C u l • t i • v a t e

Popular Annual Financial Report for Fiscal Year Ended June 30, 2007San Diego County Employees Retirement Association, San Diego County, California

To foster the growth of.

HISTORICAL MEMBERSHIP

Fiscal Number of Number of Average AnnualYear Active Members Retired Members Benefit Received

2007 17,733 12,504 $ 27,086

2006 17,451 12,049 24,880

2005 16,980 11,436 23,078

2004 17,717 10,770 21,547

2003 18,466 10,253 20,033

Membership includes the total number of active employees paying into the plan and thetotal number of retired members drawing monthly benefits.

Deferred members are not shown.

HISTORICAL FUND REVIEWALL AMOUNTS IN MILLIONS

Fiscal County Employee InvestmentYear Contributions Contributions Earnings

2007 $ 320.5 $ 44.5 $ 1,119.2

2006 302.5 41.9 962.2

2005 316.1 40.8 794.8

2004 700.6* 33.6 936.5

2003 616.1* 35.0 150.0

This chart shows the three sources of revenue for the retirement fund over afive-year period.

* Includes proceeds from pension obligation bonds.

HISTORICAL MARKET RETURNON AVAILABLE ASSETSALL AMOUNTS IN MILLIONS

Fiscal Total Fund Total Fund Increase/DecreaseYear Return Market Value Market Value

2007 15.36% $ 8,444.5 $ 1,113.6

2006 14.68% 7,330.9 972.5

2005 13.91% 6,358.5 849.9

2004 21.27% 5,508.6 1,405.3

2003 4.64% 4,103.3 569.7

Total Fund Return is the market return of entire investment portfolio, net of allinvestment fees.

Total Fund Market Value is the assets available to pay benefits.

FUND EXPENSESALL AMOUNTS IN MILLIONS

Expense 2007 2006

Benefit payments $ 322.6 $ 290.2

Retiree health care program 35.3 32.9

Investment expenses 87.2 85.5

Administration expenses 10.2 8.0

The majority of SDCERA’s expenditures are for retiree benefit payments.

Health care program benefits are designed to assist retirees with a portion of theirmedical costs.

Investment expenses are payments to asset managers, investment consultants,actuaries and the master custodian.

Administration expenses include retirement office salaries and operating costs.

PENSION BENEFIT ASSETS – JUNE 30, 2007ALL AMOUNTS IN MILLIONS

Market Percent 2007 2006Asset Value of Total Return Return

Domestic equity $ 2,068.7 24.5% 12.82% 14.69%

International equity 2,294.0 27.2% 32.13% 32.49%

Fixed income 2,474.9 29.3% 7.64% 3.79%

Real estate 507.1 6.0% 14.16% 18.07%

Alternative equity 311.7 3.7% 18.03% 23.63%

Commodities 428.7 5.1% (13.50%) 7.29%

Cash and other assets

and liabilities 359.4 4.2% N/A* N/A*

Total $ 8,444.5 100.0% 15.36% 14.68%

This chart shows the market value at fiscal year end, the actual percent of each asset type in the entireportfolio and the annual return for both fiscal years 2006 and 2007.

* Returns for cash and other included in domestic equity returns.

ASSET ALLOCATION – JUNE 30, 2007

This chart gives a visual overview of the percentage each

asset classification holds in the SDCERA portfolio.

Domestic Equity24.5%

InternationalEquity27.2%

Fixed Income29.3%

Commodities5.1%

Real Estate 6.0%

Alternative Equity 3.7%Cash and Other 4.2%

I am pleased to submit this summary of the Annual FinancialReport of San Diego County Employees Retirement Association(SDCERA) for the year ended June 30, 2007.

SDCERA is a public employee retirement system that wasestablished by the County of San Diego on July 1, 1939, andis administered by a Board of Retirement to provide serviceretirement, disability, death and survivor benefits for itsmembers under the California Government Code, Section31450, et.seq. (County Employees Retirement Law of 1937).

FINANCIAL AND ECONOMIC SUMMARYThe total net assets increased by over $1 billion, ending the yearon June 30, 2007 at $8.4 billion. SDCERA’s funding ratio, whichcompares the plan’s assets to its liabilities, increased to 89.7%, up from 83.6% last year.

For the fiscal year 2007, investments provided a return of 15.4% net of fees. The plan'sannualized net-of-fee return was 14.6% over the last three years, 13.7% over the lastfive years, and 9.6% over the last 10 years.

The markets this year remained focused on fluctuating oil prices, rising interest rates,widespread concerns in sub-prime lending, and general uncertainty about the futuredirection of the market.

The U.S. stock market generated positive returns across the different market caps(large, mid, and small) and investment styles (growth and value). The S&P 500 Indexreturned 20.6% for the year compared to a return of 8.6% for the same period last year.

Non-U.S. markets continue to outperform the U.S. market for the fiscal year period.Performance was driven by strong returns in the Latin American region due to therising value of regional currencies and continued economic growth. The MorganStanley EAFE Index, excluding the U.S., returned 27.0%.

MAJOR INITIATIVES AND SIGNIFICANT EVENTSThe Board of Retirement approved a new Supplemental Benefit Allowance (SBA) forGeneral Tier A members and Safety members covered by the 3% at age 50 formula,which became effective July 1, 2007.

As part of SDCERA’s continuous efforts to improve service to members, we launcheda new web site with sections for active, retired and deferred members for easiernavigation, and began offering new seminars with presentations tailored to members’needs based on their proximity to retirement. SDCERA also completed its move tothe new, centrally located Mission Valley office.

AWARDS AND ACHIEVEMENTSThe Government Finance Officers Association (GFOA) of the United States and Canadapresented SDCERA with the Award for Outstanding Achievement in Popular AnnualFinancial Reporting for the year ended June 30, 2006. This prestigious national awardrecognizes conformance with the highest standards for state and local governmentfinancial reporting. We are confident this current report will also receive favorableconsideration when we submit it for the 2007 GFOA award.

The Public Pension Coordinating Council (PPCC) also granted SDCERA an award formeeting the public pension standards for plan design and administration.

Thank you for taking the time to view our Popular Annual Financial Report and, asalways, we welcome your feedback.

Brian P. White, Chief Executive Officer

Brian WhiteCHIEF EXECUTIVE OFFICER

The Government Finance Officers

Association of the United States

and Canada (GFOA) has given an

Award for Outstanding Achievement

in Popular Annual Financial Reporting

to SDCERA for its Popular Annual

Financial Report for the fiscal year

ended June 30, 2006.

MISSION STATEMENT

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San Diego County Employees Retirement Association

2275 Rio Bonito Way,San Diego, Californiatoll free 1.888.473.2372tel 619.515.6800fax 619.515.5063www.sdcera.org

This summary annual report is derived from the informationcontained in SDCERA’s Comprehensive Annual FinancialReport (CAFR). This summary does not represent our financial information in a manner to conform with GenerallyAccepted Accounting Principles (GAAP). However, SDCERA’sCAFR, which is produced in conformity with GAAP, providesa comprehensive overview of SDCERA’s financial and operating results. SDCERA’s CAFR is available for review at the Retirement Association’s office or on our web site at www.sdcera.org.

Brian P. WhiteChief Executive Officer

Mark MimnaughChief Operating Officer

David DeutschChief Investment Officer

Marsha BoydDirector, Member Services

Victor E. DeWittAssistant Director,Member Services

Deborah BillMember Services Manager

Jan Eleni GarnerMember Services Manager

Judith HughesMember Services Manager

Johanna ShickMember Services Manager

David A. MyersChairman

Garry SobeckVice Chairman

Laura DeMarco Secretary

Trustees

John Arnold

Marc Doss

James W. Feeley

Dianne Jacob

Dan McAllister

Douglas M. Rose

Alternate Trustees

Warren L. Gibson

Kay Ryan

SDCERA MANAGEMENT BOARD OF RETIREMENT