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<br />. <br />. <br />'. <br />. <br />. <br />I <br />. <br />I <br />I <br />II <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br /> <br />NOTE -1 <br /> <br />THE LAKE HENRY RESERVOIR COMPANY <br /> <br />NOTES TO FINANCIAL STATEMENTS <br /> <br />NATURE OF OPERATIONS AND ACCOUNTING POLICIES <br />Nature of Operations <br />The Company maintains and operates The Lake Henry Reservoir for the purpose of <br />storing water therein for irrigation, all for the exclusive use of the stockholders of <br />the Company_ The operations are financed by assessing the stockholders_ <br /> <br />A summary of the Company's significant accounting policies follows: <br /> <br />Use of Estimates <br />The preparation of financial statements in conformity with generally accepted <br />accounting principles requires the use of estimates based on management's <br />knowledge and experience. Due to their prospective nature, actual results could <br />differ from those estimates. <br /> <br />Assessment Revenue <br />Assessments are levied on all stockholders_ In 1999 and 1998, assessments were <br />levied on 8,967_58 shares of outstanding capital stock at the rate of $8_00 and <br />$4_20 per share_ <br /> <br />Property and Equipment <br />The reservoir, canals and ditches were donated by The National Sugar <br />Manufacturing Company in 1951, in a non-reciprocal transfer. These assets were <br />recorded at their estimated fair value at date of transfer. All subsequent additions <br />have been recorded at cost <br /> <br />Depreciation of property and equipment is computed by the straight-line method <br />over the following estimated useful lives: <br /> <br />Reservoir, Canals and Ditches <br />Reservoir Improvements <br />Machinery and Equipment <br /> <br />150 Years <br />100 Years <br />10 Years <br /> <br />Maintenance and repairs of property are charged to expense and major <br />improvements are capitalized_ Upon retirement, sale or other disposition of property <br />and equipment, the cost and accumulated depreciation are eliminated from the <br />accounts and any gain or loss is included in operations_ <br /> <br />Income Taxes <br />The Company is an organization exempt from paying income taxes under the <br />Internal Revenue Code Section 501(c)(12) as long as 85% of the Company's gross <br />income is derived from stockholders of the Company_ In 1999 and 1998 <br />Company's revenue from stockholders was 92% and 88%_ <br /> <br />Page 5 <br />