LGIP Q2 2012

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


INVESTMENT PHILOSOPHY

SAFETY before

LIQUIDITY before

YIELD


EARNINGS FOR FY 2012 YTD

$63,384,105

LGIP PERFORMANCE

Q2FY 2012


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


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


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%


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


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)


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


ENDOWMENT

PERFORMANCE Q2 2012


ENDOWMENT TRUST LANDS

Privately-owned land (17%)

State trust land (13%)

Tribal Reservations (28%)

US Forest Service (15%)

Bureau of Land

Management (17%)


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)


$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


-$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


ENDOWMENT

DISTRIBUTION


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


STATE CASH FLOW


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.


STATE CASH FLOW

-$1,000

-$500

$0

$500

$1,000

$1,500

$2,000

$2,500 State Operating Balance CY

2007 - CY 2011:


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


ARIZONA ECONOMIC

UPDATE


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


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%


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


Jul '90-Mar '91

Recession

Mar'01-Nov '01

Recession

Dec. '07- June '09

Recession


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


Th

ou

san

ds

Jul '90-Mar '91

Recession

Mar'01-Nov '01

Recession

Dec. '07- June '09

Recession


SPECIAL ECONOMIC

PRESENTATION

JOSEPH P. QUINLAN MANAGING DIRECTOR & CHIEF MARKET STRATEGIST

U.S. TRUST, BANK OF AMERICA PRIVATE WEALTH MANAGEMENT


QUESTIONS?

LGIP Q2 2012

Documents