SDCERS’ INVESTMENT COMMITTEE Meeting of November 20, 2008

EXECUTIVE SUMMARY OF STAFF REPORTS Status Reports • $13.6 million was needed for October monthly benefit payments and operating

expenses. • Net invested assets as reported by the custodial bank were $3.782 billion

(unaudited) as of October 31st. Asset Allocation • Declines in domestic and international equity markets triggered a portfolio

rebalancing on October 9th. $177 million was moved from the fixed income allocations to the domestic and international stock allocations.

Manager Search Activity • An RFI for Domestic Equity Small Cap Growth was issued in October 2008 and

responses are being reviewed by staff. Private Equity Update • Staff has included a separate status report of the progress of the Private Equity

search. Managers Watch List• Fidelity Real Estate Fund III was added to the Watchlist under the category of

significant organizational change related to Fidelity’s desire to exit the Real Estate business.

Real Estate Activity • A $6.68 million capital call to Invesco was funded on October 15th. • A $0.38 million capital call to CA Smart Growth Fund IV was funded on October 24th. I:\WPDATA\INVEST\BOARD Reports\IC Executive Summaries\CY 2008\Exec Summary Nov 2008.doc

SAN DIEGO CITY EMPLOYEES’ RETIREMENT SYSTEM STAFF REPORT

INVESTMENT DIVISION

DATE: November 7, 2008 TO : SDCERS' Investment Committee FROM: Doug McCalla, Chief Investment Officer SUBJECT: Status Report - Investment Division

I Trust Fund Status and Transactions

On October 9th, a rebalancing of the portfolio comprising 4.7% of assets was initiated. The rebalancing was in response to the global equity market declines of the previous days that resulted in the core bond, market neutral and international bond allocations exceeding or reaching the upper bounds of their risk control bands. Cash was raised from the following fixed income allocations: PIMCO (domestic fixed income) $ 49.0 million Met West (domestic fixed income) $ 45.0 million Pyramis (domestic fixed income – market neutral) $ 16.0 million SSI (domestic fixed income – market neutral) $ 18.0 million Salus (domestic fixed income – market neutral) $ 20.0 million Rogge (international fixed income) $ 29.0 million Total $177.0 million Cash was added to the following equity allocations: TCW (domestic large cap growth) $ 16.1 million Dodge & Cox (domestic large cap value) $ 16.4 million Delta (domestic large cap core) $ 6.3 million INTECH (domestic large cap core) $ 4.2 million TCW (domestic mid cap value) $ 7.1 million Globeflex (domestic mid cap growth) $ 17.2 million Wall St. Assoc. (domestic micro cap growth) $ 6.9 million Fisher (domestic small cap value) $ 6.3 million Brandes (international large cap value) $ 9.1 million McKinley (international large cap growth) $ 51.6 million GMO (international small cap value) $ 11.2 million Globeflex (international small cap growth) $ 10.8 million Total $163.2 million Also, several wires totaling $7.059 million were made for real estate capital calls as follows: Invesco; $6,679,257 on 10/15/08 CA Smart Growth Fund; $380,194 on 10/24/08

Investment Division - Status Report November 7, 2008 Page 2 of 4

The balance of funds raised in the rebalancing were reserved for pending real estate investments and November’s benefits payment and operating expenses. On October 30th, a wire totaling $13.6 million was sent from the custodial bank to SDCERS’ operating trust fund on deposit with the City Treasurer’s investment pool to pay retirees benefits and operating expenses.

II Status of Realized and Unrealized Gains / Losses The realized gains for the first three months of FY 2009 totaled $9.0 million. The level of unrealized losses totaled -$220.6 million. These values are unaudited. As of the most recent reconciled market valuation on October 31st, net assets as reported by the custodial bank totaled $3.782 billion (unaudited).

III Corporate Governance Operations A. Monthly Proxy Voting

During the month of September, 43 proxies were voted by SDCERS’ voting agent, including eight referred proxies that were voted by staff. Five referred proxies were voted in accordance with SDCERS’ proxy voting policy and guidelines as the vote recommendations of ISS and the investment managers were in agreement. Three referred proxies required further analysis by staff; and, attached to this report are the written analysis and the votes submitted for these proxies. A vote record summary report documenting all of the proxy voting activities for the month of September is on file with SDCERS’ Investment Staff.

IV Investment Operations

A. Portfolio Review and Monitoring

Staff has reviewed investment manager monthly and quarterly reports and investment activity appears to be in compliance with investment guidelines.

B. Real Estate

1. Fidelity Real Estate Growth Fund III, L.P. (FREG III) – Commingled, Value-Added Fund (all property type) – Upcoming Legal Document Review In October, Staff met with the FREG III team in SDCERS offices, as well as attending the Advisory Committee & Limited Partner meeting in Denver. Fidelity is still working with the FREG III team to finalize the remaining details related to the impending spinout of the Real Estate team. Staff is in contact with the FREG III team and will continue to monitor this situation. SDCERS has a 2.2% ownership interest in the $900 million total equity capital of this Fund ($20 million / $900 million).

Investment Division - Status Report November 7, 2008 Page 3 of 4

2. INVESCO Real Estate Fund II, L.P. – Value Added Fund (all property type) – Capital Call A capital call was funded on October 15th totaling $6,679,257. SDCERS has a 8.75% ownership interest in the total $457 million total equity capital of this Fund ($40 million / $457 million).

3. California Smart Growth Fund IV, L.P. – Commingled, California-Focused High Return Fund – Capital Call

A capital call totaling $380,194 was funded on October 24th. SDCERS has a 2.01% ownership interest in the $746 million total equity capital of this Fund ($15 million / $746.15 million).

C. Private Equity Program Design and Implementation Staff conducted on-site due diligence reviews of three firms in early November.

A separate status report regarding the progress of the private equity program is attached.

D. Manager Search Activity Staff issued an RFI for a Domestic Equity Small Cap Growth Manager in

October. The RFI was issued to assess other small cap growth investment managers in relation to Putnam. Putnam is on the Watch List for performance issues as well as significant organizational changes. Staff is currently reviewing the responses to the RFI.

E. Cash Overlay Program Staff is continuing to work with The Clifton Group to complete contract

documents, develop specific investment guidelines and implement the process. Staff will be meeting with the Clifton Group in November to develop policies and procedures related to the cash overlay process.

F. SDCERS’ FY 2008 Audit and CAFR Staff is continuing to work with SDCERS’ outside auditor, Macias Gini O’Connell,

who began audit fieldwork in September. In addition, Staff is finalizing all investment related disclosures and schedules for the FY 2008 CAFR.

Investment Division - Status Report November 7, 2008 Page 4 of 4 G. Research Activities

Investment staff met with or engaged in discussions with the following firms to review products, processes, operations and services:

Name of Firm Type of Service/Product Offered Gould Investment Partners Domestic equity - small cap growth Sterling Johnston Capital Mgmt. Domestic equity - small cap growth Nicholas Investment Partners Domestic equity - small cap growth Dimensional Fund Advisors Domestic equity - small cap value State Street Global Advisors Multiple products Baillie Gifford International LLC International equity - growth Atlantic Investment Mgmt. Hedge funds First Quadrant Market Volatility Research INTECH Domestic equity – large cap core Pyramis (Fidelity) Real Estate Fund III review State Street Bank Compliance monitoring reporting TCW Large Cap concentrated growth AXA Rosenberg Global Advantage Long/Short RREEF Real Estate Separate Account RREEF Global Real Estate Securities Invesco Real Estate Commingled Funds

H. Training and Related Activities IO Buuhoan attended the ILPA General Partners Summit in New York. IO Hamrick attended the Invesco 2008 Client Conference in La Jolla, CA.

Attachments: 1. Proxies Referred to Staff (8) – September 2008

2. Proxy Analysis Documents (3) 3. Due Diligence Report – The Townsend Group

Proxies Referred to StaffSeptember 2008

Company Name CUSIP Meeting Date Analysis Required *H&R Block, Inc. 93671105 4-Sep-08IXYS Corp 46600W106 5-Sep-08Power-One, Inc. 739308104 5-Sep-08 XActivision Blizzard, Inc. 00507V109 24-Sep-08DG FastChannel Inc. 23326R109 24-Sep-08 XWm. Wrigley Jr. Co. 982526105 25-Sep-08Centennial Communications Corp 15133V208 25-Sep-08FedEx Corporation 31428X106 29-Sep-08 X

* X in this column indicates staff conducted analysis and made a vote decision.

I:\WPDATA\INVEST\PROXY\Reports - Current\2008\2008 Referred Proxies.xls

POWER-ONE, INC. Annual Meeting: September 5, 2008 CUSIP 739308104

SDCERS ISS

MGMT Wall Street

163,500 recommends recommends 163,500 Item 1

Amend Conversion of Securities FOR AGT FOR FOR

Attachment to Investment Division Status Report Dated November 7, 2008, A-1 Page 1 of 1 I:\WPDATA\INVEST\PROXY\Reports - Current\2008\Proxy Analysis Documents\Power-One.amend conv sec.doc

This management proposal seeks to approve the removal of the share cap on the issuance of shares underlying the company’s eight percent Senior Convertible Notes due 2013. This would have the effect of increasing the number of shares of common stock that are potentially issuable upon conversion of the notes in the event the conversion rate is reset on June 18, 2008. Management states that it sold the new convertible notes to Lehman Brothers Inc. to retire approximately $50.2 million of existing debt owed to PWER Bridge LLC, and to fund general corporate purposes. Following the retirement of the notes provided by PWER Bridge, Power-One cancelled the 1.5 million unvested warrants entitled to PWER Bridge whose vesting was contingent on an ongoing outstanding principal balance of the notes. Management also contends that shareholders’ approval of this item would facilitate the maintenance of a healthy relationship between the company and its debtholders, which may give the company more financial flexibility at a later date. ISS was unable to determine a clear benefit to shareholders by approving the proposal or a clear detriment to shareholders by not approving the proposal. Therefore, ISS does not believe that this proposal in the best interest of shareholders. ISS recommends voting AGAINST this item. Wall Street recommends voting FOR this shareholder proposal in agreement with management’s position and rationale. SDCERS evaluates proposals such as this on a CASE-BY-CASE basis. In this case, staff is in agreement with management and Wall Street. Because Power-One’s proposal does not have a specific negative detriment to shareholders and the fact that the company will incur more costs in re-submitting this item to shareholders, staff believes that this item is worthy of shareholder approval. Therefore, staff voted SDCERS’ shares FOR this proposal.

DG FASTCHANNEL INC.

Annual Meeting: September 24, 2008 CUSIP 23326R109

SDCERS ISS

MGMT Wall Street

79,800 Recommends Recommends 79,800 Item 1

Issue Shares in Connection with Acquisition FOR ABSTAIN FOR FOR

Attachment to Investment Division Status Report Dated November 7, 2008, A-2 Page 1 of 1 I:\WPDATA\INVEST\PROXY\Reports - Current\2008\Proxy Analysis Documents\DG FastChannel.issue shares.doc

This proposal is seeking to issue additional shares of the company in connection with a proposed merger with Enliven Marketing Technologies Corporation. The company expects to achieve operating and financial synergies basted on the combination of the respective operating strategies of the company and Enliven. In addition, the new combined company expects to realize approximately $3.0 million of cost savings in its first full year of operation as a combined entity through the elimination of duplicative corporate overhead. On September 4, 2008, the company and Enliven entered into an amendment to the previously announced merger agreement. Because the number of shares of common stock outstanding immediately prior to such issuance, a vote of the DG FastChannel stockholders is not required under the rules of the Nasdaq Global Market to approve the issuance of shares under the merger. Although ISS recognizes that a vote is no longer required and the special meeting to approve the issuance of the company’s common stock in connection with the merger will not take place, the proxy ballot is still outstanding and requires a vote submission. Given that the company’s shareholders are not required to vote on the proposed share issuance, ISS recommends that shareholders ABSTAIN voting on this item. Wall Street recommends voting FOR this proposal in agreement with management’s position. SDCERS evaluates proposals such as this on a CASE-BY-CASE basis. In the case of DG FastChannel, staff is in agreement with Wall Street’s recommendation. Although a vote is no longer required for this item per Nasdaq rules, the ballot is still technically outstanding and requires a vote. Therefore, staff voted SDCERS’ shares FOR this proposal in agreement with Wall Street’s vote recommendation.

FEDEX CORPORATION Annual Meeting: September 29, 2008

CUSIP 31428X106

SDCERS ISS MGMT Dodge &

Cox Delta

102,500 Recommends Recommends 85,000 17,500 Item 15

Require Independent Board Chairman FOR FOR AGT AGT FOR

Item 16

Advisory Vote to Ratify Named Executive Officers’ Compensation

FOR FOR AGT AGT FOR

Attachment to Investment Division Status Report Dated November 7, 2008, A-3 page 1 of 5 I:\WPDATA\INVEST\PROXY\Reports - Current\2008\Proxy Analysis Documents\FedEx.indptboardchair.vote on exec compdoc.doc

Item 15 This shareholder proposal requests that the board adopt a policy that the board's chairman be an independent director who has not previously served as an executive officer of the company. The policy should be implemented so as not to violate any contractual obligation. The policy should also specify (a) how to select a new independent chairman if a current chairman ceases to be independent during the time between annual meetings of shareholders; and (b) that compliance with the policy is excused if no independent director is available and willing to serve as chairman. According to the proponent, it is the responsibility of the board to protect shareholders' long-term interests by providing independent oversight of management, including the CEO in directing the corporation's business and affairs. The proponent believes that having one person fulfill both roles necessarily impairs the chair’s ability to hold the CEO accountable. The proponent notes that Fred Smith currently holds the positions of chairman and CEO. The proponents believe this leadership structure has allowed Mr. Smith to exert a dominant influence over the board, impeding the Board’s ability to ensure that management acts strictly in the best interests of the company. The Board believes that the company’s shareholders have been well served by having Mr. Smith act as both chairman and CEO. In addition, the board believes that requiring that the chairman be an independent director is not necessary to ensure that the board provides independent and effective oversight of FedEx’s business and affairs because such oversight is maintained through the composition of the board, the strong leadership of its independent directors and board committees, and its highly effective corporate governance structures and processes already in place. Although ISS recognizes that many large companies maintain the combined posts of Chairman and CEO and perform well with this arrangement, it is often in shareholders’ best interest to separate these positions. One of the board’s primary responsibilities is to represent the interests of shareholders. In addition, the board is responsible for overseeing management and instilling accountability. Conflicts of interest may arise when one person holds both the chairman and CEO positions.

FEDEX CORPORATION Annual Meeting: September 29, 2008

CUSIP 31428X106

SDCERS ISS MGMT Dodge &

Cox Delta

102,500 Recommends Recommends 85,000 17,500 Item 15

Require Independent Board Chairman FOR FOR AGT AGT FOR

Item 16

Advisory Vote to Ratify Named Executive Officers’ Compensation

FOR FOR AGT AGT FOR

Attachment to Investment Division Status Report Dated November 7, 2008, A-3 page 2 of 5 I:\WPDATA\INVEST\PROXY\Reports - Current\2008\Proxy Analysis Documents\FedEx.indptboardchair.vote on exec compdoc.doc

ISS will generally recommend FOR shareholder proposals requiring that the chairman’s position be filled by an independent director, unless there are compelling reasons to recommend against the proposal, such as a counterbalancing governance structure. ISS will look for all the following:

(1) A designated lead director, elected by and from the ranks of the independent board members with clearly delineated and comprehensive duties. The duties should include, but are not limited to, the following:

- Presides at all meetings of the board at which the Chairman is not present, including executive sessions of the independent Directors;

- Serves as liaison between the chairman and the independent directors;

- Approves information sent to the board;

- Approves meeting agendas for the board;

- Approves meeting schedules to assure that there is sufficient time for discussion of all agenda items;

- Has the authority to call meetings of the independent Directors;

- If requested by major shareholders, ensures that he is available for consultation and direct communication.

(2) The company publicly discloses a comparison of the duties of its independent lead director and its chairman.

(3) The company publicly discloses a sufficient explanation of why it chooses not to give the position of chairman to the independent lead director, and instead to combine the chairman and CEO positions.

(4) The following should be present within the current company’s board structure:

2/3 independent board;

FEDEX CORPORATION Annual Meeting: September 29, 2008

CUSIP 31428X106

SDCERS ISS MGMT Dodge &

Cox Delta

102,500 Recommends Recommends 85,000 17,500 Item 15

Require Independent Board Chairman FOR FOR AGT AGT FOR

Item 16

Advisory Vote to Ratify Named Executive Officers’ Compensation

FOR FOR AGT AGT FOR

Attachment to Investment Division Status Report Dated November 7, 2008, A-3 page 3 of 5 I:\WPDATA\INVEST\PROXY\Reports - Current\2008\Proxy Analysis Documents\FedEx.indptboardchair.vote on exec compdoc.doc

All-independent key committees;

Established governance guidelines;

The company does not have any problematic governance issues; and

The company should not have underperformed both its peers and index on the basis of both one-year and three-year total shareholder returns as of fiscal year end, unless there has been a change in the Chairman/CEO position within that time.

ISS may recommend a vote FOR the proposal if the company does not provide disclosure with respect to any or all of the bullet points above. If disclosure is provided, ISS will evaluate on a CASE-BY-CASE basis. In the case of FedEx, ISS has determined that the company does not meet all of the counterbalancing governance criteria listed above. Specifically, a particular concern is the lack of a lead director performing the duties described above. As a result, ISS believes the proposal warrants shareholder support. ISS recommends that shareholders vote FOR this shareholder proposal. Dodge & Cox, in accordance with the firm’s proxy voting guidelines, does not agree with the proponent’s position, and recommends voting AGAINST this item. Conversely, Delta agrees with the proponent’s position and recommends a vote FOR this shareholder proposal. SDCERS generally supports shareholder proposals seeking to separate the Chairman and CEO posts. In this case, staff agrees with ISS’ analysis. Because the company does not have a lead director performing the desired duties, staff believes that this shareholder proposal is in shareholders’ best interests. Therefore, staff voted SDCERS’ shares FOR this item in agreement with vote recommendations from ISS and Delta. Item 16 This shareholder proposal requests that the board adopt a policy giving shareholders the opportunity at each annual meeting of shareholders to vote on an advisory

FEDEX CORPORATION Annual Meeting: September 29, 2008

CUSIP 31428X106

SDCERS ISS MGMT Dodge &

Cox Delta

102,500 Recommends Recommends 85,000 17,500 Item 15

Require Independent Board Chairman FOR FOR AGT AGT FOR

Item 16

Advisory Vote to Ratify Named Executive Officers’ Compensation

FOR FOR AGT AGT FOR

Attachment to Investment Division Status Report Dated November 7, 2008, A-3 page 4 of 5 I:\WPDATA\INVEST\PROXY\Reports - Current\2008\Proxy Analysis Documents\FedEx.indptboardchair.vote on exec compdoc.doc

resolution, proposed by company's management, to ratify the compensation of the named executive officers (NEOs) set forth in the proxy statement's summary compensation table (SCT) and the accompanying narrative disclosure of material factors provided to understand the SCT. The proposal submitted to shareholders should make clear that the vote is non-binding and would not affect any compensation paid or awarded to any NEO. The proponent states that investors are increasingly concerned about mushrooming executive pay which too often is insufficiently aligned with the creation of shareholder value. The board believes that an advisory vote is not necessary because the company’s shareholders already have an efficient and effective method of communicating directly with the board and its Compensation Committee and an advisory vote does not provide that level of communication. The Board also believes that the company’s compensation structure for executive officers promotes the best interests of FedEx and its shareholders by enabling FedEx to retain and attract highly qualified and productive executive officers, while ensuring that they are compensated in such a manner as to sustain and enhance long-term stockholder value. ISS believes that the advisory vote would allow shareholders a voice in a company’s executive compensation practices. The advisory vote would be a confidence vote on the work of the compensation committee and would encourage constructive dialogue between the committee and investors on any contentious pay issues. ISS encourages companies to allow shareholders to express their opinions of executive compensation practices by establishing an annual referendum process. An advisory vote on executive compensation is another step forward in enhancing board accountability. Given this, ISS supports this shareholder proposal and recommends a vote FOR this item. Dodge & Cox, in accordance with the firm’s proxy voting guidelines, does not agree with the proponent’s position, and recommends voting AGAINST this item. Conversely, Delta agrees with the proponent’s position and recommends a vote FOR this shareholder proposal.

FEDEX CORPORATION Annual Meeting: September 29, 2008

CUSIP 31428X106

SDCERS ISS MGMT Dodge &

Cox Delta

102,500 Recommends Recommends 85,000 17,500 Item 15

Require Independent Board Chairman FOR FOR AGT AGT FOR

Item 16

Advisory Vote to Ratify Named Executive Officers’ Compensation

FOR FOR AGT AGT FOR

Attachment to Investment Division Status Report Dated November 7, 2008, A-3 page 5 of 5 I:\WPDATA\INVEST\PROXY\Reports - Current\2008\Proxy Analysis Documents\FedEx.indptboardchair.vote on exec compdoc.doc

SDCERS' voting guidelines state that executive compensation will be decided on a CASE-BY-CASE basis. In the case of FedEx, the company has experienced poor stock performance over the one, three, and five-year periods as compared to the S&P 500 and its peers. By allowing shareholders to have a voice in executive compensation, shareholders would gain confidence in the work of the compensation committee and that any compensation concerns could be addressed. Therefore, staff voted SDCERS’ shares FOR this shareholder proposal in agreement with vote recommendations from ISS and Delta.

SDCERS Y-T-D Status of FY 2009 Realized Gains(unaudited)

16.9 23.69.0

172.2203.9

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Hurdle #1: Est'd Surplus Earnings Threshold @ $XXX million

Hurdle #2: Hurdle #1 + 13th Check Est of $X.X million

Hurdle #3: Hurdle #2 + Projected Corbett FY08 of $X.X million

Total YTD Realized Earnings/(Losses)

Total YTD Unrealized Earnings/(Losses)

L:\Invest\Excel\FY 2009 Status & Forecast of Realized Gains for 9_2008.xls

SAN DIEGO CITY EMPLOYEES’ RETIREMENT SYSTEM STAFF REPORT INVESTMENT DIVISION

DATE : Nov. 7, 2008 TO : SDCERS' Investment Committee FROM : Liza Crisafi, Deputy Chief Investment Officer SUBJECT : Managers Watch List PERFORMANCE (TIME PERIOD / *) MANAGER STYLE GROUP DATE WATCH PROBATION Delta Domestic Stocks Large Cap Core 09/05/08 5yr/R Brandes International Stocks Large Cap Value 12/10/07 3yr/P 3yr/R TCW Domestic Stocks Mid Cap Value 02/03/06 5yr/R TCW Domestic Stocks Large Cap Growth 11/20/06 5yr/R 3yr/R SSI Domestic Bonds Defensive Market Neutral 11/20/06 3 yr/R 5yr/P&R Putnam Domestic Stocks Small Cap Growth 06/06/08 3yr/R 5yr/R SIGNIFICANT ORGANIZATIONAL/PERSONNEL CHANGES MANAGER STYLE GROUP DATE WATCH PROBATION INTECH Large Cap Core 04/10/08 X TCW Domestic Mid Cap Value 03/27/08 X TCW Domestic Stocks Large Cap Growth 02/08/08 X Townsend Group Real Estate Consultant

02/25/08 04/30/08 X

GMO International Stocks Small Cap Value 03/04/08 X Putnam Domestic Stocks Small Cap Growth 09/24/08 X Fidelity Real Estate Fund III 11/07/08 X COMPLIANCE ISSUES MANAGER STYLE GROUP DATE WATCH PROBATION

* = REASON FOR LISTING, i.e. P = ABSOLUTE PERFORMANCE; R = RELATIVE RANK TO PEERS STRIKE THROUGH = TO BE REMOVED FROM WATCH LIST BOLD = ADDED TO WATCH LIST SINCE LAST REPORT Updated on 11/07/2008 I:\INVEST\Board Reports\Watch List\Nov 2008.doc

SDCERS Watch List Monitoring: November 2008

Watch List Monitoring for Performance Issues:

Manager

Presentation to Investment Committee

Meeting with Staff Conference Call

Due Diligence Visit Current Status

BrandesDecember 2007May 2008 Ongoing monitoring

DeltaOngoing monitoring; Staff to schedule meeting

TCW MCV November 2007 November 2006January 2008July 2008 (Callan) Ongoing monitoring

TCW LCG October 2007 November 2008January 2008June 2008 March 2008 Ongoing monitoring

SSI April 2007November 2007February 2008 Ongoing monitoring

Putnam SCG November 2008 November 2007 March 2008 RFI issued October 2008

Watch List Monitoring for Organizational Issues:

Manager

Presentation to Investment Committee

Meeting with Staff Conference Call

Due Diligence Visit Current Status

Intech

June 2007September 2007March 2008 November 2008 May 2008 Ongoing monitoring

The Townsend Group October 2008 July 2008 October 2008Rehired October 2008; Ongoing Monitoring

GMO March 2008 Ongoing monitoring

TCW MCV November 2007 November 2006January 2008July 2008 (Callan) Ongoing monitoring

TCW LCG October 2007 November 2008January 2008June 2008 March 2008 Ongoing monitoring

Putnam SCG November 2008 November 2007 March 2008 RFI issued October 2008

SDCERS Asset Allocation & Rebalancing Status Monitor Chart

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File Name: SMonitor22.xlsRebalancing Ranges Reviewed and Approved on December 21, 2007

As of: 10/31/2008These market values are reconciled and unaudited.

CURRENT ACTUAL ASSET MIX Percent Percent Percentof Total of Asset of Asset

Domestic Equity Market Value Assets Class Subclass Asset Managers Large Cap Growth $291,494,657 7.71% 14.6% 20.5% TCW Large Cap Value $287,521,528 7.60% 14.4% 20.2% Dodge & Cox Large Cap Core $287,456,975 7.60% 14.4% 20.2% Delta & INTECH Mid Cap Core Growth $138,384,072 3.66% 6.9% 9.7% Globeflex Mid Cap Core Value $140,021,959 3.70% 7.0% 9.9% TCW Small & Micro Cap Growth $134,157,775 3.55% 6.7% 9.4% Putnam & Wall St. Small Cap Value $141,804,493 3.75% 7.1% 10.0% DFA & Fisher Total Equity $1,420,841,458 37.57% 71.2% 100.0%

International Equity Top Down (growth) $232,328,032 6.14% 11.6% 40.3% McKinley Bottom Up (value) $239,718,871 6.34% 12.0% 41.6% Brandes Small Cap $104,060,153 2.75% 5.2% 18.1% GMO & Globeflex Total Intl. Equity $576,107,056 15.23% 28.8% 100.0%

Total Equity Domestic & International $1,996,948,514 52.80% 100.0%

Domestic Fixed Lehman Aggregate $673,681,401 17.81% 51.8% 58.6% PIMCO & MetWest Converts $111,019,942 2.94% 8.5% 9.7% Nicholas Applegate Market Neutral Defensive $364,864,757 9.65% 28.1% 31.7% Pyramis, Salus & SSI Total U.S. Fixed $1,149,566,100 30.39% 88.4% 100.0%

International Fixed Salomon Non-US $ $150,857,936 3.99% 11.6% 100.0% Rogge & PIMCO

Pimco has 0-2% discretionTotal Fixed Income Domestic & International $1,300,424,035 34.38% 100.0%

Real Estate Enhanced / High Return Funds $83,033,999 2.20% 17.6% CHIEF, CAV III, IREF I, IREF

II CSGF IV, Capmark, FREG III, Europa

Stable Return, Directly Owned $309,244,051 8.18% 65.5% INVESCO, RREEF, Pyramis REITs $79,527,705 2.10% 16.9% RREEF REITs Total Real Estate $471,805,755 12.47% 100.0%

Cash STIF & STEP $12,939,129 0.34% 100.0% Reserve for benefits &

real estate purchases TOTAL FUND $3,782,117,433 100.0%

These market values are reconciled and unaudited.

SDCERS Asset Allocation Policy Reviewed and Approved on September 21, 2007 (With a 5% Allocation to Private Equity via a Reduction of Domestic Equity as P.E. Commitments are CalledRebalancing Ranges Reviewed and Approved on December 21, 2007

ASSET ALLOCATION TARGET AMOUNTSAdjustment

TARGET ASSET MIX Percent Percent Percent Necessary Proportionateof Total of Asset of Asset to Return Change

Domestic Equity Target Value Assets Class Subclass to Target Mix from Target Large Cap Growth $287,440,925 7.60% 13.8% 20.0% ($4,053,732) -1.4% Large Cap Value $287,440,925 7.60% 13.8% 20.0% ($80,603) 0.0% Large Cap Core $287,440,925 7.60% 13.8% 20.0% ($16,050) 0.0% Mid Cap Core Growth $143,720,462 3.80% 6.9% 10.0% $5,336,391 3.7% Mid Cap Core Value $143,720,462 3.80% 6.9% 10.0% $3,698,504 2.6% Small & Micro Cap Growth $143,720,462 3.80% 6.9% 10.0% $9,562,688 6.7% Small Cap Value $143,720,462 3.80% 6.9% 10.0% $1,915,970 1.3% Total U.S. Equity $1,437,204,625 38.00% 69.1% 100.0% $16,363,167 1.1%

International Equity Top Down (growth) $257,183,985 6.80% 12.4% 40.0% $24,855,953 9.7% Bottom Up (value) $257,183,985 6.80% 12.4% 40.0% $17,465,114 6.8% Int'l. Small Cap $128,591,993 3.40% 6.2% 20.0% $24,531,840 19.1% Total Int'l. Equity $642,959,964 17.00% 30.9% 100.0% $66,852,908 10.4%

Total Equity Domestic & International $2,080,164,588 55.0% 100.0% $83,216,075 4.0%

Domestic Fixed Lehman Aggregate $680,781,138 18.00% 52.9% 60.0% $7,099,737 1.0% Converts $113,463,523 3.00% 8.8% 10.0% $2,443,581 2.2% Market Neutral Defensive $340,390,569 9.00% 26.5% 30.0% ($24,474,188) -7.2% Total U.S. Fixed $1,134,635,230 30.00% 88.2% 100.0% ($14,930,870) -1.3%

International Fixed Salomon Non-US $ $151,284,697 4.00% 11.8% 100.0% $426,762 0% to 2% Tactical

Discretion w/ PIMCOTotal Fixed Income Domestic & International $1,285,919,927 34.00% 100.0% ($14,504,108) -1.1%

Real Estate Enhanced / High Return Funds $187,214,813 4.95% 45.0% $104,180,814 55.6% Stable Return, Directly Owned $124,809,875 3.30% 30.0% ($184,434,176) -147.8% REITs $104,008,229 2.75% 25.0% $24,480,525 23.5% Total Real Estate $416,032,918 11.00% 100.0% ($55,772,838) -13.4%

Cash STIF & STEP $0 0.00% ($12,939,129) Reserved for benefits

& real estate TOTAL FUND $3,782,117,433 100.0% $0

These values are reconciled and unaudited.

POLICY REVIEWED AND APPROVED ON DECEMBER 21, 2007SAN DIEGO CITY EMPLOYEES' RETIREMENT SYSTEM

Rebalancing Ranges Reviewed and Approved on December 21, 2007 Optimized Portfolio Rebalancing

ASSET ALLOCATION STATUS AND PORTFOLIO +/- Adjustment Factor in Std. Dev. => 1.95REBALANCING MONITORING AS OF =====> 10/31/2008

| | || | Signaled | Expected

Market Value & | Target $'s & Min. $'s & Max. $'s & | Rebalancing | Standard CATEGORY / STYLE % of Portfolio | Target % Min. % Max. % | Adjustment | Deviation Large Cap Growth $291,494,657 | $287,440,925 $192,154,258 $382,727,592 | $0 | 17.00%

7.71% | 7.60% 5.08% 10.12% | | Large Cap Core $287,456,975 | $287,440,925 $203,364,454 $371,517,395 | $0 | 15.00%

7.60% | 7.60% 5.38% 9.82% | | Large Cap Value $287,521,528 | $287,440,925 $208,969,552 $365,912,297 | $0 | 14.00%

7.60% | 7.60% 5.53% 9.67% | | Mid Cap Core Growth $138,384,072 | $143,720,462 $96,077,129 $191,363,796 | $0 | 17.00%

3.66% | 3.80% 2.54% 5.06% | | Mid Cap Core Value $140,021,959 | $143,720,462 $98,879,678 $188,561,247 | $0 | 16.00%

3.70% | 3.80% 2.61% 4.99% | | Small Cap Growth $66,426,785 | $71,860,231 $38,790,153 $104,930,310 | $0 | 23.60%

1.76% | 1.90% 1.03% 2.77% | | Micro Cap Growth $67,730,990 | $71,860,231 $29,821,996 $113,898,467 | $0 | 30.00%

1.79% | 1.90% 0.79% 3.01% | | Small Cap Value $141,804,493 | $143,720,462 $98,038,913 $189,402,011 | $0 | 16.30%

3.75% | 3.80% 2.59% 5.01% | | Subtotal US Equities $1,420,841,458 | $1,437,204,625 | |

37.57% | 38.00% | |

International Growth $232,328,032 | $257,183,985 $171,927,494 $342,440,477 | $0 | 17.00%6.14% | 6.80% 4.55% 9.05% | |

International Value $239,718,871 | $257,183,985 $174,435,038 $339,932,933 | $0 | 16.50%6.34% | 6.80% 4.61% 8.99% | |

International Small Cap $104,060,153 | $128,591,993 $84,960,730 $172,223,256 | $0 | 17.40%2.75% | 3.40% 2.25% 4.55% | |

Subtotal Intn'l. Equities $576,107,056 | $642,959,964 | |15.23% | 17.00% | |

Defensive - Market Neutral $364,864,757 | $340,390,569 $312,180,701 $368,600,437 | $0 | 4.25%9.65% | 9.00% 8.25% 9.75% | |

Core Plus Bonds $673,681,401 | $680,781,138 $594,492,129 $767,070,147 | $0 | 6.50%17.81% | 18.00% 15.72% 20.28% | |

Convertible Bonds $111,019,942 | $113,463,523 $86,249,297 $140,677,749 | $0 | 12.30%2.94% | 3.00% 2.28% 3.72% | |

Subtotal US Fixed Income $1,149,566,100 | $1,134,635,230 | |30.39% | 30.00% | |

International Bonds $150,857,936 | $151,284,697 $117,949,114 $184,620,280 | $0 | 11.30% (strategic allocation to Rogge) 3.99% | 4.00% 3.12% 4.88% | |

Cash & Enhanced Cash $12,939,129 | $0 $0 $0 | ($12,939,129) | 1.00%0.34% | 0.00% 0.00% 0.00% | |

Real Estate $471,805,755 | $416,032,918 $302,455,931 $529,609,904 | $0 | 14.00%12.47% | 11.00% 8.00% 14.00% | |

Prepared: TOTAL PORTFOLIO VALUE $3,782,117,433 | 100.00% File Name: SMonitor22.xls 11/10/08

These values are reconciled and unaudited.

POLICY ALLOCATION RANGES

Top 25 Equity Positionsas of 10/31/08

Security NameLocal Currency

Code Shares Base Market Value Base Total Cost Base Unrealized

Gain/Loss Percent of Total

Portfolio Asset Class

1 PROCTER AND GAMBLE CO USD 370,366.00 23,903,421.64$ 22,866,266.80$ 1,037,154.84$ 0.632% EQUITY

2 HEWLETT PACKARD CO USD 570,233.00 21,828,519.24$ 15,091,566.28$ 6,736,952.96$ 0.577% EQUITY

3 GENZYME CORP USD 259,100.00 18,883,208.00$ 16,409,102.24$ 2,474,105.76$ 0.499% EQUITY

4 GOOGLE INC USD 51,134.00 18,375,514.24$ 16,967,191.09$ 1,408,323.15$ 0.486% EQUITY

5 QUALCOMM INC USD 472,553.00 18,079,877.78$ 17,426,125.94$ 653,751.84$ 0.478% EQUITY

6 GILEAD SCIENCES INC USD 377,900.00 17,326,715.00$ 16,602,062.92$ 724,652.08$ 0.458% EQUITY

7 GENERAL ELEC CO USD 883,938.00 17,245,630.38$ 25,490,998.50$ (8,245,368.12)$ 0.456% EQUITY

8 SCHLUMBERGER LTD USD 307,821.00 15,898,954.65$ 17,417,868.15$ (1,518,913.50)$ 0.420% EQUITY

9 WAL MART STORES INC USD 284,513.00 15,878,670.53$ 12,510,966.46$ 3,367,704.07$ 0.420% EQUITY

10 APPLE INC USD 144,886.00 15,588,284.74$ 17,590,700.87$ (2,002,416.13)$ 0.412% EQUITY

11 GENENTECH INC USD 185,732.00 15,404,612.08$ 9,272,528.53$ 6,132,083.55$ 0.407% EQUITY

12 C H ROBINSON WORLDWIDE INC USD 275,220.00 14,250,891.60$ 12,650,859.99$ 1,600,031.61$ 0.377% EQUITY

13 MONSANTO CO NEW USD 160,000.00 14,236,800.00$ 16,430,461.39$ (2,193,661.39)$ 0.376% EQUITY

14 COMCAST CORP NEW USD 897,099.00 14,138,280.24$ 17,835,549.92$ (3,697,269.68)$ 0.374% EQUITY

15 BERKSHIRE HATHAWAY INC DEL USD 122.00 14,089,780.00$ 15,959,549.86$ (1,869,769.86)$ 0.373% EQUITY

16 AMAZON COM INC USD 215,355.00 12,326,920.20$ 8,777,297.00$ 3,549,623.20$ 0.326% EQUITY

17 CERNER CORP USD 330,054.00 12,287,910.42$ 14,746,747.28$ (2,458,836.86)$ 0.325% EQUITY

18 EXXON MOBIL CORP USD 154,524.00 11,453,318.88$ 8,403,788.65$ 3,049,530.23$ 0.303% EQUITY

19 DEUTSCHE TELEKOM EUR 777,100.00 11,410,957.48$ 14,674,955.45$ (3,263,997.97)$ 0.302% EQUITY

20 PFIZER INC USD 636,629.00 11,274,699.59$ 15,258,455.03$ (3,983,755.44)$ 0.298% EQUITY

21 NESTLE SA CHF 290,300.00 11,184,024.66$ 13,206,834.47$ (2,022,809.81)$ 0.296% EQUITY

22 INTERCONTINENTALEXCHANGE INC USD 129,590.00 11,087,720.40$ 18,199,279.33$ (7,111,558.93)$ 0.293% EQUITY

23 VARIAN MED SYS INC USD 234,700.00 10,681,197.00$ 9,874,667.00$ 806,530.00$ 0.282% EQUITY

24 CHEVRON CORP USD 139,451.00 10,403,044.60$ 7,183,127.53$ 3,219,917.07$ 0.275% EQUITY

25 NIPPON TEL+TEL CP JPY 2,606.00 10,386,903.91$ 13,530,260.64$ (3,143,356.73)$ 0.275% EQUITY

Top 25 Fixed Income Positionsas of 10/31/08

Security Name Security Description Shares Base Market Value Base Total Cost Base Unrealized

Gain/Loss Percent of Total

Portfolio Asset Class

1 FNMA TBA NOV 30 SINGLE FAM 5.5% 01 Dec 2099 78,232,500.00 76,411,153.52$ 77,493,576.50$ (1,082,422.98)$ 2.020% FIXED INCOME

2 FNMA TBA DEC 30 SINGLE FAM 5% 01 Dec 2099 21,800,000.00 20,632,507.54$ 20,860,726.56$ (228,219.02)$ 0.546% FIXED INCOME

3 NETHERLANDS KINGDOM OF 5% 15 Jul 2012 12,057,000.00 16,079,322.78$ 17,337,831.59$ (1,258,508.81)$ 0.425% FIXED INCOME

4 FNMA POOL 995018 5.5% 01 Oct 2038 15,478,623.00 15,132,771.74$ 15,554,806.84$ (422,035.10)$ 0.400% FIXED INCOME

5 FNMA TBA DEC 30 SINGLE FAM 5.5% 01 Dec 2099 13,200,000.00 12,874,125.00$ 12,960,750.00$ (86,625.00)$ 0.340% FIXED INCOME

6 DEV BK OF JAPAN 1.75% 17 Mar 2017 1,190,000,000.00 12,134,733.10$ 9,887,416.48$ 2,247,316.62$ 0.321% FIXED INCOME

7 HOUSEHOLD FIN CORP 3.0869% 16 Nov 2009 12,000,000.00 11,479,504.80$ 11,805,720.00$ (326,215.20)$ 0.304% FIXED INCOME

8 FNMA TBA NOV 30 SINGLE FAM 6% 01 Dec 2099 10,560,000.00 10,551,750.53$ 10,665,220.23$ (113,469.70)$ 0.279% FIXED INCOME

9 DEV BK OF JAPAN 1.75% 21 Jun 2010 1,000,000,000.00 10,300,965.94$ 8,602,367.16$ 1,698,598.78$ 0.272% FIXED INCOME

10 FNMA POOL 908613 5% 01 Feb 2037 9,597,180.09 9,102,700.74$ 9,276,274.34$ (173,573.60)$ 0.241% FIXED INCOME

11 FNMA POOL 819714 5% 01 Apr 2020 8,282,013.99 8,138,049.40$ 8,274,249.53$ (136,200.13)$ 0.215% FIXED INCOME

12 UNITED STATES TREAS NTS 2% 15 Jan 2016 8,875,663.28 7,832,673.44$ 9,096,545.25$ (1,263,871.81)$ 0.207% FIXED INCOME

13 NETHERLANDS (KINGDOM OF) 4.25% 15 Jul 2013 5,820,000.00 7,594,076.68$ 8,850,415.94$ (1,256,339.26)$ 0.201% FIXED INCOME

14 FED HM LN PC POOL G04706 5.5% 01 Sep 2038 7,752,288.77 7,572,108.52$ 7,801,421.21$ (229,312.69)$ 0.200% FIXED INCOME

15 JAPAN FIN CORP ME 2% 09 May 2016 700,000,000.00 7,550,711.74$ 6,794,269.40$ 756,442.34$ 0.200% FIXED INCOME

16 UNITED STATES TREAS BDS 1.75% 15 Jan 2028 9,734,200.91 7,531,837.95$ 9,137,986.74$ (1,606,148.79)$ 0.199% FIXED INCOME

17 UNITED STATES TREAS BILLS 0.3% 28 Nov 2008 7,350,000.00 7,342,555.28$ 7,342,555.28$ -$ 0.194% CASH EQUIVALENT

18 ASIAN DEV BANK 2.35% 21 Jun 2027 740,000,000.00 7,324,382.31$ 5,988,425.79$ 1,335,956.52$ 0.194% FIXED INCOME

19 FED HM LN PC POOL G04711 6% 01 Sep 2038 6,760,468.93 6,756,243.64$ 6,909,410.51$ (153,166.87)$ 0.179% FIXED INCOME

20 GERMANY(FED REP) 3.5% 04 Jan 2016 5,374,000.00 6,745,677.98$ 7,836,377.20$ (1,090,699.22)$ 0.178% FIXED INCOME

21 FNMA POOL 735502 6% 01 Apr 2035 6,478,488.16 6,489,369.43$ 6,613,878.47$ (124,509.04)$ 0.172% FIXED INCOME

22 FNMA POOL 883204 6% 01 Jul 2036 6,473,246.48 6,477,039.16$ 6,608,527.23$ (131,488.07)$ 0.171% FIXED INCOME

23 FED HM LN PC POOL G04709 6% 01 Oct 2038 6,445,142.22 6,445,142.22$ 6,588,647.34$ (143,505.12)$ 0.170% FIXED INCOME

24 FNMA POOL 889995 5.5% 01 Oct 2038 6,466,177.00 6,321,698.03$ 6,364,890.39$ (43,192.36)$ 0.167% FIXED INCOME

25 FNMA POOL 745275 5% 01 Feb 2036 6,411,658.88 6,087,319.35$ 6,032,218.92$ 55,100.43$ 0.161% FIXED INCOME

SAN DIEGO CITY EMPLOYEES’ RETIREMENT SYSTEM INVESTMENT DIVISION STAFF REPORT

DATE : November 7, 2008 TO : SDCERS' Investment Committee FROM : Doug McCalla, Chief Investment Officer SUBJECT : FY 2009 Realized Rate of Return The following represents the realized rate of return for Fiscal Year 2008-2009:

Quarter Ended 09/30/2008 + 0.19% FY 2008 YTD Total Realized Rate of Return + 0.19% (compounded)

Realized earnings (interest and dividend income and net gains on the sale of investments) totaled $9.0 million (unaudited) through September 30, 2008.

W:\INVEST\BOARD Reports\Realized Gain thru 1Q FY2009.doc