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Paris Junior CollegeExhibit 1Statement of Net AssetsAugust 31, 2008CurrentYearASSETSCurrent Assets:Cash and Cash EquivalentsRestricted Cash and Cash EquivalentsShort-Term InvestmentsAccounts Receivable, NetNotes ReceivableInventoriesOther AssetsTotal Current Assets Noncurrent Assets:Notes ReceivableCapital Assets, Net (See Note 5)Total Noncurrent 1,815,66517,591,309PriorYear 153,36641,888,82838,230,666LIABILITIESCurrent Liabilities:Accounts PayableAccrued LiabilitiesFunds Held for OthersDeferred RevenuesBonds Payable - Current PortionTotal Current ncurrent Liabilites:DepositsBonds PayableTotal Noncurrent ,148,1099,568,9439,142,143Total AssetsTotal LiabilitiesNET ASSETSInvested in Capital Assets, Net of Related DebtRestricted for Debt ServiceUnrestrictedTotal Net Assets (Schedule D) The notes to the financial statements are an integral part of this statement.1122,916,600 18,711,086

Paris Junior CollegeExhibit 2Statement of Revenues, Expenses, and Changes in Net AssetsYear Ended August 31, 2008OPERATING REVENUESTuition and Fees (Net of Discounts of 2,805,772 and 2,566,810, respectively)Federal Grants and ContractsState Grants and ContractsNon-Governmental Grants and ContractsSales and Services of Educational ActivitiesAuxiliary Enterprises (Net of Discounts)Other Operating RevenuesTotal Operating Revenues (Schedule A)CurrentYear OPERATING EXPENSESInstructionPublic ServiceAcademic SupportStudent ServicesInstitutional SupportOperation and Maintenance of PlantScholarships and FellowshipsAuxiliary EnterprisesDepreciationTotal Operating Expenses (Schedule B)Operating Income (Loss)NON-OPERATING REVENUES (EXPENSES)State AppropriationsMaintenance Ad Valorem TaxesDebt Service Ad Valorem TaxesInvestment IncomeInterest on Capital Related DebtGain on Disposal of Capital AssetsNet Non-Operating Revenues (Schedule C)Increase in Net AssetsNET ASSETSNet Assets - Beginning of YearNet Assets - End of Year 98015,554,021 6,600The notes to the financial statements are an integral part of this statement.12PriorYear 16,158,00618,711,086

Paris Junior CollegeExhibit 3Statement of Cash FlowsYear Ended August 31, 2008CASH FLOWS FROM OPERATING ACTIVITIESReceipts from Students and Other CustomersReceipts of Grants and ContractsPayments to or for EmployeesPayments to Suppliers for Goods or ServicesPayment of ScholarshipsNet Cash Provided (Used) by Operating ActivitiesCurrentYear 6)(8,966,249)CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIESReceipts from State AppropriationsReceipts from Ad Valorem TaxesNet Cash Provided (Used) by Non-Capital Financing ActivitiesPriorYear 22,657,27711,895,759CASH FLOWS FROM CAPITAL AND RELATED FINANCINGACTIVITIESNet Proceeds from Issuance of Capital DebtReceipts from Ad Valorem TaxesPurchases of Capital AssetsPrincipal Paid on Capital DebtInterest Paid on Capital DebtProceeds from Sale of Capital AssetsNet Cash Provided (Used) by Capital and Related Financing 428)1,545,584CASH FLOWS FROM INVESTING ACTIVITIESReceipts from Sales and Maturities of InvestmentsReceipts from Interest on InvestmentsPurchase of InvestmentsNet Cash Provided (Used) by Investing 447,689364,158(14,000,000)(11,188,153)Increase (Decrease) in Cash and Cash Equivalents1,242,677(6,053,177)Cash and Cash Equivalents - Beginning of Year3,026,8169,079,993Cash and Cash Equivalents - End of YearReconciliation of Operating Income (Loss) to Net Cash Provided(Used) by Operating Activities:Operating Income (Loss)Adjustments to Reconcile Operating Income (Loss) toNet Cash Provided (Used) by Operating Activities:Depreciation ExpenseChange in Assets and Liabilities:Receivables, NetInventoriesOther AssetsAccounts PayableDeferred RevenueDepositsFunds Held for OthersNet Cash Provided (Used) by Operating Activities 4,269,493 3,026,816 (9,350,925) (9,391,754) The notes to the financial statements are an integral part of this 40,754413,790(4,800)23,369(8,966,249) (8,306,367)

Paris Junior CollegeNotes to Financial StatementsAugust 31,20081. Reporting EntityParis Junior College (PJC) was established in 1924, In accordance with the laws of the State of Texas, to servethe educational needs of Paris and the surrounding communities. The College is considered to be a specialpurpose, primary government according to the definition in Governmental Accounting Standards Board (GASB)Statement No. 14, The Financial Reportina Entity. While the College receives funding from local, state, andfederal sources, and must comply with the spending, reporting, and record-keeping requirements of theseentities, it is not a component unit of any other governmental entity.2. Summary of Significant Accounting Policiesreport in GuidelinesThe significant accounting policies followed by the College in preparing these financial statements are inaccordance with the Texas Hiaher Education Coordinatina Board's Annual Financial Reportina Reauirements forTexas Public Communitv and Junior Colleaes. The College applies all applicable GASB pronouncements and allapplicable Financial Accounting Standards Board (FASB) statements and interpretations issued on or beforeNovember 30, 1989, unless they conflict with or contradict GASB pronouncements. The College has elected notto apply FASB guidance issued subsequent to November 30.1989, unless specifically adopted by the GASB.The College is reported as a special-purpose government engaged in business-type activities.Tuition DiscountinqTexas Public Education GrantsCertain tuition amounts are required to be set aside for use as scholarships by qualifying students. This setaside, called the Texas Public Education Grant (TPEG), is shown with tuition and fee revenue amounts as aseparate set-aside amount (Texas Education Code section 56.033). When the award is used by the student fortuition and fees, the amount is recorded as a tuition discount. If the amount is dispersed directly to the student,the amount is recorded as a scholarship expense.Title IV, Higher Education Act Program FundsCertain Title IV HEA Program funds are received by the College to pass through to the student. These funds areinitially received by the College and recorded as revenue. When the award is used by the student for tuition andfees, the amount is recorded as a tuition discount. If the amount is dispersed directly to the student, the amountis recorded as a scholarship expense.Other Tuition DiscountsThe eollege-awards tuition and fee scholarships from-institutional funds to students who qualify. When theseamounts are used for tuition and fees, the amount is recorded as a tuition discount. If the amount is disperseddirectly to the student, the amount is recorded as a scholarship expense.Basis of AccountingThe financial statements of the College have been prepared on the accrual basis whereby all revenues arerecorded when earned and all expenses are recorded when they have been reduced to a-legal or contractualobligation to pay.Budsetarv DataEach community college district in Texas is required by law to prepare an annual operating budget of anticipatedrevenues and expenditures for the fiscal year beginning September 1. The College's Board of Regents adoptsthe budget, which is prepared on the accrual basis of accounting. A copy of the approved budget andsubsequent amendments must be filed with the Texas Higher Education Coordinating Board, Legislative BudgetBoard, Legislative Reference Library, and Governor's Office of Budget and Planning by December 1.

Paris Junior CollegeNotes to Financial Statements (Continued)August 31,20082. Summary of Significant Accounting Policies (Continued)Cash and Cash EouivalentsThe College's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-terminvestments with original maturities of three months or less from the date of acquisition.InvestmentsIn accordance with GASB Statement No. 31, Accountina and Financial Reportino for Certain Investments andExternal Investment Pools, investments are reported at fair value. Fair values are based on published marketrates. Short-term investments have an original maturity greater than three months but less than one year at timeof purchase. Long-term investments have an original maturity of greater than one year at the time of purchase.Inventorieslnventories consist of jewelry, horology, gemology, welding, and electronics tools, books, and materials for sale tostudents. Inventories are valued at cost using the first-in first-out'method.Ca italAssetsCapital assets are recorded at cost at the date of acquisition or fair value at the date of donation. Forequipment, the College's capitalization policy includes all items with a unit cost of 5,000 or more and anestimated useful life in excess of one year. Renovations to buildings, infrastructure and land improvements thatsignificantly increase the value or extend the useful life of the structure are capitalized. The costs of normalmaintenance and repairs that do not add to the value of the asset or materially extend assets' lives are charged tooperating expense in the year in which the expense is incurred.Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally50 years for buildings, 20 years for land improvements, 15 years for library books, 10 years for furniture,machinery, vehicles, and other equipment, and 5 years for telecommunications and peripheral equipment.Collections - In accordance with guidance issued by the Texas Comptroller of Public Accounts, collections arecapitalized but not depreciated. Collections are valued at their historical cost or fair value at date of donation.The College has statues and antique pianos and organs which it capitalizes as collections. These collectionsare not depreciated due to the inexhaustible nature of these assets.Tuition and fees and housing charges of 3,759,599 and 3,552,677 and federal, state and local grants of 468,757 and 432,248 have been reported as deferred revenues at August 31,2008 and 2007, respectively.EstimatesThe preparation of the financial statements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptions that affect certain reportedamounts and disclosures. Accordingly, actual results could differ from those estimates.

Paris Junior CollegeNotes to Financial Statements (Continued)August 31,20082. Summary of Signiflcant Accounting Policies (Continued)O eratincland Non-O eratinclRevenue and Expense PolicyThe College distinguishes operating revenues and expenses from non-operating items. Operating revenues andexpenses generally result from providing services in connection with the College's principal on-going operations.The principal operating revenues are tuition and related fees. The major non-operating revenues are stateappropriations and property tax collections. Operating expenses include the cost of sales and services,administrative expenses, and depreciation on capital assets.3. Authorized InvestmentsParis Junior College is authorized to invest in obligations and instruments as defined in the Public FundsInvestment Act (Sec. 2256.001 Texas Government Code). Such investments include (1) obligations of theUnited States or its agencies, (2) direct obligations of the State of Texas or its agencies, (3) obligations ofpolitical subdivisions rated not less than A by a national investment rating firm, (4) certificates of deposit, and (5)other instruments and obligations authorized by statute. At August 31, 2008, Paris Junior College's short-terminvestments consisted of certificates of deposit. Paris Junior College had no long-term investments at August31, 2008.4. Deposits and Investments-At August 31, 2008 and 2007, the carrying amount of Paris Junior College's deposits was 13,537,186 and 20,807,683, respectively, and total bank balances equaled 15,013,916 and 22,051,906. Bank balances of 313,472 and 312,241 are covered by federal depository insurance and 15,486,828 and 20,488,328 werecovered by collateral pledged in PJC's name. No collateral was held by PJC or by its agent. Bank balancestotaling 15,486,828 and 20,488,328 were collateralized with securiiies held by the pledging financial institution'strust department or agent in PJC's name.Bank DepositsDemand DepositsTime DepositsCash and Cash EquivalentsCash on HandTotal Cash and Deposits5. Note ReceivableParis Junior College has a note receivable bearing interest at 4.5% from an entity located in Greenville, Texas,for the purchase of real estate. The note is due and payable in fifty consecutive semi-annual installmentsof 29,060. All principal and interest, if not previously paid will become due and payable on August 18, 2033.This note is secured by the property. The balance of this note as of August 31,2008, was 867,000.

Paris Junior CollegeNotes to Financial Statements (Continued)August 31,20086. Capital AssetsCapital assets activity for the year ended August 31, 2008 were as follows:BalanceSeptember I,2007AdditionsRetirementsBalanceAugust 31,2008RetirementsBalanceAugust 31,2007Not Depreciated:LandConstruction in ProgressCollectionsSubtotalBuildinas and Other Capital Assets:Buildings and lmprovementsFurniture and EquipmentVehiclesLibrary BooksSubtotalAccumulated Depreciation:Buildings and lmprovementsFurniture and EquipmentVehiclesLibrary BooksSubtotalNet Other Capital AssetsNet Capital AssetsCapital assets activity for the year ended August 31, 2007 were as follows:BalanceSeptember 1,2006Not Depreciated:LandConstruction in ProgressCollectionsSubtotalBuildinas and Other Capital Assets:Buildings and lmprovementsFurniture and EquipmentVehiclesLibrary BooksSubtotalAccumulated Depreciation:Buildings and lmprovementsFumiture and EquipmentVehiclesLibrary BooksSubtotalNet Other Capital AssetsNet Capital AssetsAdditions

Paris Junior CollegeNotes to Financial Statements (Continued)August 31, 20087. Long-Term LiabilitiesLong-term liability activity for the year ended August 31, 2008 was as follows:Revenue BondTotalBalanceSeptember 1,2007 13,500,000 13,500,000Additions --Retirements 436,000 436,000BalanceAugust 31,2008 13,064,000 13,064,000CurrentPortion 140,000 140,000BalanceAugust 31,2007 13,500,000CurrentPortion 160,000Long-term liability activity for the year ended August 31, 2007 was as follows:Revenue BondTotalBalanceSeptember 1,2006 7,645,000Additions 6,000,000Retirements 145,000PJC has two series of revenue bonds outstanding that bear interest from 4.38% to 4.5%. They are due seriallyin varying amounts aggregating from 316,000 to 876,000 through March 15, 2032. Revenues of PJC arepledged for the payment of principal and interest on these bonds. lnterest of 991,451 was paid for the yearended August 31,2008, on revenue bonds.Debt service requirements at August 31, 2008 were as follows:Year EndingAugust 31,2009Revenue BondsPrincipalInterest 316,000 584,892 Total900,892Less payment priorto year end ofSeptember I,2008requirementsGeneral information related to bonds and notes payable is summarized below:Revenue Bonds:Tuition and General Fee Revenue Bonds, Series 2006To acquire site, construct,'and equip Greenville centerIssued August 16,2006 7,500,000; all authorized bonds have been issuedSource of revenue for debt service - tuition and other fee revenuesAuaust 31.2008 7,274,000

Paris Junior CollegeNotes to Financial Statements (Continued)August 31, 20087. Long-Term Liabilities (Continued)Revenue Bonds (Continued):Tuition and General Fee Revenue Bonds, Series 2007To acquire site, construct, and equip Greenville centerIssued August 16,2007 6,000,000; all authoriied bonds have been issuedSource of revenue for debt service -tuition and other fee revenuesAuaust 31,20085,790,0008 Employees' Retirement PlansThe State of Texas has joint contributoty retirement plans for almost all its employees. One of theprimary plans in which PJC participates is administered by the Teacher Retirement System of Texas.The percentages of participant salaries currently contributed by the state and by each participant are6.58% and 6.4% respectively, of annual compensation.The Teacher Retirement System of Texas does not separately account for each of its componentgovernment agencies because it bears sole responsibility for retirement commitments beyondcontributions fixed by the Legislature.The State has also established an optional retirement program for institutions of higher education. Participation inthe optional retirement program is in lieu of participation in the Teacher Retirement System of Texas. Theoptional retirement program provides for the purchase of annuity contracts. The percentages of participantsalaries currently contributed by the State and each participant are 6.58% and 6.65%, respectively. The C

Paris Junior College purchased 172 acres in Greenville in 2006 to be used for construction of a new campus. A groundbreaking ceremony was held in May, 2007 and construction began in July, 2007. The 39,000 square foot building was completed in August, 2008 and classes offered in