Asset Allocation/Manager Changes

Recommendations

The Wilshire Associates Asset Allocation Study substantially supports the Bradley Foundation's long term asset allocation strategy. Major asset allocation changes are not needed in the short term. While Wilshire Associates suggests a number of long term recommendations, it is recommended that the Investment Committee consider the following actions at the June 2, 1997 meeting:

I.	Asset Allocation Targets (Exhibit I, Page V-4)

A.	Increase foreign stock target allocation to 20% from 18%. This allocation is more consistent with the Bradley Foundation's actual allocation and Wilshire's recommendation.

B.	Reduce small cap stock target allocation from 21% to 18% and increase U.S. large cap by 1%. The revised allocation will result in a 68%/32% split between large cap and small cap. This allocation is more consistent with the Bradley Foundation's actual allocation and Wilshire's recommendation.

C.	Remove PRI investments from active investment portfolio for performance and asset allocation decisions. While the current PRI balance is relatively immaterial ($2,000,000), the $20,000,000 Stadium Financing PRI commitment will unduly distort performance statistics and spending levels.

D.	Increase high yield bonds target allocation to 3.0% from 2.0%

II.	Spending Strategies

A.	Continue to fund grants, operating expenses and alternative investments from fixed income portfolio until fixed income target allocation is achieved.

B.	Consider adopting a spending policy that is based on a percentage of a 3-5 year moving average of the investment portfolio. A formal analysis and proposal of a spending policy will be prepared for consideration at the August 25, 1997 Investment Committee meeting.

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III.	Manager Changes and Style Allocation

A.	Adopt long term strategy to achieve style neutrality for the domestic equity portfolio. Some actions to achieve this objective include indexing of large cap stocks and adding a small cap value manger.

B.	Consider termination of TCW-Large Cap portfolio ($31 million at 4/30/97). The TCW-Large Cap portfolio has a cumulative net unfavorable performance deviation through 4/30/97 of a negative ($3,316,993). For 1996 and the 4 months ended April 30, 1997 the net unfavorable performance deviation is a negative ($1,513,600). The representations of TCW in April, 1996 that active management was superior to passive indexing did not materialize.

Transfer TCW Large Cap portfolio to Barclays Index Fund. Since inception Barclays Index Fund has a favorable net performance deviation of a plus $308,000. This action will accomplish the following:

1.	Move overall portfolio to more style neutrality.

2.	Increase indexing in the more efficient large cap sector of the market.

3.	Provide increased liquidity in the domestic equity portfolio due to the liberal withdrawal terms of the Barclays Index Fund.

C.	Place TCW Small Cap and Founders Asset Management on the "watch" list. These managers have struggled recently but the good news is that they have demonstrated a significant positive rebound in May, 1997 as outlined below:

Founders Asset

TCW Small Cap	Management

Portfolio value at 4/30/97	$44,825,000	$24,120,000

Net (unfavorable) performance

deviation through 4/30/97	($1,071,302)	($2,981,743)

Year to date return through 4/30/97:

Portfolio	(19.58%)	(16.08%)

NASDAQ Index	(2.05%)	(2.05%)

Year-to-date return through 5/22/97:

Portfolio	(7.30%)	(8.51%)

NASDAQ Index	+6.32%	+6.32%

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The small cap market has experienced extreme volatility in recent months. This market sector rebounded favorably so far in May, 1997 and is beginning to establish a level of stability. Reduction of the small cap portfolios at this time may be premature. See memo from Charles Larsen, TCW (Pages V-5 to V-7).

D.	Begin search for small cap value manager for approximately a $20,000,000 portfolio. Funding of this portfolio would be from the TCW Small Cap or Founders depending on their respective performance or from the large cap portfolio. Recommendation of a small cap value manager will be completed no later than August 25, 1997.

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