Investment Report SALIENT PARTNERS. SDCERA Board of Trustees Meeting. March 2011

Investment Report SDCERA Board of Trustees Meeting March 2011 Lee Partridge, CFA Salient Partners, LP Lisa Needle, CFA SDCERA John Claisse, PhD Albourne America, LLC 1

Table of Contents I. Market & Economic Overview II. Fund Performance III. Risk Management IV. Factor Exposures V. Stress Testing 2

Market Overview Overall Market Conditions Continuation of liquidity fueled rally across asset classes supported by Federal Reserve QE2 November guidance. Global Equity Markets Developed and Emerging gmarkets Equities moved higher. Japan bounced back with its strongest quarter in recent memory. Global equity correlations remained high. Risk on mentality prevailed. Global Interest Rate Markets Global Rates moved lower as investors migrated toward risky assets. High Yield instruments were favored. Inflation Sensitive Markets China s inflationary pressures are being watched closely by investors. Risks Socio economic issues in the Middle East/North Africa loom large. Duration and sustainability of Federal Reserve interest rate policy. 3

Market & Economic Overview 4

Market Overview 16.00 14.00 14.33 13.41 12.00 12.21 11.59 10.00 8.00 7.16 6.00 4.62 4.00 3.13 2.00 0.34 (2.00) (0.66) (1.30) (1.85) (4.00) Listed Private Equity Commodites Listed Venture Domestic Equity Foreign Equity Commercial Real Estate (1Q lag) High Yield CPI Inflation Linked Bonds Core Fixed Income EM Debt 5

Global Equity 12.00 10.85 10.00 8.95 8.00 7.34 7.16 600 6.00 4.00 2.00 All World US Emerging Markets World ex US 6

EM Equity 9.00 8.50 800 8.00 7.00 7.34 6.99 6.00 598 5.98 5.00 4.00 3.00 2.00 1.00 All EM Europe Asia Latin America 7

US Equity Style 18.00 16.00 16.25 14.00 12.00 11.59 11.22 11.83 10.54 10.00 8.00 6.00 4.00 2.00 Core Small Large Growth Value 8

US Equity Sectors 25 21.48 20 19.17 15 10 12.77 11.83 11.61 10.26 7.34 6.12 5 3.64 1.09 0 9

Fixed Income 4.00 3.22 3.00 2.00 1.00 0.91 0.24 0.13 (1.00) (2.00) (1.04) (1.30) (0.39) (1.09) (1.49) (1.61) (1.72) (3.00) (2.64) 10

Hedge Funds 8.00 7.00 6.74 6.00 5.43 5.00 4.77 4.69 400 4.00 3.25 3.00 2.00 1.00 Composite Equity Hedge Macro Event Driven Relative Value 11

Developed Currencies 6.00 5.00 5.07 4.00 3.00 3.13 3 2.92 2.00 1.00 0.39 0.43 (1.00) (0.66) (2.00) (1.83) (3.00) DXY Swiss Franc Canadian Dollar Japanese Yen Swedish Krona British Pound Euro 12

Emerging Currencies 8.00 7.02 6.00 5.13 4.00 2.00 255 2.55 2.05 1.62 1.35 1.31 0.54 (2.00) (1.06) (4.00) (6.00) (6.20) (8.00) Taiwan Dollar South African Rand Singapore Dollar Mexican Peso Brazilian Real Chinese Renminbi Korean Won Indian Rupee Indonesian Rubiah Turkish Lira 13

Commodities 30.00 25.00 24.97 20.00 15.00 13.41 12.52 12.24 11.62 10.00 5.00 263 2.63 GSCI Agriculture Industrial Metals Precious Metals Energy Livestock 14

Commercial Real Estate 16.00 14.00 13.59 12.00 11.82 10.00 9.19 8.00 8.06 6.00 4.00 4.62 6.29 4.77 3.93 342 3.42 2.00 NCREIF Property Index Apartment Retail Office Industrial West South East Midwest 15

Market Update Major Theme: Fiscal Retrenchment vs. Monetary Stimulus Major Theme: Global Fiscal Retrenchment vs. Monetary Stimulus Inflation/Deflation: US Money Supply has Turned Higher 3 primary events aligning to contract developed market fiscal deficit f (Deflation, Money Printing, Inflation, Velocity) = Monetary Instability spending: US Inflation may arrive as soon as the summer of 2011 G20 2010 Summer Communiqué US M2 and M3 money supply have turned higher US Municipal and State Woes Ongoing European Debt Crisis US Fed, ECB, and BOJ have taken active roles in adding monetary stimulus Credit and Credit Markets: Rollovers Helping Hold Down Defaults Emerging Central Banks intervening with developing market capital controls Economic Strength: Emerging Strength vs. Developed Stagnation US Economy in a fragile growth path with 3 4% GDP prints possible Emerging and trade based economies have been very strong US GDP driven by temporary factors: government spending and inventory build US businesses have stopped deferring capital spending making industrial production, durable goods and trade all strong Heavy bond issuance has pushed down defaults and extend maturities Delinquencies have peaked in many categories barring a slowdown Commercial RE fundamentals have stabilized but values are at lower levels relative to the peak in 2007 Stock Markets: Investor Sentiment Hitting Highs S&P valuations remain stretched but underlying earnings are impressive Stock funds seeing renewed inflows US Employment: Some Glimmers of Hope US employment picture is improving with lower layoffs and more job openings Commodity Markets: Global Food Inflation Global food prices are sharply higher spanning grains, meats, and softs Grain stock/use ratios are historically i thin Energy prices higher with US summer $4 pump prices a possibility US Housing: Second Down Leg in Prices Economy Grows Without Housing Home prices have turned down again and activity has stalled New home buyer traffic and mortgage purchase applications are down A shadow hd inventory (over 1 year supply) l)looms over the market kt Residential delinquency trends are finally falling but from a high level Bottom Line: Where we differ with Wall Street Street sees benign inflation with high growth in 2011 We see an array of outcomes Deflation, Stagflation, sudden high h inflation i are all possibilities i Street sees all powerful Fed, ready to protect markets We are reminded of our dependence on foreign capital Control over interest rates is a luxury not a certainty 16

Market Update Latest Economic Statistics Friday, February 25, 2011 World & US Economic Growth Level Q Q Units Y o Y% Date Inflation and Monetary Stats Level Units Y o Y% Date US GDP 13370.1 SAAR $ bill 2.7 12/31/2010 Consumer Price Index (headline) 221.1 index 1.7 1/31/2011 Latest Q QQ Growth 28 2.8 Producer Price Index (headline) 185.55 index 37 3.7 1/31/2011 EU GDP 2310.5 SAAR eur bill 3.1 9/30/2010 Consumer Price Index (core) 310.9 index 1.8 1/31/2011 Latest Q Q Growth 0.8 Producer Price Index (core) 175.5 index 1.6 1/31/2011 US Durable Goods Orders 33853 SAAR $ mill 4.0 1/31/2011 US M2 Money Supply 8873.7 SAAR $ bill 4.2 2/7/2011 US Commercial Paper Outstanding 1121.8 SAAR $ bill 1.1 2/23/2011 US Employment + Consumption Level Units Y o Y% Date Equity and Rate Markets Level Units Y o Y% Date Civilian Unemployment Rate 9.0 % 7.2 1/31/2011 US Dollar Index 77.3 index 4.3 2/25/2011 Weekly Unemployment Claims 391 SAAR thou 19.5 2/18/2011 S&P 500 1306.1 index 18.4 2/24/2011 Average Hourly Earnings $19.34 rate 2.3 1/31/2011 S&P 500 Earnings Yield 6.49 inverse PE N / A 2/24/2011 Average Hourly Workweek 33.4 hours 0.3 1/31/2011 10 Year Treasury Yield 3.44 % yield 5.2 2/25/2011 Productivity Growth 3.5 % 250.0 12/31/2010 10 Year Tips Yield 1.02 % yield N / A 2/25/2011 Unit Labor Costs 104.5 index 0.2 12/31/2010 MBA 30 Year Fixed Rate 5.0 yield 2.0 2/24/2011 CB Consumer Confidence 70.4 index 51.7 2/28/2011 MBA 30 Year Jumbo Rate 5.4 yield 9.7 2/24/2011 UM Consumer Confidence 86.8 index 6.1 2/28/2011 MBA Refi Index 2177.2 index 16.4 2/18/2011 US Retail Sales 381.6 SAAR $ bill 7.8 1/31/2011 MBA Purchase Index 184.1 index 6.5 2/18/2011 US Retail Sales ex Autos 312.7 SAAR $ bill 6.2 1/31/2011 VIX Index 21.3 index 6.1 2/24/2011 3 Month LIBOR 0.31 yield 23.2 2/25/2011 LIBOR Treasury "TED" Spread 0.19 spread nm 2/25/2011 Manufacturing and Services Level Units Y o Y% Date BBB Bond STW 220.0 spread nm 2/25/2011 US Industrial Production 95.1 index 5.1 1/31/2011 Chase High Yield STW 517.0 basis pts 24.0 2/24/2011 EU Industrial Production 99.6 index 8.1 12/31/2010 US Total Mortgage Delinquency % 8.2 % 13.2 12/31/2010 JP Industrial Production 94.8 index 4.9 12/31/2010 US Credit Card Delinquency % 2.1 % 31.9 1/31/2011 US Capacity Utilization 76.1 pct 5.3 1/31/2011 Philadelphia Fed Index 35.9 index 70.1 2/28/2011 World Trade Level Units Y o Y% Date Empire State Index 15.4 index 37.9 2/28/2011 US Imports 168.5 SAAR $ bill 15.4 12/31/2010 Wholesale Inventories 430.5 SAAR bill 10.5 12/31/2010 US Exports 118.1 SAAR $ bill 20.4 12/31/2010 Retail Inventories 454 SAAR $ bill 59 5.9 12/31/2010 US Balance of Trade 40.6 6 SAAR $ bill 9.3 93 12/31/2010 Inventory to Sales Ratio 1.33 ratio 2.2 12/31/2010 China Exports 150.7 SAAR $ bill 37.7 1/31/2011 Semiconductor Exports 3.9 SAAR bill 9.5 12/31/2010 Taiwan Exports 25.4 SAAR $ bill 16.6 1/31/2011 US Housing Level Units Y o Y% Date Commodity Markets Level Units Y o Y% Date US Housing Starts 596.0 SAAR thous. 2.6 1/31/2011 Gold 1405.33 USD / oz 27.0 2/25/2011 US Building Permits 563.0 SAAR thous. 10.5 1/31/2011 Silver 32.89 USD / oz 104.5 2/25/2011 US Existing Home Sales 5,360.0 SAAR thous. 5.3 1/31/2011 Copper 7010 USD / metric ton 32.4 2/25/2011 US New Home Sales 284.0 SAAR thous. 18.6 6 1/31/2011 Crude Oil 97.57 USD / bbl 24.8 2/25/2011 US New+Existing Home Sales 5,644.0 SAAR thous. 14.5 1/31/2011 CRB Index 346.2 index 27.8 2/25/2011 US New Home Inventory (mos) 7.9 months 1.3 1/31/2011 Natural Gas 3.864 USD / MMBtu 18.9 2/25/2011 US Existing Home Inventory (mos) 7.6 months 1.3 1/31/2011 US New Home Total For Sale 0.2 thou 19.1 1/31/2011 US Existing Home Total For Sale 3.4 mil 3.1 1/31/2011 US New+Existing Home Inventory (mos) 7.6 months 31.0 1/31/2011 US Case Shiller Index 142.4 index 2.4 12/31/2010 Change from Peak 31.0% chg 17

US Personal Savings Rate US Personal Savings Rate 2009 2010 average around 5.5% represents the new normal for savings vs. consumption bl balance. 12 10 US Personal Savings Rate (% of Disposable Personal Income) We see savings stabilizing near here Consumers are financing much more of US twin deficit problem with internal savings 8 6 4 2 0 1985 1989 1993 1997 2001 2005 2009 As of March 7, 2010 Update: Monthly, January 2011 18

Consumer deleveraging is pausing as borrowings have turned higher. Bank balance sheets are also expanding through securities ownership and through muted loan growth, US Households have shed an impressive $8k in average debt in 2 years Half through choice, half through default Bank credit is finally turning higher $ billions NSA $2,700 $2,500 $2,300 $2,100 $1,900 $1,700 $1,500 US Credit Conditions Consumer Credit 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 $ Billions 250 200 150 100 50 Non Financial CP $ billions 8000 7500 7000 6500 6000 5500 5000 4500 Bank Credit Total Loans and Leases on US Bank Balance Sheets 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 As of January 19, 2010 4000 2003 2004 2005 2006 2007 2008 2009 2010 19

US Money Supply US monetary indicators are flashing warning signs. However, an upturn in the broader 1.5 money aggregates is afoot 1.3 1.1 meaning deflation may be short 09 0.9 lived. 0.7 Latest small M0 uptick is the effect of QE2 Value / Trillions 2.3 2.1 1.9 1.7 0.5 0.3 US Monetary Base (M0) MONETARY BASE 1995 1997 1999 2001 2003 2005 2007 2009 2011 US M1 Money Supply Conflicting data makes strong arguments for deflation (M3, Velocity) and for inflation (M1, Monetary Base) As of January 19, 2010 Update: Weekly, January 2 010 Billions 1900 1800 1700 1600 1500 1400 1300 1200 1100 1000 M1 Money Supply M1 Yearly Percent Change 1995 1997 1999 2001 2003 2005 2007 2009 2011 25% 20% 15% 10% 5% 0% 5% 10% 20

US Consumer Confidence University of Michigan & Conference Board Surveys Rising from recessionary levels, improvement has been steady throughout 2009 2010. Currently imply 0 2% growth in consumption Surveys provide good insight i htinto spending patterns. Conference board sub surveys for cars and houses remain weak. 160 140 120 100 80 60 40 20 Univ of Michigan Conference Board 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 As of January 19, 2010 Update: Monthly, December/January 2010 21

US Economic Growth Weekly continuing jobless are finally falling toward breakeven levels (425,000) Unemployment is well above prior cycle highs 12 10 8 Unemployment Rate Hiring has picked up with job openings rising 6 Hours worked are improving and temp hiring is better 4 2 As of January 19, 2010 Update: Weekly/Monthly, December/January 2010 0 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 4.0 35 3.5 3.0 2.5 Job Openings Rate 800 700 600 500 400 300 4 Week Claims Average 2.0 1.5 2000 2002 2004 2006 2008 2010 200 100 0 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 22

CPI is falling, PPI holding steady on rising raw inputs Typical predecessor to a profits squeeze US inflation picture is much more benign than the rest of the world US consumers spend less than 10% on food Emerging consumers 30 50% If the economy continues to grow, we would not be surprised to see elevated inflation as soon as 3Q2011 Update: Monthly, January 2011 650 600 550 500 450 400 350 300 250 200 CRB Raw Industrials 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 201 As of February24, 2011 100 % 15% YOY 80 60 40 10% 5% 0% 5% 10% Inflation and Money Supply YOY Inflation Measures 1999 2001 2003 2005 2007 2009 20 CPI PPI TIPS 5y B/E ISM Prices Paid Indices 20 ISM Manufacturing Prices Paid 0 ISM Services Prices Paid 1999 2001 2003 2005 2007 2009 20 23

Credit cards are seeing improvement No federal intervention here Universe of deadbeats burned through Issuers move through the default process to quick write downs % 55 5.5 4.5 3.5 New Credit Card Delinquencies Credit Trends Mortgage delinquencies arefinally seeing improvement. Improvement in all buckets Coupled with a coming spring seasonal improvement, this could be a source of good news for many months 2.5 12% 10% 2002 2003 2004 2005 2006 2007 2008 2009 2010 8% Mortgage Delinquencies 6% 4% 2% Late Pay Foreclosure As of January 19, 2010 0% Update (Mortgage): Quarterly, 3Q10; Update (Credit Card): Monthly, 9/30/2010 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 24

Fund Performance 25

Performance Summary Performance Summary Annualized Performance 4Q 2010 FYTD 1 Year 3 Year 5 Year 10 Year SDCERA Total Fund 4.43% 13.97% 11.39% 2.12% 3.45% 5.49% Current Benchmark 4.21% 14.04% 11.03% 0.21% 5.29% 5.66% Excess Return 0.22% 0.07% 0.36% 2.33% 1.84% 0.17% NOTE: Total Fund Net data since September 1980, excluding WG writedown Current Benchmark Data since January 1991 Fiscal YTD is 7/1/10 12/31/10 / / / Note: Performance presented excludes WG writedown. One year performance including WG writedown is 56 bps lower. 26

$20,000 $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Total Fund VAMI vs. Target VAMI ($bn)* (5% probability band) 17,958 (34% probability band) 14,919 12,111 9,747 11,880 7,992 8,841 7,383 5,969 5,802 5,019 2,655 Feb 03 Jun 03 Oct 03 Feb 04 Jun 04 Oct 04 Feb 05 Jun 05 Oct 05 Feb 06 Jun 06 Oct 06 Feb 07 Jun 07 Oct 07 Feb 08 Jun 08 Oct 08 Feb 09 Jun 09 Oct 09 Feb 10 Jun 10 Oct 10 Feb 11 Jun 11 Oct 11 Feb 12 Jun 12 Oct 12 Feb 13 Jun 13 Oct 13 Feb 14 Jun 14 Oct 14 Feb 15 Jun 15 Oct 15 Total Fund VAMI 8.25% Target Current Systematic VAMI +/ 1 Stdev (68% confidence level) +/ 2 Stdev (95% confidence level) 8.25% Projected Total Fund VAMI *VAMI stands for Value Added Monthly Index; volatility calculated from January 31, 1994 27

Annual Calendar Year Excess Return* 40.0% 30.0% 20.0% 10.0% 0.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 10.0% 20.0% 30.0% 40.0% Total Fund Total Fund ex WG writedown Benchmark Excess Return 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Total Fund 5.87% 8.86% 31.00% 15.62% 10.79% 13.59% 11.24% 31.76% 23.37% 11.39% Total Fund (ex WG wd) 5.87% 8.86% 31.00% 15.62% 10.79% 13.59% 11.24% 31.76% 23.37% 11.95% Benchmark 6.76% 9.70% 27.82% 14.20% 8.99% 15.41% 11.42% 24.59% 20.16% 11.02% Excess Return 0.89% 0.84% 3.18% 1.42% 1.80% 1.82% 0.18% 7.18% 3.21% 0.37% *through December 31, 2010 28

Annual Fiscal Year Excess Return* 30.0% 20.0% 10.0% 0.0% 10.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 FYTD 2011 20.0% 30.0% 0% Total Fund Total Fund ex WG writedown Benchmark Excess Return 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 FYTD 2011 Total Fund 8.19% 4.48% 3.89% 21.28% 13.91% 14.65% 15.34% 0.17% 24.57% 13.08% 13.97% Total lfund d( (ex WG wd) 8.19% 8 4.48% 448% 3.89% 21.28% 28% 13.91% 14.65% 15.34% 0.17% 24.57% 13.65% 13.97% Benchmark 10.34% 6.31% 3.97% 18.86% 11.98% 13.69% 16.45% 1.66% 18.03% 10.75% 14.04% Excess Return 2.15% 1.83% 0.08% 2.42% 1.93% 0.96% 1.12% 1.49% 6.54% 2.33% 0.07% *through December 31, 2010 29

Total Fund Performance Summary Total Fund Vol Benchmark Vol Tracking Error Excess Return Information Ratio 3m 4.43% 4.21% YTD 11.39% 11.02% FYTD 13.97% 14.04% 1yr 11.39% 10.73% 11.02% 10.10% 1.38% 0.37% 0.26 3yr 2.12% 15.43% 0.20% 13.62% 3.16% 2.32% 0.73 5yr 3.45% 12.81% 5.28% 11.15% 2.92% 1.83% 0.63 10yr 5.49% 11.60% 5.65% 12.16% 16% 3.25% 0.17% 0 0.050 05 Weights Returns Attribution 1YR Returns (through Dec 31, 2010)* Portfolio Benchmark Portfolio Benchmark Allocation Selection Interaction Total Active Global Developed Equity 33.70% 20.00% 9.07% 13.94% 1.91% 1.64% 0.27% Emerging Market Equity 6.79% 5.00% 20.42% 18.88% 0.34% 0.10% 0.44% High Yield Fixed Income/Cre 8.47% 5.00% 15.53% 14.49% 0.50% 0.09% 0.59% Private Equity 5.23% 10.00% 22.76% 15.97% 0.76% 0.35% 0.41% Emerging Market Debt 4.41% 10.00% 15.63% 17.93% 1.00% 0.10% 1.10% US Bonds 13.41% 40.00% 2.40% 5.04% 1.34% 0.35% 1.69% Global Macro/CTA 4.22% 10.00% 12.99% 3.31% 0.19% 0.41% 0.22% Relative Value 4.36% 10.00% 7.74% 2.66% 0.15% 0.45% 0.60% US TIPS 5.06% 5.00% 6.72% 6.33% 0.00% 0.02% 0.02% Real Estate 8.33% 10.00% 7.34% 11.05% 0.18% 0.31% 0.49% Natural Resources and ORA 6.01% 10.00% 18.62% 22.57% 0.90% 0.24% 1.14% Futures 0.00% 35.00% Total 100.00% 135.00% 11.39% 11.02% 1.48% 1.21% 3.05% 0.37% *Beginning of period weights used for attribution analysis 30

Total Fund Performance Last 3M Returns (through Weights Returns Attribution Dec 31, 2010)* Portfolio Benchmark Portfolio Benchmark Allocation Selection Interaction Total Active Global Developed Equity 20.88% 20.00% 8.74% 8.95% 0.08% 0.04% 0.03% Emerging Market Equity 5.78% 5.00% 5.95% 7.34% 0.06% 0.08% 0.02% High Yield Fixed Income/Cre 7.50% 5.00% 4.39% 3.06% 0.08% 08% 0.10% 0.18% Private Equity 9.43% 10.00% 7.72% 11.79% 0.07% 0.38% 0.45% Emerging Market Debt 10.88% 10.00% 0.50% 0.39% 0.00% 0.01% 0.01% US Bonds 15.18% 40.00% 7.05% 3.31% 0.82% 0.57% 0.25% Global Macro/CTA 13.31% 10.00% 2.06% 4.59% 0.15% 0.34% 0.19% Relative Vl Value 7.96% 10.00% 00% 3.34% 34% 2.09% 0.04% 0 04% 0.10% 0.06% 06% US TIPS 5.06% 5.00% 0.67% 0.66% 0.00% 0.00% 0.00% Real Estate 10.68% 10.00% 6.64% 5.28% 0.04% 0.15% 0.18% Natural Resources and ORA 10.19% 10.00% 11.84% 12.99% 0.02% 0.12% 0.09% Futures 16.84% 35.00% Total 116.84% 135.00% 4.43% 4.21% 1.13% 1.20% 0.29% 0.22% *Beginning of period weights used for attribution analysis 31

Total Fund Performance FYTD Returns (through Dec Weights Returns Attribution 31, 2010)* Portfolio Benchmark Portfolio Benchmark Allocation Selection Interaction Total Active Global Developed Equity 33.04% 20.00% 23.85% 23.96% 3.12% 0.04% 3.09% Emerging Market Equity 5.57% 5.00% 25.21% 26.69% 0.15% 0.08% 0.07% High Yield Fixed Income/Cre 4.93% 5.00% 7.86% 9.98% 0.01% 0.10% 0.11% Private Equity 5.35% 10.00% 13.40% 12.74% 0.59% 0.04% 0.56% Emerging Market Debt 14.85% 10.00% 11.18% 11.92% 0.58% 0.11% 0.47% US Bonds 6.92% 40.00% 3.62% 0.28% 0.09% 0.23% 0.14% Global Macro/CTA 5.05% 10.00% 5.70% 8.92% 0.44% 0.16% 0.60% Relative Value 3.89% 10.00% 7.78% 2.63% 0.16% 0.20% 0% 0.04% US TIPS 5.58% 5.00% 1.77% 1.83% 0.01% 0.00% 0.01% Real Estate 9.39% 10.00% 15.64% 13.51% 0.08% 0.20% 0.12% Natural Resources and ORA 5.43% 10.00% 22.79% 27.04% 1.23% 0.23% 1.47% Futures 0.00% 35.00% Total 100.00% 00% 135.00% 13.97% 14.04% 1.44% 0.53% 0.98% 0.07% 07% *Beginning of period weights used for attribution analysis 32

Performance Drivers 4Q results were aided d by a significant underweight to US Bonds. Higher beta ( riskier ) equities rose during quarter; higher yielding credits continued their winning streak. Top Five Return Contributors % Contribution US Bonds Allocation 0.82% Timing and Interaction 0.29% Global Macro/CTA Allocation 0.15% Real Estate Security Selection 0.15% High Yield Security Selection 0.10% Top Five Return Detractors % Contribution US Bonds Security Selection 0.57% Private Equity Selection 0.38% Managers with more balanced positioning lagged behind. Global Macro/CTA Selection 0.34% Natural Resources Selection 0.12% Emerging Market Equity Selection 0.08% 33

Fund Alpha and Residual Volatility*(1): 3m, 1yr 3m 1 year Actual Return Predicted Return Alpha Residual Vol ZScore Z-Score Actual Return Predicted Return Alpha Residual Vol ZScore Z-Score R^2 Global Developed Equity Global Equity Swap 8.06% 8.80% -0.74% 0.74% -1.00 10.85% 10.79% 0.05% 0.84% 0.06 99.97% Legato Composite 14.83% 13.65% 1.18% 0.89% 1.33 25.99% 22.64% 3.34% 2.04% 1.63 99.34% Nicholas Applegate CB 11.55% 8.82% 2.73% 0.53% 5.17 21.53% 13.72% 7.81% 2.38% 3.28 97.75% Russell Global Overlay Ntl 7.24% 8.63% -1.39% 0.94% -1.48 10.93% 10.12% 0.81% 1.86% 0.43 99.60% Emerging Market Equity Baillie Gifford 4.46% 7.69% -3.23% 0.80% -4.01 15.27% 16.43% -1.16% 3.76% -0.31 98.18% Berens 5.76% 2.22% 3.54% 2.00% 1.77 21.86% 0.50% 21.37% 3.95% 5.41 85.62% Genesis 7.20% 6.34% 0.85% 0.82% 1.04 24.95% 20.78% 4.17% 3.54% 1.18 96.63% High Yield Fixed Income/Credit BlackRock Credit Investors 7.27% 5.77% 1.49% 2.58% 0.58 11.41% 7.38% 4.03% 4.59% 0.88 81.85% Hotchkis & Wiley 518% 5.18% 292% 2.92% 225% 2.25% 652% 6.52% 035 0.35 21.19% 19% 14.46% 46% 673% 6.73% 585% 5.85% 115 1.15 94.94% 94% Oaktree 2.51% 2.35% 0.16% 0.49% 0.32 12.93% 9.29% 3.64% 2.01% 1.82 82.67% Zazove High Yield CB Fund 7.21% 6.26% 0.96% 6.31% 0.15 18.72% 9.13% 9.58% 14.15% 0.68 1.45% Private Equity Russell US Equity PE Ntl 11.59% 11.59% 0.00% 0.06% -0.02 16.18% 17.28% -1.11% 0.57% -1.95 99.91% SDCERA PE Buyout 0.54% 1.08% -0.54% 0.12% -4.57 7.29% -8.38% 15.66% 5.36% 2.92 74.60% SDCERA PE Distressed 14.38% -0.28% 14.66% 1.71% 8.58 20.37% -8.83% 83% 29.20% 20% 6.50% 4.4949 25.76% SDCERA PE Niche & Other 3.07% 3.05% 0.02% 0.01% N/A 15.19% 15.04% 0.15% 0.02% N/A 100.00% SDCERA PE Venture Capital 0.74% 5.48% -4.74% 1.03% -4.58 8.75% 7.11% 1.65% 6.84% 0.24 70.42% Emerging Market Debt Wellington EMD -0.50% 0.08% -0.58% 2.69% -0.22 14.14% 14.95% -0.81% 4.95% -0.16 61.34% US Bonds Hoisington -15.41% -23.38% 38% 7.97% 12.16% 16% 0.66 48.62% 4.80% 43.83% 20.05% 05% 2.19 79.97% 97% Russell Core Overlay 30yr Treas -3.72% -3.28% -0.44% 0.28% -1.59 7.76% 9.43% -1.67% 1.00% -1.66 97.77% Russell Core Overlay 10yr Treas -3.72% -3.98% 0.25% 0.44% 0.58 7.76% 5.44% 2.32% 1.06% 2.19 97.79% *through December 31, 2010 34

Fund Alpha and Residual Volatility (1): 7yr 7 Years Actual Predicted Residual Return Return Alpha Vol ZS Z-Score R^2 Global Developed Equity Global Equity Swap 4.97% 4.66% 0.31% 0.50% 0.62 99.91% Legato Composite 7.89% 5.14% 2.75% 1.95% 1.41 98.97% Nicholas Applegate CB 9.52% 4.75% 4.77% 3.59% 1.33 92.64% Russell Global Overlay Ntl 4.99% 4.34% 0.64% 0.83% 0.78 99.77% Emerging Market Equity Baillie Gifford 19.17% 14.93% 4.25% 3.96% 1.07 97.84% Berens 14.26% -5.40% 19.66% 5.57% 3.53 87.15% Genesis 20.29% 15.32% 4.98% 3.87% 1.29 97.55% High Yield Fixed Income/Credit BlackRock Credit Investors 4.60% 1.23% 3.36% 7.05% 0.48 86.34% Hotchkis & Wiley 795% 7.95% 785% 7.85% 009% 0.09% 278% 2.78% 003 0.03 94.14% Oaktree 7.92% 4.92% 3.00% 2.54% 1.18 92.86% Zazove High Yield CB Fund 8.75% 3.23% 5.53% 12.01% 0.46 53.38% Private Equity Russell US Equity PE Ntl 4.39% 4.91% -0.51% 0.49% -1.05 99.91% SDCERA PE Buyout 11.90% -17.07% 28.97% 3.92% 7.39 78.60% SDCERA PE Distressed 21.49% -14.82% 36.32% 32% 5.59% 59% 6.49 56.42% SDCERA PE Niche & Other 8.21% 7.78% 0.44% 0.09% N/A 99.99% SDCERA PE Venture Capital 7.07% 2.97% 4.10% 4.01% 1.02 82.32% Emerging Market Debt Wellington EMD 9.46% 9.92% -0.46% 3.61% -0.13 86.44% US Bonds Hoisington 183% 1.83% 42.70% -40.88% 21.22% 22% -1.93 72.52% Russell Core Overlay 30yr Treas 4.03% 5.88% -1.85% 1.36% -1.36 95.80% Russell Core Overlay 10yr Treas 4.03% 0.75% 3.28% 1.23% 2.66 96.51% 35

Fund Alpha and Residual Volatility(2): 3m, 1yr Actual Return Predicted Return 3m Residual Vol Actual Return Predicted Return 1 year Residual Alpha Vol Z-Score R^2 Alpha Z-Score Global Macro/CTA BlackRock EM Macro -1.12% 12% -1.81% 0.69% 1.41% 0.49-3.68% 0.38% -4.07% 5.94% -0.69 10.69% BlackRock Global Ascent 4.24% 2.23% 2.01% 1.76% 1.14 10.19% -0.13% 10.32% 4.53% 2.28 66.89% Brevan Howard -1.04% -1.85% 0.81% 0.40% 2.05 0.38% -2.62% 3.00% 3.83% 0.78 2.57% Bridgewater Major Markets 4.92% 2.67% 2.26% 4.43% 0.51 25.21% 8.61% 16.60% 6.95% 2.39 13.09% Bridgewater Pure Alpha Opp 10.78% 3.82% 6.96% 9.05% 0.77 46.53% 12.82% 33.71% 11.51% 2.93 13.80% Campbell Multi-Strategy 7.03% -21.30% 28.33% 7.35% 3.86 15.70% -69.90% 85.60% 8.09% 10.58 60.20% Graham Capital Management 0.75% 0.10% 0.65% 0.04% 15.00 11.28% 2.33% 8.95% 5.46% 1.64 0.15% Kenmar CTA Choice Fund LLC 2.53% 2.54% -0.02% 4.56% 0.00 5.51% 2.46% 3.05% 4.61% 0.66 54.48% Relative Value AQR Delta Fund - Regular Vol 4.72% 2.43% 2.29% 2.86% 0.80 11.87% 4.86% 7.01% 3.13% 2.24 64.45% Carlson Capital 2.26% 2.15% 0.10% 1.47% 0.07 10.44% -0.09% 10.53% 2.65% 3.98 71.29% DE Shaw -3.72% 2.63% -6.35% 14.64% -0.43-4.94% 0.11% -5.05% 13.80% -0.37 18.19% Moon Capital 2.00% -0.46% 2.46% 0.67% 3.68 3.86% 1.99% 1.87% 3.41% 0.55 19.75% Stark Investments 4.32% -3.31% 7.63% 1.24% 6.17 8.08% -21.18% 29.26% 3.21% 9.10 62.52% UBS O'Connor MNO 1.59% 0.12% 1.48% 0.21% 7.19 1.70% -0.69% 2.40% 1.30% 1.85 52.10% US TIPS SSGA TIPS Index Fd -0.65% -0.61% -0.04% 0.77% -0.06 4.76% 6.72% -1.95% 1.62% -1.20 89.82% Real Estate Dow Jones REIT Swap CL 6.99% 7.73% -0.74% 0.46% -1.62 35.10% 30.98% 4.12% 6.27% 0.66 91.31% SDCERA RE Core+Non-Core 0.68% -5.83% 6.51% 0.45% 14.49 10.89% -24.00% 34.89% 3.34% 10.45 0.27% Natural Resources and ORA Brookfield Americas 4.96% 3.02% 1.94% 2.21% 0.88 5.77% 1.77% 4.01% 3.49% 1.15 93.88% Commodity SWAP (Notional) 12.91% 12.49% 0.42% 1.29% 0.32 10.58% 10.89% -0.31% 2.69% -0.12 97.76% Global Infrastructure Partners 2.45% 2.54% -0.09% 1.77% -0.05 26.95% 4.23% 22.72% 13.23% 1.72 4.88% Macquarie Infrastructure II 11.65% 2.44% 9.21% 11.72% 0.79 17.41% 4.83% 12.58% 12.17% 1.03 14.85% SDCERA PE Energy 25.97% 21.15% 4.83% 7.27% 0.66 32.84% 25.34% 7.49% 11.23% 0.67 81.34% SSGA S&P 500 Materials 18.71% 18.60% 0.12% 0.21% 0.56 12.17% 21.75% -9.58% 8.73% -1.10 89.02% SSGA S&P MLP Index 8.66% 8.58% 0.07% 0.09% 0.84 28.23% 34.51% -6.28% 5.74% -1.09 80.46% SSGA S&P TSX Materials 17.80% 14.06% 3.74% 3.95% 0.95 40.72% 35.78% 4.93% 9.33% 0.53 90.13% 36

Fund Alpha and Residual Volatility*(2): 7yr Actual Return Predicted Return 7 Years Residual Alpha Vol Z-Score R^2 Global Macro/CTA BlackRock EM Macro 16.03% 4.48% 11.55% 14.52% 0.80 35.89% BlackRock Global Ascent 8.85% 0.12% 8.74% 10.07% 0.87 26.69% Brevan Howard 13.54% 0.38% 13.16% 6.63% 1.99 11.14% Bridgewater Major Markets 9.16% 5.01% 4.14% 7.38% 0.56 29.61% Bridgewater Pure Alpha Opp 12.96% 7.42% 5.54% 10.46% 0.53 30.85% Campbell Multi-Strategy 1.92% -84.46% 86.38% 13.66% 6.32 29.22% Graham a Capital Management age e 8.21% -1.35% 9.57% 5.48% 1.75 20.75% Kenmar CTA Choice Fund LLC 3.92% 1.84% 2.08% 5.16% 0.40 49.77% Relative Value AQR Delta Fund - Regular Vol 4.23% 3.43% 0.80% 2.66% 0.30 66.06% Carlson Capital 9.37% -1.31% 10.68% 3.85% 2.77 62.43% DE Shaw 7.42% -0.75% 8.17% 7.23% 1.13 15.99% Moon Capital 6.36% 3.43% 2.93% 4.26% 0.69 50.01% Stark Investments 4.93% -30.19% 35.12% 4.78% 7.35 63.01% UBS O'Connor MNO 8.99% -0.03% 9.03% 2.96% 3.05 20.30% US TIPS SSGA TIPS Index Fd 5.21% 3.56% 1.65% 1.45% 1.13 95.48% Real Estate Dow Jones REIT Swap CL 6.15% 12.22% -6.07% 2.61% -2.32 99.16% SDCERA RE Core+Non-Core 4.21% -30.93% 35.14% 4.74% 7.42 40.49% Natural Resources and ORA Brookfield Americas 11.09% -5.08% 16.17% 5.26% 3.08 91.19% Commodity SWAP (Notional) 1.55% 3.90% -2.35% 2.27% -1.04 99.21% Global Infrastructure Partners 12.68% 1.12% 11.56% 13.67% 0.85 6.02% Macquarie Infrastructure II 14.40% 4.13% 10.27% 8.53% 1.20 36.26% SDCERA PE Energy 23.44% 6.16% 17.28% 14.76% 1.17 74.31% SSGA S&P 500 Materials 6.52% 7.71% -1.19% 3.33% -0.36 97.66% SSGA S&P MLP Index 13.29% 13.96% -0.67% 2.17% -0.31 98.39% SSGA S&P TSX Materials 21.16% 16.04% 5.12% 10.44% 0.49 92.17% Note: Z Score is (Actual Return Predicted Return)/Alpha Vol 37

Peer Comparison 51

Risk adjusted Peer Comparison 52

Risk Management 53

Total Fund Risk* Total Fund Risk Security Selection Risk 0.90% 9.63% 10.52% Fund Factor Risk 200 150 250 100 300 50 350 Benchmark Factor Risk Security Selection Impact 0.70% Total Active Risk 1.05% 1.75% 9.75% 0 Current Quarter: 154bps Current Quarter: 175bps Prior Quarter: 165bps (101bp Prior allocation Quarter: 165bps and 64bp (101bp allocation selection and impact) 64bp selection impact) 400 Allocation Impact 0% 2% 4% 6% 8% 10% 12% A B A^2 A2 B^2 B2 (A 2 +B 2 ) SS Risk AA Risk SS^2 AA^2 Total Active Risk Total Fund Risk 0.98% 10.48% 0.01% 1.10% 10.52% Total Active Risk 0.98% 1.46% 0.01% 0.02% 1.75% A= Allocation Risk Description of relative benchmark risk B=Security Selection Risk Fundspecificrisk *Assumes no correlation between security and allocation risk. 7 year lookback period. 54

Risk Summary* Contribution to risk from Total Systematic Residual Portfolio Expected Volatility 10.63% 10.47% 1.84% Portfolio Monthly 95% VAR 5.05% 4.97% 0.87% MSCI World Monthly 95% VAR 7.90% 7.90% N/A ML US High Yield Bonds Monthly 95% VAR 5.39% 5.39% N/A Portfolio Monthly 99% VAR 7.14% 7.03% 1.24% Portfolio Conditional Monthly 95% VaR 5.35% Portfolio Cornish Fisher Monthly 95% VAR 5.84% Frequency of violations of 95% VAR 4.17% *Calculated from Jan 31, 2003 through December 31, 2010 55

Total Fund Annualized Monthly 95% VaR 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% Total Fund Absolute VaR to Month* Total Fund Absolute VaR 36m Rolling 60 Equity/40 Fixed Income VaR 36m Rolling Benchmark VaR 36m Rolling Total Fund Long Term VaR (7 years) *March 31, 1997 start 56

Total Fund Annualized Tracking Error 8.00% 6.00% 4.00% 4.20% 2.00% 3.26% 0.00% 1.65% Feb 00 Jun 00 Oct 00 Feb 01 Jun 01 Oct 01 Feb 02 Jun 02 Oct 02 Feb 03 Jun 03 Oct 03 Feb 04 Jun 04 Oct 04 Feb 05 Jun 05 Oct 05 Feb 06 Jun 06 Oct 06 Feb 07 Jun 07 Oct 07 Feb 08 Jun 08 Oct 08 Feb 09 Jun 09 Oct 09 Feb 10 Jun 10 Oct 10 2.00% 4.00% 2.89% 6.00% 8.00% 800% 6.96% 10.00% 12.00% Ann Tracking Error to Current Month Ann Total Active Risk 95% Relative VaR to Current Month Ann Tracking Error 36M Rolling Ann 95% Relative VaR To Current Month Total Active Risk 57

Composite Level Risk Decomposition Current Portfolio Proforma from Jan 2008 and Dec 2010 Investment Fund Decomposed Risk Fund $m Risk Rank Global Developed Equity $1,770.27 22.15% 23.84% 5.03% 1 33.65% Emerging Market Equity $469.38 5.87% 32.81% 1.81% 4 12.09% High Yield Fixed Income/Credit $556.34 6.96% 16.54% 0.91% 7 6.09% Private Equity $733.35 9.18% 17.80% 1.51% 5 10.11% Emerging Market Debt $821.24 10.28% 13.23% 1.21% 6 8.07% US Bonds $2,179.63 27.27% 11.38% 0.08% 11 0.55% Global Macro/CTA $1,062.31 13.29% 5.13% 0.10% 10 0.64% Relative Value $613.33 7.67% 4.71% 0.23% 9 1.53% US TIPS $385.78 4.83% 8.68% 0.25% 8 1.66% Real Estate $897.65 11.23% 20.32% 1.81% 3 12.12% Natural Resources and ORA $906.90 11.35% 21.55% 2.01% 2 13.48% CurrentPortfolio Proforma $10,396.19 130.08% 14.94% 14.94% 100.00% Perc Act. Perc 58

Factor Exposures 59

Principal Factor Exposures How do the factor exposures present in SDCERA s current portfolio differ from those present in the policy (benchmark) portfolio? These factor exposures will explain most of the return of the current portfolio. Differences between portfolio and benchmark returns will be partially explained dby the differing i factors exposures each has. %MV Alpha Proforma Risk Small Cap (Russe ell 2000) turn S&P500 Total Ret MSCI World ex-us MSCI Emerging Markets ML US High Yield Bonds Global Developed Equity 22.15% 0.85% 16.81% 2.2% 9.3% 9.7% 0.0% 0.6% 0.0% 0.0% -0.1% -0.1% 0.1% 0.0% 0.0% 0.2% -0.1% -0.3% 0.0% Emerging Market Equity 5.87% 6.01% 24.60% 0.0% 0% 0.0% 0% 0.0% 0% 5.1% 0.9% 0.8% 0.0% 0% 0.0% 0% 0.0% 0% 0.0% 0% 0.0% 0% 0.1% -1.0% 0.0% 0% 0.0% 0% 0.0% 0% High Yield Fixed Income/Credit 6.96% 2.02% 11.17% 0.0% 0.0% 0.0% 0.0% 6.3% 0.0% -2.0% 0.0% -0.1% 0.1% 0.0% 0.1% 0.3% 0.0% 0.0% 0.0% Private Equity 9.18% 10.98% 12.58% 0.7% 5.8% 0.0% 0.0% 0.8% 0.0% -0.4% 0.0% 0.1% 0.1% 0.0% 0.1% 0.0% 0.0% 0.2% 0.0% Emerging Market Debt 10.28% -0.46% 9.74% 0.0% 0.0% 0.0% 0.0% 4.7% 2.5% 7.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -0.2% 0.0% 0.0% US Bonds 27.27% -0.91% 8.68% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 46.1% -0.4% 0.0% 0.0% -1.3% 0.0% 1.9% -0.1% 0.0% 0.0% Global Macro/CTA 13.29% 17.42% 4.51% -0.6% -0.3% 0.0% 1.2% -0.8% 0.0% -0.7% 0.0% 0.7% 0.0% 0.0% -0.3% 0.0% 0.0% 0.0% 0.0% Relative Value 7.67% 5.71% 3.75% 0.0% 0.0% 1.2% 0.2% 0.4% 0.0% -0.8% -0.4% 0.3% -0.1% 0.3% -0.2% 0.3% 0.0% 0.6% 0.0% JP GBI-EM Globa al Diversified Comp posite Unhedged USD US TIPS 483% 4.83% 165% 1.65% 683% 6.83% 00% 0.0% 0.5% -0.3% 00% 0.0% 00% 0.0% 00% 0.0% 0.7% 00% 0.0% 00% 0.0% 00% 0.0% 00% 0.0% 0.1% 4.1% 00% 0.0% 00% 0.0% 00% 0.0% Real Estate 11.23% 18.29% 14.98% 0.0% 0.0% 0.0% 0.0% -1.6% 0.0% 0.0% 6.2% 0.0% 0.0% 0.0% 0.4% 0.0% 0.0% 0.0% 0.0% Natural Resources and ORA 11.35% 2.36% 16.79% 0.3% -0.3% 0.1% 0.2% 0.1% 0.0% -0.3% 0.0% 2.0% 1.6% 3.1% 3.1% 0.0% 0.0% 0.0% 0.0% Portfolio 2.6% 15.0% 10.7% 6.7% 11.3% 3.3% 50.0% 5.2% 2.8% 1.8% 2.1% 3.4% 5.8% -0.4% 0.5% 0.0% 10.46% Benchmark 1.2% 18.6% 12.1% 5.2% 2.9% 9.4% 53.6% 1.1% 2.7% 1.7% 4.0% 3.9% 5.5% -0.3% 0.0% -12.6% 9.75% Difference 1.3% -3.6% -1.4% 1.5% 8.4% -6.1% -3.6% 4.2% 0.1% 0.1% -1.9% -0.5% 0.3% -0.1% 0.5% 12.6% 1.46% ter US Treasury Mast e DJ US Real Estate Index ls S&P/TSX Materia Index S&P 500 Materials TR Index Citigroup MLP TR Index S&P GSCI TR Markit iboxx TIPS Inflation-Linked Real Total Return Inde ex Change in VIX US Dollar Risk Free Rate Portfolio Risk 60

Percentage of Total Portfolio Risk Explained by Primary Factors The factors on the previous slide do not explain everything. In fact, 83.35% of total portfolio risk is explained by primary factors. The unexplained part is a combination of a) other factors that have not been used but may explain part of the currently unexplained and b) manager skill 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 5.00% 61

Secondary Asset Weighted Factor Exposures We can try to improve on the explanatory power of external market factors by taking a second run at the portion we could not explain with some other factors (we will call them secondary factors). %MV Factor F&F SMB Factor F&F HML TED Sprea ad -Gov US 10Y B- Global Developed Equity 22.15% 0.0% -0.2% 18.7% 0.0% 0.0% 0.0% 0.0% 0.3% 0.0% 0.1% 0.0% Emerging Market Equity 5.87% 0.0% 0.0% 0.0% -1.0% 3.2% 0.0% 0.0% 0.0% -0.4% 0.0% 0.0% High YieldFixedIncome/Credit 696% 6.96% 00% 0.0% 00% 0.0% 00% 0.0% 00% 0.0% 00% 0.0% 00% 0.0% 00% 0.0% 00% 0.0% -0.4% 00% 0.0% 0.1% Private Equity 9.18% 0.0% 0.0% 4.8% -8.6% -0.3% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% Emerging Market Debt 10.28% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 1.0% 0.0% 0.0% 0.0% US Bonds 27.27% 0.0% 0.0% 58.8% -11.9% 8.9% 0.0% 0.0% 0.0% 0.0% 1.8% -1.6% Global Macro/CTA 13.29% 0.3% 0.0% -2.9% -11.4% 35.7% 0.0% -26.8% 0.0% 1.7% -0.4% 0.3% Relative Value 7.67% 0.0% -0.1% 4.1% -2.1% 0.6% 0.0% 0.0% 0.0% 0.4% 0.0% 0.0% US TIPS 483% 4.83% 00% 0.0% 00% 0.0% 00% 0.0% 00% 0.0% 00% 0.0% 00% 0.0% 00% 0.0% 00% 0.0% 00% 0.0% 00% 0.0% -0.1% Real Estate 11.23% 0.0% -0.8% 0.0% -21.9% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Natural Resources and ORA 11.35% 0.0% 0.0% 7.5% -0.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Portfolio 0.3% -1.1% 90.9% -57.1% 48.1% 0.1% -26.8% 1.3% 1.3% 1.5% -1.3% 0.47% Total Fund Factor Risk = (wx2σx2+wy2σy2+2wxwyσxσyρ(x,y)) 10.48% S&P Yield Difference US 10y Sw wap Spread US Slope ndex FX Carry I FX Momen ntum Index x =Primary Factor y =Secondary Factor F&F Large GMV Factor l GMV Factor F&F Smal σ =Stdev ρ =Correl Portfolio Risk 62

Percentage of Total Portfolio Risk Contributed by Secondary Factors SALIENT In aggregate, secondary factors contributed 0.0308% to total portfolio risk. 0.1000% 0.0800% 0.0600% 0.0400% 0.0200% 0.0000% 0.0200% 0 0200% 0.0400% 0.0600% 0.0800% 0.1000% 63

Factor Exposure (Absolute) US Treasury Master S&P500 ML US High Yield MSCI World ex US MSCI Emerging Markets Markit iboxx TIPS DJ US Real Estate S&P GSCI JP GBI EM S&P/TSX Materials Russell 2000 Citigroup MLP S&P 500 Materials US Dollar Risk Free Rate VIX We need to risk adjust the factor exposures to show the contribution to risk of each i.e. how dominant is each factor in epa explaining the Total Fund Factor Risk of 10.48? The equity beta in the portfolio will tend to dominate the combined factor risk. 10.00% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% Asset Weighted Risk Adjusted Portfolio (Asset Weighted) Portfolio (Risk Adjusted)* Rank Russell 20 000 &P500 S MSCI World ex- US MSCI E merging Markets ML US High Yield JP GBI-EM US T reasury Master DJ US Real E state 2.6% 15.0% 10.7% 6.7% 11.3% 3.3% 50.0% 5.2% 2.8% 1.8% 2.1% 3.4% 5.8% -0.4% 0.5% 0.0% 4.3% 20.1% 17.9% 14.7% 10.2% 3.3% 1.0% 11.2% 4.4% 3.2% 1.5% 4.5% 1.9% 1.8% -0.3% 0.0% 8 1 2 3 5 9 14 4 7 10 13 6 11 12 16 15 S &P/TSX Materials S &P 500 Materials Citigroup MLP &P GSCI S Markit ib Boxx TIPS VIX US Dollar Risk Free Rate *Percentage of Total Factor Risk 64

Factor Exposures (Relative): 175bps Active Factor Risk Risk Free Rate ML US High Yield DJ US Real Estate MSCI Emerging Markets Russell 2000 US Dollar Markit iboxx TIPS S&P/TSX Materials S&P 500 Materials VIX S&P GSCI MSCI World ex US Citigroup MLP S&P500 US Treasury Master JP GBI EM Active Factor Risk is created by having slightly different asset weighted beta s than the benchmark. This chart shows those differences and their respective contributions to the overall 175bps of Active Factor Risk the portfolio currently has. 40.00% 20.00% 0.00% 20.00% 40.00% 60.00% 80.00% Asset Weighted Risk Adjusted Relative (Asset Weighted) Relative (Risk Adjusted)* Rank Russell 20 000 &P500 S MSCI World ex- US MSCI E merging Markets ML US High Yield JP GBI-EM US T reasury Master DJ US Real E state S &P/TSX Materials S &P 500 Materials Citigroup MLP &P GSCI S Markit ib Boxx T IPS 1.3% -3.6% -1.4% 1.5% 8.4% -6.1% -3.6% 4.2% 0.1% 0.1% -1.9% -0.5% 0.3% -0.1% 0.5% 12.6% 13.0% -22.2% -8.9% 12.1% 50.4% -15.7% 4.1% 64.4% 0.4% 0.8% -8.5% -1.3% 0.1% 3.0% -0.4% -1.7% 3 16 14 4 2 15 5 1 8 7 13 11 9 6 10 12 VIX US Dollar Risk Free Rate *Percentage of Total Factor Risk 65

Historical Evolution of Factors Exposures with Cash 66

Beta of Current Systematic Returns 67

Change in Expected Portfolio Risk (Basis Points) Subject to Changes in Factor Allocations (1% Increase) 68

Change in Expected Portfolio Risk (Basis Points) Subject to Changes in Factor Allocations (Removal) 69

Stress Testing 70

Current Systematic vs. Tactical Indices The top graphs show the historical relationship of the current systematic monthly returns and the factor return for the same month. The most recent month is shown in red and the three months prior are shown in yellow. The bottom graphs show the average performance of the current systematic and residual components during historical time periods based on performance deciles of the factors. 71

Stress Test in Event Periods Historical Average Performance of the Current Systematic and the Residuals MSCI World Deciles ML US High Yield Bonds Deciles MSCI World Systematic Residuals Total ML US High Yield Bonds Systematic Residuals Total Worst 9.68% 5.49% 0.44% 5.05% 5.68% 4.93% 0.35% 4.58% 9th 3.17% 1.48% 0.35% 1.12% 1.33% 0.76% 0.21% 0.55% 8th 1.77% 1.53% 0.36% 1.17% 0.26% 1.18% 0.41% 0.77% 7th 0.31% 0.45% 0.51% 0.96% 0.46% 0.44% 0.48% 0.92% 6th 0.93% 0.69% 0.45% 1.14% 0.97% 0.90% 0.53% 1.43% 5th 1.67% 0.77% 0.31% 1.08% 1.30% 0.98% 0.62% 1.60% 4th 2.29% 0.88% 0.57% 1.45% 1.53% 1.44% 0.39% 1.84% 3rd 3.38% 2.62% 0.31% 2.92% 1.93% 1.52% 0.47% 2.00% 2nd 4.71% 2.69% 0.47% 3.17% 2.81% 2.13% 0.37% 2.51% Best 8.03% 4.59% 0.29% 4.88% 6.08% 3.69% 0.24% 3.93% Monte Carlo Simulations for Current Systematic Exposures only Normal Market MSCI World Event ML US High Yield Market Conditions Market Conditions Bonds Event Conditions Current Current Current Current 50% 0.01% 0.04% 0.04% 0.07% 75% 1.79% 3.58% 3.32% 2.44% 95% 4.38% 8.67% 8.42% 5.81% 99% 6.32% 12.17% 17% 12.08% 8.24% Worst of 10000 9.45% 18.01% 17.29% 13.45% Beta to MSCI World 52.90% 58.31% 61.70% 55.13% R squared 80.38% 94.85% 94.51% 93.81% Beta to ML US High Yield Bonds 71.76% 75.43% 69.25% 69.50% R squared 53.08% 70.83% 73.49% 41.34% Systematic Vol (p.a.) 9.25% 18.32% 17.49% 12.21% 21% Normal market conditions are the average conditions over the full history of the index. Event market conditions are the conditions in the 12 largest loss and 12 largest gain months. Current market conditions are the conditions in the most recent 24 months. 72

Risk Decomposition (1) Fund Historical Standard Deviation Risk Decomposition (based on current portfolio and proforma calculations) Total Risk Realised Risk Expected Risk Fund Allocation Fund Rank Fund Rank Fund Rank AQR Delta Fund Regular Vol 4.06% 4.44% 43 0.99% 19 0.85% 20 Baillie Gifford 2.40% 25.00% 5 5.35% 7 5.21% 7 Berens 0.46% 15.78% 17 0.56% 26 0.54% 26 BlackRock Credit Investors 0.58% 16.76% 14 0.66% 23 0.72% 23 BlackRock EM Macro 0.43% 17.68% 12 0.29% 31 0.30% 29 BlackRock Global Ascent 1.55% 12.05% 23 0.63% 24 0.76% 22 Brevan Howard 2.83% 6.94% 36 0.17% 45 0.14% 44 Bridgewater Major Markets 0.53% 8.83% 30 0.05% 41 0.13% 39 Bridgewater Pure Alpha Opp 0.64% 11.66% 24 0.09% 39 0.04% 42 Brookfield Americas 0.10% 17.70% 11 0.14% 37 0.14% 38 Campbell Multi Strategy 0.75% 15.07% 19 0.31% 29 0.35% 28 Carlson Capital 0.66% 5.45% 42 0.17% 36 0.15% 37 Commodity SWAP (Notional) 3.07% 24.86% 6 3.75% 9 3.58% 8 DE Shaw 0.16% 7.71% 33 0.03% 42 0.04% 41 Dow Jones REIT Swap CL 5.30% 26.79% 4 10.98% 2 10.40% 2 Genesis 3.02% 24.72% 7 6.32% 6 6.23% 6 Global Equity Swap 13.14% 16.93% 13 19.34% 1 19.22% 1 Global Infrastructure Partners 0.87% 13.95% 22 0.30% 30 0.26% 33 Graham Capital Management 3.75% 6.90% 40 0.09% 44 0.24% 34 Hii Hoisington 209% 2.09% 39.77% 1 000% 0.00% 43 0.38% 0 45 Hotchkis & Wiley 3.32% 11.04% 27 2.80% 11 2.61% 11 Kenmar CTA Choice Fund LLC 2.82% 7.80% 32 0.38% 27 0.28% 31 Legato Composite 2.27% 19.08% 9 3.46% 10 3.45% 9 73

Risk Decomposition (2) Standard Deviation Risk Decomposition (based on current portfolio and proforma calculations) Total Risk Realised Risk Expected Risk Fund Allocation Fund Rank Fund Rank Fund Rank Macquarie Infrastructure II 0.61% 11.35% 25 0.24% 33 0.27% 32 Moon Capital 1.04% 7.20% 35 0.28% 32 0.28% 30 Nicholas Applegate CB 1.02% 14.80% 20 1.12% 17 1.11% 18 Oaktree 2.35% 7.68% 34 1.39% 15 1.27% 16 Russell Core Overlay 10yr Treas 17.73% 6.93% 37 0.79% 21 1.04% 19 Russell Core Overlay 30yr Treas 7.45% 6.93% 38 0.33% 28 0.44% 27 Russell Global Overlay Ntl 5.72% 15.71% 18 8.47% 3 8.25% 4 Russell US Equity PE Ntl 5.66% 15.93% 16 7.61% 5 7.47% 5 SDCERA PE Buyout 1.80% 8.37% 31 1.13% 16 1.18% 17 SDCERA PE Distressed 1.28% 9.07% 29 0.58% 25 0.59% 25 SDCERA PE Energy 0.44% 29.01% 2 0.79% 20 0.78% 21 SDCERA PE Niche & Other 0.12% 11.22% 26 0.10% 38 0.09% 40 SDCERA PE Venture Capital 0.31% 14.71% 21 0.23% 34 0.21% 35 SDCERA RE Core+Non Core 5.93% 4.05% 44 1.08% 18 1.34% 15 SSGA S&P 500 Materials 1.61% 21.28% 8 2.78% 12 2.79% 10 SSGA S&P MLP Index 2.87% 16.42% 15 1.96% 13 1.99% 13 SSGA S&P TSX Materials 1.77% 28.53% 3 3.90% 8 2.54% 12 SSGA TIPS Index Fd 4.83% 5.97% 41 1.58% 14 1.45% 14 Stark Investments 0.41% 6.91% 39 0.17% 35 0.18% 36 UBS O'Connor MNO 1.35% 3.50% 45 0.05% 40 0.03% 43 Wellington EMD 10.28% 9.61% 28 7.87% 4 10.03% 3 Zazove High Yield CB Fund 0.72% 18.15% 10 0.68% 22 0.62% 24 Sum 130.08% 100.00% 100.00% 74

Perfect Storm Worst Peak to Min (DD, Worst Peak to Min (DD, Fund Month* trough DD 6 s.d.) Fund Month* trough DD 6 s.d.) AQR Delta Fund 6.03% 11.24% 11.24% Macquarie Infrastructure II 7.96% 20.90% 20.90% Baillie Gifford 27.69% 64.62% 64.62% Moon Capital (ACF) 5.20% 12.90% 12.90% Berens 21.46% 45.92% 45.92% Nicholas Applegate CB 16.18% 41.83% 41.83% BlackRock Credit Investors Fund 29.12% 52.79% 52.79% Oaktree 11.86% 25.94% 25.94% BlackRock EM Macro 13.97% 41.23% 41.23% Russell Core Overlay 10yr Treasuries 5.80% 6.60% 12.01% BlackRock Global Ascent 9.41% 18.93% 20.87% Russell Core Overlay 30yr Treasuries 5.80% 6.60% 12.01% Brevan Howard 3.80% 5.18% 12.02% Russell Global Overlay 18.96% 54.03% 54.03% Bridgewater Major Markets 7.09% 13.13% 15.29% Russell US Equity PE 17.74% 51.20% 51.20% Bridgewater Pure Alpha Fund Opp 10.30% 19.23% 20.20% SDCERA PE Buyout 9.46% 29.52% 29.52% Brookfield Americas 18.60% 52.71% 52.71% SDCERA PE Distressed 10.07% 32.67% 32.67% Campbell Global Assets 12.69% 24.35% 26.11% SDCERA PE Energy 23.61% 61.95% 61.95% Carlson Capital Ltd 7.21% 18.78% 18.78% SDCERA PE Niche & Other 16.30% 33.28% 33.28% Commodity SWAP 27.37% 63.08% 63.08% SDCERA PE Venture Capital 10.43% 62.47% 62.47% DE Shaw 10.50% 16.01% 16.01% SDCERA RE Core+Non Core 5.02% 36.21% 36.21% Dow Jones REIT Swap CL Fund 31.41% 69.73% 69.73% SSGA S&P 500 Materials 22.07% 56.91% 56.91% Genesis 28.79% 58.20% 58.20% SSGA S&P MLP Index 16.53% 41.96% 41.96% Global Equity Swap 18.96% 54.03% 54.03% SSGA S&P TSX Materials 39.23% 61.49% 61.49% Global Infrastructure Partners 24.01% 34.08% 34.08% SSGA TIPS Index Fd 8.28% 11.89% 11.89% Graham Capital 5.65% 16.80% 16.80% Stark Multi Strategy 8.78% 30.48% 30.48% Hoisington Fund 43.83% 68.59% 68.88% UBS O'Connor MNO 2.54% 4.26% 6.06% Hotchkis & Wiley 16.30% 33.28% 33.28% Wellington EMD 14.89% 20.74% 20.74% Kenmar CTA Choice Fund LLC 5.49% 10.05% 13.51% Zazove High Yield CB Fund 19.76% 55.27% 55.27% Legato Composite 21.13% 49.18% 49.18% Expected Portfolio Worst (Weighted Sum) 14.35% 32.38% 33.72% 75

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