RESEARCH CORPORATION Notes to Financial Statements 1. Summary of significant accounting policies of Research Corporation (the Foundation): (a) Security valuation, the Foundation carries its investments at cost less an allow ance for possible losse, v kem there wasilence that the carrying y due of P ·rtic ་ ular securities has beça permitently may orod. Ganse losses on sales of securities are cranputed on the first-m, ár-t-ont (1¡FO' method. (b) Income and expenses interest income is recorded as exrned, diviends are accrued as of the ex-dividend date. Grants are recorded at the time of approval by the Board of Directors. (c) Pension plan—the Foundation has a non-contributory pension plan covering substantially aile fits employees. The total poision expense for facil years 1973 and 1971 was $504,000 and $255649 respectively, wine'n cludes anortization of prior service cost over a period of 20 years. The Fou: dation's policy is to fund pension cost accured The Found wa sticipates 1.9 :nsterial ine reise in costs as a result of the Employee Retirement Income Security Act of 1974. 2. Grant from the National Science Foundation, see "Patent Awareness Program® page 29 for details. $763,710 3. The investment in Research-Cottrell, Inc at October 31, 1975 represents the cost of: 10.35% (643,000 shares) of its outstanding capital stock The unpaid balance of a 1959% purchase money mortgage payable in instaliments of $30,000 per anum to October 31, 1979 120,000 5553,710 RESEARCH CORPORATION 405 LEXINGTON AVENUE NEW YORK, NEW YORK 10017 Base! on audited financial stateinerits as of October 51, 1975 the comats of the Fron dation in the net assets of Research Centrell 15. !. 、་.. • b; approximately $5,705 000. The stock of dea one! Cottre cod by the foo dation is not registered with the Securities ved å se hange ( price of unrestricted stock of the satur class on the Arche de S October 31, 1973 was $17 70 per share, on December 17, 1975 the daung price was 51.3.50 per Juare. 1 4. Research Corporation is a private foundation exempt from meorge tax under section 301 (e) 13 of the Internal Revenue Code. As a private for andet, a it as subject to 14′i Federal excise tax on net investment mcome as defrost five foundation and its comunsel are of the opinion that all its activities are mite goods related to its chartered philanthropic purposes and none of theja constitute an utare!ated business. Sulel, at the request of the Internal Rosenve Service, the Foundation filed under protest unrelated business income tax returns for the years 1961 through 1974 with regard in one of its activities for information purposes only. None of these returns showed not taxable income. The Internal Revoire Service coemmation of several returns, including the year 1973, resulted in no assessment of unrelated business Pay and it is expected there will be no assessment of such taxes for the years 1971 and 1975. & Purchases and sales of marketable securities Lexclusive of U.S. Government securities, short term notes and certificates of deposit) „griegated $23,35 1,000 and $25,104,000 in 1973, and $70,378,000 and $29,910,000 in 1971. • The Fousulation has a lease agreement for office space at an annual rental of $120,000, plus escalation charges, which expire» October 1, 1980. 7. The Foundation has initiated an action against Salomon Brothers and! others contesting the attempt by Salomon Brothers to rescind the purchase of 19 500 shares of Funding Corporation common stock from the Foundation and has also filed a olting in the Equity Finding bankruptcy proceeding for the original purchase of price such shares to the Foundation. In a relateri action for actual and pinative damages a clan has been made against the Found etion and others alleging the use of inside information with respect to the sale of Equity Funding shares. The Foundation denies the use by it of any inside information with respect to the sale of such shares. Auditors' Report Board of Directors, New York, N.Y. We have examined the bulance sheet of RESEARCH CORPORATION as of October 31, 1973 and the related statcinents of income, grants and expenses and of changes in fund for the year then ended. Our examination was made in accordance with 2-nerally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. W ́e previously examined and reported upon the financial statements of Rewatch Corporation for the year ended October 31, 1974. In our opinion, the aforementioned statements present fairly the financial position of Research Corporation at October 31, 1975 and 1971, and the results of its operations and changes in its faucial position for the years then ended, in coufounity with generally accepted accounting principles applied on a consistent basis, Xew York, December 17, 1975 COOPERS & LYHMAND 32-635 O-78-25 RESEARCH CORPORATION 13-1563407 405 Lexington Avenue, New York, N. Y. 10017 FORM 990 PF - PAGE 2 PART 111 - LINE 9 of BALAN E SHEFT FOR THE FISCAL YEAR ENDED OCTOBER 31, 1975 (e) The Investment in Research-Cottrell, Inc. represents the cost of 16.5% (695,000 shares) of its outstanding capital stock, $765,710. *The sotck of Research-Cottrell, Inc. owned by the Corporation is not registered with the Securities Exchange Commission. The closing price of unrestricted stock of the same class on the American Stock Exchange on October 31, 1975 was $17.50 per share. |