OFFICE OF THE ARIZONA STATE TREASURER
1.26.2012
LGIP QUARTERLY MEETING
& CONFERENCE CALL
ARIZONA STATE TREASURER DOUG DUCEY
AGENDA
Earnings
LGIP Performance
New LGIP Product
Endowment Performance
Endowment Distribution
State Cash Flow/Arizona Economic Update
Economic Presentation: Joseph P. Quinlan, Managing Director & Chief Market Strategist, U.S. Trust, Bank of America Private Wealth Management
Q & A
ARIZONA STATE TREASURER DOUG DUCEY
INVESTMENT PHILOSOPHY
SAFETY before
LIQUIDITY before
YIELD
ARIZONA STATE TREASURER DOUG DUCEY
EARNINGS FOR FY 2012 YTD
$63,384,105
LGIP PERFORMANCE
Q2FY 2012
ARIZONA STATE TREASURER DOUG DUCEY
POOL 5
$1.54 Billion Assets as of 12/31/2011
Net Asset Value - $ .9999 12/31/2011
Diversified investments weighted to highly rated Commercial Paper, Repurchase agreements, and Agency/Treasuries third
ARIZONA STATE TREASURER DOUG DUCEY
POOL 7
$1.6 Billion Assets as of 12/31/2011
Net Asset Value - $ 1.000 12/31/2011
All securities backed by U.S. Government
ARIZONA STATE TREASURER DOUG DUCEY
POOL 500
$219.5 million as of 12/31/2011
Floating Net Asset Value - $1.038 as of 12/31/2011
Keep maximum exposure to any credit at 2.5%
ARIZONA STATE TREASURER DOUG DUCEY
POOL 700
$145.4million as of 12/31/2011
Floating Net Asset Value - $ 1.014 as of 12/31/2011
All securities backed by U.S. Government
LGIP NEW PRODUCT
ARIZONA STATE TREASURER DOUG DUCEY
Separately Managed Accounts (SMAs)
Designed for those seeking a customized investing solution based on your risk tolerance, liquidity needs and duration target
Monthly Liquidity
Requires $100 million minimum deposit
Pre-Meeting with Portfolio Manager to set up Account and determine investing needs
Costs: Standard 6 basis points, plus yearly accounting charges of about $20,000 that will come out of earnings (equivalent to 2 basis points)
ARIZONA STATE TREASURER DOUG DUCEY
POOL 12 $263.3 million in assets as of
12/31/2011
Net Asset Value - $1.023 12/31/2011
Invests in single A and above credit. Duration is at 2.26 years vs. benchmark of 4.92 years
Client requires 20% of assets under one year maturity
OFFICE OF THE ARIZONA STATE TREASURER
ENDOWMENT
PERFORMANCE Q2 2012
ARIZONA STATE TREASURER DOUG DUCEY
ENDOWMENT TRUST LANDS
Privately-owned land (17%)
State trust land (13%)
Tribal Reservations (28%)
US Forest Service (15%)
Bureau of Land
Management (17%)
ARIZONA STATE TREASURER DOUG DUCEY
ENDOWMENT ASSET ALLOCATION
$1,600.04M
$1,052.42M
$502.79M $1,549.4 million
$1,122.1 million
$542.2 million
43.3%
34.4%
14.7%
7.6%Fixed Income
S&P 500
S&P 400
S&P 600
$3.23 billion
(As of 12/31/2011)
ARIZONA STATE TREASURER DOUG DUCEY
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
Dec
emb
er 2
00
6
Feb
ruar
y 2
00
7
Ap
ril 2
00
7
Jun
e 2
00
7
Au
gust
20
07
Oct
ob
er 2
00
7
Dec
emb
er 2
00
7
Feb
ruar
y 2
00
8
Ap
ril 2
00
8
Jun
e 2
00
8
Au
gust
20
08
Oct
ob
er 2
00
8
Dec
emb
er 2
00
8
Feb
ruar
y 2
00
9
Ap
ril 2
00
9
Jun
e 2
00
9
Au
gust
20
09
Oct
ob
er 2
00
9
Dec
emb
er 2
00
9
Feb
ruar
y 2
01
0
Ap
ril 2
01
0
Jun
e 2
01
0
Au
gust
20
10
Oct
ob
er 2
01
0
Dec
emb
er 2
01
0
Feb
ruar
y 2
01
1
Ap
ril 2
01
1
Jun
e 2
01
1
Au
gust
20
11
Oct
ob
er 2
01
1
Dec
emb
er 2
01
1
Bill
ion
s
Endowment Market Value
ENDOWMENT MARKET VALUE
$3.23
Billion
ARIZONA STATE TREASURER DOUG DUCEY
-$200.00
$0.00
$200.00
$400.00
$600.00
$800.00
$1,000.00 D
ecem
ber
20
06
Feb
ruar
y 2
00
7
Ap
ril 2
00
7
Jun
e 2
00
7
Au
gust
20
07
Oct
ob
er 2
00
7
Dec
emb
er 2
00
7
Feb
ruar
y 2
00
8
Ap
ril 2
00
8
Jun
e 2
00
8
Au
gust
20
08
Oct
ob
er 2
00
8
Dec
emb
er 2
00
8
Feb
ruar
y 2
00
9
Ap
ril 2
00
9
Jun
e 2
00
9
Au
gust
20
09
Oct
ob
er 2
00
9
Dec
emb
er 2
00
9
Feb
ruar
y 2
01
0
Ap
ril 2
01
0
Jun
e 2
01
0
Au
gust
20
10
Oct
ob
er 2
01
0
Dec
emb
er 2
01
0
Feb
ruar
y 2
01
1
Ap
ril 2
01
1
Jun
e 2
01
1
Au
gust
20
11
Oct
ob
er 2
01
1
Dec
emb
er 2
01
1
Mill
ion
s
Total Endowment Unrealized Gains/Losses
ENDOWMENT UNREALIZED GAINS $722
million
OFFICE OF THE ARIZONA STATE TREASURER
ENDOWMENT
DISTRIBUTION
ARIZONA STATE TREASURER DOUG DUCEY
K-12 DISTRIBUTIONS
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Mill
ions
New Record Distribution for FY 2012: $77,832,917
OFFICE OF THE ARIZONA STATE TREASURER
STATE CASH FLOW
ARIZONA STATE TREASURER DOUG DUCEY
STATE CASH FLOW TOTAL OPERATING ACCOUNT AVERAGE MONTHLY BALANCE
Up 33% in First Half YOY
-$1,000
-$500
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Th
ou
sa
nd
s
of D
olla
rs
Jul '90-Mar '91
Recession
Mar'01-Nov '01
Recession
Dec'07-June '09
Recession
$979 million
in Dec.
ARIZONA STATE TREASURER DOUG DUCEY
STATE CASH FLOW
-$1,000
-$500
$0
$500
$1,000
$1,500
$2,000
$2,500 State Operating Balance CY
2007 - CY 2011:
ARIZONA STATE TREASURER DOUG DUCEY
STATE CASH FLOW
$-
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec 1-Jan
FY 2011 FY 2012 Actual
FYTD 2012 Cash Flow vs. 2011
OFFICE OF THE ARIZONA STATE TREASURER
ARIZONA ECONOMIC
UPDATE
ARIZONA STATE TREASURER DOUG DUCEY
AZ NON-FARM EMPLOYMENT
750
1000
1250
1500
1750
2000
2250
2500
2750
3000
Feb
-82
Feb
-83
Feb
-84
Feb
-85
Feb
-86
Feb
-87
Feb
-88
Feb
-89
Feb
-90
Feb
-91
Feb
-92
Feb
-93
Feb
-94
Feb
-95
Feb
-96
Feb
-97
Feb
-98
Feb
-99
Feb
-00
Feb
-01
Feb
-02
Feb
-03
Feb
-04
Feb
-05
Feb
-06
Feb
-07
Feb
-08
Feb
-09
Feb
-10
Feb
-11
Source: Bloomberg 2012 L.P.
Jul '81-Nov '82
Recession
Jul '90-Mar '91
Recession
Mar'01-Nov '01
Recession
Dec '07-Jun 09
Recession
AZ Job growth remains slow
ARIZONA STATE TREASURER DOUG DUCEY
AZ UNEMPLOYMENT AT 8.7%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12% Jan
-76
Ja
n-7
7
Ja
n-7
8
Ja
n-7
9
Ja
n-8
0
Ja
n-8
1
Ja
n-8
2
Ja
n-8
3
Ja
n-8
4
Ja
n-8
5
Ja
n-8
6
Ja
n-8
7
Ja
n-8
8
Ja
n-8
9
Ja
n-9
0
Ja
n-9
1
Ja
n-9
2
Jan
-93
Ja
n-9
4
Ja
n-9
5
Ja
n-9
6
Ja
n-9
7
Ja
n-9
8
Ja
n-9
9
Ja
n-0
0
Ja
n-0
1
Ja
n-0
2
Ja
n-0
3
Ja
n-0
4
Ja
n-0
5
Ja
n-0
6
Ja
n-0
7
Ja
n-0
8
Ja
n-0
9
Jan
-10
Ja
n-1
1
Source:
Bloomberg
2012 L.P.
Jan '80-Jul '80
Recession
Jul '81-Nov '82
Recession Jul '90-Mar '91
Recession
Mar'01-Nov '01
Recession Dec'07-June 09
Recession
National rate of 8.5% in June
AZ Rate at 8.7%
ARIZONA STATE TREASURER DOUG DUCEY
AZ SALES OF EXISTING HOMES Quarterly Data Jan. 1990 through Sept. 2011
0
25
50
75
100
125
150
175
200
225
Ja
n-9
0
Ju
l-9
0
Ja
n-9
1
Ju
l-9
1
Ja
n-9
2
Ju
l-9
2
Ja
n-9
3
Ju
l-9
3
Ja
n-9
4
Ju
l-9
4
Ja
n-9
5
Ju
l-95
Ja
n-9
6
Ju
l-9
6
Ja
n-9
7
Ju
l-9
7
Ja
n-9
8
Ju
l-9
8
Ja
n-9
9
Ju
l-9
9
Ja
n-0
0
Ju
l-0
0
Ja
n-0
1
Ju
l-0
1
Ja
n-0
2
Ju
l-0
2
Ja
n-0
3
Ju
l-0
3
Ja
n-0
4
Ju
l-0
4
Ja
n-0
5
Ju
l-0
5
Ja
n-0
6
Ju
l-0
6
Ja
n-0
7
Ju
l-0
7
Ja
n-0
8
Ju
l-08
Ja
n-0
9
Ju
l-0
9
Ja
n-1
0
Ju
l-1
0
Ja
n-1
1
Ju
l-11
Source: Bloomberg 2012 L.P.
Jul '90-Mar '91
Recession
Mar'01-Nov '01
Recession
Dec. '07- June '09
Recession
ARIZONA STATE TREASURER DOUG DUCEY
AZ HOUSING PRICES
0
50
100
150
200
250
1/1
/19
89
7/1
/19
89
1/1
/19
90
7/1
/19
90
1/1
/19
91
7/1
/19
91
1/1
/19
92
7/1
/19
92
1/1
/19
93
7/1
/19
93
1/1
/19
94
7/1
/19
94
1/1
/19
95
7/1
/19
95
1/1
/19
96
7/1
/19
96
1/1
/19
97
7/1
/19
97
1/1
/19
98
7/1
/19
98
1/1
/19
99
7/1
/19
99
1/1
/20
00
7/1
/20
00
1/1
/20
01
7/1
/20
01
1/1
/20
02
7/1
/20
02
1/1
/20
03
7/1
/20
03
1/1
/20
04
7/1
/20
04
1/1
/20
05
7/1
/20
05
1/1
/20
06
7/1
/20
06
1/1
/20
07
7/1
/20
07
1/1
/20
08
7/1
/20
08
1/1
/20
09
7/1
/20
09
1/1
/20
10
7/1
/20
10
1/1
/20
11
7/1
/20
11
S & P/Case Schiller Housing Price Index for Phoenix
Source: Bloomberg 2012 L.P.
Th
ou
san
ds
Jul '90-Mar '91
Recession
Mar'01-Nov '01
Recession
Dec. '07- June '09
Recession
OFFICE OF THE ARIZONA STATE TREASURER
SPECIAL ECONOMIC
PRESENTATION
JOSEPH P. QUINLAN MANAGING DIRECTOR & CHIEF MARKET STRATEGIST
U.S. TRUST, BANK OF AMERICA PRIVATE WEALTH MANAGEMENT
OFFICE OF THE ARIZONA STATE TREASURER
QUESTIONS?