We are sure to remember 2005 as the year we broke ground on the largest expansion of the Laboratory’s facilities in its 115-year history. This is an enormous undertaking. Five years of architectural and engineering planning, municipal and environmental reviews and approvals, and internal strategic and financial planning culminated in a July groundbreaking ceremony attended by New York State, Nassau County and Village of Laurel Hollow leaders and officials.

The process to date has been challenging but remarkably smooth. It has been facilitated by a diligent but cooperative Board of Trustees in the Village of Laurel Hollow. Centerbrook Architects have again put forth beautiful and innovative building designs. Chief Facilities Officer Art Brings and his staff have worked extremely effectively with the municipalities, government agencies, architects, engineers and contractors to keep the project on time, on budget and orderly. If all goes according to schedule, we will be dedicating and opening six new research buildings on the southern tip of our main campus in the fall of 2008. Approximately 80,000 square feet of new space will accommodate the expansion of our research programs in cancer, cognitive neuroscience and bioinformatics. Fundraising for the project is in full swing. While the cost of infrastructure and buildings is approximately $100 million, we must devote substantial additional funds to start-up expenses and endowment. While this is an ambitious undertaking, we are encouraged by the generous gifts received to date. We are grateful for the support, energy and generosity of the Laboratory’s friends and Trustees who are so critical to the success of these efforts.

2005 also marked another successful year in our core programs. The research continues to be innovative and of the very highest quality. It has been recognized as such through distinguished faculty publications, awards and honors too numerous to mention. Despite growing competition around the world, our Meetings & Courses Program remains the most impactful and sought after in the field. The Banbury Center and the Dolan DNA Learning Center are operating at capacity as they each do their part to fulfill the Laboratory’s educational mission. The Watson School of Biological Sciences has now established itself as one of the most innovative, popular and successful graduate programs in biology. The Cold Spring Harbor Laboratory Press had a banner year with its journals and books contributing very positively to our cash flow and bottom line.

For the fiscal year ended 12/31/05, the Laboratory budget reached $103 million – a 7% increase over the prior year and well ahead of budget. We had expected an operating deficit for the year, which did not materialize. This is a fortunate and interesting outcome given the fact that we were concerned up to the end of the year about the funding for the research budget. As is often the case, funding from grants and from endowment support were not going to be sufficient to cover the direct cost of the research in 2005. In such years, we must rely on royalty and licensing income to make up the difference. Fortunately, at year-end 2005, we received an unexpectedly large royalty payment on an expired patent that allowed us to cover the annual research budget in its entirety. We also anticipated a shortfall for the year in our ability to cover our indirect (or overhead) expenses. Despite rigorous and effective efforts to contain administrative expenses, it did not appear that there would be sufficient indirect cost recovery on grants and income from operations to balance the budget after depreciation and interest expense. Fortunately, this also proved not to be the case. Indirect cost reimbursement was greater than budgeted and the Cold Spring Harbor Laboratory Press had an excellent year, exceeding its budgeted operating surplus.

Investment returns on our endowment funds were strong for the third consecutive year. The total return on the portfolio was 7.5% for the calendar year – well ahead of the benchmark indices. Our total equity portfolio was up 9.1% as compared to the 4.9% appreciation in the S&P. This was a result of excellent performance from both our domestic and international equity managers. The fixed income portfolio returned 3.1%, slightly ahead of the benchmarks. At year-end, the market value of the endowment funds totaled $255 million after taking our customary annual draw of 4%. The Investment Committee continues to work diligently, under the leadership of Board Treasurer Ed Travaglianti, to establish a well-diversified portfolio of investments with proven managers and acceptable levels of risk and return. Over the coming year, the Committee will be evaluating the allocation to alternative investments and deciding whether to increase the exposure to this asset class. While investments in private equity, venture capital, real assets and hedge funds can generate higher returns and less correlation, they are not always as accessible to endowments our size as they are to multi-billion dollar funds.

While it is satisfying to report a “balanced budget” for the year, our challenges going forward should not be underestimated. The cost of doing cutting-edge research is escalating at a time when the pool of federal funds for research is no longer growing. Operating costs that are difficult to control such as utilities, insurance and healthcare are increasing at double-digit rates. In order to mount a successful fundraising campaign, we have doubled the expense of our development office. And in 2006, we anticipate issuing bonds to support the building project that will more than double our interest expense. All of these hurdles present themselves at a time when we are undertaking a 40% expansion of our physical plant.

The good news is that Cold Spring Harbor Laboratory continues to distinguish itself by doing some of the world’s best and most important scientific research. And in our experience, funding follows good research. In periods when public funding is static, we must increase our efforts to develop private sources of research support. Fortunately, we are already having success in this effort with names like Simons, Dart, Starr, Davis, Stanley and Swartz funding important research initiatives. We must also continue to be creative in our efforts to commercialize our technology and intellectual property

where possible. Our Office of Technology Transfer, so ably lead over the years by John Maroney, has been very proactive and innovative in this area, allowing us to support research that would not otherwise have been possible. The future looks bright and exciting – but we have our work cut out for us.