2004 Research Foundation Annual Report · The Research Foundation is also responsi-ble for...

M A N A G E 4 N U R T U R E 4 G R O W

The Research Foundation Annual Report 2004

The Research Foundation serves and supports The State University of

New York and strengthens the economic impact of the University by:

4 Attracting resources to expand research and scholarship

4 Cultivating relationships and attracting philanthropic and grant

support from individuals, corporations, and foundations

4 Maximizing the impact of financial resources through sound

management of sponsored program and philanthropic revenues

4 Ensuring responsible stewardship of the University’s research

enterprise through effective administration and oversight

4 Creating partnerships with business and industry, government,

higher education, and research institutions to expand research

and encourage the start up of new companies

4 Developing, identifying, protecting, marketing and licensing

University faculty-developed intellectual property and inventions

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The Research Foundation set a new standard of excellence this past year as key corporate indicators continued theirupward climb. The corporation is admin-istering a record number of sponsored programs and sustaining significantgrowth in the areas of federal advocacyand philanthropy.

The Research Foundation is a private,nonprofit corporation created in 1951 tosupport research, education and publicservice at The State University of NewYork. Through a 1977 agreement withSUNY, the corporation was designated asthe organization responsible for manag-ing all sponsored programs and activities.The corporation’s success at this over thepast 53 years has spurred unprecedentedgrowth of the State University’s researchenterprise. Since 2001 external fundinghas increased each year by an average of14 percent. The fact that this growthoccurred at a time when competition forresearch money was becoming more andmore intense speaks volumes about thequality of the research conducted atSUNY and the management provided bythe corporation.

The Research Foundation is also responsi-ble for protecting and promoting the intellectual capital that derives fromSUNY research. Its five Technology

Transfer Offices serve as catalysts for converting faculty, staff and even students’inventions and ideas into commercialproducts. In FY 2004, 44 U.S. Patentswere issued to the Research Foundationon behalf of researchers for inventions asdiverse as chemical sensor elements,processes for developing thin films usedto make computer chips, and methods of manufacturing a new generation ofcancer drugs.

While valuing its primary mission, thecorporation has broadened its scope toinclude a full range of professional pro-grams and services needed to sustain andenhance the University’s reputation andstature. The additional financial resourcesobtained with the help of the ResearchFoundation provide SUNY with the mar-gin of excellence in research, educationand service that are the hallmarks of atruly world-class public university.

The corporation remains focused onquality and efficiency, which togetherensure that we continue to provide thehigh level of service to which our cus-tomers are accustomed. We are gratefulfor the confidence shown in us by themany principal investigators, campus-based foundations, affiliated corporationsand other customers who made use of ourservices in 2003-04.

The Research Foundation

4Robert L. King

Chair, The Board of Directors

Chancellor, The State University of New York

Message from

the Chair


managed a record

million in contract and

grant funding in 2003–04

$710.2

Project

Stony Brook University was awarded a $4.1 million grantfrom the U.S. Agency for International Development(USAID) to support reconstruction efforts in Iraq bystrengthening academic programs in archaeology andenvironmental health at four Iraqi universities. In addi-tion, six Iraqi students will come to Stony Brook to pur-sue master’s degrees in archaeology and the universitylibrary will create a digital library of materials related toMesopotamian culture.

Principal Investigator

Dr. Elizabeth C. Stone, professor of anthropology andproject director and principal investigator on the archaeology component, is shown here with (left) Dr.Robert McGrath, Chief Academic Officer, Stony BrookUniversity and (right) Randy A. Daniels, Vice Chairman,SUNY Board of Trustees. One of five Americans permittedto do archaeological research in Iraq before the gulf war,Dr. Stone is among the very few scholars who have workedboth with archaeological data and with the written recordof city state and territorial state societies in the ancientNear East. She has directed excavations at ‘Ain Dara, Syria,Mashkan-shapir, Iraq and at Ayanis in Eastern Turkey.

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Since its establishment in 1951, the Research

Foundation has efficiently and effectively

administered a diverse portfolio of projects

funded by a wide range of sponsoring agen-

cies including governments, corporations,

foundations and other organizations.

In fiscal 2003-04, the RF managed a record

$710.2 million in contract and grant funding

for more than 8,800 SUNY research projects

covering the entire gamut of academic

pursuits — from preventing, detecting and

treating diseases to discovering and preserving

cultural artifacts, creating next-generation

computer and communication tools and

developing alternative energy solutions. By

administering grants and contracts, advanc-

ing funds to get projects up and running and

providing fiscal guidance, the RF gives SUNY

researchers the resources, services and flexibil-

ity they need to pursue their research goals.

Statutory colleges at Cornell and Alfred

reported research volumes of $136.9 million

and $4.1 million, respectively, bringing the

total for the entire University system to over

$851.2 million. This represents an increase of

$76.7 million over FY 2002-03 and puts the

University on track for reaching the $1 billion

dollar annual goal set by Chancellor King.

In addition to sponsored projects, the

Research Foundation also administers agency

funds totalling almost $111 million. These

funds are used to support clinical practice

plans, campus-based foundations, faculty-

student associations and other University-

related organizations. The RF also manages

several endowment funds and investment

pools designed to help campuses generate

revenue for important programs.

Broadening its scope to include the full range

of professional programs and services needed

to sustain and enhance the University’s repu-

tation and stature, the Research Foundation

has applied the innovative and efficient man-

agement techniques that proved so successful

in the sponsored programs arena to achieve

extraordinary results in the areas of federal

advocacy and philanthropy.

To support a rapidly growing research enter-

prise and make a full spectrum of services

available to all 64 SUNY campuses, the RF

expanded and improved its service infra-

structure and strengthened its business

processes. With more than 50 years of expe-

rience, the RF has earned a national reputa-

tion for providing superior and highly cost-

effective professional services.

W E M A N A G E 4

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Project

The spintronics program at Albany NanoTech focuses ondeveloping magnetically-doped semiconductors to pro-duce novel devices and interconnects that can improvechip performance. The research program is also develop-ing nanoscale spin probes that can measure electron spintransport on the atomic scale. Semiconductor devicesthat use the spin of the electron (spintronic devices) havethe potential to achieve higher speeds with lower powerconsumption than conventional devices. The program issupported by the National Science Foundation (NSF),NYSTAR and the Microelectronics Advanced ResearchCorporation (MARCO).


Dr. Vincent LaBella is an assistant professor at theUniversity at Albany’s College of Nanoscale Science andEngineering (CNSE) and a senior scientist at AlbanyNanoTech. An expert in surface nanosciences and theemerging field of spintronics, Dr. LaBella was recentlyawarded a $400,000 National Science Foundation grantthrough its Faculty Early Career Development Program.

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The Research Foundation is unique in its

ability to bring together the resources of

organizations having different legal or man-

agement systems. By nurturing relationships

with sponsors, donors, business leaders and

government officials, the RF is helping SUNY

solidify its position as one of the top public

higher education institutions in America.

Working in concert with SUNY’s 64 cam-

puses, the RF provides various levels of serv-

ice and support to build vital public-private

partnerships and expand the flow of gifts,

grants and bequests that will help SUNY

carry out its mission.

Through strategic partnerships with business

and industry, the RF is advancing the tech-

nology economy of the 21st century.

Inventions and discoveries stemming from

SUNY research have become commercial

products that benefit the world thanks to the

efforts of the RF’s five technology transfer

offices. The RF identifies and protects uni-

versity-developed intellectual property and

helps researchers market new technology by

offering inventors valuable links to business

and industry partners.

The Research Foundation advances University

programs by joining with private industry and

campus-based organizations in creating sepa-

rate affiliated corporations. These corpora-

tions address a wide range of needs, from

managing the world-famous Brookhaven

National Laboratory, to providing incubator

space for emerging technologies, to fostering

collaboration and accelerating the growth of

research opportunities at SUNY.

The Research Foundation initiated a system-

wide commitment to federal advocacy that has

reengaged the State University with the mem-

bers of New York’s congressional delegation.

Strengthening ties with key decision makers

has greatly improved SUNY’s ability to attract

congressional appropriations and compete

aggressively for funding from all sources.

Separate from the State University, the

Research Foundation is able to form partner-

ships that cannot be accommodated through

state processes. These partnerships are

enhancing SUNY’s education, research and

public service mission and spurring economic

development across New York State.

W E N U R T U R E 4

4

RF affiliated corporations bring

university-industry-government

resources together to

address a wide range of needs

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start-up companies based on

SUNY research are creating new

jobs around the state

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The unique partnership formed by the

Research Foundation and SUNY has

fostered the development of a world-class

public university system. Today, the State

University conducts more sponsored

research, attracts more federal funding and

receives more philanthropic gifts than at any

time in its history.

During the past decade the volume of

research and other sponsored programs fund-

ed through the Research Foundation has

climbed by more than 80 percent. SUNY

faculty conduct some of the most sophisti-

cated and complex research in the world. By

extending the boundaries of knowledge they

are driving innovation that will improve our

quality of life and spur economic growth.

To date, more than 650 patents have been

issued to the Research Foundation, placing

SUNY among such top patent producing uni-

versities as Columbia, Harvard and Cornell.

The State University ranks 14th among U.S.

colleges and universities for royalties received

on inventions licensed to industry. An impor-

tant engine of economic growth, the knowl-

edge generated by SUNY’s researchers has led

to the establishment of 46 new companies

that are providing new products and services

and creating new jobs around the state.

Since the RF began coordinating SUNY

requests for federal funds three years ago,

congressional appropriations to SUNY

increased ten-fold, vaulting from $3.1 mil-

lion in fiscal 2002 to $33.2 million in fiscal

2004. This additional $59 million in federal

funding has supported more than 40 projects

at SUNY institutions, touching every region

of the state.

Fiscal 2004 marked the close of the first

SUNY system-wide fundraising campaign,

which reached its $1 billion target 18 months

ahead of schedule. Subsequently, the RF

worked with SUNY campus presidents and

development staff on an even more ambitious

fundraising effort called “The SUNY $3

Billion Challenge.” This campaign brings

together 64 campuses with one vision—to

move SUNY into the front ranks of American

public higher education. The SUNY $3

Billion Challenge, which officially began

Jan. 1, 2004, and concludes June 30, 2012,

is the largest fundraising goal ever set by a

comprehensive university system.

This unprecedented rate of growth proves

that the original concept of the Research

Foundation functioning as a private, non-

profit corporation is as timely today as it was

53 years ago.

W E G R O W 4

Project

Nanogenesys Inc. is a technology start-up that producesminiaturized devices for conducting biomedical analysis.Located in the University at Buffalo TechnologyIncubator, the company produces nanospray emitters, arevolutionary, cost-effective method for biomedical and pharmaceutical applications based on technologydeveloped in the Department of Chemistry at UB.Nanogenesys currently offers a number of different products and employs three people. Nanogenesys is GLPcompliant and is helping companies solve their massspectral needs.


Dr. Troy D. Wood, associate professor in the Departmentof Chemistry and vice president of Nanogenesys, heads aresearch program that is dedicated to the developmentand use of modern mass spectrometry techniques for the advancement of biomedicine. He was awarded U.S.Patent 6,670,607 for his Conductive Polymer CoatedNano-Electrospray Emitter. He also has a pending patent application relating to nanospray emitters thatcould be used as sensitive detectors for molecules that arebiomarkers for diseases.

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7Note: Data in this section of the annual report is presented on a cash basis. As a result, it is not consistent with corresponding informationappearing in the financial statements, which is presented on an accrual basis in conformity with generally accepted accounting principles.

C U S T O M E R S E R V I C E

C A S E S T U D Y

Binghamton University’s PIAIImplementation

T H E C H A L L E N G E

The Research Foundation’s sponsored pro-gram administration office at BinghamtonUniversity needed to provide its researchersand administrative staff with timely, accu-rate financial data in an electronic format.After the RF debuted the PrincipalInvestigator Award Interface (PIAI) inMarch 2004, Binghamton decided it need-ed to roll out this online tool to its users.

T H E S O L U T I O N

The RF’s Binghamton University staff conducted an aggressive customer relationscampaign to promote the use of PIAI, an intuitive online tool that provides summary and detailed financial informa-tion for research grants. A series of trainingsessions were scheduled, and the RF staffmade sure that login IDs and passwordswere established for participants prior totheir training session. This ensured a trulyhands-on training approach, as participantswere able to go in to the PIAI tool andaccess data pertinent to their projects during their training session. Binghamton’sRF staff worked closely with its faculty toimplement this tool and continues to offer monthly training sessions as well asindividual training.

T H E R E S U LT S

The RF set up PIAI access for over 120people at Binghamton University, andresponse to the tool and its rollout was verypositive. Binghamton’s faculty and admin-istrative staff like the user friendly PIAI andhave much more confidence in the accura-cy of their financial data. Now thatresearchers have the financial data theyneed right at their fingertips, the RF staff atBinghamton are responding to fewer infor-mation requests and have more time tofocus on their operational responsibilities,strengthen their relationships with facultyand further improve their customer service.

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S P O N S O R E D P R O G R A M S

A D M I N I S T R AT I O N

The volume of research and other spon-sored programs administered by theResearch Foundation of State University ofNew York, representing activity at 29 state-operated campuses and system administra-tion, achieved a new high in fiscal year2003-04, climbing 13 percent to $710.2million, continuing an eight-year upwardtrend. Statutory colleges at Cornell andAlfred reported research volumes of $136.9million and $4.1 million, respectively,bringing the total for the entire StateUniversity system to an all-time high ofover $851 million. This represents anincrease of $76.7 million over FY 2003-04.The most recent system total is 10 percenthigher than last fiscal year’s total.

The University at Albany, with $132.1million in sponsored funding, experi-enced a 69 percent increase in fundingover last year, primarily because of thenew College of Nanoscale Science andEngineering and the Center of Excellencein Nanoelectronics. These programs sup-port the University’s strategy to establishthe critical mass of intellectual know-howand state-of-the-art educational andresearch facilities in emerging scientific disciplines that aim to under-stand and manipulate physical, chemical,and biological systems at the molecularlevel. Stony Brook University garnerednearly $159.9 million in sponsored fund-ing, followed by University at Buffalowith more than $134.3 million.

The volume of sponsored programsadministered by the Research Foundationhas increased each year for the last eightyears. Overall growth in research funding

since 1998 is 80 percent. More than17,000 full- and part-time jobs statewideare supported by more than 8,800 SUNYresearch projects administered by theResearch Foundation, contributing to the state’s economic well-being. Thisresearch leads to new discoveries, newpatents, and new products and services,all of which drive the economy and pro-vide jobs and a better future for all thepeople of New York.

The United States government providedmore than half of the research funds for SUNY with the largest sponsors being the U.S. Department of Health and Human Services, the National ScienceFoundation, the Department of Educationand the Department of Defense. Examplesof federally funded research include:

l Dr. Claes Lundgren, professor,Department of Physiology and Biophysicsat the University at Buffalo School ofMedicine and Biomedical Sciences, wasawarded a $1.5 million grant from theNational Institutes of Health (NIH) todevelop a blood substitute.

l Dr. Scott Oliver, assistant professor,Department of Chemistry at BinghamtonUniversity, was awarded a $500,000 NSF Career Award to support hisresearch into synthetics that could soonmake it possible to safely and permanently“mop up” some of the most common anddangerous industrial pollutants.

l Thomas W. White, assistant professor,Department of Physiology and Biophysicsat Stony Brook University, received a$274,000 NIH grant to research deafness.

2004 RF Highlights

9

The Research Foundation also experienced a 37 percent increase in funding from nonfederal sources, such as business andindustry, philanthropic organizations, stateagencies, and foreign sources. For example:

l Lydia Davis, an acclaimed fiction writerand associate professor/writer-in-resi-dence in the English Department at theUniversity at Albany, received $500,000in “no strings attached” support from theJohn D. and Catherine T. MacArthurFoundation. The MacArthur FellowsProgram offers highly creative people thegift of time and the unfettered opportuni-ty to explore, create, and accomplish.

The enormous scope of SUNY’s researchenterprise was made clear on October 20,2003 when Randy Daniels, Vice Chair of the SUNY Board of Trustees and John J. O’Connor, President of theResearch Foundation, honored 58 of New York’s most innovative scholars andscientists. The honorees, who represent24 SUNY campuses, are responsible for generating nearly $70 million inresearch funding from such organizationsas the National Institutes of Health(NIH), the National Aeronautical andSpace Administration (NASA), Pfizer, the American Heart Association, theEnvironmental Protection Agency, theNational Oceanographic and AtmosphericAdministration (NOAA), the WildlifeConservation Society, the NationalScience Foundation (NSF), the U.S.Department of Energy, General Motors,and the American Chemical Society.Their research spans 21 disciplines rang-ing from biology, chemistry, geology andphysics to medicine, computer science,materials science and engineering.

S T R AT E G I C PA R T N E R S H I P S

This surge in research funding is the resultof a system-wide effort to build partner-ships to attract federal, state and privatefunds to the State University. Across thestate, the Research Foundation is forgingnew government and industry alliancesthat are furthering university-basedresearch and speeding the movement ofSUNY inventions from the lab bench tothe marketplace.

Chancellor Robert L. King hosted aPartners in Leadership dinner in Albanyon March 15, 2004 to salute individualsfrom the public and private sectors andthe University who are working togetherto support Governor Pataki’s Centers ofExcellence program and enhance eco-nomic development efforts across NewYork State. The honorees were cited fortheir support of new groundbreaking academic research, the generation ofproblem solving technologies and theadvancement of economic developmentat three of New York’s Centers ofExcellence and eight innovative researchpartnerships that are located on SUNYcampuses. The high turnout for the eventis testimony to the University’s rising visi-bility as a source of world-class researchtalent across a broad range of disciplines.

TOP Research Foundation President John J.

O’Connor (right) is shown with (left to right)

Randy Daniels, vice chair of the SUNY Board of

Trustees, and Senate Majority Leader Joseph

Bruno at the October 20 recognition dinner

honoring 58 of SUNY scholars and scientists for

their accomplishments in 21 disciplines ranging

from chemistry, medicine, and materials science

to music education, literary criticism and

political science. MIDDLE New York State

Senator Thomas W. Libous (left) and

Distinguished Professor of Systems Science and

Industrial Engineering K. (Hari) Srihari listen

to updates on Binghamton University’s burgeon-

ing research programs. BOTTOM New York

State Assembly Majority Leader Paul A. Tokasz

(left) was cited for his support of the New York

State Center for Engineering Design and

Industrial Innovation at the University at

Buffalo at the Saluting Partners in Leadership

recognition dinner held in Albany on March 15.

He is pictured with Dr. John B. Simpson, presi-

dent of the University at Buffalo, who was

recently named to the Research Foundation

Board of Directors.

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4 Affiliated Corporations

Campuses are increasingly turning to theResearch Foundation to establish affiliat-ed corporations to provide a mechanismfor achieving their economic develop-ment goals. The SUNY Board of Trustees,following a thorough examination of theroles and relationships of campus founda-tions, auxiliary service corporations andalumni associations, adopted formal poli-cies for those campus-based entities thatpreclude their involvement in economicdevelopment activities.

Since 1983, the Research Foundation hasestablished affiliated corporations to facili-tate university-industry-government part-nerships and accelerate the growth of spon-sored programs and applied researchopportunities at SUNY. These range fromreal estate holding companies and businessincubators to limited liability partnershipsand include nationally recognized organi-zations including:

l Brookhaven Science Associates LLC(BSA) which operates the world-famousBrookhaven National Laboratory under a $2 billion contract with the U.S.Department of Energy. Since assumingmanagement of the laboratory in 1998,BSA has received numerous accolades formaking lasting improvements in environ-mental, safety and health performance atthe facility.

l Calspan-UB Research Center Inc.(CUBRC) is a strategic partnership thathas brought together scientists, engineersand resources from academia and indus-try to provide business developmentopportunities in Western New York.

l Long Island High Technology Incubator(LIHTI), New York’s most successful incubator. LIHTI was ranked a top-per-forming technology incubator in a 2002report produced by the National BusinessIncubation Association.

The Research Foundation created twonew affiliated corporations in fiscal 2004.NanoTech Resources Inc. will work withthe University at Albany to help it meetits obligations in support of the Center ofExcellence in Nanoelectronics by assistingin exploring and implementing corporatepartnerships and securing external fund-ing; to partner with the College ofNanoscale Science and Engineering at theUniversity at Albany; and to link academ-ic teaching and research with technologydevelopment. The Purchase CollegeAdvancement Corporation will operatefacilities that will support the College’sacademic mission and spur economicdevelopment in the mid-Hudson region.

This is a growing segment of the RF business with additional corporations currently in development. Recognizingthe need to provide oversight and managethis rapidly expanding program, the RFappointed Retired Vice Admiral JohnCraine to the post of Senior Vice President.In addition to ensuring continuity andgrowth of existing links with agencies,organizations and major corporations, thisoffice will facilitate collaborative efforts topromote economic development in NewYork State by furthering research and intellectual property development.

S O U N D B U S I N E S S P R O C E S S E S

A strong business entity with solid corporatestanding, The Research Foundation pro-vides an innovative, effective and efficientinfrastructure that facilitates cost-effectiveand efficient administrative processes.

The Research Foundation consists of a cen-tral office that works with operating unitsat 30 campus locations across New YorkState. The campus offices, under the super-vision of RF operations managers (OMs),are responsible for the day-to-day adminis-tration of sponsored programs includingfinancial, human resources, procurement,

2004 RF Highlights

TOP Phillip Bond, Undersecretary of Commerce

for Technology (center) tours the Albany

NanoTech research site with Governor George

Pataki (left) and Alain Kalayeros, Executive

Director of the New York State Center of

Excellence in Nanoelectronics and founding dean

of the College of Nanoscale Science and

Engineering (right). BOTTOM Research

Foundation Executive Vice President Timothy P.

Murphy (right) is pictured with U.S. Rep.

Sherwood Boehlert, chairman of the House

Science Committee. Congressman Boehlert was

recognized with a “Partners in Leadership”

award for his support of The Griffiss Institute

for Information Assurance in Rome, NY and his

efforts to secure more than $2.4 million in the

fiscal year 2004 federal budget in support of

SUNY projects in his district. Congressman

Boehlert drafted the Cybersecurity Research and

Development Act and introduced the 21st

Century Nanotechnology Research and

Development Act, two pieces of legislation

that will help ensure a steady stream of

federal research and development dollars in an

area critical to the nation’s and New York’s high

tech future.

License/Option Agreements

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30

40

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00 01 02 03 404

32 33 30 33 48

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reporting and, in some cases, grants man-agement activities. The offices provide thissupport in accordance with federal, state,sponsor, Research Foundation, SUNY andcampus guidelines. During the past year,the RF appointed four new operationsmanagers: Kenneth Armstrong, SUNYDelhi; Louis Spiro, SUNY Brockport;Frederick J. Hammond Jr., DownstateMedical Center; and James J. Grillo, AlfredState College.

4 Compliance

In an increasingly complex regulatoryenvironment, the Research Foundationensures the integrity of the University’sresearch mission through strict adherenceto sponsor and government regulations.The RF keeps abreast of changes in feder-al and state regulations in the sponsoredprograms arena, informs campuses of newrequirements and facilitates related com-pliance efforts, brings in workshops andother forms of education and training,and coordinates university-wide responsesto proposed regulations.

Developed to help employees understandcompliance rules and regulations, the RF’s Sponsored Programs FundamentalsTraining series covers topics ranging frompre- and post award overviews to researchcompliance, travel and property manage-ment, and personnel and salary-relatedissues. More than 1,400 participants from30 campuses participated in one or moreof these sessions. The RF also conductedfour training sessions that focused oninternal controls.

Export control regulations increasinglyaffect much of the research administeredby the RF. University compliance has comeunder increased scrutiny due to the inter-section of cutting-edge science, technology

and engineering research with nationalsecurity, foreign policy and homeland secu-rity. A project team composed of RF andSUNY members developed a comprehen-sive Web page and other materials to helpresearchers understand the implications ofexport control regulations.

The RF has been working to implementnew Fair Labor Standards Act (FLSA) regulations issued by the Department ofLabor. To comply with these new regula-tions, the RF is re-examining exempt posi-tions; converting exempt positions that nolonger qualify as exempt, and the employ-ees in those jobs, to non-exempt positions;and ensuring the salary of exempt employ-ees is at least $455 per week. The RF isalso making every effort to minimize theimpact of these changes on employees,campuses and grant-funded projects.

The Communications Workers ofAmerica (CWA) filed a petition at SUNYESF seeking to represent various job titles,including research project assistants(RPAs), funded through the RF’s spon-sored programs. An election was held onApril 16, 2004 to allow RPAs to vote onwhether or not they want union represen-tation. The votes were impounded pend-ing a determination by the NationalLabor Relations Board (NLRB) onwhether RPAs are students or employees.On July 13, 2004, the NLRB issued adecision on Brown University vs. UnitedAuto Workers, which held that a similargroup of graduate students at BrownUniversity do not fit the definition ofemployees under the National LaborRelations Act. As a result, the NLRBreferred the RF’s case back to the regionaldirector for reconsideration consistentwith the Brown decision, an action that isstill pending.

I N T E R N A L C O N T R O L S

C A S E S T U D Y

Buffalo State College Strengthens Business Processes


As the first campus to decentralize afterimplementation of the Oracle business system, the Research Foundation staff atBuffalo State College faced a dauntingtask. Decentralization involves transferringresponsibility for performing pre- and postaward activities (billings, account estab-lishment and monitoring, award requestforms, etc.) from the RF’s central office tothe campus RF office. The last time a cam-pus decentralized was 12 years ago.


Since the pre- and post award staff at thecampus shared many of the same func-tions, these teams worked together to writeprocedures tailored to the RF’s business atBuffalo State. They started with a cleanslate and developed internal policies,forms, documents, procedures and simplework instructions to ensure a strong frame-work was in place for their businessprocesses. They also realized a separategrants management unit was needed toensure staff had easy access to necessaryinformation and the ability to collabora-tively solve problems. This unit was estab-lished with staff from existing functionswithin the office, and they only needed tohire one additional staff member.

T H E R E S U LT S

In August 2003, Buffalo State Collegereceived final approval of its status as adecentralized location. An internal decen-tralization audit, completed in February2004, demonstrated that the businessprocesses put in place by the Buffalo StateRF staff were working. The team receivedan excellent review, with only a few minorissues that have since been resolved.

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With health care insurance rates increas-ing at double-digit rates the RF, like manyemployers, is seeking to control costs of itsfringe benefit programs without sacrific-ing the value that these programs confer.A team composed of campus operationsmanagers, principal investigators and HRdirectors worked closely with the RF cen-tral office, with support from Mercer HRConsulting, to assess current offerings anddetermine what changes may be possiblein order to maintain the important bal-ance between benefits and costs. As aresult of this collaborative effort, thefringe benefit rate for regular employeesfor fiscal year 2004-05, approved by theDepartment of Health and HumanServices, was lowered from an estimated35 percent to 33 percent. The projectedrates for 2006 and 2007 and the rates forsummer employees were also lowered.

In a gesture of corporate transparency, theRF allowed the Office of the StateComptroller (OSC) to audit its discre-tionary fund expenditures. The OSCauditors spent about five months examin-ing the discretionary expenditures of theRF. At the conclusion, the auditors sharedtheir preliminary findings with the RF.None of the findings raised significantissues and the auditors indicated that theexpenditures were generally in accordancewith RF guidelines.

The 2002 Sarbanes-Oxley Act imple-mented rules affecting corporate gover-nance, financial disclosure and the prac-tice of public accounting. While theserules do not apply to nonprofit organiza-

tions, the RF devoted considerable focusover the past fiscal year on applying bestpractices from Sarbanes-Oxley, particular-ly in the areas of educating employees andimplementing strong control processes.The RF analyzed its business operationsand began an internal process to identifypotential risks and classify their priorityby use of risk assessment “heat maps” thatshow the probability of a risk occurringand the impact if it does happen.

4 Business System

The Research Foundation uses a computer-ized business system to support sponsoredprograms administration and corporatefinancial reporting. The system has grantsmanagement, finance and human resourcescomponents to help principal investigatorsmanage their projects.

In fiscal year 2004, the enhancement ofthe business system continued with theimplementation of a customized payrollencumbering module and PrincipalInvestigator Award Interface (PIAI). Thepayroll encumbering project, whichdebuted in January 2004, allows principalinvestigators (PIs) to encumber for the lifeof a person’s assignment or labor scheduleand for full and partial pay periods-pro-viding grants staff a clear financial pictureof their grant balances. The PIAI allowsusers to quickly and easily get both summary and detailed information ontheir sponsored funds. Both of these proj-ects garnered very positive feedback fromprincipal investigators at all RF locations.

2004 RF Highlights

TOP Governor George Pataki (right) and

Senate majority Leader Joseph Bruno (left) are

pictured with Vice Admiral John R. Ryan,

Interim President of the University at Albany

and President of SUNY Maritime College.

BOTTOM U.S. Senator Hillary Clinton tours

the Emergency Room at University Hospital

with SUNY Upstate officials, including SUNY

Upstate President Gregory L. Eastwood,

M.D.(right).

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$16.4 $14.7 $17.6 $13.6 $13.4

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TOP Frank Zuraf, vice president for Internal

Audit and Management Advisory Services,

leads a department that is responsible for pro-

viding an independent appraisal of

RF operations and ensuring the integrity

and accuracy of corporate records and reports.

MIDDLE New York State Senator Michael

A.L. Balboni, Chairman, Committee on

Veterans, Homeland Security and Military

Affairs, was the guest speaker at the networking

luncheon which was part of the Homeland

Security Business-to-Business Conference held on

June 2 at SUNY Maritime College. BOTTOM

U.S Representative Thomas Reynolds visits the

Cluster Computing Facility at SUNY Geneseo.

B O A R D N E W S

The Research Foundation board of directors elected four new board members (clockwise fromtop left): at-large member Dr. Randall D. Isaac, faculty representative Dr. Bahgat Sammakiaand campus administrator representatives Dr. John Simpson and Dr. Raymond Cross.

D R . R A N D A L L D . I S A A C

Dr. Randall D. Isaac is the vice president, strategic alliances, for the IBM TechnologyGroup. He has held management and executive leadership positions within IBM as direc-tor of silicon technology in IBM Research Division; senior manager of theMicroelectronics Division Semiconductor Research and Development Center, where hewas responsible for 64Mb DRAM development; founder and Director of the IBM AustinResearch Laboratory, responsible for high-performance microprocessor design; and foreight years the research division vice president of science and technology.

D R . B A H G AT G . S A M M A K I A

Bahgat Sammakia joined Binghamton University in 1998 as director of the IntegratedElectronics Engineering Center (IEEC). A research consortium in the area of ElectronicPackaging and Small Scale Systems Packaging, the IEEC is a New York State Center forAdvanced Technology (CAT). Member companies include Universal Instruments,Lockheed Martin, IBM, Analog Devices, GE Corporate Research and Development,Endicott Interconnect Technologies, Samsung and BAE. Prior to coming to SUNY, Dr.Sammakia held various management positions at IBM. He holds 14 U.S. patents, 12 IBMtechnical disclosures and has contributed to three books on natural convection heat trans-fer and electronics packaging.

D R . J O H N B . S I M P S O N

John B. Simpson, Ph.D., took office as the 14th president of the University at Buffalo onJanuary 1, 2004. He came to UB following a distinguished 30-year career in higher edu-cation. Most recently, Dr. Simpson was executive vice chancellor and provost of theUniversity of California, Santa Cruz where he oversaw the creation of new graduate pro-grams in digital arts and new media, bioinformatics, electrical engineering, and politics,and an innovative Ed.D. degree with San Jose State University. These developments wereframed by a campus-wide, long-term strategic planning process completed under his lead-ership as provost. Prior to that, he had a 23-year teaching, research, and administrativecareer at the University of Washington in Seattle, where he was dean of the College of Artsand Sciences from 1994-98.

D R . R AY M O N D W. C R O S S

Raymond Wayne Cross was named the seventh president of Morrisville State College onJanuary 27, 1998. Since his arrival, he has led the college in new and exciting directions.In partnership with IBM, Morrisville State College is a ThinkPad University and the cam-pus has expanded distance-learning courses and has begun offering courses via theInternet. President Cross has involved the campus in a variety of initiatives, including thecreation of a strategic plan for Morrisville State College and laying the groundwork for anEntrepreneurial Center for students, staff and alumni. Plans are underway for a JavaInstitute, and Equine Institute, and the expansion of the Norwich Campus. Prior to join-ing SUNY, Dr. Cross was president and CEO of Northwest Technical College, where hewas responsible for the leadership, supervision, planning, operation and performance ofthe five-campus college.

14

2004 RF Highlights

Following the successful collaboration onthese and other projects, the ResearchFoundation formed the CustomerConnection Team to strengthen the work-ing relationship between central officeand campus employees. The team aims togain understanding of business needs andunderlying risks and issues, assess whereefforts should be applied to improve busi-ness performance and mitigate risk, iden-tify opportunities for additional value-added services, and engage campus staffon an ongoing basis.

4 Sponsored Programs Advisory Council

The Research Foundation is also workingclosely with the Sponsored ProgramsAdvisory Council (SPAC) on a wide rangeof issues. Composed of principal investi-gators on the State-operated campuses,SPAC serves as an advisory body to theResearch Foundation on matters affectingsponsored programs administration in theareas of advocacy, compliance, the busi-ness system and personnel issues.

SPAC presented the principal investigatorpoint of view as the Research Foundationmade decisions about modifying itsemployee benefits package, worked onhealth insurance issues, and provided keyguidance from a user’s perspective in thedevelopment of the PIAI and other busi-ness system enhancements. SPAC is alsoworking on a quick reference complianceguide for new principal investigators andis exploring ways that faculty can workwith the Research Foundation to advanceSUNY initiatives with key governmentagencies and officials.

R E P R E S E N T I N G S U N Y I N

W A S H I N G T O N D C

The Research Foundation coordinatesSUNY’s system-wide request for federalfunds to leverage the size, strength anddiversity of the largest and most compre-hensive higher education system in theworld for the benefit of its students, NewYork citizens and businesses.

As a single entity, the RF brings the weightof the entire State University systembehind each individual campus request.This advocacy effort is aided by theWashington law firm of Akin, Gump,Strauss, Hauer & Feld, LLP, which helpsthe Research Foundation identify discre-tionary congressional budget lines thatcould potentially benefit SUNY, helps cam-puses align their requests with those fund-ing accounts and facilitates access to leader-ship in the Congress and federal agencies.

The Research Foundation also buildsstrong relationships in Washington byshowcasing the State University’s humanand economic impact. The presence ofmore than 700 SUNY alumni and 30campus presidents who joined ChancellorKing at the 2004 SUNY Day in DC federal advocacy program reinforced themessage that the State University is one of the nation’s leading universities. TheSUNY Day DC program also included a tour and briefing at the Pentagon, followed by a concerted advocacy effortthat involved system administration, cam-pus leaders and faculty researchers. Theresult: SUNY’s appropriations perform-ance within the Defense budget is main-taining a steady rate of growth.

F E D E R A L A F F A I R S

C A S E S T U D Y

NYS Strategic Center for Port andMaritime Security


SUNY Maritime College, Stony BrookUniversity, the Brookhaven NationalLaboratory and the Port Authority ofNew York and New Jersey pooled theirresources to create the first-in-the-nationfocused Center for Port and MaritimeSecurity. The partners needed to securefunding to establish a home base for thiscollaborative effort.


Working with the RF, the partners devel-oped a plan that aligned the Center’sactivities with the National Strategy forHomeland Security border and trans-portation initiatives and promoted thelocal, national and global economic bene-fits of improved security in the maritimetransportation industry. Activities includ-ed a series of advocacy visits at both thestate and federal levels and publicationsthat summarized the issue of port securityand provided government officials withat-a-glance information about the uniquefacilities, resources, expertise and talentthat each partner brings to the Center.

T H E R E S U LT S

In December 2003, New York State allo-cated $1.5 million in start up funds toestablish the NYS Strategic Center for Portand Maritime Security on the SUNYMaritime campus. These funds are beingused in conjunction with a $1.7 millioncommitment from federal sources formaterial and equipment. The Center ispursuing its mission by developing portsecurity microsensor technology, uncover-ing flaws in threat assessment protocol,disaster response and infrastructure protec-tion, and offering advanced education andtraining in port security.

15

Working in concert with campus presi-dents, the State University has reengagedthe members of New York’s congressionaldelegation. With a clearer understandingof just how important SUNY is to theirdistricts, delegation members are elevat-ing the University’s stature with key federal policy makers by arranging toursand meetings, hosting receptions andexpressing their strong support for theState University.

National decision makers, who participat-ed in SUNY Day DC activities in recordnumbers this year, have been increasinglyvisible on SUNY campuses:

l Congressman Sherwood Boehlert,Chairman of the House ScienceCommittee, gave a special presentationabout the national research agenda at thefall SUNY President’s meeting onNovember 13, 2003.

l The Center of Excellence inNanoelectronics at the University atAlbany hosted a visit by Phillip Bond,undersecretary for technology at the U.S.Department of Commerce, who notedthat the Center is well-positioned toobtain significant federal funding.

l Senator Hillary Rodham Clinton servedas moderator, along with College ofEnvironmental Science and ForestryPresident Dr. Cornelius B. Murphy Jr., at a state-wide conference to promotehomeland security technologies held in Syracuse.

4 Advocacy Success

The combination of a unified appropria-tions request and a system-wide commit-ment to federal advocacy has greatlyenhanced SUNY’s ability to gain recogni-tion and support in the national arena.Congressional appropriations to SUNYfor the fiscal year that began Oct. 1, 2003totaled more than $33.2 million, repre-senting a more than 117 percent increaseover the previous year. The congressionalfunding for SUNY in FY2004 is in sup-port of 23 different projects. Nearly half ofthis federal funding, $14.4 million, wasearmarked for two Centers of Excellencethat are located on SUNY campuses.Significant funding was also provided formedical research and development, home-land security, environmental projects andeducational initiatives.

To further this effort, the ResearchFoundation launched a Federal AffairsWeb site to enhance communication withcampuses on national issues and share best practices in such areas as advocacyand grantsmanship. In addition, the RFdeveloped an Appropriations 101 presen-tation to introduce new campus presidentsto federal affairs, earmarkable accountsand to review the SUNY system-wideappropriations process.

TOP U.S. Representative Nita Lowey (left) is

shown with Purchase College President Thomas

J. Schwarz at the SUNY Day DC Presidents

Dinner on March 30, 2004. Congresswoman

Lowey talked to the assembled presidents about

her priorities, including making college more

affordable for American families, developing

local bioterrorism response plans, and increasing

federal investments in biomedical research.

BOTTOM U.S. Representative James Walsh

accepts a Partners in Leadership award from

(left to right) SUNY Upstate Medical Center

President Gregory L.Eastwood, Chancellor

Robert L. King, and SUNY College of

Environment Science and Forestry President

Cornelius Murphy.

Direct Federal Appropriations

(in millions)

0

5

10

15

20

25

30

35

02 03 404

$10.7 $15.3 $33.2

16

2004 RF Highlights

C O M M E R C I A L I Z I N G S U N Y

I N V E N T I O N S

For 25 years the Research Foundation hasplayed a pivotal role in managing and nur-turing SUNY ideas and discoveries to astage where they have grown into com-mercially viable products, services andbusiness ventures. The RF fosters collabo-rative relationships between industry andthe SUNY academic research communi-ties that are moving ideas from the labbench to the marketplace, providing criti-cal jobs for highly skilled graduates, anddriving New York State’s economic engine.

Thanks to steadily increasing interest andparticipation by the SUNY academicresearch community, the five RFTechnology Transfer Offices closed fiscal2004 with a critical up-tick in a key tech-nology transfer indicator - 253 inventiondisclosures were submitted, representing a7.6 percent increase over the previous year.

During fiscal 2004 the TechnologyTransfer staff in the RF’s central office inAlbany and on the campuses in Albany,Binghamton, Buffalo and Stony Brookalso worked with SUNY faculty to develop their ideas and discoveries beyonda novel hypothesis or lab experiment andinto protected intellectual capital.

These activities resulted in the RF record-ing 169 patent applications in fiscal 2004.The RF also was awarded 44 patents infiscal 2004.

Equally important to managing and nur-turing intellectual property and innova-tion is the RF’s expertise and guidance inconverting SUNY technology into prod-ucts, services and business ventures.

The RF received $13.4 million in royaltieson all license and option agreements dur-ing fiscal 2004. The RF also reported sixnew business start-ups launched in fiscal2004, bringing the total number of start-ups based on SUNY technology to 46.

4 Refining the RF Tech Transfer Model

Moving into fiscal 2005, the RF will focuson invention and commercialization activity in its ongoing efforts to increasethe licensing of RF technologies. As commercialization activities improve, TheResearch Foundation of SUNY expects toincrease royalties for the inventor andrespective campus, and increase the number of SUNY innovations turned intocommercial products.

The RF also expects more university-industry collaborative relationships toemerge from the commercializationprocess, which will bolster the standing ofSUNY as a leading research system whilepromoting economic development inNew York State.

C A M P U S C A S E S T U D Y

RF Links SUNY Innovation WithBusiness To Assist Success


Success for technology transfer activitieshinges on the ability of the ResearchFoundation to pull together resources,alliances and networks of expertise withoptimal combinations of people, tech-nologies and talents that will eventuallyimprove the quality of life in the U.S. andacross the globe.


The RF facilitates interactions betweenthe business community and SUNYresearchers to forge relationships withbusinesses such as Myomatrix TherapeuticsLLC., a privately held biopharmaceuticalcompany that relies on novel technologiesto develop commercial pharmaceuticaltherapies. Introduced to a new target fortreatment of heart failure and hyperten-sion identified by researchers at SUNYDownstate Medical Center and validatedin animal models and human tissue dur-ing an initial meeting, Myomatrix workedwith RF technology transfer professionalsto obtain a world wide exclusive license to the technology. The RF also facilitatedthe appointment of Dr. M.A.Q. Siddiqui,professor and chairman of Anatomy andCell Biology at SUNY Downstate to theMyomatrix scientific advisory board.

T H E R E S U LT S

Today, thanks to the $5 million exclusivelicensing agreement negotiated by the RF,Myomatrix is collaborating with theAustralian biotech company, Cytopia, onbreakthrough treatments for heart failureand hypertension. Under the jointlyfunded work program, Myomatrix is test-ing Cytopia’s improved kinase inhibitorsin the same animal model used by theSUNY Downstate team. Success in thisanimal model could pave the way for pre-clinical development of the molecules fora number of applications such as heartfailure and pulmonary hypertension.

Invention Disclosures

0

50

100

150

200

250

300

00 01 02 03 404

186 174 209 235 253

Güven Yalcintas, Vice President for Technology

Transfer, participates in a discussion about joint

venture and licensing agreements during the

Technology Transfer Directors meeting held

November 6, 2003, at Stony Brook University.

17

SUNY Tech Transfer Overview

95 96 97 98 99 00 01 02 03 404

50

100

150

200

250

300

50

100

150

200

250

300

Invention Disclosures ● Patent Applications ●

License/Option Agreements ● U.S. Patents Awarded ●

ABOVE Buffalo State College President

Muriel A. Howard (left) and Chancellor Robert

L. King (right) with distinguished alumni

including the Honorable Ed Sontag, Assistant

Secretary of Health and Human Services for

Administration and Management (2nd from

left). More than 700 SUNY alumni from the

Washington area attended an alumni and dele-

gation reception hosted by Congressman Thomas

Reynolds as part of SUNY Day DC 2004.

BELOW Corrine A. Sukiennik, director of the

Kimberly-Clark Worldwide’s Global Technology

Transfer Program, presents State University of

New York Chancellor Robert L. King with 13

patents the consumer products company donated.

In FY04 RF Technology Transfer activitiestook a number of forms, among them:

l Partnering with industry, several patentdonations from U.S. corporations wereaccepted so SUNY faculty researchers canbuild on the existing patented research to develop new technologies for use in new products.

l Bringing SUNY inventors and researchersinto direct contact with entrepreneurs, venture capitalists, start-up specialists and other commercial partners throughevents and programs such asUNYTECH03 — Universities of UpstateNew York Venture Forum.

l Interacting with faculty and research scientists throughout the SUNY system to bring resources and options to innovation opportunities.

l Developing solid relationships with business and federal, state and local governments that will result in projectssuch as the three Centers of Excellenceand eight research partnerships at SUNY campuses that are supported by the publicand private sector.

l Forging commercial collaborationsbetween SUNY innovators and businessthat will provide the foundation for NewYork’s future and lead to greater economicand social prosperity.

Some examples of commercial collabora-tion in FY04 include:

l Patented F11 protein developed atDownstate Medical Center — ZymedLaboratories Inc. and R&D Systemslicensed a newly discovered adhesionprotein that could lead to the develop-ment of a new generation of therapeu-tic agents to treat thrombosis and atherosclerosis, and prevent heartattacks and stroke.

l Video rental software developed at SUNY Brockport — ArchSynergy Ltd.licensed the software for use in its management tool designed for small-scale video stores.

l Drug screen for neurological disorder developed at Downstate Medical Center— Zymed Laboratories Inc. licensedthis technology that some day may helpdiagnose Alzheimer’s disease.

l Electronic prescription system developedat University at Buffalo — mobileLexisInc. licensed Accuscript, a technologythat allows for unmatched handwritingrecognition on digital paper.

l Prevention or Reversal of SensorineuralHearing Loss developed at University atBuffalo — American BioHealth Grouplicensed a family of unique antioxidantcompounds that prevent and treatacute hearing loss resulting from noiseand chemical exposure.

l Stackable encryption file system developedat Stony Brook University — PacketGeneral Networks, a start-up companyin Stony Brook University’s softwareincubator, licensed software adapted totransparently encrypt and decrypt datafrom a computer file passing through astackable file system.

l Portable suction device developed atStony Brook University — Sopho Inc.licensed technology that is designed forbattlefield settings to clear the throatand wounds of blood, mucous, etc. andfor collecting suspicious powders into acontainer that has color changingreagents that can screen for biohazards.

l Hydrogen sensor developed at University atAlbany — A New York State companyhas optioned sensor technology that candetect hydrogen leaks, which is essentialto the successful implementation of anyhydrogen-based energy system.

l Protein kinase inhibitors developed atUniversity at Buffalo — KinexPharmaceuticals, a faculty start-up, has an exclusive option to license the technology for a unique method fordesigning and synthesizing anti-cancercompounds.


SUNY Oswego Increases ResearchVolume by Encouraging New Researchers


SUNY Oswego sought to increase thelevel and breadth of externally sponsoredprogram activity on campus to enhanceteaching, research and training opportuni-ties for faculty and students.


The campus and the Research Foundationencouraged interdisciplinary collabora-tions focusing on modern science andtechnology to enhance teaching andresearch. Six researchers representing theBiology and Chemistry departmentsteamed up to develop a cooperative plan ofresearch activities and equipment needs.

T H E R E S U LT S

The Research Foundation was awardedalmost $250,000 from the NationalScience Foundation to support a projectentitled, “Acquisition of ProteomicsEquipment and a MALDI-TOF MassSpectrometer for Establishment of aProteomics/Mass Spectrometry Facility”,under the direction of Anthony J.A.Ouellette, Kestutis Bendinskas, Casey C.Raymond, Martha Bruch, Webe Kadima,and J. Alden Lackey. This facility willadvance teaching, research, and training inmass spectrometry and proteomics.

18

l Microwave Processing of Dental Ceramicsl Ivan and Alexis: The Journey of Teen Parentsl Increase in Writing Ability from High School to

College Level, for Learning Disabled Studentsl Nanosphere Delivery System for the

Treatment of Spinal Cord Injuryl System for the Testing and Optimization

Protocol of Topical and Systemic Agents

Modulating Oxidation in Human Skinl An In Vitro Model of Bacteriemal Novel Inhibitor of Inflammatory Cytokine

Transcription Derived from HCMV Protein IE2l Common Simultaneous Gene Expression in

Normal Weight, Obesity and After Weight

Loss in Hypothalamus and in Subcutaneous

Fat Relevant to Metabolic Syndromel CLAAR Chemiluminescence Analysis of

Atmospheric Radicalsl An Anti-ras Peptide Blocks Myocardial

Hypertrophyl K-6 Childhood Obesity Databasel Prevention of Pneumothorax as a

Complication of Percutaneous Needle Biopsy

of the Lungl A New Method of Computed Tomography

(CT) Radiation Dosimetryl Stand-Alone Externally Powered Trigger Systeml Using Pure Surfactants and Mixtures Thereof as

Novel “Green” Solvents for Chemical Processesl Tunable Spring Gratings for Free-Space

Optical Communication Applicationsl Wide Field Coherent Scatter Imaging for

Mammography Using a Divergent Beaml Initiative to Establish the UAlbany Center for

Conformal Computingl Novel Biosensor Using Living Cells on

Silicon-Based Microarraysl Tailoring Hydrogen Sensing Materials with

Fast Response: Compositional Control of

Palladium Alloy Thin Films

l Harsh Environment Compatible All Optical

Chemical Sensorl Harsh Environment Compatible Gate Material

for GaN or SiC Chemical Sensor Devicesl Fabrication of Thin Si Diaphragm Using

Silicon-on-Insulator Waferl Multiple Convergent Image Inspection System l Method to Enhance Plant Thermotolerancel MEMS Based Self Calibrating Systems for

Chemical Sensorsl Phase Contrast Microscopy in Reflection Using

Diffractive Opticsl Novel Aptamers as Anti-Excitotoxic Drugsl Antibiotics acting through mechanosensitive

ion channelsl Computer Assisted reporting of overnight

polysomnographyl Technique and devices for UV pasteurization

of continuous flow of fluidsl Pharmaceutical Biotechnology Virtual

Laboratory Educational Softwarel GeoSurveillance softwarel Method for the Preparation of Semiconductor

Nanocrystal Cores, Core-Shell, Core-Buffer-

Shell and Multiple Layer Systems in a

Noncoordinating Solvent Utilizing in-situ

Surfactant Generationl Novel Calcium Channel Antagonistsl Automated Functional Templates (ATF)

method for assignmentl Rk-GFP Transgenic mouse with Rhodopsin

kinase promoter driven Green Fluorescent

protein with green photo receptorsl The “UB Talker”, an Augmentative

Communications Device for the Speech

Impaired, using Commercial grade Technologyl Fludarabine Adjunct Therapy in Interferon-

Beta-treated

Research Foundation Technology Transfer

FY 2004 Invention Disclosures

253 invention disclosures were

submitted including this sampling that

covers a diverse range of SUNY

ideas and discoveries.


Morrisville Alumni Board MembersBecome Energized Ambassadors


Morrisville State College named JessicaMoquin as coordinator of alumni affairs in 2002. From the outset, she recognizedshe needed to learn how to work with a 15-member Alumni Board of Directorswith a limited understanding of how toserve as campus ambassadors, and toteach them how to raise funds from significant prospects as effectively as theMorrisville College Foundation Board wasable to do.


Moquin turned to the ResearchFoundation for expert counsel, tactics,and techniques that would help herbecome more effective in setting a newagenda for the alumni board. She attendedRF-sponsored workshops where she wasable to talk to experts in the field andlearn best practices used by her counter-parts on other campuses.

T H E R E S U LT S

President Ray Cross and Vice President ofInstitutional Advancement James Hastiewere able to help Moquin transform theMorrisville State College Alumni Board into a “dedicated and energized group of passionate campus supporters.” Today,Morrisville State College development initiatives are being facilitated in collabo-ration with alumni volunteers who arenow responding to the call of philanthropyas never before.

19

2004 RF Highlights

P R O M O T I N G P H I L A N T H R O P Y

The Research Foundation helped theState University of New York set the rightbalance of advancement activity through-out its 64-campus system in fiscal 2004.

One component of this balance creates avital three-way partnership that willenhance world-class academic and culturalprograms, provide critical student support,attract and retain internationally recog-nized faculty and advance intellectualinquiry and research:

l Dependable Philanthropy — Seriousfundraising programs secure critical leadership gifts from individuals, corporations and foundations to create an extra margin of excellence at SUNY.

l Affordable Tuition and Fees — SUNYcontinues to maintain undergraduatetuition and fees at affordable levels so students can attain the quality educationthey need and deserve.

l Reasonable Tax Support — New York State officials and legislators recognize theimportance of SUNY and allocate impor-tant funding that helps the Universitymaintain the health and well-being ofthe various campus communities for thebenefit of all the state’s citizens.

Another component involves a systemapproach that complements and coordi-nates with 64 autonomous campusadvancement operations. The RF sup-ports the broader approach by providingvarious levels of support and encourage-ment that strengthen campus develop-ment and alumni activities.

Fiscal 2004 marked the close of the firstSUNY system-wide fundraising cam-paign, which reached the $1 billion target18 months ahead of schedule, and thelaunch of The State University of New York$3 Billion Challenge, that brings together64 campuses with one vision — to keepSUNY in the front ranks of Americanpublic higher education. The RF worked

with SUNY campus presidents and development staff throughout the SUNYsystem to develop reasonable but opti-mistic target goals toward the SUNY $3Billion Challenge.

System Administration and ResearchFoundation central office employees con-tributed to this fundraising goal withmore than $40,000 in pledges for SUNYcampuses during the second annualSUNY Spring Campaign. Giving oppor-tunities were extended for the first time tomore than half a million New York state,county and municipal employees thanksto new legislation supported by the RF.Public employees now can make a contri-bution via payroll deduction to anySUNY campus, including communitycolleges for the first time.

SUNY institutions also collaborated on RFdeveloped alumni relations activities,including “All SUNY” alumni events inTampa and Boca Raton, Fla., andWashington, D.C., which brought togethermore than 1,000 SUNY alumni fromabout half of the SUNY campuses.Attendees learned first-hand how alumnican aid the transformation of the StateUniversity. These cooperative gatheringsgave individual campuses an opportunity tobring their alumni together under a campusbanner and meet their president, all withinthe framework of a large SUNY reception.

In fiscal 2004, the RF held its secondannual joint meeting for SUNY chiefadvancement and chief alumni officerswhere more than 80 development andalumni professionals and campus presi-dents discussed fundraising dynamics,ideas and tactics, and prospective donorrelationship building. These fundraisingthemes were repeated throughout the yearin various workshops and panel presenta-tions at multiple locations throughoutNew York State. Chancellor Robert L.King also met with campus presidentsduring a special fundraising session heldby the RF.

20

2004 RF Highlights

Some campus highlights in FY 04 include:

l Paul Weigand, a professor at Triple CitiesCollege and Harpur College for 32 years,bequeathed his $1 million estate toBinghamton University. Weigand’sendowment will support both undergrad-uate and graduate students in Germanlanguage or literature. In addition totuition support, the endowment may fundstudy abroad opportunities in Germany orthe German-speaking nations.

l Ray and Wanda Osterhout made a $1million gift to establish a DistinguishedProfessorship in Entrepreneurship at theSchool of Management at BinghamtonUniversity.

l Luella Slaner, a community leader andphilanthropist, left a $1 million bequestfor Asian Studies at Purchase College tobring leading scholars to the campus and,through an expanding roster of courses,engage students and the public in discus-sions on timely topics about cultural andpolitical events in Asian countries.

l Professor emeritus Richard W. Millerbecame the Canton College Foundation’sfirst $1 million donor. The StateUniversity of New York Board of Trusteesapproved a resolution supporting Canton’saction to name their campus center theRichard W. Miller Campus Center.

l An anonymous donor gave $600,000 tomodernize and expand the North CountryCommunity College’s Allied Health programs with special emphasis on theLicensed Practical Nurse and RegisteredNurse programs. This is the largest singlegift in the College’s 38-year history.

l Students voted in favor of a referendum to voluntarily contribute to the DutchessCommunity College Foundation. The funds donated by full- and part-timestudents over five years are projected toestablish a $500,000 endowment for technology and equipment upgrades at the college.

l The Seneca Falls Savings Bank pledged$100,000 in June 2004 in support of theCayuga Community College’s“Community Partners Building for theFuture” campaign.

l Upstate Medical Center received a $1million donation, the largest individualphilanthropic gift received by the campus.

l Sullivan County Community Collegereceived a $3 million anonymous donation, the largest gift received in its39-year history.

l About 40 SUNY campuses have completedor launched a capital campaign.

For fiscal 2005, the Research Foundationplans to expand its system approach tophilanthropic and alumni services andintroduce new initiatives in support of the campuses.

Foremost will be the Research Foundation’splanned giving services, an offering ofadministrative and management services,in cooperation with TIAA-CREF that areexclusively designed to help all the cam-pus foundations significantly improve theacquisition of major and planned gifts.

Collectively, the campuses are stronger,richer, and better positioned than they areindividually. The Research Foundationcollaborates with the campuses to developstrategies, share best practices, join forcesto disseminate information to legislatorsand policy makers, establish brands thatraise the University system’s profile, mar-ket to parents and prospective students,and collaborate on alumni functions.

The collective approach sometimes func-tions best as a unit directed from the RF,sometimes as a collection of entrepreneurs,and sometimes as a combination of theseconfigurations. The RF strives to balanceits operations so all the campuses — fromthe youngest and smallest institutions tothe flagships — benefit.


RF Helps HVCC Shift PhilanthropyEfforts Into High Gear


Under the direction of Sarah M. Boggess, Vice President for InstitutionalAdvancement, Hudson Valley CommunityCollege is in the early stages of creating an effective development program that will have a positive and beneficial impact upon both the college and the communityit serves.


To advance the process, Boggess enlistedthe Research Foundation to provide ahost of “incredibly important” philan-thropy and alumni support services, fromadvice and counsel to sample documentsthat helped her office establish and imple-ment policies. Through her associationwith the RF she has “little nuggets of information” that have helped the HudsonValley Community College Foundationreach out to donors and friends.

T H E R E S U LT S

Today, Hudson Valley Community Collegehas an evolving development programthat is projecting a positive image of thecampus and SUNY. The success of this program can be measured: In fiscal 2004,Hudson Valley leapt past the $320,000raised the previous year to surpass the $1million fundraising threshold, a levelBoggess believes never would have beenachieved so quickly without assistancefrom the Research Foundation.

21

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Another year of double-digit growth confirmed that theResearch Foundation’s sound business practices drive thestrength of its balance sheet. Total assets climbed 16 percent to$489 million, while total liabilities were $385 million, leavinga net asset balance of $104 million for the fiscal year endingJune 30, 2004. Cash and investment balances grew for thethird consecutive year, and sponsored program revenueincreased 14 percent to $723 million.

M A N A G I N G G R O W T H

Over the past seven years, the RF experienced unparalleledgrowth. Sponsored research is at an all time high of $723 mil-lion, an increase of 93 percent from fiscal year 1997. During atime when many companies experienced slow economicgrowth, the RF’s total assets grew 228 percent and the cash andinvestment pool grew 176 percent. This growth is the result ofthe RF’s well-earned reputation as an able administrator offunds and its prudent investment management and portfoliodiversification.

It is important to note that this growth occurred whilethe RF was implementing a major initiative to improve keycomponents of its technology. This project included improving the RF’s business systems, performing businessprocess re-engineering and applying an integrated generalledger system. Despite completing a total overhaul of its back-end financial system, the RF accommodated thedemands of SUNY’s expanding research enterprise andresource development initiatives with very few additional staffand an unqualified audit opinion.

N U R T U R I N G A S T R O N G B U S I N E S S F R A M E W O R K

Much of the RF’s focus over the past fiscal year aimed at miti-gating corporate risk by examining key business operations,

implementing best practices taken from the 2002 Sarbanes-Oxley Act, educating employees on the importance of soundfiscal management and carefully monitoring business processes.One effort to ensure the RF’s solid corporate standing includ-ed comparing data in the payroll system against data in thevendor system to detect possible overpayments or expendituresmade to vendors in violation of sponsor or RF rules and regu-lations. The RF also addressed the issue of older delinquentaccounts receivable balances on awards with more expendi-tures than cash received. At the beginning of this effort, the RFhad delinquent accounts receivable balances on 458 awards,representing over $11 million in uncollected revenue. As aresult of the RF’s work, delinquent accounts receivable bal-ances were reduced to just over $2.5 million, representing a 77percent decrease.

G R O W I N G I N V E S T M E N T S

Changes made over the past few years to the RF’s investmentstrategy set the stage for a fundamentally strong investment pro-gram. Through close collaboration with the finance committeeof the RF’s board of directors, and with the approval of the fullboard, the RF continued to diversify its investment portfolio infiscal year 2004. This goal of consistent and periodic asset real-locations to maximize return on investment is paying off. In fis-cal year 2004, the RF’s investment portfolio was just over $274million, an increase of 18 percent over the prior fiscal year.

Under Financial Accounting Standard (FAS) 106,employers who offer retirement medical benefits calculate theliability of current and future retiree benefits each year. The RFsets money aside to pay for these benefits by placing funds ina retiree medical insurance investment pool. With health carecosts increasing at double-digit rates each year, the RFreviewed its medical benefits program during fiscal year 2004to offset the economic impact of this trend and to ensure the

Treasurer’s Review of Financial Statements

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Total Revenue,

5-Year Trend

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$463.9 $508.6 $590.4 $653.9 $744.2

22

strong fiscal health of its retiree medical insurance investmentpool. Changes made as a result of this review, supported by ourstrong investment strategy, will strengthen our asset and liabil-ity position for retiree medical benefits.

L O O K I N G T O W A R D S T H E N E X T S E A C H A N G E

The RF is poised at the cusp of its next big transformation:managing, nurturing and growing the services needed to helpthe State University of New York advance education, researchand discovery. Throughout fiscal year 2004, the RF continuedits efforts to provide comprehensive services and expertise toSUNY—leveraging technology to efficiently and effectivelymonitor business processes through Web-based tools; launch-ing investment and planned giving services to maximizeSUNY funds; and improving its customer service model tomeet the needs of consumers both within and outside the cor-poration. As the RF approaches its $1 billion milestone, itsefficient and effective operations will pave the way for recogni-tion as an able partner and a fiscally sound corporation.

I N T E G R I T Y O F F I N A N C I A L I N F O R M AT I O N

Research Foundation management is responsible for theintegrity of the financial information presented in this AnnualReport. The accompanying financial statements were preparedin conformity with generally accepted accounting principles.Data in this report is presented on an accrual basis.

B A L A N C E S H E E T A S S E T S

During fiscal year 2003-2004, the Research Foundation’s totalassets increased $67 million or 16 percent in comparison tothe prior year. The overall increase was due to the growth insponsored program activity and proper investment portfolio

and cash management processes. A comparison of the majorcomponents of the RF’s assets for the year ending June 30,2004 to the previous year-end amounts is shown below:

Assets

(in thousands) 42004 2003

Current assets:Cash and cash equivalents $ 1,298 $ 1,568Accounts receivable, net 170,738 139,329Advances to others 6,270 —Short-term investments 139,442 74,215

Total current assets 317,748 215,112

Non current assets:Long-term investments 95,382 121,068Long-term investments

designated for post-retirementbenefit obligation 39,549 37,588

Due from broker for securities sold 6,071 12,667Fixed assets, net 28,943 34,818Other 914 511

Total non-current assets 170,859 206,652

Total $488,607 $421,764

C U R R E N T A S S E T S

Cash and cash equivalents decreased by $300,000 from 2003.The Research Foundation increased its Line of Credit (LOC)borrowing program from $10 million to $30 million to supportmajor campus programs that are waiting for state funding.

Accounts receivable, net (amounts due from sponsors) bal-ances increased by $31.4 million or 23 percent. Timing differ-ences related to funding of the nanoelectronics program at theUniversity at Albany contributed to this rise. Eliminating thetiming difference brings the accounts receivable balanceincrease to just 9 percent, which is more in line with the RF’ssponsored program revenue growth of 14 percent. As a result


Accounts Receivable, by Sponsor

(in millions)

NY State Federal Private Colleges Other State Other Total & Universities & Local

2003 ● 2004 ●

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23

of the successful effort to reduce the delinquent accountsreceivable balances, management lowered its allowance foruncollectible accounts from $9 million to $8 million.

Short-Term Investments increased by approximately $65 mil-lion. The RF has two types of short-term investments: liquidand operational. A liquid money market fund of $81 millionis invested for the major nanoelectronics program at theUniversity at Albany. The associated sponsor agreement dic-tates the type of investment instrument, generally governmentsecurities. This program receives an annual advance for pro-gram costs, and the cash balance for this program increased by$35 million through June 30, 2004. In addition, to enhanceinvestment income, the RF monitors daily inflows and out-flows of cash in its main checking account. Each night, allavailable cash from the account is invested in an overnightmoney market account. Cash that will not be used for 30 daysis moved to a professionally managed investment pool, theRF’s “Operational Pool.” This pool is intended to enhance theRF’s investment income, while ensuring there is adequate liq-uidity for daily cash needs. The Operational Pool is invested20 percent in the equity market and 80 percent in fixedincome instruments. For the fixed income portion, $55 mil-lion is invested in short-term fixed income instruments asdetermined by an asset allocation study. This short-term fixedincome investment increased $30 million in fiscal year 2004 asa result of investment re-balancing, income earned andincreases in operational cash. The Operational Pool generateda return, net of fees, of 4.7 percent for the fiscal year endingJune 30, 2004.

N O N - C U R R E N T A S S E T S

Long-term investments decreased by approximately $26 mil-lion during fiscal year 2004. As noted in the short-term invest-ment narrative, the Research Foundation maintains an

Operational Pool that consists of equity and fixed incomeinvestments. This past year, to comply with board-directed assetallocation targets, the RF moved assets from long-term invest-ments to short-term fixed income investments. The equitycomponent of the Operational Pool, in which approximately$27 million was invested, consists of asset classes or strategies oflarge cap growth, large cap enhanced S&P 500 index, large capequal weighted S&P 500 index, core small cap and internation-al equities. The long-term fixed income component, in whichapproximately $68 million was invested, consists of securitiestraded in domestic markets and may include U.S. Governmentand Agency obligations, mortgage-backed securities, corporatebonds, debentures, commercial paper and Yankee bonds. Theoverall average quality of the long-term fixed income fund israted “A” or better, and its total return, net of fees, is expectedto equal or exceed the Lehman Aggregate Bond Index over arolling three- to five-year period. A portion of the fixed incomefund is also invested in high-yield fixed income securities. Asstated earlier, the Operational Pool (long- and short-terminvestments) generated a return, net of fees, of 4.7 percent.

Long-term investments designated for post-retirement bene-fit obligations increased by $2 million, or approximately 5percent, due to market performance. This investment repre-sents assets that are restricted by the board to pay post-retire-ment medical benefits for current and future retirees.

Assets due the Research Foundation from broker for securi-ties sold decreased by $6.6 million and represent investmenttrade activity that occurred prior to June 30, 2004 that was notsettled by June 30, 2004. The settlement date is usually threeto five days after the trade date.

Fixed assets, net represent office furniture, equipment, theRF’s information system and the corporate office building.These assets decreased $5.9 million or 17 percent over the

RF Senior Vice President and Treasurer Bonny Boice

(right) meets with (left to right) Timothy Jennings,

assistant vice president, corporate expenditure

accounting, and Chris Wade, comptroller.

24

prior year-end balance due to current year depreciation levelsin excess of fixed asset purchases.

Other assets balance is comprised of funds maintained as partof a Deferred Compensation Plan set up in accordance withsection 457 (b) of the Internal Revenue Code. Fiscal year 2004marked the second year of the plan’s operation.

B A L A N C E S H E E T L I A B I L I T I E S

Total liabilities as of June 30, 2004 were $385 million, anincrease of $65 million or 20 percent over the prior year. Themajor components of the Research Foundation’s liabilitiescompared to balances from the previous year are shown below:

Liabilities(in thousands) 42004 2003

Current liabilities:Accounts payable and

other accruals $ 80,346 $ 69,283Deferred revenue and

deposits held for others 164,590 129,351Post-retirement benefit

obligations 3,888 3,027Other current liabilities 3,286 3,205Line of credit 30,000 10,000

Total current liabilities 282,110 214,866

Non-current liabilities:Deposits held for others 2,376 2,936Post-retirement benefit

obligations 70,039 52,630Due to broker for

securities purchased 18,230 33,974Long-term debt 10,978 14,332Other liabilities 914 511Total non-current liabilities 102,537 104,383

Total $384,647 $ 319,249

Accounts payable and other accruals represent amounts due tovendors, accrued compensation and the RF’s vacation liability.These accruals increased $11 million, or 16 percent, primarily dueto increased activity with sponsors in comparison to the prior year.

Deferred revenue and deposits held for others representamounts received from sponsors that are not yet expended.The increase of approximately $35.5 million from the prioryear is primarily the result of cash received in connection withthe nanoelectronics program at the University at Albany.

Other current liabilities represent the portion of paymentsexpected to be distributed in fiscal year 2005 for post-retire-ment benefits and include the current portion of the RF’slong-term debt.

Line of credit is the amount the RF borrowed on an overnightbasis to supplement daily cash flow needs. The line of creditenables the RF to minimize the impact that routine fluctua-tions in daily cash flow have on its investment program, allow-ing investment managers to maintain a steady portfolio levelwhich enhances earnings over the long term. As noted previ-ously, the line of credit was increased from $10 million to $30million during fiscal year 2004 to support major campus pro-grams that are waiting for state funding.

Post-retirement benefit obligation increased by $18.3 millionor 33 percent from the prior year. This liability represents theactuarially-determined amount incurred to pay current andfuture retiree medical benefits. The RF, like many employers, isincurring significant increases in retiree medical benefits costs.Rising health care costs, changes in workforce census data andincreasing trend rates are all contributing to this increase in lia-bility. (See Footnote F in the Notes to the Financial Statements)

Amounts due to broker for securities purchased decreased$15.7 million and represent investment trade activity that


Pat Winters, Vice President for Sponsored Programs

Services, directs the RF office that provides direct

contract and grant services to the university colleges

and specialized campuses and corporate compliance

for all campuses.

25

occurred prior to June 30, 2004 that was not settled by June30, 2004. The settlement date is usually three to five days afterthe trade date.

Long-term debt balance is comprised of amounts borrowed tofinance the corporate office building, the RF information sys-tem and some capital leases. Long-term debt declined byapproximately $3.4 million or 23 percent during fiscal year2004 due to debt principal payments made by the RF duringthe year. Additionally, debt on the information system was refi-nanced in 2003 to allow for further debt reduction.

B A L A N C E S H E E T N E T A S S E T S

The net assets of the Research Foundation represent fundsspecified for development activity at the campuses as outlinedin the RF’s board-approved financial plan.

S TAT E M E N T O F A C T I V I T I E S : R E V E N U E S

Total operating revenues of the Research Foundation for fiscalyear 2004 exceeded $744 million, an increase of $90 millionor 14 percent compared to the previous year. The RF’s primarysource of revenue is grants and gifts awarded for sponsoredresearch activities, which represented 97 percent of total rev-enues for the current fiscal year.

Revenues(in thousands) 42004 2003

Grants and gifts awarded for research and other sponsored activities:

Direct revenues $599,659 $524,974F&A revenues 123,254 108,996

$ 722,913 $633,970

Investment income 6,765 8,246Inventions and licenses income 14,491 11,662Total $744,169 $653,878

Total revenue awarded for sponsored activities, including facil-ities and administrative (F&A) recoveries, increased by $89million to $723 million, an increase of 14 percent in compar-ison to the prior year. For the second consecutive year, theUniversity at Albany experienced the most significant growthwith sponsored program activity increasing by 69 percent or$54 million. The nanoelectronics program contributed signif-icantly to this increase. Stony Brook University also showedsubstantial growth in sponsored program volume with anincrease of $19 million or 13 percent. Binghamton Universityand the University at Buffalo reported increases of 11 percentand 4 percent, respectively.

New York State sponsored program revenue increased by30 percent while federally sponsored program revenue increasedby 8 percent. F&A recoveries earned on grants and contractsadministered by the RF were $123 million for the fiscal yearending June 30, 2004, an increase of 13 percent over the prioryear. Investment income decreased by approximately $1.5 mil-lion to a total of $6.8 million, but remained a solid contributor.

S O U R C E S O F R E V E N U E

Revenue from projects sponsored directly by the federal gov-ernment totaled $361 million or 50 percent of total sponsoredrevenues. Of these federally sponsored projects, 55 percent ofthe funding was received from the Public Health Service.Other major federal sponsors include the National ScienceFoundation, the Agency for International Development andthe Departments of Education, Defense and Energy. Revenuefrom projects sponsored by nonfederal sponsors-including fed-eral flow-through funding-totaled $362 million or 50 percentof the total. The combination of all federal funds (direct andflow-through) represents $524 million or 73 percent.

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Sponsored Revenue,

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$440.5 $484.3 $569.7 $634.0 $722.8

Federal ● NY State ● Other ●

26

S TAT E M E N T O F A C T I V I T I E S : E X P E N S E S

Total expenses of the Research Foundation for fiscal year 2004were $743 million, an increase of $85 million or 13 percentcompared to the previous year. The RF’s expenses consist ofsponsored program expenditures and administration and support costs.

Expenses(in thousands) 42004 2003

Sponsored programs $599,426 $524,914Administration and support 143,297 132,807

Total $742,723 $657,721

Sponsored program expenses increased $75 million primarilyas a result of increased sponsored program activity during thefiscal year. Contrary to most businesses, the 14 percentincrease is a positive sign for the RF. Increased sponsored pro-gram revenues are driven by increased sponsored programexpenditures. This revenue provides research and educationalbenefits to the State University of New York while increasingeconomic activity throughout New York State.

Administration and support expenses grew by $10 mil-lion or 8 percent. This increase was mainly due to the signifi-cant increase in post-retirement medical costs.


Expenditure by Category

(in millions)

Salaries Building Subawards Other Total & Fringe & Equipment

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Report of Independent Auditors

To the Board of DirectorsThe Research Foundation of State University of New York

In our opinion, the accompanying balance sheets and the related statements of activities and of cash flows present fairly, in allmaterial respects, the financial position of The Research Foundation of State University of New York (the “Foundation”) at June30, 2004 and 2003, and the changes in its net assets and its cash flows for each of the years then ended, in conformity withaccounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Foundation’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States ofAmerica, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, assessing the accounting principles used and significant estimates made by management,and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

August 13, 2004

28

The Research Foundation of State University of New York

Balance SheetsFor the Years Ended, June 30, 2004 and 2003

42004 2003

AssetsCurrent Assets:Cash and cash equivalents $ 1,297,661 $ 1,568,049Accounts receivable, net 170,737,954 139,329,120Advances to others 6,269,681 —Short-term investments 135,554,644 71,187,425Short-term investments — designated for

post-retirement benefit obligation 3,888,000 3,027,400

Total current assets 317,747,940 215,111,994

Non-current Assets:Long-term investments 95,382,574 121,067,672Long-term investments — designated for

post-retirement benefit obligation 39,548,828 37,587,860Due from broker for securities sold 6,070,623 12,666,591Fixed assets, net 28,942,734 34,818,471Other assets 914,305 511,171

Total non-current assets 170,859,064 206,651,765

Total assets $488,607,004 $421,763,759

LiabilitiesCurrent liabilities:Accounts payable and accrued expenses $ 49,930,923 $ 41,384,383Accrued compensation 11,180,933 8,809,505Accrued vacation 19,234,998 19,088,669Deferred revenue 164,589,530 125,606,305Deposits held for others — 3,744,803Current portion of post-retirement benefit obligation 3,888,000 3,027,400Current portion of long-term debt 3,285,858 3,204,426Line of credit 30,000,000 10,000,000

Total current liabilities 282,110,242 214,865,491

Non-current liabilities:Deposits held for others 2,376,357 2,936,340Post-retirement benefit obligation 70,038,828 52,630,278Due to broker for securities purchased 18,229,505 33,973,601Long-term debt, net of current portion 10,977,670 14,332,046Other liabilities 914,305 511,171

Total non-current liabilities 102,536,665 104,383,436

Total liabilities 384,646,907 319,248,927

Net assetsUnrestricted 103,960,097 102,514,832

Total liabilities and net assets $488,607,004 $421,763,759

The accompanying notes are an integral part of the Financial Statements.

29


Statements of ActivitiesFor the Years Ended, June 30, 2004 and 2003

42004 2003

RevenuesGrants and gifts awarded for research and other sponsored activities $722,913,102 $633,969,453Investment income 6,764,437 8,246,376Inventions and licenses income 14,491,096 11,662,197

Total revenues 744,168,635 653,878,026

ExpensesSponsored programs 599,426,445 524,914,218Administration and support 143,296,925 132,807,216

Total expenses 742,723,370 657,721,434

Net increase (decrease) in net assets 1,445,265 (3,843,408)

Net assets at beginning of year 102,514,832 106,358,240

Net assets at end of year $103,960,097 $102,514,832


30

42004 2003

Cash flows from operating activitiesFederal grants and contracts $ 515,443,492 $507,480,654State and local grants and contracts 110,365,510 127,351,286Private gifts and grants 103,888,967 85,881,411Other receipts 115,250,061 115,729,681Salaries and wages payments (322,532,751) ( 308,680,558)Employee benefits payments (88,314,610) ( 81,815,745)Payments to suppliers/vendors (387,995,966) ( 378,360,784)Operating interest, dividends and investment gains 4,067,785 1,967,089Interest payments on capital debt/notes (311,059) ( 567,980)Other payments (16,542,780) ( 12,338,413)

Net cash provided by operating activities 33,318,649 56,646,641

Cash flows from financing activitiesCash overdraft 2,037,562 5,343,747Proceeds from capital debt/notes — 7,806,080Principal payments on capital debt/notes (3,272,944) ( 10,096,110)Proceeds from line of credit 234,082,704 81,389,892Payments on line of credit (214,082,704) ( 80,366,052)

Net cash provided by financing activities 18,764,618 4,077,557

Cash flows from investing activitiesRestricted cash and cash equivalents — 1,615,820Proceeds from sales of investments 691,820,599 708,915,168Purchases of investments (741,374,556) ( 762,313,561)Cash paid for purchases of fixed assets (2,799,698) ( 8,529,736)

Net cash used in investing activities (52,353,655) ( 60,312,309)

Net (decrease) increase in cash and cash equivalents (270,388) 411,889

Cash and cash equivalents, beginning of year 1,568,049 1,156,160

Cash and cash equivalents, end of year $ 1,297,661 $ 1,568,049

Reconciliation of change in net assets to net cashprovided by operating activities

Change in net assets $ 1,445,265 $ (3,843,408)Adjustments to reconcile change in net assets to net cash

provided by operating activities:Realized and unrealized gain on investments (897,174) (2,890,341)Depreciation 8,342,093 7,734,426Loss on disposal of fixed assets 333,342 486,031Bad debt (recovery) expense (1,000,000) 2,000,000Change in assets and liabilities:Accounts receivable and other assets (30,811,968) (1,725,938)Accrued investment income (200,686) (151,890)Accounts payable and accrued expenses, net of cash overdraft 6,508,978 3,422,881Other accruals and other liabilities 2,920,891 2,322,822Deferred revenue 38,983,225 45,623,207Deposits held for and advances to others (10,574,467) (4,151,774)Post-retirement benefit obligation 18,269,150 7,820,625

Net cash provided by operating activities $ 33,318,649 $ 56,646,641

Non-cash activityCapital lease obligation $ — $ 1,615,820



Statements of Cash FlowsFor the Years Ended, June 30, 2004 and 2003

31

N O T E A

Organization

The Research Foundation of State University of New York (the “Foundation”) is a private, non-profit, educational corporation chartered by the Board of Regents of the State ofNew York to further the educational purposes of the StateUniversity of New York (SUNY). The Foundation is tax-exempt under Internal Revenue Service Code Section501(c)(3). The Foundation is primarily responsible for the fiscal administration of grants, contracts and gifts supportingresearch, training, public service and related programs carriedout by, or under the supervision of, faculty or staff members ofthe State-operated campuses of SUNY.

The Foundation also acts as fiscal agent in the receipt anddistribution of specific funds that have been awarded to SUNYby outside organizations. The respective campuses of SUNY areresponsible for general administration of these programs.

The services provided by the Foundation do not extendto program review and evaluation or consideration of the tech-nical merits of sponsored programs.

N O T E B

Summary of significant accounting policies

(a) Basis of presentation

The financial statements of the Foundation have been pre-pared on the accrual basis of accounting.

(b) Use of estimates

The preparation of financial statements in conformity withaccounting principles generally accepted in the United Statesof America requires management to make significant estimatesand assumptions that affect the reported amount of net assetsand disclosures of contingent assets and liabilities as of the dateof the financial statements and the reported amounts ofchange in net assets during the reporting period. Actual resultscould differ from those estimates.

(c) Revenue recognition

Substantially all of the Foundation’s revenues are exchange transactions derived from restricted grants and cost reimburse-ment contracts that provide for the recovery of direct and indi-rect costs, subject to audit. In the opinion of management nomaterial adjustments are expected as a result of such audits.Grants and contracts awarded for research and other sponsoredactivities are recognized only to the extent of direct costsincurred or when such costs are eligible for reimbursement.Amounts received in excess of expenses are recorded as deferredrevenues. The Foundation funds its operations primarily fromrecoveries of indirect costs provided from grants and contracts.Such recoveries are recorded in the year in which the direct costsare incurred or when such costs are eligible for reimbursement.

(d) Investments

Investments in equity securities with readily determinable fairvalues and all investments in debt securities are reported at fairvalue based upon quoted market prices. Purchases and sales ofsecurities are recorded on a trade-date basis. Dividend incomeis recorded on the ex-dividend date. Interest income is record-ed on the accrual basis.

The captions “Due from broker for securities sold” and“Due to broker for securities purchased” represent investmenttrade activity that took place prior to year end but had notbeen settled by year end. Net appreciation (depreciation) inthe fair value of investments, which consists of the realizedgains or losses and unrealized appreciation (depreciation), isreported in the statement of activities. The average cost ofsecurities sold is used to determine the basis for computingrealized gains or losses.

The Foundation does not require its investments to becollateralized. To minimize potential losses, the Foundationmaintains a diversified investment portfolio and, with respectto debt instruments, has a policy of investing in primarily highquality securities with a minimum rating of BBB or equiva-lent. The portfolio maintains an average investment grade ofAA. Investments are held with the investment custodian in theFoundation’s name.

(e) Fixed assets

Fixed assets are stated at cost, net of accumulated depreciation,and are depreciated on a straight-line basis over the estimateduseful life of the assets. Estimated useful life (in years) of theFoundation’s fixed assets is as follows:Equipment and information system 5Office furniture 7Building 50

Upon sale or retirement of fixed assets, the cost and the relat-ed accumulated depreciation are removed from the accountsand the resulting gain or loss is recorded. Depreciation expensefor the years ended June 30, 2004 and 2003 was $8,342,093and $7,734,426, respectively. Generally, title to equipmentpurchased using sponsored funds is retained by the grantorinstitution until such time as final disposition is determined.Accordingly, purchases of equipment charged to the respectivegrant or contract are not capitalized.

(f) Accrued vacation

Foundation employees are granted vacation and sick leave invarying amounts. In the event of termination an employee isreimbursed for accumulated vacation up to a maximum ofthirty days. Employees are not reimbursed for accumulatedsick leave at termination.

(g) Cash equivalents

Cash equivalents include short-term, highly liquid investmentswith a maturity of three months or less at the time of purchase.

Notes to Financial Statements

32

Cash and cash equivalents representing assets of the long-terminvestment portfolio are classified as long-term investments.

(h) Reclassifications

Certain 2003 amounts have been reclassified to conform withthe 2004 classified balance sheet presentation.

(i) Other information

Accounts receivable as of June 30, 2004 and 2003 are report-ed net of an allowance for doubtful accounts of $8,000,000and $9,000,000, respectively.

Advances to others and deposits held for others representamounts related to agency activity at the campus locations.

The Foundation has been awarded approximately$863,192,000 and $767,683,000 of grants and contracts thathave not been advanced or expended as of June 30, 2004 and2003, respectively, and accordingly, such amounts have notbeen recorded in the financial statements.

The Foundation maintains a Deferred CompensationPlan established in accordance with Section 457(b) of theInternal Revenue Code. Plan funds are a part of the generalassets of the Foundation and are subject to claims of creditorsof the Foundation.

The net assets of the Foundation primarily representfunds specified for development activity at the campuses asoutlined in the Foundation’s Board-approved financial plan.

N O T E C

Affiliated organizations

The Foundation has established twelve affiliated organizationsto facilitate university-industry-government partnerships andaccelerate the growth of sponsored program and appliedresearch opportunities at SUNY. This is sometimes done incooperation with campus based or related organizations.These entities limit liability to the Research Foundation andSUNY and often are able to meet the needs of SUNY and/orSUNY campuses that cannot be easily accomplished throughexisting structures. The Foundation does not have a financialinterest in nor is it contingently liable to these affiliated organizations. The affiliated organizations are as follows:

(a) Binghamton Technologies Corporation (BTC)

BTC is a private, not-for-profit corporation formed by theResearch Foundation to construct a high technology facility atthe eastern edge of the Binghamton University campus to assistin the economic development of the region. The InnovativeTechnologies Complex will house a new BioengineeringDepartment, the Center for Protein Dynamics, technologyincubators for biotech and advanced sensor design companies,research laboratories, and Binghamton University’s Division ofResearch, which oversees technology transfer and economicoutreach. It will also serve as a magnet for faculty and gradu-ate students and an engine for new ideas and businesses.

(b) Broad Hollow Bioscience Park, Inc.

Broad Hollow Bioscience Park, Inc. is a not-for-profit corpo-ration formed by the Research Foundation and Cold SpringHarbor Laboratory to establish a high technology incubatorfacility on the Farmingdale State campus. Its purpose is toassist in the economic development of the region by attractingpublic and private funds to further research and biotechnologydevelopment, by facilitating the transfer of biotechnologyresources to the marketplace and by creating jobs.

(c) Brookhaven Science Associates

In a national competition against the country’s leadingresearch universities, the U.S. Department of Energy in 1997selected Brookhaven Science Associates, LLC (BSA) to operatethe world-famous Brookhaven National Laboratory (BNL) —a $2 billion contract. Formed as a limited liability company by Battelle Memorial Institute (BMI) and the ResearchFoundation on behalf of the Stony Brook University, BSA isthe legal entity responsible for leading BNL successfullythrough the 21st century. In accordance with the LLC agreement, member profits and losses are allocated 50% eachto Battelle and the Foundation. During 1998, Battelle and the Foundation each made an initial capital contribution of$125,000 each.

The total assets of BSA as of September 30, 2003 and2002 are $10,804,757 and $8,913,207, respectively. Total revenue for the years ended September 30, 2003 and 2002 are$6,706,548 and $6,884,950, respectively. Total expenses forthe years ended September 30, 2003 and 2002 are $2,811,968and $2,620,006, respectively. The Foundation records its shareof the net earnings of BSA from BSA’s most recent completedfiscal year. The Foundation records distributions received as areduction of the investment balance.

(d) Calspan-UB Research Center, Inc. (CUBRC)

Calspan-UB Research Center, Inc. (CUBRC) is a strategicpartnership whose mission is to bring together scientists, engineers and resources from academia and industry to provide the synergy to expand the research capabilities of alland to provide significant growth opportunities in WesternNew York. Founded by Calspan Corporation, now GeneralDynamics, Inc., and The Research Foundation, acting onbehalf of the University at Buffalo, CUBRC was incorporatedin New York State in 1983 as an independent, not-for-profit,multidisciplinary research center. By making available theresources of both UB and General Dynamics, CUBRC com-petes for research programs that would not be available to UBor General Dynamics separately.

(e) Downstate Technology Center, Inc.

Downstate Technology Center, Inc. is a private, not-for-profitcorporation formed by the Health Science Center at BrooklynFoundation, Inc. and the Research Foundation to provide avehicle for the construction of an advanced biotechnology


33

research park adjacent to the Downstate Medical Center toadvance medical research, provide incubator space and assist inthe economic development of the Borough of Brooklyn.

(f) Fuller Road Management Corporation (FRMC)

Fuller Road Management Corporation (FRMC), a private, not-for-profit corporation, is a partnership between theResearch Foundation and the University at Albany Foundation,Inc. to provide a vehicle for the construction of comprehensiveresearch facilities that support a high-tech business incubator,workforce development, research and development and technology acceleration. On July 2, 2002, the Foundationguaranteed a loan in the amount of $8,966,000 on behalf ofFRMC. The outstanding balance of this loan at June 30, 2004is $8,803,067. As the assets of FRMC would not be distrib-uted to the Foundation in the event of liquidation, and theFoundation is not receiving distributions, no equity invest-ment has been recorded.

(g) Griffiss Institute Inc.

The Griffiss Institute Inc. is a private, not-for-profit corpora-tion formed by the Research Foundation in partnership withMohawk Valley EDGE, Inc., Syracuse University, PolytechnicUniversity and Utica College to establish a research facility atthe Griffiss Business and Technology Park in Rome, New York.The mission of the Institute is to advance the study of the secu-rity and vulnerability of public and private information systemsand infrastructure in the United States. The Institute will focuson ensuring the security of information systems, developing aworkforce of information security professionals, and creating alocale for information assurance services and products.

(h) Long Island High Technology Incubator (LIHTI)

The Long Island High Technology Incubator (LIHTI), a pri-vate, not-for-profit corporation incorporated in 1989, is apartnership between the Research Foundation and the StonyBrook Foundation, Inc. LIHTI’s mission is to target the devel-opment of new high technology companies in a limited num-ber of overlapping technology growth areas including biotech-nology, environmental technologies, electronics, informationtechnologies and new materials technologies.

(i) NanoTech Resources, Inc.

Nano Tech Resources, Inc. is a private, not-for-profit corpora-tion formed by the Research Foundation to support high tech-nology development and deployment throughout New YorkState by coordinating nanotechnology research and educationprograms within the State University of New York. As the leadentity on behalf of SUNY for its strategic involvement in nan-otechnology efforts, Nano Tech Resources, Inc. is responsiblefor assisting in implementing university-industry and corpo-rate partnerships, securing external funding from public andprivate sources, facilitating donations and organizing fundrais-ing activities, and coordinating resources and capabilities with-in the SUNY system and with other higher education andresearch institutions in New York and across the U.S.

(j) New York Maritime College Sailing Foundation, Inc. (NYMCSF)

New York Maritime College Sailing Foundation, Inc. (NYM-CSF) is a private, not-for-profit corporation formed by theResearch Foundation to serve as the funding and supportivebody in support of sailing programs at the State University ofNew York Maritime College. The goal of NYMCSF is toadvance the college’s mission through the enhancement of thefaculty, student and staff for the benefit of midshipmen and to facilitate the program’s short and long-term excellencethrough donations of funds, equipment or boats.

(k) Purchase College Advancement Corporation

Purchase College Advancement Corporation is a private, not-for-profit corporation formed by the Research Foundation on behalf of the State University College at Purchase to develop a retirement community, faculty and staff housing and a hotel/conference center on the grounds of the StateUniversity at Purchase to further the objectives and purposesof the State University of New York.

(l) State Street Management Inc. (SSMI)

SSMI is a not-for-profit realty holding corporation, incorpo-rated in 1990, to purchase and hold real estate for the benefitof the Nelson A. Rockefeller Institute of Government.

N O T E D

Investments

Investments by type, exclusive of investments designated forthe post-retirement benefit obligation, consist of the followingas of June 30:

42004 2003

Cash equivalents $ 91,049,607 $ 59,727,382U.S. Government Securities 83,832,058 69,360,065Mortgage/asset-backed securities 5,126,551 14,998,890Corporate debt securities 13,322,823 17,314,455Common stocks 28,819,423 28,440,130Investment in equity partnership 730,925 365,235Other 8,055,831 2,048,940

Total $230,937,218 $ 192,255,097

For the years ended June 30, 2004 and June 30, 2003, investments classified as long term are $95,382,574 and$121,067,672, respectively; investments classified as shortterm are $135,554,644 and $71,187,425, respectively, exclusive of investments designated for the post-retirementbenefit obligation.

34

The following is the composition of investment incomein the financial statements:

42004 2003

Dividends and interest $ 3,919,973 $3,223,563Realized and unrealized gains, net 897,174 2,890,341Income from investment in

equity partnership 1,947,290 2,132,472

Total return on investments $ 6,764,437 $8,246,376

The Board of Directors has designated certain investments in common stocks for the purpose of funding post-retirementbenefit obligations. These investments are separately disclosedon the balance sheet, and amounted to $43,436,828 and$40,615,260 at June 30, 2004 and 2003, respectively.

N O T E E

Fixed assets

Fixed assets consist of the following at June 30:

42004 2003

Building $ 6,500,000 $ 6,500,000Office furniture and equipment 42,434,045 41,232,920Information systems 23,690,231 23,457,110

72,624,276 71,190,030Less: accumulated depreciation (43,681,542) (36,371,559)

Fixed assets, net $ 28,942,734 $ 34,818,471

N O T E F

Post-retirement benefit obligation

The Foundation sponsors a defined benefit plan that coverssubstantially all employees. The plan provides post-retirementmedical benefits and is contributory for employees hired after1985. Retirees who were employed after 1985 are subject tothe same cost sharing requirements as active employees.Annual allocations are made by management pursuant to afunding policy established by the Board of Directors. Theassets are held in an unrestricted investment account designat-ed by the Board of Directors.

The following table sets forth the plan’s funded status recon-ciled with the amount shown in the Foundation’s financialstatements at June 30:

42004 2003

Change in benefit obligationBenefit obligation at beginning

of year $ 131,055,678 $ 86,271,053Service cost 5,960,000 4,586,000Interest cost 8,169,000 7,123,000Plan participant’s contributions 61,000 37,625Actuarial (gain) loss (5,259,000) 36,103,000Benefits paid (3,567,000) (3,065,000)Benefit obligation at the end

of the year $ 136,419,678 $ 131,055,678Benefit obligation at the end

of the year $(136,419,678) $ (131,055,678)Unrecognized actuarial loss 59,165,000 71,516,000Unrecognized transition cost 3,327,850 3,882,000

Accrued benefit cost $ (73,926,828) $ (55,657,678)Weighted-average assumptions

as of June 30Discount rate 6.25% 6%Expected return on plan assets 8% 8%Components of net periodic

benefit costService cost $ 5,960,000 $ 4,586,207Interest cost 8,169,000 7,123,000Expected return on plan assets (3,354,000) (3,444,000)Amortization of transition obligation 555,000 555,000Net amortization and deferral 5,124,000) 3,116,000

Net periodic benefit cost $16,454,000 $12,036,207

Estimated future benefit payments(net of retiree contributions)

First year $ 3,888,000Second year 4,384,000Third year 4,925,000Fourth year 5,582,000Fifth year 6,183,000Next five years 42,150,000

For measurement purposes, annual rates of increase in the percapita cost of covered health care benefits of 11.5% for boththe indemnity plan and for the health maintenance organiza-tion (HMO) plan were assumed for 2004. The rate for bothplans was assumed to decrease gradually to 5% through 2013and remain at that level thereafter. The Foundation recordedan expense of $20,782,000 and $9,708,000 in 2004 and 2003,respectively, to recognize the unrecoverable amount of theunfunded plan obligation.

Assumed health care cost trend rates have a significanteffect on the amounts reported for the health care plans.


35

A one-percentage-point change in assumed health care costtrend rates would have the following effects:

1-Percentage 1-PercentagePoint Increase Point Decrease

Effect on total of service andinterest cost components $ 2,914,000 $ (2,302,000)

Effect on post-retirementbenefit obligation $23,807,000 $(19,268,000)

The Medicare Prescription Drug, Improvement andModernization Act of 2003 (the “Act”) was reflected onDecember 8, 2003 assuming that the Foundation will contin-ue to provide a prescription drug benefit to retirees in the pre-ferred provider organization (PPO) plan that is at least actuar-ially equivalent to Medicare Part D and that the Foundationwill receive the federal subsidy. Based on the design of theHMO plans, it is assumed that there will be no savings to theFoundation as a result of the Act.

As a result of reflecting the effects of the Act as ofDecember 8, 2003, the liabilities were remeasured at that datewith a discount rate of 6.25%. The accumulated post-retire-ment benefit obligation (APBO) at December 8, 2003decreased by $5,436,000 from $143,187,000 to $137,751,000due to the change in discount rate. The APBO at December 8,2003 decreased by $7,143,000 from $137,751,000 to$130,608,000 due to the effect of the Act. The net periodicpost-retirement benefit cost (NPPBC) decreased by $740,000from $17,194,000 to $16,454,000. The effect of the subsidy byNPPBC component is shown below:

Effect of Effect ofRemeasurement Subsidy

Service cost $(367,000) $(163,000)Interest cost 223,000 (249,000)Expected return on plan assets (105,000) —Amortization of transition obligation — —Amortization of prior service cost — —Net amortization and deferral of

actuarial (gain) loss (451,000) (328,000)

Net periodic post-retirement benefit cost $(700,000) $(740,000)

Estimated gross amount ofsubsidy receipts

First year $ —Second year (102,000)Third year (230,000)Fourth year (261,000)Fifth year (298,000)Next five years (2,158,000)

Investment Policies and Strategies

The plan’s primary investment goal is to achieve the expectedrequired return, consistent with prudent investment manage-

ment. The plan’s asset allocation is structured to meet a long-term targeted total return. Borrowing from the diversificationtechniques developed under Modern Portfolio Theory, the plan’sassets are invested so that total portfolio risk exposure and risk-adjusted returns meet the plan’s long-term total return goal.

The Foundation’s investment managers exercise fullinvestment discretion within guidelines outlined in theFoundation’s Investment Policy. The investment managers arecharged with the responsibility of managing the assets with thecare, skill, prudence and diligence that a prudent investmentprofessional in similar circumstances would exercise.

The individual investment managers are provided specific investment guidelines under which they are to investtheir assets. In general, investment managers are expected toremain fully invested. Equity and fixed income managers areexpected to invest, through best execution, in assets that theydeem to be prudent investments.

The Foundation’s Investment Policy prohibits the use ofderivatives for purposes of leverage or unrelated speculation.The Policy also outlines certain securities, strategies and invest-ments that are ineligible for inclusion within the plan.

Basis Used to Determine the Overall Expected Long-Term Rate-of-Return-on-Assets Assumption

The Foundation works with a consultant to develop the long-term rate of return assumptions used to model and determinethe overall asset allocation. The consultant’s asset allocationcommittee is responsible for determining the asset class assump-tions. Forecast returns are based on a combination of historicalreturns, current market conditions and their forecast for the cap-ital markets over the next 5-7 years. The consultant analyzes thehistoric trends of asset class index returns since inception of theasset class over various market cycles and economic conditions.Approximately 75% of the return assumption is based on histor-ical information and 25% is based on current or forward-look-ing information. All asset class assumptions are within certainbands around the long-term historical averages. Adjustments tohistorical returns are based on a number of factors including,but not limited to, current market valuations, yield, inflationand various economic indicators.

The plan’s asset allocation in the table below is expectedto meet the plan’s expected return.

PermissibleAsset Class Target Ranges

Equities 58% 48-68%Large Cap Growth 19 —Large Cap Core 19 —Small Cap Core 10 —International 10 —

Fixed Income 42% 32-52%Large Term FI 32 —High Yield FI 10 —

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N O T E G

Retirement plans

The Foundation maintains a non-contributory defined contri-bution retirement plan for substantially all employees.Contributions are based on a percentage of regular salary andrange from 8% to 15%. Employees become fully vested incontributions made by the Foundation after the completion offive years of service. Contributions are allocated to individualemployee accounts. Vested participants have the option of having contributions to their accounts deposited in either theTeachers Insurance and Annuity Association (TIAA), which issimilar to a fixed income account, or in the College RetirementEquities Fund (CREF), a common stock fund. Pensionexpense was approximately $22,169,000 and $20,490,000 forthe years ended June 30, 2004 and 2003, respectively.

N O T E H

Long-term debt

The Foundation entered into an agreement during fiscal 2002with the City of Albany Industrial Development Agency (IDA)whereby the IDA issued both a taxable and a tax exempt seriesof bonds for the purpose of providing funds to acquire a parcelof real estate together with the existing building thereon. TheFoundation occupies and conducts most of its Central Officeoperations from this location. For the year ended June 30,2004, the long term debt associated with these bond issuancesis as follows: The tax exempt bond issuance totaled $5,600,000with maturity in 2032. The interest rate of 1.16% at June 302004, is applicable through July 1, 2004. The taxable bondissuance totaled $900,000 with maturity in 2009. The interestrate is 1.44% at June 30 2004, and is also applicable throughJuly 1, 2004. Thereafter, the bonds will bear interest at variablerates as established by First Albany Corporation, as remarketingagent. The adjustable rate for the tax exempt bonds will notexceed 12% per annum and the adjustable rate for the taxablebonds will not exceed 15% per annum.

In fiscal 1999, the Foundation entered into a tax-exemptleasing program through the City of Albany IndustrialDevelopment Agency to finance development of a new information system. The borrowing totaled $16,300,000 andwas collateralized by the associated equipment. During fiscal2003, the Foundation refinanced the amount outstanding onthis borrowing. The amount refinanced, including additionalcosts associated with the refinancing, was $7,806,080. Therefinanced amount is at an effective annual rate of 2.67% andall other terms and conditions of the original tax-exempt leaseremain the same. The refinancing will result in interest savingsof approximately $113,000.

The Foundation is also contractually obligated per longterm lease agreements for capital equipment.

Payments on the debt are due on the first day of eachcalendar quarter. A summary of the aggregate annual principalamounts of the debt obligation due during each fiscal year isnoted below.

Fiscal Fiscal Total Capital2002 2003 Issuance/ Lease Total

Issuance Refinancing Refinancing Agreements Debt

2005 $ — $2,601,413 $ 2,601,413 $ 684,445 $ 3,285,858

2006 130,000 2,671,543 2,801,543 699,382 3,500,925

2007 135,000 — 135,000 714,994 849,994

2008 145,000 — 145,000 636,751 781,751

2009 150,000 — 150,000 — 150,000

Thereafter:

5,695,000 — 5,695,000 — 5,695,000

$6,255,000 $5,272,956 $11,527,956 $2,735,572 $14,263,528

Line of credit

The Foundation maintains one revolving line of credit for$30,000,000 of which $30,000,000 was used as of June 30,2004. The agreement for the revolving line of credit was executed during the year ended June 30, 2002. The lending isat prime rate less 2% and is payable daily based upon the available amount in the Foundation’s overnight investmentaccount. The line of credit was increased from $10,000,000 to$30,000,000 during the year ended June 30, 2004.

N O T E I

University at Buffalo Foundation Services, Inc.

The Foundation has signed an agreement with the Universityat Buffalo Foundation Services, Inc. (UBFS) to enable UBFSto enter into contracts and accept grants for certain sponsoredprograms (generally excluding Federal, New York State andForeign) on behalf of the State University of New York atBuffalo. Under this agreement, UBFS serves as an agent for theFoundation. Activity through UBFS amounted to approxi-mately $3,416,000 and $4,119,000 for the years ended June30, 2004 and 2003, respectively.

N O T E J

Administration and support

These expenses are funded primarily from revenue receivedfrom grants for the reimbursement of Facilities andAdministrative (F&A) costs. F&A costs are overhead expensesincurred to support sponsored research and other sponsoredprograms within the university. Expenses incurred includesponsored program support and development, institutionaland departmental support, academic support, maintenanceand operations and administrative costs. Unreimbursed post-retirement medical expense, included in administrationand support expense, was $20,782,000 and $9,708,000 in2004 and 2003, respectively (Note F).


Board of Directors

Mr. Robert L. King, ChairChancellorState University of New York

Dr. George B. Stefano, Vice-Chair Director, Neuroscience Research Institute& Distinguished Professor Biological SciencesOld Westbury

Dr. Frances E. Carr — Resigned 8/1/2003Vice President for ResearchState University at Binghamton

Dr. Raymond W. CrossPresidentMorrisville State College

Mr. Robert L. EcklinExecutive Vice PresidentCorning, Inc.

Mr. William M. Greiner — Retired 12/31/2003PresidentState University at Buffalo

James A. Hayward, Ph.D., D.Sc.Vice President, Personal Care and Life SciencesEngelhard Corporation

Dr. Karen R. Hitchcock — Resigned 1/31/2004PresidentState University at Albany

Dr. Randall D. IsaacVice President for Strategic AlliancesIBM Technology Group

Dr. Shirley S. KennyPresidentStony Brook University

Dr. Linwood L. Lee — Termed 12/31/2003Professor of PhysicsState University at Stony Brook

Dr. John J. LucasVice Provost for Research Upstate Medical Center

Mr. George M. PhilipExecutive DirectorNew York State Teachers Retirement System

Vice Admiral John R. Ryan, USN (Ret.)PresidentMaritime College

Dr. Peter D. SalinsProvost & Vice Chancellor for Academic AffairsState University of New York

Dr. John B. SimpsonPresidentUniversity at Buffalo

Dr. Bahgat G. SammakiaProfessor of Mechanical EngineeringDirector, Integrated Electronics Engineering CenterBinghamton University

Ms. Patricia E. StevensDirector of the Monroe County Departmentof Health and Human Services

Dr. Paul Yu — Termed 12/31/2003PresidentState University College at Brockport

Research Foundation Officersand Senior Staff

Research Foundation Officers Mr. John J. O'ConnorPresident

Mr. Timothy P. Murphy Executive Vice President

Ms. Bonny G. BoiceSenior Vice President for Finance and Treasurer

James R. Dennehey, Esq.General Counsel and Secretary

Mr. Matthew P. Behrmann Senior Vice President, External Affairs

Vice Admiral John W. Craine, Jr., USN (Ret.)Senior Vice President

Mr. Gerard P. DrahosVice President, Information Services & Chief Information Officer

Mr. Frank J. GabrielVice President, Investment Services

Ms. Catherine J. KaszlugaVice President, Corporate Communications

Dr. Michael F. Luck Vice President, Philanthropy and Alumni Affairs

Ms. Lynn D. ManningVice President, Human Resources

Ms. Patricia A. WintersVice President, Sponsored Programs Services

Dr. M. Guven Yalcintas Vice President, Technology Transfer

Mr. Frank Zuraf Vice President, Internal Audit andManagement Advisory Services

Acknowledgements

The 2004 Annual Report was produced bythe Office of Corporate Communications ofthe Research Foundation of State Universityof New York, a private nonprofit corporationheadquartered at 35 State Street in Albany.

Vice President, Corporate Communications:Catherine Kaszluga

Editor:Joanne Lafrancois

Contributing writers:David PerilsteinElizabeth Piga

Photography: Lisa Helfort, Tom Mike, Joe Putrock, AshokSubramanian Scott Suchmann, LeifZurmuhlen, State University of New YorkSystem Administration, Albany NanoTechBinghamton University, Buffalo StateCollege, University at Buffalo, SUNYDownstate Medical Center, SUNY College ofEnvironmental Science and Forestry, SUNYGeneseo, Hudson Valley CommunityCollege, SUNY Maritime College, MorrisvilleState College, Nanogenesys, Inc.; SUNYOswego, Stony Brook University, TompkinsCortland Community College, SUNY UpstateMedical Center.

Design:Graphic Expression, Inc., New York City;www.tgenyc.com

President John J. O’Connor, (seated right) withResearch Foundation officers (seated from left)Executive Vice President Timothy P. Murphy,Senior Vice President and Treasurer Bonny Boice,and (standing from left) Senior Vice President,External Affairs and Business and IndustryRelations Matthew Behrmann, General Counseland Secretary James R. Dennehey, Vice Presidentfor Information Services and Chief InformationOfficer Gerard P. Drahos and Senior VicePresident John W. Craine, Jr.


35 State Street

Albany, NY 12207-2826

(518) 434-7000

For additional copies of the Research Foundation’s 2004 annual report or for more information about The Research Foundation, please contact:

Catherine KaszlugaVice PresidentCorporate CommunicationsThe Research Foundation35 State StreetAlbany, New York 12207-2826(518) [email protected]

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