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Arizona Inside the Vault 2Q 2013

Arizona Inside the Vault 2Q 2013

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Published by Barbara Espinosa
Arizona State Treasury 2nd Q Report, Doug Ducey
Arizona State Treasury 2nd Q Report, Doug Ducey

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Published by: Barbara Espinosa on May 16, 2013
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11/12/2013

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February’s closing market value for the PermanentLand Endowment Trust Fund was
$4,010,564,397
,marking the first time in state history the fund hasended a month above the $4 billion mark. It took 88.5 years for the endowment to reach its first $1billion in August 2000, a little more than 6.5 yearsto get to $2 billion in March 2006, and then a littlemore than 4.5 years to reach the $3 billion mark inNovember 2010. It only took 2.25 years to crossthe $4 billion threshold. The unrealized gains forthe fund are also at an all-time high of approximately
$1.238 billion
.If Arizona’s endowment were a college endowmentit would be the twenty-first largest in the country.The estimated market value of the remaining 9 million acres of unsold state trust landexceeds $70 billion – twice the size of Harvard’s endowment.Through an Act of Congress in 1863 that established the Territory of Arizona and theState Enabling Act of 1910, the federal government granted more than 10 millionacres of land to Arizona public institutions. Every time the state sells a piece of stateland, those proceeds are deposited into the State Treasurer’s Office to be managedinto perpetuity. Today state trust land (the light blue shaded areas on the map above)makes up approximately 12 percent of all land in Arizona.The endowment’s asset allocation is 60 percent stocks all passively indexed to theS&P 400, S&P 500 and S&P 600, with the remaining 40 percent invested in fixedincome products including high grade corporate bonds and United States Treasurysecurities.Earning money for Arizona’s public schools is the primary mission of the trust’smanagement. In 2012 the State Treasurer’s Office and the Board of Investmentcompleted the first-ever asset allocation study for the fund. The analysis uncovered acritically flawed formula used to distribute earnings to the fund’s 13 beneficiaries, withK-12 education receiving more than 90 percent of all proceeds. Prop 118 introduceda simplified formula to ensure more consistent and reliable distributions of earnings.With its passage in November 2012 Arizona voters provided K-12 education anadditional $8.9 million distribution from the endowment in FY 2013 for a total of $62.4 million. The FY 2014 K-12 distribution will be $67.7 million, an 8.6% increaseover the previous year with the passage of Prop 118.
AZ’s State Land Endowment Tops $4 Billion
OFFICE OF THE
A
RIZONA
 S
TATE
 T
REASURER 
 
H
ON
.
D
OUG
D
UCEY
T
REASURER 
I
NVESTMENT
 P
HILOSOPHY
 
SAFETY
 
before 
 
LIQUIDITY
before 
 
YIELD
Treasurer Doug DuceyArizona State Capitol1700 W. Washington St.Phoenix, AZ 85007(602) 542-7800toll free (877) 365-8310info@aztreasury.govwww.AZTreasurer.gov
Inside the Vault
The Arizona State Treasurer’s Quarterly Update
Q2 2013Volume I1I, Issue 1I
 
 
AT A GLANCE
$1.25 Billion in assetswith Net Asset Value at$1.000 as of 3/31/2013.
Diversified investmentsweighted to highly ratedCommercial Paper,Repurchase Agreementsand Agencies/Treasuries.
Continues to maintainthe highest rating of AAAF/S1+.
Weighted AverageMaturity is 24 days.
Short-term rates havebeen choppy in the pastquarter, and will con-tinue to be this quarter,as the market absorbsnew cash due to theexpiration of federalprograms.
LGIP Pool 5: Short-term fundLGIP Pool 500: Medium-term fund
Page 2 Local Government Investment Pools (LGIP & LGIP-GOV)
Pool 5 YTDNet Yieldhas beaten itsbenchmark by12 basis points
AT A GLANCE
$305.7 Million in assetswith Floating Net AssetValue at $1.0408 as of 3/31/2013.
Diversified fundcontaining Treasuries,Agencies, CorporateBonds and Mortgages.
The effective durationis 1.32 years.
Keeping the fund shortwith 70.4% of theinvestments maturingunder two years.
Maximum exposure toany credit at 2.5%.
Weighted AverageRating of all thesecurities is AA.
Pool 500 YTDhas beaten itsbenchmark by42 basis points
DISCLAIMER
: Historical returns are not indicative of future performance. The NAV will float due to fluctuating marketNo investment pools offered by the Arizona State Treasurer are insured and returns are not guaranteed.
 
Pool 7 LGIP-GOV: Short-term fund
Page 3FY 2013 Q3 Performance Update
AT A GLANCE
$1.26 Billion Assets withNet Asset Value at$1.00 as of 3/31/2013.
Invested in highly liquid,low-risk securities thatare backed by the fullfaith and credit of theU.S. Government.
 
Overall rating is AA+,which reflects the S&Pdowngrade of U.S. debt.
Weighted AverageMaturity is 40 days.
We expect rates todecline for the quarteras the federal fiscalissues have causedsupply and demandimbalances in theovernight repo markets.
Pool 700 LGIP-GOV: Medium-term fund
Pool 700 YTDhas beaten itsbenchmark by46 basis points
conditions and could result in the loss of money. Pools are susceptible to investment risk and market volatility by design.
THIS IS NOT A PROSPECTUS
.
AT A GLANCE
$244.6 Million in assetswith Floating Net AssetValue at $1.0146 as of 3/31/2013.
All securities arebacked by the full faithand credit of U.S.Government includingTreasuries, FDIC paperand GNMA Mortgages.
The effective durationis 1.49 years.
Keeping the fund shortwith 71% of theinvestments maturing inunder two years.
Weighted AverageRating of all thesecurities is AA+.
Pool 7 YTDNet Yieldhas beaten itsbenchmark by4 basis points

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