##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION



Form 10-K




|    |                                                                                         
|--- | ----------------------------------------------------------------------------------------
|[X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002 or



|    |                                                                                               
|--- | ----------------------------------------------------------------------------------------------
|[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) 
     OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition period from

to

Commission file number 1-4720

WESCO FINANCIAL CORPORATION

(Exact name of Registrant as Specified in its
Charter)


|                                                                                                              |  |                                     
|------------------------------------------------------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                                                                      |  | 95-2109453                          
|(State or Other Jurisdiction of
    incorporation or organization)                                            |  | (I.R.S. Employer Identification No.)
|                                                                                                             
|301 East Colorado Boulevard, Suite 300,
    Pasadena, California
    (Address of Principal Executive Offices) |  | 91101-1901
    (Zip Code)           

(626) 585-6700


(Registrants Telephone Number, Including
Area Code)


Securities registered pursuant to section 12(b) of the Act:

|                            |  |                                                       
|--------------------------- |  | ------------------------------------------------------
|Title of Each Class         |  | Name of Each Exchange on Which Registered             
|Capital Stock, $1 par value |  | American Stock Exchange
    and Pacific Stock Exchange

Securities registered pursuant to
Section 12(g) of the Act:

None




(Title of Class)




---

(Title of Class)


Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past 90 days.  Yes X  No

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any
amendment to this
Form 10-K.  o

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Exchange Act
Rule 12b-2).  Yes X  No

The aggregate market value of voting and
non-voting stock of the registrant held by non-affiliates of the
registrant as of June 28, 2002 was: $401,776,000.

The number of shares outstanding of the
registrants Capital Stock as of March 17, 2003
was: 7,119,807.

DOCUMENTS INCORPORATED BY REFERENCE

|                                                            |  |                                  
|----------------------------------------------------------- |  | ---------------------------------
|Title of Document                                           |  | Parts of Form 10-K               
|Proxy Statement for 2003
    Annual Meeting of Shareholders |  | Part III. Items 10, 11, 12 and 13

11



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TABLE OF CONTENTS



|             |                                                                                                        |  |  |  |  |  |  | 
|------------ | ------------------------------------------------------------------------------------------------------ |  |  |  |  |  |  | 
|PART I      
|             | Item 1. Business                                                                                      
|             | ACTIVITIES NOT IDENTIFIED WITH A BUSINESS SEGMENT                                                     
|             | Item 2.Properties                                                                                     
|             | Item 3.Legal Proceedings                                                                              
|             | Item 4.Submission of Matters to a Vote of Security Holders                                            
|PART II     
|             | Item 5.Market for Registrants Common Equity and Related Shareholder Matters                          
|             | Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations          
|             | Item 7A.Quantitative and Qualitative Disclosures About Market Risk                                    
|             | Item 8.Financial Statements and Supplementary Data                                                    
|             | Item 10.Directors and Executive Officers of the Registrant                                            
|             | Item 11.Executive Compensation                                                                        
|             | Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
|             | Item 13.Certain Relationships and Related Transactions                                                
|             | Item 14.Controls and Procedures                                                                       
|             | Item 15.Exhibits, Financial Statement Schedules, and Reports on Form 8-K                              
|             | SIGNATURES                                                                                            
|EXHIBIT 99.1
|EXHIBIT 99.2



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PART I






Item 1.     Business


GENERAL

Wesco Financial Corporation (Wesco)
was incorporated in Delaware on March 19, 1959. Wesco,
through subsidiaries, engages in three principal businesses:
(1) the insurance business, through Wesco-Financial
Insurance Company (Wes-FIC), which was incorporated
in 1985 and engages in the property and casualty insurance
business, and The Kansas Bankers Surety Company
(KBS), which was incorporated in 1909, was purchased
by Wes-FIC in mid-1996 and provides specialized insurance
coverages for banks; (2) the furniture rental business,
through CORT Business Services Corporation (CORT),
which traces its national presence to the combination of five
regional furniture rental companies in 1972 and was purchased by
Wesco in 2000; and (3) the steel service center business,
through Precision Steel Warehouse, Inc. (Precision
Steel), which was begun in 1940 and acquired by Wesco in
1979. The subsidiaries, with one minor exception, are wholly
owned, either directly or indirectly.

Wescos operations also include, through
another wholly owned subsidiary, MS Property Company
(MS Property), management of owned commercial
real estate in downtown Pasadena, California, a portion of which
is being redeveloped. MS Property began its operations in late
1993, upon transfer to it of real properties previously owned by
Wesco and by a former savings and loan subsidiary of Wesco.

Since 1973, Wesco has been 80.1%-owned by Blue
Chip Stamps (Blue Chip), a wholly owned subsidiary
of Berkshire Hathaway Inc. (Berkshire). Thus, Wesco
and its subsidiaries are controlled by Blue Chip and Berkshire.
All of these companies may also be deemed to be controlled by
Warren E. Buffett, who is Berkshires chairman and
chief executive officer and economic owner of approximately 31%
of its stock. Charles T. Munger, the chairman of Wesco, is
also vice chairman of Berkshire, and consults with
Mr. Buffett with respect to Wescos investment
decisions and major capital allocations. Although operating
decisions for Wescos businesses are made by the managers
of those business units, Mr. Buffett is president and a
director of Wesco Holdings Midwest, Inc. (WHMI), a
wholly owned subsidiary of Wesco, and a director of Wes-FIC,
Precision Steel, and CORT, which are wholly owned subsidiaries
of WHMI.

Wescos activities fall into three business
segments  insurance, furniture rental and industrial.
The insurance segment consists of the operations of Wes-FIC and
KBS. The furniture rental segment consists of the operations of
CORT. The industrial segment comprises Precision Steels
steel service center and other operations. Wesco is also engaged
in several relatively insignificant activities not identified
with the three business segments; these include
(1) investment activity unrelated to the insurance segment,
(2) MS Propertys real estate activities, and
(3) parent company activities.

INSURANCE SEGMENT

Wes-FIC was incorporated in 1985 to engage in the
property and casualty insurance and reinsurance business. Its
insurance operations are managed by National Indemnity Company
(NICO), which is headquartered in Omaha, Nebraska.
To simplify discussion, the term Berkshire Insurance
Group, as used in this report, refers to NICO and certain
other wholly owned insurance subsidiaries of Berkshire,
individually or collectively, although Berkshire also includes
in its insurance group the insurance subsidiaries 80.1%-owned
through Berkshires ownership of Wesco.

Wes-FICs high net worth (about
$1.9 billion at 2002 yearend) has enabled Berkshire to
offer Wes-FIC the opportunity to participate, from time to time,
in contracts in which Wes-FIC effectively has reinsured certain
property and casualty risks of unaffiliated property and
casualty insurers. These arrangements have included contracts
for super-catastrophe reinsurance, which subject the
reinsurer to especially large amounts of losses from
mega-catastrophes such as hurricanes or earthquakes.
Super-catastrophe policies indemnify the ceding companies for
all or part of covered losses in excess

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of large, specified retentions, and have been
subject to aggregate limits; reinsurance of this type is
referred to as excess-of-loss reinsurance
(as contrasted with quota-share reinsurance,
under which a ceding company is indemnified in proportion to its
own loss).


Wescos and Wes-FICs boards of
directors have authorized automatic acceptance of retrocessions
of super-catastrophe reinsurance offered by the Berkshire
Insurance Group provided the following guidelines and
limitations are complied with: (1) in order not to delay
the acceptance process, the retrocession is to be accepted
without delay in writing in Nebraska by agents of Wes-FIC who
are salaried employees of the Berkshire Insurance Group;
(2) any ceding commission received by the Berkshire
Insurance Group cannot exceed 3% of premiums, probably less than
the Berkshire Insurance Group could get in the marketplace;
(3) Wes-FIC is to assume 20% or less of the total risk;
(4) the Berkshire Insurance Group must retain at least 80%
of the identical risk; and (5) the aggregate premiums from
this type of business in any twelve-month period cannot exceed
10% of Wes-FICs net worth. Occasionally, the Berkshire
Insurance Group will also have an upper-level reinsurance
interest with interests different from Wes-FICs,
particularly in the event of one or more large losses.

Following is a summary of Wes-FICs more
significant reinsurance agreements:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A quota-share arrangement entered into in 1985
    whereby Wes-FIC effectively reinsured  through the
    Berkshire Insurance Group, as
    intermediary-without-profit  2% of the entire book of
    insurance business of a major property and casualty insurer
    written during a four-year coverage period that expired in 1989.
    Wes-FIC remains liable for its share of remaining unpaid losses
    and loss adjustment expenses, an estimate of which is included
    in insurance liabilities on Wescos consolidated balance
    sheet, and will continue to invest the related float
    (funds set aside and invested pending payment of claims) until
    all liabilities are settled, perhaps many years hence.                                                                      
|
| |  | During 1992 and 1993, a 50% quota-share agreement
    retroceded from the Berkshire Insurance Group related to certain
    personal lines business written by another large U.S.-based
    property and casualty insurer. No liabilities remain under this
    agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Several contracts for super-catastrophe
    reinsurance retroceded from the Berkshire Insurance Group
    beginning in 1994, including 3% participations in two
    super-catastrophe reinsurance policies covering hurricane risks
    in Florida: (1) a 12-month policy effective June 1,
    1996; and (2) a three-year policy effective January 1,
    1997. No losses were incurred under these contracts.                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Participation to the extent of 10% in a
    catastrophic excess-of-loss contract effective for the 1999
    calendar year covering property risks of a major international
    reinsurer, also retroceded by the Berkshire Insurance Group. No
    liabilities remain under this contract.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | A three-year arrangement entered into in 2000
    through NICO, as intermediary without profit, for participation
    to the extent of 3.3% in certain property and casualty exposure
    ceded by a large, unaffiliated insurer. The terms of this
    arrangement are identical to those accepted by another member of
    the Berkshire Insurance Group, except as to the amount of the
    participation. In connection with this arrangement, Wes-FIC
    recorded a provision of $10 million before income taxes
    ($6.5 million after taxes) reflecting estimated loss and
    expenses relating to the September 11, 2001 terrorist
    activity. (See Item 7, Managements Discussion and
    Analysis of Financial Condition and Results of Operations,
    below, for additional information.)
|
| |  | Participation in four risk pools managed by a
    Berkshire Insurance Group member covering hull, liability,
    workers compensation and satellite exposures relating to
    the aviation industry, as follows: with respect to 2001, to the
    extent of 3% for each pool; for 2002, 13% of the hull and
    liability pools, 3% of the workers compensation pool and,
    effective mid-year, 15.5% of the satellite pool; and, for 2003,
    10% of the hull and liability pools only. The Berkshire
    Insurance Group member provides a portion of the upper-level
    reinsurance protection to these aviation                                                                                                                                                                                  

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| |  |                                                                                                                                                               
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | risk pools, and therefore to Wes-FIC, on terms
    that could cause some conflict of interest under certain
    conditions, e.g., in settling some large loss.

The insurance industry, including Wes-FIC,
experienced significant reinsurance and insurance losses from
the September 11, 2001 terrorist attack. The Terrorism Risk
Insurance Act of 2002 (TRIA), enacted
November 26, 2002, established for commercial property and
casualty insurers (but not as reinsurers  see next
paragraph) a program providing for federal reinsurance of
insured terrorism losses occurring after enactment. Under TRIA,
a terrorism loss must have resulted from a terrorist act
undertaken on behalf of a foreign person or interest which has
resulted in an insured loss in excess of $5 million, as
certified by the federal government. To be eligible for federal
reinsurance, insurers must make available insurance coverage for
acts of terrorism by providing policyholders with clear and
conspicuous notice of the amount of premium that will be charged
for this coverage and of the federal share of any insured losses
resulting from any act of terrorism. In the event of a certified
act of terrorism, the federal government will reimburse each
insurer (conditioned on its satisfaction of policyholder
notification requirements) for 90% of its insured losses in
excess of the insurers deductible. The insurers
deductible is calculated based on the direct earned premiums for
relevant commercial lines written by the insurers entire
insurance group. For 2003, the insurers deductible is 7%
of its groups earned premiums; this rises to 10% in 2004
and then to 15% in 2005 assuming the TRIA program is extended to
a third year. The aggregate deductible amount for the Berkshire
insurance group (including Wescos insurance subsidiaries)
is believed to approximate $130 million for 2003. There is
a $100 billion cap on aggregate certified losses per TRIA
program year (all eligible insurers deductibles plus their
10% share and the federal 90% share above the deductibles), and
insurers are free to exclude their liability for terrorism
losses in excess of the cap.

Assumed reinsurance is specifically excluded from
TRIA participation. Thus, terrorism exclusions contained within
reinsurance contracts remain in effect. Reinsurers are not
required to offer terrorism coverage and are not eligible for
federal reinsurance of terrorism losses. Wes-FIC, as a
reinsurer, however, could indirectly benefit under TRIA
essentially in proportion to applicable federal loss limitations
that may be available to its ceding insurer customers. Although
Wes-FICs (and thus Wescos) exposure to terrorism
losses as a reinsurer or insurer, whether or not mitigated by
TRIA, cannot be predicted, Wes-FICs management does not
believe it likely that, on a worst-case basis, Wes-FICs
shareholders equity would be severely impacted by future
terrorism-related insurance losses under reinsurance or
insurance contracts currently in effect.

Although Wes-FIC has no active super-catastrophe
reinsurance contracts in force, its management has indicated
that Wes-FIC will likely have opportunities to participate in
such business from time to time in the future. Management
believes that an insurer in the reinsurance business must
maintain large net worth in relation to annual premiums in order
to remain solvent when called upon to pay claims when a loss
occurs. In this regard, Wes-FIC is believed to operate
differently from many other reinsurers in that risks it writes
are entirely retained, while other reinsurers may retrocede
portions of the risks to other reinsurers, thereby assuming
contingent risks that such reinsurers will not be able to
respond if called upon to pay off on risks reinsured. In this
respect Wes-FIC and KBS are competitively well positioned,
inasmuch as their net premiums written for calendar 2002
amounted to only 4.8% of their combined statutory surplus,
compared to an industry average of about 112% based on figures
reported for 2001.

Wes-FIC is also licensed to write
direct insurance business (as distinguished from
reinsurance) in Nebraska, Utah and Iowa, and may write direct
insurance in the non-admitted excess and surplus lines market in
several other states, but the volume written to date has been
minimal.

In July 1996, Wes-FIC purchased KBS for
approximately $80 million in cash. KBS provides specialized
insurance coverage to more than 20% of the banks in the United
States, mostly small and medium-sized banks in the Midwest. It
is licensed to write business in 27 states. KBS is also subject
to regulation by the Department of the Treasury. Its product
line for financial institutions includes policies for crime
insurance, check kiting fraud indemnification, Internet banking
catastrophe theft

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insurance, directors and officers liability, bank
employment practices, and professional errors and omissions
indemnity, as well as deposit guaranty bonds, which insure
deposits in excess of federal deposit insurance limits. KBS,
which for many years had minimized its risks arising from large
losses through cessions to third party reinsurers, restructured
its reinsurance program effective January 1, 1998 in order
to retain a much higher portion of its premiums and risks of
loss. Wescos management anticipates that KBSs
reinsurance restructuring will improve operating results over
the long term in return for greater short-term volatility.


KBS markets its products in some states through
exclusive, commissioned agents, and direct to insureds in other
states. Inasmuch as the number of small midwestern banks is
declining as the banking industry consolidates, KBS relies for
growth on an extraordinary level of service provided by its
dedicated employees and agents, and on new products such as
deposit guaranty bonds, which were introduced in 1993 and
currently account for approximately 45 percent of premiums
written.

Standard & Poors Corporation, in
recognition of Wes-FICs strong competitive position as a
member of Berkshires family of wholly and substantially
owned insurance subsidiaries and its unusual capital strength,
has assigned its highest rating, AAA, to Wes-FICs
claims-paying ability. This rating recognizes the commitment of
Wes-FICs management to a disciplined approach to
underwriting and reserving, as well as Wes-FICs extremely
strong capital base.

Wescos and Wes-FICs boards are
hopeful, but have no assurance, that the businesses of Wes-FIC
and KBS will grow. They welcome the opportunity to participate
in additional reinsurance retrocessions and other insurance
arrangements, as well as acquisitions of other insurance
companies.

Insurance companies are subject to regulation by
the departments of insurance of the various states in which they
write policies as well as the states in which they are domiciled
and, if applicable, as is the case with KBS, by the Department
of the Treasury. Regulations relate to, among other things,
capital requirements, shareholder and policyholder dividend
restrictions, reporting requirements, annual audits by
independent accountants, periodic regulatory examinations, and
limitations on the size and types of investments that can be
made.

Wes-FIC, which is operated by NICO, has no
employees of its own. KBS has 16 employees.

FURNITURE RENTAL SEGMENT

CORT, acquired in February 2000 by a subsidiary
of Wesco, is the largest, and only national, provider of rental
furniture, accessories and related services in the
rent-to-rent (as opposed to rent-to-own)
segment of the furniture industry. It rents high-quality
furniture to corporate and individual customers who desire
flexibility in meeting their temporary office, residential or
trade show furnishing needs and who typically do not seek to own
such furniture. In addition, CORT sells previously rented
furniture through company-owned clearance centers, thereby
enabling it to regularly renew its inventory and update styles.
CORTs national network includes 121 showrooms, 98
clearance centers and 91 warehouses in 35 states and the
District of Columbia as well as two websites, cort1.com and
corttradeshow.com.

The rent-to-rent business is differentiated from
the rent-to-own business primarily by the terms of the rental
arrangements and the type of customer served. Rent-to-rent
customers generally desire high-quality furniture to meet
temporary needs, have established credit, and pay on a monthly
basis. Typically, these customers do not seek to acquire the
property rented. In the typical rent-to-rent transaction, the
customer agrees to rent furniture for three to six months,
subject to extension by the customer on a month-to-month basis.
By contrast, rent-to-own arrangements are generally made by
customers without established credit whose objective is to
acquire ownership of the property; these arrangements are
typically entered into on a month-to-month basis and require
weekly rental payments.

CORTs customer base includes Fortune 500
companies, small businesses and professionals, and owners and
operators of apartment communities. CORTs management
believes that its size, national

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presence, consistently high level of customer
service, product quality and breadth of selection, depth of
management and efficient clearance centers have been key
contributors to the companys success. CORT offers a full
range of office and home furniture and furnishings, including
panel systems, televisions, housewares and accessories. CORT
emphasizes its ability to outfit an apartment, home or entire
suite of offices with high-quality furniture in two business
days. CORTs objective is to build on these fundamentals
and to further increase revenues by continuing to pursue its
growth strategy. The key components of this strategy are
(1) expanding its corporate customer base,
(2) capturing an increasing number of Internet customers
through enhancements to its on-line catalog and web sites,
(3) making selective acquisitions, and (4) continuing
to invest in the development of various products and services.
CORT believes that, as a result, over the long term, margins
will expand and operating earnings will increase.


In order to capitalize on the significant profit
potential available from longer average rental periods and the
higher average monthly rent typically available for office
products, CORTs strategy is to place greater emphasis on
rentals of office furniture than residential furniture. In order
to promote longer office lease terms, CORT offers lower rates on
leases where lease terms exceed six months. A significant
portion of CORTs residential furniture rentals are derived
from corporate relocations and temporary assignments, as new and
transferred employees of CORTs corporate customers enter
into leases for residential furniture. Sales personnel maintain
contact with corporate relocation departments and present the
possibility of obtaining fully furnished rental apartments as a
lower-cost alternative to hotel accommodations. Thus, CORT
offers its corporate rental customers a way to reduce the costs
of corporate relocation while developing residential business
with new and transferred employees.

CORTs Relocation Central Corporation
subsidiary (Relocation Central) was formed in
January 2001. Its relocationcentral.com website provides
information for individuals planning to relocate as well as an
apartment locator service. In addition, potential customers can
call Relocation Centrals customer management center for
help in finding an apartment and selecting rental furniture,
which is provided by CORT. As a result of the acquisition of its
largest competitor in December 2002, Relocation Central operates
in 20 metropolitan cities in sixteen states.

Through joint marketing, Relocation Central and
CORT offer furniture rental referral opportunities to real
estate investment trusts and other owners of housing communities
and apartment houses. CORTs management hopes that, through
Relocation Central, CORT will become the principal source of
furniture rentals for large, multi-unit owners whose tenants
require rental furniture. To date, more than 350 apartment
communities refer their tenants to CORT. Relocation Central
should be considered as still in a start-up phase
and, so far, has generated pre-tax losses, amounting to
$12.8 million in 2002 and $10.8 million in 2001.

CORT also provides short-term rentals for trade
shows and conventions. Its corttradeshow.com website assists in
providing information to and gathering leads from prospects.

Until the economy weakened beginning late in
2000, CORT benefited from increasing demand for furniture rental
services. CORTs management believed that this favorable
trend had been caused by continued growth in management and
professional employment, the increasing importance to American
business of flexibility and outsourcing, and the impact of a
more mobile and transitory population. CORTs management
attributes the decline in business experienced throughout its
industry in 2001 and 2002 to continued weakness of the economy,
notably in the high-technology sector, exacerbated by the
terrorist activity on September 11, 2001.

The rent-to-rent segment of the furniture rental
industry is highly competitive. There are several large regional
as well as a number of smaller regional and local rent-to-rent
furniture companies. In addition, numerous retailers offer
residential and office furniture under rent-to-own arrangements.
Management believes that the principal competitive factors in
the furniture rental industry are product value, furniture
condition, extent of furniture selection, terms of rental
agreement, speed of delivery, exchange privilege, option to
purchase, deposit requirements and customer service.

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The majority of CORTs furniture sales
revenue is from clearance center sales. The remaining furniture
sales revenue is derived primarily from lease conversions and
sales of new furniture. Sales of rental furniture allow CORT to
control inventory levels and maintain showroom quality of rental
inventory. On average, furniture is typically sold through the
clearance centers three years after its initial purchase by the
company.

With respect to sales of furniture through its
clearance centers, CORT competes with numerous used and new
furniture retailers, some of which are larger than CORT.
Management believes that price and value are its principal
competitive advantages in this activity.

CORT and Relocation Central have approximately
2,750 employees, including 90 union members. Management
considers labor relations to be good.

INDUSTRIAL SEGMENT

Precision Steel, acquired in 1979, and one of its
subsidiaries operate steel service centers in the Chicago and
Charlotte metropolitan areas. The service centers buy stainless
steel, low carbon sheet and strip steel, coated metals, spring
steel, brass, phosphor bronze, aluminum and other metals, cut
these metals to order, and sell them to a wide variety of
customers.

The service center business is highly
competitive. Precision Steels annual sales volume of
approximately 25 thousand tons of flat rolled products
compares with the domestic steel service industrys annual
volume of approximately 13 million tons of comparable
products. Precision Steel competes not only with other service
centers but also with mills which supply metal to the service
centers. Sales competition exists in the areas of price,
quality, availability and speed of delivery. Because it is
willing to sell in relatively small quantities, Precision Steel
has been able to compete in geographic areas distant from its
service center facilities. Competitive pressure is intensified
by imports and by an increasing tendency of domestic
manufacturers to use less costly materials in making parts.

Precision Brand Products, Inc. (Precision
Brand), a wholly owned subsidiary of Precision Steel that
is also located in the Chicago area, manufactures shim stock and
other toolroom specialty items, and distributes a line of hose
clamps and threaded rod. These products are sold under the
Precision Brand and DuPage names nationwide, generally through
industrial distributors. This business is highly competitive.
Precision Brands share of the toolroom specialty products
market is believed to approximate .5%; statistics are not
available with respect to its share of the market for hose
clamps and threaded rod.

Steel service raw materials are obtained
principally from major domestic steel mills, and their
availability is considered good. Precision Steels service
centers maintain extensive inventories in order to meet customer
demand for prompt deliveries; typically, processed metals are
delivered to the customer within one week. Precision Brand
normally maintains inventories adequate to allow for
off-the-shelf service to customers within 24 hours.

The industrial segment businesses are subject to
economic cycles. These businesses are not dependent on a few
large customers. The backlog of steel service orders amounted to
$4.1 million at both December 31, 2002 and
December 31, 2001.

There are 209 full-time employees engaged in the
industrial segment businesses, about 40% of whom are members of
unions. Management considers labor relations to be good.






ACTIVITIES NOT IDENTIFIED WITH A BUSINESS SEGMENT


Certain of Wescos activities are not
identified with any business segment. These extraneous,
relatively insignificant operations include (1) investment
activity unrelated to the insurance segment, (2) management
of owned commercial real property in Pasadena, California, a
portion of which is in process of redevelopment, and
(3) parent company activities.

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The Wesco group, while it seeks suitable
businesses to acquire and explores ways to expand its existing
operations, also invests in marketable equity securities and in
securities with fixed maturities. (See Note 3 to the
accompanying consolidated financial statements for summaries of
investments.)

Six full-time employees are engaged in the
activities of Wesco and MS Property.

AVAILABLE INFORMATION

The public may read and copy any materials that
Wesco has filed with the Securities and Exchange Commission
(SEC) at the SECs Public Reference Room at 450
Fifth Street, NW, Washington, DC 20549. Information on the
operation of the Public Reference Room is available by calling
1-800-SEC-0330. Copies of Wescos filings can also be
accessed electronically on the SECs website at
http://www.sec.gov.

Wesco plans later in 2003 to establish a company
website so that forms 10-K, 10-Q and 8-K, and amendments
thereto, may be accessed as soon as practicable after such
material is electronically filed with, or furnished to, the SEC.
Meanwhile, Wesco will provide electronic or paper copies of its
filings free of charge upon request. Requests for specific
filings should be directed to Wesco Financial Corporation, 301
East Colorado Blvd., Suite 300, Pasadena, California 91101,
Attention: Chief Financial Officer.






Item 2. Properties


MS Property owns a business block in Pasadena,
California situated between the city hall and a large shopping
mall. The mall has recently been redeveloped to include
residential units and a multi-screen movie theater. The
blocks improvements include a nine-story office building
that was constructed in 1964 and has approximately 125,000
square feet of net rentable area, and a multistory garage with
space for 425 vehicles. Of the 125,000 square feet of space in
the office building, approximately 5,000 square feet are used by
MS Property or leased to Blue Chip or Wesco. The remaining space
is almost fully leased to outside parties, including Citibank
(the ground floor tenant), law firms and others, under
agreements expiring at dates extending to 2008. Adjacent to the
building and garage is a vacant parcel; MS Property is in
process of redeveloping it, together with a vacant parcel of
land it owns in the next block.

MS Property also owns several buildings that are
leased to various small businesses in a small shopping center in
Southern California.

Wes-FICs place of business is the Omaha,
Nebraska headquarters office of NICO.

KBS leases 5,100 square feet of office space in a
multistory office building in Topeka, Kansas under a lease that
expires in 2007.

CORT leases 23,800 square feet of office space in
a multistory office building in Fairfax, Virginia, which it uses
as its headquarters. It has an option to renew the lease for
five years beyond its 2006 expiration.

CORT carries out its rental, sales and warehouse
operations in metropolitan areas in 35 states and the
District of Columbia through 217 facilities, of which
20 were owned and the balance leased as of
2002 yearend. The leased facilities lease terms
expire at dates ranging from 2003 to 2015. CORT has generally
been able to extend expiration dates of its leases or obtain
suitable alternative facilities on satisfactory terms. As leases
expire, CORT has been eliminating redundant locations. Where
locations are desirable, its management has been attempting to
combine rental, clearance and warehouse operations rather than
retain separate showrooms, because business and residential
customers have been increasingly using the Internet, fax and
telephone.

CORTs showrooms generally have 4,500 square
feet of floor space. CORT regularly reviews the presentation and
appearance of its furniture showrooms and clearance centers and
periodically improves or refurbishes them to enhance their
attractiveness to customers.

18



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Relocation Central leases 3,800 square feet of
office space in a multistory office building in Santa Clara,
California, which it uses as its headquarters. It is currently
negotiating renewal of the lease beyond its August 2003
expiration date. Its apartment locator services are situated in
50 leased facilities in 20 metropolitan areas in
16 states under leases expiring at dates ranging from 2003
to 2007, as well as in four of CORTs showrooms.

Precision Steel and its subsidiaries own three
buildings housing their plant and office facilities, with usable
area approximately as follows: 138,000 square feet in
Franklin Park, Illinois; 63,000 square feet in Charlotte, North
Carolina; and 59,000 square feet in Downers Grove, Illinois.




Item 3. Legal Proceedings

Wesco and its subsidiaries are not involved in
any legal proceedings that are expected to result in material
loss.






Item 4. Submission of Matters to a Vote
of Security Holders


None.




PART II




Item 5. Market for Registrants
Common Equity and Related Shareholder Matters

Wescos capital stock is traded on the
American Stock Exchange and the Pacific Stock Exchange.

The following table sets forth quarterly ranges
of composite prices for American Stock Exchange trading of Wesco
shares for 2002 and 2001, based on data reported by the American
Stock Exchange, as well as cash dividends paid by Wesco on each
outstanding share:

|              |  |             |     |           |  |             |     |           |  |     |       |      |  |   |     |  |  |   |     |  |  |   |       | 
|------------- |  | ----------- | --- | --------- |  | ----------- | --- | --------- |  | --- | ----- | ---- |  | - | --- |  |  | - | --- |  |  | - | ----- | 
|              |  |             |     |          
|              |  | 2002        |     | 2001     
|              |  |             |     |          
|              |  |             |     |           |  |             |     |          
|              |  | Sales Price |     |           |  | Sales Price |     |          
|              |  |             |     | Dividends |  |             |     | Dividends
|Quarter Ended |  | High        |     | Low       |  | Paid        |     | High      |  | Low |       | Paid
|              |  |             |     |           |  |             |     |           |  |     |       |     
|March 31      |  | $           | 325 |           |  | $           | 302 |           |  | $   | 0.325 |      |  | $ | 310 |  |  | $ | 270 |  |  | $ | 0.315 | 
|June 30       |  |             | 338 |           |  |             | 300 |           |  |     | 0.325 |      |  |   | 350 |  |  |   | 291 |  |  |   | 0.315 | 
|September 30  |  |             | 323 |           |  |             | 290 |           |  |     | 0.325 |      |  |   | 349 |  |  |   | 275 |  |  |   | 0.315 | 
|December 31   |  |             | 314 |           |  |             | 293 |           |  |     | 0.325 |      |  |   | 343 |  |  |   | 287 |  |  |   | 0.315 | 
|              |  |             |     |           |  |             |     |           |  |     |       |      |  |   |     |  |  |   |     |  |  |   |       | 
|              |  |             |     |           |  |             |     |           |  | $   | 1.300 |      |  |   |     |  |  |   |     |  |  | $ | 1.260 | 
|              |  |             |     |           |  |             |     |           |  |     |       |      |  |   |     |  |  |   |     |  |  |   |       | 

There were approximately 600 shareholders of
record of Wescos capital stock as of the close of business
on March 17, 2003. It is estimated that approximately
5,200 additional Wesco shareholders held shares of
Wescos capital stock in street name at that date.

19



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##### Table of Contents



Item 6. Selected Financial Data

Set forth below and on the following page are
selected consolidated financial data for Wesco and its
subsidiaries. For additional financial information, attention is
directed to Wescos audited 2002 consolidated financial
statements appearing elsewhere in this report. (Amounts are in
thousands except for amounts per share.)

|                      |                                                            |                                  |                                |                   |         |           |        |           |         |           |        |           |         |           |        |           |           |           |        |           |           |           |        | 
|--------------------- | ---------------------------------------------------------- | -------------------------------- | ------------------------------ | ----------------- | ------- | --------- | ------ | --------- | ------- | --------- | ------ | --------- | ------- | --------- | ------ | --------- | --------- | --------- | ------ | --------- | --------- | --------- | ------ | 
|                      |                                                            |                                 
|                      |                                                            | December 31,                    
|                      |                                                            |                                 
|                      |                                                            | 2002                             |                                | 2001              |         | 2000      |        | 1999      |         | 1998     
|                      |                                                            |                                  |                                |                   |         |           |        |           |         |          
|Assets:               |                                                            |                                  |                                |                   |         |           |        |           |         |           |        |           |         |           |        |           |           |           |        |          
|                      | Cash and cash equivalents                                  |                                  | $                              | 349,812           |         |           | $      | 120,784   |         |           | $      | 153,810   |         |           | $      | 66,331    |           |           | $      | 320,034   |          
|                      | Investments                                               |                                  |                                |                   |         |           |        |           |         |           |        |           |         |           |        |           |           |           |        |           |          
|                      |                                                            | Securities with fixed maturities |                                |                   | 827,537 |           |        |           | 924,160 |           |        |           | 839,683 |           |        |           | 309,976   |           |        |           | 66,619    |          
|                      |                                                            | Marketable equity securities     |                                |                   | 626,768 |           |        |           | 667,262 |           |        |           | 833,937 |           |        |           | 2,214,883 |           |        |           | 2,778,595 |          
|                      | Accounts receivable                                        |                                  |                                | 67,425            |         |           |        | 43,871    |         |           |        | 38,444    |         |           |        | 8,685     |           |           |        | 7,707     |          
|                      | Rental furniture                                           |                                  |                                | 187,480           |         |           |        | 212,586   |         |           |        | 244,847   |         |           |        |          |           |           |        |          |          
|                      | Goodwill of acquired businesses                            |                                  |                                | 266,203           |         |           |        | 264,465   |         |           |        | 260,037   |         |           |        | 28,556    |           |           |        | 29,338    |          
|                      | Other assets                                               |                                  |                                | 81,750            |         |           |        | 86,565    |         |           |        | 90,157    |         |           |        | 23,764    |           |           |        | 26,113    |          
|                      |                                                            |                                  |                                |                   |         |           |        |           |         |           |        |           |         |           |        |           |           |           |        |          
|                      |                                                            |                                  | Total assets                   |                   | $       | 2,406,975 |        |           | $       | 2,319,693 |        |           | $       | 2,460,915 |        |           | $         | 2,652,195 |        |           | $         | 3,228,406 |       
|                      |                                                            |                                  |                                |                   |         |           |        |           |         |           |        |           |         |           |        |           |           |           |        |          
|Liabilities:          |                                                            |                                  |                                |                   |         |           |        |           |         |           |        |           |         |           |        |           |           |           |        |          
|                      | Insurance losses and loss adjustment expenses              |                                  | $                              | 73,065            |         |           | $      | 61,879    |         |           | $      | 39,959    |         |           | $      | 33,642    |           |           | $      | 36,731    |          
|                      | Unearned insurance premiums                                |                                  |                                | 48,681            |         |           |        | 24,897    |         |           |        | 17,006    |         |           |        | 8,420     |           |           |        | 7,749     |          
|                      | Deferred furniture rental income and security
    deposits |                                  |                                | 21,562            |         |           |        | 23,796    |         |           |        | 27,669    |         |           |        |          |           |           |        |          |          
|                      | Accounts payable and accrued expenses                      |                                  |                                | 44,184            |         |           |        | 36,794    |         |           |        | 33,881    |         |           |        | 3,674     |           |           |        | 4,520     |          
|                      | Notes payable                                              |                                  |                                | 32,481            |         |           |        | 33,649    |         |           |        | 56,035    |         |           |        | 3,635     |           |           |        | 33,635    |          
|                      | Income taxes payable, principally deferred                 |                                  |                                | 227,902           |         |           |        | 225,665   |         |           |        | 305,175   |         |           |        | 707,345   |           |           |        | 920,035   |          
|                      | Other liabilities                                          |                                  |                                | 938               |         |           |        | 616       |         |           |        | 4,156     |         |           |        | 107       |           |           |        | 1,980     |          
|                      |                                                            |                                  |                                |                   |         |           |        |           |         |           |        |           |         |           |        |           |           |           |        |          
|                      |                                                            |                                  | Total liabilities              |                   | $       | 448,813   |        |           | $       | 407,296   |        |           | $       | 483,881   |        |           | $         | 756,823   |        |           | $         | 1,004,650 |       
|                      |                                                            |                                  |                                |                   |         |           |        |           |         |           |        |           |         |           |        |           |           |           |        |          
|Shareholders equity: |                                                            |                                  |                                |                   |         |           |        |           |         |           |        |           |         |           |        |           |           |           |        |          
|                      | Capital stock and surplus                                  |                                  | $                              | 30,439            |         |           | $      | 30,439    |         |           | $      | 30,439    |         |           | $      | 30,439    |           |           | $      | 30,439    |          
|                      | Unrealized appreciation of investments, net of
    taxes   |                                  |                                | 374,571           |         |           |        | 372,267   |         |           |        | 480,469   |         |           |        | 1,312,590 |           |           |        | 1,686,716 |          
|                      | Retained earnings                                          |                                  |                                | 1,553,152         |         |           |        | 1,509,691 |         |           |        | 1,466,126 |         |           |        | 552,343   |           |           |        | 506,601   |          
|                      |                                                            |                                  |                                |                   |         |           |        |           |         |           |        |           |         |           |        |           |           |           |        |          
|                      |                                                            |                                  | Total shareholders
    equity |                   | $       | 1,958,162 |        |           | $       | 1,912,397 |        |           | $       | 1,977,034 |        |           | $         | 1,895,372 |        |           | $         | 2,223,756 |       
|                      |                                                            |                                  |                                |                   |         |           |        |           |         |           |        |           |         |           |        |           |           |           |        |          
|                      |                                                            |                                  |                                | Per capital share |         | $         | 275.03 |           |         | $         | 268.60 |           |         | $         | 277.68 |           |           | $         | 266.21 |           |           | $         | 312.33 | 
|                      |                                                            |                                  |                                |                   |         |           |        |           |         |           |        |           |         |           |        |           |           |           |        |          

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|                           |                                                                 |                         |         |         |  |      |         |         |  |      |           |           |  |   |         |        |  |   |         |        | 
|-------------------------- | --------------------------------------------------------------- | ----------------------- | ------- | ------- |  | ---- | ------- | ------- |  | ---- | --------- | --------- |  | - | ------- | ------ |  | - | ------- | ------ | 
|                           |                                                                 |                        
|                           |                                                                 | Year Ended December 31,
|                           |                                                                 |                        
|                           |                                                                 | 2002                    |         | 2001    |  | 2000 |         | 1999    |  | 1998
|                           |                                                                 |                         |         |         |  |      |         |         |  |     
|Revenues:                  |                                                                 |                         |         |         |  |      |         |         |  |      |           |           |  |   |         |        |  |   |         |       
|                           | Sales and service revenues                                      |                         | $       | 437,099 |  |      | $       | 443,628 |  |      | $         | 426,096   |  |   | $       | 64,571 |  |   | $       | 66,137 | 
|                           | Insurance premiums earned                                       |                         |         | 64,627  |  |      |         | 43,031  |  |      |           | 23,783    |  |   |         | 17,655 |  |   |         | 15,923 | 
|                           | Dividend and interest income                                    |                         |         | 70,652  |  |      |         | 70,981  |  |      |           | 59,759    |  |   |         | 49,679 |  |   |         | 40,543 | 
|                           | Realized net securities gains                                   |                         |         |        |  |      |         |        |  |      |           | 1,311,270 |  |   |         | 11,186 |  |   |         | 51,706 | 
|                           | Other                                                           |                         |         | 3,299   |  |      |         | 3,439   |  |      |           | 3,056     |  |   |         | 4,600  |  |   |         | 3,921  | 
|                           |                                                                 |                         |         |         |  |      |         |         |  |      |           |           |  |   |         |        |  |   |         |       
|                           |                                                                 |                         | 575,677 |         |  |      | 561,079 |         |  |      | 1,823,964 |           |  |   | 147,691 |        |  |   | 178,230 |       
|                           |                                                                 |                         |         |         |  |      |         |         |  |      |           |           |  |   |         |        |  |   |         |       
|Costs and expenses:        |                                                                 |                         |         |         |  |      |         |         |  |      |           |           |  |   |         |        |  |   |         |       
|                           | Cost of products and services sold                              |                         |         | 145,677 |  |      |         | 144,712 |  |      |           | 146,649   |  |   |         | 50,728 |  |   |         | 51,527 | 
|                           | Insurance losses, loss adjustment and
    underwriting expenses |                         |         | 58,736  |  |      |         | 46,682  |  |      |           | 19,392    |  |   |         | 7,366  |  |   |         | 8,174  | 
|                           | Selling, general and administrative                             |                         |         | 288,353 |  |      |         | 276,712 |  |      |           | 227,954   |  |   |         | 11,468 |  |   |         | 12,425 | 
|                           | Interest expense                                                |                         |         | 1,994   |  |      |         | 4,169   |  |      |           | 5,235     |  |   |         | 2,549  |  |   |         | 3,016  | 
|                           | Goodwill amortization                                           |                         |         |        |  |      |         | 7,476   |  |      |           | 6,342     |  |   |         | 782    |  |   |         | 782    | 
|                           |                                                                 |                         |         |         |  |      |         |         |  |      |           |           |  |   |         |        |  |   |         |       
|                           |                                                                 |                         | 494,760 |         |  |      | 479,751 |         |  |      | 405,572   |           |  |   | 72,893  |        |  |   | 75,924  |       
|                           |                                                                 |                         |         |         |  |      |         |         |  |      |           |           |  |   |         |        |  |   |         |       
|Income before income taxes |                                                                 |                         | 80,917  |         |  |      | 81,328  |         |  |      | 1,418,392 |           |  |   | 74,798  |        |  |   | 102,306 |       
|Provision for income taxes |                                                                 |                         | (28,199 | )       |  |      | (28,792 | )       |  |      | (495,922  | )         |  |   | (20,655 | )      |  |   | (30,503 | )     
|                           |                                                                 |                         |         |         |  |      |         |         |  |      |           |           |  |   |         |        |  |   |         |       
|Net income                 |                                                                 | $                       | 52,718  |         |  | $    | 52,536  |         |  | $    | 922,470   |           |  | $ | 54,143  |        |  | $ | 71,803  |       
|                           |                                                                 |                         |         |         |  |      |         |         |  |      |           |           |  |   |         |        |  |   |         |       
|Amounts per capital share: |                                                                 |                         |         |         |  |      |         |         |  |      |           |           |  |   |         |        |  |   |         |       
|                           | Net income                                                      |                         | $       | 7.40    |  |      | $       | 7.38    |  |      | $         | 129.56    |  |   | $       | 7.60   |  |   | $       | 10.08  | 
|                           | Cash dividends                                                  |                         |         | 1.30    |  |      |         | 1.26    |  |      |           | 1.22      |  |   |         | 1.18   |  |   |         | 1.14   | 
|                           |                                                                 |                         |         |         |  |      |         |         |  |      |           |           |  |   |         |        |  |   |         |       






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of
    Financial Condition and Results of Operations

In reviewing this item, attention is directed to
Item 6, Selected Financial Data, and Item 1, Business.

FINANCIAL CONDITION

Wescos shareholders equity at
December 31, 2002 was $2.0 billion ($275.03 per
share), up from $1.9 billion ($268.60 per share) at
December 31, 2001. Shareholders equity included
$374.6 million at December 31, 2002, and
$372.3 million at December 31, 2001, representing
appreciation in market value of investments, which is credited
directly to shareholders equity, net of taxes, without
being reflected in earnings. Because unrealized appreciation is
recorded based upon market quotations, gains or losses
ultimately realized upon sale of investments could differ
substantially from recorded unrealized appreciation. Net
unrealized appreciation constituted approximately 19% of
shareholders equity at December 31, 2002 and
December 31, 2001. (See Item 7A, Quantitative and
Qualitative Disclosures About Market Risk, as well as
Note 3 to Wescos accompanying consolidated financial
statements, for additional information on investments.)

At December 31, 2002, Wescos
consolidated cash and cash equivalents totaled
$349.8 million, up from $120.8 million at
December 31, 2001. The $229 million increase resulted
from a number of factors as shown in Wescos accompanying
consolidated statement of cash flows.

Wescos consolidated borrowings totaled
$32.5 million at December 31, 2002 versus
$33.6 million at December 31, 2001. Most of the
borrowings related to a $150 million revolving line of
credit used by CORT in its furniture rental business.
CORTs borrowings remained relatively unchanged during 2002
despite the ongoing expansion of its business through cash
acquisitions aggregating $37.1 million in 2002 (up from
$20.0 million in 2001).

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Wescos management believes the group has
adequate liquidity and capital resources to provide for
contingent needs. Borrowings from banks and others have been
available to Wesco and its subsidiaries under attractive terms
for a number of years. Wes-FIC enjoys Standard & Poors
Corporations highest rating, AAA, with respect to its
claims-paying ability.

RESULTS OF OPERATIONS

The consolidated data in the table on the
preceding page are set forth essentially in the income statement
format customary to generally accepted accounting principles
(GAAP). Revenues, including realized net securities
gains, are followed by costs and expenses, including goodwill
amortization (if applicable), and a provision for income taxes,
to arrive at net income. The following summary sets forth the
after-tax contribution to GAAP net income of each business
segment  insurance, furniture rental and
industrial  as well as activities not considered
related to such segments. Realized net securities gains and
goodwill amortization are excluded from segment activities,
consistent with the way Wescos management views the
business operations. (Amounts are in thousands, all after
income tax effect.)

|                                               |                               |                                         |                         |      |        |        |        |        |        |        |        |         |        |         | 
|---------------------------------------------- | ----------------------------- | --------------------------------------- | ----------------------- | ---- | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ------- | ------ | ------- | 
|                                               |                               |                                        
|                                               |                               | Year Ended December 31,                
|                                               |                               |                                        
|                                               |                               | 2002                                    |                         | 2001 |        | 2000  
|                                               |                               |                                         |                         |      |        |       
|Insurance segment                              |                               | $                                       | 49,471                  |      |        | $      | 45,254 |        |        | $      | 45,518 |        
|Furniture rental segment                       |                               |                                         | 2,442                   |      |        |        | 13,076 |        |        |        | 28,988 |        
|Industrial segment                             |                               |                                         | 250                     |      |        |        | 388    |        |        |        | 1,281  |        
|Unrelated to business segment
    operations  |                               |                                         |                         |      |        |        |        |        |        |        |        |        
|                                               | Goodwill amortization         |                                         |                         |     |        |        |        | (6,814 | )      |        |        | (5,867  | )     
|                                               | Other nonsegment items        |                                         |                         | 555  |        |        |        | 632    |        |        |        | 167     |       
|                                               |                               |                                         |                         |      |        |        |        |        |        |        |        |        
|                                               |                               | Income before realized securities gains |                         |      | 52,718 |        |        |        | 52,536 |        |        |         | 70,087 |        
|                                               | Realized net securities gains |                                         |                         |     |        |        |        |       |        |        |        | 852,383 |       
|                                               |                               |                                         |                         |      |        |        |        |        |        |        |        |        
|                                               |                               |                                         | Consolidated net income |      | $      | 52,718 |        |        | $      | 52,536 |        |         | $      | 922,470 | 
|                                               |                               |                                         |                         |      |        |        |        |        |        |        |        |        

In the following sections the data set forth in
the foregoing summary on an after-tax basis are broken
down and discussed. Attention is directed to Note 9 to the
accompanying consolidated financial statements for additional
information.

Insurance Segment

Following is a summary of the results of
operations of the insurance segment (i.e., Wes-FIC and KBS),
which represent the combination of underwriting results with
dividend and interest income. (Amounts are in thousands.)

|                             |  |                         |         |      |  |      |         |   |  |   |         |  
|---------------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                             |  |                        
|                             |  | Year Ended December 31,
|                             |  |                        
|                             |  | 2002                    |         | 2001 |  | 2000
|                             |  |                         |         |      |  |     
|Premiums written             |  | $                       | 88,411  |      |  | $    | 50,922  |   |  | $ | 32,370  |  
|                             |  |                         |         |      |  |      |         |   |  |   |         |  
|Premiums earned              |  | $                       | 64,627  |      |  | $    | 43,031  |   |  | $ | 23,783  |  
|                             |  |                         |         |      |  |      |         |   |  |   |         |  
|Underwriting gain (loss)     |  | $                       | 5,891   |      |  | $    | (3,651  | ) |  | $ | 4,391   |  
|Dividend and interest income |  |                         | 70,007  |      |  |      | 70,048  |   |  |   | 59,241  |  
|                             |  |                         |         |      |  |      |         |   |  |   |         |  
|Income before income taxes   |  |                         | 75,898  |      |  |      | 66,397  |   |  |   | 63,632  |  
|Income tax provision         |  |                         | (26,427 | )    |  |      | (21,143 | ) |  |   | (18,114 | )
|                             |  |                         |         |      |  |      |         |   |  |   |         |  
|Segment net income           |  | $                       | 49,471  |      |  | $    | 45,254  |   |  | $ | 45,518  |  
|                             |  |                         |         |      |  |      |         |   |  |   |         |  

Premiums written for 2002, 2001 and 2000 included
$67.7 million, $32.8 million and $15.5 million
attributable to Wes-FIC, and $20.7 million,
$18.1 million and $16.9 million attributable to KBS.

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Earned premiums for 2002, 2001 and 2000 included
$45.4 million, $25.3 million and $7.4 million
attributable to Wes-FIC, and $19.2 million,
$17.7 million and $16.4 million attributable to KBS.

At December 31, 2002, Wes-FICs
in-force reinsurance business consisted principally of
(1) a three-year contract incepting in 2000 with a large,
unaffiliated insurer, and (2) a contract incepting in 2001
under which Wes-FIC assumed aviation-related risks.
Wes-FICs participation in the contract first described
above was principally responsible for its earned premiums for
2000. Wes-FICs participation in the aviation-risk pool
increased from approximately 3.0% for risks incepting in 2001 to
15.5% for the 2002 year. Written and earned premiums
increased accordingly. The increases in premiums written by KBS
in recent years have been principally due to growth in volume of
bank deposit guarantee bonds; this product currently accounts
for approximately 45% of premiums written by KBS.

The underwriting gain (loss) for 2002, 2001 and
2000 included $5.8 million, $8.7 million and
$4.2 million attributable to KBS, and $.1 million,
($12.4 million) and $.2 million attributable to
Wes-FIC. Wes-FICs underwriting loss in 2001 resulted
mainly from a loss provision of $10 million before income
taxes ($6.5 million after taxes) recorded as a result of
the terrorist activity of September 11, 2001. The amount is
an estimate and is subject to considerable estimation error; in
addition, management believes that it will take years to resolve
complicated coverage issues, which could have a material effect
on the ultimate loss incurred. Underwriting results of
KBS have been more volatile since it restructured its program
for reinsurance in 1998 in order to retain a much higher portion
of its premiums and risks of loss.

Aggregate underwriting results benefited by
$.8 million, $2.3 million and $4.1 million in
2002, 2001 and 2000 from net downward revisions of estimated
liabilities for losses and loss adjustment expenses established
for events occurring in prior years. Insurance losses and loss
adjustment expenses, and the related liabilities reflected on
Wescos consolidated balance sheet, because they are
estimates, are subject to estimation error. Revisions of such
estimates in future periods could significantly affect the
results of operations reported for those periods.

Since September 11, 2001, the insurance
industry has been particularly concerned about its exposure to
claims resulting from acts of terrorism. As explained in
Item 1, Business, in spite of relief provided by enactment
of the Terrorism Risk Insurance Act (TRIA) on
November 26, 2002, Wes-FIC is exposed to insurance losses
from terrorist events covered by TRIA occurring after that date
as well as terrorism losses not covered by TRIA. While
Wes-FICs and thus Wescos exposure to such losses
from an insurance standpoint cannot be predicted, Wes-FICs
management does not believe it likely that, on a worst-case
basis, Wes-FICs shareholders equity would be
severely impacted by future terrorism-related insurance losses
under reinsurance or insurance contracts currently in effect.

Another industry concern has been its exposure to
loss from environmental contamination, particularly
asbestos-related claims. Wes-FICs management currently
believes such exposure to be minimal.

Dividend and interest income has been earned by
the insurance group principally (1) on earnings retained
and reinvested by Wes-FIC, (2) on capital contributed by
Wesco, and (3) on float (funds invested pending payment of
claims). Dividend and interest income, before income taxes, was
essentially unchanged in 2002 from the amount earned in 2001,
after having increased $10.8 million in 2001 from the 2000
figure. The increase in 2001 was due principally to the sale of
Wes-FICs investment in Freddie Mac common stock in various
transactions throughout 2000. The proceeds of $1.4 billion
were reinvested mainly in fixed-income securities.

The income tax provision of the insurance segment
fluctuated as a percentage of its pre-tax income from year to
year during the period presented in the foregoing table mainly
due to the relationship of substantially tax-exempt components
of income to total pre-tax income.

A significant marketing advantage enjoyed by
Berkshires insurance subsidiaries, including Wescos
insurance segment, is the maintenance of extraordinary capital
strength. The combined

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statutory surplus of Wescos insurance
businesses totaled approximately $1.8 billion at
December 31, 2002. This capital strength creates
opportunities for the Wesco subsidiaries to participate in
reinsurance and insurance contracts not necessarily available to
many of their competitors. Although Wesco would welcome other
attractive reinsurance or insurance arrangements, or
acquisitions of insurance businesses, the timing and extent of
any increase in its insurance underwriting activity cannot
presently be predicted.


Furniture Rental Segment

Following is a summary of the consolidated
operating results of CORT as included in Wescos
consolidated results of operations since acquisition on
February 18, 2000. For comparative purposes, corresponding
amounts for all of 2000 are also presented; these unaudited
figures are set forth exclusive of items not classified as
segment-related by Wesco  goodwill amortization,
securities gains or losses, and income tax provisions or
benefits related thereto. (Amounts are in thousands.)

|                                             |                   |                         |         |                |  |             |         |         |  |   |         |         |  |   |         |         | 
|-------------------------------------------- | ----------------- | ----------------------- | ------- | -------------- |  | ----------- | ------- | ------- |  | - | ------- | ------- |  | - | ------- | ------- | 
|                                             |                   |                         |         |               
|                                             |                   | Year Ended December 31, |         | February 18 to
|                                             |                   |                         |         | December 31,  
|                                             |                   | 2002                    |         | 2001           |  | 2000        |         | 2000   
|                                             |                   |                         |         |                |  |             |         |        
|                                             |                   |                         |         |                |  | (unaudited) |         |        
|Revenues:                                    |                   |                         |         |                |  |             |         |         |  |   |         |         |  |   |         |        
|                                             | Furniture rentals |                         | $       | 315,767        |  |             | $       | 329,406 |  |   | $       | 348,429 |  |   | $       | 305,820 | 
|                                             | Furniture sales   |                         |         | 72,816         |  |             |         | 66,008  |  |   |         | 62,852  |  |   |         | 55,235  | 
|                                             |                   |                         |         |                |  |             |         |         |  |   |         |         |  |   |         |        
|                                             |                   |                         | 388,583 |                |  |             | 395,414 |         |  |   | 411,281 |         |  |   | 361,055 |        
|                                             |                   |                         |         |                |  |             |         |         |  |   |         |         |  |   |         |        
|Cost of rentals and sales                    |                   |                         | 106,050 |                |  |             | 105,718 |         |  |   | 105,544 |         |  |   | 93,165  |        
|Selling, general and administrative expenses |                   |                         | 277,100 |                |  |             | 265,130 |         |  |   | 245,682 |         |  |   | 215,787 |        
|Interest expense                             |                   |                         | 1,790   |                |  |             | 3,889   |         |  |   | 5,732   |         |  |   | 4,955   |        
|                                             |                   |                         |         |                |  |             |         |         |  |   |         |         |  |   |         |        
|                                             |                   |                         | 384,940 |                |  |             | 374,737 |         |  |   | 356,958 |         |  |   | 313,907 |        
|                                             |                   |                         |         |                |  |             |         |         |  |   |         |         |  |   |         |        
|Income before income taxes                   |                   |                         | 3,643   |                |  |             | 20,677  |         |  |   | 54,323  |         |  |   | 47,148  |        
|Income tax provision                         |                   |                         | (1,201  | )              |  |             | (7,601  | )       |  |   | (20,952 | )       |  |   | (18,160 | )      
|                                             |                   |                         |         |                |  |             |         |         |  |   |         |         |  |   |         |        
|Segment net income                           |                   | $                       | 2,442   |                |  | $           | 13,076  |         |  | $ | 33,371  |         |  | $ | 28,988  |        
|                                             |                   |                         |         |                |  |             |         |         |  |   |         |         |  |   |         |        

Furniture rental revenues for the segment for
2002 declined $13.6 million, or 4.1%, from those of 2001,
following a decline of $19.0 million, or 5.5%, the prior
year. Excluding rental revenues from locations acquired during
each year, rentals from trade shows each year, apartment locator
fees generated by Relocation Central since its start-up in
January 2001, and rental income from a large short-term contract
with the census bureau in 2000, rental revenues for 2002
declined approximately 17% from those reported for 2001,
following a decline of approximately 6% the prior year. The
number of furniture leases in effect in 2001 and 2002 continued
a downward trend begun in late 2000, reflecting unabated
weakness of the economy, notably in the high-technology sector,
exacerbated by the September 11, 2001 terrorist activity.
Rental revenues on a per-unit basis began to improve toward the
end of 2002 due mainly to price increases. Furniture sales
revenues increased approximately 10% in 2002 versus 5% in 2001;
excluding sales from newly acquired locations, furniture sales
decreased approximately 2% in 2002 due mainly to reductions in
selling prices in an effort to reduce excess, idle inventory,
compared to an increase of 4% in 2001.

Cost of furniture rentals and sales amounted to
27.3% of related revenues for the year 2002, versus 26.7% for
2001 and 25.7% for 2000. The increasing cost percentages
reflected mainly CORTs efforts, particularly in 2002, to
trim excess idle inventories through decreases in selling
prices. The increase in cost percentage in 2002 was reduced
somewhat due to a decrease in depreciation expense, as CORT
purchased less new product in 2002 than in the prior year; CORT
depreciates its rental furniture under the declining balance
method, whereby recorded depreciation is exceptionally high in
the first year and declines in each successive year.

Selling, general and administrative
(SG&A) expenses for the furniture rental segment
for 2002 increased $12.0 million from those of 2001,
following an increase of $19.4 million the prior year.

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Excluding $18.3 million and
$12.3 million incurred by Relocation Central in 2002 and
2001 (its first two years of operation), segment SG&A
expenses amounted to $258.8 million in 2002, up 2.4% from
$252.8 million in 2001; 2001s $252.8 million was
up 2.9% from $245.7 million in 2000. The increase in 2002
resulted mainly from CORTs acquisition of Globe Furniture
Rental Company (Globe) early in 2002. CORT initially
undertook to operate Globe as a separate division in order to
capitalize on its strong brand name. However, late in 2002 CORT
decided it could not afford to wait longer for recovery of the
economy: it began to merge Globes operations with its own.
CORT expects that, as a result, SG&A expenses will drop
through the closing of redundant or underperforming locations,
reductions in payroll and other expenses, and economies of
scale. SG&A expenses had benefited significantly in 2002
from a similar program that CORTs management instituted
late in 2001 after noting that showroom traffic was diminishing
as prospective customers increasingly adapted to the Internet
and facsimile transmission.


Income before income taxes for the segment
decreased to 0.9% of total revenues for the year 2002 from 5.2%
for the year 2001 and 13.2% for the year 2000. The decline was
due to decreasing revenues and increasing costs and expenses,
all as explained in the preceding paragraphs.

Industrial Segment

Following is a summary of the results of
operations of the industrial segment, consisting of the
businesses of Precision Steel and its subsidiaries. (Amounts are
in thousands.)

|                                         |  |                         |        |      |  |      |        |   |  |   |        |  
|---------------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                         |  |                        
|                                         |  | Year Ended December 31,
|                                         |  |                        
|                                         |  | 2002                    |        | 2001 |  | 2000
|                                         |  |                         |        |      |  |     
|Revenues, principally sales and services |  | $                       | 48,567 |      |  | $    | 48,440 |   |  | $ | 65,119 |  
|                                         |  |                         |        |      |  |      |        |   |  |   |        |  
|Income before income taxes               |  | $                       | 663    |      |  | $    | 862    |   |  | $ | 2,188  |  
|Income tax provision                     |  |                         | (413   | )    |  |      | (474   | ) |  |   | (907   | )
|                                         |  |                         |        |      |  |      |        |   |  |   |        |  
|Segment net income                       |  | $                       | 250    |      |  | $    | 388    |   |  | $ | 1,281  |  
|                                         |  |                         |        |      |  |      |        |   |  |   |        |  

Industrial segment revenues for 2002 increased
0.3% from the corresponding 2001 figure; pounds of steel
products sold increased 6.6%. Revenues for 2001 decreased 25.6%
from the corresponding 2000 figure; pounds of steel products
sold decreased 29.7%. Precision Steel is continuing to suffer
from extraordinary competitive pressures, as well as from a
prolonged downturn in domestic manufacturing activity
attributable both to ongoing weakness in the economy and the
shift by many manufacturers from domestic to overseas production
facilities. The failure of revenues to keep pace with pounds
sold in 2002 was attributable principally to deflation in sales
prices. Steel mills and other suppliers have lowered many
prices, allowing Precision Steel, in turn, to lower many of its
selling prices while not significantly affecting gross profit
margins. In 2001, there was (1) a significant reduction in
demand due both to ongoing weakness in the economy and increased
competitive pressures, already extreme, and (2) a change in
mix of products sold toward lower-priced products.

Income before income taxes and net income of the
industrial segment are dependent not only on revenues, but also
on operating expenses and the cost of products sold. The latter,
as a percentage of revenues, amounted to 81.7%, 80.9% and 82.2%
for 2002, 2001 and 2000. The cost percentage typically
fluctuates slightly from year to year as a result of changes in
product mix and price competition at all levels. Precision
Steels cost of products sold percentage is very sensitive
to current changes in the cost of materials purchased, because
it carries its inventories at the lower of last-in, first-out
(LIFO) cost or market; under this method, the most
recent costs are reflected in cost of goods sold. LIFO inventory
accounting adjustments increased Precision Steels
after-tax earnings by $.2 million and $.4 million for
2002 and 2001 and decreased its earnings by $.4 million for
2000.

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Unrelated to Business Segment
Operations

Set forth below is a summary of items increasing
(decreasing) Wescos consolidated net income that are
viewed by management as unrelated to the operations of the
insurance, furniture rental and industrial segments. (Amounts
are in thousands.)

|                                                            |                                                         |                                             |   |        |     |      |        |        |     |   |           |         |     | 
|----------------------------------------------------------- | ------------------------------------------------------- | ------------------------------------------- | - | ------ | --- | ---- | ------ | ------ | --- | - | --------- | ------- | --- | 
|                                                            |                                                         |                                            
|                                                            |                                                         | Year Ended December 31,                    
|                                                            |                                                         |                                            
|                                                            |                                                         | 2002                                        |   | 2001   |     | 2000
|                                                            |                                                         |                                             |   |        |     |     
|Goodwill amortization, before income tax effect             |                                                         | $                                           |  |        |     | $    | (7,476 | )      |     | $ | (6,342    | )      
|Income tax benefit                                          |                                                         |                                             |  |        |     |      | 662    |        |     |   | 475       |        
|                                                            |                                                         |                                             |   |        |     |      |        |        |     |   |           |        
|                                                            | Goodwill amortization                                   |                                             | $ |       |     |      | $      | (6,814 | )   |   | $         | (5,867  | )  
|                                                            |                                                         |                                             |   |        |     |      |        |        |     |   |           |        
|                                                           
|Realized net securities gains, before income tax
    effect |                                                         | $                                           |  |        |     | $    |       |        |     | $ | 1,311,270 |        
|Income tax provision                                        |                                                         |                                             |  |        |     |      |       |        |     |   | (458,887  | )      
|                                                            |                                                         |                                             |   |        |     |      |        |        |     |   |           |        
|                                                            | Realized net securities gains                           |                                             | $ |       |     |      | $      |       |     |   | $         | 852,383 |    
|                                                            |                                                         |                                             |   |        |     |      |        |        |     |   |           |        
|Other nonsegment items                                     |                                                         |                                             |   |        |     |      |        |        |     |   |           |        
|                                                            | Rental income from commercial real estate               |                                             | $ | 3,248  |     |      | $      | 3,214  |     |   | $         | 2,978   |    
|                                                            | Dividend and interest income                            |                                             |   | 616    |     |      |        | 885    |     |   |           | 518     |    
|                                                            | Real estate and general and administrative
    expenses |                                             |   | (3,186 | )   |      |        | (3,303 | )   |   |           | (3,067  | )  
|                                                            | Interest expense                                        |                                             |   |       |     |      |        | (79    | )   |   |           | (79     | )  
|                                                            | Other items, net                                        |                                             |   | 35     |     |      |        | 151    |     |   |           | 146     |    
|                                                            |                                                         |                                             |   |        |     |      |        |        |     |   |           |        
|                                                            | Income before income taxes                              |                                             |   | 713    |     |      |        | 868    |     |   |           | 496     |    
|                                                            | Provision for income taxes                              |                                             |   | (158   | )   |      |        | (236   | )   |   |           | (329    | )  
|                                                            |                                                         |                                             |   |        |     |      |        |        |     |   |           |        
|                                                            |                                                         | Net income from other nonsegment activities |   | $      | 555 |      |        | $      | 632 |   |           | $       | 167 | 
|                                                            |                                                         |                                             |   |        |     |      |        |        |     |   |           |        

Goodwill represents the excess of the cost over
the fair value of identified net assets of acquired businesses.
In the case of the Wesco group, it relates to the acquisitions
of CORT and KBS, as well as smaller entities acquired by CORT
following its purchase by Wesco in February 2000. Prior to
2002, goodwill was amortized mainly on a straight-line basis
over 40 years. As explained in Note 2 to the
accompanying consolidated financial statements, effective as of
the beginning of 2002, Wesco discontinued amortization of
goodwill and became subject to other changes in goodwill
accounting, as required by the Financial Accounting Standards
Board. The increase in amortization of goodwill for 2001 was due
principally to the inclusion of a full years amortization
of CORT goodwill in 2001, versus less than eleven months
in 2000.

Realized gains and losses on the Wesco
groups investments have fluctuated in amount from year to
year, sometimes impacting net income significantly, as in 2000.
However, the amounts and timing of these realizations have no
predictive or practical analytical value. Wescos
investments are carried at market value, and unrealized gains or
losses are reflected, net of potential income tax effect, in the
unrealized appreciation component of its shareholders
equity. When gains or losses are realized, due to sale of
securities or other triggering event, they are credited or
charged, net of tax effect, to the consolidated statement of
income; generally, in Wescos case, there has been little
effect on total shareholders equity  merely a
transfer from unrealized appreciation to retained earnings.
Wescos consolidated earnings for 2000 contained net
realized securities gains, after income taxes, of
$852.4 million; no gains or losses were realized in 2002 or
2001.

Other nonsegment items include mainly
(1) rental income from owned commercial real estate and
(2) dividend and interest income from marketable securities
and cash equivalents owned outside the insurance subsidiaries,
reduced by real estate and general and administrative
expenses  plus or minus income taxes related to such
items. These taxes do not correlate well with total pre-tax
income, because dividend income is substantially tax-exempt. Net
income from other nonsegment activities typically fluctuates
from period to period but is not significant in amount.

*  *  *  *  *

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Wescos effective consolidated income tax
rate typically fluctuates from period to period for various
reasons, such as the inclusion in consolidated revenues of
significant, varying amounts of dividend income, which is
substantially exempt from income taxes. The respective income
tax provisions, expressed as percentages of income before income
taxes, amounted to 34.8%, 35.4% and 35.0% in 2002, 2001 and
2000. (See Note 7 to Wescos accompanying consolidated
financial statements for further information on income taxes.)

Managements principal goal is to maximize
gain in Wescos intrinsic business value per share over the
long term. Accounting consequences do not influence business
decisions. There is no particular strategy as to the timing of
sales of investments. Securities may be sold for a variety of
reasons, including (1) the belief that prospects for future
appreciation of a particular investment are less attractive than
the prospects for reinvestment of the after-tax proceeds from
its sale, or (2) the desire to generate funds for an
acquisition or repayment of debt.

Consolidated revenues, expenses and net income
reported for any period are not necessarily indicative of future
revenues, expenses and net income in that they are subject to
significant variations in amount and timing of securities gains
and losses, as well as other unusual nonoperating items such as
the acquisition of CORT. In addition, consolidated revenues,
expenses and net income are subject to external conditions such
as the ongoing weakness of the economy, which continues to
adversely affect CORT and Precision Steel, and the
September 11, 2001 terrorist activity, which had an
immediate impact on Wes-FICs operating results.

As explained in Item 1, Business, in spite
of relief provided by enactment of the Terrorism Risk Insurance
Act (TRIA) on November 26, 2002, Wes-FIC is
exposed to losses from terrorist events covered by TRIA
occurring after that date as well as terrorism losses not
covered by TRIA. Although Wes-FICs and thus Wescos
exposure to terrorism losses cannot be predicted, Wes-FICs
management does not believe it likely that, on a worst-case
basis, Wes-FICs shareholders equity would be
severely impacted by any terrorism-related insurance losses
under reinsurance or insurance contracts currently in effect.

Shareholders equity is impacted not only to
the extent that unusual items affect earnings, but also to
reflect changes in unrealized appreciation of investments, which
are not reflected in earnings.

Wesco is not now suffering from inflation, but
its business operations have potential exposure, particularly in
the insurance and industrial segments. Large unanticipated
changes in the rate of inflation could adversely impact the
insurance business, because premium rates are established well
in advance of expenditures. Precision Steels businesses
are competitive and operate on tight gross profit margins,
making their earnings susceptible to inflationary and
deflationary cost changes; the impact, though not material in
relation to Wescos consolidated net income, may be
significant to that of the industrial segment, due particularly
to the segments use of LIFO inventory accounting.

CRITICAL ACCOUNTING POLICIES

Wescos consolidated financial statements
are prepared in conformity with accounting principles generally
accepted in the United States (GAAP). The more
important accounting principles and policies followed by Wesco
are set forth in the notes to Wescos consolidated
financial statements appearing on pages 42 through 50 of
this report. Following are the accounting principles and
policies considered by Wescos management to be critical to
its determination of consolidated financial position and results
of operations.

In preparing the consolidated financial
statements management is required to make estimates and
assumptions based on evaluation of facts and circumstances using
information currently available. For example, the process of
establishing loss reserves for property and casualty reinsurance
and insurance is subject to considerable estimation error due to
the inherent uncertainty in projecting the claim amounts that
will be reported and ultimately paid over many years. Although
the amounts of assets, liabilities, revenues and expenses
included in the consolidated financial statements may differ

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significantly from those that might result from
use of estimates and assumptions based on facts and
circumstances not yet available, Wescos management does
not believe such differences would have a material adverse
effect on reported shareholders equity.


A significant amount of judgment is required in
performing the periodic impairment tests of goodwill of acquired
businesses required under Statement of Financial Accounting
Standards No. 142. Such tests include determining or
reviewing the estimated fair value of Wescos reporting
units. Fair value refers to the amount for which the entire
reporting unit may be bought or sold. There are several methods
of estimating reporting-unit values, including market
quotations, asset and liability fair values, discounted cash
flows, and multiples of earnings or revenues. If the carrying
amount of a reporting unit, including goodwill, were to exceed
the estimated fair value, then individual assets, including
identifiable intangible assets, and liabilities of the reporting
unit would be estimated at fair value; the excess of the
carrying amount over the estimated fair value would be charged
off as an impairment loss. Goodwill of acquired businesses on
Wescos consolidated balance sheet amounted to
$266 million at December 31, 2002.

The appropriate classifications of investments in
securities with fixed maturities and marketable equity
securities are established at the time of purchase and
reevaluated as of each balance sheet date. There are three
permissible classifications: held-to-maturity, trading, and,
when neither of those classifications is applicable,
available-for-sale. In recent years Wescos management has
classified all of its equity and fixed-maturity investments as
available-for-sale; they are carried at fair value, with
unrealized gains and losses, net of deemed applicable income
taxes, reported as a separate component of shareholders
equity.

Liabilities for insurance losses and loss
adjustment expenses as of any balance sheet date represent
estimates of the ultimate amounts payable under property and
casualty reinsurance contracts related to losses occurring on or
before the balance sheet date. As of that date, some incurred
claims have not yet been reported (and some of these may not be
reported for many years); the liability for unpaid losses must
include significant estimates for these claims. Additionally,
reported claims are in various stages of the settlement process.
Each claim is settled individually based upon its merits, and
some take years to settle, especially if legal action is
involved. Actual ultimate claims amounts are likely to differ
from amounts recorded at the balance sheet date. Changes in
estimates are recorded as a component of losses incurred in the
period of change. Liabilities for insurance losses and loss
adjustment expenses on Wescos consolidated balance sheet
amounted to $73 million at December 31, 2002.

Insurance premiums are recognized as earned
revenues in proportion to the insurance protection provided,
which in most cases is pro rata over the term of each contract.
Unearned insurance premiums are deferred in the liability
section of the consolidated balance sheet. Certain costs of
acquiring premiums are deferred in other assets on Wescos
consolidated balance sheet, and charged to income as the
premiums are earned.

Furniture rentals are recognized as revenue in
the month due; rentals received in advance are deferred in the
liability section of Wescos consolidated balance sheet.
Related costs comprise the main element of cost of products and
services sold on Wescos consolidated income statement and
include depreciation expense, repairs and maintenance and
inventory losses. Rental furniture consists principally of
residential and office furniture which is available for rental
or, if no longer up to rental standards, for sale. It is carried
on Wescos consolidated balance sheet at cost, less
accumulated depreciation calculated primarily on a
declining-balance basis over 3 to 5 years using estimated
salvage values of 25 to 40 percent of original cost.

FORWARD-LOOKING STATEMENTS

Certain written or oral representations of
management stated in this annual report or elsewhere constitute
forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, as contrasted
with statements of historical fact. Forward-looking statements
include

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statements which are predictive in nature, or
which depend upon or refer to future events or conditions, or
which include words such as expects, anticipates, intends,
plans, believes, estimates, may, or could, or which
involve hypothetical events. Forward-looking statements are
based on information currently available and are subject to
various risks and uncertainties that could cause actual events
or results to differ materially from those characterized as
being likely or possible to occur. Such statements should be
considered judgments only, not guarantees, and Wescos
management assumes no duty, nor has it any specific intention,
to update them.


Actual events and results may differ materially
from those expressed or forecasted in forward-looking statements
due to a number of factors. The principal important risk factors
that could cause Wescos actual performance and future
events and actions to differ materially from those expressed in
or implied by such forward-looking statements include, but are
not limited to, changes in market prices of Wescos
significant equity investments, the occurrence of one or more
catastrophic events such as hurricanes or other events that
cause losses insured by Wescos insurance subsidiaries,
changes in insurance laws or regulations, changes in income tax
laws or regulations, and changes in general economic and market
factors that affect the prices of securities or the industries
in which Wesco and its affiliates do business, especially those
affecting the property and casualty insurance industry.




Item 7A. Quantitative and Qualitative
Disclosures About Market Risk

Wescos consolidated balance sheet contains
substantial amounts of investments whose estimated fair
(carrying) values are subject to market risks. Values of
marketable equity securities are subject to fluctuations in
their stock market prices, and values of securities with fixed
maturities are subject to changes in interest rate levels.
Otherwise, the consolidated balance sheet at December 31,
2002 did not contain significant assets or liabilities with
values subject to these or other potential market exposures such
as those relating to changes in commodity prices or foreign
exchange rates. Wesco does not utilize stand-alone derivatives
to manage market risks.

EQUITY PRICE RISK

Wescos consolidated balance sheet at
December 31, 2002 contained $627 million of marketable
equity securities stated at market value, down from
$667 million one year earlier. The decline was due to a
decline in market values; no marketable equity securities were
purchased or sold during 2002. The carrying values of
Wescos equity securities are exposed to market price
fluctuations, which may be accentuated by the concentration
existing in the equity portfolio. (At December 31, 2002,
two investments comprised 81% of the carrying value of the
consolidated equity portfolio.) In addition, the businesses
represented by the equity investments are exposed to risks
related to other markets. The two largest holdings of the
consolidated group at December 31, 2002 ($510 million,
combined) were common stocks of The Coca-Cola Company and
The Gillette Company, both of which have global operations and
thus are subject to changes in foreign currency exchange rates.
These and other market risks to which these investees are
subject, such as commodity price fluctuations, are required,
where material, to be reported upon in their filings with the
SEC, which are available to the public.

Strategically, Wesco strives to invest in
businesses that possess excellent economics, with able and
honest management, at sensible prices. Wescos management
prefers to invest a meaningful amount in each investee,
resulting in concentration. Most equity investments are expected
to be held for long periods of time; thus, Wescos
management is not ordinarily troubled by short-term price
volatility with respect to its investments provided that the
underlying business, economic and management characteristics of
the investees remain favorable. Wesco strives to maintain
above-average levels of shareholders equity to provide a
margin of safety against short-term equity price volatility.

The carrying values of investments subject to
equity price risks are based on quoted market prices. Market
prices are subject to fluctuation and, consequently, the amount
realized upon the

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subsequent sale of an investment may
significantly differ from the reported market value. Fluctuation
in the market price of a security may result from perceived
changes in the underlying economic characteristics of the
investee, the relative prices of alternative investments, or
general market conditions. Furthermore, amounts realized upon
the sale of a particular security may be adversely affected if a
relatively large quantity of the security is being sold.


The following table summarizes Wescos
equity price risks as of December 31, 2002 and 2001. It
shows the effects of a hypothetical 30% overall increase or
decrease in market prices of marketable equity securities owned
by the Wesco group on total recorded market value and, after tax
effect, on Wescos shareholders equity at each of
those dates. (Amounts are in thousands.)

|                                                   |              |                   |   |                   |  |          |   |           |  |  |   |           |  |  |   |           | 
|-------------------------------------------------- | ------------ | ----------------- | - | ----------------- |  | -------- | - | --------- |  |  | - | --------- |  |  | - | --------- | 
|                                                   |              |                   |   |                  
|                                                   |              | December 31, 2002 |   | December 31, 2001
|                                                   |              |                   |   |                  
|                                                   |              | Increase          |   | Decrease          |  | Increase |   | Decrease 
|                                                   |              |                   |   |                   |  |          |   |          
|Market value of marketable equity
    securities  |              |                   |   |                   |  |          |   |           |  |  |   |           |  |  |   |          
|                                                   | As recorded  |                   | $ | 626,768           |  |          | $ | 626,768   |  |  | $ | 667,262   |  |  | $ | 667,262   | 
|                                                   | Hypothetical |                   |   | 814,799           |  |          |   | 438,737   |  |  |   | 867,441   |  |  |   | 467,083   | 
|Shareholders equity                              |              |                   |   |                   |  |          |   |           |  |  |   |           |  |  |   |          
|                                                   | As recorded  |                   |   | 1,958,162         |  |          |   | 1,958,162 |  |  |   | 1,912,397 |  |  |   | 1,912,397 | 
|                                                   | Hypothetical |                   |   | 2,080,382         |  |          |   | 1,835,942 |  |  |   | 2,042,513 |  |  |   | 1,782,781 | 
|                                                   |              |                   |   |                   |  |          |   |           |  |  |   |           |  |  |   |          

The 30% hypothetical changes in market values
assumed in preparing the tables do not reflect what could be
considered best- or worst-case scenarios. Indeed, actual results
could be much worse or better due both to the nature of equity
markets and the aforementioned concentration existing in
Wescos equity investment portfolio.

INTEREST RATE RISK

Wescos consolidated balance sheet at
December 31, 2002 contained $828 million of securities
with fixed maturities stated at fair value, down from
$924 million one year earlier. A decrease in
mortgage-backed securities ($485 million at
December 31, 2002 versus $899 million one year
earlier) was substantially offset by increases in
U.S. government and other securities.

As noted in the preceding section on equity price
risk, Wesco prefers to acquire entire businesses or invest in
equity securities. When unable to do so, it may invest in
mortgage-backed securities, government bonds or other
interest-rate-sensitive investments. Wescos strategy is to
acquire securities that are attractively priced in relation to
perceived credit risk. Wesco recognizes and accepts that losses
may occur.

The fair values of Wescos fixed-maturity
investments fluctuate in response to changes in market interest
rates. Increases and decreases in prevailing interest rates
generally translate into decreases and increases in fair values.
Additionally, fair values of these investments may be affected
by the creditworthiness of the issuer, prepayment options,
relative values of alternative investments, the liquidity of the
instrument and other general market conditions.

The following table shows the estimated effects
as of December 31, 2002 and 2001 of hypothetical overall
increases and decreases in interest rates on the fair value of
Wescos fixed-

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maturity investments and, after tax effect, on
Wescos shareholders equity at each of those dates.
(Dollar amounts are in thousands.)


|                                       |                             |                   |         |                   |  |               |           |               |  |   |         |         |  |   |           |           | 
|-------------------------------------- | --------------------------- | ----------------- | ------- | ----------------- |  | ------------- | --------- | ------------- |  | - | ------- | ------- |  | - | --------- | --------- | 
|                                       |                             |                   |         |                  
|                                       |                             | December 31, 2002 |         | December 31, 2001
|                                       |                             |                   |         |                  
|                                       |                             | Fair Value of     |         | Shareholders     |  | Fair Value of |           | Shareholders
|                                       |                             | Investments       |         | Equity            |  | Investments   |           | Equity       
|                                       |                             |                   |         |                   |  |               |           |              
|As recorded                            |                             | $                 | 827,537 |                   |  | $             | 1,958,162 |               |  | $ | 924,160 |         |  | $ | 1,912,397 |          
|Hypothetical change in interest rate  |                             |                   |         |                   |  |               |           |               |  |   |         |         |  |   |           |          
|                                       | 1 percentage point decrease |                   |         | 873,471           |  |               |           | 1,988,019     |  |   |         | 932,101 |  |   |           | 1,917,558 | 
|                                       | 1 percentage point increase |                   |         | 801,988           |  |               |           | 1,941,555     |  |   |         | 897,765 |  |   |           | 1,895,240 | 
|                                       | 2 percentage point increase |                   |         | 769,948           |  |               |           | 1,920,729     |  |   |         | 857,062 |  |   |           | 1,868,783 | 
|                                       | 3 percentage point increase |                   |         | 724,732           |  |               |           | 1,891,339     |  |   |         | 805,013 |  |   |           | 1,834,951 | 
|                                       |                             |                   |         |                   |  |               |           |               |  |   |         |         |  |   |           |          

The hypothetical changes in market interest rates
assumed in preparing the table do not reflect what could be
deemed best- or worst-case scenarios. For example, variations in
market interest rates could produce significant changes in the
timing of repayments of mortgage-backed securities due to
prepayment options available to borrowers under the mortgages.
For this and other reasons, actual results might differ from
those reflected in the table.






Item 8. Financial Statements and
Supplementary Data


Following is an index to financial statements and
related schedules of Wesco appearing in this report:

|                                                                                                                 |  |           |         | 
|---------------------------------------------------------------------------------------------------------------- |  | --------- | ------- | 
|                                                                                                                 |  | Page     
|Financial Statements                                                                                             |  | Number(s)
|                                                                                                                 |  |          
|Independent auditors report                                                                                     |  |           | 37      | 
|Consolidated balance sheet 
    December 31, 2002 and 2001                                                      |  |           | 38      | 
|Consolidated statement of income 
    years ended December 31, 2002, 2001 and 2000                              |  |           | 39      | 
|Consolidated statement of changes in
    shareholders equity  years ended
    December 31, 2002, 2001 and 2000 |  |           | 40      | 
|Consolidated statement of cash flows 
    years ended December 31, 2002, 2001 and 2000                          |  |           | 41      | 
|Notes to consolidated financial statements                                                                       |  |           | 42  50 | 

Listed below are financial statement schedules
required by the SEC to be included in this report. The data
appearing therein should be read in conjunction with the
consolidated financial statements and notes of Wesco and the
independent auditors report referred to above. Schedules
not included with these financial statement schedules have been
omitted because they are not applicable or the required
information is shown in the consolidated financial statements or
notes thereto.

|                                                                                                                                |  |          |   |           |  |  |         | 
|------------------------------------------------------------------------------------------------------------------------------- |  | -------- | - | --------- |  |  | ------- | 
|                                                                                                                                |  | Schedule |   | Page     
|Financial Statement Schedule                                                                                                    |  | Number   |   | Number(s)
|                                                                                                                                |  |          |   |          
|Condensed financial information of
    Wesco  December 31, 2002 and 2001, and years
    ended December 31, 2002, 2001 and 2000 |  |          | I |           |  |  | 51  52 | 

Item 9. Changes in and Disagreements
with Accountants on Accounting and Financial
Disclosure

Not applicable, as there were no such changes or
disagreements.

PART III






Item 10. Directors and Executive
Officers of the Registrant


The information set forth in the sections
entitled Election of Directors and Executive
Officers appearing in the definitive combined notice of
annual meeting and proxy statement of Wesco for its annual
meeting of shareholders scheduled to be held May 7, 2003
(the 2003 Proxy Statement) is incorporated herein by
reference.

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Item 11. Executive
Compensation


The information set forth in the section
Compensation of Directors and Executive Officers in
the 2003 Proxy Statement is incorporated herein by reference.
All such compensation is cash compensation; Wesco neither has,
nor is considering having, any stock option plan or other equity
compensation arrangement.






Item 12. Security Ownership of
Certain Beneficial Owners and Management and Related Shareholder
Matters


The information set forth in the sections
Voting Securities and Holders Thereof and
Requirements for Reporting Securities Ownership in
the 2003 Proxy Statement is incorporated herein by reference.






Item 13. Certain Relationships and
Related Transactions


Certain information set forth in the sections
Election of Directors, Voting Securities and
Holders Thereof, Compensation of Directors and
Executive Officers and Board of Director Interlocks
and Insider Participation in the 2003 Proxy Statement is
incorporated herein by reference.






Item 14. Controls and
Procedures


Within the 90 days prior to the date of
filing this Annual Report on Form 10-K, managements of
Wesco and each of its subsidiaries evaluated the effectiveness
of the design and operation of their respective disclosure
controls and procedures. Based upon those evaluations,
Wescos chief executive officer (Charles T. Munger,
Chairman of the Board) and chief financial officer
(Jeffrey L. Jacobson, Vice President and Chief Financial
Officer) concluded that the disclosure controls and procedures
of Wesco and its subsidiaries are effective in timely alerting
them to material information required to be included in reports
that Wesco is required to file with the SEC. Subsequent to the
dates of their evaluations, there have been no significant
changes in internal controls or other factors that could
significantly affect internal controls, including any corrective
actions with regard to significant deficiencies and material
weaknesses.






Item 15. Exhibits, Financial
Statement Schedules, and Reports on Form 8-K


The following exhibits (listed by numbers
corresponding to Table 1 of Item 601 of
Regulation S-K) are filed as part of this Annual Report on
Form 10-K or are incorporated herein by reference:

3a  Articles of incorporation and
by-laws of Wesco (filed as exhibit 3a to Wescos
Form 10-K for the year ended December 31, 1999)

21  List of subsidiaries (filed as
exhibit 21 to Wescos Form 10-K for the year
ended December 31, 2001)


99.1  Certification pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (chief
executive officer)


99.2  Certification pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (chief
financial officer)


Instruments defining the rights of holders of
long-term debt of Wesco and its subsidiaries are not being filed
since the total amount of securities authorized by all such
instruments does not exceed 10% of the total assets of Wesco and
its subsidiaries on a consolidated basis as of December 31,
2002. Wesco hereby agrees to furnish to the Commission upon
request a copy of any such debt instrument to which it is a
party.

The index to financial statements and related
schedules set forth in Item 8 of this report is
incorporated herein by reference.

No reports on Form 8-K were filed during the
quarter ended December 31, 2002.

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SIGNATURES

Pursuant to the requirements of Section 13
of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

WESCO FINANCIAL CORPORATION

|    |  |                                                                                                                     |  |               
|--- |  | ------------------------------------------------------------------------------------------------------------------- |  | --------------
|   
|By: |  | Charles T. Munger
    Chairman of the Board (principal executive officer)                                           |  | March 19, 2003
|   
|By: |  | Robert H. Bird
    President (principal operating officer)                                                          |  | March 19, 2003
|   
|By: |  | Jeffrey L. Jacobson
    Vice President and Chief Financial Officer
    (principal financial and accounting officer) |  | March 19, 2003

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.

|                                      |  |               
|------------------------------------- |  | --------------
|                                     
|Robert H. Bird
    Director           |  | March 19, 2003
|                                     
|Carolyn H. Carlburg
    Director      |  | March 19, 2003
|                                     
|Robert E. Denham
    Director         |  | March 19, 2003
|                                     
|James N. Gamble
    Director          |  | March 19, 2003
|                                     
|Charles T. Munger
    Director        |  | March 19, 2003
|                                     
|Elizabeth Caspers Peters
    Director |  | March 19, 2003
|                                     
|David K. Robinson
    Director        |  | March 19, 2003

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CERTIFICATIONS

Pursuant to Rule 13a-14 under the Securities
and Exchange Act of 1934, as amended

I, Charles T. Munger, certify that:



| |    |                                                                                                                                                                                                                                                                                                                                             
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | I have reviewed this annual report on
    Form 10-K of Wesco Financial Corporation (the
    registrant);                                                                                                                                                                                                                                  
|
| | 2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;                       
|
| | 4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                       



| |    |                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;



| |    |                                                                                                                                                                                                       
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and



| |    |                                                                                                                                                                             
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;



| |    |                                                                                                                                                                                                          
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants board of directors (or persons performing
    the equivalent function):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and



| |    |                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and



| |    |                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | The registrants other certifying officers
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.

Date: March 19, 2003

| |                          
| | -------------------------
| | /s/ CHARLES T. MUNGER    
| |                          
| | Charles T. Munger        
| | Chairman of the Board    
| | (Chief Executive Officer)

34



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##### Table of Contents



I, Jeffrey L. Jacobson, certify that:



| |    |                                                                                                                                                                                                                                                                                                                                             
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | I have reviewed this annual report on
    Form 10-K of Wesco Financial Corporation (the
    registrant);                                                                                                                                                                                                                                  
|
| | 2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;                       
|
| | 4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the Registrant and we have:                                                                                                       



| |    |                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;



| |    |                                                                                                                                                                                                       
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and



| |    |                                                                                                                                                                             
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;



| |    |                                                                                                                                                                                                          
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants board of directors (or persons performing
    the equivalent function):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and



| |    |                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    Registrants internal controls; and



| |    |                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | The registrants other certifying officers
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.

Date: March 19, 2003

| |                        
| | -----------------------
| | /s/ JEFFREY L. JACOBSON
| |                        
| | Jeffrey L. Jacobson    
| | Vice President and     
| | Chief Financial Officer

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INDEPENDENT AUDITORS REPORT

To the Board of Directors and Shareholders of

Wesco Financial Corporation


We have audited the accompanying consolidated
balance sheets of Wesco Financial Corporation and subsidiaries
as of December 31, 2002 and 2001, and the related
consolidated statements of income, changes in shareholders
equity, and cash flows for each of the three years in the period
ended December 31, 2002. Our audits also included the
financial statement schedule listed in the index at Item 8.
These financial statements and the financial statement schedule
are the responsibility of the Corporations management. Our
responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, such consolidated financial
statements present fairly, in all material respects, the
financial position of Wesco Financial Corporation and
subsidiaries as of December 31, 2002 and 2001, and the
results of their operations and their cash flows for each of the
three years in the period ended December 31, 2002, in
conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, the financial
statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

As described in Note 2 to the consolidated
financial statements, the Corporation adopted Statement of
Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets, effective January 1, 2002.

-s- Deloitte & Touche LLP

Omaha, Nebraska

March 6, 2003


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WESCO FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEET


(Dollar amounts in thousands)

|                                                           |                                                                                                              |                            |           |           |           |   |           |           |           | 
|---------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------ | -------------------------- | --------- | --------- | --------- | - | --------- | --------- | --------- | 
|                                                           |                                                                                                              |                           
|                                                           |                                                                                                              | December 31,              
|                                                           |                                                                                                              |                           
|                                                           |                                                                                                              | 2002                       |           | 2001     
|                                                           |                                                                                                              |                            |           |          
|ASSETS                                                    
|Cash and cash equivalents                                  |                                                                                                              | $                          | 349,812   |           |           | $ | 120,784   |          
|Investments:                                               |                                                                                                              |                            |           |           |           |   |           |          
|                                                           | Securities with fixed maturities                                                                             |                            |           | 827,537   |           |   |           | 924,160   |          
|                                                           | Marketable equity securities                                                                                 |                            |           | 626,768   |           |   |           | 667,262   |          
|Accounts receivable                                        |                                                                                                              |                            | 67,425    |           |           |   | 43,871    |          
|Rental furniture                                           |                                                                                                              |                            | 187,480   |           |           |   | 212,586   |          
|Goodwill of acquired businesses                            |                                                                                                              |                            | 266,203   |           |           |   | 264,465   |          
|Other assets                                               |                                                                                                              |                            | 81,750    |           |           |   | 86,565    |          
|                                                           |                                                                                                              |                            |           |           |           |   |           |          
|                                                           |                                                                                                              | $                          | 2,406,975 |           |           | $ | 2,319,693 |          
|                                                           |                                                                                                              |                            |           |           |           |   |           |          
|                                                          
|LIABILITIES AND SHAREHOLDERS
    EQUITY                  
|Insurance losses and loss adjustment expenses              |                                                                                                              | $                          | 73,065    |           |           | $ | 61,879    |          
|Unearned insurance premiums                                |                                                                                                              |                            | 48,681    |           |           |   | 24,897    |          
|Deferred furniture rental income and security
    deposits |                                                                                                              |                            | 21,562    |           |           |   | 23,796    |          
|Accounts payable and accrued expenses                      |                                                                                                              |                            | 44,184    |           |           |   | 36,794    |          
|Notes payable                                              |                                                                                                              |                            | 32,481    |           |           |   | 33,649    |          
|Income taxes payable, principally deferred                 |                                                                                                              |                            | 227,902   |           |           |   | 225,665   |          
|Other liabilities                                          |                                                                                                              |                            | 938       |           |           |   | 616       |          
|                                                           |                                                                                                              |                            |           |           |           |   |           |          
|                                                           |                                                                                                              |                            | 448,813   |           |           |   | 407,296   |          
|                                                           |                                                                                                              |                            |           |           |           |   |           |          
|Shareholders equity:                                      |                                                                                                              |                            |           |           |           |   |           |          
|                                                           | Capital stock, $1 par value 
    authorized, 7,500,000 shares; issued and outstanding, 7,119,807
    shares |                            |           | 7,120     |           |   |           | 7,120     |          
|                                                           | Capital in excess of par value                                                                               |                            |           | 23,319    |           |   |           | 23,319    |          
|                                                           | Unrealized appreciation of investments, net of
    taxes                                                     |                            |           | 374,571   |           |   |           | 372,267   |          
|                                                           | Retained earnings                                                                                            |                            |           | 1,553,152 |           |   |           | 1,509,691 |          
|                                                           |                                                                                                              |                            |           |           |           |   |           |          
|                                                           |                                                                                                              | Total shareholders equity |           |           | 1,958,162 |   |           |           | 1,912,397 | 
|                                                           |                                                                                                              |                            |           |           |           |   |           |          
|                                                           |                                                                                                              | $                          | 2,406,975 |           |           | $ | 2,319,693 |          
|                                                           |                                                                                                              |                            |           |           |           |   |           |          

See accompanying notes to consolidated
financial statements.

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WESCO FINANCIAL CORPORATION

CONSOLIDATED STATEMENT OF INCOME


(Dollar amounts in thousands except for
amounts per share)

|                                                                                          |                                                                 |                         |         |         |        |      |         |         |        |  |           |           |         | 
|----------------------------------------------------------------------------------------- | --------------------------------------------------------------- | ----------------------- | ------- | ------- | ------ | ---- | ------- | ------- | ------ |  | --------- | --------- | ------- | 
|                                                                                          |                                                                 |                        
|                                                                                          |                                                                 | Year Ended December 31,
|                                                                                          |                                                                 |                        
|                                                                                          |                                                                 | 2002                    |         | 2001    |        | 2000
|                                                                                          |                                                                 |                         |         |         |        |     
|Revenues:                                                                                 |                                                                 |                         |         |         |        |      |         |         |        |  |           |          
|                                                                                          | Sales and service revenues                                      |                         | $       | 437,099 |        |      | $       | 443,628 |        |  | $         | 426,096   |        
|                                                                                          | Insurance premiums earned                                       |                         |         | 64,627  |        |      |         | 43,031  |        |  |           | 23,783    |        
|                                                                                          | Dividend and interest income                                    |                         |         | 70,652  |        |      |         | 70,981  |        |  |           | 59,759    |        
|                                                                                          | Realized net securities gains                                   |                         |         |        |        |      |         |        |        |  |           | 1,311,270 |        
|                                                                                          | Other                                                           |                         |         | 3,299   |        |      |         | 3,439   |        |  |           | 3,056     |        
|                                                                                          |                                                                 |                         |         |         |        |      |         |         |        |  |           |          
|                                                                                          |                                                                 |                         | 575,677 |         |        |      | 561,079 |         |        |  | 1,823,964 |          
|                                                                                          |                                                                 |                         |         |         |        |      |         |         |        |  |           |          
|Costs and expenses:                                                                       |                                                                 |                         |         |         |        |      |         |         |        |  |           |          
|                                                                                          | Cost of products and services sold                              |                         |         | 145,677 |        |      |         | 144,712 |        |  |           | 146,649   |        
|                                                                                          | Insurance losses, loss adjustment and
    underwriting expenses |                         |         | 58,736  |        |      |         | 46,682  |        |  |           | 19,392    |        
|                                                                                          | Selling, general and administrative expenses                    |                         |         | 288,353 |        |      |         | 276,712 |        |  |           | 227,954   |        
|                                                                                          | Interest expense                                                |                         |         | 1,994   |        |      |         | 4,169   |        |  |           | 5,235     |        
|                                                                                          | Goodwill amortization                                           |                         |         |        |        |      |         | 7,476   |        |  |           | 6,342     |        
|                                                                                          |                                                                 |                         |         |         |        |      |         |         |        |  |           |          
|                                                                                          |                                                                 |                         | 494,760 |         |        |      | 479,751 |         |        |  | 405,572   |          
|                                                                                          |                                                                 |                         |         |         |        |      |         |         |        |  |           |          
|Income before income taxes                                                                |                                                                 |                         | 80,917  |         |        |      | 81,328  |         |        |  | 1,418,392 |          
|Provision for income taxes                                                                |                                                                 |                         | (28,199 | )       |        |      | (28,792 | )       |        |  | (495,922  | )        
|                                                                                          |                                                                 |                         |         |         |        |      |         |         |        |  |           |          
|                                                                                          |                                                                 | Net income              |         | $       | 52,718 |      |         | $       | 52,536 |  |           | $         | 922,470 | 
|                                                                                          |                                                                 |                         |         |         |        |      |         |         |        |  |           |          
|Amounts per capital share based on 7,119,807
    shares outstanding throughout each year: |                                                                 |                         |         |         |        |      |         |         |        |  |           |          
|                                                                                          | Net income                                                      |                         | $       | 7.40    |        |      | $       | 7.38    |        |  | $         | 129.56    |        
|                                                                                          | Cash dividends                                                  |                         |         | 1.30    |        |      |         | 1.26    |        |  |           | 1.22      |        
|                                                                                          |                                                                 |                         |         |         |        |      |         |         |        |  |           |          

See accompanying notes to consolidated
financial statements.

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WESCO FINANCIAL CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN


SHAREHOLDERS EQUITY


(Dollar amounts in thousands)

|                                                                                            |                                   |                      |       |            |  |                |        |          |  |         |           |          |   |   |           |   |  |   |           |          |   |   |         |   | 
|------------------------------------------------------------------------------------------- | --------------------------------- | -------------------- | ----- | ---------- |  | -------------- | ------ | -------- |  | ------- | --------- | -------- | - | - | --------- | - |  | - | --------- | -------- | - | - | ------- | - | 
|                                                                                            |                                   |                      |       |           
|                                                                                            |                                   | Shareholders Equity |       | Total     
|                                                                                            |                                   |                      |       | Compre-   
|                                                                                            |                                   |                      |       | Capital in |  | Unrealized     |        |          |  | hensive
|                                                                                            |                                   | Capital              |       | Excess of  |  | Appreciation   |        | Retained |  |         |           | Income  
|                                                                                            |                                   | Stock                |       | Par Value  |  | of Investments |        | Earnings |  | Total   |           | (Loss)  
|                                                                                            |                                   |                      |       |            |  |                |        |          |  |         |           |         
|Balance, December 31, 1999                                                                  |                                   | $                    | 7,120 |            |  | $              | 23,319 |          |  | $       | 1,312,590 |          |   | $ | 552,343   |   |  | $ | 1,895,372 |          |   |   |         |  
|Net income                                                                                  |                                   |                      |       |            |  |                |        |          |  |         |           |          |   |   | 922,470   |   |  |   | 922,470   |          |   |   |         |  
|Increase in unrealized appreciation of
    investments, net of income tax effect of $11,248 |                                   |                      |       |            |  |                |        |          |  |         | 20,262    |          |   |   |           |   |  |   | 20,262    |          |   | $ | 90,349  |  
|                                                                                            |                                   |                      |       |            |  |                |        |          |  |         |           |          |   |   |           |   |  |   |           |          |   |   |         |  
|                                                                                           
|Reversal of unrealized appreciation upon
    inclusion of realized net gains in net income  |                                   |                      |       |            |  |                |        |          |  |         | (852,383  | )        |   |   |           |   |  |   | (852,383  | )        |   |   |         |  
|Cash dividends declared and paid                                                            |                                   |                      |       |            |  |                |        |          |  |         |           |          |   |   | (8,687    | ) |  |   | (8,687    | )        |   |   |         |  
|                                                                                            |                                   |                      |       |            |  |                |        |          |  |         |           |          |   |   |           |   |  |   |           |          |   |   |         |  
|Balance, December 31, 2000                                                                  |                                   |                      | 7,120 |            |  |                | 23,319 |          |  |         | 480,469   |          |   |   | 1,466,126 |   |  |   | 1,977,034 |          |   |   |         |  
|Net income                                                                                  |                                   |                      |       |            |  |                |        |          |  |         |           |          |   |   | 52,536    |   |  |   | 52,536    |          |   |   |         |  
|Decrease in unrealized appreciation                                                         |                                   |                      |       |            |  |                |        |          |  |         |           |          |   |   |           |   |  |   |           |          |   | $ | (55,666 | )
|                                                                                            | of investments, net of income tax |                      |       |            |  |                |        |          |  |         |           |          |   |   |           |   |  |   |           |          |   |   |         |   | 
|                                                                                            | effect of $58,634                 |                      |       |            |  |                |        |          |  |         |           | (108,202 | ) |   |           |   |  |   |           | (108,202 | ) |   |         |   | 
|Cash dividends declared and paid                                                            |                                   |                      |       |            |  |                |        |          |  |         |           |          |   |   | (8,971    | ) |  |   | (8,971    | )        |   |   |         |  
|                                                                                            |                                   |                      |       |            |  |                |        |          |  |         |           |          |   |   |           |   |  |   |           |          |   |   |         |  
|Balance, December 31, 2001                                                                  |                                   |                      | 7,120 |            |  |                | 23,319 |          |  |         | 372,267   |          |   |   | 1,509,691 |   |  |   | 1,912,397 |          |   |   |         |  
|Net income                                                                                  |                                   |                      |       |            |  |                |        |          |  |         |           |          |   |   | 52,718    |   |  |   | 52,718    |          |   |   |         |  
|Increase in unrealized appreciation                                                         |                                   |                      |       |            |  |                |        |          |  |         |           |          |   |   |           |   |  |   |           |          |   | $ | 55,022  |  
|                                                                                            | of investments, net of income tax |                      |       |            |  |                |        |          |  |         |           |          |   |   |           |   |  |   |           |          |   |   |         |   | 
|                                                                                            | effect of $1,342                  |                      |       |            |  |                |        |          |  |         |           | 2,304    |   |   |           |   |  |   |           | 2,304    |   |   |         |   | 
|Cash dividends declared and paid                                                            |                                   |                      |       |            |  |                |        |          |  |         |           |          |   |   | (9,257    | ) |  |   | (9,257    | )        |   |   |         |  
|                                                                                            |                                   |                      |       |            |  |                |        |          |  |         |           |          |   |   |           |   |  |   |           |          |   |   |         |  
|Balance, December 31, 2002                                                                  |                                   | $                    | 7,120 |            |  | $              | 23,319 |          |  | $       | 374,571   |          |   | $ | 1,553,152 |   |  | $ | 1,958,162 |          |   |   |         |  
|                                                                                            |                                   |                      |       |            |  |                |        |          |  |         |           |          |   |   |           |   |  |   |           |          |   |   |         |  

See accompanying notes to consolidated
financial statements.

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WESCO FINANCIAL CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS


(Dollar amounts in thousands)

|                                                  |                                                                                     |                                                                                       |                                          |          |        |         |         |          |         |          |         |            |            |          |  
|------------------------------------------------- | ----------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ---------------------------------------- | -------- | ------ | ------- | ------- | -------- | ------- | -------- | ------- | ---------- | ---------- | -------- | -
|                                                  |                                                                                     |                                                                                      
|                                                  |                                                                                     | Year Ended December 31,                                                              
|                                                  |                                                                                     |                                                                                      
|                                                  |                                                                                     | 2002                                                                                  |                                          | 2001     |        | 2000   
|                                                  |                                                                                     |                                                                                       |                                          |          |        |        
|Cash flows from operating activities:             |                                                                                     |                                                                                       |                                          |          |        |         |         |          |         |          |         |           
|                                                  | Net income                                                                          |                                                                                       | $                                        | 52,718   |        |         | $       | 52,536   |         |          | $       | 922,470    |           
|                                                  | Adjustments to reconcile net income with cash
    flows from operating activities  |                                                                                       |                                          |          |        |         |         |          |         |          |         |            |           
|                                                  |                                                                                     | Realized net securities gains                                                         |                                          |          |       |         |         |          |        |          |         |            | (1,311,270 | )       
|                                                  |                                                                                     | Provision for depreciation and amortization, net                                      |                                          |          | 51,914 |         |         |          | 65,564  |          |         |            | 47,203     |         
|                                                  |                                                                                     | Increase in liabilities for insurance losses and
    loss adjustment expenses         |                                          |          | 11,186 |         |         |          | 21,920  |          |         |            | 6,317      |         
|                                                  |                                                                                     | Increase in unearned insurance premiums                                               |                                          |          | 23,784 |         |         |          | 7,891   |          |         |            | 8,586      |         
|                                                  |                                                                                     | Increase (decrease) in income taxes payable                                           |                                          |          | 893    |         |         |          | (20,876 | )        |         |            | 20,398     |         
|                                                  |                                                                                     | Proceeds from sales of rental furniture, less
    gross profit included in net income |                                          |          | 48,173 |         |         |          | 44,225  |          |         |            | 34,252     |         
|                                                  |                                                                                     | Other, net                                                                            |                                          |          | (239   | )       |         |          | (6,717  | )        |         |            | 538        |         
|                                                  |                                                                                     |                                                                                       |                                          |          |        |         |         |          |         |          |         |           
|                                                  |                                                                                     |                                                                                       | Net cash flows from operating activities |          |        | 188,429 |         |          |         | 164,543  |         |            |            | (271,506 | )
|                                                  |                                                                                     |                                                                                       |                                          |          |        |         |         |          |         |          |         |           
|Cash flows from investing activities:             |                                                                                     |                                                                                       |                                          |          |        |         |         |          |         |          |         |           
|                                                  | Purchases of securities with fixed maturities                                       |                                                                                       |                                          | (289,117 | )      |         |         | (719,769 | )       |          |         | (1,204,104 | )         
|                                                  | Maturities and redemptions of securities with
    fixed maturities                  |                                                                                       |                                          | 427,387  |        |         |         | 631,639  |         |          |         | 20,385     |           
|                                                  | Sales of marketable equity securities                                               |                                                                                       |                                          |         |        |         |         |         |         |          |         | 1,396,997  |           
|                                                  | Sales of securities with fixed maturities                                           |                                                                                       |                                          |         |        |         |         |         |         |          |         | 674,660    |           
|                                                  | Acquisition of businesses, net of cash and cash
    equivalents acquired            |                                                                                       |                                          | (37,082  | )      |         |         | (20,009  | )       |          |         | (394,523   | )         
|                                                  | Purchases of rental furniture                                                       |                                                                                       |                                          | (44,550  | )      |         |         | (56,065  | )       |          |         | (103,693   | )         
|                                                  | Other, net                                                                          |                                                                                       |                                          | (5,974   | )      |         |         | (2,008   | )       |          |         | (7,450     | )         
|                                                  |                                                                                     |                                                                                       |                                          |          |        |         |         |          |         |          |         |           
|                                                  |                                                                                     |                                                                                       | Net cash flows from investing activities |          |        | 50,664  |         |          |         | (166,212 | )       |            |            | 382,272  |  
|                                                  |                                                                                     |                                                                                       |                                          |          |        |         |         |          |         |          |         |           
|Cash flows from financing activities:             |                                                                                     |                                                                                       |                                          |          |        |         |         |          |         |          |         |           
|                                                  | Increase (decrease) in notes payable, net                                           |                                                                                       |                                          | (2,508   | )      |         |         | 9,714    |         |          |         |           |           
|                                                  | Borrowings (repayments) of line of credit
    borrowings, net                       |                                                                                       |                                          | 1,700    |        |         |         | (32,100  | )       |          |         | (14,600    | )         
|                                                  | Payment of cash dividends                                                           |                                                                                       |                                          | (9,257   | )      |         |         | (8,971   | )       |          |         | (8,687     | )         
|                                                  |                                                                                     |                                                                                       |                                          |          |        |         |         |          |         |          |         |           
|                                                  |                                                                                     |                                                                                       | Net cash flows from financing activities |          |        | (10,065 | )       |          |         | (31,357  | )       |            |            | (23,287  | )
|                                                  |                                                                                     |                                                                                       |                                          |          |        |         |         |          |         |          |         |           
|Increase (decrease) in cash and cash equivalents  |                                                                                     |                                                                                       | 229,028                                  |          |        |         | (33,026 | )        |         |          | 87,479  |           
|Cash and cash equivalents  beginning
    of year |                                                                                     |                                                                                       | 120,784                                  |          |        |         | 153,810 |          |         |          | 66,331  |           
|                                                  |                                                                                     |                                                                                       |                                          |          |        |         |         |          |         |          |         |           
|Cash and cash equivalents  end of year           |                                                                                     | $                                                                                     | 349,812                                  |          |        | $       | 120,784 |          |         | $        | 153,810 |           
|                                                  |                                                                                     |                                                                                       |                                          |          |        |         |         |          |         |          |         |           
|Supplementary disclosures:                        |                                                                                     |                                                                                       |                                          |          |        |         |         |          |         |          |         |           
|                                                  | Interest paid during year                                                           |                                                                                       | $                                        | 1,241    |        |         | $       | 4,356    |         |          | $       | 4,818      |           
|                                                  | Income taxes paid during year                                                       |                                                                                       |                                          | 27,306   |        |         |         | 49,668   |         |          |         | 491,288    |           
|                                                  |                                                                                     |                                                                                       |                                          |          |        |         |         |          |         |          |         |           

See accompanying notes to consolidated
financial statements.

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##### Table of Contents



WESCO FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


(Dollar amounts in thousands except for
amounts per share)

Note 1. Presentation

Wesco Financial Corporation (Wesco)
is an indirect, 80.1%-owned subsidiary of Berkshire Hathaway
Inc. (Berkshire).

Wescos consolidated financial statements
include the accounts of Wesco and its subsidiaries, which, with
one minor exception, are all either directly or indirectly
wholly owned. The principal subsidiaries are Wesco-Financial
Insurance Company (Wes-FIC), The Kansas Bankers
Surety Company (KBS), CORT Business Services
Corporation (CORT) and Precision Steel Warehouse,
Inc. (Precision Steel). Intercompany balances and
transactions have been eliminated in the preparation of the
consolidated statements.

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses. The estimates and
assumptions are based on managements evaluation of the
relevant facts and circumstances using information available at
the time such estimates and assumptions are made. For example,
the process of establishing loss reserves for property and
casualty reinsurance and insurance is subject to considerable
estimation error due to the inherent uncertainty in projecting
the claim amounts that will be reported and ultimately paid over
many years. Although the amounts of such assets, liabilities,
revenues and expenses included in the consolidated financial
statements may differ significantly from those that might result
from use of estimates and assumptions based on facts and
circumstances not yet available, Wescos management does
not believe such differences would have a material adverse
effect on reported shareholders equity.

Wescos management does not believe that any
accounting pronouncements issued to date by the Financial
Accounting Standards Board and required to be adopted after
yearend 2002 will have a material effect on reported
shareholders equity. See Note 2 for explanation of an
accounting change effected in 2002.

Note 2. Acquisitions and
Goodwill

Effective February 18, 2000, Wesco acquired
all of the outstanding common stock of CORT for approximately
$386 million cash pursuant to a tender offer and merger.
The acquisition has been accounted for as a purchase, with
CORTs accounts included in the consolidated financial
statements as of the date of acquisition. CORT is the largest,
and only national, provider of rental furniture, accessories and
related services in the rent-to-rent segment of the
furniture industry. It rents high-quality furniture to corporate
and individual customers who desire flexibility in meeting their
temporary office, residential or trade show furnishing needs and
who typically do not seek to own such furniture. In addition,
CORT sells previously rented furniture through company-owned
clearance centers.

Under GAAP, companies are required to present pro
forma revenues, net income and per-share data which indicate the
significance of an acquired business to the combined entity, as
if the acquisition had been made at the beginning of the
earliest year for which an income statement is included in the
consolidated financial statements. Because the CORT purchase was
made early in 2000, pro forma data for that year did not
materially differ from the actual results of Wescos
operations for the year 2000. Accordingly, pro forma data for
that year are not presented herein; they were included in the
notes to Wescos consolidated financial statements in each
of the previous two

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##### Table of Contents



annual reports in order to facilitate comparison
with pro forma data required to be set forth for the
pre-acquisition years.


During 2000, 2001 and 2002, CORT purchased
various companies engaged in the furniture rental business.
These acquisitions have also been accounted for as purchases,
and the results of their operations have been included in
CORTs since the dates of acquisition. Pro forma
disclosures have not been provided inasmuch as the acquisitions,
taken as a whole, were immaterial.

At December 31, 2002, the unamortized
balance of goodwill carried as an asset on Wescos
consolidated balance sheet was $266,203, of which $239,167
related to CORT and the balance to KBS, acquired by Wesco in
1996.

In June 2001, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
(SFAS) No. 142, Goodwill and Other
Intangible Assets, changing from an accounting model that
required amortization of goodwill, supplemented by impairment
tests, to an accounting model based solely on impairment tests
performed at least annually. SFAS No. 142 also provided
guidance on accounting for identifiable intangible assets that
may or may not require amortization. The provisions of SFAS
No. 142 became effective for Wesco at the beginning of
2002; as a result, the accompanying consolidated financial
statements do not reflect any goodwill amortization in 2002,
compared to $7,476 and $6,342, before taxes, of goodwill
amortization for 2001 and 2000, which had been provided on a
straight-line basis, principally over 40 years. Had Wesco
adopted the provisions of SFAS No. 142 and ceased goodwill
amortization as of the beginning of 2000, its after-tax income
would have been $59,350 ($8.34 per share) for 2001 and $928,337
($130.38 per share) for 2000, representing increases in
after-tax earnings of $6,814 ($.96 per share) for 2001 and
$5,867 ($.82 per share) for 2000. Based on impairment tests
performed during 2002, no writedown of goodwill was required.

Note 3. Investments

Cash equivalents consist of funds invested in
money-market accounts and other investments maturing less than
three months from date acquired.

The appropriate classifications of investments in
securities with fixed maturities and marketable equity
securities are established at the time of purchase and
reevaluated as of each balance sheet date. There are three
permissible classifications: held-to-maturity, trading, and,
when neither of those classifications is applicable,
available-for-sale. In recent years, Wescos management has
classified all of the Wesco groups equity and
fixed-maturity investments as available-for-sale; they are
carried at fair value, with unrealized gains and losses, net of
applicable deferred income taxes, reported as a separate
component of shareholders equity.

Realized gains and losses on sales of
investments, determined on a specific-identification basis, are
included in the consolidated statement of income, as are
provisions for other-than-temporary declines in market or
estimated fair value, when applicable.

Although the investments of the Wesco group are
subject to market risks, including interest rate risks, the
group does not utilize derivatives to manage risks.

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##### Table of Contents



Following is a summary of securities with fixed
maturities:

|                                                |  |                   |         |                   |  |           |         |                |  |   |         |  |  |   |         | 
|----------------------------------------------- |  | ----------------- | ------- | ----------------- |  | --------- | ------- | -------------- |  | - | ------- |  |  | - | ------- | 
|                                                |  |                   |         |                  
|                                                |  | December 31, 2002 |         | December 31, 2001
|                                                |  |                   |         |                  
|                                                |  |                   |         | Estimated Fair    |  |           |         | Estimated Fair
|                                                |  | Amortized         |         | (Carrying)        |  | Amortized |         | (Carrying)    
|                                                |  | Cost              |         | Value             |  | Cost      |         | Value         
|                                                |  |                   |         |                   |  |           |         |               
|Mortgage-backed securities                      |  | $                 | 463,176 |                   |  | $         | 484,760 |                |  | $ | 886,186 |  |  | $ | 899,066 | 
|Other, principally U. S. government obligations |  |                   | 308,364 |                   |  |           | 342,777 |                |  |   | 26,119  |  |  |   | 25,094  | 
|                                                |  |                   |         |                   |  |           |         |                |  |   |         |  |  |   |         | 
|                                                |  | $                 | 771,540 |                   |  | $         | 827,537 |                |  | $ | 912,305 |  |  | $ | 924,160 | 
|                                                |  |                   |         |                   |  |           |         |                |  |   |         |  |  |   |         | 

At 2002 yearend, the estimated fair values
of securities with fixed maturities contained $55,997 of
unrealized gains and no unrealized losses, compared with $13,918
of unrealized gains and $2,063 of unrealized losses at
2001 yearend.

Fixed-maturity investments other than
mortgage-backed securities at 2002 yearend are expected to
mature as follows:

|                                   |  |           |         |          |  |   |         | 
|---------------------------------- |  | --------- | ------- | -------- |  | - | ------- | 
|                                   |  | Amortized |         | Carrying
|                                   |  | Cost      |         | Value   
|                                   |  |           |         |         
|In one year or less                |  | $         | 201     |          |  | $ | 203     | 
|After one year through five years  |  |           | 0       |          |  |   | 0       | 
|After five years through ten years |  |           | 9,485   |          |  |   | 10,143  | 
|After ten years                    |  |           | 298,678 |          |  |   | 332,431 | 
|                                   |  |           |         |          |  |   |         | 
|                                   |  | $         | 308,364 |          |  | $ | 342,777 | 
|                                   |  |           |         |          |  |   |         | 

Following is a summary of marketable equity
securities (all common stocks):

|                      |  |           |           |                   |  |                   |         |      |  |            |         |  |  |   |         |  |  |   |         | 
|--------------------- |  | --------- | --------- | ----------------- |  | ----------------- | ------- | ---- |  | ---------- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                      |  |           |           |                   |  |                  
|                      |  |           |           | December 31, 2002 |  | December 31, 2001
|                      |  |           |           |                   |  |                  
|                      |  |           |           |                   |  | Quoted            |         |      |  | Quoted    
|                      |  |           |           |                   |  | Market            |         |      |  | Market    
|                      |  | Number of |           |                   |  | (Carrying)        |         |      |  | (Carrying)
|                      |  | Shares    |           | Cost              |  | Value             |         | Cost |  | Value     
|                      |  |           |           |                   |  |                   |         |      |  |           
|The Coca-Cola Company |  |           | 7,205,600 |                   |  | $                 | 40,761  |      |  | $          | 315,893 |  |  | $ | 40,761  |  |  | $ | 339,744 | 
|The Gillette Company  |  |           | 6,400,000 |                   |  |                   | 40,000  |      |  |            | 194,304 |  |  |   | 40,000  |  |  |   | 213,760 | 
|Other                 |  |           |           |                   |  |                   | 27,020  |      |  |            | 116,571 |  |  |   | 27,020  |  |  |   | 113,758 | 
|                      |  |           |           |                   |  |                   |         |      |  |            |         |  |  |   |         |  |  |   |         | 
|                      |  |           |           |                   |  | $                 | 107,781 |      |  | $          | 626,768 |  |  | $ | 107,781 |  |  | $ | 667,262 | 
|                      |  |           |           |                   |  |                   |         |      |  |            |         |  |  |   |         |  |  |   |         | 

There were no unrealized losses with respect to
marketable equity securities at December 31, 2002 or
December 31, 2001.

Realized investment gains (losses), before income
taxes, from sales and redemptions of investments are summarized
below for each of the past three years:

|                                   |                       |      |   |      |  |      |   |   |  |   |           |           |  
|---------------------------------- | --------------------- | ---- | - | ---- |  | ---- | - | - |  | - | --------- | --------- | -
|                                   |                       | 2002 |   | 2001 |  | 2000
|                                   |                       |      |   |      |  |     
|Securities with fixed maturities  |                       |      |   |      |  |      |   |   |  |   |           |          
|                                   | Gross realized gains  |      | $ |     |  |      | $ |  |  |   | $         | 3,012     |  
|                                   | Gross realized losses |      |   |     |  |      |   |  |  |   |           | (8,644    | )
|Marketable equity securities      |                       |      |   |      |  |      |   |   |  |   |           |          
|                                   | Gross realized gains  |      |   |     |  |      |   |  |  |   |           | 1,318,060 |  
|                                   | Gross realized losses |      |   |     |  |      |   |  |  |   |           | (1,158    | )
|                                   |                       |      |   |      |  |      |   |   |  |   |           |          
|                                   |                       | $    |  |      |  | $    |  |   |  | $ | 1,311,270 |          
|                                   |                       |      |   |      |  |      |   |   |  |   |           |          



Dollar amounts in thousands except for amounts
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Note 4. Insurance

Insurance premiums are recognized as earned
revenues in proportion to the insurance protection provided,
which in most cases is pro rata over the term of each contract.
Unearned insurance premiums are deferred in the liability
section of the consolidated balance sheet. Certain costs of
acquiring insurance premiums  commissions, premium
taxes, and other  are deferred, and charged to income
as the premiums are earned. Deferred premium acquisition costs
are included in other assets on the accompanying consolidated
balance sheet and amounted to $6,015 and $4,005 at
December 31, 2002 and December 31, 2001.

Liabilities for unpaid losses and loss adjustment
expenses represent estimated claim and claim settlement costs.
The liabilities are based upon estimates of ultimate claim costs
associated with claim occurrences as of the balance sheet date,
and are determined from (1) individual case amounts,
(2) incurred but not reported losses, based on past
experience, and (3) reports from ceding insurers.
Considerable judgment is required to evaluate claims and
estimate claim liabilities in connection with reinsurance
contracts because of the inherent delays in receiving loss
information from ceding companies. As further data become
available, the liabilities are reevaluated and adjusted as
appropriate.

In the third quarter of 2001, Wes-FIC recorded a
provision of $10,000 ($6,500 after income tax effect),
reflecting estimated insurance loss and expenses relating to the
September 11, 2001 terrorist activity. The amount is
subject to considerable estimation error. Wes-FICs
management believes it will take years to resolve complicated
coverage issues, which could produce a material change in the
ultimate loss amount.

One area of particular concern to the insurance
industry is its exposure to claims for environmental
contamination, including asbestos. Wes-FICs exposure to
such claims is believed to be minimal.

Provisions for losses and loss adjustment
expenses are reported in the consolidated statement of income
after deducting estimates of amounts that will be recoverable
under reinsurance contracts. Reinsurance contracts do not
relieve the ceding companies of their obligations to indemnify
policyholders with respect to the underlying insurance contracts.

Following is a summary of liabilities for unpaid
losses and loss adjustment expenses for each of the past three
years:

|                                       |                     |                       |        |        |        |      |        |        |        |   |        |        |        | 
|-------------------------------------- | ------------------- | --------------------- | ------ | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                       |                     | 2002                  |        | 2001   |        | 2000
|                                       |                     |                       |        |        |        |     
|Balance at beginning of year           |                     | $                     | 61,879 |        |        | $    | 39,959 |        |        | $ | 33,642 |       
|Less ceded liabilities                 |                     |                       |       |        |        |      | (50    | )      |        |   |       |       
|                                       |                     |                       |        |        |        |      |        |        |        |   |        |       
|Net balance at beginning of year       |                     |                       | 61,879 |        |        |      | 39,909 |        |        |   | 33,642 |       
|                                       |                     |                       |        |        |        |      |        |        |        |   |        |       
|Incurred losses recorded during year  |                     |                       |        |        |        |      |        |        |        |   |        |       
|                                       | For current year    |                       |        | 39,641 |        |      |        | 35,913 |        |   |        | 16,195 |       
|                                       | For all prior years |                       |        | (818   | )      |      |        | (2,336 | )      |   |        | (4,099 | )     
|                                       |                     |                       |        |        |        |      |        |        |        |   |        |       
|                                       |                     | Total incurred losses |        |        | 38,823 |      |        |        | 33,577 |   |        |        | 12,096 | 
|                                       |                     |                       |        |        |        |      |        |        |        |   |        |       
|Payments made during year             |                     |                       |        |        |        |      |        |        |        |   |        |       
|                                       | For current year    |                       |        | 12,607 |        |      |        | 3,597  |        |   |        | 2,521  |       
|                                       | For all prior years |                       |        | 15,080 |        |      |        | 8,010  |        |   |        | 3,308  |       
|                                       |                     |                       |        |        |        |      |        |        |        |   |        |       
|                                       |                     | Total payments        |        |        | 27,687 |      |        |        | 11,607 |   |        |        | 5,829  | 
|                                       |                     |                       |        |        |        |      |        |        |        |   |        |       
|Net liabilities at end of year         |                     |                       | 73,015 |        |        |      | 61,879 |        |        |   | 39,909 |       
|Plus ceded liabilities                 |                     |                       | 50     |        |        |      |       |        |        |   | 50     |       
|                                       |                     |                       |        |        |        |      |        |        |        |   |        |       
|Gross liabilities at end of year       |                     | $                     | 73,065 |        |        | $    | 61,879 |        |        | $ | 39,959 |       
|                                       |                     |                       |        |        |        |      |        |        |        |   |        |       



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Incurred losses for all prior years
represent the net amount of estimation error charged (credited)
to earnings in a year with respect to the liabilities
established as of the beginning of that year.

Payment of dividends by insurance subsidiaries is
restricted by insurance statutes and regulations. In 2003,
without prior regulatory approval, Wesco can receive dividends
from its insurance subsidiaries up to approximately $184,000.

Combined shareholders equity of
Wescos insurance subsidiaries determined pursuant to
statutory accounting rules of $1,839,145 and $1,802,392 at
December 31, 2002 and December 31, 2001 approximate
the corresponding figures determined under GAAP.

Note 5. Furniture Rental Business
Accounting

Since the acquisition of CORT in
February 2000 (see Note 2), the principal source of
Wescos consolidated sales and service revenues has been
from rental of furniture. Furniture rentals are recognized as
revenue in the month due; rentals received in advance are
deferred in the liability section of the consolidated balance
sheet. Related costs comprise the main element of cost of
products and services sold on the consolidated income statement
and include depreciation expense, repairs and maintenance and
inventory losses.

Rental furniture consists principally of
residential and office furniture which is available for rental
or, if no longer up to rental standards or excessive in
quantity, for sale. It is carried on Wescos consolidated
balance sheet at cost, less accumulated depreciation calculated
primarily on a declining-balance basis over 3 to 5 years
using estimated salvage values of 25 to 40 percent of
original cost.

Following is a breakdown of rental furniture:

|                              |  |              |         |      |  |   |         |  
|----------------------------- |  | ------------ | ------- | ---- |  | - | ------- | -
|                              |  |             
|                              |  | December 31,
|                              |  |             
|                              |  | 2002         |         | 2001
|                              |  |              |         |     
|Cost of rental furniture      |  | $            | 261,565 |      |  | $ | 262,388 |  
|Less accumulated depreciation |  |              | (74,085 | )    |  |   | (49,802 | )
|                              |  |              |         |      |  |   |         |  
|                              |  | $            | 187,480 |      |  | $ | 212,586 |  
|                              |  |              |         |      |  |   |         |  

Note 6. Notes Payable

Following is a summary of notes payable, at
yearend:

|                         |  |              |        |      |  |   |        | 
|------------------------ |  | ------------ | ------ | ---- |  | - | ------ | 
|                         |  |             
|                         |  | December 31,
|                         |  |             
|                         |  | 2002         |        | 2001
|                         |  |              |        |     
|Revolving line of credit |  | $            | 22,000 |      |  | $ | 20,300 | 
|Other                    |  |              | 10,481 |      |  |   | 13,349 | 
|                         |  |              |        |      |  |   |        | 
|                         |  | $            | 32,481 |      |  | $ | 33,649 | 
|                         |  |              |        |      |  |   |        | 

The line of credit, used in the furniture rental
business, totals $150,000 and is unsecured. The weighted average
annual rate of interest on amounts outstanding at
December 31, 2002 was 1.69% in addition to an annual
commitment fee of .14% of the total credit line. The underlying
agreement does not contain any materially restrictive covenants.
The credit line expires in August 2003; management does not
anticipate any difficulty in renewing or replacing it on
satisfactory terms.

Of the other notes payable at December 31,
2001, notes totaling $3,635 were fully repaid during 2002. The
$10,481 of principal amount remaining at December 31, 2002
represented convertible notes of a subsidiary of CORT; $9,606
principal amount of these were converted into equity of the
subsidiary in February 2003.



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Estimated fair values of the notes payable at
December 31, 2002 and December 31, 2001 totaled
approximately $32,481 and $33,756. These figures were calculated
using discounted cash flow computations based upon estimates as
to interest rates prevailing on those dates for comparable
borrowings.

Note 7. Income Taxes

Following is a breakdown of income taxes payable
at 2001 and 2000 yearends:

|                                        |                              |              |         |         |  |   |         |         | 
|--------------------------------------- | ---------------------------- | ------------ | ------- | ------- |  | - | ------- | ------- | 
|                                        |                              |             
|                                        |                              | December 31,
|                                        |                              |             
|                                        |                              | 2002         |         | 2001   
|                                        |                              |              |         |        
|Deferred tax liabilities, relating to  |                              |              |         |         |  |   |         |        
|                                        | Appreciation of investments  |              | $       | 200,414 |  |   | $       | 199,070 | 
|                                        | Other items                  |              |         | 32,511  |  |   |         | 71,880  | 
|                                        |                              |              |         |         |  |   |         |        
|                                        |                              |              | 232,925 |         |  |   | 270,950 |        
|Deferred tax assets                     |                              |              | (8,159  | )       |  |   | (44,740 | )      
|                                        |                              |              |         |         |  |   |         |        
|                                        | Net deferred tax liabilities |              |         | 224,766 |  |   |         | 226,210 | 
|Taxes currently payable (recoverable)   |                              |              | 3,136   |         |  |   | (545    | )      
|                                        |                              |              |         |         |  |   |         |        
|Income taxes payable                    |                              | $            | 227,902 |         |  | $ | 225,665 |        
|                                        |                              |              |         |         |  |   |         |        

Income taxes are accounted for using the asset
and liability method. Under this method, temporary differences
between financial statement and tax return bases of assets and
liabilities at each balance sheet date are multiplied by the tax
rates in effect at that date, with the results reported on the
balance sheet as net deferred tax liabilities or assets. The
effect of a change in tax rate on such deferred items is
required, under GAAP, to be reflected when enacted in the
consolidated statement of income even though the original charge
or credit for income taxes has been charged or credited to
shareholders equity, as in the case of unrealized
appreciation of investments. As the temporary differences
reverse in future periods, the taxes become currently payable or
recoverable.

The consolidated statement of income contains a
provision (benefit) for income taxes, as follows:

|         |                            |      |        |        |  |      |        |        |  |   |         |         | 
|-------- | -------------------------- | ---- | ------ | ------ |  | ---- | ------ | ------ |  | - | ------- | ------- | 
|         |                            | 2002 |        | 2001   |  | 2000
|         |                            |      |        |        |  |     
|Federal  |                            | $    | 29,046 |        |  | $    | 29,225 |        |  | $ | 493,859 |        
|State    |                            |      | (847   | )      |  |      | (433   | )      |  |   | 2,063   |        
|         |                            |      |        |        |  |      |        |        |  |   |         |        
|         | Provision for income taxes |      | $      | 28,199 |  |      | $      | 28,792 |  |   | $       | 495,922 | 
|         |                            |      |        |        |  |      |        |        |  |   |         |        
|Current  |                            | $    | 24,750 |        |  | $    | 28,461 |        |  | $ | 495,145 |        
|Deferred |                            |      | 3,449  |        |  |      | 331    |        |  |   | 777     |        
|         |                            |      |        |        |  |      |        |        |  |   |         |        
|         | Provision for income taxes |      | $      | 28,199 |  |      | $      | 28,792 |  |   | $       | 495,922 | 
|         |                            |      |        |        |  |      |        |        |  |   |         |        

Following is a reconciliation of the statutory
federal income tax rate with the effective income tax rate
resulting in the provision for income taxes appearing on the
consolidated statement of income:

|                                     |                                              |      |      |      |   |      |      |      |   |  |      |      |  
|------------------------------------ | -------------------------------------------- | ---- | ---- | ---- | - | ---- | ---- | ---- | - |  | ---- | ---- | -
|                                     |                                              | 2002 |      | 2001 |   | 2000
|                                     |                                              |      |      |      |   |     
|Statutory federal income tax rate    |                                              |      | 35.0 | %    |   |      | 35.0 | %    |   |  | 35.0 | %   
|Increase (decrease) resulting from  |                                              |      |      |      |   |      |      |      |   |  |      |     
|                                     | Dividends received deduction                 |      |      | (3.1 | ) |      |      | (3.3 | ) |  |      | (0.3 | )
|                                     | Goodwill amortization                        |      |      |     |   |      |      | 2.4  |   |  |      | 0.4  |  
|                                     | State income taxes, less federal tax benefit |      |      | (1.0 | ) |      |      | (0.3 | ) |  |      | 0.1  |  
|                                     | Other differences, net                       |      |      | 3.9  |   |      |      | 1.6  |   |  |      | (0.2 | )
|                                     |                                              |      |      |      |   |      |      |      |   |  |      |     
|Effective income tax provision rate  |                                              |      | 34.8 | %    |   |      | 35.4 | %    |   |  | 35.0 | %   
|                                     |                                              |      |      |      |   |      |      |      |   |  |      |     



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Wesco and its subsidiaries join with other
Berkshire entities in the filing of consolidated federal income
tax returns for the Berkshire group. The consolidated federal
tax liability is apportioned among group members pursuant to
methods that result in each member of the group paying or
receiving an amount that approximates the increase or decrease
in consolidated taxes attributable to that member.

Effective with the conversion into equity in
February 2003 of convertible notes issued by Relocation
Central Corporation (Relocation Central), a
subsidiary formed by CORT in January 2001 (see Note 6),
Relocation Central became ineligible to continue to be included
in the consolidated federal return group. Because Relocation
Centrals operations have not become profitable to date, it
received federal tax benefits in cash from Berkshire of
approximately $3 million each for 2002 and 2001. So long as
Relocation Central remains outside the consolidated return
group, it will not realize tax benefits from continued operating
losses.

Returns have been examined by and settled with
the Internal Revenue Service through 1988.

Note 8. Quarterly Financial
Information

Unaudited quarterly consolidated financial
information for 2002 and 2001 follows:

|                                   |                   |               |         |               |  |          |         |           |  |   |         |      |  |   |         |      | 
|---------------------------------- | ----------------- | ------------- | ------- | ------------- |  | -------- | ------- | --------- |  | - | ------- | ---- |  | - | ------- | ---- | 
|                                   |                   |              
|                                   |                   | Quarter Ended
|                                   |                   |              
|                                   |                   | December 31,  |         | September 30, |  | June 30, |         | March 31,
|                                   |                   | 2002          |         | 2002          |  | 2002     |         | 2002     
|                                   |                   |               |         |               |  |          |         |          
|Sales and service revenues         |                   | $             | 101,523 |               |  | $        | 111,683 |           |  | $ | 111,928 |      |  | $ | 111,965 |     
|Cost of products and services sold |                   |               | 34,142  |               |  |          | 37,556  |           |  |   | 36,917  |      |  |   | 37,062  |     
|                                   |                   |               |         |               |  |          |         |           |  |   |         |      |  |   |         |     
|                                   |                   | $             | 67,381  |               |  | $        | 74,127  |           |  | $ | 75,011  |      |  | $ | 74,903  |     
|                                   |                   |               |         |               |  |          |         |           |  |   |         |      |  |   |         |     
|Total revenues                     |                   | $             | 139,547 |               |  | $        | 148,424 |           |  | $ | 144,397 |      |  | $ | 143,309 |     
|                                   |                   |               |         |               |  |          |         |           |  |   |         |      |  |   |         |     
|Net income                         |                   | $             | 8,256   |               |  | $        | 15,145  |           |  | $ | 14,880  |      |  | $ | 14,437  |     
|                                   | Per capital share |               |         | 1.16          |  |          |         | 2.12      |  |   |         | 2.09 |  |   |         | 2.03 | 
|                                   |                   |               |         |               |  |          |         |           |  |   |         |      |  |   |         |     

|                                   |                   |              |         |               |  |          |         |           |  |   |         |      |  |   |         |      | 
|---------------------------------- | ----------------- | ------------ | ------- | ------------- |  | -------- | ------- | --------- |  | - | ------- | ---- |  | - | ------- | ---- | 
|                                   |                   | December 31, |         | September 30, |  | June 30, |         | March 31,
|                                   |                   | 2001         |         | 2001          |  | 2001     |         | 2001     
|                                   |                   |              |         |               |  |          |         |          
|Sales and service revenues         |                   | $            | 97,885  |               |  | $        | 109,009 |           |  | $ | 116,203 |      |  | $ | 120,531 |     
|Cost of products and services sold |                   |              | 32,882  |               |  |          | 35,423  |           |  |   | 36,955  |      |  |   | 39,452  |     
|                                   |                   |              |         |               |  |          |         |           |  |   |         |      |  |   |         |     
|                                   |                   | $            | 65,003  |               |  | $        | 73,586  |           |  | $ | 79,248  |      |  | $ | 81,079  |     
|                                   |                   |              |         |               |  |          |         |           |  |   |         |      |  |   |         |     
|Total revenues                     |                   | $            | 130,259 |               |  | $        | 136,909 |           |  | $ | 144,060 |      |  | $ | 149,851 |     
|                                   |                   |              |         |               |  |          |         |           |  |   |         |      |  |   |         |     
|Net income                         |                   | $            | 6,422   |               |  | $        | 11,191  |           |  | $ | 15,106  |      |  | $ | 19,817  |     
|                                   | Per capital share |              |         | .91           |  |          |         | 1.57      |  |   |         | 2.12 |  |   |         | 2.78 | 
|                                   |                   |              |         |               |  |          |         |           |  |   |         |      |  |   |         |     

No securities gains or losses were realized in
2002 or 2001.

Note 9. Business Segment Data

Consolidated financial information for each of
the past three years is presented in the table on the next page.
It is broken down as to Wescos three business segments.

The insurance segment includes the accounts of
Wes-FIC and its subsidiary, KBS. Wes-FIC is engaged in the
property and casualty insurance and reinsurance business. Its
business has included retrocessions from wholly owned insurance
subsidiaries of Berkshire and reinsurance with unaffiliated
insurance companies. KBS provides specialized insurance coverage
to more than 20% of the banks in the United States, mostly small
and medium-sized banks in the Midwest. In addition to generating
insurance premiums, Wescos insurance segment has derived
dividend and interest income from the



Dollar amounts in thousands except for amounts
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investment of float (premiums received before
payment of related claims and expenses) as well as
shareholders equity.


The furniture rental segment includes the
operating accounts of CORT, which was acquired in February 2002
(see Note 2), and its Relocation Central subsidiary, which
was formed in January 2001.

The industrial segment includes the operating
accounts of Precision Steel and its subsidiaries. The Precision
Steel group operates two service centers, which buy steel and
other metals in the form of sheets or strips, cut these to order
and sell them directly to a wide variety of industrial customers
throughout the United States. The Precision Steel group also
manufactures shim stock and other toolroom specialty items and
sells them, along with hose clamps and threaded rod, nationwide,
generally through distributors.

Wescos consolidated realized net securities
gains  most of which have resulted from sales of
investments held by its insurance subsidiaries  and
goodwill of acquired businesses and related amortization, are
shown separately as nonsegment items, consistent with the way
Wescos management evaluates the performance of its
operating segments. Other items considered unrelated to
Wescos three business segments include principally
(1) investments other than those held by Wes-FIC and KBS,
together with related dividend and interest income,
(2) commercial real estate, together with related revenues
and expenses, (3) the assets, revenues and expenses of the
parent company, and (4) related income taxes.

|                                 |                                                                                       |      |   |           |   |      |   |           |   |  |   |           |  
|-------------------------------- | ------------------------------------------------------------------------------------- | ---- | - | --------- | - | ---- | - | --------- | - |  | - | --------- | -
|                                 |                                                                                       | 2002 |   | 2001      |   | 2000
|                                 |                                                                                       |      |   |           |   |     
|Insurance segment:               |                                                                                       |      |   |           |   |      |   |           |   |  |   |          
|                                 | Premiums earned                                                                       |      | $ | 64,627    |   |      | $ | 43,031    |   |  | $ | 23,783    |  
|                                 | Dividend and interest income                                                          |      |   | 70,007    |   |      |   | 70,048    |   |  |   | 59,241    |  
|                                 | Provision for income taxes                                                            |      |   | (26,427   | ) |      |   | (21,143   | ) |  |   | (18,114   | )
|                                 | Net income                                                                            |      |   | 49,471    |   |      |   | 45,254    |   |  |   | 45,518    |  
|                                 | Depreciation and amortization other than of
    discounts and premiums of investments |      |   | 26        |   |      |   | 39        |   |  |   | 44        |  
|                                 | Capital expenditures                                                                  |      |   | 3         |   |      |   | 23        |   |  |   | 39        |  
|                                 | Assets at yearend                                                                     |      |   | 1,818,788 |   |      |   | 1,724,612 |   |  |   | 1,820,244 |  
|                                 |                                                                                       |      |   |           |   |      |   |           |   |  |   |          
|Furniture rental segment:        |                                                                                       |      |   |           |   |      |   |           |   |  |   |          
|                                 | Revenues                                                                              |      | $ | 388,583   |   |      | $ | 395,414   |   |  | $ | 361,055   |  
|                                 | Provision for income taxes                                                            |      |   | (1,201    | ) |      |   | (7,601    | ) |  |   | (18,160   | )
|                                 | Net income                                                                            |      |   | 2,442     |   |      |   | 13,076    |   |  |   | 28,988    |  
|                                 | Depreciation and amortization other than of
    discounts and premiums of investments |      |   | 47,998    |   |      |   | 53,429    |   |  |   | 48,657    |  
|                                 | Capital expenditures                                                                  |      |   | 3,497     |   |      |   | 1,605     |   |  |   | 6,967     |  
|                                 | Assets at yearend                                                                     |      |   | 277,308   |   |      |   | 286,269   |   |  |   | 325,048   |  
|                                 |                                                                                       |      |   |           |   |      |   |           |   |  |   |          
|Industrial segment:              |                                                                                       |      |   |           |   |      |   |           |   |  |   |          
|                                 | Sales, service and other revenues                                                     |      | $ | 48,567    |   |      | $ | 48,440    |   |  | $ | 65,119    |  
|                                 | Provision for income taxes                                                            |      |   | (413      | ) |      |   | (474      | ) |  |   | (907      | )
|                                 | Net income                                                                            |      |   | 250       |   |      |   | 388       |   |  |   | 1,281     |  
|                                 | Depreciation and amortization                                                         |      |   | 592       |   |      |   | 747       |   |  |   | 780       |  
|                                 | Capital expenditures                                                                  |      |   | 137       |   |      |   | 245       |   |  |   | 303       |  
|                                 | Assets at yearend                                                                     |      |   | 17,905    |   |      |   | 19,044    |   |  |   | 22,537    |  
|                                 |                                                                                       |      |   |           |   |      |   |           |   |  |   |          
|Goodwill of acquired businesses: |                                                                                       |      |   |           |   |      |   |           |   |  |   |          
|                                 | Amortization, net of income taxes                                                     |      | $ |          |   |      | $ | (6,814    | ) |  | $ | (5,867    | )
|                                 | Assets at yearend                                                                     |      |   | 266,203   |   |      |   | 264,465   |   |  |   | 260,037   |  
|                                 |                                                                                       |      |   |           |   |      |   |           |   |  |   |          
|Realized net securities gains:   |                                                                                       |      |   |           |   |      |   |           |   |  |   |          
|                                 | Before taxes (included in revenues)                                                   |      | $ |          |   |      | $ |          |   |  | $ | 1,311,270 |  
|                                 | After taxes (included in net income)                                                  |      |   |          |   |      |   |          |   |  |   | 852,383   |  
|                                 |                                                                                       |      |   |           |   |      |   |           |   |  |   |          



Dollar amounts in thousands except for amounts
per share


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##### Table of Contents



|                                                           |                               |      |           |        |   |      |           |        |   |   |           |        |  
|---------------------------------------------------------- | ----------------------------- | ---- | --------- | ------ | - | ---- | --------- | ------ | - | - | --------- | ------ | -
|                                                           |                               | 2002 |           | 2001   |   | 2000
|                                                           |                               |      |           |        |   |     
|Other items unrelated to business segments:                |                               |      |           |        |   |      |           |        |   |   |           |       
|                                                           | Dividend and interest income  |      | $         | 616    |   |      | $         | 885    |   |   | $         | 518    |  
|                                                           | Other revenues                |      |           | 3,277  |   |      |           | 3,261  |   |   |           | 2,978  |  
|                                                           | Provision for income taxes    |      |           | (158   | ) |      |           | (236   | ) |   |           | (329   | )
|                                                           | Net income                    |      |           | 555    |   |      |           | 632    |   |   |           | 167    |  
|                                                           | Depreciation and amortization |      |           | 360    |   |      |           | 360    |   |   |           | 367    |  
|                                                           | Capital expenditures          |      |           | 302    |   |      |           | 135    |   |   |           | 197    |  
|                                                           | Assets at yearend             |      |           | 26,771 |   |      |           | 25,303 |   |   |           | 33,049 |  
|                                                           |                               |      |           |        |   |      |           |        |   |   |           |       
|Consolidated revenues (total of those set forth
    above) |                               | $    | 575,677   |        |   | $    | 561,079   |        |   | $ | 1,823,964 |       
|                                                           |                               |      |           |        |   |      |           |        |   |   |           |       
|Consolidated assets (total of those set forth
    above)   |                               | $    | 2,406,975 |        |   | $    | 2,319,693 |        |   | $ | 2,460,915 |       
|                                                           |                               |      |           |        |   |      |           |        |   |   |           |       



Dollar amounts in thousands except for amounts
per share


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WESCO FINANCIAL CORPORATION

SCHEDULE I  CONDENSED
FINANCIAL


INFORMATION OF REGISTRANT


BALANCE SHEET

(Dollar amounts in thousands)


|                                      |                                                                                                                             |                   |           |           |         |   |           |           |        | 
|------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | ----------------- | --------- | --------- | ------- | - | --------- | --------- | ------ | 
|                                      |                                                                                                                             |                  
|                                      |                                                                                                                             | December 31,     
|                                      |                                                                                                                             |                  
|                                      |                                                                                                                             | 2002              |           | 2001     
|                                      |                                                                                                                             |                   |           |          
|Assets:                               |                                                                                                                             |                   |           |           |         |   |           |          
|                                      | Cash and cash equivalents                                                                                                   |                   | $         | 20        |         |   | $         | 28        |       
|                                      | Investment in subsidiaries, at cost plus equity
    in subsidiaries undistributed earnings and unrealized
    appreciation |                   |           | 2,065,376 |         |   |           | 2,009,026 |       
|                                      | Other assets                                                                                                                |                   |           | 10        |         |   |           | 10        |       
|                                      |                                                                                                                             |                   |           |           |         |   |           |          
|                                      |                                                                                                                             | $                 | 2,065,406 |           |         | $ | 2,009,064 |          
|                                      |                                                                                                                             |                   |           |           |         |   |           |          
|Liabilities and shareholders equity: |                                                                                                                             |                   |           |           |         |   |           |          
|                                      | Advances from subsidiaries                                                                                                  |                   | $         | 104,792   |         |   | $         | 92,487    |       
|                                      | Notes payable                                                                                                               |                   |           |          |         |   |           | 1,035     |       
|                                      | Income taxes payable, principally deferred                                                                                  |                   |           | 2,426     |         |   |           | 3,119     |       
|                                      | Other liabilities                                                                                                           |                   |           | 26        |         |   |           | 26        |       
|                                      |                                                                                                                             |                   |           |           |         |   |           |          
|                                      |                                                                                                                             | Total liabilities |           |           | 107,244 |   |           |           | 96,667 | 
|                                      | Shareholders equity (see consolidated
    balance sheet and statement of changes in shareholders
    equity)              |                   |           | 1,958,162 |         |   |           | 1,912,397 |       
|                                      |                                                                                                                             |                   |           |           |         |   |           |          
|                                      |                                                                                                                             | $                 | 2,065,406 |           |         | $ | 2,009,064 |          
|                                      |                                                                                                                             |                   |           |           |         |   |           |          

STATEMENT OF INCOME

(Dollar amounts in thousands)


|                                                 |                                                                            |                         |        |       |        |      |        |       |        |  |         |       |         | 
|------------------------------------------------ | -------------------------------------------------------------------------- | ----------------------- | ------ | ----- | ------ | ---- | ------ | ----- | ------ |  | ------- | ----- | ------- | 
|                                                 |                                                                            |                        
|                                                 |                                                                            | Year Ended December 31,
|                                                 |                                                                            |                        
|                                                 |                                                                            | 2002                    |        | 2001  |        | 2000
|                                                 |                                                                            |                         |        |       |        |     
|Revenues:                                        |                                                                            |                         |        |       |        |      |        |       |        |  |         |      
|                                                 | Dividend and interest income                                               |                         | $      |      |        |      | $      | 1     |        |  | $       | 1     |        
|                                                 | Other                                                                      |                         |        |      |        |      |        |      |        |  |         |      |        
|                                                 |                                                                            |                         |        |       |        |      |        |       |        |  |         |      
|                                                 |                                                                            |                         |       |       |        |      | 1      |       |        |  | 1       |      
|                                                 |                                                                            |                         |        |       |        |      |        |       |        |  |         |      
|Expenses:                                        |                                                                            |                         |        |       |        |      |        |       |        |  |         |      
|                                                 | Interest, including intercompany interest of
    $1,511, $1,899 and $2,789 |                         |        | 1,512 |        |      |        | 1,978 |        |  |         | 2,868 |        
|                                                 | General and administrative                                                 |                         |        | 531   |        |      |        | 512   |        |  |         | 483   |        
|                                                 |                                                                            |                         |        |       |        |      |        |       |        |  |         |      
|                                                 |                                                                            |                         | 2,043  |       |        |      | 2,490  |       |        |  | 3,351   |      
|                                                 |                                                                            |                         |        |       |        |      |        |       |        |  |         |      
|Loss before items shown below                    |                                                                            |                         | (2,043 | )     |        |      | (2,489 | )     |        |  | (3,350  | )    
|Income tax benefit                               |                                                                            |                         | 714    |       |        |      | 870    |       |        |  | 1,119   |      
|Equity in undistributed earnings of subsidiaries |                                                                            |                         | 54,047 |       |        |      | 54,155 |       |        |  | 924,701 |      
|                                                 |                                                                            |                         |        |       |        |      |        |       |        |  |         |      
|                                                 |                                                                            | Net income              |        | $     | 52,718 |      |        | $     | 52,536 |  |         | $     | 922,470 | 
|                                                 |                                                                            |                         |        |       |        |      |        |       |        |  |         |      

See notes to accompanying consolidated
financial statements

51



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##### Table of Contents



WESCO FINANCIAL CORPORATION

SCHEDULE I  CONDENSED
FINANCIAL


INFORMATION OF REGISTRANT
(CONTINUED)


STATEMENT OF CASH FLOWS

(Dollar amounts in thousands)


|                                                  |                                                                                     |                                                           |                                          |        |         |        |    |        |         |      |    |         |          |        |  
|------------------------------------------------- | ----------------------------------------------------------------------------------- | --------------------------------------------------------- | ---------------------------------------- | ------ | ------- | ------ | -- | ------ | ------- | ---- | -- | ------- | -------- | ------ | -
|                                                  |                                                                                     |                                                          
|                                                  |                                                                                     | Year Ended December 31,                                  
|                                                  |                                                                                     |                                                          
|                                                  |                                                                                     | 2002                                                      |                                          | 2001   |         | 2000  
|                                                  |                                                                                     |                                                           |                                          |        |         |       
|Cash flows from operating activities:             |                                                                                     |                                                           |                                          |        |         |        |    |        |         |      |    |        
|                                                  | Net income                                                                          |                                                           | $                                        | 52,718 |         |        | $  | 52,536 |         |      | $  | 922,470 |         
|                                                  | Adjustments to reconcile net income with cash
    flows from operating activities  |                                                           |                                          |        |         |        |    |        |         |      |    |         |         
|                                                  |                                                                                     | Increase (decrease) in income taxes payable
    currently |                                          |        | (693    | )      |    |        | 1,231   |      |    |         | (411     | )     
|                                                  |                                                                                     | Equity in undistributed earnings of subsidiaries          |                                          |        | (54,047 | )      |    |        | (54,155 | )    |    |         | (924,701 | )     
|                                                  |                                                                                     | Other, net                                                |                                          |        | 1       |        |    |        | 14      |      |    |         |         |       
|                                                  |                                                                                     |                                                           |                                          |        |         |        |    |        |         |      |    |        
|                                                  |                                                                                     |                                                           | Net cash flows from operating activities |        |         | (2,021 | )  |        |         | (374 | )  |         |          | (2,642 | )
|                                                  |                                                                                     |                                                           |                                          |        |         |        |    |        |         |      |    |        
|Cash flows from investing activities:             |                                                                                     |                                                           |                                          |        |         |        |    |        |         |      |    |        
|                                                  | Principal collections on loans, and other items                                     |                                                           |                                          |       |         |        |    |       |         |      |    | 377     |         
|                                                  |                                                                                     |                                                           |                                          |        |         |        |    |        |         |      |    |        
|                                                  |                                                                                     |                                                           | Net cash flows from investing activities |        |         |       |    |        |         |     |    |         |          | 377    |  
|                                                  |                                                                                     |                                                           |                                          |        |         |        |    |        |         |      |    |        
|Cash flows from financing activities:             |                                                                                     |                                                           |                                          |        |         |        |    |        |         |      |    |        
|                                                  | Advances from subsidiaries, net                                                     |                                                           |                                          | 12,305 |         |        |    | 9,347  |         |      |    | 10,955  |         
|                                                  | Repayment of notes payable                                                          |                                                           |                                          | (1,035 | )       |        |    |       |         |      |    |        |         
|                                                  | Payment of cash dividends                                                           |                                                           |                                          | (9,257 | )       |        |    | (8,971 | )       |      |    | (8,687  | )       
|                                                  |                                                                                     |                                                           |                                          |        |         |        |    |        |         |      |    |        
|                                                  |                                                                                     |                                                           | Net cash flows from financing activities |        |         | 2,013  |    |        |         | 376  |    |         |          | 2,268  |  
|                                                  |                                                                                     |                                                           |                                          |        |         |        |    |        |         |      |    |        
|Increase (decrease) in cash and cash equivalents  |                                                                                     |                                                           | (8                                       | )      |         |        | 2  |        |         |      | 3  |        
|Cash and cash equivalents  beginning
    of year |                                                                                     |                                                           | 28                                       |        |         |        | 26 |        |         |      | 23 |        
|                                                  |                                                                                     |                                                           |                                          |        |         |        |    |        |         |      |    |        
|Cash and cash equivalents  end of year           |                                                                                     | $                                                         | 20                                       |        |         | $      | 28 |        |         | $    | 26 |        
|                                                  |                                                                                     |                                                           |                                          |        |         |        |    |        |         |      |    |        

See notes to accompanying consolidated
financial statements

52