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LEFT HAND DITCH COMPANY <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2011 and 2010 <br />NOTE 3 - PROPERTY AND EQUIPMENT <br />Depreciation and amortization has been determined based upon estimated useful lives as <br />follows: <br />Roads, dams, reservoirs, and equipment, etc. 15 - 50 years <br />Office equipment, furniture and software 3 - 10 years <br />Depreciation expense totaled $37,737 and $38,080 for the years 2011 and 2010, <br />respectively. <br />Amortization expense totaled $15,133 and $15,133 for the years 2011 and 2010, <br />respectively. <br />NOTE 4 - OPERATING LEASE <br />On May 1, 2000, the Company entered into an agreement with the Left Hand Valley Lake <br />Association to lease the recreational rights of the Left Hand Valley Reservoir. The lease <br />consists of the surface area of the Lake and portions of adjacent land for recreational <br />purposes only. The lease was scheduled to expire on April 30, 2002, and was extended until <br />April 30, 2010. On May 1, 2010, the lease was extended again until April 30, 2015. The <br />scheduled quarterly payments are $5,500 for annual lease income of $22,000. <br />The cost of the surface water rights is not determinable. <br />NOTE 5 - RELATED PARTY TRANSACTIONS <br />The Company has an agreement with the Left Hand Water District (the District) to <br />transfer and exchange Northern Colorado Water Conservancy District (Big "T ") water and <br />Left Hand Ditch Company water, pursuant to certain restrictive terms and conditions. This <br />agreement may be terminated or amended upon written mutual agreement between the <br />parties. As of December 31, 2011 and 2010, the Left Hand Water District owns <br />approximately 17% of Left Hand Ditch Company stock. <br />The Company received $45,696 and $38,966 and disbursed $32,874 and $25,325 for the <br />years 2011 and 2010, respectively, as a result of this agreement. <br />Page 6 <br />