CBIS Submits Comment Letter to SEC

March 10, 2004

Jonathan G. Katz
Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609

Re: File No. S7-03-04 Release No. IC-26323

Dear Mr. Katz:

Christian Brothers Investment Services, Inc. (CBIS), an investment adviser registered under the Investment Advisers Act of 1940, would like to submit comments on the Commission's January 23, 2004 Proposed Rule: "Investment Company Governance" (File No. S7-03-04; Release No. IC-26323).

CBIS manages approximately $3.5 billion for Catholic organizations seeking to combine faith and finance through the responsible stewardship of Catholic assets. CBIS is an active shareholder, working with companies on a number of issues we believe are critical to the long-term value of the
investments we make on behalf of our clients.

We commend the Commission for its efforts to bring greater independence and accountability to investment companies. The pooled funds that CBIS offers have long maintained boards of trustees that are composed, overwhelmingly, of independent directors. We place high value on the varied perspectives made possible by the diverse compositions of these boards.

We are deeply concerned about the implications for the fund business resulting from the recent allegations, and admissions, of wrongdoing. The abuses of public trust by a few impacts the credibility of the entire industry. Restoring this trust needs to be a priority for regulators and
for the funds themselves.

The principles that create public confidence in fund companies do not differ from those that apply to operating companies; independence, transparency and accountability are necessary elements of a board of directors that fulfills its mandate to represent the interests of shareholders.

We understand that many fund companies have raised concerns about the  additional costs that shareholders might be asked to bear to comply with the SEC's proposed rules. While these costs may not be insubstantial, we believe that they will be reasonable in light of the need for improved
oversight of funds. The loss of shareholder confidence caused by unethical and illegal behavior poses a far greater cost to funds.

We therefore support the principles embodied in the proposed rules, and offer the following specific comments:

Board Composition and Chair
We strongly support the supermajority independence requirement for boards, and the requirement that board chairs be independent of management. As with operating companies, only independent members of fund company boards are free from conflicts that hinder their ability to represent
shareholders. On our own boards, we find that our independent directors add to the diversity of perspective and expertise of the board. Moreover, since board chairs wield significant power to determine agendas, it is particularly important that these members be independent of the fund
management company.

We believe that shareholders have the right to communicate with their representatives, and to know the manner by which these representatives were selected.  The Commission adopted a rule in 2003 requiring operating companies to disclose certain information about their nominating committees and charters, and to inform shareholders whether there was a process by which they could communicate directly with directors.  We suggest that the Commission consider requiring investment companies to
take similar actions.

We further propose that the Commission consider asking boards to evaluate the inclusivity of their current board and of their director search process, especially with regard to women and members of minority groups. We are concerned that typical director searches may miss talented people
from non-traditional backgrounds, potentially depriving funds of the best possible directors. Director searches, therefore, should make explicit efforts to locate candidates from diverse backgrounds. We ask, at a minimum, that the Commission require companies to make information about the diversity of fund boards available to shareholders.

Independent Director Staff
While it is our experience that our boards of trustees successfully fulfill their fiduciary duty without staff, some funds may consider it appropriate that certain board activities, such as those related to audit and compensation, be handled by board members who are independent of management, and who may require the assistance of staff to fulfill these duties. We are concerned, however, that providing staff to these independent directors at the company's expense could increase costs to
shareholders without providing a proportional compensating benefit. Since the fund boards themselves are in the best position to decide whether to make dedicated employees available to independent directors, we support the provision to allow independent directors to hire staff, but would oppose any requirement that they do so.

We are also concerned about the necessity of requiring independent directors to hire their own counsel. While this may be appropriate for some funds, others will be ably served by the fund's own counsel.

We appreciate the work of the Commission in all its efforts to protect and promote shareholder rights, and thank you for the opportunity to submit these comments. Please contact me with any questions.

Sincerely,

John K.S. Wilson
Director - Socially Responsible Investing

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