1. O FFICE OF THE A RIZONA S TATE T REASURER 3.9.2011 ARIZONA ASSOCIATION OF SCHOOL BUSINESS OFFICIALS

2. A RIZONA S TATE T REASURER D OUG D UCEY AGENDA: 3.9.2011  Endowment Performance  Asset Allocation Changes  Endowment Distribution Formula  State Cash Flow  Q & A

3. O FFICE OF THE A RIZONA S TATE T REASURER ENDOWMENT PERFORMANCE Through December 2010

4. A RIZONA S TATE T REASURER D OUG D UCEY ENDOWMENT PERFORMANCE Privately-owned land State trust land Tribal Reservations US Forest Service Bureau of Land Management

5. A RIZONA S TATE T REASURER D OUG D UCEY ENDOWMENT PERFORMANCE $1,600.04M $1,052.42M $502.79M

6. A RIZONA S TATE T REASURER D OUG D UCEY ENDOWMENT MARKET VALUE UPWARD TREND $3.15 Billion!

7. A RIZONA S TATE T REASURER D OUG D UCEY ENDOWMENT UNREALIZED GAINS GAINS AT RECORD HIGH $713 million!

8. A RIZONA S TATE T REASURER D OUG D UCEY CHANGE SINCE 2010 SHARES $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 MARKET VALUEBOOK VALUE $2,036,303$23,158,917 $2,277,232$2,441,490$2,669,674 $3,155,262 DEC 09 DEC 10 ENDOWMENT FY 11 2 ND QUARTER

9. A RIZONA S TATE T REASURER D OUG D UCEY UNREALIZED GAINS $392,441 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 0 $713,772 CHANGE SINCE 2010 DEC 09 DEC 10 ENDOWMENT FY 11 2 ND QUARTER

10. A RIZONA S TATE T REASURER D OUG D UCEY UNREALIZED GAINS SHARESMARKET VALUEBOOK VALUE ENDOWMENT FY 11 2 ND QUARTER

11. O FFICE OF THE A RIZONA S TATE T REASURER Endowment Asset Allocation Changes

12. A RIZONA S TATE T REASURER D OUG D UCEY ASSET ALLOCATION: 1999 100% BONDS

13. A RIZONA S TATE T REASURER D OUG D UCEY ASSET ALLOCATION: MARCH 2003 50% BONDS 50% STOCKS

14. A RIZONA S TATE T REASURER D OUG D UCEY ASSET ALLOCATION: MARCH 2011 49% BONDS 51% STOCKS

15. A RIZONA S TATE T REASURER D OUG D UCEY TARGET ASSET ALLOCATION: FEB 2011 With +/- 5% market value rebalance triggers. Sell high, buy low. 40% BONDS 60% STOCKS

16. O FFICE OF THE A RIZONA S TATE T REASURER Endowment Distribution Formula

17. A RIZONA S TATE T REASURER D OUG D UCEY ADJUSTED FOR INFLATION Formula takes 20% of the returns adjusted for inflation from each of the previous five years. DISTRIBUTION FORMULA 20072008200920102011 20%

18. A RIZONA S TATE T REASURER D OUG D UCEY HOW THE FORMULA WORKS

19. A RIZONA S TATE T REASURER D OUG D UCEY HOW THE FORMULA WORKS SUBTRACT

20. A RIZONA S TATE T REASURER D OUG D UCEY HOW THE FORMULA WORKS (in millions) Results in a $16.2 million K-12 distribution in FY11 Equals.75% multiplied by 5-year average market value of $2.158 billion

21. A RIZONA S TATE T REASURER D OUG D UCEY 21 WHAT’S THE FORMULA FORECAST FOR 2012? 2012 PRELIMINARY ESTIMATE

22. A RIZONA S TATE T REASURER D OUG D UCEY 22 WHAT’S THE FORMULA FORECAST FOR 2012? 2012 PRELIMINARY ESTIMATE

23. A RIZONA S TATE T REASURER D OUG D UCEY 23 WHAT’S THE FORMULA FORECAST FOR 2012? = estimated FY 12 distribution of $45 million 2012 PRELIMINARY ESTIMATE

24. O FFICE OF THE A RIZONA S TATE T REASURER STATE CASH FLOW

25. A RIZONA S TATE T REASURER D OUG D UCEY STATE CASH FLOW TOTAL OPERATING ACCOUNT AVERAGE MONTHLY BALANCE BACK IN THE BLACK $863 million in February

26. O FFICE OF THE A RIZONA S TATE T REASURER QUESTIONS?