New Mexico Private Equity Investment Program

Q4 2016 Review

May, 2017

2

• Program is in compliance with the statute

– $270.9 million in net deployed capital versus a statutory cap of $420.4 million

– Individual company ownership concentration levels are below statutory caps

• Net deployed capital represents 5.8% of the Severance Tax Permanent Fund (“STPF”), on schedule to achieve the approved long term target allocation of 5.0%

• Since inception financial performance continues to be adversely impacted by investments made before 2004

NMPEIP 2016 Year End Performance Snapshot

Internal Rate of Return

Fund Group 1 yr 3 yr 5 yr Inception

NMPEIP Aggregate 8.2% 6.2% 8.4% 0.9%

2004 to Present 8.1% 7.9% 9.8% 5.6%

Prior to 2004 10.1% -6.9% 1.3% -5.9%

3

NMPEIP Financial Performance Improvement1993-2003 vs. 2004-Present

Metric 1993-2003 2004-Present Difference

Internal Rate of Return -18.2% 5.6% +23.8%

Since Inception Returns $-56.5M $70.4M $126.9M

Distributions to the SIC $5.0M $151.7M $146.7M

Non-Program Investment Into NM-based Companies

$0.5B $1.5B $1.0B

Source: Invient

Program focused on economicdevelopment

Program focused on financial returnsAdvisor - Sun Mountain Capital

4

Since 2004, NMPEIP Vintages Tracking National Benchmark Returns

• Since 2004, performance has tracked a national venture capital benchmark

– 63% of vintages are above median

• From 1993-2003, only 14% of vintages are above median

2004-Present Vintage1st quartile: 38%2nd quartile: 25%3rd quartile: 37%4th quartile: 0%

1993-2003 Vintage1st quartile: 0%2nd quartile: 14%3rd quartile: 43%4th quartile: 43%

NMPEIP v. National Benchmark

NMPEIP Preqin

Vintage Net IRR Quartile

1993 44.8% Second

1994 N/A --

1995 N/A --

1996 (0.9%) Fourth

1997 N/A --

1998 (20.6%) Fourth

1999 N/A --

2000 (7.4%) Third

2001 1.7% Third

2002 (2.1%) Third

2003 (20.6%) Fourth

2004 (3.9%) Third

2005 (2.7%) Third

2006 9.7% Second

2007 4.0% Third

2008 9.9% Second

2009 N/A --

2010 N/A --

2011 N/A --

2012 N/A --

2013* 1.87x First

2014* 1.39x First

2015* 1.50x First

2016** N/A --

*IRR considered not meaningful due to short time horizon so quartile is

based on multiple of invested capital

Source: Invient reporting (as of 12/31/2016) and Preqin Database

custom benchmarking (as of 12/31/2016)

Note: No fund commitments were made in years labeled "N/A"

Note: Fund Performance Benchmark composed of venture capital funds

based in North America and smaller than $300 million in size

Benchmark reviewed and approved by Pavilion Capital and State

Investment Office staff

** There are not a significant number of 2016 Funds to create a benchmark

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• In 2014 NMSIC approved a pacing plan calling for a 5.0% allocation and $30-$35 million of annual commitments. NMSIC has approved commitments averaging $30.5 million per year since then

• The Program is on pace to achieve its long-term allocation of 5.0%

• Due to the Statutory change in 2016, Sun Mountain has seen a significant change in the number of high quality funds in the pipeline

• Four new funds received commitments from the SIC in 2016

NMPEIP Pacing Update

Source: Invient (SIC’s private equity record keeper); as of 12/31/16

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2016 Program Highlights

Distributions

Fund Investment

Small Company Support

Company Highlights

The NMSIC received distributions from 10different funds in the Program in 2016

Significant distributions were received fromBlue Sage Capital, Epic Ventures IV, Red RiverVentures, Verge Fund, and Village Ventures

The Catalyst Fund has been launched andwill make commitments to three new fundsin early 2017

Working with BioSciences Center, ABQid,SFid, Fatpipe, and other New Mexico-basedorganizations to foster small companycreation and growth

At least 6 companies raised multi-milliondollar rounds: Exagen, Respira, RiskSense,Seamless Medical, Skorpios, and Trilumina

Two notable program exits in 2016: Intellicyt Innovasic Miox

Four funds received a commitment from theNMSIC in 2016: Phoenix Ventures, NMCatalyst, Trinity Capital Investment, andKickstart Seed Fund

Fund pipeline is very active with multiple funds currently under review for potential investment in 2017

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Summary of Program Economic Impact in Q4 2016

NMPEIP Impact Summary as of 12/31/16

Total Investment in New Mexico Portfolio Companies

A) Investment by Funds with NMPEIP Participation $332,182,255

B) External Investment Caused by Funds with NMPEIP Participation $2,015,334,476

Total VC Investment in NM Companies $2,203,293,637

Investment Multiplier (B / A) 6.1x

Categorization of NM Portfolio Companies

Active Companies 30 41.1%

Companies Exited at a Gain 15 20.5%

Companies Exited at a Loss 28 38.4%

Number of Companies funded 73 100.0%

NM Economic Impact Q4 2016

NM Purchases $25,591,205

NM Payroll $27,827,105

NM Economic Impact $53,418,310

Total Current Full-Time Jobs 1,532

Average Salary of Jobs Created $72,656

Average Salary in New Mexico1$44,160

Source: Survey of participating NMPEIP fund managers and NM companies for active companies and most recent verified data for exited companies1 Source: New Mexico wage and salary disbursements and total wage and salary employees from the U.S. Dept. of Commerce,

Bureau of Economic Analysis

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Summary of Key Points

• Program is currently tracking to the pacing plan approved by the SIC

• We are evaluating potential new commitments for the Program

– Over 28 potential fund investments looked at in 2016

– Currently 3 funds are in advanced stages of due diligence for potential commitment from the NMPEIP

• Program financial returns are improving steadily from the 1993-2003 era

– Since 2004, NMPEIP investments have performed in line with national VC benchmarks and have produced a positive financial return for the NMSIC

• Program is having a positive impact on the New Mexico economy

9

Capital Invested by Sector: Active NMPEIP Program Sector Concentration

10

73 New Mexico Companies

New Mexico Companies as of 12/31/16

Advent Solar Eclipse Aviation MIOX Skorpios Technologies

Agilvax Elisar Software Nanocrystal Southwest Med Tech

Altaview Technologies Enerpulse NanoMR Sundrop

Altela Entrada Noribachi Surfect Technologies

American Clay Exagen Diagnostics Nuvita TCI Medical

Amtech Figaro OnQueue Technologies Teucrium Trading

Aspen Avionics Growstone Patchwork Systems Tred

Avasca Holochip Phase-I TriLumina

Avisa Pharma Infantelligence POSLavu TruTouch Technologies

Azano InnovASIC Protalex VeraLight

Bioreason Intellicyt ProtoHIT Vertical Power

Boomtime Introbotics Puente Partners Vibrant

BounceChat Iosil Energy Quasar WellKeeper

Comet Solutions JackRabbit Systems Respira Therapeutics xF Technologies

Consolidated Energy Kinetisis RiskSense Zia Laser

Controlled Recovery Lumidigm SBA Materials ZTEC Instruments

Desert Power Mesofuel Seamless Medical

Dining Gift Services Metaphor Seattle Fish Company

Earthstone MicroOptical Devices Seclarity

Status Key

Active (30) Exited at a Gain (15) Exited at a Loss (28)

Note: NMPEIP participants and the SIC directly have invested in 71 New Mexico-based companies,

with 2 additional companies funded by SIC National Program participants

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NMPEIP Status Overview and Summary of Partnership Commitments

Unaudited Performance Data as of 12/31/16

Number of Fund Commitments 35

Capital Committed (Total) $469.1

Capital Committed (Net of Dist.'s Received) $312.4

Capital Drawn $427.7

% of Capital Committed (Total) 91.2%

Distributions Received $156.7

% of Capital Drawn 36.6%

Outstanding Deployed Capital $270.9

Outstanding Deployed Capital as % of STPF 5.8%

Portfolio Carrying Value $298.8

Total Portfolio Value $455.5

% of Capital Drawn 106.5%

Portfolio Multiple of Invested Capital 1.07x

Portfolio IRR 0.9%

Note: Returns calculated using reported Carrying Values as of 12/31/16

and data provided by Invient

Severance Tax Permanent Fund ('STPF') currently $4,670.7 millionas of 12/31/16

All Fund Commitment Summary Commitment Funded Percent NM Investment Value ($)2

Return2

Fund

as of 12/31/16 Vintage Dollars To Date Funded Invest1 Realized Unrealized

3Total Multiple IRR Liquidated

ARCH Venture Fund II, L.P. 1993 $1.2 $1.2 100.0% $67.1 $4.3 $0.0 $4.3 3.53x 44.8% Yes

ARCH Venture Fund III, L.P. 1996 $4.0 $4.0 100.0% $0.0 $3.7 $0.0 $3.8 0.94x -0.9% In Process

CVM Equity Fund V 1998 $3.0 $3.0 100.0% $1.1 $1.7 $0.0 $1.7 0.58x -6.1% Yes

Murphree Venture Partners IV, L.P. 1998 $4.0 $4.0 100.0% $4.9 $0.1 $0.0 $0.1 0.02x -71.8% Yes

Tullis/Dickerson Capital Focus II, L.P.41998 $5.0 $5.0 100.0% $10.1 $2.5 $1.5 $4.0 0.80x -1.7% Yes

Valley Ventures II, L.P. 1998 $3.0 $3.0 100.0% $18.4 $2.6 $0.0 $2.6 0.87x -1.6% Yes

Vestor Partners, L.P. 1998 $2.5 $2.4 94.0% $0.0 $0.6 $0.0 $0.6 0.27x -16.4% Yes

International Venture Fund I, L.P. 2000 $5.0 $5.0 100.0% $9.6 $0.9 $0.1 $1.0 0.19x -12.3% Yes

Murphree Venture Partners V, L.P. 2000 $3.0 $3.0 100.0% $2.2 $1.0 $0.2 $1.2 0.41x -10.6% In Process

Red River Ventures, L.P. 2000 $7.2 $7.2 100.0% $12.8 $5.6 $0.4 $5.9 0.83x -2.7%

Tullis/Dickerson Capital Focus III, L.P.4

2001 $15.0 $15.0 100.0% $25.2 $13.9 $4.3 $18.2 1.21x 4.1%

Wasatch Venture Fund III, LLC 2001 $8.7 $8.6 99.0% $41.6 $4.6 $2.6 $7.2 0.84x -2.5%

Altira Technology Fund IV, L.P. 2002 $10.0 $10.0 100.0% $14.3 $14.2 $0.0 $14.2 1.42x 6.1%

Blue Sage Capital, L.P. 2002 $10.0 $7.8 77.7% $10.0 $26.0 $3.0 $28.9 3.72x 21.7%

ITU Ventures West I, L.P. 2002 $15.0 $15.0 100.0% $15.3 $6.0 $0.0 $6.0 0.41x -15.5% Yes

Valley Ventures III, L.P. 2002 $6.7 $6.5 98.0% $14.9 $2.3 $0.0 $2.3 0.35x -12.0%

New Mexico Co-Investment Partners, L.P.5 2003 $62.0 $62.0 100.0% $163.7 $13.3 $0.0 $13.3 0.21x -23.4% YesvSpring II, L.P.4

2003 $20.0 $20.0 100.0% $91.9 $0.0 $5.2 $5.2 0.26x -11.9%

Flywheel I, L.P. 2004 $15.0 $15.0 100.0% $52.8 $10.1 $5.2 $15.4 1.02x 0.3%

Verge I, L.P. 2004 $10.0 $10.0 100.0% $50.6 $7.3 $2.4 $9.7 0.97x -0.5%

Wasatch New Mexico Fund, LLC 2004 $12.0 $12.0 100.0% $47.0 $1.4 $2.8 $4.2 0.35x -12.0%

ITU Ventures III NM, L.P. 2005 $2.3 $2.3 100.0% $0.0 $0.1 $0.0 $0.1 0.04x -73.6% Yes

Psilos Group Partners IIIB, L.P. 2005 $15.0 $15.0 100.0% $28.8 $8.0 $11.5 $19.6 1.31x 4.7%

Village Ventures Fund II-B, L.P. 2006 $15.0 $17.5 116.6% $3.2 $14.4 $15.1 $29.5 1.68x 9.7%

NMSIC Co-Investment Fund, L.P. (Classic) 2007 $30.0 $30.0 100.0% $364.0 $7.1 $18.1 $25.3 0.85x -3.6%

NMSIC Co-Investment Fund, L.P. (Focused) 2007 $62.5 $62.5 100.0% $850.7 $1.9 $114.5 $116.3 1.85x 9.0%

vSpring III, L.P.4 2007 $15.0 $15.0 100.0% $13.2 $0.5 $13.1 $13.6 0.91x -1.4%

EPIC Venture Fund IV, LLC 2008 $10.0 $8.8 88.2% $10.0 $2.1 $13.3 $15.4 1.71x 9.9%

NMSIC Co-Investment Fund, L.P. (2013) 2013 $20.0 $17.6 87.9% $53.9 $0.2 $33.4 $33.6 1.87x 26.5%

EPIC Venture Fund V, LLC 2014 $10.0 $1.0 10.0% $0.0 $0.0 $1.0 $1.0 1.00x 0.0%

NMSIC Co-Investment Fund, L.P. (2014) 2014 $40.0 $29.6 74.1% $54.2 $0.2 $42.0 $42.2 1.40x 34.2%

Psilos Group Partners III Subsidiary, L.P. 2015 $2.0 $2.0 100.0% $0.0 $0.0 $3.0 $3.0 1.50x N/M

New Mexico Catalyst Fund, L.P. 2016 $10.0 $0.2 2.3% $0.0 $0.0 $0.0 $0.0 N/M N/M

Phoenix Venture Partners II, L.P. 2016 $10.0 $1.4 14.2% $0.0 $0.0 $1.1 $1.1 N/M N/M

Trinity Capital Fund III, L.P. 2016 $5.0 $5.0 100.0% $0.0 $0.0 $5.0 $5.0 N/M N/M

Program Totals $469.1 $427.7 91.2% $2,031.6 $156.7 $298.8 $441.6 1.03x 0.9% 10 of 35

Source: Invient reporting

Notes:

1) Includes both direct fund investments and caused to invest dollars into New Mexico companies. Sourced from Invient reporting, GP reporting and Sun Mountain Capital analysis

Variance from total external dollars in New Mexico companies due to exclusion of previously raised capital and accounting for overlapping caused to invest dollar allocations

2) Investment Values and Return calculations based upon asset values from 12/31/16

3) Fair Market Value as determined by Fund GPs under ASC 820 as of the report date

4) Firm managing the fund has changed name: Tullis/Dickerson is now called Tullis Health Investors, vSpring is now called Signal Peak Capital

5) New Mexico Co-Investment Partners, L.P. data includes one SIC direct investment for reporting purposes

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NMPEIP Carrying Value Quarter Over Quarter

NM PEIP Changes in Q3 2016 Reported Value

Early VC Later VC Buyout Total

Reported Valuation as of Q2 2016 $158.8 $105.9 $3.5 $268.1

Contributions to General Partners $4.0 $0.0 $0.1 $4.1

Distributions from General Partners $4.7 $0.0 $0.3 $4.9

Change in Value ($5.7) $21.9 ($0.5) $15.7

Reported Valuation as of Q3 2016 $161.7 $127.8 $3.3 $292.8

Source: Invient reporting

NM PEIP Changes in Q4 2016 Reported Value

Early VC Later VC Buyout Total

Reported Valuation as of Q3 2016 $161.7 $127.8 $3.3 $292.8

Contributions to General Partners $5.1 $5.0 $0.0 $10.1

Distributions from General Partners $3.1 $0.0 $1.7 $4.8

Change in Value ($5.4) ($1.9) ($1.6) ($8.9)

Reported Valuation as of Q4 2016 $164.5 $131.0 $3.3 $298.8

Source: Invient reporting

New Mexico Catalyst Fund, LPUpdate to the New Mexico State Investment Council

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Catalyst Fund Overview

• The New Mexico Catalyst Fund was launched in 2016 to help address the lack of seed and early stage investment funds in New Mexico

• The Catalyst Fund has held two closings totaling $19 million in commitments:

– $10 million from NMSIC

– $5 million from NMEDD

– $4 million from private institutional investors

• The goal of the Catalyst Fund is to commit to 8-10 seed and very early stage investment funds in New Mexico

– The 8-10 seed funds are required to raise matching private capital, so the amount of investment capital available will be at least $40 million

– The 8-10 seed funds will invest in approx. 50 NM-based companies over the next 5 years

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Catalyst Fund is Tracking to Plan

• Commitment pacing

– 3 funds have closed on investment commitments from the Catalyst Fund

• Arrowhead Innovation Fund (Las Cruces)

• Tramway Venture Partners (Albuquerque)

• Cottonwood Technology Fund (Santa Fe)

– 1 fund has received a contingent commitment

– 4 funds are in various stages of due diligence

• Targeted companies will originate from New Mexico’s research universities and national labs, as well as from the private sector

– 1 company investment has been made by a portfolio fund to date

• Catalyst Fund portfolio characteristics

– Funds that have received commitments all feature experienced investors in the general partner and on their investment committees

– Broad industry diversification

– Geographic diversity

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Disclaimer

The preceding presentation relies on information provided by third parties, including the New Mexico State Investment Council(“NMSIC”), NMSIC’s General Partners and/or Invient, NMSIC’s data provider. The analysis included herein is dependent on suchinformation being complete and accurate in all material respects. Additionally, analysis may utilize or involve forward-lookinginformation that is derived in part from longer-term historical data provided by third-party sources.

In addition, projected results, if any, are based on a number of assumptions, including returns, fund size, economic terms,targeted investment allocation and other factors. Due to various risks and uncertainties, the projections in this presentation maydiffer materially from actual results or change significantly if any one or more of the assumptions are changed. As such, unduereliance should not be placed on such information.

Economic development data including employment, payroll and dollars spent in the State of New Mexico is collected quarterlyfor both active companies in the NMPEIP as well as those in which portfolio funds no longer have an active interest. For activecompanies, Sun Mountain Capital Advisors conducts quarterly surveys of fund managers to collect economic development data.For companies no longer obligated to report to NMPEIP fund managers, data is based on the most recent and materially reliableof 1) last reported data, 2) direct outreach to companies to collect data or 3) independently verified data provided by third partyentities. Annually, Sun Mountain Capital Advisors reviews fund manager data submissions by directly contacting a sampling ofunderlying portfolio companies to verify accuracy of data.

Nothing herein is intended to serve as investment advice, a recommendation of any particular investment or type of investment,a suggestion of merits of purchasing or selling securities, or an invitation or inducement to engage in investment activity.

This report is solely for the use of NMSIC. No part of it may be circulated, quoted, or reproduced without prior approval fromSun Mountain Capital Advisors or the New Mexico State Investment Council.