Q2 2012 Quarterly Update for Local Government Investment Pools (LGIP)

1. LGIP QUARTERLY MEETING
& CONFERENCE CALL
1.26.2012
OFFICE OF THE ARIZONA STATE TREASURER

2. 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

3. INVESTMENT PHILOSOPHY
SAFETY
before
LIQUIDITY
before
YIELD
ARIZONA STATE TREASURER DOUG DUCEY

4. EARNINGS FOR FY 2012 YTD
$63,384,105
ARIZONA STATE TREASURER DOUG DUCEY

5. LGIP PERFORMANCE
Q2FY 2012

6. 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

7. 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

8. 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

9. 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
ARIZONA STATE TREASURER DOUG DUCEY

10. LGIP NEW PRODUCT

11. 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

12. 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
ARIZONA STATE TREASURER DOUG DUCEY

13. ENDOWMENT
PERFORMANCE
Q2 2012
OFFICE OF THE ARIZONA STATE TREASURER

14. ENDOWMENT TRUST LANDS
Bureau of Land
Management (17%)
US Forest Service (15%)
Tribal Reservations (28%)
Privately-owned land (17%)
State trust land (13%)
ARIZONA STATE TREASURER DOUG DUCEY

15. ENDOWMENT ASSET ALLOCATION
$3.23 billion
7.6%
Fixed Income
$1,549.4 million
$542.2 million
14.7% $1,600.04M $502.79M
43.3% S&P 500
34.4% S&P 400
$1,122.1 million
$1,052.42M
S&P 600
(As of 12/31/2011)
ARIZONA STATE TREASURER DOUG DUCEY

16. Billions
$1.50
$0.00
$0.50
$1.00
$2.00
$2.50
$3.00
$3.50
$4.00
December 2006
February 2007
April 2007
June 2007
August 2007
October 2007
December 2007
February 2008
April 2008
ARIZONA STATE TREASURER DOUG DUCEY
June 2008
August 2008
October 2008
December 2008
February 2009
April 2009
June 2009
August 2009
October 2009
Endowment Market Value
December 2009
February 2010
April 2010
June 2010
August 2010
October 2010
ENDOWMENT MARKET VALUE
December 2010
February 2011
$3.23
Billion
April 2011
June 2011
August 2011
October 2011
December 2011

17. Millions
$200.00
$1,000.00
-$200.00
$0.00
$400.00
$600.00
$800.00
December 2006
February 2007
April 2007
June 2007
August 2007
October 2007
December 2007
February 2008
April 2008
ARIZONA STATE TREASURER DOUG DUCEY
June 2008
August 2008
October 2008
December 2008
February 2009
April 2009
June 2009
August 2009
October 2009
December 2009
February 2010
April 2010
Total Endowment Unrealized Gains/Losses
June 2010
August 2010
October 2010
December 2010
February 2011
ENDOWMENT UNREALIZED GAINS
April 2011
June 2011
August 2011
October 2011
$722
million
December 2011

18. ENDOWMENT
DISTRIBUTION
OFFICE OF THE ARIZONA STATE TREASURER

19. K-12 DISTRIBUTIONS
$90.00 Millions
New Record Distribution for FY 2012: $77,832,917
$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
ARIZONA STATE TREASURER DOUG DUCEY

20. STATE CASH FLOW
OFFICE OF THE ARIZONA STATE TREASURER

21. STATE CASH FLOW
TOTAL OPERATING ACCOUNT AVERAGE MONTHLY BALANCE
$3,000
Up 33% in First Half YOY
Thousands
Dec'07-June '09
of Dollars
Recession
$2,500 Mar'01-Nov '01
Recession
Jul '90-Mar '91 $979 million
$2,000 Recession
in Dec.
$1,500
$1,000
$500
$0
-$500
-$1,000
ARIZONA STATE TREASURER DOUG DUCEY

22. STATE CASH FLOW
$2,500
State Operating Balance CY
$2,000
2007 - CY 2011:
$1,500
$1,000
$500
$0
-$500
-$1,000
ARIZONA STATE TREASURER DOUG DUCEY

23. STATE CASH FLOW
$1,600,000
FYTD 2012 Cash Flow vs. 2011
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
FY 2011 FY 2012 Actual
$-
1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec 1-Jan
ARIZONA STATE TREASURER DOUG DUCEY

24. ARIZONA ECONOMIC
UPDATE
OFFICE OF THE ARIZONA STATE TREASURER

25. AZ NON-FARM EMPLOYMENT
3000
Dec '07-Jun 09
Recession
2750 Mar'01-Nov '01
Recession
2500
2250
AZ Job growth remains slow
Jul '90-Mar '91
2000 Recession
1750 Jul '81-Nov '82
Recession
1500
1250
1000
750
Feb-11
Feb-89
Feb-08
Feb-82
Feb-83
Feb-84
Feb-85
Feb-86
Feb-87
Feb-88
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-09
Feb-10
Source:
Bloomberg
2012 L.P.
ARIZONA STATE TREASURER DOUG DUCEY

26. AZ UNEMPLOYMENT AT 8.7%
12% Jul '81-Nov '82
Jul '90-Mar '91
Mar'01-Nov '01
Dec'07-June 09
Recession Recession
Recession Recession
11%
Jan '80-Jul '80 AZ Rate at 8.7%
Recession
10%
9%
National rate of 8.5% in June
8%
7%
6%
5%
4%
3%
2%
Jan-11
Jan-76
Jan-93
Jan-10
Jan-77
Jan-78
Jan-79
Jan-80
Jan-81
Jan-82
Jan-83
Jan-84
Jan-85
Jan-86
Jan-87
Jan-88
Jan-89
Jan-90
Jan-91
Jan-92
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Source:
Bloomberg
2012 L.P.
ARIZONA STATE TREASURER DOUG DUCEY

27. Source:
25
50
75
100
125
150
175
200
225
0
2012 L.P.
Bloomberg
Jan-90
Jul-90
Jan-91
Jul-91
Recession
Jan-92
Jul '90-Mar '91
Jul-92
Jan-93
Jul-93
Jan-94
Jul-94
Jan-95
Jul-95
Jan-96
ARIZONA STATE TREASURER DOUG DUCEY
Jul-96
Jan-97
Jul-97
Jan-98
Jul-98
Jan-99
Jul-99
Jan-00
Jul-00
Jan-01
Quarterly Data Jan. 1990 through Sept. 2011
Jul-01
Recession
Mar'01-Nov '01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
AZ SALES OF EXISTING HOMES
Jul-08
Recession
Jan-09
Dec. '07- June '09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11

28. Thousands
Source:
100
150
200
250
0
50
2012 L.P.
Bloomberg
1/1/1989
7/1/1989
1/1/1990
7/1/1990
1/1/1991
7/1/1991
1/1/1992
7/1/1992
1/1/1993
Recession
7/1/1993
Jul '90-Mar '91
1/1/1994
7/1/1994
1/1/1995
7/1/1995
1/1/1996
7/1/1996
ARIZONA STATE TREASURER DOUG DUCEY
1/1/1997
7/1/1997
1/1/1998
7/1/1998
1/1/1999
7/1/1999
1/1/2000
7/1/2000
1/1/2001
7/1/2001
AZ HOUSING PRICES
1/1/2002
7/1/2002
1/1/2003
7/1/2003
Recession
1/1/2004
Mar'01-Nov '01
7/1/2004
1/1/2005
7/1/2005
1/1/2006
7/1/2006
1/1/2007
7/1/2007
S & P/Case Schiller Housing Price Index for Phoenix
1/1/2008
7/1/2008
1/1/2009
7/1/2009
1/1/2010
7/1/2010
Recession
1/1/2011
Dec. '07- June '09
7/1/2011

29. 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

30. QUESTIONS?
OFFICE OF THE ARIZONA STATE TREASURER