluating the amount or form of executive and director compensation;

¡                  recommends the salary for each executive officer, including the salary of Mr. Sprowls, the president and chief executive officer of the company, for ratification by the independent members of the board;

¡                  makes stock awards for each executive officer and manager pursuant to our equity compensation plans;

¡                  sets performance standards and makes awards under non-equity compensation plans;

¡                  approves objective and discretionary cash bonuses for executive officers;

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¡                  reviews and makes recommendations to the board regarding long-term compensation strategies and changes in the executive compensation program and the terms of our employee benefit and pension plans;

¡                  reviews trends in executive compensation and considers changes in accounting principles and tax laws that impact executive compensation;

¡  makes recommendations to the board regarding the terms of employment and severance arrangements applicable to specific executive officers;

¡                  reviews and makes recommendations to the board regarding the compensation of directors;

¡                  administers the 2000 Stock Incentive Plan, or 2000 plan, and the 2008 Stock Incentive Plan, or 2008 plan, for employees, and the 2003 Non-Employee Directors Stock Plan, or 2003 directors plan, and the 2013 Non-Employee Directors Stock Plan, or 2013 directors plan, for directors; and

¡                  reviews and discusses with management the Compensation Discussion & Analysis section.

The compensation committee has the authority, in its discretion, to hire, retain, terminate and oversee the work of compensation consultants, independent counsel and other advisers to assist the committee in evaluating the amount or form of executive or director compensation.  Before retaining any compensation consultant, independent counsel or other such advisers, the compensation committee is required to take into account those factors specified in the Dodd-Frank Act and the rules and regulations promulgated by the SEC thereunder and such other factors that the compensation committee considers appropriate that may affect the independence of such consultants, counsel or advisers.  Unless otherwise provided by the board, the compensation committee does not have the authority to delegate its authority to a subcommittee.

What fees have we paid for services provided by our compensation consultant and its affiliates?

The compensation committee engaged Pearl Meyer & Partners to prepare a survey of executive compensation trends and pay practices of other companies and to make recommendations to the compensation committee regarding the amount and types of compensation to be paid to our executive officers in 2014 (hereafter referred to as the engagement).  The aggregate amount of fees paid to Pearl Meyer & Partners in 2014 in connection with the engagement was $146,992.  The compensation committee had the sole authority to appoint Pearl Meyer & Partners, oversee the executive compensation services provided by Pearl Meyer & Partners and to approve the compensation paid to Pearl Meyer & Partners for these services.

Is our compensation consultant independent?

The compensation committee believes that the consulting advice that it has received from Pearl Meyer & Partners was objective.  The committee has assessed the independence of Pearl Meyer & Partners pursuant to SEC rules and concluded that no conflicts of interest exist between the company and Pearl Meyer & Partners (or any individuals working on the company’s account on behalf of Pearl Meyer & Partners).  In reaching such determination, the committee considered the following enumerated factors, all of which were attested to or affirmed by Pearl Meyer & Partners:

¡  During 2014, Pearl Meyer & Partners provided no services to and received no fees from the company other than in connection with the engagement.

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¡  The amount of fees paid or payable by the company to Pearl Meyer & Partners for services provided during the 2014 calendar year represented less than 1% of Pearl Meyer & Partners’ total revenue for the same period.

¡  Pearl Meyer & Partners has adopted and implemented adequate policies and procedures designed to prevent conflicts of interest, which policies and procedures were provided to the company.

¡  There are no business or personal relationships between any member of the Pearl Meyer & Partners team assigned to the engagement and any member of the compensation committee, other than in respect of the engagement, or any work performed by Pearl Meyer & Partners for any other company, board of directors or compensation committee for whom such committee member also serves as an independent director.

¡  There is no business or personal relationships between any member of the Pearl Meyer & Partners team assigned to the engagement or Pearl Meyer & Partners itself and any executive officer of the company other than in respect of the engagement.

¡                  No individual on the Pearl Meyer & Partners team assigned to the engagement maintains any direct individual position in the stock of the company.

Compensation Committee Interlocks and Insider Participation

Mr. Anderson is the chair of the compensation committee.  Ms. Holloway, Dr. Bontá, and Mr. McNulty are members of this committee.  Mr. Ross is a non-voting ex-officio member of this committee.

The board has determined that no member of this committee has a material relationship with the company, either directly or indirectly as a partner, shareholder or officer of an organization that has a material relationship with us or any other relationship with the company that the board of directors determined would affect the independence of that member.

No member of this committee is a current or former officer or employee of the company or any of its subsidiaries.  None of the executive officers of the company is (or has been during the past three years) a member of the board of directors or the compensation committee of any company on which any of our directors serves as an executive officer, director or member of the compensation committee.  No compensation committee member or any entity in which such member has a 5% or more interest or by whom such member is employed has received any consulting, advisory or other compensatory fees paid by the company or any of its subsidiaries, other than fees received by such member for serving on our board of directors, serving on or attending meetings of committees of our board, acting as a liaison between the board and/or its committees and management on matters specified by the board or otherwise working on matters specified by the board.  We are not aware of any facts or circumstances that would make any member of the compensation committee an affiliate of the company.

GOVERNANCE OF THE COMPANY

Is each of our board and committee members independent?

Based on information solicited from each director, the board has determined that none of our directors, other than Mr. Sprowls, has a material relationship with us, either directly or indirectly as a partner, shareholder or officer of an organization that has a relationship with us and is otherwise independent under the corporate governance standards of the New York Stock Exchange.  We have not adopted any other categorical standards for determining whether a board member is independent.

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The board determined that Mr. Anderson, Ms. Anderson, Dr. Bontá, Mr. Fielder, Ms. Holloway, Mr. McNulty, Ms. Wilkins and Mr. Ross are independent directors.  In determining that these directors are independent, the board considered the following facts:

¡  none of these directors or any of their immediate family members is or has been an executive officer or employee of the company or any of its subsidiaries at any time;

¡                  none of our directors or any of their immediate family members or any “related person” had any indebtedness to us, any business relationship with us or any transaction or proposed transaction with us in excess of $120,000 since January 2014, other than compensation for serving as a director, serving as a member or attending meetings of a committee of the board, serving as a liaison between the board and management or otherwise working on matters specified by the board;

¡                  none of these directors or any of their immediate family members received during any twelve month period within the last three years more than $100,000 in direct compensation from us, other than compensation for serving as a director, serving as a member or attending meetings of a committee of the board, serving as a liaison between the board and management or otherwise working on matters specified by the board;

¡  none of these directors has accepted, either directly or indirectly, any consulting, advisory or other compensatory fee from us, other than compensation for serving as a director, serving as a member or attending meetings of a committee of the board, serving as a liaison between the board and management or otherwise working on matters specified by the board;

¡  no director is, or has been, an employee of any entity, including a charitable organization, that has made payments to, or received payments or charitable contributions from us at any time during the past three years for property or services in an amount which, in any single fiscal year, exceeded the greater of $1 million or 2% of the other entity’s consolidated gross revenues reported for that fiscal year;

¡  no immediate family member of any director is an executive officer of any entity, including a charitable organization, that has made payments to, or received payments or charitable contributions from, us at any time during the past three years for property or services in an amount which, in any single fiscal year, exceeded the greater of $1 million or 2% of the other entity’s consolidated gross revenues reported for that fiscal year;

¡                  no director or an immediate family member is a current partner or employee of a firm that is our internal or external auditor;

¡                  no director or an immediate family member was, within the last three years, a partner or employee of our internal or external auditor and personally worked on our audit during that time;

¡                  none of the executive officers of the company is, or has been during the past three years, a member of the board of directors or the compensation committee of any company on which any of our directors serve as an executive officer, director or member of the compensation committee; and

¡                  none of our directors is prohibited from serving on our board of directors by the interlocking director rules of the Federal Energy Regulatory Commission.

We did not identify any other businesses or other relationships between us and any non-employee director that would affect the independence of these directors nor did the board consider any other

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relationships or transactions in determining director independence.  The board has also affirmatively determined that all members of the audit and finance committee, nominating and governance committee and compensation committee, including Mr. Ross, are independent directors under the corporate governance listing standards of the New York Stock Exchange and that all members of the audit and finance committee are independent under the standards set forth in Rule 10A-3 under the Securities Exchange Act of 1934.

No member of the audit and finance committee served on more than three public company boards during 2014.

Do we have any relationships with any executive officers?

No executive officer or nominee or any of his or her immediate family members had any indebtedness to us, any business relationships with us or any transactions or proposed transactions with us since January 2014.

What procedures do we use for reviewing and approving transactions between us and our directors and executive officers?

We have adopted a code of conduct and guidelines on significant governance issues which include policies and procedures regarding relationships between us and our directors and executive officers.  Information about how to obtain a copy of the code of conduct and guidelines on significant governance issues is set forth in this proxy statement under the heading, “Obtaining Additional Information from Us.”

Under the company’s guidelines on significant governance issues, directors are expected to make business opportunities relating to the company’s business available to the company before pursuing the opportunity for the director’s own or another’s account.  Neither the board nor the audit and finance committee has approved any other guidelines that would permit a director or executive officer to engage in any transactions or actions that would create a conflict of interest.  All conflict of interest transactions must be approved by disinterested members of the board and the audit and finance committee in accordance with California law and the rules of the New York Stock Exchange.

Our code of conduct prohibits any director or executive officer from engaging in any transactions or other actions which create a conflict of interest, except under guidelines approved by the board or the audit and finance committee.  A conflict of interest arises if a director or executive officer takes an action or has interests that may make it difficult for the director or executive officer to act objectively or effectively and include:

¡  causing the company or any of its subsidiaries to employ or retain a family member as an employee or consultant,

¡  causing the company or any of its subsidiaries to do business with any businesses in which the director, executive officer or any family member stands to gain personally,

¡                  making investments which may impair the ability of the director or executive to make decisions on behalf of the company,

¡                  taking advantage of business opportunities relating to the company’s business or that are discovered through the use of corporate property, information or position for personal gain, without first offering the opportunity to the company, or

¡                  competing with the company.

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Our guidelines on significant governance issues also require each director to disclose to the board any financial or personal interest in any transaction that comes before the board for approval.  Each director and executive officer is also required to disclose annually any relationships with the company and to declare that all such relationships during the prior year have been disclosed.  Our board did not consider any transactions in which any member of the board or executive officer had an interest in 2014.

We do not provide loans, loan guarantees or otherwise extend credit, directly or indirectly, to any of our executive officers or directors.

Have any of our directors, executive officers or affiliates been involved in certain legal proceedings during the past ten years?

None of our current executive officers, directors or any affiliate or owner of more than 5% of our common shares has been a party adverse to us in any material legal proceeding or been involved in any legal proceedings that the SEC has identified as being material to the evaluation of the ability or integrity of a director or executive officer.

What is our policy regarding attendance by board members at our annual meetings?

We adopted a policy that each director should make every reasonable effort to attend each annual meeting of shareholders.  All directors were present at our 2014 annual meeting.

What is the process for shareholders and other interested persons to send communications to our board?

You or any interested person may, at any time, communicate in writing with the chair of the board who presides at regularly scheduled board meetings and executive sessions, any particular director or non-management directors as a group, by writing to our corporate secretary at American States Water Company, 630 East Foothill Boulevard, San Dimas, California 91773.  We will provide copies of written communications received at this address to the relevant director or the non-management directors as a group unless the corporate secretary, in her reasonable judgment, considers the communications to be improper for submission to the intended recipient(s).  Examples of communications considered improper for submission include customer complaints, solicitations, ordinary work employee grievances, communications that do not relate directly or indirectly to our business and communications that relate to improper or irrelevant topics.

What are the requirements for submission of shareholder proposals?

If you want us to include your shareholder proposal in our proxy materials for the 2016 annual meeting, you must submit the proposal to our corporate secretary at American States Water Company, 630 East Foothill Boulevard, San Dimas, California 91773.  Our corporate secretary must receive your proposal no later than December 9, 2015.  Your proposal must also satisfy the other requirements for shareholder proposals set forth in Rule 14a-8 under the Securities Exchange Act of 1934.

A shareholder making a shareholder proposal should state as clearly as possible the course of action that the shareholder believes we should follow.  If we place a shareholder proposal on the proxy card, we will provide, in the form of proxy, the means for other shareholders to specify, by checking a box, as to whether they want to approve, disapprove or abstain from voting on the shareholder proposal.

If you want your shareholder proposal to be considered at the 2016 annual meeting and you have not met the deadline for us to include your shareholder proposal in our proxy materials, you may nevertheless submit your proposal for consideration at the 2016 annual meeting if you comply with the following procedures.

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You must deliver or mail your notice to our corporate secretary at American States Water Company, 630 East Foothill Boulevard, San Dimas, California 91773 stating that you intend to submit a shareholder proposal at our 2016 annual meeting.  Our corporate secretary must receive your notice between February 19, 2016 and March 5, 2016, unless we change our 2016 annual meeting date by more than 30 days from the date of our 2016 annual meeting, in which case, our corporate secretary must receive your notice no later than the close of business on the tenth day following the day on which we mail you notice of the meeting or the date on which we publicly disclose the date of the meeting.

Your notice to our corporate secretary must include for each matter you propose to bring before the 2016 annual meeting:

n                  a brief description of the matter you intend to bring before the 2016 annual meeting;

n                  reasons for bringing such matter before the 2016 annual meeting;

n                  the name and address of the record and beneficial owner, if any, of the shares making the proposal;

n                  the number of our common shares you own; and

n                  any material interest you have in the matter.

STOCK OWNERSHIP

Are there any large owners of our common shares?

The following table identifies shareholders who own more than 5% of our outstanding common shares on March 31, 2015.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

(1)             Based on Schedule 13G filed with the SEC on January 15, 2015, BlackRock Inc. has sole voting over 3,593,363 of our common shares and sole dispositive power over 3,721,066 of our common shares.

(2)             Based on Schedule 13G filed with the SEC on February 11, 2015, The Vanguard Group, Inc. has sole voting power over 54,991 of our common shares, sole dispositive power over 3,189,090 of our common shares and shared dispositive power over 48,091 of our common shares.

(3)            Percent of class is based on 37,977,279 common shares outstanding on March 31, 2015, 124,558 common shares which our directors and executive officers as a group have the right to acquire on or prior to May 31, 2015 and 29,713 common shares which other employees of the company have the right to acquire on or prior to May 31, 2015.

__________________________

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How much stock do directors and executive officers own?

We are providing you information in the table below regarding the number of our common shares beneficially owned by our directors and executive officers as of March 31, 2015, including common shares which each director and executive officer has a right to acquire on or prior to May 31, 2015.

SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

*Less than 1%

(1)             Mr. Ross has a right to acquire, on or prior to May 31, 2015, 6,000 of our common shares through the exercise of stock options granted pursuant to the 2003 directors plan.  Ms. Anderson, Dr. Bontá, Mr. McNulty, Ms. Wilkins and Mr. Fielder have not been granted any stock options.

(2)                   Mr. Sprowls has the right to acquire 36,992 and 47,438 of our common shares on or prior to May 31, 2015 through the exercise of stock options granted pursuant to the 2000 plan and 2008 plan, respectively.

(3)                   Mr. Harris, who retired on November 21, 2014, has the right to acquire 6,087 of our common shares on May 21, 2015 through the pay-out of restricted stock units that have vested.

(4)             Ms. Tang has the right to acquire 8,604 and 6,816 of our common shares on or prior to May 31, 2015 through the exercise of stock options granted pursuant to the 2000 plan and 2008 plan, respectively.

(5)             Our directors and executive officers as a group have the right to acquire 124,558 of our common shares on or prior to May 31, 2015 through the exercise of stock options or the pay-out of restricted stock units that have vested.  We have not included in this table common shares relating to dividend equivalents that may be received by our directors and executive officers with respect to dividends declared by the board after March 31, 2015 or restricted stock units which the directors will have a right to acquire on the date of the 2015 annual meeting pursuant to the 2013 directors plan.

(6)                   Percent of class is based on 37,977,279 common shares outstanding on March 31, 2015, 124,558 common shares which our directors and executive officers as a group have the right to acquire on or prior to May 31, 2015 and 29,713 common shares which other employees of the company have a right to acquire on or prior to May 31, 2015.

__________________________

Section 16(a) Beneficial Ownership Reporting Compliance

We have adopted procedures to assist our directors and executive officers in complying with Section 16(a) of the Securities Exchange Act of 1934, including assisting directors and executive officers with preparing and filing statements on Form 3, Form 4 and, if applicable, Form 5.  We believe, on the basis of our review of the statements filed by directors and executive officers in 2014, there were no late filings.

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PROPOSAL 1:  ELECTION OF DIRECTORS

We have provided information below about each of our directors including their ages, years of service as a director of the company, educational background, business experience, service on other boards and community service activities.  The process used by the board in nominating directors is a subjective one and is based on the recommendations of the nominating and governance committee, the background and qualifications of each of the other members of the board, considered as a group, and the evaluation of the performance of each director based on previous service on the board, board committees and as liaisons between management and the board or a committee or otherwise working on matters specified by the board.

What is the experience of each nominee for election as a director?

Our board of directors has nominated three persons as class I directors for a three-year term expiring at the end of our annual meeting of shareholders in 2018 or until their successors are duly elected and qualified.

The ages of the directors reported below are as of April 1, 2015.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR ALL” OF THE NOMINEES LISTED BELOW.

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What is the experience of our other directors?

Our board has three class II directors with terms expiring at the end of the annual meeting in 2016 or until their successors are duly elected and qualified.

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Our board has three class III directors with terms expiring at the end of the annual meeting in 2017 or until their successors are duly elected and qualified.

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How did we compensate our directors in 2014?

We paid fees to each of our directors monthly in cash and made awards of restricted stock units to our directors in 2014 pursuant to the terms of the 2013 directors plan as more particularly described below.  We also reimbursed each of our directors in 2014 for expenses incurred in the performance of his or her duties as a director.

DIRECTOR(1) COMPENSATION FOR 2014(3)

(1)                   Mr. Sprowls, the president and chief executive officer of the company in 2014, was also a director of the company.  We did not pay him any additional compensation for his services as a director or member of any committee.

(2)                   The amounts in this column reflect the aggregate grant date fair value of the awards, including dividend equivalent rights, computed in accordance with FASB’s accounting guidance ASC Topic 718.  We provide information regarding the assumptions used in calculation of these amounts in Note 12 to our audited financial statements for the year ended December 31, 2014 in our Annual Report on Form 10-K filed with the SEC.  We did not make any other form of stock award to any director in 2014.  None of our directors forfeited any stock awards in 2014.  Mr. Ross, Mr. Anderson, Ms. Anderson, Dr. Bontá, Ms. Holloway, Mr. McNulty and Ms. Wilkins had a balance of 18,287, 17,515, 975, 3,736, 17,250, 975 and 975 restricted stock units, respectively, credited to his or her account at December 31, 2014, which include restricted stock units granted pursuant to awards under the 2003 directors plan.

(3)                   We did not grant any options to directors in 2014.  Mr. Ross had options to acquire 12,000 of our common shares outstanding at December 31, 2014, of which 6,000 was acquired on January 2, 2015.  We have not granted any options to Dr. Bontá, Mr. McNulty, Ms. Anderson, Ms. Wilkins or Mr. Fielder.  All options were granted pursuant to the 2003 directors plan.

(4)             We provide our board members and executive officers a blanket accident insurance policy.  The policy is intended to provide coverage for traveling on company business or on assignment for the benefit of our company.  We allocated one–third of the premium of $7,786 (three-year premium) for coverage under the blanket accident insurance policy equally to our board members and executive officers.  The cost was $130 per person in 2014.  We also reimburse our board members for the related cost of travel and meals of their spouses when attending regular board and committee meetings.

_________________________

Director Fees

We paid fees to non-employee directors of the board in 2014 for services rendered on the following basis:

n      to each non-employee director, an annual retainer of $25,000 from January through May with an increase of the annual retainer to $45,000 from June through December for service on the board, payable in equal monthly installments;

n      to Mr. Ross, an additional annual retainer of $100,000 for his services as chair of the board, payable in equal monthly installments;

n      to Ms. Anderson, an additional annual retainer of $15,000 for her services as chair of the audit and finance committee, payable in equal monthly installments;

n      to Mr. Anderson, an additional annual retainer of $12,000 for his services as chair of the compensation committee, payable in equal monthly installments;

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n      to Ms. Holloway, an additional annual retainer of $7,500 for her services as chair of the nominating and governance committee, payable in equal monthly installments;

n      to Mr. McNulty, an additional annual retainer of $7,500 for his services as chair of the ASUS committee, payable in equal monthly installments;

n      to each outside director, other than Mr. Ross, and to each outside director who was a member of a committee, a fee of $1,200 for each board or committee meeting attended, other than the annual organizational meeting and telephonic meetings;

n      to each non-employee director, other than Mr. Ross, and to each outside director who was a member of a committee, a fee of $600 for each telephonic board or committee meeting attended;

n      to Dr. Bontá, $2,400 for serving as the enterprise risk management liaison,

n      to Ms. Anderson and Ms. Wilkins, $600 each for serving as issuance committee member, and

n      to Mr. McNulty, $1,200 for time spent on ASUS matters.

Stock Awards

Under the terms of our 2013 directors plan, we automatically granted to each non-employee director in 2014:

n                  restricted stock units on the date of the annual meeting in an amount equal to twice the then current annual retainer payable by the company for services rendered as a director divided by the closing price of our common shares on the trading day immediately preceding the date of the annual meeting as shown on The Wall Street Journal website (www.online.wsj.com), and

n                  restricted stock units on each dividend record date in an amount equal to the cash dividends payable on this date on a number of shares equal to the aggregate number of restricted stock units credited to each non-employee director’s restricted stock unit account divided by the closing price of our common shares on the dividend payment date, as shown on The Wall Street Journal website (www.online.wsj.com), which we refer to as dividend equivalents.

These awards vested and the underlying common shares distributed to each director ninety days after the date of grant.  Commencing with the 2015 annual meeting, the amount of restricted stock units that each director will be entitled to receive at an annual meeting has been revised to an amount equal to $55,000 divided by the closing price of our common shares on the trading day immediately preceding the date of the annual meeting as shown on The Wall Street Journal website (www.online.wsj.com).

Under the terms of our 2003 directors plan, each non-employee director who received an award of restricted stock units in 2011 and 2012 was credited with restricted stock units in 2014 on each dividend record date in an amount equal to the cash dividends payable on this date on a number of shares equal to the aggregate number of undistributed restricted stock units credited to each non-employee director’s restricted stock unit account divided by the closing price of our common shares on the dividend record date, as shown on The Wall Street Journal website (www.online.wsj.com).  Under the terms of each award granted in 2011 and 2012, each non-employee director was entitled to receive one-third of each grant in the form of common shares on the first, second and third anniversaries of the grant.

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Each non-employee director who received an award of restricted stock units in 2003 through 2008 in the form of retirement stock units was also credited in 2014 with restricted stock units on each dividend record date in an amount equal to the cash dividends payable on this date on a number of shares equal to the aggregate number of undistributed restricted stock units credited to each non-employee director’s restricted stock unit account divided by the closing price of our common shares on the dividend record date, as shown on The Wall Street Journal website (www.online.wsj.com).  Mr. Anderson, Dr. Bontá, Ms. Holloway and Mr. Ross are the only current directors who have received awards of retirement stock units.

Other Compensation Plans for Directors

We have no incentive compensation, deferred compensation or pension plans for non-employee directors.

Stock Ownership Guidelines

In 2014, we amended our stock ownership guidelines in response to changes adopted in our compensation program to closer align director and board chair compensation with the market median determined by Pearl Meyer & Partners based on 2013 proxy statement information for members of the peer group approved by the compensation committee described below under “Compensation Discussion and Analysis—Compensation-Committee Process.”  Under the amended guidelines, we have requested each non-employee member of our board to accumulate and hold common shares of the company, restricted stock units or other equity equivalents (other than stock options) granted by the company equal in value to four times his or her annual retainer for board service, plus 1,000 common shares, with the latter to be accumulated and held within three years after his or her appointment as a director.  Non-employee directors are also prohibited from selling or transferring common shares awarded by the company until he or she satisfies these requirements, except where the director sells or transfers his or her shares to satisfy applicable tax withholding obligations owed by the director as a result of the receipt or vesting of his or her shares.  The nominating and governance committee may suspend or adjust these guidelines if the nominating and governance committee determines that the guidelines are unduly burdensome by reason of personal circumstances affecting a director, are unduly affected by temporary declines in the price of our common shares or there has been a recent change in the compensation of directors.  We have not exempted any of our directors from compliance with these guidelines.

We consider these guidelines to have been satisfied once the minimum ownership requirements have been satisfied regardless of subsequent changes in the market value of our common shares.  Each member of our board currently satisfies the revised stock ownership guidelines.

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EXECUTIVE OFFICERS

What has been the business experience of our executive officers during the past five years?

We have set forth the principal occupation of each of our executive officers in the following table.  Unless otherwise specified, the principal position of the executive officer is with American States Water Company.  Mr. Sprowls, Ms. Tang and Ms. Farrow are also officers of each of our direct and indirect subsidiaries.  The age of each executive officer is current as of April 1, 2015.

EXECUTIVE EXPERIENCE TABLE

Compensation Discussion and Analysis

In this section, we describe the philosophy and objectives of our executive compensation programs, explain the compensation decision-making process, summarize the individual components of total compensation for our named executive officers and provide you with our assessment of our compensation program in 2014.  We provide more detailed information regarding the compensation paid to our named executive officers during the past three years in the tables following this section and in the narrative discussion after each of these tables.

Total compensation of our named executive officers in 2014 was significantly impacted by a change in pension value assumptions under the Golden State Company Pension Plan, or pension plan, and the Supplemental Executive Retirement Plan or SERP.  Excluding the change in pension values,

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Mr. Sprowls’ total compensation in 2014 increased by $207,045 due primarily to an increase in his “at-risk” related compensation (stock awards).  However, Mr. Sprowls’ total compensation, including the change in pension values, increased by $870,694 in 2014 including an increase of $663,649 in pension values even though we made no changes in the terms of our pension plan or supplemental retirement plan, and we have no non-qualified deferred compensation arrangements.  Approximately 65% of the $663,649 increase in the pension values for Mr. Sprowls was due to two external factors: the change in discount rates and the change in mortality rates.  The discount rates used to value pension benefits decreased by 85 basis points for the qualified pension plan and 90 basis points for the supplemental retirement plan as compared to the prior year.  This decrease in discount rate increased Mr. Sprowls’ pension values by $361,350. The mortality assumption was updated to reflect the recent release of new mortality tables by the Society of Actuaries projecting longer life expectancies.  This change in mortality table assumption increased Mr. Sprowls’ pension values by $68,403.  These changes in pension value assumptions also significantly impacted the total compensation of our other named executive officers in 2014.

Financial Highlights for Continuing Operations

We achieved

§                 a total shareholder return, including reinvestment of dividends, of 34.7% in 2014 compared to 13.7% for the S&P 500(1)

§                 5.6% annualized growth in revenue over the past 5 years,

§                 15.8% annualized growth in net income over the past 5 years,

§                 14.3% annualized growth in earnings per share over the past 5 years, and

§                 10.5% annualized growth in dividends over the past 5 years.

The following table compares our cumulative total shareholder return for the five years ended December 31, 2014 to the cumulative total shareholder return for the same period of the S&P 500 and the members of our peer group described in this section under “Compensation Committee Process:”

(1)                   Copyright© S&P Capital IQ, a division of The McGraw-Hills Companies Inc.  All rights reserved.

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Approach to Compensation

The compensation committee desires to implement the company’s executive compensation program in a manner that will enable the company to:

§                 attract, retain and motivate talented and experienced executives,

§                 provide fair, equitable and reasonable compensation to each executive officer,

§                 reward job performance, and

§                 further align the interests of our executive officers with that of our shareholders and customers.

Executive Compensation Practices at a Glance

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2014 Pay Mix

The principal elements of our compensation program include a base salary, annual cash incentives, a portion of which is based on achieving financial, operational and customer service objectives during the year, and annual equity grants, a portion of which is based on achieving financial and operational performance objectives during a three year performance period.  We refer to these elements of compensation as total direct compensation.

The compensation committee set the target percentages set forth in the chart below for each component of total direct compensation in 2014, assuming that each named executive officer earned the aggregate target and will earn his or her performance stock awards at the target level following the end of the three year performance period.  As these charts show, approximately 60% and 40% of target total direct compensation (salary, bonus and equity) is variable (or “at-risk”) for our CEO and other named executive officers, respectively.

In determining the target percentages for each component of total direct compensation, the compensation committee considered the practices of our peer group, how well the company’s pay levels are aligned with performance compared to the company’s peer group, the views and practices of the California Public Utilities Commission, or CPUC, in setting rates, the practices of the two water utilities regulated by the CPUC that are members of our peer group, the preference of proxy advisory firms for significant portions of total direct compensation to consist of variable pay based on the satisfaction of objective performance targets and the prior year’s performance of the executive officer. The compensation committee also believes that it is important for more of the compensation of the chief executive officer to be dependent on performance than that of the other executive officers.

The mix of total direct compensation awarded in 2014 which will actually be received by an executive officer (which does not include the actuarial calculation of the change in pension value or other compensation shown in the Summary Compensation Table) may be different from the target mix depending upon, a variety of factors, the value of some of which cannot yet be determined.  The factors affecting actual total direct compensation awarded in 2014 that have not yet been determined include:

§                 the company’s financial and operational performance for the period commencing January 1, 2014 and ending on December 31, 2016 with respect to the performance measures set forth in the executive’s performance stock award agreement;

§                 the value of the company’s common shares upon the vesting of time vested restricted stock units awarded to the executive in 2014 and the value of dividend equivalent rights on dividends paid after 2014 on these restricted stock units;  no restricted stock units awarded to an executive in 2014 vested in 2014; and

§                 the value of the company’s common shares following the determination in 2017 of the amount of common shares to be received by an executive based upon satisfaction of the

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objective performance criteria set forth in the performance stock award agreement and the time vesting of these awards, together with the value of any dividend equivalent rights thereon.

Alignment of CEO Pay with Performance

In the course of reviewing our overall executive compensation program for 2014, our consultants, (Pearl Meyer & Partners) reviewed the relationship between realizable total direct compensation of our CEO and our performance for the two three-year periods ended December 31, 2013 and December 31, 2014.  This review was conducted to assist the compensation committee in understanding the degree of alignment between realizable total direct compensation delivered to the CEO during the period and our performance relative to our peer group as identified below.  For purposes of this review, company performance is defined as total shareholder return (including reinvested dividends) over the respective three-year period.  Peer Group total direct realizable compensation is defined as the sum of:

§                 Actual base salaries paid over the three-year period ending December 31, 2013;

§                 Actual short-term incentives (bonuses) paid over the three-year period ending December 31, 2013;

§                 “In-the-money” value as of December 31, 2013 of any stock options granted over the prior three-year period;

§                 The value as of December 31, 2013 of any restricted shares or restricted stock units granted over the prior three-year period; and

§                 Payouts of cash-based long-term incentive awards and the value as of December 31, 2013 of any performance shares earned over the three-year period.

As a second comparison, we also reviewed the company’s CEO’s pay for performance using realizable pay from January 1, 2012 to December 31, 2014 compared to total shareholder return (including reinvested dividends) over the same period.  Pay is based on the period 2012 and 2013 with an estimate of 2014 equal to 2013 for our peers since 2014 pay information for most of our peers was not available at the time of this analysis.

The following chart illustrates the pay for performance analysis of our CEO using realizable pay relative to our peer group for 2013 and illustrates our realizable pay and performance for 2014.  For both periods, the company’s total shareholder return (including reinvestment of dividends) rank was at the 100th percentile, in both periods, and our CEO’s realizable pay rank was at the 54th percentile.

In both cases, our CEO’s realizable compensation rank was below the percentile rank of our performance, indicating a strong correlation between realizable compensation and performance.  The compensation committee believes this demonstrates an appropriate alignment between our compensation program outcomes and company performance.

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Changes in our Compensation Program

As a result of our annual reviews of our compensation programs in 2014 and 2015, the compensation committee made the following significant changes in our executive compensation programs:

§                 approved an amendment to the 2008 plan to prohibit the repurchase of options granted under the plan after the effective date of the amendment,

§               adopted a formal policy prohibiting officers and directors, effective March 18, 2014, from entering into hedging or monetization transactions involving our common shares and holding our common shares in a margin account,

§               adopted a formal policy prohibiting officers and directors, effective March 18, 2014, from pledging our common shares as collateral for a loan,

§                 approved the elimination of the gross up for excise taxes pursuant to Section 280G of the Internal Revenue Code in the change in control agreement and equity award agreements provided to senior executives, and

§                 approved the elimination of the single trigger provision on the acceleration of vesting on equity following a change in control under the change in control agreements and equity award agreements.  The revised agreements include a double trigger requirement on vesting of equity where both events have to occur before the equity vests: (1) a change in control event occurs, and (2) the officer is terminated or leaves for “Good Reason” (e.g., cut in pay, responsibilities, etc.), each within two years after the change in control event occurs.

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In May 2014, our shareholders cast an advisory vote approving the compensation of our named executive officers, as disclosed in our 2014 proxy statement.  Approximately 96.4% of the votes cast for or against this matter supported our 2014 “say-on-pay” proposal, which was an increase in the favorable vote over the vote in 2013.  Abstentions were not counted as a vote either for or against this proposal.  The compensation committee considered this result when making changes to its compensation program.

Compensation Committee Process

The compensation committee annually reviews our executive compensation program in order to assess whether the program continues to meet the objectives of the program.  The compensation committee typically engages a compensation consultant to assist the committee.

The compensation committee engaged Pearl Meyer & Partners in August 2011 as a compensation consultant to the committee.  The committee extended this engagement in 2012, 2013 and 2014.  Pearl Meyer & Partners provided the compensation committee with information regarding the compensation programs of the following group of companies selected by Pearl Meyers & Partners, after consultation with management, and approved by the compensation committee:

Owing to the limited number of similarly sized water utilities, peer companies were selected based on similarity in industry (water, gas and electric utilities) and size (annual revenues between $100 million and $1 billion).  The compensation committee considered compensation information for this same group of companies during the past three years with the exception of ALLETE, Inc., El Paso Electric Company and Northwest Natural Gas Company, which were added to the peer group in 2012, and Central Vermont Public Service Corporation which was eliminated in June 2012 due to its acquisition by Green Mountain Power Corporation.  Three members of the peer group are in the water industry, two of which are also regulated by the CPUC, the regulator of the company’s principal subsidiary.  The compensation committee often gives greater weight to the practices of the two CPUC-regulated companies since the company competes with these companies for executive talent and is subject to similar regulatory oversight.  In addition, the compensation committee believes that the financial and operational performance of these companies and the compensation programs of these companies are particularly relevant since the ability of these companies to earn their authorized rate of return and to obtain rate adjustments for changes in employee compensation are also affected to some extent by the rules, regulations and practices of the CPUC.  These companies are, to some extent, also affected by the same weather, climate and economic conditions as the company.  All of the other companies are utilities or utility holding companies.

Pearl Meyer & Partners also provided the compensation committee in January 2014 with its competitive assessment of the company’s executive compensation program based on information derived by Pearl Meyer & Partners from four different general market surveys, the Towers Watson-2013 Management Compensation Survey (all industries) and three confidential/proprietary general industry surveys.  The competitive assessment was summary in nature, did not identify any particular company and did not contain any information regarding the compensation program of any particular company.  Accordingly, the compensation committee did not consider the compensation practice of any particular company, other than the compensation practices of members of the peer group, in designing any of the company’s compensation plans.

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Pearl Meyer & Partners noted in the competitive assessment provided to the compensation committee that, in the aggregate, the total direct compensation of the executive officers of the company was slightly below the 50th market percentile and that the company’s relative performance significantly exceeds the company’s relative realizable pay rank as measured against its peers for the 2011-2013 period.  Pearl Meyer & Partners also noted in the competitive assessment that the company’s target long-term incentive grants were between the 25th and 50th percentile, with variation by executive, and that the total cash compensation paid by the company was close to the 50th percentile.

In addition to the information provided by Pearl Meyer & Partners, the compensation committee considered:

§                 recommendations of management regarding changes that the compensation committee may wish to consider in the company’s compensation program,

§                 the chief executive officer’s subjective assessment of the company’s performance and the performance of individual executive officers,

§                 the recommendations of the chief executive officer for adjustments in the base salary and incentive compensation of other executive officers and managers,

§                 compensation increases authorized by the CPUC in rate cases of the company’s principal subsidiary, GSWC,

§                 a subjective assessment by individual directors of the company’s performance and the performance of the chief executive officer and other members of the management team,

§                 a subjective assessment of whether the company’s compensation program properly incents management,

§                 objective measures of the company’s financial, operational and customer service performance established in the company’s short-term incentive program,

§                 objective measures of the company’s financial performance used in establishing performance criteria for performance stock awards under the 2008 plan,

§                 the views of proxy advisory firms, and

§                 the views of the CPUC regarding the company’s compensation programs or practices, to the extent known.

Independence Assessment – Compensation Committee Consultant

In 2014, as required by rules adopted by the Securities and Exchange Commission under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the compensation committee selected Pearl Meyer & Partners to continue to serve as its independent compensation consultant after assessing the firm’s independence and concluded that no conflicts of interest existed between the company and Pearl Meyer & Partners (or any individuals working on the company’s account on behalf of Pearl Meyer & Partners).  We provide additional information regarding this assessment under “Compensation Committee - Is our compensation consultant independent?”

Risk Considerations

In establishing and reviewing the company’s compensation program, the compensation committee considers whether the program encourages unnecessary or excessive risk taking and has concluded that it does not.  Base salaries, which constitute the largest component of total direct compensation for all employees of the company, are fixed in amount and thus do not encourage excessive risk taking.

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The compensation committee considers a variety of factors in awarding additional cash compensation based on the performance of its executive officers, including factors based on earnings performance, customer satisfaction, capital improvements, improvements in operations and internal accounting controls.  The committee believes that, as a result of this mix of factors, the company’s short-term cash incentive program appropriately balances risk and the committee’s desire to compensate executives for accomplishments that are important to the company’s customers and shareholders.

The compensation committee also makes awards of restricted stock units and performance stock to executive officers.  Restricted stock units and performance stock awards granted after 2013 vest at the rate of 33% in the first year, 33% in the second year and 34% in the third year and, with respect to performance stock awards, provide for determination of whether the performance criteria have been satisfied after the end of a three year performance period, subject to limited exceptions.  In addition, we may not repurchase any options granted to any executive officers or managers after March 18, 2014 or reprice any options awarded to any executive officer or manager under our 2008 plan.  The compensation committee believes that these features of our equity plans further discourage excess risk-taking by executives.  In addition, the vesting schedule serves as a retention vehicle for executive officers and managers.

In order to mitigate risks that may be associated with performance-based compensation, the compensation committee maintains a clawback policy to recoup cash and equity performance-based compensation payments if:

§                 we calculated the amount of the compensation based on achieving financial results that were subsequently subject to an accounting restatement due to material noncompliance with a financial reporting requirement under the securities laws,

§                 we identified the need for the accounting restatement within three years after the date of the filing of financial results that were subsequently restated, and

§                 we would have paid a lesser amount to the executive officer based on the restated financial results.

All awards made to executives under our 2008 stock incentive plan after December 31, 2010 and all awards made under our short-term cash incentive plan are subject to this policy and any rights to repayment that the company may have under Section 304 of the Sarbanes-Oxley Act of 2002 and other applicable laws.

We adopted a policy that prohibits the hedging of the risks of economic ownership of our common shares and the pledging of our common shares by officers and directors in March 2014.  Each of our officers and directors has represented to us that he or she has not purchased any financial instrument in 2014 or 2015 designed to hedge or offset any decrease in the market value of any company common shares held, directly or indirectly, by such officer or director or pledged any of our common shares.  We also previously requested each officer and director to inform the company whether he or she had engaged in any hedging activities or pledged any of our common shares.  To date, no officer or director has informed the company that he or she has engaged in any such activities.

In addition to establishing and reviewing our compensation program, the compensation committee also examines the pay practices and policies relating to all employees of the company.  On the basis of this examination, the compensation committee has concluded that our pay practices and policies do not appear to involve risks that could have a material adverse effect on us.

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Elements of Executive Compensation

Our compensation program consists of base salary, short-term cash incentives, stock awards, retirement benefits, severance arrangements and welfare and other benefits and perquisites.  We discuss each of these elements in more detail below.  The compensation committee considers each of these elements independently before assessing whether its overall compensation program is competitive with that of its peer group and other companies with which the company competes for executive talent.

Base Salary

We pay a base salary in order to enable us to attract and retain talented executive officers and to provide a fixed base of compensation commensurate with the individual responsibilities, performance and experience of each of our executives.

The compensation committee considered the following factors in making adjustments to the base salaries of individual executive officers in 2014:

§                 the competitiveness of our compensation of each executive officer compared to executive officers of our peer group in comparable positions,

§                 the desire to compensate executives in comparable positions in a similar manner; in 2014, Robert Sprowls was our chief executive officer; Denise Kruger, McClellan Harris III and Eva Tang were senior vice presidents; and Patrick Scanlon was a vice president,

§                 a subjective assessment of each executive’s performance during 2013, including his or her performance in the areas of our business over which he or she had individual responsibility, and

§                 a review of the company’s financial performance and management’s accomplishments during 2013.

After consideration of the factors described above, the compensation committee increased the base salary of Mr. Sprowls, Ms. Kruger, Mr. Harris, Ms. Tang and Mr. Scanlon by 3.17%, 3.91%, 3.01%, 4.11% and 3.50%, respectively, in January 2014.

Short-Term Cash Incentives

We adopted a short-term cash performance incentive plan in order to motivate executives who participate in the plan to maximize our performance from a financial, operations and customer service perspective.  We also from time to time approve short-term cash incentives for specified executives based on objective criteria that were not included in the short-term cash performance incentive plan, referred to herein as the other objective criteria.  We believe that the performance incentives set forth in our annual short-term cash incentive programs will permit us to meet our objectives.  Our customers and shareholders benefit if we achieve our customer service objectives.  Our customers and shareholders also benefit if we are able to attract capital at a lower cost as the result of improved financial performance.

In March 2014, the compensation committee approved a short-term incentive program which gave each named executive officer the opportunity to receive:

§                 80% of each executive’s target bonus under the performance incentive plan based on achieving objective performance criteria in 2014,

§                 20% of each executive’s target bonus based on the subjective assessment by the compensation committee of the executive officer’s performance in 2014 following the end of the year.  In making this subjective assessment, the compensation committee took into account the recommendations of the chief executive officer based on his subjective assessment of the performance of the other executive officers and a subjective assessment of the performance of each executive officer by other members of the board.

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The compensation committee increased the target aggregate bonus for Mr. Sprowls under this program by 10% over his percentage of base salary in 2013, by 3.5% over the percentage of base salary in 2013 for Ms. Kruger, Mr. Harris and Ms. Tang, and by 3.0% over the percentage of base salary in 2013 for each of the other executive officers.  The compensation committee may, in its discretion, reduce an award below the level earned for each of the criteria or upon the failure to satisfy other objective criteria, but, may not in any event, increase the amount of the bonus above the level specified for that criteria.  Mr. Harris was not entitled to receive a bonus under this program in 2014 since he was not an employee of the company in 2015 when the bonuses were paid out.  Detailed information regarding the objective criteria selected by the compensation committee for these awards can be found under “How were certain of our executive officers compensated in 2014 - “Non-Equity Incentive Compensation.”

The compensation committee recognizes that our financial performance is dependent upon a number of factors beyond the immediate control of management, such as weather, water quality and water supply.  As a result, the pay-out structure includes a discretionary bonus component based on a subjective assessment of the performance of each executive officer by the compensation committee after the end of the year.

Mr. Sprowls, Ms. Kruger, Ms. Tang and Mr. Scanlon earned 80.1%, 68.8%, 80.1%, and 68.8%, of the target aggregate bonus as a result of satisfying the objective criteria set for that executive officer, respectively. Mr. Sprowls, Ms. Kruger, Ms. Tang and Mr. Scanlon will receive $312,390, $74,432, $84,420, and $45,874, respectively, in April 2015 with respect to the awards based on these criteria.

Mr. Sprowls, Ms. Kruger, Ms. Tang and Mr. Scanlon earned 28.2%, 28.0%, 28.0%, and 25.0% of the aggregate target bonus as a result of the discretionary award for that executive officer, respectively. Mr. Sprowls, Ms. Kruger, Ms. Tang and Mr. Scanlon will receive $110,000, $30,292, $29,510, and $16,669, respectively, in April 2015 with respect to these discretionary bonus awards.

In Proposal 2, we are asking our shareholders to approve an amendment and extension of our performance incentive plan in order to enable us to continue to provide each of our executive officers short-term cash incentives that are performance-based under Section 162(m) of the Internal Revenue Code.

Equity Awards

In order to promote internal pay equity, it is the practice of the compensation committee generally to grant the same amount of equity awards to each senior vice president and the same amount of equity awards to each vice president.  The chief executive officer generally receives a higher equity award than the amounts granted to other officers.

The compensation committee considered the following factors in determining the amount and type of equity awards to be made to the chief executive officer, senior vice presidents and vice presidents in 2014:

§                 the past practices of the committee in awarding equity, and

§                 the market survey prepared by Pearl Meyer & Partners which indicated that the company’s long-term incentives were below average compared to that of our peer group and consisted of a mixture of time vested equity awards and performance stock awards.

The compensation committee recommended that all equity awards to executive officers in 2013 and 2014 be granted through a combination of time vested restricted stock units and performance stock awards in the form of restricted stock units, rather than in all time vested restricted stock units, in order to base a higher portion of compensation on achieving objective performance goals as set forth by the

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compensation committee.  Information regarding the objective performance goals can be found under “How were certain of our executive officers compensated in 2014 - “Equity Compensation” and “Grants of Plan-Based Awards in 2014.”

In January 2014, the compensation committee decided to increase the target value of equity awards to executives in order to increase the amount of the company’s long-term incentives paid to executives to a level closer to that of members of our peer group.  Approximately 50% of the value of equity awards to Ms. Tang and 60% of the value of equity awards to Mr. Harris are subject to the satisfaction of performance conditions.  Approximately 42% of the value of equity awards to Ms. Kruger and Mr. Scanlon were subject to the satisfaction of performance conditions.  The percentage of the equity awards based on satisfaction of performance conditions was lower for Ms. Kruger and Mr. Scanlon due to an increase in the amount of their time vested restricted stock units over that of other executive officers in order to provide additional compensation to them for favorably resolving well contamination issues in the company’s Hawthorne, California system in 2013.  The compensation committee also concluded that more of Mr. Sprowls’ equity awards should be based upon the satisfaction of performance conditions than was the case with the other executive officers, with 75% of the value of his awards subject to performance conditions. The compensation committee determined the amount of these equity awards on the basis of the average closing price of the company’s common shares for the thirty days ending on the date preceding the date that the compensation committee resolutions were presented for approval by the committee.

Each equity award granted in 2014 vests over a three-year period, provided that, with respect to performance stock awards the performance criteria have been satisfied at the end of the three-year performance period.  The compensation committee believes that granting equity awards with three-year vesting periods creates a substantial retention incentive and also encourages the named executive officers to focus on the company’s long-term business objectives and stock performance.

Each time vested restricted stock unit and performance stock award was granted with dividend equivalent rights to the extent the employee vests in the underlying restricted stock unit or performance stock award.  The compensation committee believes that granting stock units with dividend equivalent rights helps align the interests of the named executive officers with the interests of the shareholders of a utility holding company who, in many cases, purchase and retain the stock of the holding company based on the amount of dividends that the holding company consistently pays.  Dividends have also historically been an important component of our total shareholder return.

The number of restricted stock units accumulated for each executive officer pursuant to dividend equivalent rights on time vested restricted stock units prior to vesting and payout of restricted stock units granted to each executive officer was 366.2, 171.5, 172.7, 152.6, 136.2 for Mr. Sprowls, Ms. Kruger, Mr. Harris, Ms. Tang and Mr. Scanlon, respectively, in 2014.  No restricted stock units granted in 2014 were paid out to any executive officer in 2014 since none of the restricted units awarded in 2014 vested in 2014.

The number of restricted stock units accumulated for the executive officer pursuant to dividend equivalents rights on performance stock awards granted to each executive officer prior to payout of the awards was 913.4, 104.1, 114.3, 104.1 and 81.1 for Mr. Sprowls, Ms. Kruger, Mr. Harris, Ms. Tang and Mr. Scanlon, respectively.  A portion of these restricted stock units accumulated for, and not paid to, Mr. Sprowls relate to the performance stock granted to him in 2012 that has not vested.  The remainder of the restricted stock units accumulated for, and not paid out to, Mr. Sprowls and the other executive officers relate to the performance stock granted to each executive in 2013 and 2014 since the performance conditions for earning these awards have not yet been satisfied.

Upon occurrence of a change in control event followed by either (a) termination of an executive’s employment (other than for cause, death or disability) or (b) termination by the executive of employment for good reason, in each case, within two years following the change in control event, each restricted stock unit and performance stock award will immediately vest free of restrictions. The compensation

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committee believes that the vesting of equity awards permits executives whose employment will be terminated as a result of the change in control to share in the value that they created for shareholders at the same time that the shareholders recognize that value upon a change in control. The performance period under the performance stock awards will also end and the performance criteria will be adjusted to account for the shortened performance period as provided in the performance stock award agreements.

Tax Considerations

Under Section 162(m) of the Internal Revenue Code, we may generally only deduct up to $1,000,000 of the compensation paid to a named executive officer, unless the compensation is performance-based and has been paid pursuant to a plan approved by shareholders. The performance incentive plan was approved by shareholders at our annual meeting in 2010 and the addition of performance stock awards to our 2008 plan was approved by shareholders at our annual meeting in 2012.  We intend the objective bonuses paid to our executive officers under the short-term cash incentive plan and the performance stock awards to qualify as performance-based within the meaning of Section 162(m).  The portion of objective bonuses paid to each of the executive officers that were based on the satisfaction of the other objective criteria do not qualify as performance-based compensation within the meaning of Section 162(m).  From time to time, the compensation committee may approve compensation of an executive officer that exceeds the limitations set forth in Section 162(m).

Retirement Benefits

We provide retirement benefits that we believe are comparable to the benefits provided by other members of our peer group in order to attract, retain and motivate talented and experienced executives.  Our retirement benefit programs are also intended to provide fair, equitable and reasonable compensation to our executive officers and to assist in the retention of our executive officers.  The change in the pension value of each executive officer may, however, differ markedly from that of members of our peer group due to differences in the age and time of service of the executive officers of the company compared to that of executives in comparable positions in members of our peer group.  Changes in pension value also differ by executive due to differences in cash compensation, the age of the executive and the number of years of service with the company.

Severance Arrangements

We do not have any employment agreements with any of our executive officers.  We do, however, have change in control agreements with each of our executive officers which provide for certain benefits in the event of a change in control if either the executive officer’s employment is terminated (other than for cause, death or disability) or the executive terminates employment for good reason, in each case within two years following the change in control event.  These change in control agreements replace change in control agreements that were negotiated with management in 1999.

The compensation committee believes that the change in control agreements provide management with benefits comparable to those provided by other members of our peer group and other public utilities in California with whom we compete.  The compensation committee also believes that the change in control agreements provide appropriate incentives to management to remain with the company in the event of a potential change in control.

We made a severance payment to Mr. Harris of $40,000 pursuant to the terms of a separation agreement executed in November 2014 in connection with his retirement on November 21, 2014 in exchange for a general release of claims against the company.

Welfare and Other Benefits and Perquisites

We provide welfare and other benefits that we believe are comparable to the benefits provided by other members of our peer group and other perquisites that we believe are reasonable to attract, retain and motivate talented and experienced executives.  Except as described under “How were certain officers

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compensated in 2014?” and in this section, we provide the same benefits to executive officers as we provide to other employees of the company.

Stock Ownership Guidelines

We have requested each of our executive officers to own common shares, restricted stock units, and other equity equivalents, including common shares held in our 401(k) plan, equal in value to:

§                 3.0 times his salary for Mr. Sprowls, as the chief executive officer,

§                 1.5 times her salary for Ms. Kruger and Ms. Tang who are senior vice presidents, and

§                 One time his annual salary for Mr. Scanlon, who is a vice president.

We do not consider unexercised stock options to be equity equivalents of our common shares for this purpose.  We have asked each executive officer, other than Mr. Sprowls, to satisfy these guidelines by the later of May 2012 or five years after his or her appointment to the position of senior vice president or vice president.

The board increased the stock ownership guidelines applicable to Mr. Sprowls from 2.5 times his salary to 3.0 times his salary in February 2012.  As a result of the increase in his guidelines, we asked Mr. Sprowls to satisfy these guidelines by January 1, 2015.

We consider these guidelines to have been satisfied once the minimum ownership requirements are met regardless of subsequent changes in the market value of our common shares.  Mr. Sprowls, Ms. Kruger, Ms. Tang and Mr. Scanlon currently satisfy these guidelines.

The nominating and governance committee may suspend or adjust these guidelines if they determine that the required holding of any executive officer is unduly burdensome by reason of personal circumstances affecting an executive officer or is the result of recent significant changes in the compensation of the executive officer.  We have exempted Ms. Farrow, a vice president of the company, from compliance with these stock ownership guidelines since she is prohibited by the auditor independence rules of PricewaterhouseCoopers LLP, our independent public accounting firm, from owning any of our common shares.  Ms. Farrow’s husband is an employee of PricewaterhouseCoopers, but is not involved in any manner in auditing our financial statements or otherwise providing any services to us.

Compensation Committee Report

The compensation committee has reviewed and discussed the Compensation Discussion and Analysis with management.  On the basis of this review and discussion, the compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement and in our Form 10-K for the year ended December 31, 2014 by incorporation by reference to this proxy statement.

This report is submitted by:

James L. Anderson, Chair

Diana M. Bontá, Member

Anne M. Holloway, Member

James F. McNulty, Member

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How were certain of our executive officers compensated in 2014?

We compensated each of our most highly compensated executive officers in 2014 as more particularly described below.  Unless otherwise specified, the principal position of the executive officer is with American States Water Company.  We also reimbursed each of these executive officers for expenses incurred in the performance of his or her duties as an executive officer.

SUMMARY COMPENSATION TABLE(1)

(1)                                      We did not grant any stock option awards during the past three years.

(2)                                      This column sets forth the amount paid to each named executive officer during the calendar year based on 26 pay periods.

(3)                                      The amounts paid to a named executive officer as a discretionary bonus for 2012, 2013 and 2014 under the short-term cash incentive plan.

(4)                                      This column sets forth the aggregate grant date fair value of the awards, including the fair value of dividend equivalent rights, computed in accordance with FASB’s accounting guidance ASC Topic 718, rather than the amounts recognized on our financial statements, which is based on vesting.  We provide information regarding the assumptions used in the calculation of the value of these awards in Note 12 to our audited financial statements for the year ended December 31, 2014 in our Form 10-K filed with the SEC.  None of our named executive officers forfeited any stock awards in 2014.  Stock awards consist of time vested restricted stock units and performance stock awards in the form of restricted stock units.  For the performance stock awards subject to performance conditions that have not been satisfied, we assumed that each executive officer would earn

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performance stock awards at the target level.  If each executive officer were instead to earn performance stock awards at the maximum level, the grant date fair value of stock awards granted to Mr. Sprowls, Ms. Kruger, Mr. Harris, Ms. Tang and Mr. Scanlon in 2014 would be $963,860, $180,103, $186,411, $158,908 and $142,832 respectively.  A portion of the maximum value includes the dividend equivalent rights on the 2013 and 2014 performance stock awards.  We granted performance stock awards to Mr. Sprowls in 2012 with a grant date fair value of $217,145.  These awards are included in the calculation of stock awards for 2012 since the compensation committee determined in March 2013 that the performance conditions set forth in his 2012 award agreement had been satisfied.  We did not grant any performance stock awards to any other executive officer in 2012.

(5)                                      Each named executive officer received non-equity incentive compensation based upon a percentage of base salary and  satisfaction of performance criteria under the short-term cash incentive programs approved by the compensation committee.

(6)                                      This column sets forth the sum of the change in the value of the pension plan and the supplemental retirement plan for each of the named executive officers.  The change in the pension value under the Golden State Water Company Pension Plan, or pension plan, for 2014, was $121,590, $243,659, $75,018, $227,493 and $331,752 for each of Mr. Sprowls, Ms. Kruger, Mr. Harris, Ms. Tang and Mr. Scanlon, respectively.  The change in the pension value under the supplemental retirement plan for 2014 was $874,337, $465,765, $389,636, $505,831 and $254,428 for each of Mr. Sprowls, Ms. Kruger, Mr. Harris, Ms. Tang and Mr. Scanlon, respectively.  Mr. Harris retired on November 21, 2014.  He deferred the receipt of his benefits under the company’s pension plan to January 1, 2015.  His supplemental executive retirement plan benefits were deferred to June 1, 2015 due to Section 409(a) of the Internal Revenue Code. See the Pension Benefits Table for additional information regarding the retirement age assumptions used in making these calculations.  We provide additional information regarding the assumptions used to calculate the change in pension value in Note 11 to our audited financial statements in our Form 10-K for the year ended December 31, 2014.  We do not have any non-qualified deferred compensation plans.

(7)                                      We provide information on the amount and types of benefits included under the heading “All Other Compensation” in the table below.

(8)                                      This column sets forth total compensation for each named executive officer excluding the Change in Pension Value and Nonqualified Deferred Compensation Earnings column, which increased significantly in 2014 as compared to 2013 even though there were no changes made to the pension plan or the supplemental retirement plan.  The increase was due, in large part, to two external factors: the change in discount rates and the change in mortality rates.  The discount rates used to value pension benefits decreased by 85 basis points for the qualified pension plan and 90 basis points for the supplemental retirement plan as compared to the prior year.  The mortality assumption was updated to reflect the recent release of new mortality tables by the Society of Actuaries projecting longer life expectancies.  The amounts reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column are calculated based on assumptions used in preparing the company’s audited financial statements, and may fluctuate significantly in a given year depending on a number of factors including changes in these actuarial assumptions.

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The following table provides information regarding the amount and types of benefits included under the heading “All Other Compensation” in the previous table.

ALL OTHER COMPENSATION