Callan Associates Inc. - SDCERSBonds, 4% International Bonds, and 11% Real Estate. Total Fund...

Callan Associates Inc.Investment Measurement Service

Quarterly Review

San Diego City Employees’ Retirement SystemMarch 31, 2008

The following report was prepared by Callan Associates Inc. ("CAI") using information from sources thatinclude the following: fund trustee(s); fund custodian(s); investment manager(s); CAI computer software;CAI investment manager and fund sponsor database; third party data vendors; and other outside sourcesas directed by the client. CAI assumes no responsibility for the accuracy or completeness of theinformation provided, or methodologies employed, by any information providers external to CAI.Reasonable care has been taken to assure the accuracy of the CAI database and computer software. Inpreparing the following report, CAI has not reviewed the risks of individual security holdings or thecompliance/non-compliance of individual security holdings with investment policies and guidelines of afund sponsor, nor has it assumed any responsibility to do so. Copyright 2008 by Callan Associates Inc.

Executive SummaryExecutive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Capital Markets ReviewCapital Markets Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Total FundTotal FundThree Year Asset Allocation Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29Asset Allocation Across Investment Managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Actual vs. Target Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31Performance Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38Cumulative Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41Quarterly Total Fund Attribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42Cumulative Total Fund Attribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Asset Class Rankings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Domestic EquityDomestic EquityMarket Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47Composite Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48Delta Asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51INTECH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53TCW Concentrated Core . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55Dodge & Cox . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57GlobeFlex Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59TCW MidCap Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61Putnam Small Cap Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63Wall Street Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65Putnam Small Cap Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67DFA Small Cap Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

International EquityInternational EquityMarket Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72Composite Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73Brandes Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75McKinley Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77GlobeFlex Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79GMO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

Domestic Fixed-IncomeDomestic Fixed-IncomeMarket Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84Composite Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85Met West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87PIMCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89Pyramis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91Salus Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95SSI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99Nicholas-Applegate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

International Fixed-IncomeInternational Fixed-IncomeMarket Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106Rogge International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Real EstateReal EstateComposite Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110Private Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111RREEF REITs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

AppendixAppendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

DisclosuresDisclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141

Callan Research/EducationCallan Research/Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

Executive Sum

mary

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PERFORMANCE SUMMARY PERIODS ENDED MARCH 31, 2008

General Market & Economic Conditions Record high oil prices, declining home sales and a deepening credit crunch contributed to one of the worst quarters this decade for equity markets, both at home and abroad. In March, the Conference Board Consumer Confidence Index fell to a five-year low to 64.5 from 76.4. The Dow (-7.0%), NASDAQ (-13.9%) and S&P 500 (-9.4%) ended the quarter down. The broad benchmark S&P 500 has been in the red for five consecutive months, its longest losing streak dating back to October 1990. Each of the 10 economic sectors within the S&P 500 declined over the three-month period. The S&P 500 Index was hindered by its higher exposure to Financials, which were hit hard in the quarter, in particular by the near collapse of Bear Stearns. During the quarter, value (S&P 500 Citi Value: -8.9%) beat growth (S&P 500 Citi Growth: -9.9%) and large cap stocks (S&P 500: -9.4%) edged its smaller counterparts (Russell 2000: -9.9%). Overseas equity markets were even more volatile, punctuated by sharp declines in January, gains in February and modest losses in March. For the first quarter, both developed (MSCI EAFE: -8.9%) and emerging markets (MSCI Emerging: -10.9%) declined. From a country perspective, losses in the developed markets were led by Hong Kong (-19%), while India (-27%) and China (-24%) were among the biggest decliners in the emerging markets region. For the fifth consecutive quarter, EAFE Growth (-8.2%) surpassed EAFE Value (-9.7%). However, value (-9.3%) trumped growth (-12.5%) within emerging markets. The flight to quality and aggressive Fed action propped up the higher quality portion of the domestic fixed income market, with a 2.2% rise for the broad Lehman Aggregate Bond Index. Jittery investors flocked to Treasurys (+4.4%), which had its best quarterly return since the third quarter of 2002. Mortgage-backed securities (+2.4%) were impacted by the slump in U.S. housing prices. Corporate bonds (+0.4%) were the worst performing fixed income sector in the first quarter. The Federal Reserve cut the fed funds target rate by a full 2%, from 4.25% to 2.25%, during the three month period — the most aggressive quarterly reduction in the short-term rate in a quarter century. Private real estate has finally begun to reflect the shifts in capital markets. The NCREIF Open-Ended Diversified Core Equity Index advanced 1.4% for the quarter, of which 1.2% was income and a mere 0.2% appreciation. There was a notable dispersion in manager performance among the investors that make up this fund index, where numerous managers are outperforming and underperformed the quarterly index value meaningfully. The NCREIF Property Index came in higher at 1.6%. Because this index does not have annual appraisal requirements, its performance tends to lag the current market environment. The strongest property type and the only sector with meaningful appreciation was Office (+2.0%). On a regional basis, the South (+2.1%) was a surprise as the leading performer, supported by Houston (+5.9%) and Nashville (+2.1%).

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Asset Allocation As of quarter end, the assets of the Fund were valued at $4,698 million. This represents a decrease from the December 31, 2007 value of $5,048 million. Approximately $64 million was paid out during the quarter. In addition, the Fund experienced a net investment loss of about $293 million due to the combination of income and realized and unrealized gains/losses. The Fund ended the quarter closely tracking its long-term strategic target of 38% Domestic Equity, 17% International Equity, 30% Domestic Bonds, 4% International Bonds, and 11% Real Estate. Total Fund Performance SDCERS’ first quarter return of -5.8% followed a slightly negative fourth quarter return of -0.6% (excluding private real estate, whose valuations are lagged one quarter) and was behind the Total Fund Benchmark’s -3.9% return. For the one year ended March, the System was down -0.8%, lagging the total fund benchmark return of +1.0% and ranking in the 75th percentile of the public fund universe. The fourth quarter of 2007 and first quarter of 2008 were particularly difficult given the financial market crisis brought on by problems in subprime mortgages and the weak housing market. Equities in general, and small cap in particular, suffered. International equity, which had been a bright spot in the portfolio, contributed to the negative absolute and relative return in the first quarter. Longer-term results for the System are very strong relative to the benchmark, the public fund universe, and the long-term actuarial return target of 8.0%. The System ranks in the top decile of the public fund universe for the ten-year period ended 3/31/08 while outperforming the benchmark. For the trailing ten years ended March 2008, the Fund returned +8.0% on an annualized basis, which ranks in the 4th percentile of the public fund universe and exceeds the total fund benchmark by approximately 1.0% on an annualized basis. The System’s volatility in returns over all of this period has been similar to the public fund median, the result of which has created excellent risk-adjusted returns as well. Domestic Equity SDCERS’ domestic equity portfolio declined on an absolute and relative basis. During the quarter ended March, the portfolio returned -11.1%, underperforming the benchmark return of -9.4% and ranking 96th percentile in the public fund universe. In an unusual quarter, underperformance was widespread as only three of the domestic equity managers succeeded in beating their respective benchmarks – Delta large cap core, TCW mid cap core value and DFA small cap value. For the trailing five years ended March 2008, in what has been a dynamic environment for the US stock markets, the domestic equity portfolio exceeded its benchmark by 1.6% per annum and ranks in the 12th percentile of the public fund universe. For the trailing ten-year period, the portfolio has compounded at +6.3% on an annualized basis (ranking 12th percentile). International Equity International equity markets experienced a negative quarter as the problems in the U.S. began to affect the rest of the world. The MSCI All Country World ex-U.S. was down -9.1% for the quarter with emerging markets down over -11%. Developed markets returned -8.9%. The System’s international equity composite lagged the total international benchmark with a return of -10.3% ranking 98th percentile versus the public fund universe for the period. All but one (GMO small cap value) of the international equity managers underperformed their respective benchmarks. Brandes lagged the index by 2.6% ranking 95th percentile as holdings in telecom services and commercial banks detracted from performance. McKinley likewise lagged the index, underperforming by 1.5%. GlobeFlex and GMO both struggled in what was a

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difficult market for small caps globally. For the trailing year, the international portfolio returned -4.5% (underperforming the target benchmark) as the last three quarters were very difficult for the global equity markets. Longer-term results for the international equity portfolio for periods measured are strong relative to the benchmark and peer universe. The portfolio ranks in the top quartile of the public fund universe over the trailing five-year period. For the trailing ten-year period, the portfolio has compounded at an impressive +10.6%, outperforming its benchmark by 2.4% per annum and ranking in the top decile versus other public funds. Domestic Fixed Income Spreads continued to widen in all sectors as investors rushed to the safety of US Treasury securities. Liquidity concerns led the Federal Reserve to lower the fed funds rate by 200 basis points including a surprise 75 basis point reduction prior to the regularly scheduled FOMC meeting on January 30. The yield curve steepened as 2-year yields declined 147 basis points. The overall domestic fixed income portfolio posted a -0.6% return, underperforming the blended benchmark of 1.6% for the period and ranking in the 93rd percentile of the public fund universe. PIMCO had a terrific quarter and year ending March returning 3.1% (5th percentile) and 10.9% (4th percentile) respectively. MetWest also managed to avoid many of the securities that were hardest hit posting a return of 1.2% (29th percentile) for the quarter. The market neutral equity program was a negative contributor for the quarter with Pyramis, Salus and SSI down 8.0%, 3.0% and 1.6% respectively. The convertibles portfolio managed by Nicholas Applegate detracted as well with a return of -5.5%. The total fixed income portfolio’s return of +7.2% (compared to +7.7% for the Lehman Aggregate) over the trailing year is 0.3% greater than the benchmark and ranks in the 31st percentile of the public fund universe. Performance for the trailing three and five year periods has met objectives, outperforming both the Lehman Aggregate and the blended benchmark. Additionally, the risk-adjusted performance for the portfolio remains very attractive. For the trailing ten year period ended March 2008, the portfolio has compounded annually at +6.3%, placing in the 17th percentile of the public plan universe while experiencing considerably less volatility in return than the benchmark and the median public plan. International Fixed Income The international fixed income portfolio is managed by Rogge International. On April 14, Rogge announced that they are acquiring the high yield division of ING Ghent. We expect this acquisition will deepen Rogge’s credit research capabilities. Turmoil continued in the global financial markets in the first quarter. The dollar continued its fall against the Euro and Yen contributing to strong USD based returns. The Citi Non-US Government Bond Index rose 10.9% during the quarter. Rogge’s portfolio returned a strong absolute return of 10.2%, but underperformed the index placing them 76th percentile against peers. Results for the last year lag the benchmark by 2.0% and ranked 65th percentile. Longer-term results for Rogge since inception are favorable compared to the index and place the portfolio above median of the non-US fixed income peer group. Also worth noting, SDCERS’ non-U.S. bond portfolio has generated a meaningful premium over U.S. bonds over the past five year period, mainly fueled by a weakening U.S. dollar as well as the strong contributions from the emerging market debt sector. Real Estate Given data timing issues, the returns on the private real estate assets of SDCERS are lagged one quarter. Through December, the long-term returns on the real estate portfolio have been strong. The overall real estate portfolio remains one of the best performing asset class for SDCERS for the trailing five years, returning 19.2% annualized over this period. This has been driven to a large extent by SDCERS’ public real estate portfolio, which has returned 20.7% per annum for the five years ended March.

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Comments on Watch List Managers TCW Large Cap Growth – SDCERS Staff and Callan met at TCW’s offices in Los Angeles with Craig Blum, portfolio manager, on March 14. It was announced during the first quarter that Scott Burlingame was leaving the firm and that Craig was named the sole portfolio manager. Performance improved in 2007 but fell back in the first quarter. For the year ended March, the portfolio returned 0.0% vs. the -0.8% for the Russell 1000 Growth and ranked 49th percentile. With the exception of the trailing three-year period, the portfolio is outperforming the index over longer time periods. TCW’s concentrated portfolio of 25-30 stocks and lower turnover approach tends to produce a volatile return pattern over time. Since their inception for SDCERS, the portfolio has added significant value over the Russell 1000 Growth Index and ranks in the top quartile of the large growth style. This said, we are concerned about the amount of personnel turnover at TCW. Burlingame’s departure is the second significant change to the portfolio management of the strategy in the past three years (Former lead PM Glenn Bickerstaff relinquished day to day management approximately three years ago but remains a vice chairman at TCW). This strategy needs to be monitored very closely over the next 12 months. TCW Mid Cap Core Value – On March 27, TCW announced that co-portfolio manager, Nick Gallucio was leaving the firm at the end of June 2008 to join Gabelli Associates. Gallucio has been with TCW since the early 1980’s and helped lead the strategy with Susan Suvall, SDCERS’ lead portfolio manager. While Nick’s portfolio management and research responsibilities are being assumed by others on the team, his departure is significant. The portfolio has performed admirably on a relative basis year-to-date, returning -5.7% and ranking in the 13th percentile of the mid cap value style group, almost 3% above the Russell Mid Cap Value Index. However, since inception returns fall short of the index and style median in what has been a remarkable period for returns within the asset class. We believe this relative underperformance is more the result of their investment style being out-of-favor than any particular issues at the firm. Long-term results for the strategy remain very strong. As mentioned above, we are concerned with the continued turnover at TCW and the implications of Nick’s departure. As with the large cap growth strategy, the mid cap value strategy needs to be monitored very closely in the coming months. Further personnel departures from the team could necessitate a change for SDCERS. Putnam Small Cap Value – The Putnam small cap value product is on watch for performance. The portfolio was down -8.5% (85th percentile) and -23.7% (93rd percentile) for the quarter and year respectively. Since inception the portfolio lags the benchmark and ranks 78th percentile. After an on-site visit to Putnam’s Boston offices last month, Staff has begun the process to identify other candidates as potential replacements to Putnam for this assignment. We are comfortable with this decision and will support the search effort to the extent needed. GMO International Small Cap Value - On March 4, GMO announced that lead portfolio manager, Ann Spruill, would be leaving the firm effective June 30, 2008. Richard Mattione, who joined in 1994, will assume strategy leadership. Spruill’s country responsibilities will be assumed by existing portfolio managers. New hires will be considered, although a direct replacement for Spruill is not expected. Her country coverages have been assumed by other members of the portfolio management team. The departure of Ann Spruill is a significant event. Our concerns are somewhat mitigated by the depth and experience of the remaining team. Although decision making is the responsibility of individual country portfolio managers, all decisions are discussed throughout the team for cross-boarder considerations on a global sector basis. Additionally, many countries within Spruill’s coverage reside in regions covered by others, with the exception of Eastern Europe. It is our opinion that the strategy be retained with ongoing monitoring and evaluation of the transition of country coverage and performance.

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SSI Market Neutral Equity – The first quarter was difficult for market neutral managers due to extreme equity market volatility. SSI’s performance for the quarter was under the target benchmark of 90 day T-Bills + 3% and ranked 89th percentile against its market neutral peers. It was the best performing of SDCERS’ market neutral managers for the quarter. However, SSI’s return since their inception falls well short of the benchmark and ranks in the bottom quartile of the style group. As we have discussed previously, we encourage SDCERS to identify potential candidates to replace SSI for this assignment. The Board may want to wait until the broader market neutral equity program is discussed in greater detail in the coming months. Summary and Conclusions It was an extremely difficult quarter for active managers given the volatility in the equity markets and the liquidity crisis in the fixed income markets. The Fund struggled as many of its historically strong performing managers found these markets to disfavor their processes. Despite the performance difficulties over the past few quarters, we do not believe any material changes to SDCERS strategic long-term plan need to be revised or revisited. We do have some concern with some of the equity strategies, as described in the sections above, and will closely monitor developments. The annualized return on the overall portfolio for the trailing three, five, and ten-year periods remains in excess of the long-term actuarial expected return target of 8.0%, the total fund benchmark, and the median public plan. Equally important, SDCERS risk over this period has been comparable to its long-term benchmark, the result being very strong risk-adjusted returns over longer-term periods measured. As always, we greatly appreciate our relationship with SDCERS. Please do not hesitate either of us if you have any questions. We look forward to seeing you at the May meeting to discuss these results in greater detail. Best Regards,

Janet Becker-Wold, CFA James A. Callahan, CFA Dated: May 6, 2008

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Capital M

arkets Review

‘

Recession Without a Decline? | U.S. ECONOMYGDP rose by 0.6%, matching the fourth quarter’s rate of growth.

Consumer sentiment in March dropped to the lowest reading

since March 1982. The current slowdown will likely be termed a

recession even though we may not meet the rule of thumb often

used by the entity empowered to brandish the “R” word—a

decline in real GDP for two consecutive quarters. see page 16

Dark Cloud Seeks Silver Lining | U.S. EQUITYDespite a strong push from the Federal Reserve, U.S. equity

markets were down across the board. The broad Russell 3000

dropped 9.5%, with all 10 sectors in the red. Based upon the

Russell style indices, value-oriented stocks topped growth-

oriented stocks across all capitalization ranges. see page 1

All Bond Out of Shape | U.S. FIXEDThe debt markets seized up and liquidity vanished in the first

quarter from a litany of negative news. Spread sectors were

decimated over the three-month period. The Lehman Treasury

Index advanced 4.43% as rates fell in a continued flight to

quality. The broad U.S. investment grade bond market, as

measured by the Lehman Aggregate, climbed 2.17%. see page 4

Real Estate Decelerates | REAL ESTATEDespite increased volatility during the quarter, the U.S. real estate

securities markets bounced back at the end of the first quarter

(+1.40). Self Storage (+20.23%) and Residential (+11.20%)

posted sizable gains. Private real estate has finally begun to

reflect the shifts in capital markets, with the NCREIF Open-

Ended Diversified Core Equity Index advancing 1.35%.

see page 12

De-Coupling Debunked | NON-U.S. EQUITYHindered by lingering credit concerns and the spillover effects

from an apparent economic slowdown, the MSCI EAFE Index

declined 8.91% in the first quarter. Nearly all developed equity

markets dropped. Countries dependent on exporting goods to

the United States, such as Japan, Germany and China, all

suffered as the American consumer shied away from imports.

see page 7

Inflation vs. Recession… Stagflation? | NON-U.S. FIXEDGlobal bond yields were driven lower over concerns of a U.S.-led

recession; the U.S. dollar depreciated against major currencies.

For the quarter, the Citi Non-U.S. World Government Bond

Index rose by 1.97% in local terms and 10.93% in U.S. dollar

terms. The JPMorgan EMBI Global Bond Index gained 0.63%

in absolute terms. see page 10

What a Difference a Year Makes | PRIVATE EQUITYFundraising totaled $51.6 billion in commitments and 68 new

funds in the first quarter of 2008. Mezzanine led the pack by

virtue of a single fund. Both exit and venture-backed merger

activity slowed during the quarter. Buyouts substantially

decreased. see page 14

Credit Crunch Squeezes Hedge Funds | HEDGE FUNDSGiven the liquidity crisis in the financial markets, the median

manager in the Callan Hedge Fund-of-Funds Database

dropped 3.20% last quarter, net of fees. Those with more

exposure to equity markets or levered strategies slumped even

further. see page 15

Pessimism Prevails | DIVERSIFIED ACCOUNTSIn the first quarter, median public (-5.31%) and Taft-Hartley

(-4.81%) plans outperformed. Corporate plans and

endowments/foundations were not far behind, losing

5.74% and 5.89%, respectively. Both domestic (-5.42%) and

global balanced managers (-6.22%) lagged their static 60%

equity and 40% fixed income benchmarks, which had returns of

-4.84% and -2.78%, respectively. see page 18

FIRST QUARTER 2008

Capital Market Review

CALLAN INVESTMENTSINSTITUTE

2.17%

10.93%

2.62%

-2.01%

0.88%

-9.52%

-8.91%

Cash (90-Day T-Bills)

U.S. Equity (Russell 3000)

Non-U.S. Equity (MSCI EAFE)

U.S. Fixed (LB Aggregate)

Non-U.S. Fixed (Citi Non-U.S.)

Real Estate (Callan Real Estate)

Hedge Funds (CS/Tremont HFI)

Broad Market Returns

Callan Associates • Knowledge for Investors

About Callan Associates

Founded in 1973, Callan Associates Inc. is one of the largest independently owned investment consulting

firms in the country. Headquartered in San Francisco, Calif., the firm provides research, education, decision

support and advice to a broad array of institutional investors through five distinct lines of business: Fund

Sponsor Consulting, Independent Adviser Group, Institutional Consulting Group, Callan Investments

Institute and the Trust Advisory Group. Callan employs more than 170 people and maintains four regional

offices located in Denver, Chicago, Atlanta and Florham Park, N.J.

About the Callan Investments Institute

The Callan Investments Institute, established in 1980, is a source of continuing education for those in the

institutional investment community. The Institute conducts conferences and workshops and provides

published research, surveys and newsletters. The Institute strives to present the most timely and relevant

research and education available so our clients and our associates stay abreast of important trends in the

investments industry.

The Capital Market Review is published quarterly by the Callan Investments Institute for professionals of the

institutional investment community, both domestic and international. The Capital Market Review focuses

primarily on the latest quarterly performance of market indices and Callan style groups for each of the major

asset classes used by institutional investors.

Editor-in-Chief – Mary Schaefer; Performance Data – Alpay Soyoguz, CFA, Adam Mills; Publication Layout – Tanja Eisenhardt

First Quarter 2008 • Capital Market Review | 1

DARK CLOUD SEEKS SILVER LINING

It can be a struggle to see anything positive in the

current mix of dismal economic milestones—gold

spiking up over $1,000 per ounce, oil at more than

$100 per barrel and the euro eclipsing $1.55.

Housing prices are also falling at a double-digit annu-

al rate (S&P/Case Shiller), job growth is turning neg-

ative, and the consumer is souring on the economy.

The good news: markets are much less expensive

and investors are beginning to take a serious look at

the opportunities that the sell-off has provided. Not

much of a silver lining, but it is all we have.

Despite a strong push from the Federal Reserve, U.S.

equity markets were down across the board. Both

the Russell 3000 and its large capitalization sub-

component, the Russell 1000, fell 9.5%. The small

cap Russell 2000 declined 9.9% compared to a loss

of 9.4% for the large cap S&P 500.

Results were negative across all Russell 3000 sec-

tors, with four sectors posting double-digit declines.

Technology (-15.2%) dipped, as both Software &

Services (-17.0%) and Hardware (-12.8%) sank.

Software & Services was hurt by poor results from

Google (-36.3%) and Microsoft (-20.0%), while

Hardware saw declines from Apple (-27.6%) and Dell

(-18.7%).

Telecommunications (-14.7%) fell due to poor growth

reported by bellwethers AT&T (-6.9%) and Verizon

(-15.7%). The wireless (-31.0%) segment also slowed.

Financials (-12.6%) took another hit from the sub-

prime contagion and near collapse of Bear Stearns

(-88.1%). Punished by Fannie Mae (-33.5%) and

Freddie Mac (-24.8%), the mortgage industry sank

19.4%. Led by Citi (-26.4%), large banks also

plunged. Residential REITs emerged as a bright spot,

gaining 11.3%.

Health Care (-11.4%) was split. Mega-cap pharma-

ceuticals such as Merck (-34.1%) declined, but

biotechnology climbed on strong earnings from DNA

pioneer Genentech (+21.0%) and Celgene (+32.6%),

a maker of cancer treatment drugs.

Telecommunications 3.1%

Telecommunications

Materials 4.2%

Materials

Utilities 3.9%

Utilities

Energy 12.5%

Energy

ConsumerStaples 9.8% Consumer Staples

ConsumerDiscretionary 9.7%

Consumer Discretionary

Industrials 12.6%

Industrials

Health Care 11.7%

Health Care

InformationTechnology

15.6%

Information TechnologyFinancials17.1%

Financials

Economic Sector Exposure (Russell 3000) Economic Sector Returns (Russell 3000)

-12.6%

-15.2%

-5.4%

-6.3%

-11.4%

-2.6%

-8.0%

-3.3%

-9.8%

-14.7%

-10%

-8%

-6%

-4%

-2%

0%

100%80%60%40%20%0%

Russell 1000 = -9.48%

Capitalization Sector Performance

Russell 3000 = -9.52% Rus

sell

2000

= -

9.90

%

U.S. EQUITY | Bob Shaw, CFA

All segments of the Utilities (-9.8%) sector were in the

red. Electric Utilities and Independents were down

8.1% and 12.5%, respectively. Multi-line Utilities lost

13.8%.

A slowdown in consumer spending negatively

impacted Consumer Discretionary (-8.0%).

Household Durables decreased 6.1% despite a

surge in Homebuilding (+15.8%). Weak demand con-

tinued to plague the Automotive sector (-11.2%).

Energy (-6.3%) declined as downstream concerns

(refining and marketing) hindered the large integrated

companies such as Exxon (-9.4%), Chevron (-7.9%)

and ConocoPhillips (-13.2%).

Due in part to a string of bankruptcy filings from the

Airlines (-21.1%) sector, Industrials (-5.4%) lost

ground. The counterpunch was in Rails (+10.4%) and

Airfreight (+3.5%) which are benefiting from the ener-

gy surcharges.

Helped by the recent commodities boom, Materials

(-3.3%) held its own. Metals & Mining slipped

0.6%, with Steel stocks (+5.6%) rising, but both

Aluminum (-0.1%) and Gold (-6.7%) companies

reversing course. Hurt by falling demand for com-

mercial and residential construction, Construction

Materials shed 14.3%.

With the economy slowing, Consumer Staples

(-2.6%) was the best performing sector. Large scale

super centers such as Wal-Mart (+11.4%) did well,

while Tobacco (-3.1%) and Beverages (-3.8%) fell.

U.S. Equity Index Characteristics as of March 31, 2008S&P 1500 S&P 500 S&P 400 S&P 600 Rus 3000 Rus 1000 Rus Midcap Rus 2000

Cap Range 39–452,506 983–452,506 263–125,300 39–4,970 6–476,462 155 –476,462 155–24,480 6–6803Number of Issues 1,500 500 400 600 2,899 998 792 1,901% of S&P 1500 100% 88% 8% 4% 100% 92% 26% 8%Wtd Avg Mkt Cap $85.46B $96.21B $3.77B $1.39B $79.85B $86.53B $8.45B $1.29BPrice/Book Ratio 2.4 2.4 2.1 1.8 2.3 2.4 2.2 1.8P/E Ratio (forecasted) 13.3 13.1 14.8 15.6 13.7 13.4 15.0 17.8Dividend Yield 2.1% 2.2% 1.5% 1.2% 2.0% 2.1% 1.7% 1.5%5-Yr Earnings (forecasted) 12.8% 12.5% 15.5% 16.0% 13.3% 13.0% 14.4% 16.9%

2 | Capital Market Review • First Quarter 2008

Large Cap Large Cap Small Cap Small Cap Growth Style Value Style Growth Style Value Style 10th Percentile -8.93 -6.98 -11.66 -3.50 25th Percentile -10.59 -8.20 -13.45 -4.54 Median -11.36 -9.27 -15.47 -6.03 75th Percentile -13.16 -10.37 -18.85 -7.81 90th Percentile -15.08 -11.83 -21.61 -8.91 R1000 Growth R1000 Value R2000 Growth R2000 Value Benchmark -10.18 -8.72 -12.83 -6.53

Callan Style Group Returns

-22%

-18%

-14%

-10%

-6%

-2%

02 0388 89 90 91 92 93 94 95 96 97 98 99 00 01-30%

-20%

-10%

0%

10%

20%

30%

04 05 06 0708

Russell 1000 Value

Russell 1000Russell 1000 Growth

Rolling One-Year Relative Returns versus Russell 1000

U.S. EQUITY | continued

Style Median and Index Returns* for Periods ended March 31, 2008Large Cap Equity Quarter Year 3 Years 5 Years 10 Years 15 YearsLarge Cap–Broad Style -10.00 -5.09 6.43 12.38 5.01 10.55Large Cap–Growth Style -11.36 -0.03 6.99 10.22 3.61 9.37Large Cap–Value Style -9.27 -9.09 6.03 13.58 5.96 10.91Aggressive Growth Style -13.58 3.16 7.51 13.47 5.72 10.66Contrarian Style -10.19 -10.68 5.30 13.76 6.14 11.72Core Style -9.68 -4.90 6.20 11.96 4.82 10.59Yield-Oriented Style -8.21 -6.25 6.70 13.56 6.22 10.87Russell 3000 -9.52 -6.06 6.10 12.07 3.88 9.45Russell 1000 -9.48 -5.40 6.19 11.86 3.83 9.55Russell 1000 Growth -10.18 -0.75 6.33 9.96 1.28 7.76Russell 1000 Value -8.72 -9.99 6.01 13.68 5.54 10.70S&P Composite 1500 -9.33 -5.45 5.94 11.80 3.98 9.64S&P 500 -9.44 -5.08 5.85 11.32 3.50 9.45NYSE -9.11 -2.65 9.61 15.74 5.82 10.64Dow Jones Industrials -7.01 1.59 7.78 11.42 5.49 11.21Mid Cap Equity Quarter Year 3 Years 5 Years 10 Years 15 YearsMid Cap–Broad Style -10.54 -6.19 7.98 15.80 8.72 12.46Mid Cap–Growth Style -12.27 -1.41 9.59 15.66 8.60 11.97Mid Cap–Value Style -8.45 -10.53 6.76 16.06 9.17 13.14Russell Midcap -9.98 -8.92 7.36 16.31 7.65 11.44S&P MidCap 400 -8.85 -6.97 7.05 15.10 9.02 12.41Small Cap Equity Quarter Year 3 Years 5 Years 10 Years 15 YearsSmall Cap–Broad Style -10.61 -12.60 5.15 15.05 7.29 11.42Small Cap–Growth Style -15.47 -7.98 6.59 13.86 5.54 10.82Small Cap–Value Style -6.03 -15.71 3.40 15.48 8.63 12.25Small Cap–Core Style -10.11 -13.67 4.13 14.87 6.72 11.02Russell 2000 -9.90 -13.00 5.06 14.90 4.96 9.04S&P SmallCap 600 -7.46 -10.60 5.31 15.62 7.05 10.94NASDAQ -13.88 -5.13 5.28 11.93 2.70 8.91Russell 3000 Sectors Quarter Year 3 Years 5 Years 10 Years 15 YearsConsumer Staples -2.57 8.47 9.76 12.40 5.09 10.79Consumer Discretionary -8.02 -19.41 -1.78 7.99 1.60 6.14Industrials -5.38 4.06 9.52 16.31 6.38 11.12Energy -6.34 20.62 19.21 27.05 13.81 14.85Materials -3.25 11.07 14.98 21.94 7.72 9.70Information Technology -15.23 -2.43 5.59 10.92 1.76 9.59Utilities -9.78 -2.89 12.47 18.56 6.56 8.68Financials -12.64 -26.34 -0.72 7.61 3.73 10.97Telecommunications -14.67 -12.13 10.49 13.36 -2.10 -Health Care -11.35 -5.66 3.76 6.47 3.85 -

*Returns less than one year are not annualized.


U.S. EQUITY | continued

Based upon the Russell style indices, value-oriented

stocks topped growth-oriented stocks across all

capitalization ranges. To compare growth and value,

Russell divides the capitalization indices to create

subsectors of growth- and value-oriented stocks.

Among smaller stocks, the Russell 2000 Small CapGrowth Index fell 12.8%, compared to a decline of

6.5% for its value counterpart. In the large stock

arena, the Russell 1000 Growth Index (-10.2%)

lagged the Russell 1000 Value Index (-8.7%).


ALL BOND OUT OF SHAPE

The debt markets seized with liquidity vanishing in

the first quarter due to a litany of negative news. The

uncharted territory forced the Fed to aggressively

forgo its normal decision-making timetable. The lack

of liquidity caused extreme dislocation in the fixed

income market. Spread sectors were decimated over

the three-month period. The Lehman TreasuryIndex advanced 4.43% as rates fell in a continued

flight to quality. The broad U.S. investment grade

bond market, as measured by the LehmanAggregate, climbed 2.17%.

The financial markets faced unprecedented stress

during the quarter. As asset values tumbled in the

first quarter, many levered financial firms became

forced sellers as margin calls were triggered. This

created a vicious cycle of downward pressure on

prices and headline news. Throughout much of 2007

the Federal Reserve had been judicious of the sim-

mering banking problems but during the first quarter

was forced to be creative. The Fed unexpectedly cut

rates by 75 basis points on January 22, followed by

expected cuts during the next two meetings on

January 30 and March 18 of 50 and 75 basis points,

respectively. Since August 2007, the Fed has lowered

the fed funds rate 300 basis points to 2.25%, with

200 during the first quarter of 2008. Much of the eas-

ing by the Fed was expected; however, the continued

lack of liquidity caused concern. On March 14, with

major primary dealer Bear Stearns facing insolvency,

the Fed stepped in to find a solution, which resulted

in the sale of Bear Stearns to JPMorgan Chase. The

Fed’s decision to not allow the firm to fail has helped

rebuild confidence and, in turn, restore some liquidi-

ty to the market.

Similar to last quarter, the overwhelming angst afflict-

ing the fixed income market hit structured securities

the hardest. The contributors to the negative excess

return relative to Treasurys were technical imbalance,

U.S. FIXED INCOME | Jon Salstrom, CFA

-2%

0%

2%

4%

6%

8%

10%

Effective Yield Over Treasurys

0%

1%

2%

3%

4%

5%U.S. Credit

Bellwether 10-Year SwapLB High Yield (right axis)

MBSABSCMBS ERISA

07 0806050403020100

U.S. Treasury Yield Curves

1%

2%

3%

4%

5%

6%

302520151050

March 31, 2008December 31, 2007March 31, 2007

Maturity (Years)

Historical 10-Year Yields

0%

1%

2%

3%

4%

5%

6%

7% U.S. 10-Year Treasury Yield10-Year TIPS YieldBreakeven Rate (Expected Inflation)

07 0806050403020100

lack of liquidity and increased volatility. The technical

imbalance caused commercial mortgage-backed

securities (CMBS) to underperform duration adjusted

Treasurys by 777 basis points. The weak housing

market and subprime contagion forced asset-backed

securities (ABS) to lag duration-adjusted Treasurys

by 594 basis points and caused the Lehman MBSIndex to underperform as well, albeit by a muted 77

basis points. Home equity ABS was the worst per-

forming subsector, returning a negative 1,682 basis

points of excess return relative to duration-adjusted

securities.

Credit spreads widened considerably during the first

quarter on a multitude of negative economic news,

poor earning announcements, higher financing costs

and the troubled monoline insurance market.

Investment grade credit spreads widened to 275

basis points, generating a negative excess return of

427 basis points versus like-duration Treasurys. On

an absolute base, investment grade corporates

advanced 0.43%, as measured by the LehmanCredit Index. Weighed down by fears of recession

and the near collapse of Bear Stearns, the high yield

market produced a negative 781 basis points of

excess return. For the quarter, the Lehman HighYield Index fell 3.02%.


U.S. FIXED INCOME | continued

Fixed Income Index ReturnsAbsolute Return Excess Return versus Like-Duration Treasurys

4.43% 0%

2.17% -1.83%

3.23% -0.68%

2.43% -0.77%

-2.57% -7.77%

-1.92% -5.94%

0.43% -4.27%

-3.02% -7.81%

LB Treasury

LB Aggregate

LB Agencies

LB MBS

LB CMBS

LB ABS

LB Credit

LB Corporate High Yield


Interm Core Bond Core Plus Ext Maturity High Yld Style Style Style Style Style 10th Percentile 3.25 2.56 2.14 3.79 -1.00 25th Percentile 2.87 1.77 1.29 2.57 -1.57 Median 2.69 1.40 0.84 1.55 -2.28 75th Percentile 2.25 1.02 0.00 0.53 -3.15 90th Percentile 1.76 0.26 -3.63 0.21 -3.65 LB Interm LB LB LB LB Agg Agg Agg G/C Long High Yld Benchmark 2.35 2.17 2.17 0.78 -3.02

-4%

-3%

-2%

-1%0%1%

2%

3%

4%

U.S. Fixed Income Index Characteristics as of March 31, 2008LB Indices Yield to Worst Modified Adj Duration Avg Maturity % of LB G/C % of LB AggLB Aggregate 4.51 4.38 7.05 100.00% 100.00%LB Govt/Credit 3.91 5.37 8.02 100.00% 55.06%

Intermediate 3.51 3.83 4.63 79.50% 43.78%Long-Term 5.47 11.34 21.15 20.50% 11.29%

LB Govt 2.76 4.79 6.59 58.85% 32.40%LB Credit 5.56 6.21 10.06 41.15% 22.66%LB Mortgage 5.13 3.09 6.19 - 35.47%LB Asset-Backed 6.32 3.46 4.47 - 0.78%LB Commercial Mortgage 6.15 4.94 6.06 - 5.21%LB Corp High Yield 10.86 4.57 7.24 - -


Style Median and Index Returns* for Periods ended March 31, 2008Broad Fixed Income Quarter Year 3 Years 5 Years 10 Years 15 YearsCore Bond Style 1.40 6.44 5.26 4.65 6.11 6.48Core Bond Plus Style 0.84 4.74 5.10 5.01 6.16 6.80LB Aggregate 2.17 7.67 5.48 4.58 6.04 6.34LB Govt/Credit 2.53 8.35 5.55 4.62 6.12 6.40LB Govt 4.05 11.45 6.44 4.71 6.18 6.36LB Credit 0.43 3.99 4.28 4.43 5.93 6.52Citi Broad Investment Grade 2.63 8.41 5.77 4.80 6.13 6.42Long-Term Quarter Year 3 Years 5 Years 10 Years 15 YearsExtended Maturity Style 1.55 7.31 6.34 6.50 7.68 8.24LB Gov/Credit Long 0.78 6.38 5.13 5.53 6.88 7.57LB Gov Long 3.75 12.62 7.16 6.20 7.41 7.96LB Credit Long -2.02 0.56 3.13 5.05 6.23 7.09Intermediate-Term Quarter Year 3 Years 5 Years 10 Years 15 YearsIntermediate Style 2.69 8.27 5.66 4.43 5.95 6.08LB Intermediate Aggregate 2.35 7.84 5.52 4.44 5.91 6.09LB Gov/Credit Intermediate 3.00 8.88 5.66 4.37 5.91 6.00LB Gov Intermediate 4.11 11.22 6.28 4.34 5.82 5.86LB Credit Intermediate 1.29 5.19 4.68 4.29 5.94 6.31Short-Term Quarter Year 3 Years 5 Years 10 Years 15 YearsDefensive Style 1.97 6.70 5.02 3.62 5.06 5.31Active Cash Style 0.61 4.59 4.48 3.25 4.35 4.68Money Market Funds (net of fees) 0.78 4.31 4.07 2.76 3.35 3.76ML Treasury 1–3 Year 2.98 8.99 5.41 3.61 4.91 5.1190-Day Treasury Bills 0.88 4.62 4.41 3.18 3.73 4.10Mortgage/Asset-Backed Quarter Year 3 Years 5 Years 10 Years 15 YearsMortgages Style 1.59 6.62 5.45 4.72 6.15 6.57LB MBS 2.43 7.82 5.78 4.80 5.99 6.31LB ABS -1.92 -1.16 2.44 2.49 5.04 5.47LB CMBS -2.57 1.34 3.41 3.28 6.14 -High Yield Quarter Year 3 Years 5 Years 10 Years 15 YearsHigh Yield Style -2.28 -1.58 5.34 8.54 5.75 8.00LB High Yield -3.02 -3.74 4.89 8.62 4.84 6.88ML High Yield Master -2.98 -3.46 4.91 8.45 5.19 7.09Convertibles Quarter Year 3 Years 5 Years 10 Years 15 YearsConvertibles Database -6.17 1.24 7.24 9.95 7.37 9.87ML Convertible (All Qualities) -5.61 -3.74 5.64 7.62 5.11 -Municipal Quarter Year 3 Years 5 Years 10 Years 15 YearsLB Muni -0.61 1.90 3.70 3.92 4.99 5.60

U.S. FIXED INCOME | continued


DE-COUPLING DEBUNKED

NON-U.S. EQUITY | Lin Fitzenhagen, CFA

Hindered by lingering credit concerns and the

spillover effects from an apparent economic slow-

down, the MSCI EAFE Index declined 8.91% in the

first quarter. As proof that global markets are indeed

linked together, nearly all developed equity markets

dropped, with the exception of Denmark. Countries

dependent on exporting goods to the United States,

such as Japan, Germany and China, all suffered as

the American consumer shied away from imports.

Central banks made a concerted effort to plug the

leak in the dike, but a series of interest rate cuts and

liquidity infusions could not halt the contagion. The

MSCI Emerging Markets Free Index (-10.92%)—a

recent bright spot in the turbulent global markets—

finally capitulated and fell harder than its developed

counterparts. Fortunately, a weak U.S. dollar helped

cut some of the negative returns in countries where

foreign currencies remained strong, as in Japan,

where the yen is at its highest in more than a decade.

For the fifth consecutive quarter, EAFE Growth(-8.16%) beat EAFE Value (-9.66%). EAFE SmallCap (-6.24%) outpaced EAFE. While Greece

(-15.83%), Portugal (-13.16%) and Germany

(-11.75%) led developed Europe downward, Hong

Kong (-18.89%), Australia (-11.74%) and New

Zealand (-14.69%) managed to weigh heavily on the

developed Pacific.

Europe The MSCI Europe Index (-8.62%) fell sharply, but

slightly outpaced the broader EAFE Index. Financials

led the regional decline due to write-offs tied to sub-

prime investments and profit losses from major

European firms, such as UBS, Credit Suisse and

Deutsche Bank. France’s Société Générale endured

a trading scandal by a rogue employee, leading to

further discomfort with governance and risk controls

within large financial institutions. The Telecommuni-

cations and Technology sectors lost nearly 20% for

the quarter amid concerns of weaker consumer and

business investment. Vodafone, Infineon and

Ericsson all suffered. Other sectors like Materials,

Energy and Industrials fared no better, even though

commodity prices, driven by emerging market

demand, reached unprecedented levels. The

European Central Bank and the Bank of England dis-

played far more fiscal restraint than the U.S. Federal

Reserve during the quarter. The European Central

Bank held rates steady at 4.00%, while the Bank of

England made one minimal rate cut of a quarter-

point, to 5.25%.

02 0388 89 90 91 92 93 94 95 96 97 98 99 00 01-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

04 05 06 0708

MSCI Europe

MSCI EAFEMSCI Pacific

Rolling One-Year Relative Returns versus MSCI EAFE U.S. Dollar

Regional Performance

MSCI Pac ex-Japan

MSCI Emerg Markets

MSCI ACW ex-U.S.

MSCI EAFE

MSCI Europe

MSCI Japan-7.81%

-8.62%

-8.91%

-9.06%

-10.92%

-13.02%


AsiaThe MSCI Pacific Basin Index (-9.57%) trailed the

broader market in dollar terms. Although the yen

strengthened against the U.S. dollar, Japan

(-7.81%) continued to struggle with political instabil-

ity and a global growth slowdown, especially given

the Japanese export-reliant economy. Australia

(-11.74%) raised interest rates twice to levels not

seen in over a decade. Hong Kong (-18.89%) was the

worst performing country in the region this quarter,

roiled by the correction in the overheated Chinese

market. Just last quarter, Hong Kong outpaced the

entire region, stemming from the momentum created

when Chinese authorities decided to allow mainland

investors to trade on the Hang Seng. Across the

region, many firms in Technology (e.g., Sony and

Toshiba) and Financials (e.g., Mizuho Financial and

National Australia Bank) experienced a poor quarter,

providing further evidence that the subprime crisis,

credit crunch and economic slowdown were not geo-

graphically isolated events.

Emerging MarketsThe MSCI EMF Index came in last among the wide-

ly followed international indices in a volatile quarter.

The EMF Index was down in January, rebounded in

February and fell again in March. The BRIC heavy-

weights punished the Index, as Brazil (-5.00%),

Russia (-11.51%), India (-26.99%) and China

(-23.96%) all gave back some of their 2007 gains.

Two other emerging market stalwarts—South Korea

(-12.74%) and South Africa (-14.96%)—suffered

double-digit losses during the quarter. On a positive

note, Taiwan (+5.29%) and Mexico (+5.07%) posted

gains. Surprisingly, Pakistan (+11.36%) was the best

performing country in the emerging markets catego-

ry—intriguing, given that the country is emerging

from the shadows of political uncertainty following

Prime Minister Benazir Bhutto’s assassination in late

December 2007. Sectorwise within emerging mar-

kets, Materials fared the best benefiting from surging

commodity prices, while Information Technology and

Consumer Staples also suffered less than other

industries.

NON-U.S. EQUITY | continued

Return Attribution for EAFE Countries(U.S. Dollar)

Country Total Local Currency WtgAustralia -11.74% -15.11% 3.96% 6.36%Austria -9.90% -16.87% 8.38% 0.59%Belgium -3.09% -10.58% 8.38% 1.30%Denmark 0.04% -7.68% 8.37% 1.02%Finland -10.51% -17.43% 8.38% 1.84%France -8.35% -15.44% 8.38% 10.91%Germany -11.75% -18.57% 8.38% 9.18%Greece -15.83% -22.33% 8.38% 0.71%Hong Kong -18.89% -19.04% 0.19% 2.18%Ireland -1.24% -8.87% 8.38% 0.70%Italy -11.72% -18.54% 8.38% 3.87%Japan -7.81% -17.86% 12.24% 20.10%Netherlands -6.58% -13.80% 8.38% 2.87%New Zealand -14.69% -16.49% 2.16% 0.12%Norway -10.46% -16.20% 6.85% 1.06%Portugal -13.16% -19.87% 8.38% 0.34%Singapore -7.43% -11.37% 4.45% 1.15%Spain -5.64% -12.93% 8.38% 4.44%Sweden -3.44% -11.40% 8.99% 2.46%Switzerland -2.10% -14.47% 14.47% 7.23%UK -10.52% -10.39% -0.16% 21.55%

“A Double Quarter Pounder” (U.S. Dollar)

MSCI India

MSCI China

MSCI BRIC

MSCI Pacific ex-Japan

MSCI Japan

MSCI Europe

MSCI Emerging Markets

MSCI AC World ex-U.S.

MSCI World

MSCI EAFE

Fourth Quarter 2007First Quarter 2008

-1.75%-8.91%

-2.42%-9.06%

-0.62%-9.06%

3.66%-10.92%

-0.46%-8.62%

-6.08%-7.81%

-1.66%-13.02%

9.35%-16.51%

-3.65%-23.69%

23.31%-27.11%


-50%

0%

50%

100%

150%

200%

Major Curencies Cumulative Returns versus U.S. Dollar

02 0383 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 04 05 06 0708

*euro returns from 1Q99

German markJapanese yen

UK sterlingeuro*


Global Eq Non-U.S. Eq Emg Mkts Small Cap Style Style Style Style 10th Percentile -6.84 -6.64 -7.63 -5.72 25th Percentile -8.97 -7.79 -10.07 -6.69 Median -9.91 -8.97 -10.91 -8.17 75th Percentile -11.61 -9.82 -12.10 -8.71 90th Percentile -13.53 -10.95 -13.46 -10.88 MSCI MSCI MSCI MSCI World EAFE Emg Mkts Small Cap Benchmark -9.06 -8.91 -10.92 -6.24

-14%

-12%

-10%

-8%

-6%

-4%

Style Median and Index Returns* for Periods ended March 31, 2008International Equity Quarter Year 3 Years 5 Years 10 Years 15 YearsGlobal Style -9.91 -2.84 10.96 16.71 6.91 10.63Non-U.S. Style -8.97 -0.54 14.78 22.40 8.18 10.32Core Style -8.85 -1.90 13.70 21.74 7.81 9.88MSCI EAFE–Unhedged -8.91 -2.70 13.32 21.40 6.18 8.07MSCI EAFE–Local -14.95 -14.79 8.57 14.63 2.85 6.26MSCI EAFE Growth –Unhedged -8.16 1.91 14.35 19.81 4.28 6.07MSCI EAFE Value–Unhedged -9.66 -7.25 12.20 22.88 7.87 9.92MSCI World–Unhedged -9.06 -3.25 9.64 15.96 4.58 8.42MSCI World–Local -11.90 -9.67 7.09 12.72 3.03 7.54MSCI AC World ex-U.S.–Unhedged -9.06 2.58 16.49 24.04 7.67 9.06MSCI AC World–Unhedged -9.18 -0.68 11.62 17.73 5.52 9.03Pacific Equity Quarter Year 3 Years 5 Years 10 Years 15 YearsPacific Basin Style -12.04 -4.40 13.07 19.59 7.46 6.35Japan Style -8.23 -15.05 6.02 15.24 5.80 5.90Pacific Rim Style -14.06 14.23 22.37 28.05 12.26 9.66MSCI Pacific–Unhedged -9.57 -8.93 10.03 18.01 5.43 3.18MSCI Pacific–Local -17.10 -21.16 7.07 13.22 2.34 1.98MSCI Japan–Unhedged -7.81 -14.71 6.44 15.01 3.44 1.19MSCI Japan–Local -17.86 -28.10 3.92 11.05 0.46 0.23Europe Equity Quarter Year 3 Years 5 Years 10 Years 15 YearsEurope Style -9.51 -2.13 14.34 22.25 8.51 12.91MSCI Europe–Unhedged -8.62 0.18 14.86 22.94 6.58 11.54MSCI Europe–Local -13.94 -11.71 9.26 15.31 3.21 9.49Emerging Markets Quarter Year 3 Years 5 Years 10 Years 15 YearsEmerging Markets Style -10.91 20.50 30.03 37.20 14.72 13.09MSCI EMF–Unhedged -10.92 21.65 29.64 35.95 12.53 10.90MSCI EMF–Local -10.94 16.23 26.37 30.54 13.47 19.40International Small Cap Equity Quarter Year 3 Years 5 Years 10 Years 15 YearsSmall Cap Style -8.17 -7.48 16.73 28.87 14.01 12.13MSCI EAFE Small Cap–Unhedged -6.24 -11.19 11.15 25.49 - -


NON-U.S. EQUITY | continued


INFLATION VS. RECESSION… STAGFLATION?

During a tumultuous first quarter, global bond yields

were driven lower due to concerns of a U.S.-led

recession. Even though economic data deteriorated,

central banks in some commodity-rich countries

were forced to raise rates to combat inflationary pres-

sures. The Citi Non-U.S. World Government BondIndex rose by 1.97% in local terms and 10.93% in

U.S. dollar terms.

The U.S. dollar fell against more than most currencies

during the first quarter. The U.S. dollar depreciated

the most relative to the Japanese yen and the Swiss

franc, which had total returns of 12.24% and

14.47%, respectively. Both low-yielding countries

saw their currencies rise as the carry trades were

unwound in a flight to quality.

EuropeIn Europe, many of the central banks are torn

between the possibility of a recession and the threat

of rising inflation. High food and energy prices are

pushing the limits of what the European Central Bank

will tolerate concerning inflation. However, the

decline in asset values as banks deleveraged, cou-

pled with lower projected economic growth, weighed

heavily on the central bank. The ECB left rates

unchanged at 4.00%, while the Bank of England cut

rates by 25 basis points to 5.25%. Amid growing

concerns of a recession, the 10-year yield on the

German bund fell from 4.30% to 3.89%, and the 10-

year UK government bond fell from 4.50% to 4.34%.

Dollar-Block CountriesUnlike the Bank of Canada, which lowered rates by

75 basis points, Australia raised rates by 25 basis

points twice during the quarter due to inflationary

0.5%

1.0%

1.5%

2.0%

10-Year Global Government Bond Yields

3%

4%

5%

6%

7%

8%

GermanyU.S. 10-Year Treasury

UKCanadaJapan (right axis)

07 0806050403020100

Change in Yields from 4Q07 to 1Q08 (bps)

Japan

Canada

UK

Germany

U.S. 10-Year Treasury-61

-41

-16

-55

-23

Return Attribution for Non-U.S. Govt Indices(U.S. Dollar)

Country Total Local Currency* Wtg**Australia 7.35% 3.26% 3.96% 0.40%Austria 11.25% 2.65% 8.38% 2.05%Belgium 10.77% 2.20% 8.38% 2.94%Canada 0.06% 4.03% -3.81% 2.16%Denmark 11.14% 2.56% 8.37% 0.81%Finland 11.21% 2.61% 8.38% 0.63%France 10.94% 2.36% 8.38% 10.29%Germany 11.20% 2.60% 8.38% 12.17%Greece 10.01% 1.51% 8.38% 2.62%Ireland 10.76% 2.20% 8.38% 0.50%Italy 10.61% 0.21% 8.38% 11.54%Japan 13.78% 1.37% 12.24% 35.75%Malaysia 5.51% 2.05% 3.39% 0.44%Netherlands 10.97% 2.39% 8.38% 2.76%Norway 9.01% 2.02% 6.85% 0.41%Poland 12.16% 1.20% 10.83% 1.10%Portugal 10.65% 2.09% 8.38% 1.17%Singapore 7.27% 2.70% 4.45% 0.37%Spain 10.49% 1.95% 8.38% 3.75%Sweden 11.87% 2.64% 8.99% 0.73%Switzerland 16.23% 1.54% 14.47% 0.73%UK 1.73% 1.89% -0.16% 6.70%

*Derived from MSCI EAFE data.**Source: Citi Non-U.S. World Government Bond Index

NON-U.S. FIXED INCOME | Jon Salstrom, CFA


concerns. New Zealand did not raise rates during the

quarter, but instead appeared hawkish on inflation.

New Zealand and Australia both face inflationary

pressures and a global slowdown which threaten to

hamper domestic growth.

AsiaFor the fourth consecutive quarter, the Bank of Japan

held its key rate steady at 0.5%—the lowest among

industrialized nations. Any economic momentum that

might have been gained was dampened by the con-

tinued turmoil surrounding Parliament and a lack of

conviction from consumers. The yield on the 10-year

Japanese bond fell 23 basis points, to end the quar-

ter at 1.28%.

Emerging MarketsThe spread widening that afflicted all fixed income

markets did not spare the emerging debt market.

However, absolute returns were still positive for the

quarter. Dollar-denominated emerging market debt,

as measured by the JPMorgan EMBI Global BondIndex, advanced 0.63%. Given the currency tailwind,

the local currency emerging debt posted a much bet-

ter return of 3.28%, as measured by the JPMorganGBI-EM Index.


Global Fixed Non-U.S. Fxed Style Style 10th Percentile 10.30 11.55 25th Percentile 9.64 10.90 Median 9.04 10.64 75th Percentile 6.71 10.29 90th Percentile 4.49 8.80 Citi World Citi Non-U.S. Govt Unhedged Govt Unhedged Benchmark 9.66 10.93

0%

2%

4%

6%

8%

10%

12%

Emerging Spreads by region

100 bp

200 bp

300 bp

400 bp

500 bp

600 bp

2007 20082006200520042003

Emerging AmericasEmerging EMEA (Europe, Middle East, Africa)Emerging Asia

Style Median and Index Returns* for Periods ended March 31, 2008Global Fixed Quarter Year 3 Years 5 Years 10 Years 15 YearsGlobal Style 9.04 18.66 7.17 8.47 7.55 7.53Citi World Govt–Unhedged 9.66 20.29 7.27 8.14 7.21 6.98Citi World Govt–Local 2.44 5.73 3.27 3.24 4.47 5.74Non-U.S. Fixed Quarter Year 3 Years 5 Years 10 Years 15 YearsNon-U.S. Style 10.64 20.61 6.94 9.06 7.31 7.55Citi Non-U.S. World Govt–Unhedged 10.93 22.31 7.40 9.00 7.37 7.12Citi Non-U.S. World Govt–Local 1.97 4.15 2.44 2.84 3.93 5.67Europe Quarter Year 3 Years 5 Years 10 Years 15 YearsCiti Euro Govt Bond–Unhedged 10.84 23.75 9.59 11.81 - -Citi Euro Govt Bond–Local 2.27 3.96 2.59 3.73 - -Emerging Markets Fixed Quarter Year 3 Years 5 Years 10 Years 15 YearsJPM Emerg Mkts Bond Plus 0.47 4.33 10.19 12.08 9.85 12.47JPM Emerg Local Mkts Plus 4.70 18.75 12.22 13.02 10.91 -JPM GBI-EM Global Composite 3.28 18.23 13.81 15.15 - -


NON-U.S. FIXED INCOME | continued


REAL ESTATE DECELERATES

Commercial real estate took a beating in the media

and is often predicted to be the next disaster zone

within the capital markets, but there is little data or

evidence to support this doomsday scenario. Tighter

and more expensive lending costs, risk repricing and

softening demand segued into expected valuation

declines across the asset class. Generally, new sup-

ply was constrained due to heightened construction

costs and strong market transparency, which made

for a better fundamental balance. From the supply

perspective, the commercial real estate outlook is

not as grim as Wall Street might presume. Further,

rent rates are still healthy based on historical stan-

dards. Yet, transactions have come to a relative

standstill and cap rates are on the rise. According to

Real Capital Analytics, average cap rates increased

two basis points during the quarter, compared to a

15 basis point decrease over the same period last

year.

Wild volatility continued throughout the quarter in the

public real estate securities markets. However, the

U.S. real estate securities markets bounced back at

the end of the first quarter (+1.40%), thanks to a

major upswing in March. There was a notable uptick

in mutual fund inflows, potentially signaling perceived

value plays. Major REIT managers bought back

shares, indicating that they see relative value as well.

Self Storage wowed investors (+20.23%) during the

quarter. Other sizeable increases included

Residential (+11.20%) and Retail (+2.65%). Lodging

(-6.79%), Industrial (-4.79%) and Office (-4.04%)

were all in the red.

Global real estates securities, as measured by the

FTSE EPRA/NAREIT Global Real Estate Index,

were down 5.63% in the first quarter. The regional

property securities markets demonstrated a depar-

NAREIT Equity Sector Performance

Specialty

Lodging/Resorts

Industrial/Office

Diversified

Health Care

Retail

Residential

Self Storage 20.23%

11.20%

2.65%

2.47%

0.42%

-4.10%

-6.79%

-7.71%

Rolling One-Year Returns

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

REIT DatabaseGlobal REIT Database*

Real Estate Database

02 0394 95 96 97 98 99 00 01 04 05 06 07 08*Global REIT returns from 2Q04

NCREIF Property IndexProperty Type Diversification

Midwest

South

East

West

Hospitality

Industrial

Retail

Apartments

Office 38.8%

22.7%

21.4%

15.2%

2.0%

Regional Diversification34.7%

34.0%

21.4%

9.9%

REAL ESTATE | Sarah Snyder


ture between Asia (-16.35%), and a rebounding

North America (+0.56%) and Europe (+6.36%). Asia

underwent a major repricing during the quarter, com-

ing off of its highs over the past six months and los-

ing nearly 500 bps of market share within the FTSE

EPRA/NAREIT Global Real Estate Index. As such,

North America is once again the largest investable

region. European securities, down 1.3% in local cur-

rency, outperformed on the sentiment that the credit

crisis may not have as large an impact on the region

as anticipated. Globally, lower rental growth assump-

tions are filtering into future expectations. Whether

new “bottoms” will be seen on the real estate securi-

ties front is unknown.

Private real estate finally began to reflect the shifts in

capital markets. The NCREIF Open-Ended

Diversified Core Equity (ODCE) Index advanced

1.35% for the quarter, of which 1.18% was income

and a mere 0.17% was appreciation. There was a

noticeable dispersion in manager performance

among the investors that make up this fund index,

where numerous managers are outperforming and

underperforming the quarterly index value meaning-

fully. The NCREIF Property Index came in slightly

above the ODCE at 1.60%. Because this index does

not have annual appraisal requirements, its per-

formance tends to lag the current market environ-

ment. The strongest property type and the only sec-

tor with meaningful appreciation was Office (+1.96%)

driven by growth in demand, primarily in the South.

On a regional basis, the South (+2.14%) was a sur-

prise as the leading performer, supported by

Houston (+5.85%) and Nashville (+2.14%). The

weakest sector was the Midwest (+1.00%), which

suffered a 0.32% depreciation in value, demonstrat-

ing flatness in Chicago (+1.22%) and a negative

Detroit (-2.98%). In the detailed MSA data of the

NCREIF Property Index, numerous markets exhibited

depreciation, a sign of the changing environment.

Real Estate REIT Global REIT Database Database Database 10th Percentile 4.21 4.01 -1.35 25th Percentile 3.22 2.83 -3.75 Median 2.62 1.90 -4.32 75th Percentile 1.50 0.98 -5.29 90th Percentile 0.45 0.15 -6.89 NCREIF NAREIT EPRA/NAREIT Property Equity Global Benchmark 1.60 1.40 -5.63


-8%

-6%

-4%

-2%

0%

2%

4%

6%

REAL ESTATE | continued

Style Median and Index Returns* for Periods ended March 31, 2008Private Real Estate Quarter Year 3 Years 5 Years 10 Years 15 YearsReal Estate Database (net of fees) 2.62 12.50 17.16 15.29 12.42 11.81NCREIF Property 1.60 13.58 16.76 15.07 12.63 11.25Public Real Estate Quarter Year 3 Years 5 Years 10 Years 15 YearsREIT Database 1.90 -16.89 12.36 19.84 13.11 13.38NAREIT Equity 1.40 -17.37 11.69 18.34 10.69 11.66Global Real Estate Quarter Year 3 Years 5 Years 10 Years 15 YearsREIT Global Database -4.32 -17.10 15.51 24.19 - -EPRA/NAREIT Global -5.63 -17.34 14.89 23.28 11.81 12.33


Overall Capitalization RatesSector 1st Quarter 2008 One Year AgoIndustrial 6.47% 6.78%Apartment 5.79% 5.89%CBD Office 6.63% 6.87%Suburban Office 7.13% 7.65%Strip Shopping Center 7.28% 7.38%

Source: Korpacz Real Estate Investor SurveyRates based on unleveraged, all-cash transactions.


WHAT A DIFFERENCE A YEAR MAKES

Fundraising totaled $51.6 billion in commitments and

68 new funds in the first quarter of 2008. This is a

moderate increase versus the $44 billion and 66

funds that were raised in the first quarter of last year.

Mezzanine led the pack by virtue of the single $23.3

billion Goldman Sachs Mezzanine Partners V fund

raised quickly during the quarter. Without the

Goldman fund, the quarter total would look consider-

ably different. Buyouts substantially decreased

($16 billion) from the first quarter of last year. So far,

venture capital is only a single digit as a percentage

of the investment opportunity set.

Investments by funds into companies dropped dra-

matically in response to the difficult capital market

environment. According to Buyouts newsletter, buy-

out-sponsored acquisitions totaled $46 billion in 53

transactions with announced values. The total num-

ber of buyout deals closed was 226. By comparison,

the first quarter of 2007 saw $103 billion across 79

deals with announced values and total closings of

283 investments. The pipeline of expected future

closings and new deal announcements has also

dropped significantly. Most of the deals being trans-

acted are in the mid- to small-size range.

Exit activity slowed during the quarter. Thompson

Financial reports that only two buyout-backed com-

panies went public, raising $267 million, and five ven-

ture-backed companies had IPOs totaling $283 mil-

lion. Venture-backed merger activity slowed to 56

transactions valued at $2.5 billion, down from last

quarter’s 83 transactions and $8.4 billion.

What a difference a year makes. In the first quarter

2007 Capital Market Review, a new trend was report-

ed where several buyout funds were seeking to raise

their carried interest by 5%. While interest in private

equity is still high, those terms are no longer being

suggested.

Please see our upcoming issue of Private Markets Trends for more in-depth coverage.

PRIVATE EQUITY | Gary Robertson

Index Returns* for Periods ended March 31, 2008Private Equity Proxy Quarter Year 3 Years 5 Years 10 Years 15 YearsWP/VE Post-Venture Cap -20.57 -12.27 5.14 14.29 1.01 6.89


Funds Closed 1/1/08 to 3/31/08Strategy # of Funds $ Amt (mil) %Venture Capital 27 $4,138 8%Acquisition/Buyouts 25 18,111 35%Subordinated Debt 4 22,271 43%Distressed Debt 3 4,153 8%Other 5 1,029 2%Fund-of-funds 4 1,914 4%Totals 68 $51,616 100%

Source: The Private Equity Analyst


CREDIT CRUNCH SQUEEZES HEDGE FUNDS

HEDGE FUNDS | Jim McKee

Style Median and Index Returns* for Periods ended March 31, 2008Diversified Hedge Fund Strategies Quarter Year 3 Years 5 Years 10 Years 15 YearsHedge Fund-of-Funds Database -3.20 2.86 7.85 8.27 8.96 10.93CS/Tremont Hedge Fund Index -2.01 6.73 10.22 10.85 8.32 -CS/Tremont Investable Blue Chip Index -2.54 2.34 5.93 - - -Market Neutral Equity Quarter Year 3 Years 5 Years 10 Years 15 YearsMarket Neutral Equity (unlevered) 1.60 2.02 4.49 4.18 4.47 6.55T-Bills 0.88 4.62 4.41 3.18 3.73 4.10Commodities Quarter Year 3 Years 5 Years 10 Years 15 YearsGS Commodity Index 9.92 38.62 8.42 16.05 11.37 9.39Mt. Lucas Futures Index 4.31 7.77 3.82 3.23 4.78 6.79Dow Jones–AIG Commodity 8.99 17.23 7.54 12.24 6.59 5.39


Last quarter, sinking housing prices and soaring

commodity prices undermined the market’s confi-

dence in the consumer-dependent U.S. economy.

The S&P 500 fell 9.44%. Despite the Fed’s unusual

efforts to keep banks lending, counterparty risks

increased dramatically and credit spreads widened.

Reacting to these concerns, prime brokers increased

their hedge fund clients’ margin requirements or

curbed their credit lines. One particularly defining

moment for counterparty risk was the sudden col-

lapse of Bear Stearns in mid-March, creating

unprecedented stress for hedge funds.

Serving as a proxy for diversified hedge fund pro-

grams, the median manager in the Callan HedgeFund-of-Funds Database dropped 3.20% last quar-

ter, net of fees. Those with more exposure to equity

markets or levered strategies slumped even further.

Representing the unmanaged universe of open and

closed funds, the Credit Suisse/Tremont HedgeFund Index declined 2.01%, its biggest quarterly

drop since the second quarter of 2000. Among the

wounded this quarter was Fixed Income Arbitrage

(-6.78%), with much of the damage caused by

unwinding leverage occurring in March. Convertible

Arbitrage (-7.64%) suffered from not only unwinding

leverage but also widening credit spreads.

Amid falling equity markets, Short Bias rose 9.83%

while Long-Short Equity lost 4.10%. With highly dis-

cretionary bets on events, the Multi-Strategy Event-

Driven managers fell 3.89%, despite ongoing suc-

cess from opportunistic subprime trades. Distressed

managers lost 2.56%. As top-down oriented alloca-

tors of risk capital, Global Macro continued to build

on its success of prior quarters, gaining 6.88% last

quarter. Buffeted by a clear upswing in virtually all

commodities, Managed Futures (+10.42%) helped to

offset losses elsewhere in the hedge fund portfolio.

Please see our upcoming issue of Hedge Fund Monitor for more in-depth coverage.

Absolute Return Core Diversified Long-Short Eq FoF Style FoF Style FoF Style 10th Percentile -0.40 -1.68 -1.78 25th Percentile -1.64 -2.25 -3.50 Median -2.11 -3.70 -5.09 75th Percentile -3.17 -3.90 -6.36 90th Percentile -3.93 -4.88 -7.94 T-Bills 0.88 0.88 0.88


-8%-7%-6%-5%-4%-3%

-2%-1%0%1% A (4) A (1) A (6)


RECESSION WITHOUT A DECLINE?

Economic growth in the United States slowed to a

crawl in the fourth quarter of 2007, fueling a steep

drop in sentiment and sharpening the lookout for

signs that the recession must surely be upon us.

While the economic reports were generally down-

beat, the data were not universally bad, and surpris-

ingly the economy continued to expand modestly in

the first quarter. GDP rose by 0.6% in the first quar-

ter, matching the rate of growth in the fourth quarter

of 2007. The rule of thumb used to be that the reces-

sion label was applied only if GDP declined for two

consecutive quarters. The National Bureau of

Economic Research (NBER), the entity responsible

for dating business cycles and thereby empowered

to brandish the “R” word, applied the recession label

to the last economic slowdown in 2001, even though

we never actually saw one quarter of GDP decline, let

alone two in a row. The current slowdown will most

likely be termed a recession, even though we may

see, at most, one quarter of GDP decline.

In the first quarter of 2008, one of the sources of

growth—output in durable goods manufacturing—

suggests a GDP decline could occur during the sec-

ond quarter. Unexpected strength came from the

output in durable goods manufacturing. These gains,

however, did not satisfy an increase in demand, but

largely padded inventories. Higher inventories count

as a plus for GDP, whether they are wanted or not,

but their presence will dampen future production and

point to a correction in the second quarter. Actual

orders for durable goods fell slightly in March, pulled

down by a sharp (20%) drop in defense orders. The

Institute for Supply Management (ISM) reported that

the Purchasing Managers Index (PMI) for March fell

below 50—the dividing line between expansion and

contraction—for the second consecutive month, rep-

resenting the weakest quarter, for the economy and

manufacturing, since the second quarter of 2003.

The ISM’s Non-Manufacturing Business Activity

Index reported its third straight month below 50 in

March, suggesting sustained contraction in econom-

ic activity.

In addition to real GDP, the NBER focuses on four

measures of monthly activity to help in its determina-

tion of business cycles: employment, personal

income, industrial production and real manufacturing

and trade sales. All four measures have declined

from peak values set in 2007. Employment

decreased during each of the first three months of

2008, albeit by relatively small amounts. Real income

reached a plateau in the third quarter of 2007 and

remained flat in the following two quarters. Industrial

production slowed sharply in the fourth quarter of

2007 and by March had returned to its July 2007

level. Finally, wholesale and retail trade peaked in

October 2007 and declined through the first quarter

of 2008. Collectively, the readings on these four

measures are not weak enough to make a definitive

recession call, but the pressure is mounting.

More bad economic news corroborated these four

measures including reports on housing and the

household sense of well-being. New home sales

U.S. ECONOMY | Jay Kloepfer

Inflation Year-Over-Year

-9%

-6%

-3%

0%

3%

6%

9%

12%

PPI (All Commodities)CPI (All Urban Commodities)

02 0383 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 04 05 06 0708


dropped 8.5% in March, to the lowest level since

October 1991. Sales in the Northeast U.S. were

down an astounding 65% compared to one year ear-

lier, while the decline in the Midwest was 50%. The

inventory of new homes rose to 11 months in March,

up from 8.3 one year earlier, but this inventory is

ebbing much faster than in past recessions, suggest-

ing builders have responded quickly to the market.

Housing starts fell below one million to 947,000, off

37% from March 2007. For comparison, the long-

term equilibrium level of starts are estimated to be

around 1.5 million per year; during the housing boom

earlier in the decade, the U.S. routinely recorded

starts in excess of 1.8 million.

Consumer sentiment in March dropped to its lowest

reading since March 1982, fueled by mounting anxi-

ety over mortgage foreclosures, falling home prices,

rising food and energy costs and job losses. The

headlines surrounding the swift action by the Federal

Reserve to calm the financial markets in response to

the implosion of Bear Stearns, did nothing to bolster

consumer confidence. Interestingly, mildly positive

reports on unemployment and retail sales countered

both the onslaught of bad news and the plummeting

measure of consumer sentiment. Retail sales rose

slightly in March and non-automotive sales were up a

strong 3.3% year-over-year, countering the 3.2%

decline in auto sales. Higher gasoline prices certain-

ly boosted retail sales, but even non-gas sales were

up. The unemployment rate has inched up, but

remains below 5%, and the four-week average of ini-

tial claims for unemployment insurance has held

below 375,000, well short of the 400,000 level usual-

ly associated with recessions.

U.S. ECONOMY | continued

Recent Quarterly IndicatorsEconomic Indicators (seasonally adjusted) 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08CPI–All Urban Consumers (year-over-year) 4.3% 2.1% 2.5% 2.8% 2.7% 2.8% 4.1% 4.0%PPI–All Commodities (year-over-year) 7.7% 2.0% 1.6% 4.4% 4.6% 4.9% 7.9% 11.1%Employment Cost–Total Compensation Growth 3.2% 3.6% 3.2% 2.3% 3.5% 3.1% 3.1% 3.6%Non-farm Business–Productivity Growth 1.2% -0.5% 2.1% 0.7% 2.2% 6.3% 1.9% 2.2%GDP Growth 2.4% 1.1% 2.1% 0.6% 3.8% 4.9% 0.6% 0.6%Manufacturing Capacity Utilization (level%) 80.6 80.9 80.1 79.8 80.3 79.8 79.2 78.7Consumer Sentiment Index (1966=1.000) 0.838 0.840 0.925 0.922 0.869 0.857 0.775 0.729

Quarterly Real GDP Growth (20 Years)

02 03908988 91 92 93 94 95 96 97 98 99 00 01 04 05 06 0708-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%


PESSIMISM PREVAILS

DIVERSIFIED ACCOUNTS | Lauren Etcheverry

The stock market experienced its worst quarterly

performance in over 20 years. Continued concerns

about a slowing economy, inflation and the crisis

within the financial markets led to a volatile and dis-

appointing January. However, the Fed stepped in

again and cut rates towards the end of the month.

Thus, the equity market was able to recoup some of

its early losses, but still fell short of its bond market

counterparts, both at home (Russell 3000: -9.52%

versus Lehman Aggregate: +2.17%) and abroad

(MSCI EAFE: -8.91% versus Citigroup Non-U.S.

World Government Bond: +10.93%). As a result,

those fund sponsors with greater fixed income expo-

sure surpassed their more aggressively invested

peers.

Using the median manager returns from the current

quarter and ending asset allocations from the prior

quarter, Callan estimates the recent total returns of

the institutional investor community.

The “Callan Style Group Returns” chart—illustrating

the range of returns for public, corporate and Taft-

Hartley pension plans, as well as endowments/foun-

dations—shows some of the worst quarterly losses

since 2002. The table on the following page com-

pares the returns of four types of institutional fund

sponsors to several benchmarks over longer time

periods. Despite the major asset classes dispersion

in returns, the range of fund sponsor returns was nar-

row. The median public (-5.31%) and Taft-Hartley

(-4.81%) plans led their institutional counterparts,

with average public equity allocations of 60% and

55%, respectively. Corporate plans and endow-

ments/foundations were not far behind, losing 5.74%

and 5.89%, respectively.

The asset allocation percentages changed only

slightly from the previous quarter, to the benefit of

those groups that stayed heavy in fixed income—

public, corporate and Taft-Hartley plans. More

specifically, public and Taft-Hartley plans’ slightly

higher allocation to non-U.S. fixed income—the high-

Average Asset Allocation*

*as of 12/31/2007**latest median quarter return

U.S. EquityNon-U.S. Equity

U.S. FixedNon-U.S. Fixed

Real EstateAlternative InvestmentsCash

Public-5.31**

41.4%

18.3%

28.4%

1.2%4.0%

5.1% 1.1%

Corporate-5.74**

16.4%

0.5%1.5%

5.0% 1.6%Taft-Hartley-4.81**

11.9%

1.2%5.7%

4.5% 0.8%

Endowment/Foundation

-5.89**

43.9%

18.9%

18.4%

0.2%

0.8%

15.2%2.0%

44.9%

42.8%

29.7%

33.0%

est performing asset class over the quarter—may

have played a role in their overall outperformance as

compared to corporates and endowments/founda-

tions. Allocation to more aggressive asset classes, as

compared to other groups, has not rewarded endow-

ment/foundation median returns, as they have been

the lowest performing group for the last three quar-

ters in a row.

Callan’s balanced manager groups generally main-

tain well-diversified portfolios and attempt to add

value by underweighting or overweighting asset

classes, as well as through security selection. In the

recent quarter, both domestic (-5.42%) and global

balanced managers (-6.22%) lagged the static 60%

equity and 40% fixed income benchmarks, which

had returns of -4.84% and -2.78%, respectively.

Global balanced manager’s average allocation over

time has been overweight equity as compared to

their target. This overweight has helped historically,

but with fixed income’s outperformance in the first

quarter, the median global balanced manager fell

behind.


DIVERSIFIED ACCOUNTS | continued


Public Plan Corporate Plan End/Found Taft-Hartley Database Database Database Database 10th Percentile -3.76 -3.91 -4.21 -3.00 25th Percentile -4.53 -4.78 -4.99 -3.73 Median -5.31 -5.74 -5.89 -4.81 75th Percentile -6.13 -6.26 -6.91 -5.46 90th Percentile -6.81 -6.89 -7.56 -5.97

-8%

-7%

-6%

-5%

-4%

-3%

-2%

Style Median and Index Returns* for Periods ended March 31, 2008Plan Sponsor Quarter Year 3 Years 5 Years 10 Years 15 YearsPublic Database -5.31 0.31 7.99 11.95 6.46 9.10Corporate Database -5.74 -0.04 8.01 11.99 6.33 9.31Endowment/Foundation Database -5.89 -0.16 7.89 12.25 6.23 9.49Taft-Hartley Database -4.81 0.49 7.78 10.72 6.07 8.79Diversified Manager Quarter Year 3 Years 5 Years 10 Years 15 YearsAsset Allocator Style -7.94 -0.48 7.47 11.45 6.05 9.83Domestic Balanced Database -5.42 0.43 6.78 10.28 5.87 9.11Global Balanced Database -6.22 2.47 9.02 14.34 7.85 10.2760% S&P 500 + 40% LB Aggregate -4.84 -0.52 5.99 9.21 5.21 8.5660% MSCI World + 40% Citi World Govt -2.78 4.20 8.67 12.64 5.88 8.12


Total Fund

‘

29

SAN DIEGO CITY EMPLOYEES’ RETIREMENT SYSTEMASSET ALLOCATION TARGET WEIGHTINGSDOMESTIC EQUITYTarget Benchmark = 60% S&P 500, 20% S&P 400 Mid Cap, 20% Russell 2000

% of % of Domestic Equity Total Fund

Large Cap Core 20% 7.6%Large Cap Value 20% 7.6%Large Cap Growth 20% 7.6%Mid Cap Core Value 10% 3.8%Mid Cap Core Growth 10% 3.8%Small Cap Value 10% 3.8%Small Cap Growth 10% 3.8%

100.0% 38.0%

INTERNATIONAL EQUITYTarget Benchmark = 80% MSCI All Country World ex U.S., 20% Citigroup EMI World Ex-U.S.

% of % of International Equity Total Fund

Large Cap Core Value 40.0% 6.8%Large Cap Core Growth 40.0% 6.8%Small Cap Value 6.7% 1.1%Small Cap Core 6.7% 1.1%Small Cap Growth 6.7% 1.1%

100.0% 17.0%DOMESTIC FIXED INCOMETarget Benchmark = 60% Lehman Aggregate, 30% Merrill Lynch 1-5 Govt/Corp, 10% ML Convertible

% of % of Domestic Fixed Total Fund

Core Fixed 60.0% 18.0%Market Neutral Equity 30.0% 9.0%Convertibles 10.0% 3.0%

100.0% 30.0%

* C o re F ixe d Inc o m e m a na ge rs , purs ua nt to the ir individua l guide line s , m a y ho ld no n-Le hm a n Aggre ga te s e c to rs s uc h a s High Yie ld, no n-U.S . a nd Em e rging M a rke t s e c uritie s .

INTERNATIONAL FIXED INCOMETarget Benchmark = 100% Citigroup Non-U.S Govt

% of % of International Fixed Total Fund

Developed Non-U.S 100.0% 4.0%100.0% 4.0%

* Inte rna tio na l m a na ge r ha s dis c re tio n to us e e m e rging m a rke t s e c uritie s

REAL ESTATETarget Benchmark = 75% NCREIF, 25% Wilshire REIT

% of % of Real Estate Total Fund

Core 30.0% 3.3%Value Added/Enhanced 45.0% 5.0%REIT's 25.0% 2.8%

100.0% 11.0%

La rge C a pC o re Gro wth

40%

La rge C a pC o re Va lue

39%

S m a ll C a pGro wth

7%

S m a ll C a pVa lue

7% S m a ll C a p

C o re7%

La rge C a pC o re20%

La rge C a pVa lue20%

La rge C a pGro wth

20%

M id C a p C o reVa lue10%

S m a ll C a pVa lue10%

S m a ll C a pGro wth

10%

M id C a p C o reGro wth

10%

C o re F ixe d60%

C o nve rtible s10%

M a rke tNe utra l Equity

30%

Develo ped No n-U.S

100%

R EIT's25%

/ Va lue Adde dEnha nc e d

45%

C o re30%

Investment Manager Asset AllocationThe table below contrasts the distribution of assets across the Fund’s investment

managers as of March 31, 2008, with the distribution as of December 31, 2007. The changein asset distribution is broken down into the dollar change due to Net New Investment andthe dollar change due to Investment Return.

Asset Distribution Across Investment Managers

March 31, 2008 December 31, 2007Market Value Percent Net New Inv. Inv. Return Market Value Percent

Domestic Equities $1,791,641,133 38.13% $104,299,975 $(214,782,916) $1,902,124,074 37.63%Delta Asset Mgmt. 185,738,399 3.95% (0) (16,530,579) 202,268,978 4.00%INTECH 182,047,481 3.87% 0 (20,579,019) 202,626,500 4.01%TCW Asset Mgmt. 356,036,543 7.58% 3,400,000 (54,748,950) 407,385,494 8.06%Dodge & Cox 350,575,075 7.46% 29,500,000 (41,307,072) 362,382,147 7.17%GlobeFlex Capital 179,428,850 3.82% 0 (26,559,348) 205,988,198 4.07%TCW - Mid Cap Value 188,733,827 4.02% 20,800,000 (9,246,730) 177,180,557 3.50%Putnam - Small Cap Growth 88,056,243 1.87% 8,500,000 (13,508,192) 93,064,435 1.84%Wall Steet Associates 82,785,007 1.76% 8,499,975 (19,680,529) 93,965,561 1.86%Putnam - Small Cap Value 86,620,748 1.84% 16,800,000 (7,080,993) 76,901,741 1.52%DFA - Small Cap Value 91,618,959 1.95% 16,800,000 (5,541,504) 80,360,462 1.59%

International Equity $820,491,309 17.46% $6,794,199 $(93,196,345) $906,893,456 17.94%Brandes Investment 324,424,661 6.91% 0 (42,962,493) 367,387,154 7.27%McKinley Capital 331,968,612 7.07% 6,800,000 (38,872,975) 364,041,587 7.20%Putnam Int’l 19,505 0.00% 0 3,477 16,028 0.00%Globeflex International 99,119,601 2.11% 0 (7,777,802) 106,897,402 2.11%Grantham, Mayo, Van Otterloo 64,852,709 1.38% 0 (3,561,403) 68,414,112 1.35%Nicholas-Applegate 106,222 0.00% (5,801) (25,149) 137,172 0.00%

Domestic Fixed-Income $1,390,950,935 29.60% $(182,200,006) $(8,622,554) $1,581,773,494 31.29%Met West 407,228,537 8.67% (78,700,000) 6,100,423 479,828,114 9.49%PIMCO 417,105,760 8.88% (78,700,000) 14,031,449 481,774,311 9.53%Fidelity 140,840,229 3.00% (16,800,000) (13,417,180) 171,057,409 3.38%Salus Capital 146,527,529 3.12% 0 (4,525,282) 151,052,812 2.99%SSI 131,480,251 2.80% (8,000,006) (2,217,014) 141,697,271 2.80%Nicholas-Applegate 147,768,628 3.15% 0 (8,594,950) 156,363,578 3.09%

International Fixed $207,969,634 4.43% $(11,000,000) $19,577,113 $199,392,521 3.94%Rogge International 207,969,634 4.43% (11,000,000) 19,577,113 199,392,521 3.94%

Real Estate $464,319,224 9.88% $(794) $2,694,687 $461,625,331 9.13%California Smart Growth IV* 5,557,420 0.12% 0 0 5,557,420 0.11%Capmark* 7,147,181 0.15% 0 0 7,147,181 0.14%Cornerstone* 14,971,301 0.32% 0 0 14,971,301 0.30%Cornerstone Apartment Venture III* 3,026,481 0.06% 0 0 3,026,481 0.06%INVESCO* 47,111,900 1.00% 0 0 47,111,900 0.93%INVESCO Enhanced* 28,296,026 0.60% 0 0 28,296,026 0.56%INVESCO Enhanced II* 3,403,856 0.07% 0 0 3,403,856 0.07%RREEF Funds* 220,771,498 4.70% 0 0 220,771,498 4.37%Colony Investors VIII* 8,532,278 0.18% 0 0 8,532,278 0.17%Fidelity Real Estate Growth III* 467,304 0.01% 0 0 467,304 0.01%Mortgage Account - - (794) 2 792 0.00%RREEF REITs 125,033,979 2.66% 0 2,694,685 122,339,294 2.42%

Securities Lending - - $(1,483,532) $1,483,532 - -

Cash Account $23,025,214 0.49% $19,103,020 $275,043 $3,647,152 0.07%

Total Fund $4,698,397,450 100.0% $(64,487,138) $(292,571,439) $5,055,456,027 100.0%

* Current quarter’s valuation is not available; 12/31/2007 valuation, provided by SDCERS’Real Estate Consultant, is used.

30San Diego City Employees’ Retirement System

Actual vs Target Asset AllocationThe top left chart shows the Fund’s asset allocation as of March 31, 2008. The top

right chart shows the Fund’s target asset allocation as outlined in the investment policystatement. The bottom chart ranks the fund’s asset allocation and the target allocationversus the CAI Public Fund Sponsor Database.

Actual Asset Allocation

Domestic Equity38%

International Equity17%

Domestic Fixed30%

International Fixed4%

Real Estate10%

Cash and Equivalents0%

Target Asset Allocation

Domestic Equity38%

International Equity17%

Domestic Fixed30%

International Fixed4%

Real Estate11%

$000s Percent Percent Percent $000sAsset Class Actual Actual Target Difference DifferenceDomestic Equity 1,791,641 38.1% 38.0% 0.1% 6,250International Equity 820,491 17.5% 17.0% 0.5% 21,764Domestic Fixed 1,390,951 29.6% 30.0% (0.4%) (18,568)International Fixed 207,970 4.4% 4.0% 0.4% 20,034Real Estate 464,319 9.9% 11.0% (1.1%) (52,505)Cash and Equivalents 23,025 0.5% 0.0% 0.5% 23,025Total 4,698,397 100.0% 100.0%

Asset Class Weights vs CAI Public Fund Sponsor Database

Wei

ghts

(10%)

0%

10%

20%

30%

40%

50%

60%

Domestic Domestic Cash Real International International AlternativeEquity Fixed and Equivalents Estate Equity Fixed

(66)(66)

(46)(46)

(60)(99)

(30)(21)

(53)(60)

(47)(50)

10th Percentile 53.01 45.45 3.89 11.55 25.04 7.44 15.3225th Percentile 48.85 37.00 1.77 10.21 21.26 5.48 11.35

Median 42.40 29.02 0.66 8.02 17.96 3.95 6.6175th Percentile 36.81 21.60 0.13 5.11 15.00 1.95 3.3990th Percentile 29.76 19.26 0.04 2.30 11.83 1.45 1.25

Fund 38.13 29.60 0.49 9.88 17.46 4.43 -

Target 38.00 30.00 0.00 11.00 17.00 4.00 -

% Group Invested 97.47% 100.00% 50.00% 52.56% 96.15% 21.79% 35.90%

* Current Quarter Target = 22.8% S&P 500, 18.0% Lehman Agg, 13.6% MSCI ACWI ex-US, 9.0% ML 1-5 Govt/Corp, 8.3% NCREIF Total Index, 7.6% Russell2000, 7.6% S&P Mid Cap 400, 4.0% Citi Non-US Gvt Bd Idx, 3.4% EMI World ex US Index, 3.0% ML All Conv and 2.8% Dow Jones Wilshire REIT.


Actual vs Target Historical Asset AllocationThe Historical asset allocation for a fund is by far the largest factor explaining its

performance. The charts below show the fund’s historical actual asset allocation, the fund’shistorical target asset allocation, and the historical asset allocation of the average fund inthe CAI Public Fund Sponsor Database.

Actual Historical Asset Allocation

0% 0%

10% 10%

20% 20%

30% 30%

40% 40%

50% 50%

60% 60%

70% 70%

80% 80%

90% 90%

100% 100%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

Cash and EquivalentsReal EstateInternational FixedDomestic FixedInternational EquityDomestic Equity

Target Historical Asset Allocation

0% 0%

10% 10%

20% 20%

30% 30%

40% 40%

50% 50%

60% 60%

70% 70%

80% 80%

90% 90%

100% 100%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

Real EstateInternational FixedDomestic FixedInternational EquityDomestic Equity

Average CAI Public Fund Sponsor Database Historical Asset Allocation

0% 0%

10% 10%

20% 20%

30% 30%

40% 40%

50% 50%

60% 60%

70% 70%

80% 80%

90% 90%

100% 100%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

Global Equity BroadHedge Fund-of-FundsGlobal BalancedOther AlternativesShort Term-CashIntl Fixed-IncReal EstateIntl EquityDomestic FixedDomestic Broad Eq



TOTAL FUNDPERIOD ENDED MARCH 31, 2008

Investment PhilosophyThe Public Fund Sponsor Database consists of public employee pension total funds including both

CallanAssociates client and surveyed non-client funds. The current quarter for the Performance Benchmark consists of22.8%S&P 500, 18.0% Lehman Aggregate, 13.6% MSCI ACW ex US Free, 9.0% ML 1-5 Govt/Corp, 7.6% Russell 2000,7.6%S&P MidCap 400, 8.25% NCREIF Classic, 4.0% Citigroup Non-U.S. Govt, 3.4% Citigroup EMI World ex US,2.75%Wilshire REIT, and 3.0% ML Convertible Index. The Total Fund return for current quarter does not include privatereal estate. The private real estate values for the current quarter are not available. The valuations for prior periods forprivate real estate are provided by SDCERS’ Real Estate Consultant.

Quarterly Summary and HighlightsTotal Fund’s portfolio posted a (5.82)% return for the quarter placing it in the 70 percentile of the CAI PublicFund Sponsor Database group for the quarter and in the 75 percentile for the last year.

Total Fund’s portfolio underperformed the Performance Benchmark by 1.87% for the quarter andunderperformed the Performance Benchmark for the year by 1.75%.

Performance vs CAI Public Fund Sponsor Database

(10%)

(5%)

0%

5%

10%

15%

20%

Last Last Last 3 Last 5 Last 10 Last 19Quarter Year Years Years Years Years

A(70)B(70)

(12)

A(75)B(75)

(36)

A(38)B(38)(41)

A(17)B(17)(44)

A(4)B(5)(25)

B(8)A(20)(79)

10th Percentile (3.76) 2.73 10.17 14.15 7.39 10.5025th Percentile (4.53) 1.72 9.63 12.76 7.00 10.13

Median (5.31) 0.31 7.99 11.95 6.46 9.7575th Percentile (6.13) (0.81) 7.14 10.40 5.89 9.2890th Percentile (6.81) (2.42) 6.08 9.13 5.39 9.06

Total Fund A (5.82) (0.80) 8.64 13.48 8.04 10.22Total ex Options B (5.82) (0.80) 8.64 13.48 7.98 10.54

Performance Benchmark (3.94) 0.95 8.52 12.16 7.00 9.24

Relative Return vs Performance Benchmark

Rel

ativ

e R

etur

ns

(3%)

(2%)

(1%)

0%

1%

2%

3%

4%

89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 0708

Total Fund

CAI Public Fund Sponsor DatabaseAnnualized Nineteen Year Risk vs Return

6 7 8 9 10 11 128.5%

9.0%

9.5%

10.0%

10.5%

11.0%

Total Fund

Total ex Options

Performance Benchmark

Standard Deviation

Ret

urns


SAN DIEGO CITY EMPLOYEES’ RETIREMENT SYSTEMPERFORMANCE VS CAI PUBLIC FUND SPONSOR DATABASE

RECENT PERIODS

Return RankingThe chart below illustrates fund rankings over various periods versus the CAI Public Fund Sponsor Database. The

bars represent the range of returns from the 10th percentile to the 90th percentile for each period for all funds in the CAIPublic Fund Sponsor Database. The numbers to the right of the bar represent the percentile rankings of the fund beinganalyzed. The table below the chart details the rates of return plotted in the graph above.

(10%)

(5%)

0%

5%

10%

15%

20%

12/2007- 3/2008 2007 2006 2005 2004

(70)(12)

(51)(61)

(46)(48)

(18)(62)

(4)(31)

10th Percentile (3.76) 10.76 15.76 9.34 13.1325th Percentile (4.53) 9.59 15.05 8.61 12.31

Median (5.31) 8.36 14.04 7.54 11.4775th Percentile (6.13) 6.91 12.29 5.86 10.1790th Percentile (6.81) 6.22 10.37 4.23 8.26

Total Fund (5.82) 8.28 14.25 8.86 13.97

Total Fund Benchmark (3.94) 7.63 14.19 7.08 12.18

(20%)

(10%)

0%

10%

20%

30%

40%

2003 2002 2001 2000 1999

(4)

(30)

(37)(24)(24)(23)

(19)(50)

(18)(55)

10th Percentile 26.12 (3.07) 0.20 5.80 18.5425th Percentile 23.99 (5.96) (1.79) 3.73 16.93

Median 21.14 (8.26) (3.73) 1.31 14.0375th Percentile 19.68 (9.52) (5.48) (0.75) 11.1090th Percentile 14.55 (11.46) (6.67) (2.17) 7.73

Total Fund 28.58 (7.20) (1.75) 4.57 17.90

Total Fund Benchmark 23.08 (5.66) (1.74) 1.29 13.67


SAN DIEGO CITY EMPLOYEES’ RETIREMENT SYSTEMTOTAL FUND RISK ADJUSTED RETURN ANALYSIS

Risk Adjusted Return Measures vs Performance BenchmarkRankings Against CAI Public Fund Sponsor Database

Five Years Ended March 31, 2008

(4)

(2)

0

2

4

6

8

10

12

Alpha TreynorRatio

(35)

(34)

10th Percentile 1.29 10.4425th Percentile 0.45 9.43

Median (0.67) 8.2975th Percentile (1.64) 7.2390th Percentile (2.27) 6.54

Total Fund (0.11) 8.87

(2.0)

(1.5)

(1.0)

(0.5)

0.0

0.5

1.0

1.5

2.0

Information Sharpe Excess ReturnRatio Ratio Ratio

(35)

(32)

(21)

10th Percentile 0.79 1.39 1.1025th Percentile 0.34 1.28 0.39

Median (0.47) 1.12 (0.16)75th Percentile (0.93) 0.98 (0.95)90th Percentile (1.52) 0.87 (1.40)

Total Fund (0.09) 1.22 0.71


Ten Years Ended March 31, 2008

(3)

(2)

(1)

0

1

2

3

4

5

Alpha TreynorRatio

(10)

(13)



Total Fund 0.74 3.92

(1.0)(0.8)(0.6)(0.4)(0.2)

0.00.20.40.60.8


(6) (14)(2)

10th Percentile 0.33 0.43 0.1525th Percentile (0.00) 0.33 0.00


Total Fund 0.48 0.41 0.56


Nineteen Years Ended March 31, 2008

(0.4)

(0.2)

0.0

0.2

0.4

0.6

0.8

1.0


(18)

(18)

(11)


Median 0.01 0.56 0.1875th Percentile (0.06) 0.52 0.0390th Percentile (0.21) 0.51 (0.07)

Total Fund 0.39 0.65 0.47

(2)(1)

01234567

Alpha TreynorRatio

(18)

(19)


Median 0.02 4.6775th Percentile (0.18) 4.4690th Percentile (0.41) 4.25

Total Fund 0.75 5.4535

SAN DIEGO CITY EMPLOYEES’ RETIREMENT SYSTEMPERFORMANCE VS CAI PUBLIC FUND SPONSOR DATABASE

RECENT PERIODS

Return RankingThe chart below illustrates fund rankings over various periods versus the CAI Public Fund Sponsor Database. The

bars represent the range of returns from the 10th percentile to the 90th percentile for each period for all funds in the CAIPublic Fund Sponsor Database. The numbers to the right of the bar represent the percentile rankings of the fund beinganalyzed. The table below the chart details the rates of return plotted in the graph above.

(10%)

(5%)

0%

5%

10%

15%

20%

12/2007- 3/2008 2007 2006 2005 2004

(70)(12)

(51)(61)

(46)(48)

(18)(62)

(4)(31)


Median (5.31) 8.36 14.04 7.54 11.4775th Percentile (6.13) 6.91 12.29 5.86 10.1790th Percentile (6.81) 6.22 10.37 4.23 8.26

Total Fundex Options (5.82) 8.28 14.25 8.86 13.97

Total Fund Benchmark (3.94) 7.63 14.19 7.08 12.18

(20%)

(10%)

0%

10%

20%

30%

40%

2003 2002 2001 2000 1999

(4)

(30)

(37)(24)(24)(23)

(19)(50)

(18)(55)

10th Percentile 26.12 (3.07) 0.20 5.80 18.5425th Percentile 23.99 (5.96) (1.79) 3.73 16.93

Median 21.14 (8.26) (3.73) 1.31 14.0375th Percentile 19.68 (9.52) (5.48) (0.75) 11.1090th Percentile 14.55 (11.46) (6.67) (2.17) 7.73

Total Fundex Options 28.58 (7.20) (1.75) 4.57 17.90

Total Fund Benchmark 23.08 (5.66) (1.74) 1.29 13.67


SAN DIEGO CITY EMPLOYEES’ RETIREMENT SYSTEMTOTAL FUND EX OPTIONS RISK ADJUSTED RETURN ANALYSIS


Five Years Ended March 31, 2008



(4)(2)

02468

1012

Alpha TreynorRatio

(35)

(34)



Total Fundex Options (0.11) 8.87

(2.0)(1.5)(1.0)(0.5)

0.00.51.01.52.0


(35)

(32)(21)



Total Fundex Options (0.09) 1.22 0.71

(3)(2)(1)

012345

Alpha TreynorRatio

(13)

(14)



Total Fundex Options 0.65 3.82

(1.0)(0.8)(0.6)(0.4)(0.2)

0.00.20.40.60.8


(7) (15)(2)

10th Percentile 0.33 0.43 0.1525th Percentile (0.00) 0.33 0.00


Total Fundex Options 0.43 0.40 0.51

(2)(1)

01234567

Alpha TreynorRatio

(15)

(16)



Total Fundex Options 0.87 5.53

(0.4)

(0.2)

0.0

0.2

0.4

0.6

0.8

1.0


(11)(15) (3)


Median 0.01 0.56 0.1875th Percentile (0.06) 0.52 0.0390th Percentile (0.21) 0.51 (0.07)

Total Fundex Options 0.50 0.66 0.66


Nineteen Years Ended March 31, 2008

37

Investment Manager Returns and Peer Group RankingsThe table below details the rates of return and peer group rankings for the

Sponsor’s investment managers over various time periods ended March 31, 2008. Negativereturns are shown in red, positive returns in black. Returns for one year or greater areannualized. The first set of returns for each asset class represents the composite returns forall the fund’s accounts for that asset class.

Returns and Rankings for Periods Ended March 31, 2008

Market Last Last LastValue Ending Last Last 3 5 10

$(Dollars) Weight Quarter Year Years Years YearsDomestic EquityLarge Cap Core

Delta 185,738,399 - (8.17%) (0.37%) 7.30% 12.40% 4.70%17 15 25 40 60INTECH 182,047,481 - (10.16%) (5.38%) - - -64 57 Standard & Poor’s 500 - - (9.44%) (5.08%) 5.85% 11.32% 3.50%42 55 65 71 86CAI Large Cap Core Style - - (9.68%) (4.90%) 6.20% 11.96% 4.82%50 50 50 50 50

Large Cap GrowthTCW* 356,036,543 - (13.42%) 0.04% 3.23% 10.53% -77 49 93 47 Russell 1000 Growth - - (10.18%) (0.75%) 6.33% 9.96% 1.28%20 57 59 52 85CAI Lrg Cap Growth Style - - (11.36%) (0.03%) 6.99% 10.22% 3.61%50 50 50 50 50

Large Cap ValueDodge & Cox 350,575,075 - (11.12%) (11.86%) 5.47% - -83 72 57 Russell 1000 Value - - (8.72%) (9.99%) 6.01% 13.68% 5.54%34 57 51 49 63CAI Large Cap Value Style - - (9.27%) (9.09%) 6.03% 13.58% 5.96%50 50 50 50 50

Mid Cap Core GrowthGlobeFlex 179,428,850 - (12.89%) (5.31%) 9.76% 17.98% 9.46%81 46 28 18 33 S&P MidCap 400 - - (8.85%) (6.97%) 7.05% 15.10% 9.02%30 55 62 61 45CAI Mid Cap Style - - (10.54%) (6.19%) 7.98% 15.80% 8.72%50 50 50 50 50

Mid Cap ValueTCW* 188,733,827 - (5.68%) (9.55%) 4.64% 14.71% -13 47 76 80 Russell Midcap Value - - (8.64%) (14.12%) 6.57% 16.77% 8.16%56 72 56 46 65CAI Mid Cap Value Style - - (8.45%) (10.53%) 6.76% 16.06% 9.17%50 50 50 50 50

Small Cap GrowthPutnam* 88,056,243 - (14.29%) (11.19%) 5.09% 14.46% 6.15%33 66 68 41 42Wall Street Micro Cap 82,785,007 - (20.18%) (14.43%) 7.38% 17.83% 10.02%84 80 45 19 13 Russell 2000 Growth - - (12.83%) (8.94%) 5.74% 14.24% 1.75%20 54 60 44 95CAI Sm Cap Growth Style - - (15.47%) (7.98%) 6.59% 13.86% 5.54%50 50 50 50 50

Small Cap ValueDFA 91,618,959 - (3.46%) (15.58%) 6.57% 20.96% 11.29%10 48 25 4 12Putnam* 86,620,748 - (8.45%) (23.65%) 1.31% 13.97% 8.03%85 93 84 77 65 Russell 2000 Value - - (6.53%) (16.88%) 4.33% 15.45% 7.46%60 54 41 52 73CAI Small Cap Value Style - - (6.03%) (15.71%) 3.40% 15.48% 8.63%50 50 50 50 50

Domestic Equity**Total Domestic Equity 1,791,641,133 - (11.13%) (7.78%) 5.67% 14.40% 6.27%96 85 72 12 12 Domestic Equity Benchmark - - (9.42%) (7.07%) 5.99% 12.85% 5.01%47 70 58 40 27 Russell 3000 Index - - (9.52%) (6.06%) 6.10% 12.07% 3.88%55 45 53 69 71Public Fund - Dom Equity - - (9.43%) (6.32%) 6.19% 12.51% 4.41%50 50 50 50 50

* indicates watchlist manager** Total Domestic Equity returns includes the historical performance of the Options Program






$(Dollars) Weight Quarter Year Years Years YearsInternational EquityCore/Emerging

Brandes* 324,424,661 - (11.69%) (8.47%) 12.32% 25.44% 12.30%95 97 84 10 6McKinley Capital 331,968,612 - (10.62%) 0.32% - - -88 45Putnam^ 19,505 - 21.69% 54.59% 40.00% 35.86% 16.29%1 1 1 1 1 MSCI AC Wld Free exUS Idx - - (9.06%) 2.58% 16.49% 24.04% 7.67%55 28 25 22 59 Custom Intl Benchmark*** - - (9.06%) 2.58% 16.49% 24.14% 7.56%55 28 25 20 62CAI Non-U.S. Equity Style - - (8.97%) (0.54%) 14.78% 22.40% 8.18%50 50 50 50 50

Small CapGlobeFlex International 99,119,601 - (7.28%) (12.79%) - - -29 83GMO (Gross) 64,852,709 - (4.99%) (4.13%) 18.02% 28.18% -7 32 35 59Nicholas-Applegate^^ 106,222 - (18.28%) (0.72%) 20.35% 29.04% -100 24 22 47 Int’l Small Cap Benchmark+ - - (6.95%) (6.39%) 15.01% 26.77% 10.78%27 44 69 73 78CAI Int’l Small Cap Style - - (8.17%) (7.48%) 16.73% 28.87% 14.01%50 50 50 50 50

International EquityTotal Intl Equity 820,491,309 - (10.25%) (4.52%) 14.79% 24.10% 10.63%98 90 41 12 10 Int’l Equity Benchmark - - (8.64%) 0.76% 16.22% 24.69% 8.25%33 43 17 7 48Public Fund - Intl Equity - - (8.96%) 0.42% 14.20% 22.18% 7.91%50 50 50 50 50

* indicates watchlist manager*** Custom Benchmark consists of 85% EAFE/15% Emerging through 12/31/03 and100% All Country World Free thereafter.+ Int’l Equity Benchmark consists of Goldman Sachs World Med-Small Cap ex US Index through 12/31/01and Citigroup Extended Market Index ex US thereafter.^ Manager was terminated during the 1st quarter, 2007.^^ Manager was terminated during the 3rd quarter, 2007.






$(Dollars) Weight Quarter Year Years Years YearsDomestic Fixed IncomeCore Plus

Met West 407,228,537 - 1.18% 6.90% 5.89% 6.71% -29 18 12 1PIMCO 417,105,760 - 3.08% 10.89% 6.98% 6.14% 7.18%5 4 4 1 6 Lehman Aggregate - - 2.17% 7.67% 5.48% 4.58% 6.04%10 10 23 84 54CAI FI Core Plus Style - - 0.84% 4.74% 5.10% 5.01% 6.16%50 50 50 50 50

Market NeutralPyramis 140,840,229 - (8.02%) 14.23% 11.94% 5.97% -97 9 11 23Salus 146,527,529 - (3.00%) (2.25%) 4.58% 3.24% -91 81 49 57SSI* 131,480,251 - (1.58%) 1.30% 3.12% 1.69% -89 61 67 74 T-Bills + 3% - - 1.63% 7.62% 7.41% 6.18% 6.73%49 11 19 22 15 Merrill 1-5 Yr Govt/Corp - - 2.84% 8.62% 5.50% 3.93% 5.46%22 11 41 54 22CAI Market Neutral Sty - - 1.60% 2.02% 4.49% 4.18% 4.47%50 50 50 50 50

ConvertiblesNicholas Applegate 147,768,628 - (5.50%) 4.29% 11.07% 14.01% 8.87%37 24 1 8 23 Convertible Benchmark++ - - (5.61%) (3.74%) 5.64% 8.18% 5.49%38 82 92 84 100CAI Convertible Bond DB - - (6.17%) 1.24% 7.24% 9.95% 7.37%50 50 50 50 50

Total Domestic FixedDomestic Fixed 1,390,950,935 - (0.63%) 7.15% 6.86% 6.13% 6.30%93 31 6 12 17 Domestic Fixed Benchmark - - 1.59% 6.81% 5.43% 4.57% 5.85%37 37 49 65 76Public Fund - Dom Fixed - - 1.23% 6.32% 5.39% 4.73% 6.06%50 50 50 50 50

International Fixed IncomeRogge 207,969,634 - 10.17% 20.31% 7.07% 9.28% 7.35%76 65 43 33 38 SSB Non-U.S. Govt Bond - - 10.93% 22.31% 7.40% 9.00% 7.37%20 18 28 52 33CAI Non-U.S. F-I Style - - 10.64% 20.61% 6.94% 9.06% 7.31%50 50 50 50 50

Real EstateTotal Real Estate**** 464,319,224 - (2.43%) 1.50% 15.81% 19.18% 13.49%89 83 65 21 29 Real Estate Benchmark***** - - (0.98%) 6.91% 15.49% 15.79% 11.56%88 77 68 39 59

Total FundTotal Fund 4,698,397,450 - (5.82%) (0.80%) 8.64% 13.48% 8.04%70 75 38 17 4TF Ex Private Real Estate 4,359,112,205 - (6.24%) (1.34%) 8.15% 13.27% 7.73%81 81 48 20 6 Total Fund Benchmark - - (3.94%) 0.95% 8.52% 12.16% 7.00%12 36 41 44 25Public Fund Sponsor DB - - (5.31%) 0.31% 7.99% 11.95% 6.46%50 50 50 50 50

* indicates watchlist manager**** Total Real Estate valuation data uses Private Real Estate data, provided by SDCERS’ Real EstateConsultant, through December 31, 2007, and Public Real Estate data through March 31, 2008.Return and ranking data is calculated as of period ended December 31, 2007.***** Real Estate Benchmark return and ranking data calculated as of period ended December 31, 2007.++ Convertible Benchmark consists of First Boston Convertible Index through December 31, 2004 andthe Merrill Lynch All U.S. Convertibles Index thereafter.


Cumulative Performance Relative to TargetThe first chart below illustrates the cumulative performance of the Total Fund

relative to the cumulative performance of the Fund’s Target Asset Mix. The Target Mix isassumed to be rebalanced each quarter with no transaction costs. The difference betweenthe Total Fund return and the Target Mix return is explained by the performance attributionon the next page. The second chart below shows the return and the risk of the Total Fundand the Target Mix, contrasted with the returns and risks of the funds in the CAI PublicFund Sponsor Database.

Cumulative Returns Actual vs Target

Cum

ulat

ive

Ret

urns

0%

100%

200%

300%

400%

500%

600%

700%

89 19901991199219931994199519961997199819992000200120022003200420052006200708

Total FundTotal Fund TargetActuarial Expected Return

Nineteen Year Annualized Risk vs Return

6.0% 6.5% 7.0% 7.5% 8.0% 8.5% 9.0% 9.5% 10.0% 10.5% 11.0% 11.5% 12.0%8.5%

9.0%

9.5%

10.0%

10.5%

11.0%

Total Fund

Total Fund Target

Standard Deviation

Ret

urns

Triangles represent membership of the CAI Public Fund Sponsor Database



Quarterly Total Fund AttributionIn general, the actual return for the Total Fund will differ from the return for the

Total Fund Target. This deviation is caused by two factors: The managers outperformingor underperforming their targets (Manager Selection Effect); or the actual asset allocationbeing different from the target asset allocation (Asset Allocation Effect). The table andcharts below dissect the Total Fund return into smaller components to quantify each ofthese effects over the most recent quarter.

Asset Class Under or Overweighting

(3%) (2%) (1%) 0% 1% 2%

Domestic Equity 1.0%

Domestic Fixed (0.4%)

Real Estate (1.8%)

International Equity 1.1%

International Fixed (0.1%)

Cash and Equivalents 0.3%

Domestic Equity

Domestic Fixed

Real Estate

International Equity

International Fixed

Cash and Equivalents

Total

Actual vs Target Returns

(20%) (15%) (10%) (5%) 0% 5% 10% 15%

(11.1%)(9.4%)

(0.6%)1.6%

0.6%1.7%

(10.2%)(8.6%)

10.2%10.9%

1.2%1.2%

(5.8%)(3.9%)

Actual Target

Attribution by Asset Class

(2.5%) (2.0%) (1.5%) (1.0%) (0.5%) 0.0% 0.5%

(0.67%)(0.03%)

(0.66%)(0.01%)

(0.11%)(0.06%)

(0.29%)(0.03%)

(0.03%)(0.01%)

0.02%

(1.76%)(0.12%)

Manager Effect Asset Allocation

Attribution for Quarter ended March 31, 2008

Effective Target Actual Target Manager AssetAsset Class Weight Weight Return Return Effect AllocationDomestic Equity 39% 38% (11.13%) (9.42%) (0.67%) (0.03%)Domestic Fixed 30% 30% (0.63%) 1.59% (0.66%) (0.01%)Real Estate 9% 11% 0.58% 1.73% (0.11%) (0.06%)International Equity 18% 17% (10.25%) (8.64%) (0.29%) (0.03%)International Fixed 4% 4% 10.17% 10.93% (0.03%) (0.01%)Cash and Equivalents 0% 0% 1.22% 1.22% 0.00% 0.02%

Total = + +(5.82%) (3.94%) (1.76%) (0.12%)



Cumulative Total Fund AttributionThe charts below accumulate the Quarterly Total Fund Attribution Analysis (shown

earlier) over multiple periods. By examining these cumulative results, the Fund Sponsorcan quantify and understand the long-term impact of asset allocation differences from thetarget, as well as the contribution of the Fund’s managers to total return. In general,assuming the Fund Sponsor is pursuing a disciplined rebalancing program, the assetallocation effects should be close to zero. The manager effects should be larger, assumingthe Sponsor is not using index funds. All analysis is for the period ended March 31, 2008.

One Year Cumulative Attribution Effects

(2.5%) (2.0%) (1.5%) (1.0%) (0.5%) 0.0% 0.5%

Domestic Equity(0.26%)

(0.03%)

Domestic Fixed0.09%

0.00%

Real Estate(0.55%)

(0.02%)

International Equity(0.98%)

0.06%

International Fixed(0.07%)(0.02%)

Cash and Equivalents 0.02%

Total(1.77%)

0.03%


Cumulative Attribution Effects

(2.5%)

(2.0%)

(1.5%)

(1.0%)

(0.5%)

0.0%

0.5%

1.0%

2007 2008

Manager EffectAsset AllocationTotal

One Year Cumulative Attribution Effects

Effective Avg Trgt Actual Target Manager AssetAsset Class Weight Weight Return Return Effect AllocationDomestic Equity 39% 38% (7.78%) (7.07%) (0.26%) (0.03%)Domestic Fixed 30% 30% 7.15% 6.81% 0.09% 0.00%Real Estate 9% 11% (1.05%) 4.94% (0.55%) (0.02%)International Equity 18% 17% (4.52%) 0.76% (0.98%) 0.06%International Fixed 4% 4% 20.31% 22.31% (0.07%) (0.02%)Cash and Equivalents 0% 0% 5.16% 5.16% 0.00% 0.02%

Total = + +(0.80%) 0.95% (1.77%) 0.03%



Cumulative Total Fund AttributionThe charts below accumulate the Quarterly Total Fund Attribution Analysis (shown

earlier) over multiple periods. By examining these cumulative results, the Fund Sponsorcan quantify and understand the long-term impact of asset allocation differences from thetarget, as well as the contribution of the Fund’s managers to total return. In general,assuming the Fund Sponsor is pursuing a disciplined rebalancing program, the assetallocation effects should be close to zero. The manager effects should be larger, assumingthe Sponsor is not using index funds. All analysis is for the period ended March 31, 2008.

Five Year Annualized Cumulative Attribution Effects

(0.5%) 0.0% 0.5% 1.0% 1.5% 2.0%

Domestic Equity0.64%

0.01%

Domestic Fixed0.50%

(0.00%)

Real Estate0.24%

(0.04%)

International Equity(0.10%)

0.08%

International Fixed0.02%0.01%

Cash and Equivalents (0.02%)

Total1.29%

0.03%


Cumulative Attribution Effects

(2%)

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2003 2004 2005 2006 2007 08

Manager EffectAsset AllocationTotal

Five Year Annualized Cumulative Attribution Effects

Effective Avg Trgt Actual Target Manager AssetAsset Class Weight Weight Return Return Effect AllocationDomestic Equity 39% 38% 14.40% 12.85% 0.64% 0.01%Domestic Fixed 31% 31% 6.13% 4.57% 0.50% (0.00%)Real Estate 9% 10% 18.84% 15.83% 0.24% (0.04%)International Equity 17% 16% 24.10% 24.69% (0.10%) 0.08%International Fixed 4% 5% 9.28% 9.00% 0.02% 0.01%Cash and Equivalents 0% 0% 3.37% 3.37% 0.00% (0.02%)

Total = + +13.48% 12.16% 1.29% 0.03%



Asset Class RankingsThe charts below show the rankings of each asset class component of the Total

Fund relative to appropriate comparative databases. In the upper left corner of each graphis the weighted average of the rankings across the different asset classes. The weights ofthe fund’s actual asset allocation are used to make this calculation. The weighted averageranking can be viewed as a measure of the fund’s overall success in picking managers andstructuring asset classes.

Total Asset Class PerformanceOne Year Ended March 31, 2008

Ret

urns

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

25%

30%

Public Fund Public Fund Public Fund CAI Non-- Dom Equity - Intl Equity - Dom Fixed U.S. F-I Style

(85)(70)(90)

(43)

(31)(37)

(65)(18)

10th Percentile (3.60) 3.79 8.55 22.9325th Percentile (4.99) 2.14 7.64 21.83

Median (6.32) 0.42 6.32 20.6175th Percentile (7.20) (2.42) 4.95 19.7190th Percentile (8.21) (4.08) 2.79 15.76

Asset ClassComposite (7.78) (4.52) 7.15 20.31

Composite Benchmark (7.07) 0.76 6.81 22.31

WeightedRanking

67

Total Asset Class PerformanceFive Years Ended March 31, 2008

Ret

urns

0%

5%

10%

15%

20%

25%

30%

Public Fund Public Fund Public Fund CAI Non-- Dom Equity - Intl Equity - Dom Fixed U.S. F-I Style

(12)(40)

(12)(7)

(12)(65)

(33)(52)

10th Percentile 14.73 24.52 6.60 10.1925th Percentile 13.48 23.47 5.42 9.69

Median 12.51 22.18 4.73 9.0675th Percentile 11.91 20.82 4.49 8.6490th Percentile 11.31 19.67 3.96 7.91

Asset ClassComposite 14.40 24.10 6.13 9.28

Composite Benchmark 12.85 24.69 4.57 9.00

WeightedRanking

13

* Current Quarter Target = 22.8% S&P 500, 18.0% Lehman Agg, 13.6% MSCI ACWI ex-US, 9.0% ML 1-5 Govt/Corp, 8.3%NCREIF Total Index, 7.6% Russell 2000, 7.6% S&P Mid Cap 400, 4.0% Citi Non-US Gvt Bd Idx, 3.4% EMI World ex USIndex, 3.0% ML All Conv and 2.8% Dow Jones Wilshire REIT.


Dom

estic Equity

‘

DOMESTIC EQUITYActive Management Overview

Active vs the IndexTrends to increase liquidity in financial markets in the first quarter of 2008 included three federal fund rate cuts; a $168billion stimulus package; and the $29 billion bailout of Bear Stearns. Except for Small and Mid Cap Value, all medianstyle group funds fell below their benchmarks in the quarter ended March 31, 2008. This underperformance rangedfrom 24 basis points for Large Cap Core to 697 basis points for Small Cap Growth. However, for the latest twelvemonths, all Large and Mid Cap funds (except Large Cap Value) outperformed their benchmarks while all Small Capfunds lagged their indexes.

Large Cap vs Small CapIn a quarter marred by fears of recession, concerns for inflation, a countrywide housing crisis and fallout from the creditmarket, investors continued to favor larger, more stable stocks. This resulted in the continued outperformance of largecapitalization stocks compared to their small cap peers. The median Small Cap Broad manager lost 10.61%, 315 basispoints more than the S&P 600’s loss of 7.46% and 93 basis points more than the median Large Cap Core fund. Themedian Mid Cap Broad manager lost 10.54%, 169 basis points more than the S&P Mid Cap’s loss of 8.85%. Themedian Large Cap Core manager fared better than both Mid Cap and Small Cap managers posting a loss of 9.68%, 24basis points more than the S&P 500’s loss of 9.44%. For the year ended March 31, 2008, Large Cap outperformed bothMid Cap and Small Cap across all styles.

Growth vs ValueLast quarter’s trend of preference for growth stocks ended this quarter, with the balance shifting towards value stocks.For the first quarter of 2008, the median Large Cap Growth fund lost 11.36%, 209 basis points more than the medianLarge Cap Value fund’s loss of 9.27%. For the twelve months ended March 31, 2008, the median Large Cap Growthmanager lost 0.03%, 9.06% ahead of the 9.09% loss for the median Large Cap Value manager and was the bestperforming group. Similar results can be found in the Mid Cap and Small Cap arenas, with value stocks outperforminggrowth stocks during the first quarter of 2008, while falling behind for the year.

Separate Account Style Group Median Returnsfor Quarter Ended March 31, 2008

(20%)

(15%)

(10%)

(5%)

0%

(15.47%)

Small CapGrowth

(6.03%)

Small CapValue

(10.61%)

Small CapBroad

(12.27%)

Mid CapGrowth

(8.45%)

Mid CapValue

(10.54%)

Mid CapBroad

(11.36%)

Large CapGrowth

(9.27%)

Large CapValue

(9.68%)

LargeCap Core

Ret

urns

S&P 500: (9.44%)S&P 500 Growth: (9.92%)S&P 500 Value: (8.94%)S&P Mid Cap: (8.85%)S&P 600: (7.46%)S&P 600 Growth: (8.50%)S&P 600 Value: (6.46%)

Separate Account Style Group Median Returnsfor One Year Ended March 31, 2008

(20%)

(15%)

(10%)

(5%)

0%

(7.98%)

Small CapGrowth

(15.71%)

Small CapValue

(12.60%)

Small CapBroad

(1.41%)

Mid CapGrowth

(10.53%)

Mid CapValue

(6.19%)

Mid CapBroad

(0.03%)

Large CapGrowth

(9.09%)

Large CapValue

(4.90%)

LargeCap Core

Ret

urns

S&P 500: (5.08%)S&P 500 Growth: (1.60%)S&P 500 Value: (8.36%)S&P Mid Cap: (6.97%)S&P 600: (10.60%)S&P 600 Growth: (7.39%)S&P 600 Value: (13.52%)


DOMESTIC EQUITY COMPOSITEPERIOD ENDED MARCH 31, 2008

Investment PhilosophyThe Domestic Equity Benchmark is comprised of 60% Standard & Poor’s 500, 20% Standard & Poor’s Mid Cap

Index and 20% Russell 2000.

Quarterly Summary and HighlightsDomestic Equity Composite’s portfolio posted a (11.13)% return for the quarter placing it in the 96 percentileof the Public Fund - Domestic Equity group for the quarter and in the 85 percentile for the last year.

Domestic Equity Composite’s portfolio underperformed the Blended Benchmark by 1.71% for the quarter andunderperformed the Blended Benchmark for the year by 0.71%.

Performance vs Public Fund - Domestic Equity

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

Year to Last Last 3 Last 5 Last 10 Last 19Date Year Years Years Years Years

A(96)B(96)

(47)

A(85)B(85)

(70)

A(72)B(72)

(58)

A(12)B(12)(40)

A(12)B(15)(27)

B(10)A(39)(66)

10th Percentile (8.44) (3.60) 7.76 14.73 6.32 11.8625th Percentile (9.20) (4.99) 6.77 13.48 5.27 11.41

Median (9.43) (6.32) 6.19 12.51 4.41 10.9375th Percentile (10.06) (7.20) 5.62 11.91 3.76 9.8990th Percentile (10.18) (8.21) 5.18 11.31 3.35 9.13

DomesticEquity Composite A (11.13) (7.78) 5.67 14.40 6.27 11.17

DomesticEquity: Ex-Options B (11.13) (7.78) 5.67 14.40 6.09 11.84

Blended Benchmark (9.42) (7.07) 5.99 12.85 5.01 10.22

Relative Return vs Blended Benchmark

Rel

ativ

e R

etur

ns

(3%)

(2%)

(1%)

0%

1%

2%

3%

4%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

Domestic Equity Composite

Public Fund - Domestic EquityAnnualized Ten Year Risk vs Return

14 15 16 17 18 19 202%

3%

4%

5%

6%

7%

8%

Domestic Equity Composite

Blended Benchmark

Domestic Equity: Ex-Options

Standard Deviation

Ret

urns


DOMESTIC EQUITY COMPOSITERETURN ANALYSIS SUMMARY

Return AnalysisThe graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart

illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows thehistorical quarterly and 12 quarter rolling manager returns versus the appropriate market benchmark. The last two chartsillustrate the manager’s ranking relative to their style using various risk-adjusted return measures.

Performance vs Public Fund - Domestic Equity

(40%)(30%)(20%)(10%)

0%10%20%30%40%50%60%

12/07- 3/08 2007 2006 2005 2004 2003 2002 2001 2000 1999

B(55)A(96)47

A(31)B(56)67

B(23)A(96)

32 A(9)B(66)58

A(6)B(70)25

A(1)B(54)17

B(60)A(61)24

A(17)B(81)

22A(5)B(83)34

A(24)B(45)52

10th Percentile (8.44) 8.87 16.48 9.31 14.74 36.10 (18.75) (5.66) 1.05 27.7525th Percentile (9.20) 6.62 15.62 7.98 13.47 32.95 (20.34) (7.12) (1.60) 22.67

Median (9.43) 5.54 14.61 6.56 12.61 31.24 (21.17) (9.67) (4.62) 20.7475th Percentile (10.06) 4.24 13.83 5.88 11.65 29.70 (22.26) (11.10) (6.87) 17.3290th Percentile (10.18) 3.14 13.15 5.06 10.73 28.32 (23.53) (12.66) (8.86) 13.87

DomesticEquity Composite A(11.13) 6.19 11.38 9.39 16.00 43.68 (21.56) (6.19) 2.97 22.68

Russell 3000 Index B (9.52) 5.14 15.72 6.12 11.95 31.06 (21.54) (11.46) (7.46) 20.90

Blended Benchmark (9.42) 4.58 15.32 6.36 13.49 33.69 (20.24) (6.78) (2.87) 20.05

Rolling 12 Quarter and Quarterly Relative Return vs Blended Benchmark

Rel

ativ

e R

etur

ns

(8%)

(6%)

(4%)

(2%)

0%

2%

4%

6%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

Domestic Equity Composite Domestic Equity Composite Russell 3000 Index Public Fund - Dom Equity

Risk Adjusted Return Measures vs Blended BenchmarkRankings Against Public Fund - Domestic Equity


(3)

(2)

(1)

0

1

2

3

4

Alpha TreynorRatio

A(12)

B(70)

A(15)

B(71)


Median (0.55) 0.7275th Percentile (1.17) 0.0390th Percentile (1.56) (0.42)

DomesticEquity Composite A 1.28 2.41

Russell 3000 Index B (1.07) 0.15

(1.0)(0.8)(0.6)(0.4)(0.2)

0.00.20.40.60.8


A(4)

B(84)

A(13)B(71)

A(4)

B(81)


Median (0.16) 0.04 (0.18)75th Percentile (0.43) 0.00 (0.42)90th Percentile (0.67) (0.02) (0.63)

DomesticEquity Composite A 0.53 0.13 0.49

Russell 3000 Index B (0.48) 0.01 (0.47)


Investment Manager ReturnsThe table below details the rates of return for the Sponsor’s investment managers

over various time periods ended March 31, 2008. Negative returns are shown in red,positive returns in black. Returns for one year or greater are annualized. The first set ofreturns for each asset class represents the composite returns for all the fund’s accounts forthat asset class.

Returns for Periods Ended March 31, 2008

Last Last LastLast Last 3 5 10

Quarter Year Years Years YearsLarge Cap Equity (11.27%) (5.00%) 5.22% 12.77% 3.77%

Standard & Poor’s 500 (9.44%) (5.08%) 5.85% 11.32% 3.50%CAI Large Capitalization Style (10.00%) (5.09%) 6.43% 12.38% 5.01%

Mid Cap Equity (9.40%) (7.25%) 7.35% 16.52% 7.94%S&P Mid Cap 400 Index (8.85%) (6.97%) 7.05% 15.10% 9.02%CAI Mid Capitalization Style (10.54%) (6.19%) 7.98% 15.80% 8.72%

Small Cap Equity (12.13%) (16.33%) 5.12% 16.94% 9.87%Russell 2000 Index (9.90%) (13.00%) 5.06% 14.90% 4.96%CAI Small Capitalization Style (10.61%) (12.60%) 5.15% 15.05% 7.29%


DELTA ASSET MGMTPERIOD ENDED MARCH 31, 2008

Investment PhilosophyDelta Asset Management’s top-down discipline guides the selection of issues in their portfolios. Economic sectors

are over/underweighted depending on the economic outlook within the current phase of the business cycle.

Quarterly Summary and HighlightsDelta Asset Mgmt’s portfolio posted a (8.17)% return for the quarter placing it in the 17 percentile of the CAILarge Cap Core Style group for the quarter and in the 15 percentile for the last year.

Delta Asset Mgmt’s portfolio outperformed the S&P 500 by 1.27% for the quarter and outperformed the S&P500 for the year by 4.71%.

Performance vs CAI Large Cap Core Style

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

Year to Last Last 3 Last 5 Last 10 From 3-95Date Year Years Years Years Inception

(17)(42)

(15)

(55)

(25)(65)

(40)(71)

(60)(86)

(55)(86)

10th Percentile (6.27) 1.12 8.59 13.74 7.18 11.7425th Percentile (8.69) (2.65) 7.32 12.81 5.67 11.50


Delta Asset Mgmt (8.17) (0.37) 7.30 12.40 4.70 10.73

S&P 500 (9.44) (5.08) 5.85 11.32 3.50 9.63

Relative Return vs S&P 500

Rel

ativ

e R

etur

ns

(5%)

(4%)

(3%)

(2%)

(1%)

0%

1%

2%

3%

4%

5%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

Delta Asset Mgmt

CAI Large Cap Core StyleAnnualized Ten Year Risk vs Return

12 14 16 18 20 222%

3%

4%

5%

6%

7%

8%

9%

Delta Asset Mgmt

S&P 500

Standard Deviation

Ret

urns


DELTA ASSET MGMTRETURN ANALYSIS SUMMARY




(40%)(30%)(20%)(10%)

0%10%20%30%40%

12/07- 3/08 2007 2006 2005 2004 2003 2002 2001 2000 1999

1742

21616351

81826040

539

4235

153 4358

5645



Delta Asset Mgmt (8.17) 9.07 14.98 4.99 9.27 31.48 (22.69) (5.07) (8.15) 20.62

S&P 500 (9.44) 5.49 15.79 4.91 10.88 28.68 (22.10) (11.89) (9.11) 21.04

Rolling 12 Quarter and Quarterly Relative Return vs S&P 500

Rel

ativ

e R

etur

ns

(6%)

(4%)

(2%)

0%

2%

4%

6%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

Delta Asset Mgmt CAI Large Cap Core Style

Risk Adjusted Return Measures vs S&P 500Rankings Against CAI Large Cap Core Style


(2)

(1)

0

1

2

3

4

5

Alpha TreynorRatio

(52) (64)


Median 1.30 1.2475th Percentile 0.64 0.3790th Percentile (0.12) (0.56)

Delta Asset Mgmt 1.25 0.94

(0.4)

(0.2)

0.0

0.2

0.4

0.6

0.8

1.0


(52)

(64)

(52)


Median 0.42 0.07 0.3975th Percentile 0.18 0.02 0.1590th Percentile (0.02) (0.03) (0.10)

Delta Asset Mgmt 0.40 0.06 0.37


INTECHPERIOD ENDED MARCH 31, 2008

Investment PhilosophyINTECH employs a stochastic mathematical investment strategy designed to achieve long-term returns in excess

of the target benchmark, while reducing the risk of significant underperformance. INTECH was hired during 4th quarter,2005. Earlier performance is based on their composite returns.

Quarterly Summary and HighlightsINTECH’s portfolio posted a (10.16)% return for the quarter placing it in the 64 percentile of the CAI LargeCap Core Style group for the quarter and in the 57 percentile for the last year.

INTECH’s portfolio underperformed the S&P 500 by 0.71% for the quarter and underperformed the S&P 500for the year by 0.30%.


(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

Year to Last Year Fr 12-05 Last 3 Last 5 Last 10Date Inception Years Years Years

(64)(42)

(57)(55)

(47)(47)(42)(65)

(22)(71)

(22)

(86)



INTECH (10.16) (5.38) 4.60 6.48 13.09 6.18

S&P 500 (9.44) (5.08) 4.59 5.85 11.32 3.50

Relative Return vs S&P 500

Rel

ativ

e R

etur

ns

(3%)

(2%)

(1%)

0%

1%

2%

3%

4%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

INTECH

CAI Large Cap Core StyleAnnualized Ten Year Risk vs Return

12 14 16 18 20 222%

3%

4%

5%

6%

7%

8%

9%

INTECH

S&P 500

Standard Deviation

Ret

urns


INTECHRETURN ANALYSIS SUMMARY




(40%)(30%)(20%)(10%)

0%10%20%30%40%

12/07- 3/08 2007 2006 2005 2004 2003 2002 2001 2000 1999

6442

39617051

2382

540

3839

435

1453

3158

3645



INTECH (10.16) 7.37 14.70 9.18 15.60 28.82 (18.46) (6.73) (4.38) 21.53

S&P 500 (9.44) 5.49 15.79 4.91 10.88 28.68 (22.10) (11.89) (9.11) 21.04

Rolling 12 Quarter and Quarterly Relative Return vs S&P 500

Rel

ativ

e R

etur

ns

(4%)

(2%)

0%

2%

4%

6%

8%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

INTECH CAI Large Cap Core Style

Risk Adjusted Return Measures vs S&P 500Rankings Against CAI Large Cap Core Style


(2)

(1)

0

1

2

3

4

5

Alpha TreynorRatio

(22) (22)


Median 1.30 1.2475th Percentile 0.64 0.3790th Percentile (0.12) (0.56)

INTECH 2.59 2.49

(0.4)(0.2)

0.00.20.40.60.81.01.21.4


(2)

(22)

(2)


Median 0.42 0.07 0.3975th Percentile 0.18 0.02 0.1590th Percentile (0.02) (0.03) (0.10)

INTECH 1.21 0.15 1.21


TCW CONCENTRATED COREPERIOD ENDED MARCH 31, 2008

Investment PhilosophyTCW looks to achieve superior long-term returns by investing in high-quality companies that possess

opportunities for growth that are not fully reflected in market valuations. TCW Core Equity was hired during 3rd quarter,2002. Earlier performance until 1st quarter, 2001, is based on their Commingled Fund history, and prior performance isbased on their separate account composite returns.

Quarterly Summary and HighlightsTCW Concentrated Core’s portfolio posted a (13.42)% return for the quarter placing it in the 77 percentile ofthe CAI Large Cap Growth Style group for the quarter and in the 49 percentile for the last year.

TCW Concentrated Core’s portfolio underperformed the Russell 1000 Growth by 3.24% for the quarter andoutperformed the Russell 1000 Growth for the year by 0.78%.

Performance vs CAI Large Cap Growth Style

(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

Year to Last Last 3 Last 5 From 9-02 Last 10Date Year Years Years Inception Years

(77)

(20)

(49)(57)

(93)

(59)

(47)(52)

(19)

(50)

(21)

(85)



TCWConcentrated Core (13.42) 0.04 3.23 10.53 12.88 5.66

Russell 1000 Growth (10.18) (0.75) 6.33 9.96 10.18 1.28

Relative Return vs Russell 1000 Growth

Rel

ativ

e R

etur

ns

(10%)

(5%)

0%

5%

10%

15%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

TCW Concentrated Core

CAI Large Cap Growth StyleAnnualized Ten Year Risk vs Return

10 15 20 25 30 35(2%)

0%

2%

4%

6%

8%

10%

12%

14%

16%

TCW Concentrated Core

Russell 1000 Growth

Standard Deviation

Ret

urns


TCW CONCENTRATED CORERETURN ANALYSIS SUMMARY



Performance vs CAI Large Cap Growth Style

(60%)

(40%)

(20%)

0%

20%

40%

60%

80%

12/07- 3/08 2007 2006 2005 2004 2003 2002 2001 2000 1999

7720

577098

25 69671065

1

26

51534450

2790

1743



TCWConcentrated Core (13.42) 15.05 (4.39) 4.96 13.84 50.83 (27.62) (19.41) (4.25) 42.88

Russell 1000 Growth (10.18) 11.81 9.07 5.26 6.30 29.75 (27.88) (20.42) (22.42) 33.16

Rolling 12 Quarter and Quarterly Relative Return vs Russell 1000 Growth

Rel

ativ

e R

etur

ns

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

TCW Concentrated Core CAI Lrg Cap Growth Style

Risk Adjusted Return Measures vs Russell 1000 GrowthRankings Against CAI Large Cap Growth Style


(6)

(4)

(2)

0

2

4

6

8

Alpha TreynorRatio

(16)

(25)


Median 1.95 (0.14)75th Percentile 0.61 (1.69)90th Percentile (0.66) (3.19)

TCWConcentrated Core 5.46 1.65

(0.4)

(0.2)

0.0

0.2

0.4

0.6

0.8

1.0


(7)

(25)

(15)


Median 0.36 (0.01) 0.3175th Percentile 0.13 (0.08) 0.1590th Percentile (0.13) (0.15) (0.16)

TCWConcentrated Core 0.74 0.07 0.54


DODGE & COXPERIOD ENDED MARCH 31, 2008

Investment PhilosophyDodge & Cox believes that increased earnings are a primary factor driving increased valuations over the long

term. To effect this policy, the firm relies on thorough fundamental research and a valuation discipline. Dodge & Cox washired during 2nd quarter, 2003. Earlier performance is based on their composite returns.

Quarterly Summary and HighlightsDodge & Cox’s portfolio posted a (11.12)% return for the quarter placing it in the 83 percentile of the CAILarge Cap Value Style group for the quarter and in the 72 percentile for the last year.

Dodge & Cox’s portfolio underperformed the Russell 1000 Value by 2.40% for the quarter andunderperformed the Russell 1000 Value for the year by 1.86%.

Performance vs CAI Large Cap Value Style

(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

Year to Last Last 3 From 6-03 Last 5 Last 10Date Year Years Inception Years Years

(83)

(34)

(72)(57)

(57)(51)

(22)(48)

(20)(49)

(1)

(63)



Dodge & Cox (11.12) (11.86) 5.47 12.02 14.95 9.68

Russell 1000 Value (8.72) (9.99) 6.01 10.68 13.68 5.54

Relative Return vs Russell 1000 Value

Rel

ativ

e R

etur

ns

(5%)

0%

5%

10%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

Dodge & Cox

CAI Large Cap Value StyleAnnualized Ten Year Risk vs Return

10 12 14 16 18 201%

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

Dodge & Cox

Russell 1000 Value

Standard Deviation

Ret

urns


DODGE & COXRETURN ANALYSIS SUMMARY



Performance vs CAI Large Cap Value Style

(40%)(30%)(20%)(10%)

0%10%20%30%40%50%

12/07- 3/08 2007 2006 2005 2004 2003 2002 2001 2000 1999

83345261

5318

2866

824

450

526

2

61

1850

4

44

10th Percentile (6.98) 6.97 23.59 13.33 19.14 34.46 (12.77) 3.97 19.60 18.4925th Percentile (8.20) 4.19 21.18 10.78 16.30 31.88 (15.47) 0.16 14.29 13.11

Median (9.27) 1.13 19.18 8.24 14.68 30.06 (18.49) (4.02) 6.82 6.1175th Percentile (10.37) (1.81) 16.95 5.76 12.05 28.18 (21.96) (6.73) 2.96 1.8590th Percentile (11.83) (6.26) 14.63 4.10 11.03 26.33 (24.35) (10.65) (3.95) (1.62)

Dodge & Cox (11.12) 0.93 19.03 10.05 19.95 35.42 (10.58) 9.26 17.09 19.75

Russell 1000 Value (8.72) (0.17) 22.25 7.05 16.49 30.03 (15.52) (5.59) 7.01 7.35

Rolling 12 Quarter and Quarterly Relative Return vs Russell 1000 Value

Rel

ativ

e R

etur

ns

(10%)

(5%)

0%

5%

10%

15%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

Dodge & Cox CAI Large Cap Value Style

Risk Adjusted Return Measures vs Russell 1000 ValueRankings Against CAI Large Cap Value Style


(3)(2)(1)

01234567

Alpha TreynorRatio

(1)

(3)


Median 0.53 2.2775th Percentile (0.56) 1.1390th Percentile (1.69) (0.15)

Dodge & Cox 4.11 6.03

(0.6)

(0.4)

(0.2)

0.0

0.2

0.4

0.6

0.8

1.0


(4)

(3)

(2)


Median 0.12 0.14 0.0975th Percentile (0.13) 0.07 (0.16)90th Percentile (0.39) (0.01) (0.40)

Dodge & Cox 0.80 0.37 0.78


GLOBEFLEX CAPPERIOD ENDED MARCH 31, 2008

Investment PhilosophyGlobeFlex Capital, L.P. utilizes an active stock selection process through identification of companies across style,

industry, and capitalization. The investment approach incorporates both growth and value criteria.

Quarterly Summary and HighlightsGlobeFlex Cap’s portfolio posted a (12.89)% return for the quarter placing it in the 81 percentile of the CAIMid Capitalization Style group for the quarter and in the 46 percentile for the last year.

GlobeFlex Cap’s portfolio underperformed the S&P Mid Cap 400 by 4.04% for the quarter and outperformedthe S&P Mid Cap 400 for the year by 1.66%.

Performance vs CAI Mid Capitalization Style

(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

25%


B(42)

A(81)

(30)

A(46)

B(68)(55)

A(28)B(59)(62)

A(18)B(38)

(61)

A(33)B(69)

(45)

A(56)B(68)

(45)



GlobeFlex Cap A (12.89) (5.31) 9.76 17.98 9.46 11.54Russell Mid-Cap Index B (9.98) (8.92) 7.36 16.31 7.65 10.96

S&P Mid Cap 400 (8.85) (6.97) 7.05 15.10 9.02 12.19

Relative Return vs S&P Mid Cap 400

Rel

ativ

e R

etur

ns

(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

GlobeFlex Cap

CAI Mid Capitalization StyleAnnualized Ten Year Risk vs Return

10 15 20 25 30 35 400%

2%

4%

6%

8%

10%

12%

14%

16%

S&P Mid Cap 400

GlobeFlex Cap

Russell Mid-Cap Index

Standard Deviation

Ret

urns


GLOBEFLEX CAPRETURN ANALYSIS SUMMARY



Performance vs CAI Mid Capitalization Style

(60%)(40%)(20%)

0%20%40%60%80%

100%120%

12/07- 3/08 2007 2006 2005 2004 2003 2002 2001 2000 1999

8130

3059 5568238 2055

4646

46403241

2135 4659


Median (10.54) 10.12 13.40 11.38 17.28 35.26 (17.83) (3.36) 12.41 19.3875th Percentile (12.36) 3.56 8.35 8.73 13.04 31.13 (26.84) (19.66) (0.21) 3.9490th Percentile (13.81) (0.71) 5.63 6.54 10.06 29.11 (32.71) (32.73) (16.02) (2.72)

GlobeFlex Cap (12.89) 16.24 12.09 21.04 21.23 35.65 (17.13) 2.41 21.21 23.38

S&P Mid Cap 400 (8.85) 7.98 10.31 12.56 16.48 35.62 (14.51) (0.60) 17.50 14.73

Rolling 12 Quarter and Quarterly Relative Return vs S&P Mid Cap 400

Rel

ativ

e R

etur

ns

(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

GlobeFlex Cap CAI Mid Cap Style

Risk Adjusted Return Measures vs S&P Mid Cap 400Rankings Against CAI Mid Capitalization Style


(6)(4)(2)

02468

1012

Alpha TreynorRatio

(34)

(36)



GlobeFlex Cap 1.06 5.96

(0.4)(0.3)(0.2)(0.1)

0.00.10.20.30.40.5


(39)

(41)

(34)


Median 0.04 0.24 (0.04)75th Percentile (0.08) 0.17 (0.16)90th Percentile (0.24) 0.09 (0.28)

GlobeFlex Cap 0.11 0.26 0.04


TCW MID CAP VALUEPERIOD ENDED MARCH 31, 2008

Investment PhilosophyThe underlying philosophy of the TCW Value Opportunities strategy is that every company has an "intrinsic

value" based on its inherent assets, its absolute level of recurring earnings, or its earnings growth potential. TCW MidCapValue was hired during 4th quarter, 2002. Earlier performance is based on their composite returns.

Quarterly Summary and HighlightsTCW Mid Cap Value’s portfolio posted a (5.68)% return for the quarter placing it in the 13 percentile of theCAI Mid Cap Value Style group for the quarter and in the 47 percentile for the last year.

TCW Mid Cap Value’s portfolio outperformed the Russell Mid-Cap by 4.30% for the quarter andunderperformed the Russell Mid-Cap for the year by 0.63%.

Performance vs CAI Mid Cap Value Style

(25%)

(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

25%

Year to Last Last 3 Last 5 Fr 12-02 Last 10Date Year Years Years Inception Years

A(13)B(56)

(77) A(47)

B(72)

(43)

B(56)A(76)

(44)

B(46)A(80)

(49) B(45)A(76)

(45)A(8)

B(65)(73)



TCW Mid Cap Value A (5.68) (9.55) 4.64 14.71 13.34 12.37Russell Midcap

Value Index B (8.64) (14.12) 6.57 16.77 15.00 8.16

Russell Mid-Cap (9.98) (8.92) 7.36 16.31 14.95 7.65

Relative Return vs Russell Mid-Cap

Rel

ativ

e R

etur

ns

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

TCW Mid Cap Value

CAI Mid Cap Value StyleAnnualized Ten Year Risk vs Return

12 14 16 18 20 22 24 264%

6%

8%

10%

12%

14%

16%

Russell Midcap Value Index

TCW Mid Cap Value

Russell Mid-Cap

Standard Deviation

Ret

urns


TCW MID CAP VALUERETURN ANALYSIS SUMMARY



Performance vs CAI Mid Cap Value Style

(40%)(30%)(20%)(10%)

0%10%20%30%40%50%60%

12/07- 3/08 2007 2006 2005 2004 2003 2002 2001 2000 1999

A(13)B(56)77

A(66)B(76)

22

B(9)A(88)72 B(25)

A(77)25

B(24)A(93)

44

A(5)B(28)22

B(41)

A(92)82

A(4)

B(62)92

A(7)

B(48)90

A(10)

B(58)

14


Median (8.45) 1.99 16.80 9.87 19.55 34.33 (11.20) 9.47 18.83 1.0375th Percentile (9.79) (1.02) 15.19 7.56 16.18 30.45 (13.49) (0.47) 15.31 (2.84)90th Percentile (11.18) (8.26) 13.88 5.45 12.85 24.90 (25.28) (4.53) 8.66 (7.30)

TCW Mid Cap Value A (5.68) 0.21 14.02 7.03 12.41 48.86 (26.09) 35.43 39.78 26.52Russell Midcap

Value Index B (8.64) (1.42) 20.22 12.65 23.71 38.07 (9.64) 2.33 19.18 (0.11)

Russell Mid-Cap (9.98) 5.60 15.26 12.65 20.22 40.06 (16.19) (5.62) 8.25 18.23

Rolling 12 Quarter and Quarterly Relative Return vs Russell Mid-Cap

Rel

ativ

e R

etur

ns

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

25%

30%

35%

99 2000 2001 2002 2003 2004 2005 2006 2007 08

TCW Mid Cap Value TCW Mid Cap Value Russell Midcap Value Index CAI Mid Cap Value Style

Risk Adjusted Return Measures vs Russell Mid-CapRankings Against CAI Mid Cap Value Style


0

2

4

6

8

10

12

14

Alpha TreynorRatio

A(11)

B(61)

A(39)

B(60)


Median 2.17 6.5875th Percentile 0.72 4.7290th Percentile 0.34 4.22

TCW Mid Cap Value A 4.92 7.71Russell Midcap

Value Index B 1.27 5.69

(0.2)(0.1)

0.00.10.20.30.40.50.60.7


A(14)

B(60)

A(36)B(58)

A(9)

B(66)


Median 0.29 0.32 0.1675th Percentile 0.07 0.22 (0.02)90th Percentile 0.04 0.18 (0.06)

TCW Mid Cap Value A 0.41 0.35 0.37Russell Midcap

Value Index B 0.17 0.27 0.06


PUTNAM SMALL CAP GROWTHPERIOD ENDED MARCH 31, 2008

Investment PhilosophyPutnam believes that they can achieve maximum capital appreciation through investments in high-quality

companies with superior earnings growth expectations and market capitalizations generally between $50 million and $750million at the time of initial purchase.

Quarterly Summary and HighlightsPutnam Small Cap Growth’s portfolio posted a (14.29)% return for the quarter placing it in the 33 percentile ofthe CAI Small Cap Growth Style group for the quarter and in the 66 percentile for the last year.

Putnam Small Cap Growth’s portfolio underperformed the Russell 2000 Growth by 1.47% for the quarter andunderperformed the Russell 2000 Growth for the year by 2.25%.

Performance vs CAI Small Cap Growth Style

(30%)

(20%)

(10%)

0%

10%

20%

30%


(33)(20)(66)

(54)

(68)(60)

(41)(44)

(42)

(95)

(30)

(99)



Putnam SmallCap Growth (14.29) (11.19) 5.09 14.46 6.15 13.09

Russell 2000 Growth (12.83) (8.94) 5.74 14.24 1.75 6.95


Rel

ativ

e R

etur

ns

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

Putnam Small Cap Growth

CAI Small Cap Growth StyleAnnualized Ten Year Risk vs Return

20 25 30 35 40 450%

2%

4%

6%

8%

10%

12%

14%

16%

Putnam Small Cap Growth

Russell 2000 Growth

Standard Deviation

Ret

urns


PUTNAM SMALL CAP GROWTHRETURN ANALYSIS SUMMARY




(100%)

(50%)

0%

50%

100%

150%

12/07- 3/08 2007 2006 2005 2004 2003 2002 2001 2000 1999

33206475 7530 3880 4233

3229

77614244 5488

22

60

10th Percentile (11.66) 29.71 20.46 15.27 19.10 54.88 (19.39) 2.27 13.02 126.6925th Percentile (13.45) 20.43 14.38 10.69 15.37 49.88 (23.55) (1.75) 3.08 79.00


Putnam SmallCap Growth (14.29) 9.31 8.09 8.76 12.94 47.89 (33.49) (8.23) (9.67) 88.74

Russell 2000 Growth (12.83) 7.05 13.35 4.15 14.31 48.54 (30.26) (9.23) (22.43) 43.09


Rel

ativ

e R

etur

ns

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

25%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

Putnam Small Cap Growth CAI Sm Cap Growth Style

Risk Adjusted Return Measures vs Russell 2000 GrowthRankings Against CAI Small Cap Growth Style


(4)

(2)

0

2

4

6

8

10

12

Alpha TreynorRatio

(39)

(46)


Median 4.14 1.8775th Percentile 2.45 (0.14)90th Percentile 0.58 (1.38)

Putnam SmallCap Growth 5.46 2.09

(0.2)

0.0

0.2

0.4

0.6

0.8

1.0


(24)

(46)

(29)


Median 0.46 0.06 0.4275th Percentile 0.20 (0.00) 0.1590th Percentile 0.06 (0.05) 0.04

Putnam SmallCap Growth 0.66 0.07 0.53


WALL STREET ASSOCIATESPERIOD ENDED MARCH 31, 2008

Investment PhilosophyWall Street invests in lesser cap growth companies exhibiting: extraordinary earnings growth; financial strength;

management vision; and the probability for earnings surprise.

Quarterly Summary and HighlightsWall Street Associates’s portfolio posted a (20.18)% return for the quarter placing it in the 84 percentile of theCAI Small Cap Growth Style group for the quarter and in the 80 percentile for the last year.

Wall Street Associates’s portfolio underperformed the Russell 2000 Growth by 7.35% for the quarter andunderperformed the Russell 2000 Growth for the year by 5.49%.


(30%)

(20%)

(10%)

0%

10%

20%

30%


(84)

(20)(80)

(54)

(45)(60)

(19)

(44)

(13)

(95)

(23)

(95)



Wall StreetAssociates (20.18) (14.43) 7.38 17.83 10.02 11.35

Russell 2000 Growth (12.83) (8.94) 5.74 14.24 1.75 4.32


Rel

ativ

e R

etur

ns

(30%)

(20%)

(10%)

0%

10%

20%

30%

40%

50%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

Wall Street Associates

CAI Small Cap Growth StyleAnnualized Ten Year Risk vs Return

15 20 25 30 35 40 45 500%

2%

4%

6%

8%

10%

12%

14%

16%

Wall Street Associates

Russell 2000 Growth

Standard Deviation

Ret

urns


WALL STREET ASSOCIATESRETURN ANALYSIS SUMMARY




(100%)

(50%)

0%

50%

100%

150%

200%

12/07- 3/08 2007 2006 2005 2004 2003 2002 2001 2000 1999

84207375 4730 1

80 5733

929

98615644 36

88

6

60

10th Percentile (11.66) 29.71 20.46 15.27 19.10 54.88 (19.39) 2.27 13.02 126.6925th Percentile (13.45) 20.43 14.38 10.69 15.37 49.88 (23.55) (1.75) 3.08 79.00


Wall StreetAssociates (20.18) 7.86 12.79 22.96 11.95 56.41 (43.41) (12.36) (3.75) 152.96

Russell 2000 Growth (12.83) 7.05 13.35 4.15 14.31 48.54 (30.26) (9.23) (22.43) 43.09


Rel

ativ

e R

etur

ns

(30%)

(20%)

(10%)

0%

10%

20%

30%

40%

50%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

Wall Street Associates CAI Sm Cap Growth Style

Risk Adjusted Return Measures vs Russell 2000 GrowthRankings Against CAI Small Cap Growth Style


(4)(2)

02468

101214

Alpha TreynorRatio

(6)

(32)


Median 4.14 1.8775th Percentile 2.45 (0.14)90th Percentile 0.58 (1.38)

Wall StreetAssociates 11.99 4.35

(0.2)

0.0

0.2

0.4

0.6

0.8

1.0


(15)

(31)

(39)


Median 0.46 0.06 0.4275th Percentile 0.20 (0.00) 0.1590th Percentile 0.06 (0.05) 0.04

Wall StreetAssociates 0.75 0.14 0.48


PUTNAM SMALL CAP VALUEPERIOD ENDED MARCH 31, 2008

Investment PhilosophyPutnam Investments Small Cap Value Equity I focuses on dividend-paying companies with consistent records and

superior financial statistics. They believe by limiting their investments to dividend paying companies, this strategy will beable to create portfolios with limited volatility and competitive returns.

Quarterly Summary and HighlightsPutnam Small Cap Value’s portfolio posted a (8.45)% return for the quarter placing it in the 85 percentile ofthe CAI Small Cap Value Style group for the quarter and in the 93 percentile for the last year.

Putnam Small Cap Value’s portfolio underperformed the Russell 2000 Value by 1.93% for the quarter andunderperformed the Russell 2000 Value for the year by 6.77%.

Performance vs CAI Small Cap Value Style

(30%)

(20%)

(10%)

0%

10%

20%

30%

Year to Last Last 3 Last 5 Last 10 Fr 12-91Date Year Years Years Years Inception

(85)(60)

(93)

(54)

(84)(41)

(77)(52)

(65)(73)

(78)(60)


Median (6.03) (15.71) 3.40 15.48 8.63 13.4275th Percentile (7.81) (20.81) 1.75 14.08 7.29 12.2590th Percentile (8.91) (23.08) (1.22) 12.64 6.66 11.39

Putnam SmallCap Value (8.45) (23.65) 1.31 13.97 8.03 12.19

Russell 2000 Value (6.53) (16.88) 4.33 15.45 7.46 12.76


Rel

ativ

e R

etur

ns

(10%)

(8%)

(6%)

(4%)

(2%)

0%

2%

4%

6%

8%

10%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

Putnam Small Cap Value

CAI Small Cap Value StyleAnnualized Ten Year Risk vs Return

12 14 16 18 20 22 24 265%

6%

7%

8%

9%

10%

11%

12%

13%

Putnam Small Cap ValueRussell 2000 Value

Standard Deviation

Ret

urns


PUTNAM SMALL CAP VALUERETURN ANALYSIS SUMMARY




(30%)(20%)(10%)

0%10%20%30%40%50%60%70%

12/07- 3/08 2007 2006 2005 2004 2003 2002 2001 2000 1999

85608259

5212

5983

3056

3228

7874

2863

4336

7272

10th Percentile (3.50) 3.76 24.47 14.39 28.47 58.59 0.21 29.59 33.13 19.4325th Percentile (4.54) (2.46) 21.48 11.04 25.39 49.19 (2.63) 22.40 24.85 10.88

Median (6.03) (8.60) 18.75 9.23 22.78 42.49 (6.98) 18.16 21.59 2.7175th Percentile (7.81) (12.68) 14.65 5.40 19.12 38.84 (11.96) 9.11 13.87 (2.18)90th Percentile (8.91) (16.41) 12.88 3.01 16.09 33.76 (19.09) 4.52 5.02 (5.35)

Putnam SmallCap Value (8.45) (13.12) 18.01 7.48 25.17 45.38 (11.99) 22.16 22.09 (1.57)

Russell 2000 Value (6.53) (9.78) 23.48 4.71 22.25 46.03 (11.43) 14.02 22.83 (1.49)


Rel

ativ

e R

etur

ns

(10%)

(8%)

(6%)

(4%)

(2%)

0%

2%

4%

6%

8%

10%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

Putnam Small Cap Value CAI Small Cap Value Style

Risk Adjusted Return Measures vs Russell 2000 ValueRankings Against CAI Small Cap Value Style


(2)

0

2

4

6

8

10

Alpha TreynorRatio

(64)

(63)



Putnam SmallCap Value 0.57 4.14

(0.4)

(0.2)

0.0

0.2

0.4

0.6

0.8


(65)(61)

(65)


Median 0.21 0.24 0.1775th Percentile (0.03) 0.18 (0.03)90th Percentile (0.08) 0.15 (0.11)

Putnam SmallCap Value 0.12 0.21 0.11


DFA SMALL CAP VALUEPERIOD ENDED MARCH 31, 2008

Investment PhilosophyDFA’s investment philosophy stems from academic research conducted by Professors Eugene Fama of the

University of Chicago, and Kenneth French of Massachusetts Institute of Technology that finds that high book/marketvalue stocks have higher expected returns than growth stocks. DFA’s quantitative investment strategy in highly diversifiedportfolio of small companies with "deep" value characteristics is designed to capture the returns of small value stocks.

Quarterly Summary and HighlightsDFA Small Cap Value’s portfolio posted a (3.46)% return for the quarter placing it in the 10 percentile of theCAI Small Cap Value Style group for the quarter and in the 48 percentile for the last year.

DFA Small Cap Value’s portfolio outperformed the Russell 2000 Value by 3.06% for the quarter andoutperformed the Russell 2000 Value for the year by 1.30%.


(30%)

(20%)

(10%)

0%

10%

20%

30%

Year to Last Last 3 Last 5 Last 10 Fr 12-95Date Year Years Years Years Inception

(10)(60)

(48)(54)

(25)(41)

(4)

(52)

(12)(73)

(18)(94)


Median (6.03) (15.71) 3.40 15.48 8.63 13.4475th Percentile (7.81) (20.81) 1.75 14.08 7.29 11.6890th Percentile (8.91) (23.08) (1.22) 12.64 6.66 11.45

DFA SmallCap Value (3.46) (15.58) 6.57 20.96 11.29 14.60

Russell 2000 Value (6.53) (16.88) 4.33 15.45 7.46 10.92


Rel

ativ

e R

etur

ns

(10%)

(8%)

(6%)

(4%)

(2%)

0%

2%

4%

6%

8%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

DFA Small Cap Value

CAI Small Cap Value StyleAnnualized Ten Year Risk vs Return

12 14 16 18 20 22 24 265%

6%

7%

8%

9%

10%

11%

12%

13%

Russell 2000 Value

DFA Small Cap Value

Standard Deviation

Ret

urns


DFA SMALL CAP VALUERETURN ANALYSIS SUMMARY




(30%)(20%)(10%)

0%10%20%30%40%50%60%70%

12/07- 3/08 2007 2006 2005 2004 2003 2002 2001 2000 1999

1060 5959

1212

4383

1656

8

28

5774

2963 79

3612

72

10th Percentile (3.50) 3.76 24.47 14.39 28.47 58.59 0.21 29.59 33.13 19.4325th Percentile (4.54) (2.46) 21.48 11.04 25.39 49.19 (2.63) 22.40 24.85 10.88

Median (6.03) (8.60) 18.75 9.23 22.78 42.49 (6.98) 18.16 21.59 2.7175th Percentile (7.81) (12.68) 14.65 5.40 19.12 38.84 (11.96) 9.11 13.87 (2.18)90th Percentile (8.91) (16.41) 12.88 3.01 16.09 33.76 (19.09) 4.52 5.02 (5.35)

DFA SmallCap Value (3.46) (9.70) 23.65 9.79 27.53 59.06 (7.98) 22.02 10.79 14.09

Russell 2000 Value (6.53) (9.78) 23.48 4.71 22.25 46.03 (11.43) 14.02 22.83 (1.49)


Rel

ativ

e R

etur

ns

(10%)

(8%)

(6%)

(4%)

(2%)

0%

2%

4%

6%

8%

10%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

DFA Small Cap Value CAI Small Cap Value Style

Risk Adjusted Return Measures vs Russell 2000 ValueRankings Against CAI Small Cap Value Style


(2)

0

2

4

6

8

10

Alpha TreynorRatio

(17)

(25)



DFA SmallCap Value 3.53 6.69

(0.4)

(0.2)

0.0

0.2

0.4

0.6

0.8


(13)

(25)

(10)



DFA SmallCap Value 0.63 0.34 0.61


International Equity

‘

INTERNATIONAL EQUITYActive Management Overview

Active vs. the IndexIn the first quarter of 2008, equity markets all over the world experienced major losses. Turmoil in the financial sectorcontinued to plague developed nations, and emerging countries have tempered their growth expectations. The medianfund manager in the Pacific region underperformed its benchmark by 247 basis points for the quarter. EmergingMarkets beat its benchmark by 4 basis points for the quarter, -10.88% vs -10.92%, but trailed by 32 basis points for theyear. European and Core International managers fell into negative territory for the year ended March 31, 2008.

EuropeEurope’s economic slowdown is not merely a ripple from the U.S. sub-prime debacle, as internal issues have begun tosurface. The euro has acted as the primary outlet for a declining U.S. Dollar and the resulting appreciation has severelyimpacted export driven countries with weak domestic demand. Spain and France are suffering from the bursting oftheir own Real Estate bubbles, resulting in deteriorating consumer confidence. The median Europe fund lost 9.51% forthe quarter, compared to the MSCI Europe Index’s loss of 8.62%. For the latest twelve months, the median fund nowlags its index by 231 basis points.

PacificFor the three months ended March 31, 2008, the median Pacific fund lost 12.04%, and was the lowest performingregion. Asian countries have lowered growth expectations since the largest market for their exports, the United States,has experienced unprecedented currency devaluation. The median Japan Only fund was the best performing region,losing only 8.23%. For the year, Pacific Basin Funds lost 4.40% while Japan Only lagged all other styles with a loss of15.05%.

Emerging MarketsIn the fourth quarter of 2007, Emerging Markets experienced a "decoupling" effect, bucking the global trend with aquarterly gain on strong fundamentals. In the first quarter of 2008, credit spreads have widened and the IPO market hascome to a grinding halt. This quarter reinforced the notion of a truly global slowdown, with the median EmergingMarkets manager posting a quarterly loss of 10.88% on lowered expectations for growth and international consumption. The median Emerging Markets fund’s twelve month return was 21.33%, compared to a 21.65% return for the index.


(15%)

(10%)

(5%)

0%

(9.51%)

Europe

(8.78%)

Core Int’l

(9.06%)

Core Plus

(12.04%)

PacificBasin

(8.23%)

JapanOnly

(10.88%)

EmergingMarkets

(9.26%)

GlobalEquity

Ret

urns

MSCI AC World Index (9.18%)MSCI ACW ex US Free: (9.06%)MSCI EAFE: (8.91%)MSCI Europe: (8.62%)MSCI Pacific: (9.57%)MSCI Emerging Markets: (10.92%)


(30%)

(20%)

(10%)

0%

10%

20%

30%

(2.13%)

Europe

(1.69%)

Core Int’l

1.58%

Core Plus

(4.40%)

PacificBasin

(15.05%)

JapanOnly

21.33%

EmergingMarkets

(2.38%)

GlobalEquity

Ret

urns

MSCI AC World Index (0.68%)MSCI ACW ex US Free: 2.58%MSCI EAFE: (2.70%)MSCI Europe: 0.18%MSCI Pacific: (8.93%)MSCI Emerging Markets: 21.65%


INT’L EQUITY COMPOSITEPERIOD ENDED MARCH 31, 2008

Investment PhilosophyThe International Equity Benchmark is currently comprised of 80% MSCI ACW ex US Free Index, and 20%

Citigroup Extended Market ex-US Index.

Quarterly Summary and HighlightsInt’l Equity Composite’s portfolio posted a (10.25)% return for the quarter placing it in the 98 percentile of thePublic Fund - International Equity group for the quarter and in the 90 percentile for the last year.

Int’l Equity Composite’s portfolio underperformed the Blended Benchmark by 1.61% for the quarter andunderperformed the Blended Benchmark for the year by 5.28%.

Performance vs Public Fund - International Equity

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

25%

30%

Year to Last Last 3 Last 5 Last 10 Last 12-3/4Date Year Years Years Years Years

(98)(33)

(90)

(43)

(41)(17)

(12)(7)

(10)(48)

(12)

(69)



Int’l EquityComposite (10.25) (4.52) 14.79 24.10 10.63 12.52

Blended Benchmark (8.64) 0.76 16.22 24.69 8.26 8.33


Rel

ativ

e R

etur

ns

(6%)

(4%)

(2%)

0%

2%

4%

6%

8%

10%

12%

14%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

Int’l Equity Composite

Public Fund - International EquityAnnualized Ten Year Risk vs Return

14 16 18 20 22 242%

4%

6%

8%

10%

12%

14%

Int’l Equity Composite

Blended Benchmark

Standard Deviation

Ret

urns


INT’L EQUITY COMPOSITERETURN ANALYSIS SUMMARY



Performance vs Public Fund - International Equity

(30%)(20%)(10%)

0%10%20%30%40%50%60%

12/07- 3/08 2007 2006 2005 2004 2003 2002

(98)(33)

(73)(47)

(4)(21)(45)(16)

(6)(10)

(7)(6)

(31)(34)

10th Percentile (8.00) 18.17 28.49 19.45 22.79 41.38 (8.76)25th Percentile (8.57) 16.60 27.26 16.81 20.59 39.66 (12.02)

Median (8.96) 14.73 26.44 15.89 19.59 37.09 (14.20)75th Percentile (9.03) 11.80 25.12 13.76 18.04 33.07 (16.04)90th Percentile (9.41) 9.11 22.61 12.19 16.65 31.23 (17.64)

Int’l EquityComposite (10.25) 12.22 29.29 16.02 24.15 43.53 (12.90)

Blended Benchmark (8.64) 15.14 27.62 18.11 22.82 43.62 (13.00)


Rel

ativ

e R

etur

ns

(6%)

(4%)

(2%)

0%

2%

4%

6%

8%

10%

12%

14%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

Int’l Equity Composite Public Fund - Intl Equity

Risk Adjusted Return Measures vs Blended BenchmarkRankings Against Public Fund - International Equity


(4)

(2)

0

2

4

6

8

Alpha TreynorRatio

(13)

(14)



Int’l EquityComposite 2.20 6.56

(0.8)

(0.6)

(0.4)

(0.2)

0.0

0.2

0.4

0.6

0.8


(11)(12)

(10)



Int’l EquityComposite 0.45 0.34 0.48


BRANDES INVESTMENTPERIOD ENDED MARCH 31, 2008

Investment PhilosophyBrandes employs a bottom-up approach to building international equity portfolios. The firm utilizes fundamental

research to select undervalued companies in the developed and emerging markets. The Custom Benchmark is comprised of85% MSCI AC Wld ex US Free and 15% MSCI Emerging Markets Index through 12/31/03, and MSCI AC Wld ex USFree thereafter.

Quarterly Summary and HighlightsBrandes Investment’s portfolio posted a (11.69)% return for the quarter placing it in the 95 percentile of theCAI Non-U.S. Equity Style group for the quarter and in the 97 percentile for the last year.

Brandes Investment’s portfolio underperformed the Custom Benchmark by 2.63% for the quarter andunderperformed the Custom Benchmark for the year by 11.04%.

Performance vs CAI Non-U.S. Equity Style

(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

25%

30%


B(55)A(95)

(55)

B(28)

A(97)

(28)

B(25)

A(84)

(25)

A(10)B(22)(20)

A(6)

B(59)(62)

A(5)

B(88)(94)



Brandes Investment A (11.69) (8.47) 12.32 25.44 12.30 14.62MSCI AC Wld

ex US Free B (9.06) 2.58 16.49 24.04 7.67 8.36

Custom Benchmark (9.06) 2.58 16.49 24.14 7.56 7.97

Relative Return vs Custom Benchmark

Rel

ativ

e R

etur

ns

(10%)

(5%)

0%

5%

10%

15%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

Brandes Investment

CAI Non-U.S. Equity StyleAnnualized Ten Year Risk vs Return

10 15 20 25 30 35 402%

4%

6%

8%

10%

12%

14%

16%

18%

MSCI AC Wld ex US Free

Brandes Investment

Custom Benchmark

Standard Deviation

Ret

urns


BRANDES INVESTMENTRETURN ANALYSIS SUMMARY




(40%)

(20%)

0%

20%

40%

60%

80%

12/07- 3/08 2007 2006 2005 2004 2003 2002 2001 2000 1999

9555

8030

18428736

332

222

5245 1136

8

66

17

62

10th Percentile (6.64) 21.71 31.58 22.96 25.22 44.12 (6.39) (11.21) (0.75) 60.2925th Percentile (7.79) 17.70 29.08 18.62 22.06 40.89 (11.52) (16.03) (7.76) 46.30


Brandes Investment (11.69) 8.91 29.98 11.99 28.53 52.42 (15.09) (11.36) 0.94 53.45

Custom Benchmark (9.06) 17.12 27.16 17.11 21.36 41.15 (14.42) (18.59) (16.75) 32.76

Rolling 12 Quarter and Quarterly Relative Return vs Custom Benchmark

Rel

ativ

e R

etur

ns

(10%)

(5%)

0%

5%

10%

15%

20%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

Brandes Investment CAI Non-U.S. Equity Style

Risk Adjusted Return Measures vs Custom BenchmarkRankings Against CAI Non-U.S. Equity Style


(4)

(2)

0

2

4

6

8

10

Alpha TreynorRatio

(7)

(12)



Brandes Investment 4.65 8.29

(0.4)

(0.2)

0.0

0.2

0.4

0.6

0.8


(7)

(10)

(4)



Brandes Investment 0.64 0.41 0.62


MCKINLEY CAPITALPERIOD ENDED MARCH 31, 2008

Investment PhilosophyMcKinley Capital believes that excess market returns can be achieved through the construction and active

management of a diversified portfolio of inefficiently priced common stocks whose earnings growth rates are acceleratingabove market expectations. McKinley Capital was hired during 1st quarter, 2007. Earlier performance is based on theircomposite returns.

Quarterly Summary and HighlightsMcKinley Capital’s portfolio posted a (10.62)% return for the quarter placing it in the 88 percentile of the CAINon-U.S. Equity Style group for the quarter and in the 45 percentile for the last year.

McKinley Capital’s portfolio underperformed the MSCI ACWI ex-US by 1.56% for the quarter andunderperformed the MSCI ACWI ex-US for the year by 2.26%.


(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

25%

30%

Year to Date From 3-07 Inception Last 3 Years Last 5 Years Last 10 Years

B(44)A(88)

(55)

B(11)

A(45)(28)

A(11)B(19)(25)

A(13)B(53)

(22)

A(27)

B(93)(59)


Median (8.97) (0.54) 14.78 22.40 8.1875th Percentile (9.82) (3.50) 13.09 20.77 7.1990th Percentile (10.95) (5.78) 11.49 19.47 6.32

McKinley Capital A (10.62) 0.32 18.74 25.04 9.63MSCI ACW ex

US Free Gr B (8.68) 6.17 17.25 22.31 5.83

MSCI ACWI ex-US (9.06) 2.58 16.49 24.04 7.67

Relative Return vs MSCI ACWI ex-US

Rel

ativ

e R

etur

ns

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

McKinley Capital

CAI Non-U.S. Equity StyleAnnualized Ten Year Risk vs Return

10 15 20 25 30 35 402%

4%

6%

8%

10%

12%

14%

16%

18%

McKinley Capital

MSCI ACW ex US Free Gr

MSCI ACWI ex-US

Standard Deviation

Ret

urns


MCKINLEY CAPITALRETURN ANALYSIS SUMMARY




(40%)

(20%)

0%

20%

40%

60%

80%

12/07- 3/08 2007 2006 2005 2004 2003 2002 2001 2000 1999

B(44)A(88)55

B(11)A(16)30

A(32)B(75)42 A(27)

B(37)36A(4)B(72)32

A(12)B(57)

21

A(12)B(48)47 A(61)

B(72)46 A(84)

B(96)55

A(16)B(49)66

10th Percentile (6.64) 21.71 31.58 22.96 25.22 44.12 (6.39) (11.21) (0.75) 60.2925th Percentile (7.79) 17.70 29.08 18.62 22.06 40.89 (11.52) (16.03) (7.76) 46.30


McKinley Capital A(10.62) 19.99 28.59 18.35 26.18 43.77 (7.47) (22.05) (21.10) 54.21MSCI ACW ex

US Free Gr B (8.68) 21.40 23.96 17.08 17.07 34.91 (14.73) (23.43) (24.85) 35.72

MSCI ACWI ex-US (9.06) 17.12 27.16 17.11 21.36 41.41 (14.67) (19.50) (15.08) 30.91

Rolling 12 Quarter and Quarterly Relative Return vs MSCI ACWI ex-US

Rel

ativ

e R

etur

ns

(10%)

(5%)

0%

5%

10%

15%

20%

2000 2001 2002 2003 2004 2005 2006 2007 08

McKinley Capital McKinley Capital MSCI ACW ex US Free Gr CAI Non-U.S. Equity Style

Risk Adjusted Return Measures vs MSCI ACWI ex-USRankings Against CAI Non-U.S. Equity Style


(4)

(2)

0

2

4

6

8

10

Alpha TreynorRatio

A(31)

B(96)

A(41)

B(94)



McKinley Capital A 1.77 5.04MSCI ACW ex

US Free Gr B (1.80) 1.95

(0.6)

(0.4)

(0.2)

0.0

0.2

0.4

0.6

0.8


A(37)

B(96)

A(41)B(94)

A(32)

B(94)



McKinley Capital A 0.23 0.25 0.23MSCI ACW ex

US Free Gr B (0.40) 0.10 (0.38)


GLOBEFLEX INTERNATIONALPERIOD ENDED MARCH 31, 2008

Investment PhilosophyGlobeFlex Capital, L.P. utilizes an active stock selection process through identification of companies across style,

industry, and capitalization. The investment approach incorporates both growth and value criteria. GlobeFlex Capital washired during 1st quarter, 2007. Earlier performance is based on their composite returns.

Quarterly Summary and HighlightsGlobeFlex International’s portfolio posted a (7.28)% return for the quarter placing it in the 29 percentile of theCAI International Small Cap Style group for the quarter and in the 83 percentile for the last year.

GlobeFlex International’s portfolio underperformed the EMI World ex US Index by 0.33% for the quarter andunderperformed the EMI World ex US Index for the year by 6.40%.

Performance vs CAI International Small Cap Style

(30%)

(20%)

(10%)

0%

10%

20%

30%

40%

Year to Date From 3-07 Inception Last 3 Years Last 5 Years Last 10 Years

(29)(27)

(83)

(44)

(44)(69)

(40)(73)

(32)(83)

10th Percentile (5.72) 3.20 23.99 33.39 19.7025th Percentile (6.69) (0.92) 18.99 30.43 14.92

Median (8.17) (7.48) 16.73 28.87 14.0175th Percentile (8.71) (11.07) 12.95 26.05 11.4290th Percentile (10.88) (14.91) 7.50 21.77 9.66

GlobeFlexInternational (7.28) (12.79) 17.04 29.53 14.25

EMI World ex US Index (6.95) (6.39) 15.01 26.77 9.97

Relative Return vs EMI World ex US Index

Rel

ativ

e R

etur

ns

(6%)

(4%)

(2%)

0%

2%

4%

6%

8%

10%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

GlobeFlex International

CAI International Small Cap StyleAnnualized Ten Year Risk vs Return

15 20 25 30 356%

8%

10%

12%

14%

16%

18%

20%

22%

GlobeFlex International

EMI World ex US Index

Standard Deviation

Ret

urns


GLOBEFLEX INTERNATIONALRETURN ANALYSIS SUMMARY




(50%)

0%

50%

100%

150%

200%

12/07- 3/08 2007 2006 2005 2004 2003 2002 2001 2000 1999

2927 85611048 1064 1464

3867

1750 15391959

7877

10th Percentile (5.72) 20.98 34.33 34.07 37.81 67.75 3.97 (5.70) 9.65 145.3525th Percentile (6.69) 15.17 33.37 30.50 34.81 62.58 (0.65) (11.91) (0.39) 73.36

Median (8.17) 9.23 29.21 25.19 29.87 57.04 (7.28) (16.57) (6.07) 49.5575th Percentile (8.71) 2.70 25.23 21.23 26.84 52.37 (14.03) (24.12) (17.07) 30.4290th Percentile (10.88) (3.65) 21.04 14.62 19.91 49.37 (16.43) (28.50) (24.52) 10.53

GlobeFlexInternational (7.28) 0.06 34.33 34.15 36.41 60.20 2.17 (7.71) 1.11 20.42

EMI World ex US Index (6.95) 7.33 29.43 22.10 28.74 53.73 (7.28) (15.70) (10.32) 23.50

Rolling 12 Quarter and Quarterly Relative Return vs EMI World ex US Index

Rel

ativ

e R

etur

ns

(10%)

(5%)

0%

5%

10%

15%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

GlobeFlex International CAI Int’l Small Cap Style

Risk Adjusted Return Measures vs EMI World ex US IndexRankings Against CAI International Small Cap Style


(2)02468

10121416

Alpha TreynorRatio

(29)

(23)


Median 3.81 8.6875th Percentile 1.22 6.9590th Percentile (0.16) 5.64

GlobeFlexInternational 4.48 11.43

(0.4)

(0.2)

0.0

0.2

0.4

0.6

0.8

1.0


(11)

(8) (17)


Median 0.35 0.45 0.3175th Percentile 0.15 0.35 0.1590th Percentile (0.13) 0.28 (0.09)

GlobeFlexInternational 0.80 0.61 0.67


GMO (GROSS)PERIOD ENDED MARCH 31, 2008

Investment PhilosophyGMO uses the reasoned combination of quantitative analysis with rigorous fundamental research to produce a

structured portfolio. Asset growth and portfolio turnover are tightly controlled to safeguard value added. The strategy uses abottom up process for both stock and country selection. It has delivered 60% value added from stock selection and 40%from country selection. GMO was hired during 3rd quarter, 2002. Earlier performance is based on their composite returns.

Quarterly Summary and HighlightsGMO (Gross)’s portfolio posted a (4.99)% return for the quarter placing it in the 7 percentile of the CAIInternational Small Cap Style group for the quarter and in the 32 percentile for the last year.

GMO (Gross)’s portfolio outperformed the EMI World ex US Index by 1.96% for the quarter andoutperformed the EMI World ex US Index for the year by 2.25%.


(30%)

(20%)

(10%)

0%

10%

20%

30%

40%


A(7)B(10)(27)

A(32)B(44)(44)

A(35)B(74)(69)

A(59)B(72)(73) A(55)

B(62)(68)

A(16)B(74)(83)



GMO (Gross) A (4.99) (4.13) 18.02 28.18 25.54 16.34EMI World

ex US Value B (5.82) (6.20) 14.07 27.17 24.44 11.57

EMI World ex US Index (6.95) (6.39) 15.01 26.77 23.90 9.97

Relative Return vs EMI World ex US Index

Rel

ativ

e R

etur

ns

(6%)

(4%)

(2%)

0%

2%

4%

6%

8%

10%

12%

14%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

GMO (Gross)

CAI International Small Cap StyleAnnualized Ten Year Risk vs Return

15 20 25 30 356%

8%

10%

12%

14%

16%

18%

20%

22%

GMO (Gross)

EMI World ex US Value

EMI World ex US Index

Standard Deviation

Ret

urns


GMO (GROSS)RETURN ANALYSIS SUMMARY




(50%)

0%

50%

100%

150%

200%

12/07- 3/08 2007 2006 2005 2004 2003 2002 2001 2000 1999

A(7)B(10)27

A(54)B(64)61

A(6)B(55)48 A(78)

B(78)64B(42)A(47)64

B(46)A(78)67

A(11)B(32)50 A(2)

B(20)39B(27)A(56)59

A(69)B(89)77

10th Percentile (5.72) 20.98 34.33 34.07 37.81 67.75 3.97 (5.70) 9.65 145.3525th Percentile (6.69) 15.17 33.37 30.50 34.81 62.58 (0.65) (11.91) (0.39) 73.36

Median (8.17) 9.23 29.21 25.19 29.87 57.04 (7.28) (16.57) (6.07) 49.5575th Percentile (8.71) 2.70 25.23 21.23 26.84 52.37 (14.03) (24.12) (17.07) 30.4290th Percentile (10.88) (3.65) 21.04 14.62 19.91 49.37 (16.43) (28.50) (24.52) 10.53

GMO (Gross) A (4.99) 8.70 36.68 20.02 30.09 51.58 3.48 4.51 (6.89) 42.37EMI World

ex US Value B (5.82) 6.63 29.01 19.70 31.26 57.27 (1.40) (9.33) (0.81) 11.41

EMI World ex US Index (6.95) 7.33 29.43 22.10 28.74 53.73 (7.28) (15.70) (10.32) 23.50

Rolling 12 Quarter and Quarterly Relative Return vs EMI World ex US Index

Rel

ativ

e R

etur

ns

(10%)

(5%)

0%

5%

10%

15%

20%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

GMO (Gross) GMO (Gross) EMI World ex US Value CAI Int’l Small Cap Style

Risk Adjusted Return Measures vs EMI World ex US IndexRankings Against CAI International Small Cap Style


(2)02468

10121416

Alpha TreynorRatio

A(16)

B(71)

A(9)

B(54)


Median 3.81 8.6875th Percentile 1.22 6.9590th Percentile (0.16) 5.64

GMO (Gross) A 6.63 14.14EMI World

ex US Value B 1.97 8.58

(0.4)(0.2)

0.00.20.40.60.81.01.21.41.6


A(1)

B(44)

A(1)

B(47)

A(2)

B(57)


Median 0.35 0.45 0.3175th Percentile 0.15 0.35 0.1590th Percentile (0.13) 0.28 (0.09)

GMO (Gross) A 1.29 0.76 1.04EMI World

ex US Value B 0.42 0.46 0.30


Dom

estic Fixed-Income

‘

DOMESTIC FIXED-INCOMEActive Management Overview

Active vs the IndexDuring the quarter ended March 31, 2008, the Federal Open Market Committee lowered the Federal Funds rate to2.25%, the lowest since February 2005. Despite measures by the Fed to alleviate liquidity issues, credit markets remainunder stress as the total value of write-downs and credit losses tied to domestic mortgage markets remainsundetermined. Fueled by a weak equity market environment, all median Fixed-Income funds (with the exception ofHigh Yield) posted gains for the quarter. The median Core Bond fund showed a gain of 1.40%, 77 basis points short ofthe Lehman Aggregate for the quarter ended March 31, 2008. For the year, the median Core Bond fund posted 6.44%,underperforming its benchmark return of 7.67%.

Short vs Long DurationThe yield curve flattened slightly by quarter end, but remained steep amidst a weakening economy. As investorsanticipated further rate cuts, spreads widened and Money Market yields decreased. The median Cash fund advanced0.61% for the quarter ended March 31, 2008, while the median Extended Maturity fund gained 1.55%, a difference of94 basis points. For the year, the median Cash fund returned 4.59% while the median Extended Maturity fund earned7.31%.

Mortgages and High YieldHigh Yield funds continue to be the worst performers amidst fears of recession fueled by rising unemployment andweak consumer spending. The median High Yield fund lost 2.28% for the quarter and 1.58% for the year ended March31, 2008, 74 and 216 basis points ahead of the Lehman High Yield index, respectively. The Fed’s attempts to ensuresufficient liquidity in the mortgage market remained apparent as the median Mortgage Backed fund returned 1.59% forthe quarter, underperforming the Lehman Mortgage index’s return of 2.43%. For the year, the median MortgageBacked fund gained 6.62%, while the Lehman Mortgage index returned 7.82%.


(4%)

(3%)

(2%)

(1%)

0%

1%

2%

3%

4%

0.61%

ActiveCash

1.97%

Defensive

2.69%

Intermed

1.40%

CoreBond

0.84%

CorePlus

1.55%

ExtendedMaturity

2.85%

ActiveDuration

1.59%

MortgageBacked

(2.28%)

HighYield

Ret

urns

Lehman Universal: 1.66%Lehman Aggregate: 2.17%Lehman Govt/Credit: 2.53%Lehman Mortgage: 2.43%Lehman High Yield: (3.02%)


(4%)

(2%)

0%

2%

4%

6%

8%

10%

12%

4.59%

ActiveCash

6.70%

Defensive

8.27%

Intermed

6.44%

CoreBond

4.74%

CorePlus

7.31%

ExtendedMaturity

8.63%

ActiveDuration

6.62%

MortgageBacked

(1.58%)

HighYield

Ret

urns

Lehman Universal: 6.57%Lehman Aggregate: 7.67%Lehman Govt/Credit: 8.35%Lehman Mortgage: 7.82%Lehman High Yield: (3.74%)


DOMESTIC FIXED COMPOSITEPERIOD ENDED MARCH 31, 2008

Investment PhilosophyThe Domestic Fixed-Income Benchmark is currently comprised of 60% Lehman Brothers Aggregate, 30% Merrill

Lynch 1-5 Yr Govt/Corp and 10% Merrill Lynch Convertible Index, All Qualities.

Quarterly Summary and HighlightsDomestic Fixed Composite’s portfolio posted a (0.63)% return for the quarter placing it in the 93 percentile ofthe Public Fund - Domestic Fixed group for the quarter and in the 31 percentile for the last year.

Domestic Fixed Composite’s portfolio underperformed the Blended Benchmark by 2.22% for the quarter andoutperformed the Blended Benchmark for the year by 0.34%.

Performance vs Public Fund - Domestic Fixed

(2%)

0%

2%

4%

6%

8%

10%

12%

Year to Last Last 3 Last 5 Last 10 Last 19Date Year Years Years Years Years

B(16)

A(93)

(37)

B(24)A(31)(37) A(6)

B(44)(49)A(12)

B(64)(65)

A(17)B(60)(76)

B(47)A(84)

(45)

10th Percentile 2.32 8.55 6.51 6.60 6.55 8.9625th Percentile 1.90 7.64 5.70 5.42 6.20 7.81

Median 1.23 6.32 5.39 4.73 6.06 7.5675th Percentile 0.87 4.95 4.98 4.49 5.87 7.3890th Percentile (0.30) 2.79 4.11 3.96 5.44 7.14

DomesticFixed Composite A (0.63) 7.15 6.86 6.13 6.30 7.35

Lehman Aggregate B 2.17 7.67 5.48 4.58 6.04 7.60

Blended Benchmark 1.59 6.81 5.43 4.57 5.85 7.65


Rel

ativ

e R

etur

ns

(3%)

(2%)

(1%)

0%

1%

2%

3%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

Domestic Fixed Composite

Public Fund - Domestic FixedAnnualized Ten Year Risk vs Return

1 2 3 4 5 6 73%

4%

5%

6%

7%

8%

9%

10%

11%

Blended Benchmark

Lehman Aggregate

Domestic Fixed Composite

Standard Deviation

Ret

urns


DOMESTIC FIXEDRETURN ANALYSIS SUMMARY



Performance vs Public Fund - Domestic Fixed

(5%)

0%

5%

10%

15%

12/07- 3/08 2007 2006 2005 2004 2003 2002 2001 2000 1999

9337

4

41 1138 5

938593

3445 94

739082

9489

56

10th Percentile 2.32 8.37 6.62 4.26 6.89 10.14 10.79 9.11 12.63 2.4525th Percentile 1.90 7.18 5.34 3.18 5.50 6.87 10.12 8.69 12.09 0.65

Median 1.23 6.60 4.67 2.82 4.83 4.91 9.48 8.32 11.51 (0.46)75th Percentile 0.87 5.71 4.42 2.48 4.32 4.48 7.87 7.53 10.60 (1.80)90th Percentile (0.30) 4.46 4.12 2.28 4.03 3.70 5.57 6.56 9.09 (2.61)

Domestic Fixed (0.63) 9.89 6.53 5.51 4.13 6.47 4.36 6.57 8.59 4.43

Blended Benchmark 1.59 6.84 4.97 2.06 3.73 5.19 7.98 7.14 9.26 3.63


Rel

ativ

e R

etur

ns

(3%)

(2%)

(1%)

0%

1%

2%

3%

4%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

Domestic Fixed Public Fund - Dom Fixed

Risk Adjusted Return Measures vs Blended BenchmarkRankings Against Public Fund - Domestic Fixed


(2)

(1)

0

1

2

3

4

5

Alpha TreynorRatio

(6)

(6)



Domestic Fixed 1.23 4.19

(0.6)(0.4)(0.2)

0.00.20.40.60.81.01.21.4


(5)

(4)

(17)


Median (0.08) 0.66 0.1075th Percentile (0.22) 0.61 0.0190th Percentile (0.30) 0.49 (0.23)

Domestic Fixed 0.81 1.17 0.24


MET WESTPERIOD ENDED MARCH 31, 2008

Investment PhilosophyMetropolitan West Asset Management (MWAM) attempts to add value by limiting duration, managing the yield

curve, rotating among bond market sectors and using proprietary quantitative valuation techniques. Metropolitan WestAsset Management was hired during 3rd quarter, 2001. Earlier performance is based on their composite returns.

Quarterly Summary and HighlightsMet West’s portfolio posted a 1.18% return for the quarter placing it in the 29 percentile of the CAI Core BondPlus Style group for the quarter and in the 18 percentile for the last year.

Met West’s portfolio underperformed the Lehman Agg by 0.99% for the quarter and underperformed theLehman Agg for the year by 0.76%.

Performance vs CAI Core Bond Plus Style

(5%)

0%

5%

10%

Year to Last Last 3 From 9-02 Last 5 From 9-01 Last 10Date Year Years Years Inception Years

(29)

(10)

(18)(10)

(12)(23)

(3)

(87)

(1)

(84)(74)(74)

(25)(54)

10th Percentile 2.14 7.70 6.09 6.39 5.96 6.55 6.6325th Percentile 1.29 6.38 5.37 5.89 5.39 5.98 6.40

Median 0.84 4.74 5.10 5.50 5.01 5.57 6.1675th Percentile (0.00) 3.77 4.70 5.09 4.82 5.27 5.8590th Percentile (3.63) (0.38) 3.41 4.31 3.98 4.66 5.52

Met West 1.18 6.90 5.89 6.72 6.71 5.30 6.41

Lehman Agg 2.17 7.67 5.48 4.72 4.58 5.31 6.04

Relative Return vs Lehman Agg

Rel

ativ

e R

etur

ns

(10%)

(5%)

0%

5%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

Met West

CAI Core Bond Plus StyleAnnualized Ten Year Risk vs Return

2.8 3.0 3.2 3.4 3.6 3.8 4.05.0%

5.5%

6.0%

6.5%

7.0%

7.5%

Met West

Lehman Agg

Standard Deviation

Ret

urns


MET WESTRETURN ANALYSIS SUMMARY




(10%)

(5%)

0%

5%

10%

15%

20%

12/07- 3/08 2007 2006 2005 2004 2003 2002 2001 2000

(29)(10)

(15)(24) (3)(92) (48)(82)

(52)(95)

(6)

(100)(99)

(16)(45)(34)

(60)(39)

10th Percentile 2.14 7.84 6.23 3.48 6.96 10.09 11.12 9.83 13.1425th Percentile 1.29 6.92 5.80 3.22 5.62 8.56 9.97 8.92 12.01

Median 0.84 5.91 5.26 2.98 5.25 7.00 8.53 8.21 11.3675th Percentile (0.00) 5.34 4.67 2.50 5.06 5.81 7.89 7.74 10.2990th Percentile (3.63) 3.92 4.37 2.30 4.84 5.36 5.73 7.33 9.07

Met West 1.18 7.41 6.36 3.03 5.23 11.49 0.91 8.25 11.15

Lehman Agg 2.17 6.97 4.33 2.43 4.34 4.10 10.26 8.43 11.63

Rolling 12 Quarter and Quarterly Relative Return vs Lehman Agg

Rel

ativ

e R

etur

ns

(10%)

(5%)

0%

5%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

Met West CAI FI Core Plus Style

Risk Adjusted Return Measures vs Lehman AggRankings Against CAI Core Bond Plus Style


0

1

2

3

4

5

6

Alpha TreynorRatio

(1)

(1)



Met West 1.38 4.84

(0.4)

(0.2)

0.0

0.2

0.4

0.6

0.8

1.0

1.2


(25)

(41)

(49)



Met West 0.51 0.79 0.12


PIMCOPERIOD ENDED MARCH 31, 2008

Investment PhilosophyPIMCO emphasizes adding value by rotating through the major sectors of the domestic and international bond

markets. They also seek to enhance returns through duration management.

Quarterly Summary and HighlightsPIMCO’s portfolio posted a 3.08% return for the quarter placing it in the 5 percentile of the CAI Core BondPlus Style group for the quarter and in the 4 percentile for the last year.

PIMCO’s portfolio outperformed the Lehman Agg by 0.91% for the quarter and outperformed the LehmanAgg for the year by 3.22%.


(6%)

(4%)

(2%)

0%

2%

4%

6%

8%

10%

12%

14%


(5)(10)

(4)

(10)(4)

(23)(1)

(84)

(6)

(54)

(4)

(90)


Median 0.84 4.74 5.10 5.01 6.16 8.1175th Percentile (0.00) 3.77 4.70 4.82 5.85 7.9590th Percentile (3.63) (0.38) 3.41 3.98 5.52 7.60

PIMCO 3.08 10.89 6.98 6.14 7.18 9.24

Lehman Agg 2.17 7.67 5.48 4.58 6.04 7.60

Relative Return vs Lehman Agg

Rel

ativ

e R

etur

ns

(1.5%)

(1.0%)

(0.5%)

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

PIMCO

CAI Core Bond Plus StyleAnnualized Ten Year Risk vs Return

2.8 3.0 3.2 3.4 3.6 3.8 4.05.0%

5.5%

6.0%

6.5%

7.0%

7.5%

Lehman Agg

PIMCO

Standard Deviation

Ret

urns


PIMCORETURN ANALYSIS SUMMARY




(10%)

(5%)

0%

5%

10%

15%

20%

12/07- 3/08 2007 2006 2005 2004 2003 2002 2001 2000 1999

510

424

6792 118212

9568

100

1316 18344839

6294

10th Percentile 2.14 7.84 6.23 3.48 6.96 10.09 11.12 9.83 13.14 1.1525th Percentile 1.29 6.92 5.80 3.22 5.62 8.56 9.97 8.92 12.01 0.32

Median 0.84 5.91 5.26 2.98 5.25 7.00 8.53 8.21 11.36 (0.05)75th Percentile (0.00) 5.34 4.67 2.50 5.06 5.81 7.89 7.74 10.29 (0.52)90th Percentile (3.63) 3.92 4.37 2.30 4.84 5.36 5.73 7.33 9.07 (0.73)

PIMCO 3.08 9.42 4.83 3.38 6.15 6.31 10.72 9.20 11.39 (0.39)

Lehman Agg 2.17 6.97 4.33 2.43 4.34 4.10 10.26 8.43 11.63 (0.82)

Rolling 12 Quarter and Quarterly Relative Return vs Lehman Agg

Rel

ativ

e R

etur

ns

(2%)

(1%)

0%

1%

2%

3%

4%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

PIMCO CAI FI Core Plus Style

Risk Adjusted Return Measures vs Lehman AggRankings Against CAI Core Bond Plus Style


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Alpha TreynorRatio

(11)

(20)



PIMCO 1.03 3.35

(0.4)

(0.2)

0.0

0.2

0.4

0.6

0.8

1.0

1.2


(10) (5) (7)



PIMCO 0.86 0.91 0.93


PYRAMISPERIOD ENDED MARCH 31, 2008

Investment Philosophy The Select Equity Market Neutral strategy is an investment approach combining active management with

quantitative risk control. They believe that intensive analysis of individual companies will identify securities that willeither outperform or underperform in the future. Pyramis was hired during 4th quarter, 2002. Earlier performance is basedon their composite returns.

Quarterly Summary and HighlightsPyramis’s portfolio posted a (8.02)% return for the quarter placing it in the 100 percentile of the CAIDefensive Fixed-Inc Style group for the quarter and in the 1 percentile for the last year.

Pyramis’s portfolio underperformed the ML 1-5 Govt/Corp by 10.87% for the quarter and outperformed theML 1-5 Govt/Corp for the year by 5.60%.

Performance vs CAI Defensive Fixed-Inc Style

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

Year to Last Last 3 Fr 12-02 Last 5 Last 10Date Year Years Inception Years Years

B(70)

A(100)

(5)

A(1)

B(24)(4)

A(1)

B(1)(6) B(1)

A(1)(9)

B(1)A(1)

(13)

B(1)A(1)(5)


Median 1.97 6.70 5.02 3.61 3.62 5.0675th Percentile 1.43 5.07 4.59 3.52 3.49 4.9690th Percentile 1.04 3.61 4.18 3.27 3.23 4.83

Pyramis A (8.02) 14.23 11.94 5.20 5.97 6.60Treasury Bills90 Day + 3% B 1.63 7.62 7.41 6.09 6.18 6.73

ML 1-5 Govt/Corp 2.84 8.62 5.50 3.96 3.93 5.46

Relative Return vs ML 1-5 Govt/Corp

Rel

ativ

e R

etur

ns

(15%)

(10%)

(5%)

0%

5%

10%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

Pyramis

CAI Defensive Fixed-Inc StyleAnnualized Ten Year Risk vs Return

0 1 2 3 4 5 6 7 84.5%

5.0%

5.5%

6.0%

6.5%

7.0%

PyramisTreasury Bills 90 Day + 3%

ML 1-5 Govt/Corp

Standard Deviation

Ret

urns


SAN DIEGO CITY EMPLOYEES’ RETIREMENT SYSTEMPERFORMANCE VS CAI DEFENSIVE FIXED-INC STYLE

RECENT PERIODS

Return RankingThe chart below illustrates fund rankings over various periods versus the CAI Defensive Fixed-Inc Style. The bars

represent the range of returns from the 10th percentile to the 90th percentile for each period for all funds in the CAIDefensive Fixed-Inc Style. The numbers to the right of the bar represent the percentile rankings of the funds beinganalyzed. The table below the chart details the rates of return plotted in the graph above.

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

25%

30%

35%

12/2007- 3/2008 2007 2006 2005 2004

B(70)

A(100)

(5)

A(1)

B(4)(5) B(1)A(1)

(95)

A(1)

B(1)

(98)B(1)

A(100)(44)

10th Percentile 2.64 7.03 5.11 2.61 2.3925th Percentile 2.31 6.89 4.84 2.40 2.06

Median 1.97 6.38 4.61 2.18 1.6775th Percentile 1.43 5.42 4.46 1.97 1.3590th Percentile 1.04 3.75 4.32 1.84 1.10

Pyramis A (8.02) 26.13 7.17 19.58 (1.74)Treasury Bills90 Day + 3% B 1.63 8.00 7.85 6.07 4.33

ML 1-5 Govt/Corp 2.84 7.27 4.26 1.43 1.76

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

25%

2003 2002 2001 2000 1999

B(10)

A(100)

(17)B(92)

A(99)

(5)

A(1)

B(93)(21)

A(1)

B(6)(14) B(1)

A(100)(91)




ML 1-5 Govt/Corp 3.30 7.91 8.98 8.87 2.19


PYRAMISPERIOD ENDED MARCH 31, 2008

Investment Philosophy The Select Equity Market Neutral strategy is an investment approach combining active management with

quantitative risk control. They believe that intensive analysis of individual companies will identify securities that willeither outperform or underperform in the future. Pyramis was hired during 4th quarter, 2002. Earlier performance is basedon their composite returns.

Quarterly Summary and HighlightsPyramis’s portfolio posted a (8.02)% return for the quarter placing it in the 97 percentile of the CAI MarketNeutral Style group for the quarter and in the 9 percentile for the last year.

Pyramis’s portfolio underperformed the ML 1-5 Govt/Corp by 10.87% for the quarter and outperformed theML 1-5 Govt/Corp for the year by 5.60%.

Performance vs CAI Market Neutral Style

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%


B(49)

A(97)

(22)

A(9)

B(11)(11)

A(11)

B(19)(41)

B(22)A(23)

(54)B(22)A(27)(53)

B(15)A(16)(22)


Median 1.60 2.02 4.49 4.18 4.03 4.4775th Percentile 0.30 0.22 2.30 1.48 1.43 4.1890th Percentile (2.23) (5.32) 0.11 0.72 0.75 1.95

Pyramis A (8.02) 14.23 11.94 5.97 5.20 6.60Treasury Bills90 Day + 3% B 1.63 7.62 7.41 6.18 6.09 6.73

ML 1-5 Govt/Corp 2.84 8.62 5.50 3.93 3.96 5.46


Rel

ativ

e R

etur

ns

(15%)

(10%)

(5%)

0%

5%

10%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

Pyramis

CAI Market Neutral StyleAnnualized Ten Year Risk vs Return

0 5 10 151%

2%

3%

4%

5%

6%

7%

8%

9%

PyramisML 1-5 Govt/Corp

Treasury Bills 90 Day + 3%

Standard Deviation

Ret

urns


SAN DIEGO CITY EMPLOYEES’ RETIREMENT SYSTEMPERFORMANCE VS CAI MARKET NEUTRAL STYLE

RECENT PERIODS

Return RankingThe chart below illustrates fund rankings over various periods versus the CAI Market Neutral Style. The bars

represent the range of returns from the 10th percentile to the 90th percentile for each period for all funds in the CAI MarketNeutral Style. The numbers to the right of the bar represent the percentile rankings of the funds being analyzed. The tablebelow the chart details the rates of return plotted in the graph above.

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

25%

30%

35%

12/2007- 3/2008 2007 2006 2005 2004

B(49)

A(97)

(22)

A(5)

B(13)(15) B(34)A(49)

(73)

A(9)

B(33)

(67)B(33)

A(95)(76)


Median 1.60 4.47 7.08 3.80 2.6575th Percentile 0.30 (1.09) 3.89 0.87 1.8190th Percentile (2.23) (6.24) 1.34 (2.20) 0.64


ML 1-5 Govt/Corp 2.84 7.27 4.26 1.43 1.76

(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

25%

30%

2003 2002 2001 2000 1999

B(23)

A(96)

(25) B(60)A(72)

(45)A(27)

B(44)(33)

A(14)

B(37)(37) B(24)

A(55)(30)


Median 1.51 7.01 6.72 5.05 (0.90)75th Percentile (1.50) (0.84) 2.75 (0.04) (7.08)90th Percentile (7.86) (3.92) (3.00) (4.50) (11.27)


ML 1-5 Govt/Corp 3.30 7.91 8.98 8.87 2.19


SALUS CAPITALPERIOD ENDED MARCH 31, 2008

Investment PhilosophySalus attempts to offer superior returns to short-term Treasurys by taking long positions in undervalued stocks

while shorting corresponding positions in overvalued stocks. Salus was hired during 2nd quarter, 1998. Earlierperformance is based on their composite returns.

Quarterly Summary and HighlightsSalus Capital’s portfolio posted a (3.00)% return for the quarter placing it in the 100 percentile of the CAIDefensive Fixed-Inc Style group for the quarter and in the 100 percentile for the last year.

Salus Capital’s portfolio underperformed the ML 1-5 Govt/Corp by 5.84% for the quarter and underperformedthe ML 1-5 Govt/Corp for the year by 10.88%.


(6%)

(4%)

(2%)

0%

2%

4%

6%

8%

10%

12%


B(70)

A(100)

(5)

B(24)

A(100)

(4)

B(1)

A(75)(6)

B(1)

A(89)(13)

B(1)

A(100)

(5)

B(1)

A(100)

(5)



Salus Capital A (3.00) (2.25) 4.58 3.24 3.70 3.75Treasury Bills90 Day + 3% B 1.63 7.62 7.41 6.18 6.69 6.73

ML 1-5 Govt/Corp 2.84 8.62 5.50 3.93 5.42 5.46


Rel

ativ

e R

etur

ns

(8%)

(6%)

(4%)

(2%)

0%

2%

4%

6%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

Salus Capital


0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.53.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

Salus Capital


ML 1-5 Govt/Corp

Standard Deviation

Ret

urns



RECENT PERIODS



(6%)

(4%)

(2%)

0%

2%

4%

6%

8%

10%

12%

14%

12/2007- 3/2008 2007 2006 2005 2004

B(70)

A(100)

(5)

B(4)

A(98)

(5)

A(1)

B(1)

(95)

B(1)A(1)

(98)

B(1)

A(99)(44)



Salus A (3.00) 1.86 11.49 5.31 0.60Treasury Bills90 Day + 3% B 1.63 8.00 7.85 6.07 4.33

ML 1-5 Govt/Corp 2.84 7.27 4.26 1.43 1.76

(2%)

0%

2%

4%

6%

8%

10%

12%

2003 2002 2001 2000 1999

B(10)

A(88)

(17)

A(5)

B(92)

(5) A(76)B(93)

(21) B(6)

A(100)

(14)B(1)

A(100)

(91)



Salus A 1.95 7.68 8.05 2.35 (0.55)Treasury Bills90 Day + 3% B 4.15 4.78 7.42 9.18 7.85

ML 1-5 Govt/Corp 3.30 7.91 8.98 8.87 2.19


SALUS CAPITALPERIOD ENDED MARCH 31, 2008

Investment PhilosophySalus attempts to offer superior returns to short-term Treasurys by taking long positions in undervalued stocks

while shorting corresponding positions in overvalued stocks. Salus was hired during 2nd quarter, 1998. Earlierperformance is based on their composite returns.

Quarterly Summary and HighlightsSalus Capital’s portfolio posted a (3.00)% return for the quarter placing it in the 91 percentile of the CAIMarket Neutral Style group for the quarter and in the 81 percentile for the last year.

Salus Capital’s portfolio underperformed the ML 1-5 Govt/Corp by 5.84% for the quarter and underperformedthe ML 1-5 Govt/Corp for the year by 10.88%.


(10%)

(5%)

0%

5%

10%

15%


B(49)

A(91)

(22)

B(11)

A(81)

(11)B(19)

A(49)(41)

B(22)

A(57)(54)

B(14)

A(80)

(22)B(15)

A(81)

(22)



Salus Capital A (3.00) (2.25) 4.58 3.24 3.70 3.75Treasury Bills90 Day + 3% B 1.63 7.62 7.41 6.18 6.69 6.73

ML 1-5 Govt/Corp 2.84 8.62 5.50 3.93 5.42 5.46


Rel

ativ

e R

etur

ns

(8%)

(6%)

(4%)

(2%)

0%

2%

4%

6%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

Salus Capital


0 5 10 151%

2%

3%

4%

5%

6%

7%

8%

9%

Salus Capital


ML 1-5 Govt/Corp

Standard Deviation

Ret

urns



RECENT PERIODS



(10%)

(5%)

0%

5%

10%

15%

20%

25%

12/2007- 3/2008 2007 2006 2005 2004

B(49)

A(91)

(22)

B(13)

A(59)

(15)

A(15)

B(34)

(73)B(33)A(41)

(67)B(33)

A(91)(76)



Salus A (3.00) 1.86 11.49 5.31 0.60Treasury Bills90 Day + 3% B 1.63 8.00 7.85 6.07 4.33

ML 1-5 Govt/Corp 2.84 7.27 4.26 1.43 1.76

(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

25%

30%

2003 2002 2001 2000 1999

B(23)A(43)(25)

A(46)B(60)

(45) A(41)B(44)

(33) B(37)

A(64)

(37) B(24)

A(48)(30)



Salus A 1.95 7.68 8.05 2.35 (0.55)Treasury Bills90 Day + 3% B 4.15 4.78 7.42 9.18 7.85

ML 1-5 Govt/Corp 3.30 7.91 8.98 8.87 2.19


SSIPERIOD ENDED MARCH 31, 2008

Investment PhilosophySSI’s Investment Philosophy is built upon three key beliefs: 1) quantitative models provide the most effective

framework for identifying superior value in securities markets; 2) fundamental research is essential in the selection ofsecurities; and 3) experienced professionals add significant value to portfolio management. SSI was hired during 4thquarter, 2001. Earlier performance is based on their composite returns.

Quarterly Summary and HighlightsSSI’s portfolio posted a (1.58)% return for the quarter placing it in the 100 percentile of the CAI DefensiveFixed-Inc Style group for the quarter and in the 99 percentile for the last year.

SSI’s portfolio underperformed the ML 1-5 Govt/Corp by 4.42% for the quarter and underperformed the ML1-5 Govt/Corp for the year by 7.33%.


(4%)

(2%)

0%

2%

4%

6%

8%

10%


B(70)

A(100)

(5)

B(24)

A(99)

(4)

B(1)

A(99)

(6)B(1)

A(100)

(13)

B(1)

A(100)

(5)

B(1)

A(8)(5)



SSI A (1.58) 1.30 3.12 1.69 2.52 5.34Treasury Bills90 Day + 3% B 1.63 7.62 7.41 6.18 5.88 6.73

ML 1-5 Govt/Corp 2.84 8.62 5.50 3.93 4.59 5.46


Rel

ativ

e R

etur

ns

(15%)

(10%)

(5%)

0%

5%

10%

15%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

SSI


0 1 2 3 4 5 6 74.5%

5.0%

5.5%

6.0%

6.5%

7.0%

SSI


ML 1-5 Govt/Corp

Standard Deviation

Ret

urns



RECENT PERIODS



(4%)

(2%)

0%

2%

4%

6%

8%

10%

12/2007- 3/2008 2007 2006 2005 2004

B(70)

A(100)

(5)

B(4)

A(84)

(5)B(1)

A(100)

(95)

A(1)B(1)

(98)

B(1)

A(100)

(44)



SSI A (1.58) 4.54 0.17 6.19 (1.50)Treasury Bills90 Day + 3% B 1.63 8.00 7.85 6.07 4.33

ML 1-5 Govt/Corp 2.84 7.27 4.26 1.43 1.76

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2003 2002 2001 2000 1999

B(10)

A(100)

(17)

A(8)

B(92)

(5) B(93)

A(100)

(21)

A(1)

B(6)(14) A(1)B(1)

(91)



SSI A 1.23 7.04 5.21 14.59 8.04Treasury Bills90 Day + 3% B 4.15 4.78 7.42 9.18 7.85

ML 1-5 Govt/Corp 3.30 7.91 8.98 8.87 2.19


SSIPERIOD ENDED MARCH 31, 2008

Investment PhilosophySSI’s Investment Philosophy is built upon three key beliefs: 1) quantitative models provide the most effective

framework for identifying superior value in securities markets; 2) fundamental research is essential in the selection ofsecurities; and 3) experienced professionals add significant value to portfolio management. SSI was hired during 4thquarter, 2001. Earlier performance is based on their composite returns.

Quarterly Summary and HighlightsSSI’s portfolio posted a (1.58)% return for the quarter placing it in the 89 percentile of the CAI Market NeutralStyle group for the quarter and in the 61 percentile for the last year.

SSI’s portfolio underperformed the ML 1-5 Govt/Corp by 4.42% for the quarter and underperformed the ML1-5 Govt/Corp for the year by 7.33%.


(10%)

(5%)

0%

5%

10%

15%


B(49)

A(89)

(22)

B(11)

A(61)

(11)B(19)

A(67)

(41) B(22)

A(74)

(54)

B(31)

A(82)

(60)

B(15)A(24)(22)



SSI A (1.58) 1.30 3.12 1.69 2.52 5.34Treasury Bills90 Day + 3% B 1.63 7.62 7.41 6.18 5.88 6.73

ML 1-5 Govt/Corp 2.84 8.62 5.50 3.93 4.59 5.46


Rel

ativ

e R

etur

ns

(15%)

(10%)

(5%)

0%

5%

10%

15%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

SSI


0 5 10 151%

2%

3%

4%

5%

6%

7%

8%

9%

ML 1-5 Govt/Corp


SSI

Standard Deviation

Ret

urns



RECENT PERIODS



(10%)

(5%)

0%

5%

10%

15%

20%

25%

12/2007- 3/2008 2007 2006 2005 2004

B(49)

A(89)

(22)

B(13)

A(49)(15) B(34)

A(94)

(73)A(32)B(33)

(67)B(33)

A(95)

(76)



SSI A (1.58) 4.54 0.17 6.19 (1.50)Treasury Bills90 Day + 3% B 1.63 8.00 7.85 6.07 4.33

ML 1-5 Govt/Corp 2.84 7.27 4.26 1.43 1.76

(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

25%

30%

2003 2002 2001 2000 1999

B(23)A(52)

(25)A(48)B(60)

(45) B(44)A(67)

(33)

A(24)

B(37)(37) A(21)B(24)

(30)



SSI A 1.23 7.04 5.21 14.59 8.04Treasury Bills90 Day + 3% B 4.15 4.78 7.42 9.18 7.85

ML 1-5 Govt/Corp 3.30 7.91 8.98 8.87 2.19


NICHOLAS-APPLEGATEPERIOD ENDED MARCH 31, 2008

Investment PhilosophyIn its Growth and Income Convertible product, Nicholas-Applegate identifies growth companies with significant

return potential. As the portfolio’s performance is driven primarily by the returns of the underlying securities, the securityselection focus is on companies with earnings acceleration, sustainable growth and positive price momemtum. TheConvertible Benchmark is comprised of the First Boston Convertible Index through 12/31/04, and the Merrill Lynch AllU.S. Convertibles Index thereafter.

Quarterly Summary and HighlightsNicholas-Applegate’s portfolio posted a (5.50)% return for the quarter placing it in the 37 percentile of the CAIConvertible Bonds Database group for the quarter and in the 24 percentile for the last year.

Nicholas-Applegate’s portfolio outperformed the Convertible Benchmark by 0.11% for the quarter andoutperformed the Convertible Benchmark for the year by 8.04%.

Performance vs CAI Convertible Bonds Database

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%


(37)(38)

(24)

(82)

(1)

(92)

(8)

(84) (23)

(100)

(20)

(99)



Nicholas-Applegate (5.50) 4.29 11.07 14.01 8.87 11.33

Convertible Benchmark (5.61) (3.74) 5.64 8.18 5.49 7.53

Relative Return vs Convertible Benchmark

Rel

ativ

e R

etur

ns

(8%)

(6%)

(4%)

(2%)

0%

2%

4%

6%

8%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

Nicholas-Applegate

CAI Convertible Bonds DatabaseAnnualized Ten Year Risk vs Return

8 10 12 14 16 185%

6%

7%

8%

9%

10%

11%

12%

13%

Nicholas-Applegate

Convertible Benchmark

Standard Deviation

Ret

urns


NICHOLAS-APPLEGATERETURN ANALYSIS SUMMARY



Performance vs CAI Convertible Bonds Database

(40%)(20%)

0%20%40%60%80%

100%120%

12/07- 3/08 2007 2006 2005 2004 2003 2002 2001 2000 1999

373815

811719 888

12602121

8565 9063 7386

2529

10th Percentile (2.40) 17.85 14.13 7.60 12.35 33.57 5.50 14.91 15.36 90.8025th Percentile (4.26) 11.01 12.19 5.26 9.18 27.38 (2.67) 5.83 9.19 51.09

Median (6.17) 8.81 11.01 3.97 7.44 20.21 (6.47) (2.54) 1.10 24.4575th Percentile (7.55) 6.26 9.91 1.54 5.28 14.66 (9.67) (8.73) (2.80) 13.3890th Percentile (8.17) 2.69 7.83 (0.01) 3.73 9.40 (17.17) (15.03) (15.87) 5.66

Nicholas-Applegate (5.50) 15.74 13.58 8.44 11.71 28.09 (13.03) (14.86) (1.71) 49.84

Convertible Benchmark (5.61) 4.47 12.83 1.01 6.92 27.99 (8.13) (6.46) (7.83) 42.27

Rolling 12 Quarter and Quarterly Relative Return vs Convertible Benchmark

Rel

ativ

e R

etur

ns

(10%)

(5%)

0%

5%

10%

15%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

Nicholas-Applegate CAI Convertible Bond DB

Risk Adjusted Return Measures vs Convertible BenchmarkRankings Against CAI Convertible Bonds Database


0

2

4

6

8

10

12

14

Alpha TreynorRatio

(24)

(49)



Nicholas-Applegate 3.34 4.91

0.0

0.2

0.4

0.6

0.8

1.0

1.2


(20)

(44)

(14)


Median 0.48 0.29 0.3675th Percentile 0.42 0.26 0.2890th Percentile 0.30 0.22 0.19

Nicholas-Applegate 0.63 0.30 0.63


International

‘

Fixed-Income

‘

INTERNATIONAL FIXED-INCOMEActive Management Overview

Active vs. the IndexTurmoil in the global financial markets continued unabated during the first quarter of 2008 and uncertainty remainshigh. Several European and Australian banks continued to run counter to the U.S. policy of easing interest rates.Volatility in the currency markets increased substantially over the quarter, with currencies considered to be safe havensreaping the benefits. The median Global Fixed-Income fund returned 9.04%, 0.62% less than the Citi WorldGovernment Index return of 9.66%. The median Non-U.S. Fixed-Income fund returned 10.64%, 29 basis points behindits benchmark return of 10.93%. For the year, median manager returns again fell behind their benchmarks, with GlobalFixed-Income funds returning 18.66%, 163 basis points behind its benchmark return of 20.29%. Non-U.S.Fixed-Income’s return of 20.61% was 170 basis points behind its index.

Emerging MarketsEmerging markets continued to weather global market volatility, but were not unaffected during the quarter. Themedian Emerging Debt fund gained a slight 1.02%, compared to a 2.26% gain in the fourth quarter of 2007, and laggedthe JP Morgan Emerging Market index return of 4.70%. The one-year median Emerging Debt manager return of 5.42%fell 13.33% behind its benchmark. Local market bonds continued to post strong dollar returns on currency appreciation,while rising yields detracted from performance. In contrast to other global markets, local emerging markets continuedto maintain relatively high trading volume and liquidity.


0%

2%

4%

6%

8%

10%

12%

14%

10.64%

Non-USFixed-Income

9.04%

GlobalFixed-Income

1.02%

Emerging Debt

1.40%

DomesticCore Bond

Ret

urns

Citi World Govt: 9.66%Citi Non-US Govt: 10.93%Citi Non-US Hedged: 2.15%JP Morgan Emerging Mkt: 4.70%


0%

5%

10%

15%

20%

25%

20.61%

Non-USFixed-Income

18.66%

GlobalFixed-Income

5.42%

Emerging Debt

6.44%

DomesticCore Bond

Ret

urns

Citi World Govt: 20.29%Citi Non-US Govt: 22.31%Citi Non-US Hedged: 6.15%JP Morgan Emerging Mkt: 18.75%


ROGGE INTERNATIONALPERIOD ENDED MARCH 31, 2008

Investment PhilosophyRogge believes that early identification of opportunities can be achieved through relative value analysis across

countries. Their process is based on long term financial and economic trends and their implications for bond and currencymarkets.

Quarterly Summary and HighlightsRogge International’s portfolio posted a 10.17% return for the quarter placing it in the 76 percentile of the CAINon-U.S. Fixed-Inc Style group for the quarter and in the 65 percentile for the last year.

Rogge International’s portfolio underperformed the Citi Non-US Gvt Bd Idx by 0.76% for the quarter andunderperformed the Citi Non-US Gvt Bd Idx for the year by 2.00%.

Performance vs CAI Non-U.S. Fixed-Inc Style

0%

5%

10%

15%

20%

25%

30%


(76)(20)

(65)

(18)

(43)(28)

(33)(52)(38)(33) (48)(87)



Rogge International 10.17 20.31 7.07 9.28 7.35 6.90

Citi Non-US Gvt Bd Idx 10.93 22.31 7.40 9.00 7.37 6.36

Relative Return vs Citi Non-US Gvt Bd Idx

Rel

ativ

e R

etur

ns

(4%)

(3%)

(2%)

(1%)

0%

1%

2%

3%

98 1999 2000 2001 2002 2003 2004 2005 2006 200708

Rogge International

CAI Non-U.S. Fixed-Inc StyleAnnualized Ten Year Risk vs Return

8.8 9.0 9.2 9.4 9.6 9.8 10.0 10.2 10.46.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

Citi Non-US Gvt Bd Idx

Rogge International

Standard Deviation

Ret

urns


ROGGE INTERNATIONALRETURN ANALYSIS SUMMARY



Performance vs CAI Non-U.S. Fixed-Inc Style

(20%)

(10%)

0%

10%

20%

30%

40%

12/07- 3/08 2007 2006 2005 2004 2003 2002 2001 2000 1999

7620 56327542

3462

1368

23883065

9268 57817214

10th Percentile 11.55 11.96 9.60 (7.72) 14.86 23.21 25.99 (0.84) 0.15 (4.28)25th Percentile 10.90 11.56 7.18 (8.22) 13.08 20.65 23.63 (1.85) (1.27) (5.88)

Median 10.64 11.00 6.71 (8.83) 12.47 20.03 22.22 (2.94) (2.06) (7.05)75th Percentile 10.29 9.79 6.04 (9.36) 11.78 19.30 21.24 (3.66) (2.25) (8.33)90th Percentile 8.80 6.31 4.40 (10.09) 10.54 18.46 19.41 (4.82) (3.25) (11.02)

Rogge International 10.17 10.03 6.04 (8.53) 13.94 20.71 23.05 (5.41) (2.11) (8.23)

Citi Non-US Gvt Bd Idx 10.93 11.46 6.95 (9.21) 12.14 18.52 21.99 (3.54) (2.63) (5.07)

Rolling 12 Quarter and Quarterly Relative Return vs Citi Non-US Gvt Bd Idx

Rel

ativ

e R

etur

ns

(4%)

(3%)

(2%)

(1%)

0%

1%

2%

3%

4%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08

Rogge International CAI Non-U.S. F-I Style

Risk Adjusted Return Measures vs Citi Non-US Gvt Bd IdxRankings Against CAI Non-U.S. Fixed-Inc Style


(2)

(1)

0

1

2

3

4

5

6

Alpha TreynorRatio

(48)

(50)



Rogge International (0.03) 3.58

(0.6)

(0.4)

(0.2)

0.0

0.2

0.4

0.6

0.8


(44)

(52)

(38)



Rogge International (0.02) 0.36 (0.01)


Real E

state

‘

TOTAL REAL ESTATEPERIOD ENDED DECEMBER 31, 2007

Investment PhilosophyThe Total Real Estate Benchmark is currently comprised of 75% NCREIF Property Index and 25% Wilshire REIT

Index.

Quarterly Summary and HighlightsTotal Real Estate’s portfolio posted a (2.43)% return for the quarter placing it in the 89 percentile of the TotalReal Estate DB group for the quarter and in the 83 percentile for the last year.

Total Real Estate’s portfolio underperformed the Real Estate Benchmark by 1.45% for the quarter andunderperformed the Real Estate Benchmark for the year by 5.42%.

Performance vs Total Real Estate DB

(10%)

0%

10%

20%

30%

40%

50%

Last Last Last 3 Last 5 Last 10 From 3-89Quarter Year Years Years Years Inception

(89)(88)

(83)

(77)

(65)(68)

(21)(39)

(29)(59) (34)

(48)



Total Real Estate (2.43) 1.50 15.81 19.18 13.49 10.72

Real Estate Benchmark (0.98) 6.91 15.49 15.79 11.56 8.67

Relative Return vs Real Estate Benchmark

Rel

ativ

e R

etur

ns

(4%)

(2%)

0%

2%

4%

6%

8%

10%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Total Real Estate

Total Real Estate DBAnnualized Ten Year Risk vs Return

0 5 10 15 20 25 30 35(5%)

0%

5%

10%

15%

20%

25%

30%

35%

Total Real Estate

Real Estate Benchmark

Standard Deviation

Ret

urns


PRIVATE REAL ESTATEPERIOD ENDED DECEMBER 31, 2007

Investment PhilosophyThe Private Real Estate Composite consists of BlackRock Realty, Cornerstone Hotel, INVESCO, INVESCO

Enhanced, RREEF Funds, and U.S. Realty.

Quarterly Summary and HighlightsPrivate Real Estate’s portfolio posted a 1.95% return for the quarter placing it in the 54 percentile of the TotalReal Estate DB group for the quarter and in the 64 percentile for the last year.

Private Real Estate’s portfolio underperformed the NCREIF Total Index by 1.26% for the quarter andunderperformed the NCREIF Total Index for the year by 5.71%.

Performance vs Total Real Estate DB

(10%)

0%

10%

20%

30%

40%

50%

Last Last Last 3 Last 5 Last 10 Fr 12-90Quarter Year Years Years Years Inception

(54)(33)

(64)

(34)(40)(52) (25)

(47) (27)(36)(36)(52)



Private Real Estate 1.95 10.14 18.65 17.46 13.78 10.34

NCREIF Total Index 3.21 15.85 17.49 15.14 12.91 9.16

Relative Return vs NCREIF Total Index

Rel

ativ

e R

etur

ns

(6%)

(4%)

(2%)

0%

2%

4%

6%

8%

10%

12%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Private Real Estate

Total Real Estate DBAnnualized Ten Year Risk vs Return

0 5 10 15 20 25 30 35(5%)

0%

5%

10%

15%

20%

25%

30%

35%

Private Real Estate

NCREIF Total Index

Standard Deviation

Ret

urns


RREEF REITPERIOD ENDED DECEMBER 31, 2007

Investment PhilosophyRREEF Securities’ philosophy is to maximize returns to clients by investing in a select number of real estate

securities with strong cash flow growth potential and, therefore, the capacity for sustained dividend increases. They seek touncover hidden value or earnings surprises by understanding the companies’ existing portfolios and potential to acquire ordevelop assets under attractive terms.

Quarterly Summary and HighlightsRREEF REIT’s portfolio posted a (12.74)% return for the quarter placing it in the 65 percentile of the CAIReal Estate-REIT DB group for the quarter and in the 55 percentile for the last year.

RREEF REIT’s portfolio outperformed the Dow Jones Wilshire REIT by 0.80% for the quarter andoutperformed the Dow Jones Wilshire REIT for the year by 1.87%.

Performance vs CAI Real Estate-REIT DB

(30%)

(20%)

(10%)

0%

10%

20%

30%

Last Last Last 3 Last 5 Last 10 From 9-96Quarter Year Years Years Years Inception

(65)(83)(55)

(85)

(42)(72)

(29)(74)

(26)(80)

(25)(82)



RREEF REIT (12.74) (15.67) 10.19 20.69 13.19 15.75

Dow JonesWilshire REIT (13.54) (17.55) 8.47 18.27 11.04 13.35

Relative Return vs Dow Jones Wilshire REIT

Rel

ativ

e R

etur

ns

(4%)

(3%)

(2%)

(1%)

0%

1%

2%

3%

4%

5%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

RREEF REIT

CAI Real Estate-REIT DBAnnualized Ten Year Risk vs Return

0 5 10 15 20 258%

9%

10%

11%

12%

13%

14%

15%

16%

17%

RREEF REIT

Dow Jones Wilshire REIT

Standard Deviation

Ret

urns


Appendix

‘

Callan Associates Inc. Public Fund Database

March 2008 * Callan's Public Fund Database is represented by both Callan and non-Callan clients. Certain information in the database is received from other database sources.

Air Force Village West Alabama PACT Trust Fund Alameda Contra Costa Transit District Alaska Permanent Fund Alaska State - Judicial Pension Alaska State - Military Pension Alaska State - Public Employees Ret. Alaska State - Teachers Ret. Plan Anchorage Police & Fire Department Arizona State Retirement System Arkansas – Judicial Arkansas PERS Arkansas State Police Retirement System Aurora General Employees’ Ret. Plan Baltimore Elected Officials’ System Baltimore Employee Retirement System California Public Employees’ Ret System Charlotte Firefighters Ret. System City of Clearwater Employees’ Pension Fund City of Fort Pierce City of Tulsa City of Valdez City of Wyoming City Sanitation District of Orange County Clayton County Public Employees Colorado Fire & Police Dekalb County Denver Employees’ Retirement East Pacific Investment Company Employees’ Retirement System of Jersey City Georgia Firefighter’s Pension Fund Georgia Municipal EBS Gwinnett Retirement System (Georgia) Gwinnett County Pension Plan Harris County Hospital Idaho Judges Retirement System

Illinois State Universities Ret. System Kansas City Employees Retirement Kansas City Firefighters’ Pension Las Vegas Valley Water District Lowry Trust Marin County Employees’ Ret. Association Municipality of Anchorage Nevada Judicial Nevada Legislators Nevada Public Employees' Ret. System New York State Common Retirement Fund North Dakota State Investment Board NYC Employees Retirement System Orange County Public Employees’ Ret System of Idaho Puerto Rico Teachers Sacramento Regional Transit – Salaried San Diego City Employees’ Retirement System South Carolina Retirement System South Dakota Investment Council St. Paul Teachers' Ret. Fund Association State of Wisconsin Investment Board Texas Employees’ Retirement System Town of Palm Beach ERS U.S. Army NAF Employee Ret Fund University of Puerto Rico Retirement System Utah State Retirement System Wichita Employees’ Retirement Board 32 Other Public Funds*

EQUITY MARKET INDICATORS

The market indicators included in this report are regarded as measures of equity or fixed-incomeperformance results. The returns shown reflect both income and capital appreciation.

Dow Jones Industrial Average is a composite of 30 major industrial companies. The index is aprice-weighted average of the issues in the index.

FRMS Universe Index is composed of all common stock issues used in the Fundamental RiskMeasurement Service (FRMS) by BARRA. The index contains about 5,700 companies and iscapitalization-weighted.

MSCI US Small + Mid Cap 2200 Index The MSCI US Small + Mid Cap 2200 Index representsthe universe of small and medium capitalization companies in the US equity market. This indextargets for inclusion 2200 companies and represents, as of October 29, 2004, approximately 27%of the capitalization of the US equity market. The MSCI Small + Mid Cap 2200 Index is theaggregation of the MSCI US Small Cap 1750 and Mid Cap 450 Indices.

New York Stock Exchange Index is composed of all common stock issues listed on the NewYork Stock Exchange. The index is capitalization-weighted.

Russell 1000 Growth measures the performance of those Russell 1000 companies with higherprice-to-book ratios and higher forecasted growth values.

Russell 1000 Value measures the performance of those Russell 1000 companies with lowerprice-to-book ratios and lower forecasted growth values.

Russell 2000 Growth contains those Russell 2000 securities with a greater than average growthorientation. Securities in this index tend to exhibit higher price-to-book and price-earning ratios,lower dividend yields and higher forecasted growth values than the Value universe.

Russell 2000 Value contains those Russell 2000 securities with a less than average growthorientation. Securities in this index tend to exhibit lower price-to-book and price-earning ratios,higher dividend yields and lower forecasted growth values than the Growth universe.

Russell Mid Cap Growth measures the performance of those Russell Mid Cap Companies withhigher price-to-book ratios and higher forecasted growth values. The stocks are also members ofthe Russell 1000 Growth Index.

Standard & Poor’s 500 Index is designed to measure performance of the broad domesticeconomy through changes in the aggregate market value of 500 stocks representing all majorindustries. The index is capitalization-weighted, with each stock weighted by its proportion of thetotal market value of all 500 issues. Thus, larger companies have a greater effect on the index.

Standard & Poor’s MidCap Index is a composite of 400 medium-capitalization, domesticcommon stocks. Stocks in this index are not included in the Standard & Poor’s 500 Index. Theindex is capitalization-weighted.

115

FIXED-INCOME MARKET INDICATORS

90-Day U.S. Treasury Bills provide a measure of riskless return. The rate of return is the averageinterest rate available on the beginning of each month for a Treasury Bill maturing in ninety days.

Citigroup Government Bond Index is a composite that covers investments in all types of U.S.Government Debt outstanding. The index offers total returns on a broad base of governmentfixed-income securities with maturities of at least one year.

Citigroup Long Term High-Grade Bond Index is a composite of approximately 800 industrial,financial, and utility bonds. The issues are rated AA or AAA and have a maturity of at least 12years. The index is weighted by the outstanding principal amount of each issue.

Lehman Brothers 1-3 Year Government Index is composed of agency and Treasury securitieswith maturities of one to three years.

Lehman Brothers Aggregate Bond Index is a combination of the Mortgage Backed SecuritiesIndex and the intermediate and long-term components of the Government/Credit Bond Index.

Lehman Brothers Govt/Credit Bond Index is a composite of all publicly issued, fixed rate,non-convertible, domestic bonds. The issues are rated at least BBB, have a minimum outstandingprincipal of $100 million for U.S. Government issues or $50 million for other bonds, and have amaturity of at least one year. The index is capitalization-weighted.

Lehman Brothers Govt/Credit Intermediate Index is one of the components of theGovernment/Credit Index which includes only bonds with maturities between one to ten years.

Salomon Brothers Broad Investment-Grade Bond Index is a composite of all institutionallytraded U.S. Treasury, agency, mortgage, and corporate securities. The issues are rated BBB- orbetter, have remaining maturities of one year or longer and at least $25 million outstanding. Theindex is capitalization-weighted.

116

GENERAL PRICE LEVEL MARKET INDICATORS

Consumer Price Index is a measure of the average change in prices for a fixed market basket ofgoods and services. This market basket is based on the spending patterns of urban wage earnersand clerical workers, who represent 40 percent of the total civilian population.

117

INTERNATIONAL EQUITY MARKET INDICATORS

FT-Actuaries World Index is composed of at least 70% of the aggregate market value of everycountry’s domestic exchange-listed companies’ shares of stock, approximately 2400 commonstocks. The index includes only markets, companies and securities where direct holdings ofcapital by foreign nationals is permissible. The index is capitalization-weighted; includescurrency changes and is expressed in terms of U.S. dollars.

Morgan Stanley Capital International (MSCI) EAFE Index is composed of approximately1000 equity securities representing the stock exchanges of Europe, Australia, New Zealand andthe Far East. The index is capitalization-weighted and is expressed in terms of U.S. dollars.

Morgan Stanley Capital International (MSCI) Europe Index is composed of approximately600 equity securities representing the stock exchanges of 14 European countries. The index iscapitalization-weighted and is expressed in terms of U.S. dollars.

Morgan Stanley Capital International (MSCI) Japan Index is composed of approximately 270equity securities representing the stock exchanges of Japan. The index is capitalization-weightedand is expressed in terms of U.S. dollars.

Morgan Stanley Capital International (MSCI) Pacific Index is composed of approximately350 equity securities representing the stock exchanges of Japan, Hong Kong, Singapore, Malaysia,plus approximately 70 Australian and New Zealand securities. The index iscapitalization-weighted and is expressed in terms of U.S. dollars.

Morgan Stanley Capital International (MSCI) United Kingdom Index is composed ofapproximately 140 equity securities representing the stock exchanges of the United Kingdom.The index is capitalization-weighted and is expressed in terms of U.S. dollars.

Morgan Stanley Capital International (MSCI) World Index is composed of approximately1500 equity securities representing the stock exchanges of the USA, Europe, Canada, Australia,New Zealand and the Far East. The index is capitalization-weighted; includes currency changesand is expressed in terms of U.S. dollars.

Morgan Stanley Capital Intl (MSCI) Emerging Markets Free Index is composed of about 549equity securities representing the stock exchanges of 13 countries in Central Asia and the Far East,Latin America, Europe, and the Middle East. Only 20% of Korea’s market capitalization isincluded in this index. The index is market capitalization-weighted and is expressed in terms ofU.S. dollars.

118

INTERNATIONAL FIXED-INCOME MARKET INDICATORS

CitiGroup Non-U.S. Dollar World Government Bond Index is composed of the CitiGroupWorld Government Bond Index excluding U.S. bonds. The index includes all fixed-rategovernment bonds in 10 countries having remaining maturities of one year or longer with amountsoutstanding of at least the equivalent of US$ 100 million. The index is capitalization-weightedand is expressed in terms of U.S. dollars.

CitiGroup UnHedged Goverment Bond Index is composed of fixed rate government bonds in11 countries (including the U.S.) having remaining maturities of one year or more with amountsoutstanding of at least the equivalent of US $100 million. The index is capitalization-weightedand is expressed in U.S. dollars.

Citigroup Global Markets Non-U.S. Dollar Hedged Government Bond Index is composed ofthe Unhedged Index with the addition of rolling one-month forward exchange contracts as hedginginstruments.

Citigroup Global Markets World Broad Investment Grade Index is composed of Governmentbonds, Eurobonds and foreign bonds rated at least AA with remaining maturities of 5 or moreyears. The index is weighted by the outstanding principal amount of each issue and is expressedin terms of U.S. dollars.

119

CALLAN ASSOCIATES DATABASES

In order to provide comparative investment results for use in evaluating a fund’s performance,Callan Associates gathers rate of return data from investment managers. These data are thengrouped by type of assets managed and by the type of investment manager. Except for mutualfunds, the results are for tax-exempt fund assets. The databases, excluding mutual funds, representinvestment managers who handle over 80% of all tax-exempt fund assets.

EQUITY FUNDS

Equity funds concentrate their investments in common stocks and convertible securities. Thefunds included maintain well-diversified portfolios.

Core Managers whose portfolio holdings and characteristics are similar to that of the broaderdeveloped market as represented by the MSCI EAFE Index, with the objective of adding valueover and above the index, typically from country, sector, or issue selection. The Core portfolio isbroadly diversified and exhibits similar risk characteristics to the developed market as measuredby low residual risk with Beta and R-Squared values close to 1.00 and combined growth and valuez-score values close to 0. Exposure to emerging markets and smaller capitalization stocks islimited.

Core Growth International Equity Style Generally benchmarked to the MSCI EAFE Index(and/or the MSCI EAFE Growth Index), Core Growth International managers focus on developedcountries and invest mainly in large capitalization companies that are expected to have aboveaverage prospects for long-term growth in earnings. Future growth prospects take precedence overvaluation levels in the stock selection process. Invests in companies with P/E, P/B ratios, ROE,and Growth-in-Earnings values generally above the broad developed market averages. Thecompanies typically have zero dividends or dividend yields below the broader market. Invests insecurities which exhibit greater volatility than the developed market as measured by the securities’Beta and Standard Deviation. Portfolios are broadly diversified and have high growth z-score andlow value z-score and exposure to emerging markets and smaller capitalization stocks is limited.

Core Plus Growth International Equity Style Generally benchmarked to the MSCI ACWIex-US Index (and/or the MSCI ACWI ex-US Growth Index), Core Plus Growth Internationalmanagers focus on adding value through increased tactical or strategic exposure to stocks in theemerging markets and smaller market capitalizations. Such managers invest primarily incompanies that are expected to have above average prospects for long-term growth in earnings.Future growth prospects take precedence over valuation levels in the stock selection process andthe manager may undertake concentrated bets. Invests in companies with P/E, P/B ratios, ROEvalues, and Growth-in-Earnings values above the broad market. The companies typically havezero dividends or dividend yields below the broader market. Invests in securities which exhibitgreater volatility than the broad market as measured by the securities’ Beta and StandardDeviation. Portfolios have high growth z-score and low value z-score and higher potentialexposure to emerging markets and small

120


Core Plus International Equity Style Managers whose portfolio holdings and characteristics aresimilar to that of the broader international market as represented by the MSCI ACWI ex-USIndex, with the objective of adding value over and above the index, typically from increasedtactical or strategic exposure to stocks in emerging markets and smaller capitalization. The CorePlus portfolio exhibits similar risk characteristics to the broad market as measured by low residualrisk with Beta and R-Squared values close to 1.00, and combined growth and value z-score valuesclose to 0. Portfolios may undertake concentrated bets.

Core Plus Value International Equity Style Generally benchmarked to the MSCI ACWI ex-USIndex (and/or the MSCI ACWI ex-US Value Index), Core Plus Value International managersfocus on adding value through increased tactical or strategic exposure to stocks in the emergingmarkets and smaller market capitalizations. Such managers invest primarily in companies believedto be currently undervalued in the general market and may undertake concentrated bets. Valuationissues take precedence over near term earnings prospect in the stock selection process. Invests incompanies with P/E, P/B ratios, and ROE values below the broader market. Portfolios have lowgrowth z-score and high value z-score, and higher potential exposure to emerging markets andsmall capitalization stocks.

Core Value International Equity Style Generally benchmarked to the MSCI EAFE Index(and/or the MSCI EAFE Value Index), Core Value International managers focus on developedcountries with liquid markets. Such managers invest primarily in large capitalization companiesbelieved to be currently undervalued in the general market. Valuation issues take precedence overnear term earnings prospect in the stock selection process. Invests in companies with P/E, P/Bratios, and ROE values below the broader market. Portfolios are broadly diversified, have lowgrowth z-score and high value z-score, and exposure to emerging markets and smallercapitalization stocks is limited.

Domestic Equity Database - The Domestic Equity Database is a broad collection of activelymanaged separate account domestic equity products.

International Emerging Markets Equity - The International Emerging Market Equity Databaseconsists of all separate account international equity products that concentrate on newly emergingsecond and third world countries in the regions of the Far East, Africa, Europe, and Central andSouth America.

International Equity - Global - The Global International Equity Database consists of all activelymanaged separate account international equity that generally include U.S. equities in theirinvestment mix.

International Equity - Non-U.S. - The Non-U.S. International Equity Database consists ofseparate account international equity products that do not generally invest in U.S. equities.

Large Cap Broad - Managers who concentrate their holdings in large capitalization domesticequity regardless of style (growth, value or core). The purpose of this group is to allow acomparison with the universe of large cap equity funds without focusing on a particularinvestment style. The Large Cap Broad Style consists of the Large Cap Growth, Large Cap Valueand Large Cap Core managers, as well as large capitalization managers of undetermined style.

121


Non-U.S. Equity A broad array of active managers who employ various strategies to invest assetsin a well-diversified portfolio of non-U.S. equity securities. This group consists of all Core, CorePlus, Growth, and Value international products, as well as products using various mixtures ofthese strategies. Region-specific, index, emerging market, or small cap products are excluded.

Small Capitalization Generally benchmarked to an international small cap index (like MSCIEAFE Small or MSCI ACWI ex-US Small or S&P/Citigroup EMI), International Small Capmanagers focus on selecting smaller capitalization stocks. They may pursue any combination ofGrowth, Value, or Core, or "Plus" strategies. Portfolios are diversified across countries, and mayhave significant exposure to emerging markets.

FIXED-INCOME FUNDS

Fixed-Income funds concentrate their investments in bonds, preferred stocks, and money marketsecurities. The funds included maintain well-diversified portfolios.

Cash Management Funds - The Cash Management Funds Database consists of actively managedshort-term funds, money market mutual funds, and short term bank funds. These funds invest inlow-risk, highly liquid, short-term financial instruments.

Convertible Bond - Managers who invest in convertible bonds. Convertible bonds offer thedownside floor price of a "straight" bond while potentially allowing the holder to share in priceappreciation of the underlying common stock. This conversion feature makes it possible for thebondholder to convert the bond to shares of the issuer’s common stock.

Domestic Fixed-Income Database - The Domestic Fixed-Income Database is a broad collectionof separate account domestic fixed-income products.

International Emerging Markets Fixed Income - The International Emerging MarketFixed-Income Database consists of all separate account international fixed-income products thatconcentrate on newly emerging second and third world countries in the regions of the Far East,Africa, Europe, and Central and South America.

International Global Fixed-Income - The International Global Fixed-Income Database consistsof all actively managed separate account international fixed-income funds that generally includeU.S. fixed-income securities in their investment mix.

International Non-U.S. Dollar Fixed-Income - The International Non-U.S. Dollar Fixed-IncomeDatabase consists of all separate account international fixed-income funds that do not generallyinvest in U.S. fixed-income securities.

122


BALANCED FUNDS

Balanced funds diversify their investments among common stocks, bonds, preferred stocks andmoney market securities. The funds included maintain well-diversified equity and fixed-incomeportfolios.

Domestic Balanced Database - The Domestic Balanced Database consists of all separate accountdomestic balanced funds.

Global Balanced Database - The Global Balanced Database consists of all separate accountbalanced funds that invest in international and domestic equity and fixed-income securities.

International Balanced Database - The International Balanced Database consists of all activelymanaged separate account balanced funds that invest in international equity and internationalfixed-income securities. International Balanced managers do not generally invest in U.S.securities.

Mutual Fund Balanced Funds - The Mutual Fund Balanced Fund Database consists of open-endmutual fund balanced products.

REAL ESTATE FUNDS

Real estate funds consist of open or closed-end commingled funds. The returns are net of fees andrepresent the overall performance of commingled institutional capital invested in real estateproperties.

CAI Total Real Estate Funds - The Total Real Estate Funds Database consists of both open andclosed-end commingled funds managed by real estate firms.

123

RISK/REWARD STATISTICS

The risk statistics used in this report examine performance characteristics of a manager or aportfolio relative to a benchmark (market indicator) which assumes to represent overallmovements in the asset class being considered. The main unit of analysis is the excess return,which is the portfolio return minus the return on a risk free asset (3 month T-Bill).

Alpha measures a portfolio’s return in excess of the market return adjusted for risk. It is ameasure of the manager’s contribution to performance with reference to security selection. Apositive alpha indicates that a portfolio was positively rewarded for the residual risk which wastaken for that level of market exposure.

Beta measures the sensitivity of rates of portfolio returns to movements in the market index. Aportfolio’s beta measures the expected change in return per 1% change in the return on the market. If a beta of a portfolio is 1.5, a 1 percent increase in the return on the market will result, onaverage, in a 1.5 percent increase in the return on the portfolio. The converse would also be true.

Downside Risk stems from the desire to differentiate between "good risk" (upside volatility) and"bad risk" (downside volatility). Whereas standard deviation punishes both upside and downsidevolatility, downside risk measures only the standard deviation of returns below the target. Returnsabove the target are assigned a deviation of zero. Both the frequency and magnitude ofunderperformance affect the amount of downside risk.

Excess Return Ratio is a measure of risk adjusted relative return. This ratio captures the amountof active management performance (value added relative to an index) per unit of activemanagement risk (tracking error against the index.) It is calculated by dividing the manager’sannualized cumulative excess return relative to the index by the standard deviation of theindividual quarterly excess returns. The Excess Return Ratio can be interpreted as the manager’sactive risk/reward tradeoff for diverging from the index when the index is mandated to be the"riskless" market position.

Information Ratio measures the manager’s market risk-adjusted excess return per unit of residualrisk relative to a benchmark. It is computed by dividing alpha by the residual risk over a giventime period. Assuming all other factors being equal, managers with lower residual risk achievehigher values in the information ratio. Managers with higher information ratios will add valuerelative to the benchmark more reliably and consistently.

R-Squared indicates the extent to which the variability of the portfolio returns are explained bymarket action. It can also be thought of as measuring the diversification relative to the appropriatebenchmark. An r-squared value of .75 indicates that 75% of the fluctuation in a portfolio return isexplained by market action. An r-squared of 1.0 indicates that a portfolio’s returns are entirelyrelated to the market and it is not influenced by other factors. An r-squared of zero indicates thatno relationship exists between the portfolio’s return and the market.

124

RISK/REWARD STATISTICS

Relative Standard Deviation is a simple measure of a manager’s risk (volatility) relative to abenchmark. It is calculated by dividing the manager’s standard deviation of returns by thebenchmark’s standard deviation of returns. A relative standard deviation of 1.20, for example,means the manager has exhibited 20% more risk than the benchmark over that time period. Aratio of .80 would imply 20% less risk. This ratio is especially useful when analyzing the risk ofinvestment grade fixed-income products where actual historical durations are not available. Byusing this relative risk measure over rolling time periods one can illustrate the "implied" historicalduration patterns of the portfolio versus the benchmark.

Residual Portfolio Risk is the unsystematic risk of a fund, the portion of the total risk unique tothe fund (manager) itself and not related to the overall market. This reflects the "bets" which themanager places in that particular asset market. These bets may reflect emphasis in particularsectors, maturities (for bonds), or other issue specific factors which the manager considers a goodinvestment opportunity. Diversification of the portfolio will reduce or eliminate the residual riskof that portfolio.

Sharpe Ratio is a commonly used measure of risk-adjusted return. It is calculated by subtractingthe "risk-free" return (usually 3 Month Treasury Bill) from the portfolio return and dividing theresulting "excess return" by the portfolio’s risk level (standard deviation). The result is a measureof return gained per unit of risk taken.

Sortino Ratio is a downside risk-adjusted measure of value-added. It measures excess return overa benchmark divided by downside risk. The natural appeal is that it identifies value-added per unitof truly bad risk. The danger of interpretation, however, lies in these two areas: (1) the statisticalsignificance of the denominator, and (2) its reliance on the persistence of skewness in returndistributions.

Standard Deviation is a statistical measure of portfolio risk. It reflects the average deviation ofthe observations from their sample mean. Standard deviation is used as an estimate of risk since itmeasures how wide the range of returns typically is. The wider the typical range of returns, thehigher the standard deviation of returns, and the higher the portfolio risk. If returns are normallydistributed (ie. has a bell shaped curve distribution) then approximately 2/3 of the returns wouldoccur within plus or minus one standard deviation from the sample mean.

Total Portfolio Risk is a measure of the volatility of the quarterly excess returns of an asset.Total risk is composed of two measures of risk: market (non-diversifiable or systematic) risk andresidual (diversifiable or unsystematic) risk. The purpose of portfolio diversification is to reducethe residual risk of the portfolio.

Tracking Error is a statistical measure of a portfolio’s risk relative to an index. It reflects thestandard deviation of a portfolio’s individual quarterly or monthly returns from the index’sreturns. Typically, the lower the Tracking Error, the more "index-like" the portfolio.

Treynor Ratio represents the portfolio’s average excess return over a specified period divided bythe beta relative to its benchmark over that same period. This measure reflects the reward over therisk-free rate relative to the systematic risk assumed.

Note: Alpha, Total Risk, and Residual Risk are annualized.

125

COMMON STOCK PORTFOLIO CHARACTERISTICS

All Portfolio Characteristics are derived by first calculating the characteristics for each security,and then calculating the weighted average of these values for the portfolio.

Cash Flow/Sales - Cash flow divided by sales. Cash flow is the cash generated by a companyafter all cash expenses, including income taxes and minority interest, but before provision fordividends. Expenses do not include non-cash expenses such as depreciation. Sales represent grosssales reduced by cash discounts, returned sales, etc.

Current Ratio - The Current Ratio is used for liquidity analysis in that it evaluates the adequacyof a firm’s cash resources relative to its cash obligations. The Current Ratio is equal to CurrentAssets divided by Current Liabilities. Current Assets are those assets of a company which arereasonably expected to be realized in cash or sold or consumed during the normal operating cycleof the business. Current Assets include cash, temporary investments, receivables, inventories, andprepaid expenses. Current Liabilities are monies owed and payable by a company, usually withinone year, deposits and advances from customers, and dividends declared but unpaid.

Debt to Capital Ratio - The Debt to Capital ratio is a measure of the level of total debt of acompany as a portion of the total capital. The Debt to Capital Ratio is equal to Total Debt dividedby Total Capital. Total Debt includes both current and long term debt. Total Capital is equal toall invested capital. The invested capital includes: 1)Total Debt; 2) the carrying value (par orstated value per share) or preferred stock; 3) the par or stated value of preferred or common stocksnot owned by the parent company; and 4) common equity, which includes common stock, capitalsurplus, and retained earnings.

Dividends/Cash Flow - The Dividend/Cash Flow ratio is a measure of the sustainability or safetyof a given dividend payment amount. Common stock dividends divided by cash flow. Thecommon stock dividends are the total dollar amount of dividends for a stock over the precedingtwelve months. Cash flow is the cash generated by a company after all cash expenses, includingincome taxes and minority interest, but before the provision for dividends.

Earnings/Sales - Earnings/Sales is a measure of a company’s profitability, specifically measuringthe relationship between the firm’s costs and its sales. The value is equal to the earnings of acompany divided by net sales. Earnings represent the income of a company after all expenses,income taxes, and minority interest, but before provisions for common and/or preferred stockdividends. Sales represent gross sales reduced by cash discounts, returned sales, etc.

Forecasted Earnings Yield - This "yield" is a forward-looking valuation measure of acompany’s common stock. It expresses the amount of earnings estimated for next year per dollarof current share price as a percentage yield. This value is calculated by dividing, for each stock,the consensus (mean) analysts’ earnings forecasts for the next year by the current share price.These earnings estimates are for recurring, non-extraordinary earnings per primary common share. The individual earnings yields (E/P) are then weighted by their respective portfolio market valuesin order to calculate a weighted average representative of the portfolio as a whole.

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Forecasted Long-Term Earnings Growth - This growth rate is a measure of a company’sexpected long-term success in generating future year-over-year earnings growth. This growth rateis a market value weighted average of the consensus (mean) analysts’ long-term earnings growthrate forecast for each company in the portfolio. The definition of long-term varies by analyst butis limited to a 3-8 year range. This value is expressed as the expected average annual growth ofearnings in percent.

Forecasted Price/Earnings Ratio - This ratio is a forward-looking valuation measure of acompany’s common stock. It encapsulates the amount of earnings estimated for next year perdollar of current share price. This value is calculated by dividing the present stock price of eachcompany in the portfolio by the consensus (mean) analysts’ earnings forecasts for the next year.These earnings estimates are for recurring, non-extraordinary earnings per primary common share.

Growth in Assets - This value represents a weighted average five year annual growth rate ofassets per common stock share. The rates of growth in assets for trailing twelve month periods arecalculated using the assets-per-share values for each time period. The five-year growth in assetsfigure is calculated for each security in a portfolio. From these individual values, a weightedaverage value is calculated for the portfolio. The number of shares in each time period is adjustedto reflect any splits, mergers, or other capital changes. Total Assets includes the sum of current,non-current, and intangible assets.

Growth in Book Value - This value represents a weighted average five year annual growth rate ofbook value per common stock share. The rates of growth in book value for trailing twelve monthperiods are calculated using the book value-per-share values for each time period. The five-yeargrowth in book value figure is calculated for each security in a portfolio. From these individualvalues, a weighted average value is calculated for the portfolio. The number of shares in eachtime period is adjusted to reflect any splits, mergers, or other capital changes. Total Book Value isthe sum of the common stock outstanding, capital surplus, and retained earnings.

Growth in Cash Flows - This value represents a weighted average five year annual growth rate ofcash flow per common stock share. The rates of growth in cash flow for trailing twelve monthperiods are calculated using the cash flow-per-share values for each time period. The five-yeargrowth in cash flow figure is calculated for each security in a portfolio. From these individualvalues, a weighted average value is calculated for the portfolio. The number of shares in eachtime period is adjusted to reflect any splits, mergers, or other capital changes. Cash flow is thecash generated by a company after all cash expenses, including income taxes and minorityinterest, but before provision for dividends. In this case, common shares are the shares used tocalculate primary earnings per share. Primary earnings per share are earnings per share that arenot diluted, because it is assumed that securities that are convertible into equities are notconverted.

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Growth in Sales - This value represents a weighted average five year annual growth rate of salesper common stock share. The rates of growth in sales for trailing twelve month periods arecalculated using the sales-per-share values for each time period. The five-year growth in salesfigure is calculated for each security in a portfolio. From these individual values, a weightedaverage value is calculated for the portfolio. The number of shares in each time period is adjustedto reflect any splits, mergers, or other capital changes. Sales represent gross sales reduced by cashdiscounts, return sales, etc. In this case, common shares are the shares used to calculate primaryearnings per share. Primary earnings per share are earnings per share that are not diluted, becauseit is assumed that securities that are convertible into equities are not converted.

Interest/Pretax Earnings - This value is used as a measure of the ability of a company to meetinterest payments out of earnings. The ratio is equal to the interest expense divided by earnings.Earnings are the value before: 1) interest expense, the expense of securing both short andlong-term debt; 2) state, federal, and foreign taxes; 3) extraordinary items and discontinuedoperation; 4) provision for common and preferred dividends; and 5) minority interests, which isthat portion of the consolidated subsidiary income applicable to common stock not owned by theparent company.

MSCI Combined Z-Score is a holdings-based measure of the "growthyness" or "valueyness" ofan individual stock or portfolio of stocks based on fundamental financial ratio analysis. TheCombined Z-Score is the difference between the MSCI Growth Z-Score and the MSCI ValueZ-Score (Growth-Value). The underlying Growth Z-Score is an aggregate score based on 5financial fundamentals: Long Term Forward Earnings Growth, Short Term Forward EarningsGrowth, Current Internal Growth Rate, Long Term Historical Earnings Growth and Long TermHistorical Sales Growth. The underlying Value Z-Score is an aggregate score based on 3 financialfundamentals: Price/Book, Price/Forward Earnings, and Dividend Yield. The MSCI CombinedZ-Score usually ranges between +2 and -2. A significantly positive Combined Z-Score impliessignificant portfolio "growthyness". A Combined Z-Score close to 0.0 (positive or negative)implies "core-like" characteristics, and a significantly negative Combined Z-Score impliesportfolio "valueyness".

MSCI Growth Z-Score is a holdings-based measure of the "growthyness" of an individual stockor portfolio of stocks based on fundamental financial ratio analysis. The Growth Z-Score is anaggregate score based on the growth scores of 5 separate financial fundamentals: Long TermForward Earnings Growth, Short Term Forward Earnings Growth, Current Internal Growth (ROE* (1-payout ratio)), Long Term Historical Earnings Growth and Long Term Historical SalesGrowth. The MSCI Growth Z-Score usually ranges between +3 and -3. A significantly positiveGrowth Z-Score implies significant "growthyness" in the stock or portfolio. A Growth Z-Scoreclose to 0.0 (positive or negative) implies "core-like" style characteristics, and a significantlynegative Growth Z-Score implies more "valueyness" in the stock or portfolio (although the MSCIValue Z-Score should be used to confirm this).

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MSCI Value Z-Score is a holdings-based measure of the "valueyness" of an individual stock orportfolio of stocks based on fundamental financial ratio analysis. The Value Z-Score is anaggregate score based on the value scores of 3 separate financial fundamentals: Price/Book,Price/Forward Earnings, and Dividend Yield. The MSCI Value Z-Score usually ranges between+3 and -3. A significantly positive Value Z-Score implies significant "valueyness" in the stock orportfolio. A Value Z-Score close to 0.0 (positive or negative) implies "core-like" stylecharacteristics, and a significantly negative Value Z-Score implies more "growthyness" in thestock or portfolio (although the MSCI Growth Z-Score should be used to confirm this).

Market Capitalization (weighted median) - The weighted median market cap is the point atwhich half of the market value of the portfolio is invested in stocks with a greater market cap, andconsequently the other half is invested in stocks with a lower market cap.

Payout Ratio - The Payout Ratio describes the portion of earnings over a twelve month periodthat is paid out as dividends and addresses the sustainability of a given dividend level. The ratio isequal to ex-dividends per share divided by fully diluted earnings per share, excludingextraordinary items and discontinued operations. Ex-dividend implies that the dividend isdeclared but not paid and that a buyer of a stock after an ex-dividend does not receive thedividend. Fully diluted earnings per share are earnings that are reduced or diluted, by assumingthe conversion of all securities that are convertible into equities.

Plant and Equipment/Assets - This ratio shows the portion of Total Assets that consists ofcapital goods permanently employed in the business of a company. The ratio is equal to the bookvalue of gross plant and equipment assets divided by the total assets. Plant and equipmentincludes land, buildings, machinery, and any other equipment permanently employed in thebusiness of a company. Total assets includes the sum of all current, non-current, and intangibleassets.

R & D/Sales - Research and development expenditures divided by sales. Research anddevelopment expenses are costs that relate to the development of new products or services. Salesrepresent gross sales reduced by cash discounts, returned sales, etc.

S & P Rating - This is the Standard and Poor’s market weighted average rating of all of the ratedsecurities in the portfolio. Stock ratings are intended to provide an objective measure of the riskof a company in terms of the perceived level of stability in earnings and dividends. Securitieswhich are not rated by Standard and Poor’s are excluded from the weighted average rating.

Sales - Equal to gross sales and earnings from interest, dividends, and rents. Gross sales is theamount of actual billings to customers for delivery of products and services in exchange for cash,a promise to pay, or a money equivalent, reduced by returns, allowances, and discounts. Earningsfrom interest, dividends, and rents is net of transaction costs.

Total Assets - Everything a company owns or is due. Includes all current, non-current, andintangible assets. Current assets include cash, temporary investments, receivables, inventories,and prepaid expenses. Non-current assets include fixed assets such as buildings and machinery.Intangible assets include such items as patents and goodwill.

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Value of Holdings - This represents the total market value of all the securities in the portfolio,computed as the sum of the products of the closing value per share and the number of shares ofeach security held in the portfolio.

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FIXED-INCOME PORTFOLIO CHARACTERISTICS

All Portfolio Characteristics are derived by first calculating the characteristics for each security,and then calculating the market value weighted average of these values for the portfolio.

Allocation by Sector - Sector allocation is one of the tools which managers often use to add valuewithout impacting the duration of the portfolio. The sector weights exhibit can be used to contrasta portfolio’s weights with those of the index to identify any significant sector bets.

Average Coupon - The average coupon is the market value weighted average coupon of allsecurities in the portfolio. The total portfolio coupon payments per year are divided by the totalportfolio par value.

Average Moody’s Rating for Total Portfolio - A measure of the credit quality as determined bythe individual security ratings. The ratings for each security, from Moody’s Investor Service, arecompiled into a composite rating for the whole portfolio. Quality symbols range from Aaa+(highest investment quality - lowest credit risk) to C (lowest investment quality - highest creditrisk).

Average Option Adjusted (Effective) Convexity - Convexity is a measure of the portfolio’sexposure to interest rate risk. It is a measure of how much the duration of the portfolio willchange given a change in interest rates. Generally, securities with negative convexities areconsidered to be risky in that changes in interest rates will result in disadvantageous changes induration. When a security’s duration changes it indicates that the stream of expected futurecash-flows has changed, generally having a significant impact on the value of the security. Theoption adjusted convexity for each security in the portfolio is calculated using models developedby Lehman Brothers and Salomon Brothers which determine the expected stream of cash-flowsfor the security based on various interest rate scenarios. Expected cash-flows take into accountany put or call options embedded in the security, any expected sinking-fund paydowns or anyexpected mortgage principal prepayments.

Average Option Adjusted (Effective) Duration - Duration is one measure of the portfolio’sexposure to interest rate risk. Generally, the higher a portfolio’s duration, the more that its valuewill change in response to interest rate changes. The option adjusted duration for each security inthe portfolio is calculated using models developed by Lehman Brothers and Salomon Brotherswhich determine the expected stream of cash-flows for the security based on various interest ratescenarios. Expected cash-flows take into account any put or call options embedded in the security,any expected sinking-fund paydowns or any expected mortgage principal prepayments.

Average Price - The average price is equal to the portfolio market value divided by the number ofsecurities in the portfolio. Portfolios with an average price above par will tend to generate morecurrent income than those with an average price below par.

Average Years to Expected Maturity - This is a measure of the market-value-weighted averageof the years to expected maturity across all of the securities in the portfolio. Expected years tomaturity takes into account any put or call options embedded in the security, any expectedsinking-fund paydowns or any expected mortgage principal prepayments.

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FIXED-INCOME PORTFOLIO CHARACTERISTICS

Average Years to Stated Maturity - The average years to stated maturity is the market valueweighted average time to stated maturity for all securities in the portfolio. This measure does nottake into account imbedded options, sinking fund paydowns, or prepayments.

Current Yield - The current yield is the current annual income generated by the total portfoliomarket value. It is equal to the total portfolio coupon payments per year divided by the currenttotal portfolio market value.

Duration Dispersion - Duration dispersion is the market-value weighted standard deviation of theportfolio’s individual security durations around the total portfolio duration. The higher thedispersion, the more variable the security durations relative to the total portfolio duration("barbellness"), and the smaller the dispersion, the more concentrated the holdings’ durationsaround the overall portfolio’s ("bulletness"). The purpose of this statistic is to gauge the"bulletness" or "barbellness" of a portfolio relative to its total duration and to that of its benchmarkindex.

Effective Yield - The effective yield is the actual total annualized return that would be realized ifall securities in the portfolio were held to their expected maturities. Effective yield is calculated asthe internal rate of return, using the current market value and all expected future interest andprincipal cash flows. This measure incorporates sinking fund paydowns, expected mortgageprincipal prepayments, and the exercise of any "in-the-money" imbedded put or call options.

Weighted Average Life - The weighted average life of a security is the weighted average time topayment of all remaining principal. It is calculated by multiplying each expected future principalpayment amount by the time left to the payment. This amount is then divided by the total amountof principal remaining. Weighted average life is commonly used as a measure of the investmentlife for pass-through security types for comparison to non-pass-through securities.

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EQUITY MANAGEMENT STYLE GROUPS

Aggressive Growth - Managers who invest in growth securities with significantly higherrisk/return expectations than the broader market. Sometimes makes concentrated "bets" byselecting a small number of securities or by investing in only a few specific sectors. Selects fromcompanies with market capitalizations significantly below the broader market. Invests incompanies with P/E ratios, Price-to-Book values, and Growth-in-Earnings values above thebroader market. The companies typically have zero dividends or dividend yields below thebroader market. Invests in securities which exhibit greater volatility than the broader market asmeasured by the risk statistics Beta and Standard Deviation.

Contrarian - Managers who invest in stocks that are out of favor or which have little currentmarket interest, on the premise that gain will be realized when they return to favor. Sometimesmakes concentrated "bets" by selecting a small number of securities or by investing in only a fewspecific sectors. Invests in companies with Return-on-Assets values, Return-on-Equity values,Growth-in-Earnings values, and Growth-in-Dividend values below the broader market. Choosessecurities that, due to their contrary status, do not move with the broader market, as measured by alow Beta and significant non-market risk.

Core Equity - Managers whose portfolio holdings and characteristics are similar to that of thebroader market as represented by the Standard & Poor’s 500 Index, with the objective of addingvalue over and above the index, typically from sector or issue selection. The core portfolioexhibits similar risk characteristics to the broad market as measured by low residual risk with Betaand R-Squared values close to 1.00.

Large Cap Growth - Managers who invest mainly in large companies that are expected to haveabove average prospects for long-term growth in earnings and profitability. Future growthprospects take precedence over valuation levels in the stock selection process. Invests incompanies with P/E ratios, Price-to-Book values, Return-on-Assets values, Growth-in-Earningsvalues above the broader market. The companies typically have zero dividends or dividend yieldsbelow the broader market. Invests in securities which exhibit greater volatility than the broadermarket as measured by the securities’ Beta and Standard Deviation.

Large Cap Value - Managers who invest in predominantly large capitalization companiesbelieved to be currently undervalued in the general market. The companies are expected to have anear-term earnings rebound and eventual realization of expected value. Valuation issues takeprecedence over near-term earnings prospects in the stock selection process. Invests in companieswith P/E ratios, and Price-to-Book values below the broader market. Usually exhibits lower riskthan the broader market as measured by the Beta and Standard Deviation.

Middle Capitalization - Managers who invest primarily in mid-range companies with marketcapitalizations between core equity companies and small capitalization companies. The averagemarket capitalization is approximately $7 billion. Invests in securities with greater volatility thanthe broader market as measured by the risk statistics Beta and Standard Deviation. The MiddleCapitalization Style Group consists of the Middle Capitalization Growth Equity and the MiddleCapitalization Value Equity Style Groups.

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Middle Capitalization (Growth) - Managers who invest primarily in mid-range companies thatare expected to have above average prospects for long-term growth in earnings and profitability.Future growth prospects take precedence over valuation levels in the stock selection process. Theaverage market capitalization is approximately $7 billion with market capitalizations between coreequity companies and small capitalization companies. Invests in companies with P/E ratios,Price-to-Book values, and Growth-in-Earnings values above the broader market as well as themiddle capitalization market segment. Invests in securities with greater volatility than the broadermarket and the middle capitalization segment as measured by the risk statistics Beta and StandardDeviation.

Middle Capitalization (Value) - Managers who invest primarily in mid-range companiesbelieved to be currently undervalued in the general market. Valuation issues take precedence overnear-term earnings prospects in the stock selection process. The average market capitalization isapproximately $7 billion with market capitalizations between core equity companies and smallcapitalization companies. Invests in companies with P/E ratios, Return-on-Equity values, andPrice-to-Book value below the broader market and the middle capitalization segment. Invests insecurities with risk/reward profiles in the lower risk range of the medium capitalization market.

Small Capitalization - Mututal funds that invest in companies with relatively small capitalization. The average market capitalization is approximately $1.4 billion. The companies typically havezero dividends or dividend yields below the broader market. The securities exhibit greatervolatility than the broader market as measured by the risk statistics Beta and Standard Deviation.The Small Capitalization Style Group consists of the Small Capitalization (Growth) Style Groupand the Small Capitalization (Value) Style Group.

Small Capitalization - Managers who invest in companies with relatively small capitalization.The average market capitalization is approximately $1.4 billion. The companies typically havezero dividends or dividend yields below the broader market. The securities exhibit greatervolatility than the broader market as measured by the risk statistics Beta and Standard Deviation.The Small Capitalization Style Group consists of the Small Capitalization (Growth) Style Groupand the Small Capitalization (Value) Style Group.

Small Capitalization (Growth) - Managers who invest in small capitalization companies that areexpected to have above average prospects for long-term growth in earnings and profitability.Future growth prospects take precedence over valuation levels in the stock selection process.Invests in companies with P/E ratios, Price-to-Book values, and Growth-in-Earnings values abovethe broader market as well as the small capitalization market segment. The companies typicallyhave zero dividends or dividend yields below the broader market. The securities exhibit greatervolatility than the broader market as well as the small capitalization market segment as measuredby the risk statistics beta and standard deviation.

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Small Capitalization (Value) - Mutual funds that invest in small capitalization companies that arebelieved to be currently undervalued in the general market. Valuation issues take precedence overnear-term earnings prospects in the stock selection process. The companies are expected to have anear-term earnings rebound and eventual realization of expected value. Invests in companies withP/E ratios, Return-on-Equity values, and Price-to-Book values below the broader market as well asthe small capitalization market segment. The companies typically have dividend yields in the highrange for the small capitalization market. Invests in securities with risk/reward profiles in thelower risk range of the small capitalization market.

Small Capitalization (Value) - Managers who invest in small capitalization companies that arebelieved to be currently undervalued in the general market. Valuation issues take precedence overnear-term earnings prospects in the stock selection process. The companies are expected to have anear-term earnings rebound and eventual realization of expected value. Invests in companies withP/E ratios, Return-on-Equity values, and Price-to-Book values below the broader market as well asthe small capitalization market segment. The companies typically have dividend yields in the highrange for the small capitalization market. Invests in securities with risk/reward profiles in thelower risk range of the small capitalization market.

Small/Mid Cap (Value) - Managers who invest in small to medium cap companies that arebelieved to be currently undervalued in the general market. The companies are expected to have anear-term earnings rebound and eventual realization of expected value.

Yield - Managers whose primary objective is a high current dividend yield. Invests in companieswith Price-to-Book values and Growth-in-Earnings values below the broader market. Invests insecurities with dividend yields above the broader market. Invests in securities with significantlylower volatility than the broader market as measured by the risk statistics Beta and StandardDeviation.

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FIXED-INCOME MANAGEMENT STYLE GROUPS

Active Cash - Managers whose objective is to achieve a maximum return on short-term financialinstruments through active management. The average portfolio maturity is typically less than oneyear.

Active Duration - Managers who aggressively employ interest rate anticipation in settingportfolio duration. Portfolios are actively managed so that large changes in duration are made inanticipation of interest rate changes in hopes of profiting from downward rate movements andminimizing losses from upward rate movements.

Core Bond - Managers who construct portfolios to approximate the investment results of theLehman Brothers Government/Credit Bond Index or the Lehman Brothers Aggregate Bond Indexwith a modest amount of variability in duration around the index. The objective is to achieve valueadded from sector and/or issue selection.

Core Plus Bond - Active managers whose objective is to add value by tactically allocatingsignificant portions of their portfolios among non-benchmark sectors while maintaining majorityexposure similar to the broad market.

Defensive - Managers whose objective is to minimize interest rate risk by investing predominantlyin short to intermediate term securities. The average portfolio duration is similar to the duration ofthe Merrill Lynch 1-3 Year Bond Index.

Extended Maturity - Managers whose average portfolio duration is greater than that of theLehman Brothers Government/Credit Bond Index. These portfolios exhibit risk/returncharacteristics similar to the long-bond portion of the Lehman Brothers Government/Credit Index,called the Lehman Brothers Government/Credit Long Bond Index. Variations in bond portfoliocharacteristics are made to enhance performance results. This results in an aggressive risk/returnprofile that embraces interest rate risk in search of both high yields as well as capital gains.

High Yield - Managers whose investment objective is to obtain high current income by investingprimarily in non-investment grade fixed-income securities. Due to the increased level of defaultrisk, security selection focuses on credit-risk analysis.

Intermediate - Managers whose objective is to lower interest rate risk while retaining reasonableyield levels by investing primarily in intermediate term securities. The average portfolio durationis similar to that of the duration of the Lehman Brothers Intermediate Government/Credit BondIndex.

Mortgage - Managers who invest primarily in mortgage-backed securities including agency(FHLMC, GNMA, FNMA) and private issue pass-throughs, asset-backed securities, and mortgagederivatives (REMICS/CMOs, IOs, POs). Funds may also contain a small percentage of U.S.Treasuries.

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INTERNATIONAL EQUITY MANAGEMENT STYLE GROUPS

Bottom Up/Stock Selection - Managers who primarily emphasize stock selection over country orcurrency selection in their portfolio construction. The country selection process is mainly aby-product of the stock selection decision, or can be passively set according to the index countryweights.

Emerging Markets Equity - Managers who primarily concentrate on investments in newlyemerging second and third world countries in the regions of the Far East, Africa, Europe, andCentral and South America. These portfolios are characterized by aggressive risk/return profilesthat generate high volatility in search of high returns.

Europe - Managers who invest predominantly in the well developed stock markets of Europe.These products will exhibit risk/return profiles similar to the MSCI Europe Index.

Global Equity - Managers who invest in both foreign and domestic equity securities in varyingproportions. These products will exhibit risk/return profiles similar to the MSCI World Index.

International Growth Style Group International Growth Equity Style managers investpredominantly in companies that are expected to have above average prospects for long-termgrowth in earnings and profitability. Future growth prospects take precedence over valuationlevels in stock selection. The International Growth Equity Style group consists of broaddeveloped market mandates with incidental exposure to the emerging markets.

International Value Style Group International Value Equity Style managers investpredominantly in companies believed to be currently undervalued in the general market. Thecompanies are expected to have a near-term earnings rebound and eventual realization of expectedvalue. The International Value Equity Style group consists of broad developed market mandateswith incidental exposure to the emerging markets.

Japan - Managers who invest predominantly in the equity of companies in Japan.

Pacific Basin - Managers who invest predominantly in Pacific Basin equities. Countries include:Japan, Hong Kong, Singapore, Malaysia, Australia, and New Zealand. These products will exhibitrisk/return profiles similar to the MSCI Pacific Index.

Pacific Rim - Managers who invest predominantly in Pacific Basin equities excluding Japan.Countries include: Hong Kong, Singapore, Malaysia, Australia, and New Zealand. These productswill exhibit risk/return profiles similar to the MSCI Pacific ex-Japan Index.

Top Down/Country Allocator - Managers who attempt to add value over an index such as theMorgan Stanley Capital International (MSCI) EAFE Index by emphasizing macroeconomicanalysis in selecting allocations in countries with above average gain prospects. Stock selectionplays a secondary role in the investment decision process, or can be passively matched to theindex stock holdings within each country.

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INTERNATIONAL FIXED-INCOME MANAGEMENT STYLE GROUPS

Global Fixed-Income - Managers who invest in both foreign and domestic fixed-incomesecurities. These funds seek to take advantage of international currency and interest ratemovements, differing bond yields, and/or international diversification.

Non-U.S. Fixed-Income - Managers who generally invest their assets only in non-U.S.fixed-income securities. These funds seek to take advantage of international currency and interestrate movements, bond yields, and/or international diversification.

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OTHER STYLE GROUPS

Asset Allocator - Managers who try to capitalize on the cyclical behavior of both the economyand market price trends by moving in and out of the equity market, fixed-income, and cashmarkets in anticipation of these cycles. Quantitative as well as qualitative models and inputs areused in an attempt to be heavily weighted in the most undervalued sector of the capital marketsand capitalize on those sectors forecasted to do well in the short term while avoiding those sectorsforecasted to underperform in the short term.

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COMMON STOCK ATTRIBUTION ANALYSIS

Common Stock Attribution Analysis provides a way to evaluate the factors that contribute to anequity portfolio’s total rate of return. The rate of return for the portfolio can be broken into threecomponents: Market Return plus additional components resulting from the manager’s IndustryConcentration and Stock Selection decisions.

Market Return is the rate of return that would have been achieved if the portfolio had beeninvested in the S&P 500 index.

Industry Concentration measures the additional return produced by the difference between theportfolio’s industry sector weightings and that of the S&P 500 index. Industry Concentration iscomputed daily by multiplying this portfolio’s weighting differential by the difference between theS&P 500 sector return and the total S&P 500 return. These daily Industry Concentration figuresare accumulated to obtain a total effect by industry sector each quarter.

Stock Selection measures the additional return produced by the manager’s security selectionwithin each industry sector. Stock Selection is computed daily by multiplying the portfolio’s dailyweighting in the industry sector by the difference between the portfolio sector return and the S&P500 sector return. These daily Stock Selection figures are accumulated to obtain a total effect byindustry sector each quarter.

An evaluation of the Common Stock Attribution Analysis begins by reviewing the total portfolioIndustry Concentration and Stock Selection components for the analysis period. Specifically, thosequarters that show either an Industry Concentration component or a Stock Selection componentappreciably less than zero can be considered in greater detail through the industry sector report.

Stock Selection by industry sector shows how the decisions for each sector contribute to the totalStock Selection effect. Each portfolio sector whose return exceeds the S&P industry sector returnwill show a positive Stock Selection effect. Each portfolio sector whose return falls short of theS&P industry sector return will show a negative Stock Selection effect.

Industry Concentration by industry sector shows how the weightings in each sector contributeto the total Industry Concentration effect. Each sector whose S&P 500 industry sector returnexceeds the total S&P 500 return and where the manager’s sector commitment was overweightedwill show a positive Industry Concentration effect. Each sector whose S&P 500 industry sectorreturn falls short of the total S&P 500 return and where the manager’s sector commitment wasunderweighted will show a positive Industry Concentration effect as well.

On the other hand, each sector whose S&P 500 industry sector return exceeds the total S&P 500return and where the manager’s sector commitment was underweighted will show a negativeIndustry Concentration effect. Similarly, each sector whose S&P 500 industry sector return fallsshort of the total S&P 500 return and where the manager’s sector commitment was overweightedwill show a negative Industry Concentration effect.

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DEFINITION OF TERMS

Mellon ACE - Active Convexity Enhancement Product.

Mellon ACE Index - A portfolio invested 70% in the Mellon Bond AssociatesGovernment/Corporate Intermediate Bond Index and 30% in Mellon ACE.

Mellon Intermediate Term Index* - A passive Index Fund managed by Mellon Bond Associatesthat replicates the Shearson Lehman Government/Corporate Intermediate Bond Index.

*Note: The return shown for this Index in the following pages represents the Lehman BrothersGovernment/Corporate Intermediate Index from 12/79 to 6/83 and the passive Index Fundmanaged by Mellon Bond Associates, as defined, after 6/83.

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Disclosures

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List of Managers That Do Business with Callan Associates Inc. Quarterly List as of March 31, 2008

Confidential – For Callan Client Use Only Callan Associates takes its fiduciary and disclosure responsibilities to clients very seriously. The list below is compiled and updated quarterly because we believe our fund sponsor clients should have a clear understanding of the investment management organizations that do business with our firm. As of 03/31/2008, Callan provided educational, consulting, software, database, or reporting services to this list of managers through one or more of the following business units: Institutional Consulting Group, Independent Adviser Group, Fund Sponsor Consulting, the Callan Investments Institute and the “Callan College.” Per strict policy these manager relationships do not affect the outcome or process by which any of Callan’s services are conducted. Fund sponsor clients may request a copy of this list at any time. Fund sponsor clients may also request specific information regarding the fees paid to Callan by the managers employed by their fund. Per company policy, information requests regarding fees are handled exclusively by Callan’s Compliance Department. Clients should also be aware that Callan maintains an asset management division, the Trust Advisory Group (TAG). TAG specializes in the design, implementation and on-going management of multi-manager portfolios for institutional investors. Currently TAG serves as the sponsor and advisor to a multi-manager small cap equity fund and as the non-discretionary adviser to a series of Target Maturity Funds known as the Callan GlidePath® Funds. We are happy to provide clients with more specific information regarding TAG, including detail on the portfolios that it oversees. Per company policy these requests are handled by TAG’s Chief Investment Officer.

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Manager Name Educational Services Consulting Services Aberdeen Asset Management YAcadian Asset Management, Inc. YAffiliated Managers Group, Inc. Y YAG Asset Management Inc. YAIG Global Investment Group YAllegiant Asset Management Group Y YAllianceBernstein Y YAllianz Investor Services, LLC YAllstate Investments LLC YAmerican Century Investment Management Y YAmSouth/Investment Management Group YAriel Capital Management, Inc. YArk Asset Management Co., Inc. Y YAtalanta Sosnoff Capital, LLC YAtlanta Capital Management Co., L.L.C. Y YAXA Rosenberg Investment Management YBaillie Gifford International LLC YBaird Advisors Y YBank of America YBarclays Global Investors YBaring Asset Management YBarrow, Hanley, Mewhinney & Strauss, Inc. YBatterymarch Financial Management, Inc. YBear Stearns Asset Management Y YBL-SH Investment Counsel, LLC YBlackRock YBoston Company Asset Management, LLC (The) Y YBNY Mellon Asset Management YBrandes Investment Partners, L.P. Y YBrandywine Global Investment Management, LLC Y YBrown Brothers Harriman & Company YCadence Capital Management YCapital Guardian Trust Company Y YCastleArk Management, LLC YCauseway Capital Management YChartwell Investment Partners YCIBC Global Asset Management (USA) Ltd. YChicago Equity Partners, LLC YClear Bridge Advisors Y YColumbia Management Advisors, LLC Y YColumbus Circle Investors Y YCramer Rosenthal McGlynn, LLC YCredit Suisse Asset Management YDavis Hamilton Jackson & Associates YDB Advisors Y YDE Shaw Investment Management, L.L.C. YDelaware Investment Advisers Y YDePrince, Race & Zollo, Inc. YDeutsche Asset Management/Deutsche Bank Y YDSM Capital Partners YDuPont Capital Management YDwight Asset Management YEagle Asset Management, Inc. YEARNEST Partners, LLC Y



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Manager Name Educational Services Consulting Services Eaton Vance Management Y YEdgar Lomax Company (The) YEnhanced Inv. Technologies, LLC (INTECH) YEntrust Capital Inc. YEquinox Capital Management, LLC YEvergreen Investments Y YFayez Sarofim & Company Y YFederated Investors YFiduciary Asset Management YFifth Third Asset Management, Inc. YFortis Investments YFranklin Portfolio Associates YFranklin Templeton YFred Alger Management Co., Inc. Y YFroley, Revy Investment Company, Inc. YGAM USA Inc. Y YGE Asset Management Y YGlobeFlex Capital, L.P. YGoldenTree Asset Management, LP YGoldman Sachs Asset Management Y YGrande-Jean Capital Management YGrantham, Mayo, Van Otterloo & Co., LLC YGreat Lakes Advisors, Inc. YHarris Investment Management, Inc. YHartford Investment Management Co./The Hartford Y YHeartland Advisors, Inc. YHenderson Global Investors YHillcrest Asset Management, LLC YHotchkis and Wiley Capital Management YHSBC Investments (USA) Inc. Y YIndependence Investments LLC Y YING Clarion YING Investment Management Y YINVESCO Y YInstitutional Capital LLC YInvestec Asset Management YJanus Capital Management, LLC YJensen Investment Management YJPMorgan Y YJulius Baer Investment Management Y YKelly Capital Management, LLC YKensington Investment Group YKnightsbridge Asset Management, LLC YLazard Asset Management Y YLehman Brothers Inc. Y YLoomis, Sayles & Company, L.P. Y YLord Abbett & Company Y YLSV Asset Management Y YMacKay-Shields LLC Y YMarquette Asset Management YMarvin & Palmer Associates, I nc. YMetropolitan Life Insurance Company YMetropolitan West Capital Management, LLC YMFC Global Investment Management (U.S.) LLC Y



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Manager Name Educational Services Consulting Services MFS Investment Management Y YMissouri Valley Partners YMondrian Investment Partners Limited Y YMontag & Caldwell, Inc. Y YMorgan Stanley Investment Management Y YNatixis Global Asset Management Y YNewton Capital Management YNew York Life Investment Management LLC (NYLIM) Y YNicholas-Applegate Capital Management Y YNomura Asset Management U.S.A., Inc. YNorthern Trust Global Investment Services Y YNorthern Trust Value Investors YNuveen Investments Institutional Services Group Y YOFI Institutional Asset Management YOld Mutual Asset Management Y YOppenheimer Capital YPacific Investment Management Company YParadigm Asset Management Co., LLC YPeregrine Capital Management, Inc. YPhiladelphia International Advisors, LP YPhoenix Investment Partners Ltd. YPioneer Investment Management, Inc. Y YPrincipal Global Investors Y YProvident Investment Counsel YPrudential Investment Management Y YPutnam Investments Y YPyramis Global Advisors YRCM Y YRice Hall James & Associates, LLC YRiverSource Investments, LLC Y YRobeco Investment Management Y YRothschild Asset Management, Inc. Y YRREEF Funds (The) YRussell Investment Group YSchroder Investment Management North America Inc. Y YScottish Widows Investment Partnership YSEI Investments Y YSeligman (J. & W.) & Company, Inc. Y YSit Investment Associates, Inc. YSmith Group Asset Management YSoutheastern Asset Management, Inc. YStandish Mellon Asset Management Company YState Street Global Advisors Y YSterne Agee Asset Management YStockbridge Real Estate Funds YStone Harbor Investment Partners, L.P. YStratton Management YSystematic Financial Management Y YT. Rowe Price Associates, Inc. Y YTaplin, Canida & Habacht YThrivent Financial for Lutherans YThompson, Siegel & Walmsley LLC YTIAA-CREF Y YTimesSquare Capital Management, LLC Y



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Manager Name Educational Services Consulting Services TCW Asset Management Company YUBP Asset Management LLC YUBS Y YUnion Bank of California YVanguard Group, Inc. (The) YVictory Capital Management Inc. Y YWaddell & Reed Asset Management Group YWEDGE Capital Management YWellington Management Company, LLP YWells Capital Management YWestern Asset Management Company YWeston Capital Management LLC YWilliam Blair & Co., Inc. Y

Callan R

esearch/Education

‘

WHITE PAPERSAsk the Expert – Securities Lending: Mechanics and Risks Revisited

Virgilio “Bo” Abesamis; Michael J. O’Leary, CFA. March 2008.

A Level Framing of LDIJason Ellement, FSA, CFA, MAAA; Karen M. Harris, ASA, CFA; Jay Kloepfer. February 2008.

MSCI Expands the Indices: An OverviewLin Fitzenhagen, CFA. January 2008.

401(k) Plan Offerings and Utilization: A Survey Across Major RecordkeepersLori Lucas, CFA; Inga Sweet. January 2008.

NEWSLETTERS & DATA PACKAGEDefined Contribution Observer – Streamlining the Investment Fund Line-Up:

A Tale of Three Plan Sponsors – Spring 2008

Hedge Fund Monitor – 4th Quarter 2007

Capital Market Review & Data Package – 4th Quarter 2007

Private Markets Trends – Winter 2007/2008

Below is a list of recent Callan Institute research and upcoming programs. The Institute’s research

and educational programs keep clients abreast of the latest trends in the investment industry and

help clients learn through carefully structured workshops and lectures. For more information,

please contact your Callan Consultant or Gina Falsetto at 415.974.5060 or [email protected].

Callan InvestmentsInstitute

Callan Investments Institute – First Quarter 2008

• WhitePapers

• Newsletters &Data Package

• Surveys

• EventSummaries &Presentations

• UpcomingEducationalPrograms

Research and Upcoming Programs

SURVEYS2007 Investment Management Compensation Survey – February 2008

2008 Impact of the PPA: Defined Contribution Plan Sponsor Survey – February 2008

EVENT SUMMARIES & PRESENTATIONS2008 National Conference Summary – January 2008

Callan Investments Institute 2008 National Conference Summary

2008 National Conference Presentations – January 2008Hedge Fund Investing – Delegate or Do It Direct?Liability Driven InvestingSecurities Lending – The Hidden Impact on PerformanceThe Future of Defined Contribution Plans – DC Goes DB

UPCOMING EDUCATIONAL PROGRAMSJune 2008 Regional Breakfast Workshops

“Target Date Funds – The Art of Selection & Benchmarking”Chicago, June 25San Francisco, June 26

October 2008 Regional Breakfast WorkshopsSubject TBANew York City, October 28Atlanta, October 29

If you have any questions regarding these programs, please contact Ray Combs at415.974.5060 or [email protected].

101 CALIFORNIA ST., SUITE 3500, SAN FRANCISCO, CALIFORNIA 94111 415.974.5060 FAX 415.274.3049 www.callan.com © 2007 Callan Associates Inc.

The Callan Investments

Institute, the educational

division of Callan Associates

Inc., has been a leading

educational forum for the

pensions and investments

industry since 1980.

The Institute offers continuing

education on key issues

confronting fund sponsors

and investment managers.

Please contact the Callan

Investments Institute for more

information, or visit our

website at www.callan.com.

Callan Investments Institute

Callan Investments Institute – First Quarter 2008

2008 “CALLAN COLLEGE” DATES

“CALLAN COLLEGE” – AN INTRODUCTION TO INVESTMENTS

May 6–7 in San FranciscoOctober 21–22 in San Francisco

“CALLAN COLLEGE” – ADVANCED INVESTMENT TOPICS

July 15–17 in San Francisco

“CALLAN COLLEGE” – ALTERNATIVE INVESTMENTS

June 3–4 in San Francisco

Tuition for the “Callan College” Introduction to Investments is $2,350 per person; tuition forthe other sessions is $2,500 per person. Tuition includes instruction, all materials, breakfastand lunch on each day and dinner on the first evening with the instructors.

CUSTOMIZED SESSIONSA unique feature of the “Callan College” is its ability to educate on a specialized levelthrough its customized sessions. These sessions are tailored to meet the training andeducational needs of the participants, whether they are plan sponsors or those who provideservices to institutional tax-exempt plans. Past customized “Callan College” sessions havecovered topics such as: custody, industry trends, sales and marketing, client service,international, fixed income and managing the RFP process. Instruction is tailored to basicor advanced audiences.

For more information on the “Callan College,” please contact Kathleen Cunnie at415.974.5060 or [email protected].

“Callan College” – First Quarter 2008

“Callan College”Educational Sessions

The Center for Investment

Training (“Callan College”)

provides relevant and

practical educational

opportunities to all

professionals engaged in the

investment decision making

process.

This educational forum offers

basic-to-intermediate level

instruction on all components

of the investment

management process.

101 CALIFORNIA ST., SUITE 3500, SAN FRANCISCO, CALIFORNIA 94111 415.974.5060 FAX 415.274.3049 www.callan.com © 2007 Callan Associates Inc.

Callan Associates Inc. - SDCERSBonds, 4% International Bonds, and 11% Real Estate. Total Fund...

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