RCF 08-03, Response to Request for Additional Information Regarding Financial Qualification and the Requalification Program for Renewal of Facility License No. CX-22

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Response to Request for Additional Information Regarding Financial Qualification and the Requalification Program for Renewal of Facility License No. CX-22
ML082060048
Person / Time
Site: Rensselaer Polytechnic Institute
Issue date: 07/21/2008
From: Winters G
Rensselaer Polytechnic Institute
To:
Document Control Desk, Office of Nuclear Reactor Regulation
References
RCF 08-03
Download: ML082060048 (32)
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Text

Rensselaer DEPARTMENT OF MECHANICAL, AEROSPACE, AND NUCLEAR ENGINEERING 50-.225 RCF 08-03 July 21, 2008 U.S. Nuclear Regulatory Commission Document Control Desk Washington, DC 20555 Re: Response to Financial Request for Additional Information

Dear Sir:

This letter provides the information requested by your letter of May 28, 2008, "Request for Additional Information Regarding Financial Qualification and the Requalification Program for Renewal of Facility License No. CX-22 for the Rensselaer Polytechnic Institute Reactor Critical Facility".

The requested financial information is attached to this letter. The information for the Requalification Program will be provided at a future date as a submittal of a revised program.

Sincerely; Glenn Winters, Director RPI Critical Experiments Facility I declare under penalty of perjury that the foregoing is true and correct.

Executed on:

Diate [3asil A. Stewart Assistant Vice President for Finance and Controller An9D Rensselaer Polytechnic Institute 110 8th Street I Troy, NY 12180-3590 USA AJ,2,

cc: Dr. Michael Podowski, Chair Dr. Jeffery Geuther RPI NSRB RCF Operations Supervisor Dr. Achille Messac, Interim Chair Dr. Peter Caracappa MANE Radiation Safety Officer Basil A. Stewart, Assistant Vice President William Kennedy for Finance and Controller NRC

Response to RAI of May 28, 2008 Requalification Plan

1. 10 CFR 55.53(h) requires all NRC-licensed reactor operators and senior reactor operators to be enrolled in a requalification program. However/the requalification program submitted with the relicensing report appears to pertain only to senior reactor operators. Explain how the requalification program ensures compliance with the requirements of 10 CFR 55.53(h), or submit a revised requalification plan that pertains to both senior reactor operators and reactor operators.

RPI Response - The requalification plan will be revised to pertain to reactor operators.

None exist at the RCF at present and it is considered unlikely that any will. The revised plan will be submitted by September 1, 2008.

Financial Qualifications

1. Under 10 CFR 50.33(d), "Contents of applications; general information," certain information is required by the applicant, Rensselaer Polytechnic Institute (RPI). To comply with the regulation, please update the application to include a statement of the organizational form of RPI (e.g., corporation), the state where it is incorporated or organized and the principal location where RPI does business, and the names, addresses and citizenship of RPI's directors (Board of Trustees) and principal officers. Also, please state whether RPI is owned, controlled, or dominated by an alien, foreign corporation, or foreign government, and if so give details.

RPI Response - RPI is a New York corporation principally doing business in New York.

The corporation is not owned, controlled, or dominated by an alien, a foreign corporation, or a foreign government. RPI is certified by the Internal Revenue Service as a IRC 501(c)(3) organization. A copy of the IRS certification is attached.

Trustees of Rensselaer Polytechnic Institute Name Address Citizenship Stephen Barre Servo Corporation of America, 123 Frost Street, USA Westbury, NY 11590-5026 Cornelius J. Barton 2 Guardhouse Drive, Redding, CT 06896-1827 USA Thomas R. Baruch CMEA Ventures, One Embarcadero Center, Suite 3250, USA San Francisco, CA 94111 Myles Brand National Collegiate Athletic Association, P.O. Box 6222, USA Indianapolis, IN 46206 John H. Broadbent, Jr. One Chestnut Hill Drive, Mohnton, PA 19540-9313 USA George Campbell, Jr. Cooper Union for the Advancement of Science and Art, USA 30 Cooper Square, 7 East 7th Street, 7th Floor, New York, NY 10003-7120 John W. Carr, Esq. Simpson Thacher & Bartlett, LLP, 425 Lexington Avenue, USA New York, NY 10017 Gary T. DiCamillo GW Premier America, Inc., 888 Washington Street, P.O. USA Box 9100, Dedham, MA 02026 Nicholas M. Donofrio IBM Corporation, New Orchard Road, Armonk, NY USA 10504 Page 1

Response to RAI of May 28, 2008 Arthur J. Gajarsa U.S. Court of Appeals, The National Courts Building, USA Suite 814, 717 MadisonPlace, NW, Washington, DC 20439 Arthur Golden Davis, Polk and Wardwell, 450 Lexington Ave, New York, USA NY 10017 Samuel Frank Heffner Dickinson-Heffner, Inc., P.O. Box 8691, BWl Airport, USA Baltimore, MD 21240-0691 Michael E. Herman Herman Family Trading Company, 6201 Ward Parkway, USA Kansas City, MO 64113 David M. Hirsch Vertex Distribution, P.O. Box 879, 327 Pine Street, USA Pawtucket, RI 02862-0879 Thomas N. lovino Judlau Contracting, 26-15 Ulmer Street, College Point, USA New York 11354-1137 Jeffrey L. Kodosky National Instruments - Res. & Dev., 11500 North USA Mopac, Austin, TX 78759 Kenneth T. Lally' 1119 Ruffner Road, Schenectady,. NY 12309-4612 USA Robin B. Martin Deer River Group, LLC, 888 17th Street, NW, Suite 1000, USA Washington, DC 20006 Francis L. McKone 228 Cotuit Bay Road, Cotuit, MA 02635 USA Nancy S. Mueller 2110 Waverley Street, Palo Alto,'CA 94301-3954 USA Curtis Priem 33385 Palomares Road, Castro Valley, CA 94552-9615 USA Janet C. Rutledge University of Maryland, Baltimore County, USA Administration Building, 2nd Floor, 1000 Hilltop Circle, Baltimore, MD 21250 Linda S. Sanford IBM Corporation, 294 Route 100, Mail Drop 3401, USA Somers, NY 10589 Paul J. Severino 680 Strawberry Hill Road, Concord, MA 01742-5406 USA Paula Loring Simon Wildlife Conservation Society, 2300Southern Boulevard, USA Bronx, NY 10460 Jackson P. Tai 75 Lower Cross Road, Greenwich, CT 06831 USA G. Robert Tod 5 Ebb Tide Drive, Cumberland Foreside, ME 04110 USA Harry Tutunjian One Monument Square, City Hall, Troy, NY 12180-3276 USA Ed Zander Motorola, Inc., 1303 E. Algonquin Road, Schaumburg, IL USA 60196 Admiral Ronald J. Zlatoper The Estate of James Campbell, 900 Fort Street Mall, USA Suite 1115, Honolulu, Hawaii 96813 Officers of Rensselaer Polytechnic Institute Shirley Ann Jackson, President Robert Palazzo, Provost Charles Carletta, Secretary of the Institute and General Counsel Laban Coblentz, Chief of Staff and Associate Vice President for Policy and Planning Page 2

Response to RAI of May 28, 2008 Virginia Gregg, Vice President, Finance John Kolb, Vice President for Information Services and Technology and Chief Information Officer Eddie Ade Knowles, Vice President, Student Life John Minasian, Vice President and Dean, Rensselaer Hartford Campus James Nondorf, Vice President, Enrollment, and Dean, Undergraduate and Graduate Admissions Curtis Powell, Vice President, Human Resources Claude Rounds, Vice President, Administration Wolf von MaltzahnActing Vice President, Research William Walker, Vice President, Strategic Communications and External Relations All officers are US citizens. The RPI business address to use for all officers is:

Rensselaer Polytechnic Institute 110 8 th St.

Troy, NY 12180

2. The staff will analyze RPI's financial statements for the current year, which are required by 10 CFR 50.71(b), to determine if the applicant is financially qualified to operate the RPI Reactor Critical Facility (RCF). Since RPI's financial statements are not included with the application, please provide a copy of the latest financial statements for the staff's review.

RPI Response - FY 2007 audited financial statements are appended.

3. Under 10 CFR 50.33(f)(2), "the applicant shall submit estimates for total annual operating costs for each of the first five years of operations of the facility." Please provide the projected operating costs of the RCF for each of the years FY2009 to FY2013 (the first five years after the projected license renewal) as well as RPI's source(s) of funding to cover the operating costs for the above fiscal years.

RPI Response - The RCF operating cost projections for 2009 - 2013 are below. A labor cost adjustment of 5% per year has been applies and a 10% adjustment per year has been applied to Other costs, primarily utilities. Any additional costs are too small to track within the Mechanical, Aerospace, and Nuclear Engineering (MANE) Department budget.

Year Labor Other 2009 $20,000 $8,000 2010 $21,000 $8,800 2011 $22,050 $9,680 Page 3

Response to RAI of May 28, 2008 2012 $23,152 $10,648 2013 $24,310 $11,713 These costs are supported by the MANE Department budget.

4. The November 19, 2002 submittal from RPI to the NRC (the Relicensing Report for the Reactor Critical Facility at Rensselaer Polytechnic Institute) identifies two recommissioning cost estimates that vary depending on the degree of work to be completed. As stated in the application, decommissioning costs are estimated to be about

$50,000 "if the only objective is to remove all fissionable material (i.e., the fuel) from the facility," or $500,000 for "a complete decommissioning including removal of all hazardous waste and asbestos, and clean-up of the facility grounds (presumably contaminated from former ALCO plant operations)." Since the application does not clearly state certain details regarding the eventual decommissioning of the RCF, the staff requests the applicant to complete and/or update the 2002 submittal to 2008 by including the following:

(a) To comply with 10 CFR 50.75(d); a current cost estimate in 2008 dollars to meet the NRC's radiological release criteria for decommissioning the facility for unrestricted use, describing the basis on how the cost estimate was developed, showing costs specifically broken down into the categories of labor, waste disposal, other items (such as energy, equipment, and supplies), and a contingency factor of at least 25%.

(b) A statement of the decommissioning method to be used (e.g., DECON or other method).

(c) To comply with 10 CFR 50.75(d), a description and basis of the means of adjusting the cost estimate .(the NRC staff notes that cost escalation factors may be appropriately different for the different categories of decommissioning costs) and associated funding level periodically over the life of the facility. Also, please provide a numerical example showing how the cost estimate will be updated periodically.

RPI Response - The anticipated costs for decommissioning in 2008 dollars, based upon reasonably conservative assumptions about characterization needs and waste disposal volume are:

Reactor Critical Facility Labor $ 167,140.00 Waste Disposal $ 107,700.00 Other (Equipment and Supplies) $ 37,713.75 Total Decommissioning Cost with 25% Contingency $ 390,692.19 The decommissioning method used will be decontamination of the primary structure and disposal of appropriate equipment. Waste disposal cost estimates are based upon disposal of the primary reactor components at Clive, UT. Labor costs cover both Page 4

Response to RAI of May 28, 2008 characterization anddisposal operations and are based upon prevailing wages for each category of worker.

The decommissioning cost estimate will be reviewed annually. The primary drivers of the cost estimate are the labor and waste disposal. Labor cost escalation will be based on changes in local labor prevailing wages. Waste disposal cost escalation will be based upon current disposal rates at EnviroCare. Costs for other items (equipment and supplies) will be adjusted by the change in the consumer price index.

5. As stated in RPI's 1991 Decommissioning Report, the applicant pIut assets with a market value of $50 000 into a prepaid custodial account. Since 10 CFR 50.33(f)(2) requires that "Applicants to renew or extend the term of an operating license for a nonpower reactor shall include the financial information that is required in an application for an initial license, the applicant needs to provide the following information with respect to the decommissioning financial assurance method to be used for the RCF:

(a) State the method to be used (e.g., an external trust or other prepayment method).

(b) Document that the chosen financial assurance method meets all-of the requirements of 10 CFR 50 75(e)(1)(i) if the method used is prepayment, or 50.75(e)(1)(m) if the method used is a surety method, insurance, or other guarantee method, and is consistent with the applicable guidance in Section 2.2 of NRC Regulatory Guide 1.159, "Assuring the Availability of Funds for Decommissioning Nuclear Reactors."

(c) Provide a copy of theagreement governing any prepaid account used, and any other documentation pertaining to such prepaid account.

(d) State the amount of funds currently in the prepaid account and RPI's plans to adjust the level of funds in the account, if such is to continue, periodically over the life of the facility to meet changes in the decommissioning cost estimate.

RPI Response - Currently, Rensselaer has $70,000+ in a 3-month certificate of deposit at HSBC Bank. At any given point in time, Rensselaer holds cash and A-rated bonds in its

.endowment fund valued at $700+ million and would like to achieve self-liquidity. When Rensselaer achieves this status from the Nuclear Regulatory Commission; the goal will be to liquidate the certificate of deposit for Rensselaer's general use.

Page 5

Internil Rovenue So'iNce May H.y28, 1971 .lAU:T:61O;SR

  • Renesmlaer Polytechnic Institute 110 Eighth Street Troy, VeV York 12181 Otl thbe basis of your stateentt and the Information recently sutmIttC6 rearding the admissiona policy of your institution, end the PublIcIzing thereof, and vitb the understauodmg that such pOlicles will remain in effect, ve confirm the exempt status of You. anstitution under Internal Revenue Code, &ectio 501(a), a$

an organitation described in bection 501(c)(3).

anit confirzation does wt preclude a rtevaluation of your a dsissioza policy at a later date. It also dioes not preclude an ex&- Itztilo of the operetiows Of your institution to determine if the policy as described in your statement Is being impleented.

Very truly Vours, Acting District Dirvctor

-$orm L-342 (11-70)

Rensselaer Polytechnic Institute Combined Financial Statements For the Years Ended June 30, 2007 and 2006

Rensselaer Polytechnic Institute Combined Financial Statements For the Years Ended June 30, 2007 and 2006 Contents Report of Independent Auditors Combined Financial Statements Combined Statements of Financial Position at June 30, 2007 and 2006 2 Combined Statement of Activities for the Year Ended June 30, 2007 3 Combined Statement of Activities for the Year Ended June 30, 2006 4 Combined Statements of Cash Flows for the Years Ended June 30, 2007 and 2006 5 Notes to the Combined Financial Statements 6 - 22

pRCEVATERHOUsECOOPER5 I PricewaterhouseCoopers I LP 125 High Street Boston, MA 02110-1707.

Telephone (617) 530 5000 Facsimile (617) 530 5001 wwpw.corn Report of Independent Auditors To The Board of Trustees Rensselaer Polytechnic Institute In our opinion, the accompanying combined statements of financial position and the related combined statements of activities and cash flows present fairly, in all material respects, the financial position of Rensselaer Polytechnic Institute and its affiliates ("Rensselaer") at June 30, 2007 and 2006, and the change in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

These financial statements are the responsibility of Rensselaer'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 of America. Those standards 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 and disclosures 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.

As discussed in Note N and L to the combined financial statements, Rensselaer changed the manner in which it accounts for conditional asset retirement obligations in 2006 and the manner in which it accounts for defined benefit pension and other postretirement plans in 2007.

August 31, 2007

Rensselaer Polytechnic Institute Combined Statements of Financial Position At June 30, 2007 and June 30, 2006 (in thousands of dollars)

Assets 2007 2006 Cash and cash equivalents (Note B) $ 7,610 $ 10,492 Accounts receivable, net (Note B)

Student related and other 5,778 5,123 Research, training and other agreements (Note F) 22,465 20,441 Contributions receivable, net (Note E) 33,549 30,611 Contributions from external remainder trusts 6,092 4,137 Inventories (Note B) 2,465 2,603 Prepaid expenses and other assets 614 1,305 Deposits with bond trustees (Note K) 21,930 56,941 Student loans receivable, net (Note B) 27,355 27,044 Investments, at market (Note 1) 835,383 702,717 Land, buildings and equipment, net (Note J) 577,024 513,013 Total assets S 1,540,265 $ 1,374,427 Liabilities Accounts payable and accrued expenses $ 50,609 $ 32,319 Deferred revenue 14,040 10,802 Short-term portion of long-term debt (Note K) 7,735 5,203 Liability on interest rate swap agreements (Note B) 11,932 11,743 Split interest agreement obligations (Note G) 12,743 10,449 Other liabilities 8,037 7,618 Pension.liability (Note L) 45,098 58,109 Accrued postretirement benefits (Note L) 13,690 13,383 Refundable government loan funds 25,686 25,282 Long-term debt (Note K) 420,374 411,599 Total liabilities $ 609,944 S 586,507 Net Assets (Note C)

Unrestricted 579,157 493,282 Temporarily restricted 114,536 78,682 Permanently restricted 236,628 215,956 Total net assets 930,321 787,920 Total liabilities and net assets $ 1,540,265 S 1,374,427 The accompanying notes are an integral part of these combined financial statements.

2

Rensselaer Polytechnic Institute Combined Statement of Activities For the year ended June 30, 2007, with comparative June 30, 2006 totals (in thousands of dollars) Temposarily Permanently Total Total Unrestricted Restricted Restricted .hune 4(0 20(17 .h,- 30. 2006 Operatiing Revenue:

Student related revenue:

Student tuition and fees, net (Note D)

Undergraduate 86,170 S S 86,170 $ 78,819 Graduate 41,394 41,394 36,995 Education far working professionals 8,2016 8,206 8,935 Fees 1,147 1,147 898 Auxiliary services 40,855 40.855 38.227 Student related revenue 177.772 - 177,772 163,874 Gifts (Note B and E) 25,012 29,415 54.427 27,719 Grants and contracts: (Note F)

Direct:

Federal 48,578 48,578 45,199 State 15,273 15,273 10,889 Private 5,076 15 5,091 4,457 Indirect (Note F) 15,460 15,460 13,576 Grants and contracts 84,387 15 84,402 74,121 Insestmtet return: (Note [)

Dividends and interest 12,948 1,245 14,193 11,954 Realized accumulated gains used to meet spending policy 14,627 1.554 16.181 17A493 Endowment spending for Rensselaer Plan initiatives 35,484 35,484 34,000 Interest on student loans 74 74 137 Investment retttnr 63,133 2,799 65,932 63,584 Rensselaer Technology Park 4,657 4,657 5,183 Other 7,276 30 7,306 7.666 Net assets released from restrictions (Note B) 6,936 (6,936)

Total operating revenue 369,173 25,323 394,496 342,147 OperatingExpenses (Note H):

Instruction 133,255 133,255 127,720 Research:

Sponsored 72,503 72,503 68,735 Unsponsnred 12,620 12,620 12,041 Student Services 9,9(h) 9,900 9,719 Institutional and academic support 82,897 82,897 81,239 Externally funded scholarships and fellowships 11,700 11,700 11,493 Auxiliary services 26,286 26,286 24,973 Rensselaer Technology Park 3,710  : 3,710 3,245 Defined benefit pension and poslretirement 14,088 14,088 10,291 Debt reutarketing costs 3,234 Total operating expenses 366,959 - 366.959 352.690 Change in net assets from operating activities 2,214 25,323 27,537 (10,543)

Non-operating (Note B) :

Realized and unrealized gains (losses), net of spending policy (Note I) 66,625 9.391 798 76,814 9.702 Realized and unrealized gains (losses), interest rate swaps (Note B) (1,209) (1,209) 15,245 Adjustment for pension liability (Note L) 25,848 25,848 10,153 Life income and endowment gifts 752 19,459 20,211 8,808 Change in value of life income contracts (Note G) 388 415 803 630 Gain (loss) on disposal of fixed assets 169 169 (3,058)

Change its net assets from non-operating activities 91.433 10,531 20,672 122.636 41,480 Increase in net assets before effect of a change in accounting principle 93,647 35,854 20,672 150,173 30,937 Cumulative effect of a change in accounting principle (Note L and N) (7,772) - - (7,772) (6,541)

Increase in net assets after cumulative effect ofa change in accounting principle 85,875 35,854 20,672 142,401 24,396 Net assets at beginning ofyear 493,282 78,682 215,956 787,920 763,524 Net assets at end of year S 579,157 S 114,536 S 236,628 $ 930,321 $ 787,920 The accompanying notes are an integral part of these combined financial statements.

3

Rensselaer Polytechnic Institute Combined Statement of Activities For the year ended June 30, 2006 (in thousands of dollars) Temprorrily Permanently Total Unrestricted Resrricted Restricted Junte 30, 2006 Operating Revenue:

Student related revenue:

Studcnt tuition and fees, net (Note D)

Undergraduate $ 7.8(9 $ S S 78,819 Graduate 36,995 36,995 Education for working professionals 8,935 8,935 Fees 898 898 Auxiliary services 38.227 38,227 Student related revenue 163.874 - 163.874 Gifts (Note B and E) 25,956 1,763 27,719 Grants and Contracts: (Note F)

Direct:

Federal 45,199 45,199 State 10,889 10,899 Private 4.457 4.457 Indirect (Note F) 13.576 13.576 Grants and contracts 74,121, - 74,121 Ilvestmrrent rctutn: (Note 1)

Dividends and interest 11,0149 9015 11,954 Realized accuttulated gains used to meet spending prlicy 16,011 1,482 17,493 Endowment spending for Rensselaer Plan initiatives 34,000 34,000 interest on student loans 137 137.

Invesitnent return 61,197 2,387 63,584 Rensselaer Technology Park 5,183 5,183 Other 7.655 11 7.666 Net assets released from restrictions (Note B) 6,294 (6,294)

Total operating revenue 344.280 (2,133) 342,147 Operting El.pe.se. (Note H):

Instruction 127.720 127,720 Research:

Sponsored 68,735 68.735 Unsponsorcd 12,041 12,041 Student Services 9.719 9,719 Institutional and academic support 81,239 91,239 Externally funded scholarships and fellowships 11,493 11,493 Auxiliary services 24,973 24,973 Rensselaer Technology Park 3.245 3,245 Defined benefit pension and postretirement 10,291 10,291 Debt remarketing costs 3.234 3,234 Total operating expenses 352,690 . 352.690 Change in net assets from operating activities 18,410) (2,133) 11(10,543)

Non-operating (Note B):

Realized and unrealized gains (losses), net of spending policy (Note I) 5.206 4.062 434 9,702 Realized and unrealized gains (losses), interest rate swaps (Note B) 15,245 15,245 Adjustment rf minimum pension liability (Note L) 10,153 10,153 Life income and endowment gifts 183 . 8.625 8,80(8 Change in value ofslilr income contracts (Note G) 290 350t 630 Loss on disposal of fixed assets (3,058) (3.058)

Othler (76) 260 (194) -

Change in net assets fiotr non-operating activities 27,470 4,785 9,225 41,480 Increase in net assets before effect of a chattge in accounting princiftle 19,060 2.652 9,225 30,937 Cumulative effect of a change in accounting principle (Note N) (6,541) - - (6.541)

Increase in net assets after cutmlative cfiect of a change in accounting principle 12,519 2,652 9,225 24,396 Net assets at beginning of year 480.763 76,030 206.731 763,524 Net assets at end of year $ 493.282 $ 78,682 $ 215.956 S 787,920 The accompanying notes are an integral part of these combined financial statemets.

,I

Rensselaer Polytechnic Institute Combined Statements of Cash Flows For the years ended June 30, 2007 and 2006 (in thousands oftdollars) 2007 2006

. . . . . . . ... 2 .. .

Cashfloivfroin operatingactivities Total change in net assets $ 142,401 S 24,396 Adjustments to reconcile change in net assets to net cash used in operating activities:

Depreciation and amortization 23,798 25,801 Accretion expense 383 (Gain) loss on disposal of fixed assets (169) 3,058 Provision for uncollectible accounts and loans (1,223) (1,194)

Cumulative effect of accounting change 7,772 6,541 Realized and usrealized gains on investments (128,479) (61,195)

Change in pension liability (21,481) (9,547)

Unrealized loss (gain), interest rate swap 189 (17,929)

Contributions of equipment and other capital items (26,315) (1,859)

Contributions restricted for long term investment (20,211) (8,808)

Contributions from external trusts, net of change in value (1,955) 1,189 Changes in operating assets and liabilities:

Accounts receivable (1,416) (1,428)

Contributions receivable (2,938). 4,715 Inventories 139 (572)

Prepaid expense and other assets 691 11 Accounts payable and accrued expenses 10,246 (5,274)

Present value of split interest agreements, net of terminations 2,294 856 Deferred revenue and other liabilties 3,657 72 Accrued nostretirement benefits 1004 772 Net cash used in operating activities (11,613) (40,395)

Cash flowi fromn investing activities Proceeds from sale of investments 234,933 217,182 Purchase of investments (239,120) (210,697)

Additional student loans granted (7,568) (6,625)

Student loans paid 7,217 8,244 Deposit with bond trustees 35,011 (11,531)

Proceeds from sale of land, building, and equipmenten 5,874 519 Purchase of land, building and equipment (59,803) (61,634)

Net cash used in investing activities (23,456) (64,542)

Cash]lovti-ont financing activities Contributions restricted for endowments 20,211 8.808 Payment of annuity obligations (1,384) (1,358)

Proceeds from issuance of bonds - 62,380 Proceeds from loans/line of credit 55,199 103,250 Repayment of debt/line of credit (42,243) (64,689)

Government loan funds 404 298 Net cash provided by financing activities . 32,187 108,689 Net (decrease) increase in cash and cash equivalents (2,882) 3,752 Cash and cash equivalents at beginning of the year 10,492 6,740 Cash and cash equivalents at end of the year $ . 7,610 $ 10,492 Non cash investing activities Gifts of equipment and other capital items $ 26,315 1,859 Cumulative effect of accounting change-plant and equipment 394 Purchases of capital assets included in accounts payable ' -7,396 3,967 Supplemtental disclosures of cashlflour infrtnatiot Cash paid during the year for interest $ 18,968 12,837_,

The accompanying notes are an integral part of these combined financial statements.

5

Rensselaer Polytechnic Institute Notes to the Combined Financial Statements For the Years Ended June 30, 2007 and June 30, 2006 Note A- Organization Rensselaer Polytechnic Institute (Rensselaer) is a nonsectarian, coeducational institution composed of five schools: Architecture, Engineering, Humanities and Social Sciences, Lally School of Management and Technology, and Science. More than 130 programs and 700 courses lead to bachelor's, master's, and doctoral degrees in all five schools.

Note B- Summary of Significant Accounting Policies Basis of Consolidation The accompanying combined financial statements of Rensselaer have been prepared on the accrual basis and include Rensselaer Hartford Graduate Center, Inc. (Center). All significant inter-organizational accounts have been eliminated.

Net Asset Classification Unrestricted Net Assets include all resources which are not subject to donor-imposed restrictions other than those which only obligate Rensselaer to utilize funds to further its educational mission.

Temporarily Restricted Net Assets carry specific, donor-imposed restrictions on the expenditure or other use of contributed funds. Temporary restrictions may expire either because of the passage of time or because certain actions are taken by Rensselaer which fulfill the restrictions:

Permanently Restricted Net Assets are those that are subject to donor-imposed restrictions which will never lapse, thus requiring that the funds be retained permanently.

Expenses are generally reported as decreases in unrestricted net assets. Expirations of donor-imposed stipulations that simultaneously increase one class of net assets and decreaseanother are reported as "net assets released from restrictions".

Use of Estimates The preparation of financial statements in-conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of-contingent assets and liabilities at the date, of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Reclassi cations It is the Institute's policy to reclassify, where appropriate, prior year financial statements to conform to the current year presentation. For fiscal year 2006, included in the combined statement of activities, research expenses were reclassified from sponsored to unsponsored.

Tax Exempt Status Rensselaer is a tax exempt 501 (c)(3) Corporation under the Internal Revenue Service Code.

Contributions Unconditional contributions are recognized as contributions receivable at their estimated net present value when pledged. Temporarily restricted net assets are reclassified to unrestricted net assets when an expense is incurred that satisfies the donor-imposed restriction., Expenses are generally reported as decreases in unrestricted net assets. Contributions of assets other than cash are recorded. at their estimated fair value at the date of gift. Rensselaer does not record gifts of the use of a long lived asset if the assets are used for academic or educational research only. Conditional promises to give are not recognized until the conditions on which they depend are substantially met.

6

Rensselaer Polytechnic Institute Notes to the Combined Financial Statements For the Years Ended June 30, 2007 and June 30, 2006 Note B- Summary of Significant Accounting Policies, (continued)

Recently Adopted Accounting Pronouncements In September 2006, the FASB issued the Statement of Financial Accounting Standards No. 158, Employers'Accountingfor Defined Benefit Pension and Other PostretirementPlans(FAS 158). FAS 158 requires employers that sponsor defined benefit plans to recognize the funded status of a benefit plan, recognize the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost, measure defined benefit plan assets and obligations as of the date of the employer's fiscal year end statement of financial position, and disclose in notes to financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year.

Rensselaer adopted the recognition provisions of FAS 158 for its fiscal year ending June 30, 2007.

Rensselaer also elected to adopt early the measurement date provisions of FAS 158 and changed the measurement date for its defined benefit pension plan from March 31 to June 30 for its 2007 financial statements. Rensselaer elected the alternative transition method for the change in measurement date.

See Note L for the effect of the adoption.

In March 2005, the FASB issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (FIN 47), which was issued to provide clarity surrounding the recognition of conditional asset retirement obligations, as referred to in FASB Statement No. 143, AccountingJbr Asset Retirement Obligations. FIN 47 defines a conditional asset retirement obligationas a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. Based on the guidance in FIN 47, management of Rensselaer determined that sufficient information was available to reasonably estimate the fair value of known retirement obligations.

FIN 47 requires the initial application of the interpretation to be recognized as a cumulative effect of a change in an accounting principle. Specifically, FIN 47 requires the recognition, a cumulative effect, the cumulative accretion and accumulated depreciation for the period from the date the liability was incurred to the date of adoption of this interpretation. The liability incurred date is presumed to be the date upon which the legal requirement to perform the asset retirement activity was enacted. See Note N for the effect of the adoption for Rensselaer.

Non-OperatingActivities Rensselaer considers the change in net assets fr'om operating activities on the combined statement of activities to be its operating indicator. Non-operating activities include realized and unrealized gains or losses on investments not used to support operations, realized and unrealized gains or losses on interest rate swap agreements, changes in the value of split interest'agreements, loss on defeasance of debt, adjustment for minimum pension liability, life income and endowment-gifts and loss on disposal of fixed assets.

Cash and Cash Equivalents Cash and cash equivalents include all highly liquid debt instruments with maturity of three months or less when purchased.

7

Rensselaer Polytechnic Institute Notes to the Combined Financial Statements For the Years Ended June 30, 2007 and June 30, 2006 Note B- Summary of Significant Accounting Policies, (continued)

Accounts and Notes Receivable Accounts and notes receivable arising from tuition fees, Rensselaer Technology Park activity, and amounts owed on research contracts are carried net of an allowance for doubtful accounts as follows (in thousands):

June 30, 2007 June 30, 2006 Student-related receivables $730 $1,036 Loans to students 1,779 1,739 Hartford Campus 61 67 Other 14 14 Rensselaer Technology Park 36 36 Research, training and other agreements 195 1,146 Total allowances for doubtful accounts 5825 S4038 It is not practicable to determine the fair value of student loan receivables because they are primarily federally sponsored student loans with U.S. government mandated interest rates and repayment terms and subject to significant restrictions as to their transfer or disposition.

In ventories Inventories consist mainly of bookstore and computer store goods and maintenance supplies and are stated at the lower of cost or current market value, based upon the first-in, first-out method.

Investments Investments are recorded in the following manner:

Short term investments consisting principally of money market funds and short term notes as well as long term investments consisting principally of equity securities; bonds and notes with readily determinable fair value are recorded at their quoted market prices.

, Private equities and certain non-marketable securities (including real assets and certain short term investments) are valued using current estimates of fair value by management based on information provided by the general partner or investment manager for the respective funds.

Marketable alternatives are valued at the unit value determined by the fund's administrator based on quoted market prices of the underlying investments.

As noted above, the values of certain investments as recorded are based upon estimates regarding their fair value., These values do not necessarily represent the amounts that Rensselaeir would realize upon liquidation of these investments.

Purchase and sale transactions are recorded on a trade date basis. Realized gains and losses are recognized on an average cost basis when securities are sold.

8

Rensselaer Polytechnic Institute Notes to the Combined Financial Statements For the Years Ended June 30, 2007 and June 30, 2006 Note B- Summary of Significant Accounting Policies, (continued)

Land, Buildings and Equipment Land, buildings and equipment are carried at cost or at the fair market value at the date of the gift.

Depreciation is computed on a straight-line basis over the estimated useful lives of buildings (50 years) and equipment (3-20 years). All gifts of land, buildings and equipment are recorded as unrestricted operating activity unless explicit donor stipulations specify how the donated assets must be used. Absent explicit donor stipulations about how long those long-lived assets must be maintained, the donor restrictions are reported as being released when the donated or acquired long-lived assets are placed in service. Gifts of land, buildings and equipment with explicit donor stipulations specifying how the assets must be used or how long the assets must be maintained are recorded as temporarily restricted operating activity and reported as being released over the period of time required and be maintained as the assets are used for its specified purpose.

Interest Rate Swap Agreements Rensselaer has entered into various interest rate swap agreements in order to convert variable rate debt to a fixed rate; thereby economically hedging against changes in the cash flow requirements of Rensselaer's variable rate debt obligations. Rensselaer has also entered into an interest rate swap to convert fixed rate debt to variable rate, thereby economically hedging against changes in the fair value of the debt.

Accordingly, the interest rate swap contracts are reflected at fair value in Rensselaer's combined statements of financial position, and the related portions of variable fixed-rate debt being hedged are reflected at an amount equal to their carrying value.

Net payments or receipts under the swap agreements along with the change in fair value of the swaps are recorded in non-operating activities as realized and unrealized gains or losses on interest rate swap agreements.

Note C- Combined Net Assets Combined net assets of Rensselaer are comprised of the following (in thousands):

Detail of Net Assets 2007 2006 Operating $ 23,047 $ 28,983 Funding for facilities 193,785 172,954 Unexpended 3,394 7,213 Funding for student loans 4,809 6,349 Annuity and life income 26,328 24,427 Realized & unrealized losses, interest rate swaps (11,932) (11,743)

Adjustment for pension liability (45,098) (58,109)

Endowment and other net assets functioning as endowment 735,988 6!7,846 Total net assets 3 7&87920 9

Rensselaer Polytechnic Institute Notes to the Combined Financial Statements For the Years Ended June 30, 2007 and June 30, 2006 Note D- Tuition Revenue The undergraduate student discount rate was 45.8% and 44.9% for the years ended June 30, 2007 and 2006, respectively.

Student tuition by segment and location is as follows (in thousands):

2007 2006 Undergraduate tuition:

Troy Campus $158,975 $143,197 Less institutional aid (72,805) (64,378)

Total undergraduate tuition 7 Graduate tuition:

Troy Campus $30,783 $28,651 Hartford Campus 10611 8,344 Total graduate tuition 4 Education for working professionals:

Troy Campus $7,333 $8,085 Hartford Campus 873 850 Total education for working professionals $8.206 S8&935 Note E- Contributions Receivable Contributions receivable are expected to be collected as follows at June 30 (in thousands):

2007 2006 In one year or less $1,179 $866 Between one year and three years 13,640 13,215 Greater than three years 27,402 24,663 Less:

Present value discount (2.27 - 6.43%) (8,125) (7,735)

Allowance for uncollectible pledges (547) (398)

Total contributions receivable $30,611 Conditional pledges, which are not accrued, approximate $10,953,000 at June 30, 2007, of which

$527,000 was unrestricted as to purpose. The remaining conditional pledges are restricted to purpose as follows: $4,011,000 current programs; $6,324,000 endowment; and $91,000 plant. It is anticipated that the conditional pledges will be collected over an average life of three years. Bequest expectancies totaling $76,672,000 have been excluded from these amounts and are not recorded in the financial statements. In compliance with donor stipulations related to the $360,000,000 transformational gift, income is being recognized as cash payments are received.

Note F- Research Grants and Contracts Rensselaer has been awarded approximately $83,926,000 and $81,535,000 of grants and contracts which have not been advanced or expended as of June 30, 2007 and 2006, respectively, and accordingly, are not recorded in the financial statements.

10

Rensselaer Polytechnic Institute Notes to the Combined Financial Statements For the Years Ended June 30, 2007 and June 30, 2006 Note G- Split Interest Agreements Split interest gift agreements consist primarily of irrevocable charitable remainder trusts, pooled income funds and charitable gift annuities for which Rensselaer is the remainder beneficiary. Assets held in these trusts are included in investments and recorded at their fair value when received. The value of split interest assets included in the investments at June 30, 2007 and 2006 were $32,974,000 and $30,739,000, respectively. Contribution revenues are recognized at the dates the trusts are established net of the liabilities for the present value of the estimated future payments to be made to the donors and/or other beneficiaries. The liabilities are adjusted during the term of the agreements for changes in the value of the assets, accretion of the discount and other changes in the estimates of future benefits. Discount rates range from 3.8% to 10.6%. The liability for the present value of deferred gifts of $12,743,000. and

$10,449,000 at June 30, 2007 and 2006, respectively, is based upon actuarial estimates and assumptions regarding the duration of the agreements and the rates to discount the liability. Circumstances affecting these assumptions can change the estimate of this-liability in future periods.

Rensselaer is also beneficiary of certain perpetual trusts held and administered by others. The present values of the estimated future cash receipts from the trusts are recognized as contributions from external trusts and contribution revenue at the date Rensselaer is notified of the establishment of the trust.

Distributions from the trusts are recorded as investment income in the period they are received. Changes in fair value of the trusts are recorded as non-operating gains or losses in temporarily or permanently restricted net assets.

Note H- Natural Expense Classification The following table compares expenses by type for the years ended June 30, 2007 and 2006, respectively (in thousands):

2007 2006 Salaries and wages $144,000 $139,042 Employee benefits excluding retirement 26,619 27,448 Retirement plan expense 19,640 14,796 Subtotal employee benefits 46,259 42,244 Total compensation $190,259 $181,286 Supplies & services 65,663 65,451 Utilities 12,065 12,541 Employee travel 5,867 6,037 Taxes & insurance 7,253 5,217 Telecommunications 391

  • 455 Library materials 2,057 2,025 Interest on debt 20,246 12,945 Depreciation and amortization 23,798 25,801 Student aid and fellowships 35,733 33,814 Operating lease agreements 3,250 3,173 Provision for uncollectible accounts 128 516 Other 249 3,429 Total non salary 17j6700 171,.404 Total expenses $36 $

11

Rensselaer Polytechnic Institute Notes to the Combined Financial Statements For the Years Ended June 30, 2007 and June 30, 2006 r,

Note I- Investments The carrying value and cost of investments at June 30 is as follows (in thousands):

2007 2006 Carrying Carrying Value Cost Value Cost Short-term investments $ 27,713 S 27,709 S 44,804 $ 41,955 Bonds and notes 109,823 102,939 90,853 89,692 Domestic equity securities 184,267. 145,237 165,249 143,2_57 Foreign equity securities 156,174 97,375 144,816 111,672 Real estate 70,010 65,078 30,096 28,095 Marketable alternatives 166,203. 131,437 126,617 110,575 Private equity partnerships 121,193 128,115 100,282 148,421 Total investments $835383 $697,890 $702,717 $673.667 Approximately $156,174,000 of the investment portf6lio at June 30, 2007 is invested in international securities that are subject to the additional risk of currency fluctuation.

At June 30, 2007, Rensselaer has committed to investing an additional $187.9*million in various equity and real asset partnerships.

Rensselaer has reviewed unrealized losses on its investments and has concluded that none represent other than temporary losses from market activities:

Spendingfirom Endowment Funds Rensselaer has adopted a "total return" policy for endowment spending. This approach considers current yield (primarily interest and dividends) as well as the net appreciation in themarket value of investments when determining a spending amount. Under this policy, the Board of Trustees establishes a spending rate which is then applied to the average market value of investments. Current yield is recorded as revenue and the difference between current yield and the spending rate produces the use of realized gains spent under the total return formula. During fiscal year 2007, certain restricted endowment funds did not have sufficient accumulated unspent income or gains to fund their spending allocation or market deficiencies and Rensselaer has borrowed funds from unrestricted endowment to offset the spending allocation.

Dividends, Interest and Realized and Unrealized Gains and Losses Total dividends, interest and realized and unrealized gains (reflected as both operating and non-operating activity) are as follows (in thousands):

2007 2006 Dividends and interest available for spending $ 14,193 $11,954 Realized gains 20,161 55,415 Unrealized gains 108,318 5,780 Total return 142,672 73,149 Less: amounts allocated for spending (28,574) (28,458)

Net return $1 12

Rensselaer Polytechnic Institute Notes to the Combined Financial Statements For the Years Ended June 30, 2007 and June 30, 2006 Note I- Investments, (continued)

Investment management fees were $2,350,000 and $2,347,000 in 2007 and 2006, respectively, and are netted against realized and unrealized gains.

In May 2000 Rensselaer's Board of Trustees approved the Rensselaer Plan, a strategic roadmap to achieving greater prominence in the 21 t century as a top-tier world-class technological research university with global reach and global impactl The Board also committed to endowment withdrawals in excess of Rensselaer's spending formula, as necessary, to fund investment in Plan initiatives. To date,

$182 million has been spent or committed for such initiatives, exclusive of capital expenditures. In fiscal year 2005, an initial withdrawal from quasi-endowment of $20 million was recognized and displayed in the Statement of Activities as "endowment spending for Rensselaer Plan initiatives." For fiscal year 2006 and fiscal year 2007, the amount reflected as "endowment spending for Rensselaer Plan initiatives" equals $34 million and $35.5 million, respectively. These amounts reflect Board approved commitments against the endowment with the residual of $182 million investment being funded from operations; Derivative FinancialInstrumnent Investments include derivative financial instruments that have been acquired to reduce overall portfolio risk by hedging exposure to certain assets held in the portfolio. At June 30, 2007, there were approximately $3,059,000 of open or unsettled forward exchange contracts to sell foreign currency and

$3,054,000 of open or unsettled forward exchange contracts to purchase foreign currency. These contracts are denominated in eleven North American, European, Asian and Australian currencies and will settle at various dates through July, 2007. The impact on the combined statement of activities is not significant.

Forward contracts are marked to market monthly. The market and credit risks related to these derivative investments are not materially different from the. risks associated with similar underlying assets in the portfolio. These derivative financial instruments are recorded at estimated fair value in investments.

Note J- Land, Buildings, and Equipment Land, buildings, and equipment consist of the following at June 30 (in thousands):

2007 2006 Land and improvements $ 20,790 $ 20,601 Buildings 488,418 487,809 Equipment 211,097 180,076 Construction in progress 155,529 105,088 Total land, buildings & equipment 875,834 793,574 Less accumulated depreciation (298,810) (280,561)

As of June 30, 2007, Rensselaer had $14,617,000 of open commitments to contractors for construction on work being performed.

13

Rensselaer Polytechnic Institute Notes to the Combined Financial Statements For the Years Ended June 30, 2007 and June 30, 2006 Note K- Debt Outstanding The following table and footnotes illustrate Rensselaer's various debt obligations, all of which are repaid from the general operations of Rensselaer and the Center, as appropriate.

Outstanding bonds and notes payable of Rensselaer are comprised of the following (in thousands):,

Debt..

Year of Final Weighted Average June 30 Maturity Annual Interest Rate 2007 2006 U.S. Department of Education Dormitory Bonds and 1988 Mortgage Loan 2018 3.0% $ 1,794 S 1,923 Rensselaer County IDA - Industrial Development Facility Issue:

Series 1997A (I) 2022 4.34% 9,334 9,666 Series 1999A and B (2) 2030 5.11%. 36,608 37,788 Series 2006 (10) 2036 4.84% 62,480 62,523 Troy Industrial Development Authority Civic Facility Issue:

Series 2002A (3) 2015 5.43% 16,410 16,496 Series 2002B-E (3) 2042 Variable 197,535 197,572 2004 Bank of America Term Loan (5) 2019 4.57% 27,938 29,587 2006 Bank of America Term Loan (8) 2011 5.57% 35,000 35,000 2006 Bank of America Term Loan (9) 2011 5.57% 13,000 10,000 2007 Bank of America Term Loan (11) 2027. 5.55% 14,250 Student Loan ProgramDebt DASNY 1992 CUEL 2009 6.78% 1,601 2,276 New York State Urban Development Corporation (UDC) CII mortgage loan (4) 2026 11.1% 3,660 3,784 (imputed)

Rensselaer Technology Park Debt:

2005 Bank of America Term Loan (7) 2013 5.82% 8,322 9,426 State of Connecticut Health and Educational Facilities Authority - 1985 2006 4.5% - 525 Mortgage Agreement (6)

Capital Lease Agreements 2007 Various 177 236

$428J109 8j4156802 Debt principal outstanding is reflected net of bond discount and/or capitalized issuance cost where applicable in the amount of $6,038,000 and $5,955,000 at June 30, 2007 and 2006, respectively. Such costs are being amortized on the straight-line method over the term of the related indebtedness.

14

Rensselaer Polytechnic Institute Notes to the Combined Financial Statements For the Years Ended June 30, 2007 and June 30, 2006 Note K- Debt Outstanding, (continued)

Long-term debt and notes payable are collateralized by certain physical properties with a carrying value of

$71,447,000 and by pledges of specified portions of tuition, fees and revenues from various facilities.

At June 30, 2007, Rensselaer had $21,930,000 of assets held by trustees for construction, student loans, debt service and other project-related expenses. Certain of thie long term debt and notes payable contain restrictive covenants including the maintenance of specified deposits with trustees.

Notes to Debt Outstanding I. On March 12, 1997, Rensselaer. entered into an agreement with the Rensselaer County Industrial Development Agency, providing for the issuance of $13,240,000 in revenue bonds for the purpose of financing the renovation of three of Rensselaer's buildings and the acquisition of a new student record system. The bonds bear a variable interest rate that resets weekly, but in no event may exceed 12% per annum.

2ý On June 30, 1999, Rensselaer entered into an agreement with the Rensselaer County Industrial Development Agency, which provided for the issuance of $41,110,000 in revenue bonds.

Proceeds from the issue in the amount of $24,196,000 were used for the construction and/or renovation of three buildings, issuance costs, and to legally defease Dormitory Authority Series 1991 Bonds.

3. On May 1, 2002, Rensselaer entered into an agreement with tile Troy Industrial Development Authority, which provided for the issuance of $218,875,000 in Series 2002 A-E revenue bonds, including $202,975,000 in variable rate mode. The transaction also generated a $1,125,000 premium on the Series 2002A bonds. Proceeds from the issue in the amount of $203,150,771 were utilized for the construction costs of two buildings, related campus-wide infrastructure improvements, issuance costs and to legally defease Dormitory Authority Series 1993 Bonds.

In fiscal year 2002, Rensselaer entered into an interest rate swap agreement, with a term of 35 years, on $150,000,000 (notional) of the Series 2002 B-D bonds issued, in order to convert variable rate borrowings to a fixed rate liability. This swap effectively locks in a fixed rate liability of 5.0325%. In February 2006, Rensselaer entered into an amendment with the counterparty which, in effect, altered the fixed rate liability to 4.30% until June 2011, at which point it converts to 4.593%.' In addition, on May 11, 2006 the Series 2002E bonds were remarketed and converted from variable to a 5-year put option, with interest during the period ending September 1, 2011 set at 4.05%. The impact on the combined statement of activities as it relates to the fair market value of the interest rate swap was $56,000.

4. The NYS Urban. Development Corporation (UDC) mortgage loan has a face amount of

$33,500,000, without interest, and resulted from the provision of assistance by New York State; through the UDC, toward the construction of the George M. Low Center for Industrial Innovation (CII). Approximately $28,654,000, the difference between the total of all payments and the net present value of the liability discounted at a rate of 11.12%, has been recorded as an addition to unrestricted net assets. The facility is leased to the State of New York and, in turn, subleased to Rensselaer. Current annual payments amount to $900,000 with increasing annual amounts through maturity. As of June 30, 2007, the discount associated with the UDC mortgage loan is approximately $14,240,000.

15

Rensselaer Polytechnic Institute Notes to the Combined Financial Statements For the Years Ended June 30, 2007 and June 30, 2006 Note K- Debt Outstanding, (continued)

5. On March 4, 2004, Rensselaer entered into an agreement with Bank of America for a

$30,000,000 15-year term loan for the purpose of financing a portion of its pension obligations and to fund the costs of certaincapital improvements. The note bears an interest rate of 4.57%

for eight years, at which point it will convert to a floating rate based on the one month LIBOR plus 40 basis points. The loan agreement requires compliance with certain financial ratio covenants.

6. On October 28, 1985, the Hartford Graduate Center entered into an agreement with the State of Connecticut Health and Educational Facilities Authority for a $5,700,000 mortgage loan for the purpose of constructing a parking garage on the Rensselaer at Hartford campus. The loan bears a floating interest rate set on December 15 th and June 15"' of each year at 75% of the prime rate, and matured on July 1, 2006. The debt was a general obligation of the Center. This loan was paid off in the current year.
7. On December 31, 2005, Rensselaer entered into an agreement with Bank of America for a

$9,834,734 term loan for purposes of refinancing of Rensselaer Technology Park 1995 and 1998 term loans with Bank of America, as successor to Fleet Bank. The fully amortizing loan matures on December 31, 2013. The note bears interest at LIBOR plus one quarter of one percent. In conjunction with this refinancing, on July 19, 2005 Rensselaer entered into a forward starting interest rate swap of $9,835,000 (notional) with Bank of America beginning January 1, 2006, effectively paying a fixed rate of 5.82% for term of the swap, which is contiguous with the loan's term. The loan agreement requires compliance with certain financial ratio covenants.

8. On April 14, 2006, Rensselaer entered into an agreement with Bank of America for a

$35,000,000 term loan, which matures on July 1, 2011. The note bears interest at LIBOR plus

.48 of one percent. In conjunction with this transaction, on March 20, 2006, Rensselaer entered into a forward starting interest rate swap of $35,000,000 (notional) .with Bank of America beginning January 1, 2007, effectively paying a fixed rate of 5.57% on the term loan. The maturity date of the swap is June 1, 2021. The fair value of the future swap is recorded on the statement of financial position in the caption, 'Liability on interest rate swap agreements'. The loan agreement requires compliance with certain financial loan covenants.

9. On May 15, 2006, Rensselaer entered into an agreement with Bank'of America for a

$10,000,000 term loan, which matures on July 1, 2011. The loan has a revolving feature which permits additional draws up to a total of $13,000,000 if completed prior to July 1, 2010. The note bears interest at LIBOR plus .48 of one percent. On June 15, 2006, Rensselaer completed a $10,000,000 advance on this revolving loan. In conjunction with this transaction, on March 20, 2006 Rensselaer entered into a forward starting interest rate swap of $10,000,000 (notional) with Bank of America beginning January .1, 2007,. effectively paying a fixed rate of 5.57% on the term loan. The maturity date of the swap is June 1, 2021. The fair value of the future swap is recorded on the statement of financial position in the caption, 'Liability on interest rate swap agreements'. The loan agreement requires compliance with certain financial loan covenants. On April 13, 2007 Rensselaer advanced the remaining $3,000,000 under this agreement bringing the total principal amount outstanding to $13,000,000.

16

Rensselaer Polytechnic Institute Notes to the Combined Financial Statements For the Years Ended June 30, 2007 and June 30, 2006 Note K- Debt Outstanding, (continued)

10. On June 15, 2006, Rensselaer entered into an agreement with the Rensselaer County Industrial Development Agency, which provided for the issuance of $62,380,000 in Series 2006 fixed rate revenue bonds. The transaction generated a $1,616,000 premium. Proceeds from the issue in the amount of $63,996,000 will be utilized for the construction costs of one building, related campus-wide infrastructure improvements; and issuance costs.
11. On May 23, 2007, Rensselaer entered into an agreement with Bank of America for a

$41,400,000 term loan, which matures on May 22, 2012. The note bears interest at LIBOR plus .43 of one percent. In conjunction with this transaction, on April 24, 2007, Rensselaer entered into a forward starting interest rate swap of $41,400,000 (notional) with the Bank of America beginning April 1, 2008i effectively paying a fixed rate of 5.55% on the term loan.

The maturity date of the swap is June 1,2022. The fair value of the future swap is recorded on the statement of financial position in the caption, 'Liability on interest rate swap agreements.'

The loan agreement requires compliance with certain financial loan covenants.

As of June 30, 2007, Rensselaer had a standby letter of credit with Bank of America totaling $1,509,000 for workers compensation insurance security purposes. In addition, Rensselaer had standby letters of credit with Bank of America totaling $1,440,000 and $250,000 for general liability insurance and professional liability insurance security purposes, respectively, related to current construction projects on the Troy, New York campus. There were no draws against these letters of credit during the fiscal year.

Rensselaer also has a mortgage loan guarantee in place for one loan made by HSBC Bank USA in 1996 to finance construction and renovation costs for an on-campus fraternity residential facility. The balance of the mortgage loan, which totaled $600,000 at inception, was $360,000 on June 30, 2007.

The Institute has an unsecured line of credit with Bank of America valued at $30,000,000, with interest calculated on the outstanding balance at a daily rate of term LIBOR plus .30%. There was no outstanding balance on tile line of credit at June 30, 2007.

Principal and interest payments due on all long-term debt as of June 30, 2007 for each of the next five fiscal years are (in thousands):

Year Amount 2008 $31,067 2009 33,327 2010 31,391 2011 34,380 2012 42,320 Thereafter $691,420 The fair value of Rensselaer's fixed rate financial debt instruments based on the borrowing rates currently available for loans with similar terms and average maturities was estimated at $254,471,000 as of June 30, 2007.

17

Rensselaer Polytechnic Institute Notes to the Combined Financial Statements For the Years Ended June 30, 2007 and June 30, 2006 Note L- Retirement Plans Defined Benefit Plans The following table sets forth Rensselaer's defined benefit and postretirement plans' change in projected benefit obligation, change in plan assets, funded status (the postretirement plans are unfunded) and amounts recognized in Rensselaer's balance sheet at June 30, 2007 and 2006. The defined benefit plan calculations were based upon data as of or projected to June 30, 2007 and April 1, 2006. Postretirernent benefit plan calculations were based upon data as of July 1, 2006 and 2005. Rensselaer's funding policy is based upon and is in compliance with ERISA requirements.

Change in projected benefit obligation (in thousands):

Defined Benefit Postretirement 2007 2006 2007 2006 Benefit obligation at beginning of year ($262,670) ($255,709) ($13,068) ($14,096)

Service cost (4,713) (4,631) (668) (584)

Interest cost (15,332) (14,307) (817) (664)

Changes in discount rate. 6,367 6,054 Plan participants" contributions (319) (273) (1,175) (1,656)

Amendments/curtailments/special termination 1,375 Actuarial (loss)/gain (4,099) (8,008) (925) 1,855 Expenses paid 1,586 760 Benefits paid 18,295 13,444 1,588 2,077 Adjustment due to change in measurement date (5,011)

Benefit obligation at end of year ($265.8 96) ($262.670) ($13.690) 106 The accumulated benefit obligation for the defined benefit pension plan was $260,974,000 and

$256,754,000 as of June 30, 2007 and 2006, respectively.

Change in plan assets (in thousands):

Defined Benefit Postretirement 2007 2006 2007 2006 Fair value of plan assets at beginning of year $198,645 $180,960 Actual expense (1,586) (760)

Actual return on plan assets 30,114 23,416 Employer contribution 7,709 8,200 413 421 Plan participant's contribution 319 273 1,175 1,656 Benefits paid (18,295) (13,444) (1,588) (2,077)

Adjustment due to change in measurement date (three months expected return) 3,892 Fair value of plan assets at end of year S 198645 18

Rensselaer Polytechnic Institute Notes to the Combined Financial Statements For the Years Ended June 30, 2007 and June 30, 2006 Note L- Retirement Plans, (continued)

Funded status and amount recognized (in thousands):

Defined Benefit Postretirement 2007 2006 2007 2006 Funded status plan assets at beginning of year ($45,098) ($64,024) ($13;690) ($13,068)

Unrecognized net actuarial (gain)/loss 100,100 (306)

Transition assets Unrecognized prior service cost 594 Prepaid/(accrued) benefit cost (45,098) 36,670 (13,690) (13,383)

Minimum pension liability (94,779).

Total liability ($45.09 8) ($13,69Q) ($13,383)

($58.,109)

Amounts recognized in the statement of financial position consist of (in thousands):.

Defined Benefit Postretirement 2007 2006 2007 2006 Prepaid benefit cost Accrued benefit liability N/A $(58,109) N/A $(13,383)

Intangible asset N/A 594 N/A N/A Cumulative reduction in unrestricted assets N/A 94,185 N/A N/A Net amount recognized N/A $36,670 N/A $(13,383)

Amounts recognized in the statement of financial position consist of (in thousands):

Defined Benefit Postretirement 2007 2006 2007 2006 Current liability $(750) N/A Non-current liability $(45,098) N/A (12,940) N/A Amounts recognized in unrestricted net assets (in thousands):

Defined Benefit Postretirement 2007 2006 2007 2006 Net transition obligation/(asset)

Net prior service cost/(credit) $359 N/A $1,318 N/A Net actuarial (gain)/loss 73,260 N/A (620) N/A Inrecognizing the effects of the change in measurement date, Rensselaer's actuary prepared a I5-month projection of net periodic pension cost for April 1, 2006, to June 30, 2007. Rensselaer allocated the net periodic cost proportionately between amounts to be recognized in unrestricted net assets ($3,189,000) and net periodic pension cost ($12,670,000) for 2007, as illustrated below in the following two tables.

The latter is reported within the defined benefit pension and postretirement line item on the combined statement of activities.

19

Rensselaer Polytechnic Institute Notes to the Combined Financial Statements For the Years Ended June 30, 2007 and June 30, 2006 Note L- Retirement Plans, (continued)

Other changes in plan assets and benefit obligations recognized in unrestricted net assets (in thousands):

Defined Benefit Postretirement 2007 2006 2007 2006 Change in additional minimum liability under FAS 87 $(25,848) $(10,153) N/A N/A Change in measurement date under FAS 158 3,189 N/A N/A N/A FAS 158 change in accounting principle. 5,28.1 N/A $(698) N/A New prior'service cost/(credit) N/A N/A N/A N/A New actuarial loss/(gain) N/A N/A N/A N/A Amortization of:

Transition obligation/(asset) N/A N/A N/A N/A Prior service cost/(credit) N/A N/A N/A N/A Actuarial loss/(gain) N/A N/A N/A. N/A Total recognized in non-operating

$(17.3 78_))

(income)/expense $(10.153) 5(698) N/A Net periodic benefit cost is included in the following components (in thousands):

Defined Benefit Postretiremient 2007 2006 2007 2006 Service cost $4,714 $4,631 $668 $584 Interest cost 15,332 14,307 817 664 Expected return on plan assets (15,567) (15,155)

Amortization of gain/(loss) from earlier 1 periods 8,020 7,727 (1)

Amortization of unrecognized net asset at transition - (2,705)

Amortization of prior service cost 171 293 (66) (55)

Net periodic benefit cost $12.670 $9.08 51.4-18 Weighted average asset allocation at June 30, 2007 and 2006, by asset category are as .follows:

Defined Benefit Asset Category 2007 2006 Domestic Equity 31.0% 39.2%

International Equity 16.9% 19.0%

Private Equity 0.2%

Marketable Alternatives 31.6% 27.4%

Real Assets 8.2% 2.9%

Fixed income 11.7% 9.6%

Cash 0.4% 1.9%

100.0% 100.0%

The Plan contains features that allow participants to have a percentage of their benefits fluctuate based on the return of a S&P 500 index account. Rensselaer maintains assets in that index fund to hedge those liabilities that are not part of the above asset allocation.

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Rensselaer Polytechnic Institute Notes to the Combined Financial Statements For the Years Ended June 30, 2007 and June 30, 2006 Note L- Retirement Plans, (continued)

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in thousands):

Fiscal Year Beginning July 1 Defined Benefit Postretirement 2007 $16,613 $750 2008 $17,535 $816 2009 $17,965 $907 2010 $18,466 $962 2011 $19,026 $1,007 2012-2016 $103,576 $6,195 As of the measurement date, the weighted average rates forming the basis of net periodic benefit cost and amounts recognized in Rensselaer's statement of financial position were:

Defined Benefit Postretirement June 30 March 31 June 30 June 30 Measurement Measurement Measurement Measurement Benefit obligations 2007 2006 2007 2006 Discount rate 6.25% 6.00% 6.25% 6.25%

Expected return on plan assets 8.25% 8.25%

Rate of compensation increase 4.00% 4.00%

Net periodic benefit cost Discount rate 6.00% 5.75% 6.25% 5.25%

Expected return on plan assets 8.25% 8.25%

Rate of compensation increase 4.00% 4.00%

For measurement purposes, a 10.0 percent, 9.0 percent and 13.0 percent annual rate of increase in the per capita cost of covered pre-65 medical, post-65 medical benefits and prescription drug benefits, respectively, was assumed for fiscal year 2007. These rates were assumed to decrease gradually to 5 percent for fiscal year 2016 and remain at that level thereafter. A plan amendment established a maximum of $85 per month for retired employees who retire after normal retirement age. Once Rensselaer's share of medical premiums for Medicare eligible retirees reaches the $85 per month maximum, the health care cost trend rate will no longer have any effect except for grandfathered participants not subject to the cap and pre-65 coverage.

Assumed health care cost trend rates have a significant effect on the amounts reported for the postretirement benefit. A one-percentage point change in the health care-cost trend rates would have the following effects (in thousands):*

1-Percentage 1-Percentage Point Increase Point Decrease Effect on total of service and interest cost components $101 ($87)

Effect on postretirement benefit obligation $652 ($571)

Based upon service at retirement date, Rensselaer pays for a portion of health care benefits for retired employees. In addition, Rensselaer Hartford Graduate Center, Inc. pays for dental and life insurance benefits for employees who had retired prior to July 1, 1997.

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Rensselaer Polytechnic Institute Notes to the Combined Financial Statements For the Years Ended June 30, 2007 and June 30, 2006 Note L- Retirement Plans, (continued)

Defined ContributionPlan Rensselaer and the Center also have non-contributory Defined Contribution Plans open to full-time employees who have met minimum service requirements. Contributions to these plans (8% of employee salary) were $6,693,000 and $5,676,000 in fiscal 2007 and 2006, respectively.

In addition, the Center has its. own pension plan in association with Teachers Insurance and Annuity Association and College Retirement Equities Fund (TIAA-CREF). The TIAA-CREF is a money purchase plan so there is no past service cost. The Center's contributions to this plan (8% of employee salary) were $277,000 and $292,000 in fiscal 2007 and 2006, respectively.

Note M- Contingencies In the normal course of business, Rensselaer has been named a defendant in various claims. Although there can be no assurance as to the eventual outcome of litigation in which Rensselaer has been named, in the opinion of management such litigation will not, in the aggregate, have a material adverse effect on Rensselaer's financial position.

Note N- Asset Retirement Obligations Upon adoption of FIN 47 on June 30, 2006, Rensselaer recognized asset retirement obligations related to asbestos contamination in buildings, decommissioning expenses and tank disposals and recorded a non-cash transition impact of $6,541,000 which is reported as a cumulative effect of a change in accounting principle in the statement of activities and changes in net assets, an asset of $393,000 included in land, buildings and equipment, and a liability for conditional asset retirement obligations of $6,935,000 included in other liabilities. In fiscal year 2007, $383,000 of accretion expense and $18,000 of depreiation expense was recorded.

The following table illustrates the effect on the change in net assets as if this interpretation had been applied for the year ended June 30 (in thousands):

2006 Change in net assets, as reported $30,937 Less: Total depreciation and interest accretion costs (382)

Proforma change in net assets $30.555

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