THE UNIVERSITY AT ALBANY FOUNDATION. Consolidated Financial Statements and Supplementary Information. June 30, 2017 and 2016

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1 Consolidated Financial Statements and Supplementary Information (With Independent Auditors Report Thereon)

2 Consolidated Financial Statements and Supplementary Information Table of Contents Page Independent Auditors Report 1 Consolidated Financial Statements: Consolidated Balance Sheets 3 Consolidated Statements of Activities 4 Consolidated Statements of Cash Flows 6 7 Supplementary Information Schedule I: Consolidating Balance Sheet June 30, Schedule II: Consolidating Statement of Activities Year ended June 30, Schedule III: Schedules of Expenditures Program Services 24 Schedule IV: Schedules of Expenditures Real Estate 25 Schedule V: Schedules of Expenditures Fund-Raising Activities 26 Schedule VI: Schedules of Expenditures General and Administrative 27

3 KPMG LLP 515 Broadway Albany, NY Independent Auditors Report The Board of Directors The University at Albany Foundation: We have audited the accompanying consolidated financial statements of The University at Albany Foundation (the Foundation), which comprise the consolidated balance sheets as of, and the related consolidated statements of activities and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The University at Albany Foundation as of, and the changes in its net assets and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles. KPMG LLP is a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity.

4 Report on Supplementary Information Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The supplementary information included in Schedules I through VI is presented for purposes of additional analysis and is not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audits of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole. September 28,

5 Consolidated Balance Sheets Assets Current assets: Cash and cash equivalents $ 2,203,556 2,623,497 Rental receivable, net 176,547 53,863 Pledges receivable, current (note 2) 2,036,078 1,944,360 Other receivables and prepaid expenses 671, ,264 Total current assets 5,087,963 5,286,984 Investments (notes 3 and 4) 81,197,180 67,922,326 Pledges receivable, long-term (note 2) 13,277,716 13,663,013 Other receivables, long-term 33,200 49,800 Property and equipment, less accumulated depreciation (note 5) 47,573,558 49,622,361 Artwork and literary collections 2,209,300 2,209,300 Current liabilities: Total assets $ 149,378, ,753,784 Liabilities and Net Assets Accounts payable and accrued expenses $ 1,053, ,447 Current portion of long-term debt (note 6) 375, ,627 Total current liabilities 1,428,745 1,228,074 Liabilities associated with investments (note 3) 3,904,940 2,010,667 Asset retirement obligation (note 11) 1,047,286 1,006,664 Long-term debt, less current portion (note 6) 1,808,072 2,182,130 Total liabilities 8,189,043 6,427,535 Commitments and contingencies (notes 5 and 12) Net assets (notes 7 and 8): Unrestricted: Board-designated for endowment 2,397,986 1,861,024 Undesignated 63,286,644 61,363,560 Total unrestricted 65,684,630 63,224,584 Temporarily restricted 17,897,603 14,395,479 Permanently restricted 57,607,641 54,706,186 Total net assets 141,189, ,326,249 Total liabilities and net assets $ 149,378, ,753,784 See accompanying notes to consolidated financial statements. 3

6 Consolidated Statement of Activities Year ended June 30, 2017 Temporarily Permanently Unrestricted restricted restricted Total Support and revenue: Contributions, gifts, and grants $ 4,458,272 2,229,993 2,792,841 9,481,106 Rental income (note 10) 8,094,471 8,094,471 Program activities and other revenue 901,307 2, ,745 Administrative fee income 65,552 65,552 Net investment income (note 3) 3,348,716 3,352,379 6,701,095 Other changes in restrictions (86,887) (21,727) 108,614 Net assets released from restrictions: Satisfaction of time and program designation restrictions 2,060,959 (2,060,959) Total support and revenue 18,842,390 3,502,124 2,901,455 25,245,969 Expenses: Program services 5,251,060 5,251,060 Real estate 8,768,531 8,768,531 Fund-raising activities 827, ,132 General and administrative 789, ,611 Equipment contributed to the University at Albany (note 12) 746, ,010 Total expenses 16,382,344 16,382,344 Change in net assets 2,460,046 3,502,124 2,901,455 8,863,625 Net assets, beginning of year 63,224,584 14,395,479 54,706, ,326,249 Net assets, end of year $ 65,684,630 17,897,603 57,607, ,189,874 See accompanying notes to consolidated financial statements. 4

7 Consolidated Statement of Activities Year ended June 30, 2016 Temporarily Permanently Unrestricted restricted restricted Total Support and revenue: Contributions, gifts, and grants $ 3,296,296 6,160,438 7,262,100 16,718,834 Rental income (note 10) 8,127,702 8,127,702 Program activities and other revenue 998,638 22,349 1,020,987 Administrative fee income 32,602 32,602 Net investment loss (note 3) (472,374) (1,205,790) (1,678,164) Gain on sale of properties 11,418 11,418 Other changes in restrictions 36,509 27,975 (64,484) Net assets released from restrictions: Satisfaction of time and program designation restrictions 2,070,207 (2,070,207) Total support and revenue 14,100,998 2,934,765 7,197,616 24,233,379 Expenses: Program services 5,025,985 5,025,985 Real estate 9,022,159 9,022,159 Fund-raising activities 560, ,431 General and administrative 755, ,824 Equipment contributed to the University at Albany (note 12) 411, ,388 Total expenses 15,775,787 15,775,787 Change in net assets (1,674,789) 2,934,765 7,197,616 8,457,592 Net assets, beginning of year 64,899,373 11,460,714 47,508, ,868,657 Net assets, end of year $ 63,224,584 14,395,479 54,706, ,326,249 See accompanying notes to consolidated financial statements. 5

8 Consolidated Statements of Cash Flows Years ended Cash flows from operating activities: Change in net assets $ 8,863,625 8,457,592 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 3,557,573 3,559,737 Gain on sale of properties (11,418) Provision for uncollectible accounts 10,750 8,473 Equipment contributed to the University at Albany 746, ,388 Net realized and unrealized (gains) losses on investments (3,422,230) 1,986,390 Change in equity interest in limited partnerships (2,512,025) 322,280 Change in value of assets held in beneficial interest trusts (12,501) (5,412) Restricted gifts for long-term purposes (2,799,341) (7,266,573) Administrative fee income from investment held on behalf of others (27,982) Decrease (increase) in assets: Rental receivable (122,684) 109,321 Pledges receivable (620,845) (4,358,687) Other receivables and prepaid expenses 10, ,524 (Decrease) increase in liabilities: Accounts payable and accrued expenses 163,889 (2,023,515) Asset retirement obligation 40,622 40,254 Net cash provided by operating activities 3,874,943 1,884,354 Cash flows from investing activities: Proceeds from sales and maturities of investments 33,449,858 5,317,633 Purchases of investments (40,559,901) (12,559,300) Cash accepted for investment on behalf of others 1,800,000 2,000,000 Appropriations released to others (95,800) Proceeds from sales of properties 524,807 Purchase of property and equipment (1,508,770) (1,312,472) Net cash used in investing activities (6,914,613) (6,029,332) Cash flows from financing activities: Cash received from restricted gifts for long-term purposes 3,703,015 3,145,603 Repayment of long-term debt (337,276) (200,406) Equipment contributed to the University at Albany (746,010) (411,388) Net cash provided by financing activities 2,619,729 2,533,809 Net decrease in cash and cash equivalents (419,941) (1,611,169) Cash and cash equivalents, beginning of year 2,623,497 4,234,666 Cash and cash equivalents, end of year $ 2,203,556 2,623,497 Supplemental information: Cash paid for interest $ 24,877 18,692 Property and equipment acquired through issuance of debt 2,045,726 See accompanying notes to consolidated financial statements. 6

9 (1) Organization and Summary of Significant Accounting Policies The University at Albany Foundation (Foundation) is responsible for the fiscal administration of support and revenue received for promotion, development, and advancement of the welfare of The University at Albany, State University of New York (University), its students, faculty, staff, and alumni and any other organization qualified as an exempt organization which has among its corporate purposes providing assistance to the University. The Foundation receives the majority of its support and revenue through contributions, gifts, grants, rental income, and investment income. The University at Albany Bioscience Development Corporation (UABDC) is a not-for-profit membership organization incorporated in March of 2007 pursuant to Section 402 of the not-for-profit Corporation Law of New York State. The Foundation is the sole member of UABDC and it is included in the consolidated financial statements of the Foundation. UABDC was incorporated for the sole purpose of acquiring, holding and developing real property and for managing facilities and real estate. UABDC receives the majority of its revenue through rental income. Following is a summary of the Foundation s significant accounting policies: (a) Basis of Presentation The accompanying consolidated financial statements of the Foundation are presented consistent with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 958, which addresses the presentation of financial statements for not-for-profit organizations. In accordance with the provisions of ASC Topic 958, net assets and revenue, expenses, gains, and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, unrestricted net assets are amounts not subject to donor-imposed stipulations and are available for operations. Temporarily restricted net assets represent resources whose use is limited by donor-imposed stipulations that either expire by the passage of time or are met by specific actions of the Foundation. Specific actions most often involve incurring of expenditures for purposes consistent with the donor s stipulations. Temporarily restricted net assets of the Foundation are comprised principally of resources that must be expended to support specific academic divisions of the University. When such donor-imposed stipulations are met, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the consolidated statements of activities as net assets released from restrictions. When temporarily restricted net assets and unrestricted net assets are available for the same purpose, the Foundation uses the temporarily restricted net assets first. Permanently restricted net assets represent resources that donors have stipulated must be maintained in perpetuity. The Foundation is permitted to expend part or all of the investment return derived from the donated assets, restricted only by the donors wishes and/or applicable laws and regulations. Donor restrictions placed on the use of investment return derived from permanently restricted net assets relate principally to the use of the investment return to support specific academic divisions of the University. The Foundation considers events or transactions that occur after the balance sheet date, but before the consolidated financial statements are issued, to provide additional evidence relative to certain 7 (Continued)

10 estimates or to identify matters that require additional disclosure. These consolidated financial statements were issued September 28, 2017 and subsequent events have been evaluated through that date. (b) Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and in the disclosure of contingencies at the date of the consolidated financial statements and the reporting of revenue and expenses during the reporting period. The primary areas affected by estimates are the valuation of certain investments, the allowance for uncollectible accounts and pledges, and the liability for asset retirement obligations. Actual results could differ from those estimates. (c) Donor Restricted Gifts Unconditional promises to give cash and other assets are reported at fair value at the date the promise is received. Conditional promises to give are reported at fair value at the date all conditions have been met. The gifts are reported as either temporarily or permanently restricted support based on donor stipulations that limit the use of the gifts. Donor restricted contributions whose restrictions are met within the same year as received are reflected as unrestricted contributions in the accompanying consolidated financial statements. Unconditional promises to give that are expected to be collected within one year are recorded at their net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of estimated cash flows. The discounts on those amounts are computed using an interest rate applicable at the time the promise is received. Amortization of the discount is included within contributions revenue. An allowance for doubtful accounts has been established based on management s assessment of collectability. (d) Donated Services The Foundation has received various contributed services as a result of having offices located at the University. The value of these contributed services is not reflected in these consolidated financial statements, since it is not susceptible to objective measurement or valuation and is not significant to the overall operations of the Foundation. (e) Property and Equipment Property and equipment are recorded at cost or, if received as a gift, at fair market value established at the date of the gift. The carrying amount of assets and related accumulated depreciation and amortization are removed from accounts when such assets are disposed and the resulting gain or loss is included in operations. Depreciation and amortization of these assets is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the lease term, which range from 3 to 40 years. Gifts of capital assets such as equipment are reported as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of capital assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be 8 (Continued)

11 used to acquire capital assets are reported as restricted support. Absent explicit donor stipulations about how long those assets must be maintained, expirations of donor restrictions are reported when the donated or acquired assets are placed in service. (f) Artwork and Literary Collections Artwork and literary collection items are recorded at cost. Donated collection items are recorded at appraised or fair values on the date accepted by the Foundation (the accession date). Gains or losses on the deaccession of collection items are classified in the consolidated statements of activities as unrestricted or temporarily restricted support depending on donor restrictions, if any, placed on the item at the time of accession. (g) Cash and Cash Equivalents For purposes of the consolidated statements of cash flows, the Foundation considers all unrestricted highly liquid investments with an initial maturity of three months or less to be cash equivalents. Temporary cash and money market accounts held in the investment portfolio, before making targeted investments or reinvestments, are included in investments on the consolidated statements of financial position. (h) Investments and Investment Income Investments are reported at fair value, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between participants at the measurement date. Investments generally consist of exposures in equity securities, fixed income securities, real assets, and other vehicles that hold investments in hedges portfolios, private equity funds, and similar instruments. The Foundation maintains a diversified portfolio of investments to manage concentration risk. Concentration risk represents the Foundation s exposure to individual securities, industries or geographic regions. See note 4 for a discussion of fair value measurements. Investment income and realized gains or losses from unrestricted net assets are recorded as unrestricted revenue. Investment income from restricted net assets is recorded as unrestricted revenue when unrestricted by donor and as an addition to the appropriate net asset category when restricted by donor. Realized gains and losses from the sale of investments are recorded as unrestricted revenue unless the gains and losses have been restricted by the donor. If the gains and losses have been restricted by the donor, the gains and losses are recorded as additions to or deductions from restricted net assets. Unrealized gains and losses are included as changes in net assets consistent with the purpose of the investment and donor-imposed restriction. Accumulated earnings related to donor-restricted endowment funds are classified as temporarily restricted net assets until the amounts are appropriated for expenditure by the Foundation s Board of Directors. See note 8 for additional information regarding income earned on endowment funds. 9 (Continued)

12 (i) Investments Held on Behalf of Others As of May 2016, the Foundation manages and invests a term-endowed fund on behalf of The Research Foundation for The State University of New York (The Research Foundation). Accordingly, the Foundation reports an equal asset and liability in the consolidated statements of financial position representing the fair value of investments managed on behalf of The Research Foundation. See note 3 for additional information. (j) Income Taxes The Foundation is a not-for-profit corporation under Section 501(c)(3) of the Internal Revenue Code (IRC) and is generally exempt from federal income taxes pursuant to Section 501(a) of the IRC. UABDC is a not-for-profit corporation under Section 501(c)(25) of the IRC and is generally exempt from Federal income taxes pursuant to Section 501(a) of the IRC. The Foundation recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Changes in recognition in measurement are reflected in the period in which the change in judgment occurs. The Foundation believes it has taken no uncertain income tax positions at June 30, 2017 or (k) Functional Expense Classifications The Foundation groups its operating expenses according to the purpose for which the costs are incurred. Following is a brief description of each category. Program Services Program services represent expenses that directly provide services and support to the University. Real Estate Real estate expenses represent program service activities incurred for the management and operation of real property owned by the Foundation for the benefit of the University. Fund-Raising Activities Fund-raising activities represent expenses directly related to support donor cultivation and gift solicitation. General and Administrative General and administrative expenses represent those that are directly related to fiscal management and the general operation of the Foundation. 10 (Continued)

13 (2) Pledges Receivable Pledges receivable represent gifts to support various Foundation and University programs which are expected to be collected at various times through The amounts are recorded at their estimated net present value assuming a discount rate in effect at the time the pledge was received, ranging from 1% to 2% at June 30, The pledges to be collected at June 30 are as follows: Less than one year $ 2,036,078 1,944,360 One to five years 13,407,897 13,951,947 Greater than five years 530, ,600 15,973,975 16,504,907 Less unamortized discounts (660,181) (897,534) $ 15,313,794 15,607,373 The 2017 and 2016 pledge receivable balance includes three pledges that represent approximately 82% and 86%, respectively, of total pledges receivable. (3) Investments The components of investments on the balance sheet at June 30 are as follows: Short-term investments $ 4,225,367 12,745,988 Equity securities: Domestic 16,679,179 10,948,343 International 14,400,806 9,790,878 Fixed income securities: Core 1,317,556 Global 13,151,572 13,343,274 Alternative and diversifying investments: Private equity/venture capital 4,036,151 2,990,572 Diversifying strategies 11,825,736 5,426,910 Directional equity 4,357,613 3,965,142 Private debt 4,123,927 2,036,634 Real assets 7,841,756 4,949,939 Assets held in beneficial interest trusts 555, ,090 $ 81,197,180 67,922, (Continued)

14 Liabilities associated with investments represent the fair value of investments held on behalf of The Research Foundation. The fair value of units held on behalf of The Research Foundation was $3,904,940 and $2,010,667 at, respectively. These amounts have been invested with the Foundation s investments on a pooled basis. As such, the initial amount invested on behalf of The Research Foundation was done on a unitized basis with the value of each unit representing the related percentage of value of the investment pool. Future investment or redemptions by The Research Foundation will be valued accordingly using the net asset value of the units purchased/sold on the date of each respective transaction. Investments at are summarized below based on when they may be redeemed or sold: Investment redemption or sale period: Daily $ 50,471,530 49,494,553 Monthly 2,132,727 1,598,148 Quarterly 2,541,424 1,479,462 Semi-annual 2,556,326 2,366,762 Annual 7,398,289 4,072,530 Locked-up until scheduled liquidation or dissolution 16,096,884 8,910,871 Total $ 81,197,180 67,922,326 Net investment income (loss) consists of the following at June 30: Interest and dividends $ 911, ,276 Change in equity interest in limited partnerships 2,512,025 (322,280) Net realized losses on sales (469,368) (467,403) Net unrealized gains (losses) 3,891,598 (1,518,987) Banking and cash management fees (145,056) (137,770) $ 6,701,095 (1,678,164) Maximum capital call commitments on limited partnerships at June 30, 2017 approximate $12.3 million. The Foundation has established a pooled income fund trust and charitable gift annuity trust for the management and investment of assets transferred to the Foundation by donors who retain a life interest. The trusts are held by investment trust companies which manage and invest the assets, and distribute amounts specified by the donors to the designated beneficiaries. Upon the death of the donor, or its designee, or expiration of a specified time period, the remaining funds will be paid to the Foundation. The assets held in trusts are recorded at fair value less the estimated present value of the future income 12 (Continued)

15 beneficiary payments. On an annual basis, the Foundation revalues the payment liabilities based on actuarial assumptions using current discount rates and applicable mortality tables. (4) Fair Value Measurements Fair value is defined as the price that the Foundation would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy distinguishes between (1) inputs that reflect the assumptions market participants would use in pricing assets or liabilities based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity s own assumptions about what other market participants would use in pricing assets or liabilities that are based on the best information available in the circumstances (unobservable inputs). The levels of the fair value hierarchy are: Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities that are available at the measurement date. Level 2 Inputs other than quoted prices in active markets that are observable for the assets or liabilities, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities, or inputs that are derived principally from or corroborated by market data by correlation or other means. Level 3 Unobservable inputs for determining the fair value of the assets or liabilities and are based on the entity s own assumptions about what market participants would use to price the assets or liabilities. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment s level within the fair value hierarchy may be based on the lowest level of input that is significant to the fair value measurement. The Foundation s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment. As a practical expedient, the Foundation measures the fair value of certain investments on the basis of the net asset value or its equivalent (NAV) reported by the investment managers. The NAV is determined by the respective investment manager taking into consideration, among other things, the cost of the underlying securities and various other estimates that require varying degrees of judgment. While the Foundation believes the valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of could result in a different estimate of fair value at the reporting date. The Foundation reviews and evaluates the values provided by the investment managers as frequently as they are provided. In addition, the Foundation receives and reviews annual audited financial statements and interim financial information from each manager and believes the valuation methods and assumptions used in determining the fair value of these investments to be reasonable. The NAV is determined as of the Foundation s fiscal year-end, without the requirement to categorize the investment in the fair value hierarchy. Under this approach, certain attributes for the investment (such as restrictions on redemption and transaction prices from principal-to-principal or brokered transactions) are not considered in measuring the fair value of the investment. 13 (Continued)

16 The following table summarizes the valuation of the Foundation s financial assets that are measured at fair value on a recurring basis within the fair value hierarchy as of : Redemption Balance Redemption notice Level 1 Level 2 June 30, 2017 frequency periods (days) Investments measured at fair value: Short-term investments $ 550,367 3,675,000 4,225,367 Daily Annually Immediate Equity securities: Domestic: Large cap 5,527,833 5,527,833 Daily Immediate Mid cap 3,249,619 3,249,619 Daily Immediate Small cap 2,939,763 2,939,763 Daily Immediate Real assets 4,961,964 4,961,964 Daily Immediate 16,679,179 16,679,179 International: Developed 6,781,698 6,781,698 Daily Immediate Emerging markets 7,619,108 7,619,108 Daily Immediate 14,400,806 14,400,806 Fixed income securities: Global 13,151,572 13,151,572 Daily Immediate Assets held in beneficial interest trusts 555, ,073 N/A N/A Subtotal $ 44,781,924 4,230,073 49,011,997 Investments measured at net asset value: Alternative and diversifying investments: Private equity/venture capital 4,036,151 Illiquid N/A Diversifying strategies 11,825,736 Daily Illiquid 45 N/A Directional equity 4,357,613 Semi-Annual/Annual 30/100 Private debt 4,123,927 Illiquid N/A Real assets 7,841,756 Quarterly Illiquid 30 N/A Subtotal 32,185,183 Total investments $ 81,197, (Continued)

17 Redemption Balance Redemption notice Level 1 Level 2 June 30, 2016 frequency periods (days) Investments measured at fair value: Short-term investments $ 9,315,988 3,430,000 12,745,988 Daily Annually Immediate Equity securities: Domestic: Large cap 4,641,993 4,641,993 Daily Immediate Mid cap 2,798,616 2,798,616 Daily Immediate Small cap 2,780,912 2,780,912 Daily Immediate Real assets 726, ,822 Daily Immediate 10,948,343 10,948,343 International: Developed 5,622,471 5,622,471 Daily Immediate Emerging markets 4,168,407 4,168,407 Daily Immediate 9,790,878 9,790,878 Fixed income securities: Core 1,317,556 1,317,556 Daily Immediate Global 13,343,274 13,343,274 Daily Immediate 14,660,830 14,660,830 Assets held in beneficial interest trusts 407, ,090 N/A N/A Subtotal $ 44,716,039 3,837,090 48,553,129 Investments measured at net asset value: Alternative and diversifying investments: Private equity/venture capital 2,990,572 Illiquid N/A Diversifying strategies 5,426,910 Daily Illiquid 45 N/A Directional equity 3,965,142 Semi-Annual/Annual 30/100 Private debt 2,036,634 Illiquid N/A Real assets 4,949,939 Quarterly Illiquid 30 N/A Subtotal 19,369,197 Total investments $ 67,922,326 There were no Level 3 investments as of, and there were no transfers into or out of Level 1 or 2 during the years ended. Short-term investments include cash and cash equivalents, money market funds, and term deposits with short-term maturities. Cash and cash equivalents and money market funds are classified as Level 1, as these are highly liquid. Term deposits restrict withdrawals of capital after investment and are classified as Level 2. Withdrawals typically range from quarterly to annually. 15 (Continued)

18 Investments in equity securities are actively traded and measured at quoted market prices and are classified as Level 1. The Foundation maintains a diversified strategy consisting of U.S. and international securities, as well as real assets and emerging markets. Investments in fixed income securities consist of mutual funds that are measured based on a quoted market price on an active exchange and classified as Level 1. Alternative and diversifying investments are comprised of other vehicles that hold investments in hedged portfolios, private equity funds, and similar instruments. The Foundation estimates the fair value of investments in certain investment companies for which the investment does not have a readily determinable fair value by using the NAV per share as a practical expedient. The Foundation s alternative and diversifying investments are typically redeemable at NAV under the original terms of the investment agreement. Redemption of such investments requires 15 to 100 days written notice prior to the redemption period. Further, these investments may be temporarily illiquid, which includes restrictions that have suspended normal liquidity terms or lock-ups with definite expiration dates, or may be restricted until the fund manager liquidates certain fund assets. Each fund s reported NAV is used as a practical expedient to estimate the fair value of the Foundation s interest therein. The inputs or methodology used for valuing or classifying investments for financial reporting purposes are not necessarily an indication of the risks associated with those investments or a reflection of the liquidity of or degree of difficulty in estimating the fair value of each fund s underlying assets and liabilities. (5) Property and Equipment A summary of property and equipment on the balance sheet at June 30 follows: Land $ 2,241,279 2,199,278 Buildings and leasehold improvements 80,920,581 79,483,495 Furniture and equipment 2,192,636 2,167,041 85,354,496 83,849,814 Less accumulated depreciation 37,780,938 34,227,453 $ 47,573,558 49,622,361 Depreciation expense for 2017 and 2016 was $3,557,573 and $3,559,737, respectively. UABDC Included in buildings and leasehold improvements are the buildings formerly known as the Sterling Winthrop Research Laboratories Facility (the Facility). In 1997, the Foundation transferred all rights and title to the Sterling site to the Rensselaer County Industrial Development Agency (RCIDA) for the sum of $1. The Foundation became the lessee of the Facility under a lease which expired on December 31, Upon expiration of the lease, which was accounted for as a capital lease, the Foundation purchased the Facility from RCIDA at a purchase price of $1. The Foundation is utilizing the property to house 16 (Continued)

19 University educational programs and to sublease to organizations which complement the University s education and research programs. (6) Debt A summary of long-term debt on the balance sheet at June 30 follows: Loan payable to New York Power Authority, in 120 monthly installments, under a variable rate of interest $ 1,915,364 2,045,726 Capital lease obligation payable to PNC Equipment Finance in 60 monthly installments less imputed interest at 3.2% 268, ,031 2,183,481 2,520,757 Less current portion 375, ,627 $ 1,808,072 2,182,130 A summary of future principal payments on long-term debt at June 30, 2017 follows: 2018 $ 375, , , , ,592 Thereafter 930,003 $ 2,183,481 (7) Temporarily and Permanently Restricted Net Assets Temporarily restricted net assets on the balance sheet at were restricted for the following: Scholarships $ 4,704,251 3,657,632 Awards 815, ,438 Fellowships 293, ,259 University programs 9,977,317 8,719,185 Capital 1,552, ,875 Beneficial interest trusts available upon death of donors 555, ,090 $ 17,897,603 14,395, (Continued)

20 Permanently restricted net assets represent endowments to be held in perpetuity. Income from the endowments are available to support scholarships and other activities in accordance with donor wishes and the spending policies and procedures of the Foundation. Transfers of permanently restricted net assets on the statements of activities represent gifts received in prior years which have been modified by terms of donor agreements. (8) Endowment Funds The New York Prudent Management of Institutional Funds Act (NYPMIFA) provides standards of fund management for those charged with governance of institutional or endowment funds. Among its various provisions, NYPMIFA requires that those responsible for managing institutional funds adopt a written investment policy; requires diversification of investments; and provides institutions with a process by which donor restrictions can be lifted. NYPMIFA allows an institution to determine the appropriate level of endowment expenditure, subject to donor-imposed restrictions expressed in the gift instrument. However, it establishes a rebuttable presumption of imprudence if such expenditure in any year is greater than 7% of the average fair market value of the endowment fund for a period of at least five years determined on at least a quarterly basis. The Foundation s endowment consists of approximately 530 and 510 individual funds at June 30, 2017 and 2016, respectively, established for a variety of purposes including both donor-restricted endowment funds and funds designated by the Board of Directors to function as endowments. Net assets associated with endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. From time to time, the fair value of assets associated with individual endowment funds may fall below their original fair value. Deficiencies of this nature are reported in unrestricted net assets. Deficiencies were approximately $26,000 and $801,000 as of, respectively. These deficiencies resulted from unfavorable market fluctuations. Future positive investment returns will be used to offset deficiencies. The Foundation has adopted endowment investment and spending policies that attempt to provide a predictable stream of funding to programs supported by its endowment while ensuring that the purchasing power of the endowment assets do not decline over time. Under this policy, as approved by the Board of Directors, the endowment assets are invested in a manner that is intended to produce results, net of fees, in excess of spending and inflation. A secondary objective is to achieve a total return in excess of the Broad Policy Index comprised of each broad asset category benchmark weighted by the target allocation. To satisfy its long-term rate-of-return objectives, the Foundation relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Foundation targets a diversified asset allocation that places a greater emphasis on equity and equity-based investments to achieve its long-term return objectives within prudent risk constraints. 18 (Continued)

21 The Foundation has a policy of appropriating for distribution each year 4% of its endowment fund s average fair value over the prior 20 quarters through the fiscal year-end preceding the fiscal year in which the distribution is planned. In establishing this policy, the Foundation considered the long-term expected return on its endowment. The Foundation expects permanent funds to provide an average rate of return, net of fees, in excess of the consumer price index plus 4%. Accordingly, over the long-term, the Foundation expects the current spending policy to grow its endowment at, or in excess of, the cost of inflation annually. This is consistent with objectives to maintain the purchasing power of the endowment assets as well as to provide additional real growth through new gifts and investment return. Endowment net assets consist of the following at : 2017 Temporarily Permanently Unrestricted restricted restricted Total Donor-restricted endowment funds $ (25,703) 5,362,231 57,607,641 62,944,169 Board-designated endowment funds 2,397,986 2,397,986 $ 2,372,283 5,362,231 57,607,641 65,342, Temporarily Permanently Unrestricted restricted restricted Total Donor-restricted endowment funds $ (800,903) 3,506,695 54,706,186 57,411,978 Board-designated endowment funds 1,861,024 1,861,024 $ 1,060,121 3,506,695 54,706,186 59,273,002 Changes in endowment net assets by fund type for the year ended June 30, 2017 are as follows: Temporarily Permanently Unrestricted restricted restricted Total Endowment net assets, July 1, 2016 $ 1,060,121 3,506,695 54,706,186 59,273,002 Net investment income 956,679 3,372,842 4,329,521 Contributions 427,033 7,347 2,792,841 3,227,221 Appropriated for spending (71,550) (1,498,825) (1,570,375) Other transfers (25,828) 108,614 82,786 Endowment net assets, June 30, 2017 $ 2,372,283 5,362,231 57,607,641 65,342, (Continued)

22 Changes in endowment net assets by fund type for the year ended June 30, 2016 are as follows: Temporarily Permanently Unrestricted restricted restricted Total Endowment net assets, July 1, 2015 $ 1,905,506 5,396,178 47,508,570 54,810,254 Net investment losses (846,291) (1,187,345) (2,033,636) Contributions 31, ,779 7,262,100 7,505,552 Appropriated for spending (43,419) (1,132,882) (1,176,301) Other transfers 12, ,965 (64,484) 167,133 Endowment net assets, June 30, 2016 $ 1,060,121 3,506,695 54,706,186 59,273,002 (9) Pension Plan Employees of the Foundation participate in a defined contribution plan sponsored by the University Auxiliary Services, Inc., a University affiliate. Employees who work at least 1,000 hours per year are eligible to participate. The Foundation contributes 10% of employee compensation to the plan. Participation and vesting begins immediately upon employment. Pension expense for 2017 and 2016 amounted to approximately $73,538 and $74,578, respectively. (10) Rental Income The Foundation s operations involve the leasing of office space and research laboratories to various tenants. A summary of minimum future rental income on noncancelable tenant leases for the next five years and thereafter approximate the following: Year ending June 30: 2018 $ 4,659, ,496, ,953, , ,157 Thereafter 86,039 $ 10,262,502 (11) Asset Retirement Obligation In the event UABDC was to renovate or demolish its buildings, UABDC has a legal obligation to perform certain asset retirement activity. Accordingly, a liability has been established equal to the present value of the estimated cost of such activities discounted at 3%. 20 (Continued)

23 Following is a reconciliation of the aggregate asset retirement liability associated with UABDC s obligation to remediate certain conditions at : Balance, June 30, 2015 $ 966,410 Accretion, net of liabilities settled 40,254 Balance, June 30, ,006,664 Accretion, net of liabilities settled 40,622 Balance, June 30, 2017 $ 1,047,286 (12) Commitments Equipment Contributions Equipment contributed to the University in 2017 and 2016 include assets in the amount of $746,010 and $411,388, respectively, that were purchased by the Foundation or received as donations with the intent of being contributed to the University for its use. In accordance with University policy, Foundation management formalizes the contributions of the equipment with the adoption of a resolution of gifts approved by the Foundation s Board of Directors. The resolution of gifts memorializes the irrevocable and unconditional transfer of the Foundation s rights, title and interest in the equipment to the University, subject to the formal acceptance of the gifts by the State University of New York Board of Trustees, acting through the Chancellor. In May 2017, the University accepted the donation from the Foundation of four properties located adjacent to the University valued at approximately $4.9 million. Under New York State law, the acceptance of these gifts are subject to the review and approval of the New York State Attorney General s Office. As of September 28, 2017, this review has not been completed and the Foundation maintains ownership of these properties. 21

24 Consolidating Balance Sheet June 30, 2017 Schedule I University at Albany The University Bioscience at Albany Development Assets Foundation Corporation Eliminations Total Current assets: Cash and cash equivalents $ 852,142 1,351,414 2,203,556 Rental receivable, net 9, , ,547 Pledges receivable, current 2,036,078 2,036,078 Other receivables and prepaid expenses 369, ,660 (29,303) 671,782 Total current assets 3,267,448 1,849,818 (29,303) 5,087,963 Investments 77,522,180 3,675,000 81,197,180 Pledges receivable, long-term 13,277,716 13,277,716 Other receivables, long-term 33,200 33,200 Property and equipment, less accumulated depreciation 4,670,067 42,903,491 47,573,558 Artwork and literary collections 2,209,300 2,209,300 Total assets $ 100,979,911 48,428,309 (29,303) 149,378,917 Liabilities and Net Assets Current liabilities: Accounts payable and accrued expenses $ 598, ,138 (29,303) 1,053,336 Current portion of long-term debt 195, , ,409 Total current liabilities 794, ,978 (29,303) 1,428,745 Liabilities associated with investments 3,904,940 3,904,940 Asset retirement obligation 1,047,286 1,047,286 Long-term debt, less current portion 72,548 1,735,524 1,808,072 Total liabilities 4,771,558 3,446,788 (29,303) 8,189,043 Commitments and contingencies Net assets: Unrestricted: Board-designated for endowment 2,397,986 2,397,986 Undesignated 18,305,123 44,981,521 63,286,644 Total unrestricted 20,703,109 44,981,521 65,684,630 Temporarily restricted 17,897,603 17,897,603 Permanently restricted 57,607,641 57,607,641 Total net assets 96,208,353 44,981, ,189,874 Total liabilities and net assets $ 100,979,911 48,428,309 (29,303) 149,378,917 See accompanying independent auditors report. 22

25 Consolidating Statement of Activities Year ended June 30, 2017 Schedule II University at Albany The University Bioscience at Albany Development Foundation Corporation Eliminations Total Support and revenue: Contributions, gifts, and grants $ 9,481,106 92,746 (92,746) 9,481,106 Rental income 1,533,070 6,561,401 8,094,471 Program activities and other revenue 774, , ,745 Administrative fee income 426,162 (360,610) 65,552 Net investment income 6,671,311 29,784 6,701,095 Total support and revenue 18,885,965 6,813,360 (453,356) 25,245,969 Expenses: Program services 5,343,806 (92,746) 5,251,060 Real estate 784,039 7,984,492 8,768,531 Fund-raising activities 827, ,132 General and administrative 763, ,358 (360,610) 789,611 Equipment contributed to the University at Albany 746, ,010 Total expenses 8,464,850 8,370,850 (453,356) 16,382,344 Change in net assets 10,421,115 (1,557,490) 8,863,625 Net assets, beginning of year 85,787,238 46,539, ,326,249 Net assets, end of year $ 96,208,353 44,981, ,189,874 See accompanying independent auditors report. 23

26 Schedule III Schedules of Expenditures Program Services Years ended Program services expenses: Scholarships, awards, and grants $ 1,813,204 1,693,469 University staffing 223, ,215 Professional fees 1,128, ,993 Printing 56,019 81,882 Supplies and services 382, ,841 Travel and conferences 262, ,074 University meetings and events 674, ,575 Computer supplies and services 149, ,798 Mailing services and postage 2,376 2,510 Advertising and promotion 17,390 10,354 Telephone 8,365 7,214 Books and publications 87, ,299 Rentals, repairs and maintenance 131,540 47,583 Dues, memberships and fees 93, ,582 Interest 12,184 18,692 Depreciation 206, ,904 Total program services expenses $ 5,251,060 5,025,985 See accompanying independent auditors report. 24

27 Schedules of Expenditures Real Estate Year ended June 30, 2017 (with summarized information for the year ended June 30, 2016) Schedule IV University Two Place / University Other Real Total Discovery Drive Place Estate(1) Real estate expenses: Supplies and services $ 24,750 3,123 27,873 29,443 Salaries and benefits(2) 273, , ,276 Professional fees 6,075 Contracted services 1,982, ,620 55,523 2,185,402 2,235,194 Interest 10,648 10,648 2,045 Real estate taxes 843,634 2, , ,111 Utilities 1,343,982 48,284 8,678 1,400,944 1,425,809 Insurance 123,692 8,974 2, , ,886 Building repairs and maintenance 533, , , ,487 Depreciation 3,147, ,400 72,138 3,350,669 3,352,833 Total real estate expenses $ 8,257, , ,276 8,768,531 9,022,159 (1) Other Real Estate includes costs associated with 452 Little Falls Place, One University Drive West, Brubacher Hall, 100 Nicholas Lane, and 18 Waverly Place. (2) Amount consists of Foundation salary expenses allocated to UABDC property. See accompanying independent auditors report. 25