Food, supplies and

culinary equipment for chefs,

caterers, small businesses and

household consumers

2002 Annua l Repor t600 Citadel Drive

Commerce, California 90040

(323) 869-7500

www.smartandfinal.com

7411M_CVRS 3/28/03 8:32 AM Page 1

Stockho lder Inqu i r iesS tockho lder Inqu i r iesStockholders and members of theStockholders and members of theinvestment industry should directinvestment industry should directinquiries to: inquiries to: Investor Relations Investor Relations Smart & Final Inc. Smart & Final Inc. 600 Citadel Drive600 Citadel DriveCommerce, CA 90040 Commerce, CA 90040 Telephone (323) 869-7606Telephone (323) 869-7606

Annua l Mee t ing DateAnnua l Mee t ing DateThe annual meeting of stockholdersThe annual meeting of stockholderswill be held at 10:00 a.m. localwill be held at 10:00 a.m. localtime on Thursday, May 22, 2003time on Thursday, May 22, 2003at Smart & Final’s corporateat Smart & Final’s corporateoffices in Commerce, CA.offices in Commerce, CA.

Common S tock L i s t ingCommon S tock L i s t ingSmart & Final Inc.’s commonSmart & Final Inc.’s commonstock is listed on the New Yorkstock is listed on the New YorkStock Exchange under the symbolStock Exchange under the symbol“SMF”.“SMF”.

Trans fer Agen tTrans fer Agen tThe transfer agent for Smart & Finalcommon stock is: common stock is: Mellon Investor Services LLCMellon Investor Services LLC85 Challenger Road85 Challenger RoadRidgefield Park, NJ 07660 Ridgefield Park, NJ 07660 (800) 356-2017(800) 356-2017www.melloninvestor.comwww.melloninvestor.com

Audi torsAudi torsThe auditors for Smart & Final are:Ernst & Young LLP Ernst & Young LLP Suite 1800Suite 18002049 Century Park East2049 Century Park EastLos Angeles, CA 90067Los Angeles, CA 90067

Smar t & F ina l Inc . S tore Loca t ionsSmar t & F ina l Inc . S tore Loca t ions

ARIZONAARIZONABullhead CityBullhead CityGlendaleGlendaleMesaMesaPhoenix (2)Phoenix (2)Scottsdale (2)Scottsdale (2)YumaYuma

CALIFORNIACALIFORNIAAlhambraAlhambraAnaheimAnaheimBakersfield (2)Bakersfield (2)BanningBanningBarstowBarstowBellBellBellflowerBellflowerBishopBishopBlytheBlytheBuena ParkBuena ParkBurbankBurbankCapistrano BeachCapistrano BeachCarlsbadCarlsbadCarsonCarsonCathedral CityCathedral CityChinoChinoChula VistaChula VistaCitrus HeightsCitrus HeightsCity of IndustryCity of IndustryClovisClovisCommerceCommerceCoronaCoronaCosta MesaCosta MesaCovinaCovinaDaly CityDaly CityDelanoDelanoEl CajonEl CajonEl CentroEl CentroEl MonteEl MonteEl ToroEl ToroEncinitasEncinitasEncinoEncinoEscondidoEscondidoEurekaEurekaFairfieldFairfieldFontanaFontanaFountain ValleyFountain ValleyFremontFremontFresno (3)Fresno (3)FullertonFullertonGarden GroveGarden GroveGardenaGardenaGlendale (2)Glendale (2)Granada HillsGranada HillsHanfordHanfordHawthorneHawthorneHaywardHaywardHemetHemetHighland ParkHighland ParkHuntington Beach (2)Huntington Beach (2)Huntington ParkHuntington ParkIndioIndioInglewood (2)Inglewood (2)IrvineIrvineLa HabraLa Habra

LakewoodLakewoodLancasterLancasterLemon GroveLemon GroveLong Beach (2)Long Beach (2)Los Angeles (14)Los Angeles (14)LynwoodLynwoodMira MesaMira MesaModesto (2)Modesto (2)MonroviaMonroviaMoreno ValleyMoreno ValleyMountain ViewMountain ViewMurrietaMurrietaNational City National City N. HollywoodN. HollywoodNorwalkNorwalkOakland (3) Oakland (3) OntarioOntarioOrangeOrangeOxnardOxnardPacific BeachPacific BeachPacoimaPacoimaPalmdalePalmdalePasadena (3)Pasadena (3)Pleasant HillPleasant HillPomonaPomonaPortervillePortervilleRancho Cucamonga Rancho Cucamonga ReddingReddingRedlandsRedlandsRedondo BeachRedondo BeachRedwood CityRedwood CityRiverside (2)Riverside (2)Sacramento (5)Sacramento (5)SalinasSalinasSan BernardinoSan BernardinoSan Diego (4)San Diego (4)San Francisco (4)San Francisco (4)San Jose (3)San Jose (3)San Luis ObispoSan Luis ObispoSan MarcosSan MarcosSan Mateo San Mateo San PabloSan PabloSan PedroSan PedroSanta Ana (2)Santa Ana (2)Santa BarbaraSanta BarbaraSanta ClaraSanta ClaraSanta ClaritaSanta ClaritaSanta MariaSanta MariaSanta RosaSanta RosaSeasideSeasideSimi ValleySimi ValleySouth Lake TahoeSouth Lake TahoeSouth San FranciscoSouth San FranciscoStockton (2)Stockton (2)Thousand OaksThousand OaksTorrance (2)Torrance (2)TujungaTujungaVallejoVallejoVan NuysVan NuysVenice Venice VenturaVenturaVictorvilleVictorvilleVisaliaVisaliaWest HollywoodWest Hollywood

West Los Angeles (2)West Los Angeles (2)WhittierWhittierWinnetkaWinnetkaWoodland HillsWoodland HillsYuba CityYuba City

FLORIDAFLORIDACarol CityCarol CityClearwaterClearwaterFt. LauderdaleFt. LauderdaleHollywoodHollywoodKey WestKey WestLauderdale LakesLauderdale LakesLauderhillLauderhillMiami (5)Miami (5)St. Petersburg (2)St. Petersburg (2)

IDAHOIDAHOBoiseBoise

NEVADANEVADAHendersonHendersonLas Vegas (5)Las Vegas (5)RenoReno

OREGONOREGONAlohaAlohaBendBendClackamasClackamasCoos BayCoos BayEugeneEugeneGreshamGreshamKlamath FallsKlamath FallsMedfordMedfordNewportNewportPendletonPendletonPortland (3)Portland (3)SalemSalemThe DallesThe DallesWarrentonWarrenton

WASHINGTONWASHINGTONBellevueBellevueBellinghamBellinghamBremertonBremertonEverettEverettFederal WayFederal WayKelsoKelsoKentKentLynnwoodLynnwoodOlympiaOlympiaRichlandRichlandSeattle (3)Seattle (3)SpokaneSpokaneTacomaTacomaTukwilaTukwilaUnion GapUnion GapVancouverVancouver

MEXICOMEXICOEnsenada (2)Ensenada (2)Mexicali (2)Mexicali (2)San Luis R. C.San Luis R. C.Tijuana (4)Tijuana (4)

For the f i sca l year 2002 2001 2000For the f i sca l year 2002 2001 2000

Sales $2,015,983 $1,946,723 $1,863,895

Net income $6,849 $12,029 $9,557Net income $6,849 $12,029 $9,557

Earnings per diluted share $0.23 $0.41 $0.33Earnings per diluted share $0.23 $0.41 $0.33

Number of weighted average common Number of weighted average common shares and common share equivalents shares and common share equivalents (thousands) 29,527 29,660 29,244(thousands) 29,527 29,660 29,244

Dollars in thousands except share dataDollars in thousands except share data

At year -end 2002 2001 2000At year -end 2002 2001 2000

Stockholders’ equity (thousands) $271,535 $271,581 $261,499Stockholders’ equity (thousands) $271,535 $271,581 $261,499

Number of stores* 240 232 221Number of stores* 240 232 221

Number of employees 5,940 5,800 5,640Number of employees 5,940 5,800 5,640

* Including joint-venture stores in Mexico* Including joint-venture stores in Mexico

Corpora te Pro f i l eCorpora te Pro f i l eSmart & Final sells food, foodservice products and professional-quality culinary equipmentthrough warehouse stores, wholesale stores and broadline foodservice distribution businesses.through warehouse stores, wholesale stores and broadline foodservice distribution businesses.

Our 195 Smart & Final warehouse stores carry an assortment of institutional-sized foods andOur 195 Smart & Final warehouse stores carry an assortment of institutional-sized foods andrelated supplies designed to appeal to foodservice professionals, businesses and household related supplies designed to appeal to foodservice professionals, businesses and household customers. The stores operate in California, Arizona, Nevada, Florida and northern Mexico.customers. The stores operate in California, Arizona, Nevada, Florida and northern Mexico.

Our 45 Cash & Carry wholesale stores sell exclusively to foodservice customers. The storesOur 45 Cash & Carry wholesale stores sell exclusively to foodservice customers. The storesare located in Washington, Oregon, northern California and Idaho.are located in Washington, Oregon, northern California and Idaho.

Our foodservice distribution companies are referred to as “broadline distributors” because ofOur foodservice distribution companies are referred to as “broadline distributors” because ofthe broad assortment of products they deliver directly to their customers’ places of business.the broad assortment of products they deliver directly to their customers’ places of business.They operate in Florida and northern California.They operate in Florida and northern California.

7411M_CVRS 3/28/03 10:41 AM Page 2

Smar t & F i na l 1

Dear Fellow Stockholders,

2002 was an unexpec ted ly cha l leng ing year for our company.

Continued economic weakness and concerns about world events have weighed on all segments of retailing, and

Smart & Final has not been immune to these pressures.

Our sales performance in this environment was actually quite good. Our total company sales topped $2 billion for

the first time, and our comparable store sales increased 3.4 percent – one of the strongest performances in our industry.

Our operating cash flow improved by over 60 percent from the prior year, reflecting very effective working capital

management in a turbulent period.

CH A I R M A N’S LE T T E R

00 01 02NET INCOME (millions)

$6.8$12.0$9.6

01 02

$2,016$1,947$1,864

00 01 02OPERATING CASH FLOW (millions)

$33.0 $53.1$41.9

00TOTAL SALES (millions)

7411M_EDITS 3/28/03 8:57 AM Page 1

Smar t & F i na l 3

■ Better control of our operating and administrative costs

■ Improved operating margins from our foodservice business units based on restructuring and an aggressive program to

increase sales

Our bus inesses have un ique n iches to appea l to d i s t inc t cus tomer types .

Smart & Final has come a long way since our first wholesale grocery store opened in Los Angeles in 1871. Our company

has grown through constant innovation and enhancement of our concept, a process that continues today.

The look of our Smart & Final stores has changed significantly in recent years, becoming more consumer-friendly while

maintaining the attributes that most appeal to foodservice professionals. The stores are bigger and brighter and are able to

carry an expanded assortment of products including fresh produce, fresh meat, deli, wine and equipment and supplies.

Our everyday warehouse prices continue to provide great value, and it is easy to get in and out quickly.

Our Cash & Carry stores, which target wholesale customers, are undergoing design changes that emphasize the products

that are most important to independent restaurants and small businesses. We continue to expand the space allocated to

produce, deli and dairy items. This is key to building frequency of customer visits.

7411M_EDITS 3/28/03 9:05 AM Page 3

2 Smar t & F i na l

We be l ieve there are so l id reasons for our s t rong sa les per formance in 2002.

■ An enhanced marketing effort that includes television advertising in selected markets

■ Continued growth of premium-quality, private-label products available only from Smart & Final

■ Continued investment in new stores and store remodeling efforts that drive increased sales

■ Ongoing initiatives in pricing and category management that give customers even more value relative to competitors

We were less successful in our bottom line performance. Fiscal year 2002 net income was $6.8 million, or 23¢ per diluted

share, compared to net income of $12.0 million, or 41¢ per diluted share, for fiscal year 2001. The intensely competitive

environment resulted in a small decrease in our net margin on sales. We also experienced increases in many areas of

operating and administrative costs that we were unable to pass on to our customers.

We are an t i c ipa t ing improved per formance in 2003.

While many uncertainties remain for our nation and our economy, we believe Smart & Final is positioned to perform well

this year and in the future. Several factors will be important to our improvements in 2003.

■ Continued performance from our initiatives to build store sales, including the development of new stores

■ Stabilizing industry margins and reduced deflationary pressures

Smart & Final stores are becoming

more consumer-friendly,while maintaining the attributes that most

appeal to foodservice professionals.

7411M_EDITS 3/28/03 9:04 AM Page 2

Smar t & F i na l 5

Our s tore deve lopment program i s cap i ta l iz ing on growth oppor tun i t i e s .

We opened 13 new stores in 2002, including one new store in Mexico and two relocations of existing stores to locations

with better growth potential. We also remodeled 36 existing stores and installed a new sign package throughout the

Smart & Final branded stores. In total, we now operate more than 4 million square feet of selling space in 240 stores.

As we look forward to 2003 and beyond, we are carefully evaluating our opportunities for further expansion.

I n i t ia t i ves are under way to fu r ther s t reng then the va lue o f our o f fe r ings .

Working with many of our top suppliers, cross-functional teams from our store operations groups are assessing product

categories to determine opportunities in product mix, in-stock quantities and the display layout for our stores. Other

teams are looking at innovative pricing opportunities and technology-based service enhancements that will help to further

differentiate Smart & Final from our competitors.

Our broad l ine foodser v ice bus inesses are in t rans i t ion to improved per formance.

Although the bottom line result of our two broadline foodservice businesses is not satisfactory, operating losses were

reduced by almost 14 percent in 2002. We are continuing efforts to improve performance. Our Florida foodservice business

has been the most encouraging, reaching a near breakeven performance in a very difficult geographic environment. We

currently are taking actions to further restructure our northern California business unit and reduce its operating costs.

7411M_EDITS 3/28/03 9:13 AM Page 5

4 Smar t & F i na l

Our direct-delivery foodservice operations are perhaps going through the most dramatic changes at Smart & Final, as we

continue to reduce costs and improve reliability and customer service. We recently have rebranded these businesses under

the Smart & Final name, which should allow them to benefit from the Smart & Final stores marketing effort.

We con t inue to re f ine our adver t i s ing program.

During 2002 we added television to our existing media mix of direct mail and radio advertising. The ads focused on

Smart & Final’s smaller, faster warehouse positioning and highlighted our strong value offerings. Sales trends in the three

television markets – Los Angeles, San Francisco and Miami - showed a meaningful improvement compared to trends in

non-television markets, and subsequent research has shown the ads to be memorable and effective.

We have an expanding ros te r o f un ique propr ie tar y brands .

We introduced several new signature brands in 2002, including Ambiance® hot beverages, Signature Bakeries and

Davis Lay™ produce. We also saw continued strong growth in existing lines such as First Street Deli™ meat and cheese

products, La Romanella® and Montecito® ethnic lines, TradeWinds™ spices and Snack’rs® snack products. Our proprietary

brands provide exceptional quality and value and are sold through all of our stores and distribution companies. Available

only from Smart & Final, these exceptional products help us to achieve superior economic returns and differentiate

Smart & Final from other food wholesalers and retailers.

At Cash & Carry stores, design changes

emphasize the products that are

most importantto independent restaurants and small businesses.

7411M_EDITS 3/28/03 9:08 AM Page 4

6 Smar t & F i na l

Smar t & F ina l has a s t rong n iche and so l id prospec t s for growth .

Our company has a unique niche in meeting the needs of value-oriented business and household consumers, and our sales

growth over the past few years reflects this strength. Our continuing programs to strengthen our product offerings and

efficiently connect with target customers provide excellent potential for continued growth.

I am confident that with improvements in operating performance, our share price will begin to reflect the true value of our

company and our potential.

As always, my entire team and I are grateful for the support of our fellow stockholders.

Ross E. Roeder

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

We offer an expandingselection of unique,

proprietary brands.

7411M_EDITS 3/28/03 10:50 AM Page 6

Smar t & F i na l 7

BU S I N E S S PR O F I L E S A N D STAT I S T I C S

Smar t & F ina l S tores

Our 195 Smart & Final warehouse stores appeal to foodservice professionals and a wide variety of business and house-

hold customers. The stores offer convenient locations and hours of operation. Customers can choose from 7,000 to 9,000

items including foodservice supplies, institutional-size groceries, janitorial products, party and catering goods, and packag-

ing items. The U.S. stores average 16,973 square feet in a mix of stand-alone and small shopping center locations. The

stores are primarily supplied by Smart & Final’s warehouse and distribution network.

Cash & Carr y S tores

Our 45 United Grocers Cash & Carry wholesale stores operate on a business customer focused, non-membership format.

The average 19,695 square foot store features an extensive selection of products designed to fill the complete needs of

foodservice professionals and other business customers, including institutional quantities of fresh produce and meats. The

stores are primarily supplied through an alliance with a wholesale grocery cooperative.

B r o a d l i n e F o o d s e r v i c e O p e r a t i o n s

We operate two broadline foodservice direct-delivery businesses.

Our Stockton, California – based business unit serves foodservice accounts in a wide area of northern and central

California. It is also recognized for its Craig & Hamilton premium quality fresh meat operation and extensive selection of

Davis-Lay vegetables and fruits.

Our Miami, Florida – based business unit serves restaurant, premium hotel, cruise ship, foreign export, and institutional

customers in the Florida and Caribbean island region. It offers complete menu and restaurant operation solutions including

fresh meats, poultry, and produce items.

Foodser v ice 2002 2001 2000

Sales (millions) $385.4 $403.8 $400.2

Segment income (loss) (millions pre-tax) ($12.6) ($14.6) ($8.2)

Foodservice employees 980 1,090 1,240

Stores 2002 2001 2000

Sales (millions) $1,630.6 $1,542.9 $1,463.7

Segment income $36.4 $41.3 $37.3

Stores at year-end* 240 232 221

Comparable store sales growth 3.4% 3.9% 5.5%

Total retail sq. ft. (thousands)* 4,205 4,000 3,730

Average comparable transaction size $38.22 $38.35 $38.05

Sales per selling square feet $412 $412 $410

Store employees 4,960 4,710 4,400

* Including joint-venture stores in Mexico

7411M_EDITS 3/28/03 9:19 AM Page 7

8 Smar t & F i na l

B o a r d o f D i r e c t o r s

Ross E. RoederChairman, President and Chief Executive OfficerSmart & Final Inc.

Pierre B. BouchutGeneral ManagerCasino Guichard-Perrachon, S.A.

Christian P. CouvreuxChairman and Chief Executive OfficerCasino Guichard-Perrachon, S.A.

Timm F. CrullRetired ChairmanNestlé USA, Inc.

James S. GoldManaging DirectorLazard Frères & Co. LLC

Antoine GuichardChairman of the Supervisory BoardCasino Guichard-Perrachon, S.A.

David J. McLaughlinPresident and Chief ExecutiveOfficerPentacle Press LLC

Joël-André OrnsteinChairmanEuristates, Inc.

Thomas G. PlaskettManaging DirectorFox Run Capital Associates

Etienne SnollaertsDeputy General ManagerCasino Guichard-Perrachon, S.A.

C o m p a n y a n d A f f i l i a t e s ’ O f f i c e r s

Ross E. Roeder*Chairman, President and Chief Executive Officer

Donald G. Alvarado*Senior Vice President,General Counsel, and Secretary

Anthony V. BernardiniVice President, Store Operations

James J. BurgeVice President, Strategic Planning

Dennis L. Chiavelli*Executive Vice President

Andre Delolmo*Senior Vice President,Operations

Zeke Duge*Senior Vice President and Chief Information Officer

Matthew J. HeslinVice President, Real Estate

John J. KosinskiVice President, Construction and Purchasing

Richard A. LinkVice President and Controller

Norah Morley*Senior Vice President, Marketing

Suzanne Mullins*Senior Vice President,Store Operations

Richard N. Phegley*Senior Vice President and Chief Financial Officer

Kenneth R. PhippsVice President, Distribution

W. Bruce SamplesPresident, Henry Lee Company

Robert J. Schofield*Executive Vice President,American Foodservice Distributors

Timothy M. Snee*Senior Vice President, Buying

Jeff D. Whynot*Senior Vice President,Human Resources

John M. WillisPresident, Cash & Carry Stores

*Members of executive management

committee

7411M_EDITS 3/28/03 9:20 AM Page 8