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Notes (continued) 

## NOTE 7. SHORT-TERM BORROWINGS 

As of December 31, 2001, the Company maintained a bank line of credit providing unsecured borrowings of up to $10,000,000 at the prime lending rate or lower rates as quoted by the bank. Approximately $7,562,000 of the line is committed to a contractor for construction of an office complex for combined Los Angeles South Bay operations. When completed, the office complex will be exchanged with the contractor for surplus Company- owned land on a tax-free basis. Cal Water maintained a bank line of credit for an additional $50,000,000 on the same terms as the Company. The line of credit agreements, which expire in April 2003 and which the Company expects to renew, do not require minimum or specific compensating balances. Washington Water has a $0.1 million bank line of credit with nothing outstanding at December 31, 2001. 

The following table represents borrowings under the bank lines of credit: 

<img src='content_image/127401.jpg'>

## NOTE 8. LONG-TERM DEBT 

As of December 31, 2001 and 2000, long-term debt outstanding was: 

<img src='content_image/127402.jpg'>

The first mortgage bonds are obligations of Cal Water. All bonds are held by institutional investors and secured by substantially all of Cal Water’s utility plant. The unsecured senior notes are also obligations of Cal Water. They are held by institutional investors and require interest-only payments until maturity. The Department of Water Resources (DWR) loans were financed under the California Safe Drinking Water Bond Act. Repayment of principal and interest on the DWR loans is through a surcharge on customer bills. Other long-term debt is primarily equipment and system acquisition financing arrangements with financial institu- tions. Aggregate maturities and sinking fund requirements for each of the succeeding five years (2002 through 2006) are $5,381,000, $5,204,000, $2,579,000 $2,579,000, and $2,605,000. 

## NOTE 9. INCOME TAXES 

Income tax expense consists of the following: 

<img src='content_image/127405.jpg'>

Income tax expense computed by applying the current federal 35% tax rate to pretax book income differs from the amount shown in the Consolidated Statement of Income. The difference is reconciled in the table below: 

<img src='content_image/127404.jpg'>

The components of deferred income tax expense were: 

<img src='content_image/127403.jpg'>

