I. CBIS Active Ownership in 2008
Sudan Violence and Chinese Toy Problems Spur New Dialogues

In 2008, CBIS plans to engage 36 companies by filing 11 resolutions and participating in 25 dialogues. These numbers are very similar to 2007, when CBIS engaged 38 companies, although three of these engagements were terminated after we sold our positions. Our issue focus will not change substantially this year.

New Dialogues in 2008
Schlumberger and the Sudan
We have joined a dialogue with oilfield services giant Schlumberger, whose global operations span 80 nations and produce over $23 billion in sales, on its human rights policies with regard to its activities in the Sudan. Houston, Texas-based Schlumberger performs project work on Sudanese oil fields. Although the company facilitates oil production, which provides revenue to the Sudanese government, its involvement is indirect since it is a subcontractor and does not control the fields.

The Sudan Divestment Task Force (SDTF), an organization that coordinates engagement and divestment strategy for institutions who own companies that operate in the Sudan, had in the past called for divestment of Schlumberger from institutional portfolios. The SDTF reversed its position after Schlumberger agreed to a dialogue on its activities there, to monitor its use of security forces in the country, and to try to ensure that its business partners in the Sudan are not directly involved in human rights violations.

Our group met with Schlumberger in August 2007 and we look forward to further discussions with the company. (For an overview of CBIS’ SRI policy concerning companies with business ties to Sudan, please see the sidebar on page 3.)

Mattel Toys and Chinese Vendors
We have also joined a dialogue, led by the Treasurer of the State of Connecticut, with premier global toy company Mattel. The company suffered considerable negative publicity in 2007 from news reports that some Mattel brand toys sourced in China were made with toxic lead-based paint. The reports raised questions about the effectiveness of the company’s monitoring of supplier factories.

CBIS is concerned about both product quality and the impact of Mattel’s manufacturing practices on its vendor’s factory workers. While toys coated with lead are hazardous for children, the impact on the workers who produce the toys might even be more severe because of long-term exposure.

New Resolutions in 2008
We will file resolutions in 2008 at two companies for the first time.

Store Siting at Lowe’s
We are asking U.S. home improvement retailer Lowe’s to create a policy that will reduce the social and environmental risks associated with the impact of its stores on local communities’ cultural heritage and historic sites, local environment, commercial sprawl and traffic congestion.

Lowe’s, which ranks 45th on the Fortune 500 list of companies, generates approximately $46 billion in annual revenue from a network of more than 1,500 stores in the U.S. and Canda. We withdrew our resolution at Lowe’s after the company agreed to engage with us on the issue.

Sustainability at Felcor Lodging Trust
Felcor Lodging Trust is the nation’s largest owner of upscale hotel properties, with 94 hotels in 27 states. Our resolution asks Felcor to produce a corporate sustainability report outlining its policies for responsible property development. Property owners and managers have considerable power to advance solutions to social and environmental issues such as energy efficiency, greenhouse gas emissions, affordable housing, water conservation and the social impact of site development.

We had a positive discussion with Felcor in late December 2007. The company said it recognizes the importance of these issues and said that it has not done more due to its belief that most of the responsibility lies with the hotel management chains. We agree that the hotel management chains (the brand names publicly identified with the hotels) also bear responsibility for social and environmental performance, but since the actual buildings are owned by Felcor it shares responsibility and should also analyze and monitor performance. Moreover, we believe Felcor can use its influence as the property owner to promote energy conservation and environmental sustainability at the hotel chains.

Newmont Mining Dialogue Advances
We will increase our involvement with Newmont Mining in 2008. After receiving the support from the company’s board of directors and 95% of shareholders for our human rights resolution in 2007, CBIS has joined an independent advisory panel which will provide advice on strengthening its environmental and social policies. The panel includes community groups and environmental organizations such as OxFam International. Together we will develop a report for the board with our recommendations. Drawing in part on our report, Newmont’s board will subsequently conduct its own research and release a two-part report. The first part is due to shareholders in April 2008.

CBIS has engaged Newmont for the past three years regarding community resistance to its operations in Peru, Indonesia and Ghana over mining waste disposal and development on sacred sites.

Shifting Dialogue
We are shifting the focus of our dialogue with Capital One from predatory mortgage lending to credit card marketing since Capital One divested its mortgage lending business. Capital One is also one of the largest issuers of consumer credit cards. The credit card industry has received criticism from consumer advocates for its high credit costs, deceptive marketing tactics and poor disclosure of fees.

Several years ago, Wells Fargo adopted anti-predatory lending guidelines for its subprime mortgage business following dialogue with CBIS and other ICCR shareholders. We will be initiating dialogue with Capital One in 2008 to discuss the impact of the recent turmoil in the subprime lending market and to review its policies for ensuring it extends credit only to borrowers who can afford the payments and who are clearly informed about payment terms.

Dialogues in the Monitoring Phase
We are introducing a new category of dialogues this year. Dialogues in the “monitoring” phase have reached a point where our major objectives with the company have been achieved. We will maintain contact in order to monitor progress, but the dialogue is less active and we are not seeking any new agreements. In these cases, we believe it beneficial to maintain our relationship with the company to encourage its efforts at continual improvement. Dialogues in the monitoring phase include those with American Electric Power, Sears, Eli Lilly and Tyco. Any of these may revert to an active dialogue if the situation warrants greater action.

Concluded Dialogues
We have concluded four 2007 dialogues. Our sub-advisers sold their positions in Petrochina and ABN Amro. Equity Office Property Trust was taken private. We decided to conclude our engagement on store siting with Costco, which demonstrated no interest in a productive dialogue. Instead, we are redirecting our efforts on this topic to Lowe’s by filing a resolution in the hopes of creating broader interest in the issue among institutional investors.

2008 Resolutions and Dialogues

(P) = primary filer. (M) = Dialogue is in the monitoring phase. / Blue type indicates that CBIS is the engagement leader and strategy coordinator. *New in 2008.

Shareholder Resolution — A proposal placed on the proxy ballot by a group of shareholders, and voted on by all shareholders at a company’s annual meeting. Resolutions are non-binding, but high vote totals get management’s attention and often spur them to action.

Corporate Dialogue — An ongoing communication between a group of shareholders and company management. The shareholders hope to convince management to take action on an issue of concern. A failed dialogue may result in the filing of a shareholder resolution.

II. Issue Brief: SRI Policy and the Sudan

Our current SRI policy for companies with operations or investments in the Sudan is an active ownership strategy. This is consistent with our general approach to human rights issues, as we believe that engaging companies can more successfully bring about the desired change than can divestment. However, we recognize that our strategy differs from that of some other SRI investors who, like CBIS, are concerned about violence in Sudan.

If we are not able to productively engage companies involved in Sudan, if CBIS participants do not support our approach, and if a clear consensus emerges from the institutional investor and local religious communities around divestment, we are willing to consider a different strategy.

In addition to engaging Schlumberger in 2008, CBIS is participating in discussions with two other companies — JPMorgan Chase and Citigroup — regarding their loans to and investments in companies with operations in Sudan. While federal laws restrict U.S. company operations in the country, they don’t impact investments in foreign firms with operations there.

During dialogues with the banks, we raised concerns about their investments in the four foreign companies that dominate the Sudanese oil industry: China National Petroleum Corporation, Petronas of Malaysia, Oil and Natural Gas Corporation of India, and Sinopec of China. For the most part, the banks are sensitive to these issues, responsive to the concerns of socially responsible investors and they recognize the reputational risks involved.

We asked the banks to utilize their influence as major investors and initiate engagement with these companies, urging them to actively contribute to constructive and positive change in Sudan.

III. The Index Option
CBIS index funds offer a confident way to grow an SRI portfolio.

As we speak with participants and other Catholic institutions around the country, we find that some are committed to the concept of socially responsible investing (SRI) but unsure how to more fully integrate SRI into their overall portfolio.

These organizations often have leaders who ask the finance committee to look into SRI options alongside non-SRI investment alternatives. Forward movement can be slowed, however, by the fact that committee members are seldom SRI experts. No one wants to make the wrong choice and select a program that backfires and doesn’t deliver the desired investment results. (Of course, the same risk applies to non-SRI investment programs.)

The finance committee may also reflect a range of views about SRI — some enthusiastic, some skeptical, others open-minded but non-committal, and a few probably ready to support whatever they perceive as the developing consensus.

Creating a Solution
An investment solution that provides an easy and confident additional step into SRI may give everyone in the organization a choice they can rally around —creating consensus and harmony instead of indecision.

Two options are CBIS’ CUIT Core Equity Index Fund and CUIT Small-Capitalization Equity Index Fund — index tracking funds with a Catholic SRI overlay. With a reduced fee structure and lower minimum balances for Class B shares set to become effective April 1, both funds merit a close look.

Given that one-quarter of all institutional money under management is allocated to indexing, many Catholic institutions will want some degree of exposure to an S&P 500 or Russell 2000 indexed strategy. CBIS’ index funds offer two advantages for those who want to increase Catholic stewardship in their portfolio while addressing the performance-related concerns of finance committee members.

1. Because it seeks to replicate the return of a benchmark index, rather than add alpha, an indexed exposure diminishes the manager selection risk associated with the commitment to a new investment program.

2. An indexed portfolio provides a clear, transparent example of how CBIS’ SRI process integrates into the investment process — one that should instill confidence in anyone worried about the impact of CBIS’ SRI program on fund performance.

CBIS Index Funds
The CUIT Core Equity Index Fund and CUIT Small-Capitalization Equity Index Fund both seek to replicate the return of their benchmarks (the S&P 500 and Russell 2000, respectively) while incorporating CBIS’ Catholic SRI program as an overlay on each fund’s investment process. The active ownership (shareholder advocacy) component of our SRI program has no impact on the investment process or fund performance — only the stock screens do.

Because our SRI program emphasizes active ownership, stock screens are limited to only activities that so violate participants’ core religious values that they refuse to profit from them. These include abortifacients and contraception, militarism, pornography production and tobacco. As of December 30, 2007, only 26 companies out of the S&P 500 were restricted from the Core Equity Index Fund, and only 20 companies, about 1% of the Russell 2000, were off limits to the Small-Cap Index Fund.

Portfolio Construction
Both Funds are managed by RhumbLine Advisers, a Boston-based institutional investment firm specializing in indexed portfolios. RhumbLine applies the same investment strategy to the Funds as it does to its comparable unscreened index programs, the only difference is the absence of screened companies in the CBIS portfolios.

As shown in Figure 1 (please refer to the associated PDF document for Figure 1), the portfolio construction process is simple and straightforward. RhumbLine removes restricted companies from its unscreened index portfolio and reinvests the capital across the remaining companies in the benchmark with two related objectives. The reallocation process is optimized to:

1) produce a portfolio that replicates, as closely as possible, the performance characteristics of the benchmark, and

2) minimize tracking error.

Steady Performance
The CUIT Core Equity Fund’s Class A shares have closely tracked the S&P 500 since inception in 1995 (please refer to the associated PDF document for the performance table), while the B shares have slightly outperformed the benchmark since their January 2003 launch. This is especially notable because concern over SRI’s impact on return is often a stumbling block for finance committees considering an SRI allocation. The recent launch of the CUIT Small-Capitalization Equity Index Fund precludes long-term analysis, but its identical portfolio construction process and manager suggest that its long-term relative return pattern will be similar.

With steady performance and a clear, transparent investment process, CBIS’ index tracking funds offer a confident solution for Catholic organizations looking for an easy way to grow SRI exposure in their institutional portfolio.

IV. Core Equity, Small-Cap Fund Fees Reduced
Class B Fees to Fall 40%, Minimums Lowered to $3 million

Effective April 1, 2008, the investment management fee for the CUIT Core Equity Index Fund’s Class B shares will be reduced to 15 basis points (bps) from the current 25 bps — a 40% reduction. The management fee for the CUIT Small-Capitalization Equity Index Fund’s Class B shares will fall from 35 basis points to 20 basis points — a 43% reduction.

In addition, the Class B minimums for both Funds will be reduced to $3 million from the current $10 million. If your organization has at least $3 million invested in either Fund on March 31, 2008 there is nothing you need to do. The account will automatically convert to Class B status on April 1, with the lower expense ratio.

Economies of scale, particularly in our B share classes, have grown as asset levels have increased, and we believe the lower expense ratios will better position us to compete in the institutional market.

In addition, we want to remove barriers that may keep Catholic institutions from integrating faith and finance. In the past, we have heard from some consultants and institutions that they would like to invest with CBIS, but felt compelled to look for lower-cost alternatives. We hope these fee reductions help to remove that obstacle.

Class B minimums reduced from $10 mil. to $3 mil.

V. Security Brief: Sending Money to CBIS
CBIS participants should be aware of two important points related to sending money to CBIS.

(1) Please do not write account deposit checks to CBIS. Make them out to RCT or CUIT, and clearly indicate your account number and the RCT or CUIT fund in which you’d like to make the deposit. We are required by federal regulations to return any deposits by check written to CBIS.

(2) The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury administers and enforces economic and trade sanctions based on U.S. foreign policy and national security objectives. CBIS’ ability to accept participants’ wire transfers to accounts in the following countries is restricted and compliance with OFAC regulations may require additional time and information to complete the transaction, or may prevent the transaction from occurring: Balkans, Belarus, Burma, Ivory Coast, Cuba, Democratic Republic of the Congo, Iran, Iraq, Liberia, North Korea, Sudan, Syria and Zimbabwe.

Please contact CBIS at 800-321-7194 before initiating a transaction with any of these countries. This list may also change over time, so please contact us if you have any questions.

VI. Nearly Half of Cisco Shareholders Want Say on Pay
CBIS executive pay resolution receives 48% support at November 2007 annual meeting.

At Cisco System’s 2007 annual meeting of shareholders, held on November 15, 2007, 48% of the shares voted were cast in support of a CBIS-sponsored resolution that asked the global high-tech giant to give shareholders an annual advisory vote on the company’s executive compensation plan. CBIS was the lead sponsor of the resolution, submitted this year for the first time at Cisco.

The proposed advisory vote would not override the board’s compensation decisions, but would simply give shareholders a means to express whether they believe the company’s executive compensation package is reasonable and in their best interest.

CBIS believes that executive compensation should offer adequate incentive for management to build a successful, sustainable company while sharing prosperity broadly and fairly among all company employees. Aflac and Verizon have already agreed to adopt a “say on pay” policy and a number of other companies are working with investors to study ways in which the practice can be implemented in the U.S. Resolutions regarding “say on pay” received votes between 40-50 percent in favor in 2007, a remarkable showing for a new issue.

Sister Judy Byron, OP, coordinator of the Northwest Coalition for Responsible Investment and representative of the resolution co-sponsor Sisters of the Holy Names of Jesus and Mary, U.S. Ontario Province, said the strong vote total represents “an important step toward holding American CEOs accountable on the issue of pay. As faith-based shareholders, we believe it is our responsibility to bring more visibility and accountability to the issue of executive compensation as practiced by companies in which we hold stock. We are concerned that an unchecked and growing concentration of wealth and privilege in corporate America does not promote the common good, economically, ecologically, socially or politically.”

The resolution was filed by CBIS and members of the Interfaith Center on Corporate Responsibility (ICCR), including the Adrian Dominican Sisters; Catholic Health East; Ethical Funds, Christus Health; Progressive Investment Management, Dominican Sisters of Columbus, Ohio; Sisters of St. Francis of Philadelphia; Sisters of the Holy Names of Jesus and Mary, U.S, Ontario Province; Walden Asset Management; and Mennonite Mutual Aid. The group holds approximately 1.2 million shares of Cisco in total.

VII. CBIS Welcomes a New Board Member

CBIS is pleased to announce that Kathleen M. Flanagan, President of Leadership Communication Inc. and a former senior vice president at Nuveen Investments, has joined our board of directors. Ms. Flanagan joined the board at its February 22, 2008 board meeting.

Kathleen brings more than two decades of experience to the CBIS board. Currently, as President of Leadership Communication Inc., she helps corporate executives, leadership teams and boards produce change, set direction and achieve success through communication and interaction.

Previously, as a senior vice president at Nuveen Investments, she was responsible for marketing communications for new product campaigns that raised $25 billion in closed-end fund assets. She also held significant responsibility for managing the operational and financial reviews required to meet SEC and fund governance requirements.

Ms. Flanagan received her Bachelor of Science degree in Humanities, magna cum laude, from Loyola University and her Master of Business Administration from the University of Chicago. She later attended the Harvard Business School’s Advanced Management Program and did additional studies at the Loyola Center for Organization Development. She is currently working on a book about the post-Vatican II renewal of Catholic sisters, focusing on the School Sisters of St. Francis who taught at Madonna High School (Aurora, Illinois) in 1965.

VIII. CBIS 2007 Annual Report Goes All Electronic

The 2007 CBIS Annual Report will be posted to our website this spring in interactive HTML format and as a PDF file for easy download and off-line reading.

We will not publish a printed version of the report this year in order to support the continued improvement of our environmental stewardship practices and to avoid the significant related printing and mailing expenses.

In addition to the printing costs and postage, the printed 2006 CBIS Annual Report required:

-1,200 sheets of cover paper weighing 384 pounds;
-5,700 sheets of text paper weighing 1,140 pounds;
-31 pounds of inks; and
-An estimated 1,600 to 2,500 kilowatt hours of electricity for running the printing press over the course of the 14-hour job.

CBIS believes that an all-electronic annual report reduces our carbon footprint and lessens the overall impact of our business on the environment.

IX. A Warm Farewell to Long-Time SRI Director John Wilson

After more than ten years with CBIS, John Wilson, CBIS’ Director of Socially Responsible Investing, accepted the position of Director of Corporate Governance at TIAA-CREF effective February 19, 2007.

All of us at CBIS extend our heartfelt thanks to John for his fine service and contribution to the SRI program during his tenure with us. We also know that many participants met John and closely followed his work. John will be missed by us all, and we all wish him the very best of success in his new role.

While CBIS conducts a search for John’s replacement, Francis G. Coleman, Executive Vice President and former Director of Socially Responsible Investing, will manage the SRI Department.

We are gratified that over the course of his decade-long tenure, John built a strong SRI team and developed a solid framework of business and administrative processes for the department’s work. With an experienced team in place, a solid administrative foundation and Frank Coleman’s guidance, all our SRI initiatives will proceed as planned.

As with all roles at CBIS, as we begin our search for John’s replacement our priority is to find the right person for the position. Fortunately, the SRI movement has grown substantially in the past ten years, giving us a large talent pool of experienced candidates. We are confident we will find an individual for the role who brings the same energy and inspiration to it, and to CBIS, as John did. We look forward to introducing a new SRI Director when our recruitment process is complete.

In the meantime, if you have any questions about this announcement or about the ongoing work of our SRI program, please contact your CBIS Investment Advisor.

X. Meet Your CBIS Investment Advisor

CBIS is a creation of the De La Salle Christian Brothers and education has been a true passion of our executive leadership from the beginning. Today, our strong commitment to education shows itself in the quality of the advice and support participants receive from their CBIS Investment Advisor (IA).

Your IA is far more than a friendly voice on a client service help line. He or she is a highly experienced, senior investment professional who can help you create a sound institutional investment strategy, structure a well-diversified portfolio, interpret and respond to developments in the financial markets, review and analyze account performance, and follow the work and achievements of our SRI program.*

Fred Duda, Paul DiLouie and Tom Matty are three relatively new IAs who have joined the firm over the past two years. Following is a brief summary of their backgrounds. All three look forward to helping your institution achieve its investment goals.

Fred Duda (Oak Brook) — Fred Duda joined CBIS as an Investment Advisor in the Oak Brook office in 2006 and brings a wealth of experience to the position. Previously, he held senior positions at a Chicago-based institutional investment manager for twenty years and has been in the investment business for more than thirty-five years. Fred is a former portfolio manager for both taxable and non-taxable accounts and had portfolio responsibility for the high-grade fixed income assets at his former firm. In addition, he served as a relationship manager for the firm’s clients. Fred is a CFA charter holder and has been the president of two local CFA societies, Chicago and Louisville. He serves on the board of The Youth Campus, a private child welfare agency in Chicago, for which he served as chairman from 2001-2003. His NASD registrations include Series 7 and 63.

Paul DiLouie (New York) — Paul DiLouie joined CBIS in July 2007 as an Investment Advisor. Paul is responsible for building and servicing participant relationships in the Eastern region. Prior to joining CBIS, he spent the majority of his 20-year investment career as a senior portfolio manager for high-net-worth clients and not-for-profit institutions. In addition, he has held positions in equity analysis, mutual fund management, client service and business development. Paul’s previous employers include Wachovia and Bank of America. He has earned the designations of Chartered Financial Analyst (CFA) and Certified Financial Planner (CFP). Paul serves as a Trustee for the Brookdale Community College Foundation. His NASD registrations include Series 7 and 63.

Tom Matty (San Francisco) — Tom Matty joined CBIS in January 2007 as Participant Relationship Manager. Tom works in the San Francisco office as an Investment Advisor for participant relationships in the Western region, Latin America and Europe. He also directs the firm’s strategic activities specific to the needs of reconfiguring religious institutes and participants invested in the RCT Flex Cash Fund. Tom has an extensive background in international cash and trade product management with global financial institutions including UBS, Deutsche Bank (Bankers Trust) and the Bank of New York. Prior to joining CBIS, Tom was an owner and managing partner of a financial services direct marketing firm headquartered in New York City. He began his career as an educator with the Christian Brothers, Midwest Province. Tom serves on the board of Instituto Fe y Vida, a Catholic ministry for young Hispanic adults. His NASD registrations include Series 7 and Series 63.

XI. Announcements

Watch for the Upcoming SRI Survey
In May and June 2008, CBIS will conduct our triennial survey of participants’ SRI issue priorities and preferred strategies for addressing those issues. Please look for an invitation containing a link to the online survey in your email.

We encourage all who receive the invitation to complete the survey. The survey is a unique and highly effective opportunity for participants to express their organization’s point of view on a wide range of SRI topics. We carefully review survey results to help us ensure that CBIS’ SRI policies and strategies remain consistent with participants’ preferences. Previous surveys have had a tangible impact on our SRI activities.