Security Update

In November 1994 the Foundation and its President received threatening phone calls and hostile letters and faxes attacking Bradley's support for Murray's Bell Curve book and a national PBS documentary on the American based activities of the terrorist organization Hamas .

These events prompted the Foundation to employ a heightened awareness regarding security matters, including obtaining the services of the Washington-based Cantril Group to evaluate the appropriate security measures for the Foundation.

In order to familiarize the Audit Committee with the history and current security activities of the Foundation, the following background information is attached:

Exhibit A (pages 3-4) includes a brief chronology of the Foundation's security activities and procedures.

Exhibit B (pages 5-19) includes excerpts of the Cantril Group's initial report, including options for Mr. Joyce's residence.

The total direct cost expended for the security system installation, maintenance, and testing through October 31, 1996 is summarized below:

Joyce

Lion House	Residence

Security Consulting	$75,190	$7,625

Alarm System Installation	58,469 (1)	67,027 (2)

Testing and Maintenance	14,484	3,558

$148,143	$78,210

Notes:

(1)	Includes only direct security system costs. Architect, fencing, electrical wiring etc. included in general building costs.

(2)	Includes all costs including architect, fencing, electrical wiring, etc.

A more detailed presentation of the security measures and costs will be presented at the Audit Committee meeting.

(Note -- Page 2 not used)

Certain of the installed security measures could add value to the Joyce Residence. However, the security system installed at the Joyce residence is technically the property of the Foundation. If Michael Joyce would terminate his employment with the Foundation, the security system could be reclaimed by the Foundation.

2.	Consider all or a portion of the Joyce residence security system cost as a taxable benefit to Michael Joyce.

This approach is the most conservative, but it is not consistent with the circumstances resulting in the installation of the security system.

3.	Enter into an agreement regarding security system ownership and reclamation options.

In order to protect the interest of the Foundation and Mr. Joyce an agreement could be entered into that clarifies ownership of the security system and provides Mr. Joyce the option to purchase the security system during the term of the agreement. The term of the agreement would be five years, representing the estimated useful life of the security system. The repurchase price would be the depreciated value of the security system or the net realizable value, whichever was lower. The net realizable value of the system to the Foundation most likely would be adjusted downward for costs associated with the removal of the basic system components and related security measures.

This approach clearly establishes ownership of the security system and provides the Foundation the potential ability to recover a portion of the costs in the event of Michael Joyce's termination. It also provides Michael Joyce the option to purchase the security system if he so chooses at a fair and reasonable price.

Option three above may be the best compromise to protect both the Foundation and Michael Joyce.

RNB/ye

The 1995 audit raised the question as to whether any of the security system's cost (system and related security items) for the Joyce residence should be treated as a taxable benefit to Michael Joyce. The answer is not "black and white" but options include:

1.	Consider the security system costs as a necessary and proper cost of the Foundation to protect its key officer.

The security system cost expenditure was based on recommenda - tions of an independent security consulting firm and approved in principle by the Foundation Board. Mr. Joyce did not unilaterally make the decision to install the security system.

A passive security system was installed versus the much more costly active security measures such as a body guard or security patrol.