LPPD000411

• Contract/PO #: C150151
• Contractor Name: Windsor Reservoir and Canal Company
• Contract Type: Loan
• Water District: 0
• County: Larimer
• Loan Projects - Doc Type: Feasibility Study

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THE WINDSOR RESERVOIR AND CANAL COMPANY
Notes To Financial Statement
For the Year Ended December 31, 2002

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Note 1: Summary of Significant Accounting Policies

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a. Cash Accounting
The Windsor Reservoir and Canal Company, a mutual irrigation company,
recognizes all revenue and expense on the cash basis of accounting.
Consequently, revenues are recognized when received rather than when earned,
and expenses and purchases of assets are recognized when paid rather than when
the obligations are incurred. Current year assessments delinquent at year end
are not included in current year revenues; likewise, prior year delinquencies
collected in the current year are recognized as revenue in the current year.
Current year expenses unpaid at year end are not included in current year
expenses; likewise, prior year expenses paid in the current year are shown as
expenses of the current year. This method differs from generally accepted
accounting principles which requires revenues to be recognized when earned and
expenses to be recognized when the obligations are incurred.

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b. Capital Improvements
Expenditures for capital improvements are recorded at cost. Depreciation
for financial statement purposes is not computed as it is a nonmonetary
transaction.

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Note 2: Income Taxes

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The Windsor Reservoir and Canal Company is a mutual irrigation company and
is exempt from income tax under Internal Revenue Code Section 501 (c) (12) in
any year when 85% or more of it's income consists of amounts collected from
members for the sole purpose of meeting losses and expenses. The Windsor
Reservoir and Canal Company has not met the "85% of income from membersn
requirement for a number of years and is subject to normal Corporate income
taxes. As of December 31, 2002, the company has a federal net operating loss
carryforward of $444,445.33 and a Colorado net operating loss carryforward of
$501,155.00, which expire in 2019 through 2022.

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Note 3: Related Party Transactions

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The Windsor Reservoir and Canal Company owns 150 shares of the capital
stock of The Tunnel Water Company, a mutual irrigation company. During the
year ended December 31, 2002, The Windsor Reservoir and Canal Company paid
$49,320.00 in assessments to The Tunnel Water Company.

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Note 4: Concentration of Credit Risk

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As of December 31, 2002, The Windsor Reservoir and Canal Company had
deposits at the Centennial Bank which exceed Federal Deposit Insurance
Corporation insurance limits by $232,660.21.

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See accompanying accountant's report.

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