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The New Mexico State Investment Council (“NMSIC”) Third Quarter 2016: Real Estate Performance Measurement Report

Proprietary & Confidential February 2017

1) Real Estate Market Updates

2) Performance Measurement Highlights 3Q 2016

Appendix:

A. Additional 3Q 2016 Performance Attribution

B. Definitions

C. Flash Report: 3Q 2016

Table of Contents

Disclaimer: This is a public version of the original Performance Measurement Presentation, portions of which have been removed for confidentiality purposes.

1. 3Q16 Economic Dashboard – Market Outlook

General

• Economic activity increased during the Third Quarter of 2016 at an annual rate of 3.2%, 1.6% over 3Q15 levels. Growth during the quarter was again driven by positive contributions by a more confident consumer as the labor market keeps making progress. Business investment remained a soft spot for growth during the quarter although leading indicators for the business sector point to a subdued expansion to round out the year.

• Macro indicators for U.S. real estate kept pace on a year-over-year basis during the

Third Quarter. Total construction investment ticked up (+1% y/y) while residential housing starts declined (-1% y/y). Building permits, which signal future construction activity, rose 2% compared to same period 2015.

United States Real Estate Market Update (3Q16)

Sources: Bureau of Economic Analysis, U.S. Census Bureau, Federal Reserve Board, NCREIF, CBRE Global Research and Consulting, Jones Lang LaSalle, Real Capital Analytics, Bloomberg LP.

Source: NCREIF

Source: NCREIF

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Current Value Cap Rates by Property Type Apartment Industrial Office Retail

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4-Qtr Rolling NOI Growth by Property Type Apartment Industrial Office Retail

Commercial Real Estate

• 3Q16 saw $71 billion in commercial real estate transaction volume, +1% over the same period last year, or 43% of global investment for the quarter. This represented a 10% year-to-date decline compared to 2015.

• CMBS issuances totaled $19.2 billion in 3Q16, -17% less than year ago levels. Credit

conditions tightened further through 3Q, even amid the current low borrowing cost environment, with the Fed’s survey of senior loan officers showing stronger demand but tighter standards for commercial real estate loans.

• U.S. cities have dominated as real estate investment targets in 2016. New York and

Los Angeles (1st and 3rd respectively), accounted for 29.6% of global transactions year-to-date, with noticeable activity in Seoul, South Korea, Singapore, and Sydney, Australia.

• On average, office, industrial and multifamily transaction cap rates contracted by

between 24 and 34 bps while hotel and retail remained flat sequentially.

United States Property Matrix (3Q16)

INDUSTRIAL MULTIFAMILY

• Net absorption for 3Q16 increased by 23.1% year-over-year, with 72.7 million SF being

absorbed, well ahead of the 59.3 million SF of delivered to market . Vacancy rate has declined another 30 basis points to a record low of 5.8%.

• Third-quarter investment volumes grew 2.3% compared to the prior year, with year-to-date volume down 28.9%, however if five largest transactions form 2015 were excluded, volumes were only down 3.1% since last year.

• The first three quarters have skewed towards single asset transactions. This is anticipated to change with several offerings averaging a $500 million deal size currently being marketed.

• Year-to-date, developers have completed 164 million SF of space. The development pipeline expanded by 4.2% from last quarter to 201 million SF. 73% of all tracked markets saw an increase in their development pipeline.

• As of 3Q16, industrial properties returned 2.89% and outperformed the NPI by 112 bps.

• Investment for 3Q16 totaled $31.6 billion. Multifamily sales are up 8.2% YTD to $101.2

billion. This represents the fifth straight quarter of sales in excess of $30 billion.

• Multifamily starts have declined by 5.1% YTD. The decrease in development should alleviate any supply-side risks in the near-term.

• The national vacancy rate has softened 30 basis points to 4.5%, from the recent cycle peak of 4.2% set in the first quarter of 2015.

• Cap rates are averaging 4.4% across major markets, driven by persistent investor demand. This is a function of increased focus on secondary markets, with portfolio activity up 66.4% and single-asset transactions up 7.5%.

• The apartment sector delivered a 1.72% return during the quarter, underperforming the NPI by 5 bps.

OFFICE RETAIL

• The office segment experienced $35.5 billion of reported capital markets activity in the third

quarters of 2016, up 5.7% from the third quarter of last year. This brings YTD volume to $101.4 billion, 1.5% below prior-year levels.

• There has been sustained sensitivity to submarket risk, with CBDs accounting for 55.0% of quarterly deal flow.

• Leasing activity totaled 59.9 million SF, representing a 4.4% increase when compared to the four-quarter trailing average. Total vacancy has declined 10 bps as markets absorbed 12.8 million SF compared to the 12.5 million SF that were delivered.

• Cap rates continue to compress, with 65.6% of the 32 largest office markets seeing year-over-year compression. Cap rates across major primary and secondary markets are averaging 4.4%, but select markets are starting to see pricing disconnects between buyers and sellers.

• The office sector returned 1.26% in 3Q16, 51 bps below the NPI.

• Year-to-date retail volumes remain down 12.1% at $50.8 billion. Investment opportunities are

starting to come to market with transaction larger than $100 million accounted for 67.8% of volume.

• With secondary markets experiencing rental rates increases, overall volumes are increasing as investors underwrite more aggressively. An indication is secondary market mall volumes, which increased 510.2%, driven by two large sales of premier malls in Las Vegas.

• Retailers and fashion companies continue to increase the acquisition of strategically located leased assets for future tenancy, raising the barriers-to-entry to urban markets.

• Foreign investment was down 2.0% quarter-over-quarter and 20.7% year-over-year. Australian investors lead inbound investment, with Asian investors remaining patient.

• As of 3Q16, the retail sector delivered a quarterly return of 1.98%, beating the NPI by 21 bps.

Sources: Cushman & Wakefield, Jones Lang LaSalle, Bloomberg LP, NCREIF, REIS

Europe

• European investment volume was €55 billion during 3Q 2016 and €160 billion year-to-date, down -10% compared to 2015. The decline was driven by the U.K. which saw transaction volume drop -30% year-to-date in local currency terms. Europe, excluding the U.K., saw flat year-to-date growth in the Third Quarter versus 2015.

• Germany accounted for 29% of European transactions during the Third Quarter, switching places with the UK as the largest

commercial real estate market in Europe. France followed as the third largest in European transactions with (+8% y/y) growth, dominated by transactions in the office sector. The retail sector has been the weakest for investment across Europe (-23% y/y).

Asia

• Asia Pacific investment ended the Third Quarter at $233 billion, a 17% sequential growth rate. Compared to the prior year, investment was up +5%.

• Investment in China was up 45% y/y to $6.0 billion, remains on par with 2015 year-to-date, with an increase in portfolio transactions during the quarter.

• Transaction volumes in Australia continued to decline, falling -9% year-to-date to $13.5 billion with limited investment opportunities. Likewise, investment in Japan dropped 9% year-to-date. Investment stock, especially in central Tokyo, remains scant as a negative interest rate environment encourages owners to refinance assets instead of selling.

• Hong Kong recorded $2.5 billion in investment during 3Q, a 56% sequential increase, driven by Chinese investor demand for

long term holds in office properties.

Global Real Estate Market Update (3Q16)

Sources: Jones Lang LaSalle Research, CBRE Global Research, Bloomberg LP

Global

• Global investment activity held up in 3Q 2016. Investment came in at $165 billion, +8% over the Second Quarter, and down -4% compared to 3Q 2015 levels. Despite political and economic uncertainties, commercial real estate investment has remained relatively stable year to date, down -8% over a strong 2015.

Global Outlook - GDP (Real) Growth % pa, 2015-20172015 2016 2017

Global 3.2 3.1 3.4Asia Pacific 4.9 4.5 4.7

Australia 2.4 3.0 3.0China 6.9 6.7 6.4India 7.2 7.4 7.8Japan 0.6 1.0 1.3

North America 2.5 1.6 2.2US 2.6 1.8 2.0

MENA* 3.3 2.2 2.5European Union 2.3 1.8 1.5

France 1.3 1.5 1.5Germany 1.7 1.7 1.4UK 2.2 2.2 1.4

*Middle East North Africa Source: Bloomberg LP, November 2016

Direct Commercial Real Estate Investment - Regional Volumes, 2015 - 2016

$ US Billions Q2 16 Q3 16% Change

Q2 16 - Q3 16 Q3 15% Change

Q3 15 - Q3 16 YTD - 2015 YTD - 2016

% Change YTD 2015 - YTD 2016

Americas 69 77 12% 76 1% 229 207 -10%EMEA 56 55 -2% 63 -13% 178 160 -10%Asia Pacific 28 33 18% 32 3% 87 87 0%Total 153 165 8% 171 -4% 494 454 -8%Source: Jones Lang LaSalle, November 2016

• Since the end of the GFC, the U.S. market has experienced strong economic expansion galvanized by favorable macro fundamentals and rising FDI volumes, given the lagging recovery experienced across Europe. As a result, the continuous growth of the U.S. market has been reflected in global currency movements characterized by a steady rise in USD compared to other major currencies since 2H14.

• The U.S. Dollar has been experiencing fast growth since 2H14. At quarter-end the British Pound (GBP)/USD and Euro (EUR)/USD exchange rates were 25% and 7% higher than their 25-year average, respectively.

• The USD appreciation is negatively correlated with the cost of imports and has been favorable to local investors and consumers. The decrease and volatility in oil prices has been influenced to some extent by the rise in USD and had similar effects to a tax-break on U.S consumers.

• Worries continue in Great Britain due to the recent decision to leave the European Union but have slowed down a bit for the time being. However, volatility is still expected to be the norm while uncertainty remains. In the meantime, the British Pound continues to weaken against the U.S. dollar and has fallen to 0.80 GBP/USD as of 11/30/16 (post Brexit vote). As of 3Q16, the Euro has also been largely affected against the U.S. dollar and declined to 0.94 EUR/USD as of 11/30/16.

Currency Effects - Market Trends (3Q16)

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EURO-USD Rates over 25 Years

25 year Average: 0.84 EUR/USD

Max: 10/25/20001.21 EUR/USD

Min: 4/22/20080.63 EUR/USD

9/30/2016 0.89 EUR/USD

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GBP-USD Rates over 25 Years

25 year Average: 0.62 GBP/USD

Min: 11/8/20070.47 GBP/USD

Max: 8/15/20160.78 GBP/USD

9/30/20160.77 GBP/USD

2. Performance Measurement Highlights: 3Q 2016

• New Mexico State Investment Council’s (NMSIC) current target allocation to real estate is 10.0%. NMSIC’s 3Q16 real estate market value represents 8.9% of total fund assets.

• The real estate portfolio continues to grow and provide positive performance. As of 3Q16, NMSIC outperformed the NFI-ODCE Index on a net basis over the quarter, one-, three-, and five-year periods. We would note, this is the first quarter where the portfolio outperforms the benchmark over the five-year period.

• NMSIC real estate commitments made since 2011 (inception of rebalancing) have been accretive to the real estate portfolio, resulting in net time weighted returns of 12.4%, 14.4% and 14.0% over the one, three and five- year periods, outperforming the ODCE benchmark by approximately 330 bps, 300 bps, and 260 bps over these respective time measurements.

• As of 3Q16, the Legacy Portfolio only represented approximately 9% of the portfolio NAV.

Portfolio Highlights

9

As of 3Q16 Quarter One-Year Three-Year Five-Year

TGRS TNET TGRS TNET TGRS TNET TGRS TNET

NMSIC* 2.9 2.4 13.8 11.5 15.8 13.2 14.4 11.9 NFI ODCE* 2.1 1.8 10.1 9.1 12.5 11.4 12.4 11.3

Over/Under Performance 0.8 0.5 3.7 2.4 3.4 1.8 2.0 0.6 *Time Weighted Returns over the quarter, one-, three-, and five-year periods.

• As of 3Q16, NMSIC’s portfolio consisted of 56% exposure to core investments and 44% exposure to tactical investments, on a NAV basis.

• During the quarter, managers called approximately $63.3 million across the core and tactical investments; return-of-capital combined with income distributions totaled $72.9 million, bringing total distributions to $215.2 million over the last 12 months.

• Strategic Core Portfolio

– Since December 2011, eight strategic core commitments have been made, totaling $935.0 million.

• Per the pacing model and NMSIC’s investment requirements, no additional core commitments will be required in the future, unless modifications occur in NMSIC’s allocation policy. Townsend will continue to consider rebalancing initiatives.

• Tactical Portfolio

– Since December 2011, approximately $1.1 billion has been committed to 19 tactical investments, including two commitments in 2016 of approximately $100.0 million to a Europe focused debt fund and $75.0 million to a US focused street retail fund.

Portfolio Highlights

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Real Estate Portfolio Allocation Portfolio Status

• Since the 2004 inception, NMSIC has committed approximately $3.2 billion to real estate across seven joint ventures and 41 funds with 28 different managers.*

• Investment activity from 2004-2007 focused exclusively on tactical investments.

• In 2011, NMSIC and Townsend began to implement its portfolio repositioning through commitments to core open end funds as well as tactical strategies in order to maintain vintage year exposure and capitalize on market opportunities, while divesting of non-strategic JV relationships.

• The pacing model does not call for any future core commitments, but calls for approximately $193 million of non-core commitments in 2017. In 4Q16, NMSIC made a commitment of $75 million to Asana Partners I. Follow-on investment opportunities and new managers to the SIC portfolio are being evaluated for the 2017 vintage year.

2 Funds $81

6 Funds $289

5 Funds $177

8 Funds $597

1 Fund $100

4 Funds $225

5 Funds $201

4 Funds $235

1 Fund $100

5 Funds $410

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$193 $200 $207 $214 $222 $229 $237 $246

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NMSIC Real Estate Allocation Growth

Annual Tactical Commitments Annual Core Commitments YTD 2016 Tactical Commitments Per Pacing Model Tactical

In 2011, NMSIC increased its real estate allocation from 5% to 10% of total assets.

*Includes a $75 million commitment to Asana that occurred post quarter end.

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Real Estate Portfolio Performance Performance

• The NMSIC real estate portfolio seeks to outperform the NFI-ODCE (net of fees) on a time weighted return basis over a rolling five-year period.

• Recent total performance is strong. NMSIC outperforms over all time periods.

• Performance of the rebalanced portfolio and corresponding commitments made since 2011 remains compelling, with significant outperformance reported against the ODCE benchmark over all measured periods.

1NMSIC Legacy Holdings represent investments made prior to the rebalancing initiative beginning 1Q 2011.

*Time Weighted Returns over the quarter, one-, three-, and five-year periods. **Port folio Weighted Benchmark is a market weighted combination of the ODCE, Townsend Value-Added Fund Index, and Townsend Opportunistic Fund Index based on NMSIC's market weights. Due to timing of this report, data for the Portfolio Weighted Benchmark is as of 2Q16.

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Quarter One-Year Three-Year Five-Year Value Weighted Since Inception Net IRR

NMSIC Total Portfolio Performance* As of September 30, 2016

NM SIC (net) New Commitments Since 2011 (net) NFI-ODCE (net) Portfolio Weighted Benchmark (net)**

Appendix A: Additional 3Q 2016 Performance Attribution

Portfolio Status

• As of 3Q16, NMSIC had $1.7 billion invested in real estate representing 8.9% of total fund assets.

• Including new commitments made YTD 2016 total unfunded commitments are $715.3 million.

• The Tactical portfolio currently represents 44% of the portfolio on a funded basis. At the 55% / 45% target core/non-core blend, the tactical real estate allocation is over-committed by approximately $343 million on a funded and committed basis, reflecting an over commitment factor of 1.4x, slightly above the over-commitment target of 1.3x.

• Over-commitment to tactical is the result of the ongoing regeneration process taking place in the portfolio, with new tactical investments (80% of the portfolio) actively drawing capital and Legacy investments (20% of the Portfolio) expecting near-term liquidation.

• The charts reflect the allocation at a point in time and do not take into account total plan growth, real estate sector NAV growth, or the projected timing of capital calls/distributions. The pacing model presented as part of the Real Estate Investment Plan takes into account all of these factors.

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Real Estate Portfolio Performance

($ in millions) as of 9/30/16 SIC's Target Allocation 10.0% $1,912.0

Current Market Value 8.9% $1,749.0

Market Value + Unfunded Commitments 12.2% $2,388.6

Funded NAV

Unfunded

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Portfolio Snapshot estimated as of 9.30.16 10% Target Allocation

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Sub-Portfolio Snapshot estimated as of 9.30.16 10% Target Allocation

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Real Estate Portfolio Domestic and International Exposure

Portfolio Status

• As of 3Q16, NMSIC’s U.S. exposure is approximately $1.5 billion on a NAV basis, representing 89% of the total portfolio vs. 11% of international exposure. On a NAV plus unfunded basis, NMSIC’s U.S. exposure is approximately $1.9 billion, representing 79% vs. 21% of international exposure.

• As of 3Q16, NMSIC committed approximately $476.7 million to seven dedicated international investments over the last two years. These investments currently represent approximately 8.9% of the portfolio’s NAV and have approximately $300.7 million of unfunded commitments.

$1,549 89%

$1,881 79%

$200 11%

$502 21%

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U.S. vs. International Exposure

US Exposure International Exposure

U.S. 88.6%

Europe 8.2%

Asia 2.4%

Emerging America

0.4% Other 0.5%

Global Geographic Diversification on NAV Basis

Portfolio Status

• Included in the pacing model presented as part of the Real Estate Investment Plan, a number of NMSIC’s existing investments are selling assets and are projecting to be fully realized over the next 12 to 24 months (see slide 22-23 for more details on Legacy Investments).

• Based on 3Q16 market values, the chart below provides a projection of how much capital NMSIC is likely to receive over this time frame. The projections rely on individual manager feedback as well as life of fund assumptions.

• Based on current market values, approximately 24% of Value-Added investments and 16% of Opportunistic investments are projected to be distributed over the next two years, totaling an estimated value between $125-175 million.

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Real Estate Portfolio Performance

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Existing Portfolio Projected Exits / Sales Over the next 12-24 Months (Market Value)

Remaining Market Value Projected Exits/Sales

Target Allocation - Strategic Core: $1,082 m Target Allocation -

Tactical: $885 m

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Legacy Portfolio ($156.1 M / 5.1%)

New Portfolio ($1.6 B / 12.4%)

Total NMSIC ($1.7 B / 11.5%)

3Q16 One-Year Net Contribution Legacy and New Investments

NAV/One-Year net TWR 17

Real Estate Portfolio Performance – Portfolio One-Year Attribution

One-Year Time Weighted Return Performance

• The charts below show the contribution of each the New Portfolio and the Legacy Portfolio to the total one-year net return, as well as the return contribution of each portfolio by asset risk type.

• Over the one-year period, the New Portfolio continues to be the main driver of NMSIC’s total net return. The New Portfolio’s share of return was 10.9% vs. 0.5% from the Legacy Portfolio. The New Portfolio continues to grow as new commitments are made, which further minimize the effects of the Legacy Portfolio on shorter-term returns.

• Over the one-year period, the Strategic Core Portfolio represented 6.0% of NMSIC’s one-year net return and had the largest impact on the portfolio shorter-term returns due to its weight combined with strong returns.

11.5%

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Strategic Core ($980.9 M / 10.7%)

Tactical Value Add ($327.47 M / 17.1%)

Tactical Opportunistic

($336.1 M / 9.8%)

Tactical Credit ($104.4 M / 4.2%)

Total NMSIC ($1.7 B / 11.5%)

3Q16 One-Year Net Contribution by Risk Type

NAV/One-Year net TWR

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Real Estate Portfolio Performance – Legacy Investment Distributions

• The charts below illustrate changes in the Legacy Investments since 2010, as well as expected distributions from the Legacy Investments from 2015 to 2017*.

• Out of nine remaining investments, four are expected to be fully liquidated by year-end 2017.

*Charts based on managers’ projections.

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2010 - 3Q16 NAV Components - Real Estate Legacy Portfolio

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Legacy Portfolio Expected Distribution - 2016 As of September 30, 2016

Actual Distributions Projected Distributions

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Real Estate Portfolio Performance – Diversification

• The portfolio is well diversified, although underweight to retail and strategically underweight to office on a NAV basis. The portfolio is strategically overweight to hotel and “other” property type (including for sale residential, student housing, self storage etc.). Recent new commitments will reduce the “Other” exposure.

• The portfolio is also well diversified by geographic location within the U.S.

• The international exposure is highly concentrated in Europe and Asia with the remaining international exposure primarily in Latin America (through a legacy investment).

• The diversification charts below will change when adding the unfunded commitments. Some of these commitments target specific property types or geographic areas.

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Property Type Diversification (%)

NMSIC - NAV NMSIC - NAV+Unfunded Capital NFI-ODCE

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Geographic Diversification (%)

NMSIC - NAV NMSIC - NAV+Unfunded Capital NFI-ODCE

Appendix B: Definitions

Definitions:

Townsend classifies risk into two main groups – Strategic Core and Tactical Non-Core Real Estate. Within Tactical Non-Core we utilize the sub-categories of Value-Added and Opportunistic. The definitions of these classifications for the NMSIC’s program are noted below:

• Strategic Core – Operating and substantially leased (typically 80% or higher at the time of acquisition) properties; typically included in this category are the traditional asset types including office, retail, industrial, and multifamily residential, although as the real estate asset class matures, we are beginning to see alternative property types being included in this category (e.g., hotels, self-storage). Leverage is usually limited to less than 30% of value although in some instances, leverage can be as high as 50%.

• Tactical Non-Core – Consists of both Value-Added and Opportunistic Return strategies and includes leasing and/or development risk, asset repositioning, distressed assets, and/or specialty property types; NMSIC’s program allows for an international component up to 30% of the real estate program. Tactical Non-Core investments can be made through a variety of structures.

• Value-Added – Properties that take on moderate additional risk from one or more of the following sources: leasing, redevelopment, repositioning, and require certain specialized operating expertise. Leverage is usually limited to less than 50% of value although in some instances, leverage can be as high as 65%.

• Opportunistic – Investments include direct real estate assets (such as development or major redevelopment of office, retail, industrial, residential or specialized property types). Other forms of investment are also included such as land plays, operating companies, distressed debt/properties, and other specialized investments (e.g., brown fields). Leverage is usually 75% of value or greater.

• Credit – Investments include debt focused strategies with real estate serving as collateral. Typical investments include mezzanine financing, recapitalizations, legacy debt instruments, listed debt securities, and preferred equity.

21

New Mexico State Investment Council

Definitions (continued):

• Townsend Portfolio Weighted Index – This Index is a combination of the equal weighted ODCE, Townsend Value Added Fund Index, Townsend Opportunistic Return Fund Index. The equal weighted Index provides a comparison of the investable universe since the NMSIC initiated its real estate portfolio.

• The NCREIF Property Index (NPI) – The NCREIF Property Index represents data collected from the Data Contributing Members of the National Council of Real Estate Investment Fiduciaries (NCREIF). The NPI is an unlevered domestic index, gross of fees, that aggregates the returns of approximately 7,225 privately owned institutional investment properties valued at $471.7 billion. All properties have been acquired, at least in part, on behalf of tax-exempt institutions and held in a fiduciary environment. The properties are wholly owned and joint venture investments consisting of operating properties only – no development projects. It is not possible for investors to invest in or duplicate the NPI.

• NFI-ODCE – The NFI-ODCE, like the NCREIF Property Index and other stock and bond indices, is a capitalization-weighted index based on each fund’s Net Invested Capital. The NFI-ODCE is a gross of fee and net of fee time-weighted return index consisting of Open-end Core Funds. Open-end Funds are defined as infinite-life vehicles consisting of multiple investors who have the ability to enter or exit the fund on a periodic basis, subject to contribution and/or redemption requests, thereby providing a degree of potential investment liquidity.

• We believe that given the inherent valuation lag and lack of leverage in the NPI that the Townsend Indices provide the proper comparison to Investors’ Real Estate Portfolios. The composition of these respective Indices represents the investable universe of funds in each sector and includes leverage.

22



• Internal Rate of Return (“IRR”) – IRR is the average rate earned by each and every dollar invested during the period. This rate is influenced not only by movements in financial markets and decisions made by portfolio managers, but also by the timing and size of cash inflows and outflows and the beginning and ending market values.

• Time-Weighted Return (“TWR”) – A rate-of-return measure of portfolio performance that gives equal weight to each period regardless of any differences in amounts invested in each period. TWR are designed to eliminate the effect that the size and timing of cash flows has on the IRR since the pattern of cash flows varies significantly among funds.

23



24


*Frontier is comprised of 151 countries mainly consisting of other developing countries not listed in the Emerging regions as well as Third World countries.

Developed Americas

(2)Developed Europe

(21)Developed Asia

(5)

Developed Middle East and Africa

(1)

Emerging Americas

(6)Emerging Europe

(5)Emerging Asia

(8)

Emerging Middle East and Africa

(3)Frontier*

(151)United States Austria Austra l ia Is rael Brazi l Czech Republ ic China Egypt Other Developing Canada Belgium Hong Kong Chi le Hungary India South Africa and Third World

Denmark Japan Colombia Morocco Indones ia Turkey counti resEngland New Zealand Mexico Poland South KoreaFinland Singapore Peru Russ ia Malays iaFrance Puerto Rico Phi l ippinesGermany TaiwanGreece Thai landIrelandIta lyLuxembourg NetherlandsNorthern Ireland NorwayPortugalScotlandSpainSwedenSwitzerlandUnited KingdomWales

Geographic Diversification

Appendix C: 3Q 2016 Flash Report

1,966,681,064 10.0% 1,748,955,101 8.9% 640,289,957 3.3% -422,563,994 -2.1%

TGRS TNET TGRS TNET TGRS TNET TGRS TNET

2.9 2.4 13.8 11.5 15.8 13.2 14.4 11.9

2.1 1.8 10.1 9.1 12.5 11.4 12.4 11.3

Funding Status ($)Investment

Vintage Year

Commitment

Amount

Funded

Amount

Unfunded

Commitments

Capital

Returned

Market

Value

Market

Value (%)

Market Value

+ Unfunded

Commitments (%)

Strategic Core Investments 2011 935,000,000 758,505,901 180,044,338 93,987,309 980,949,237 56.1 48.6

Tactical Value-Added Investments 2004 863,125,000 716,682,237 173,329,680 532,533,967 327,466,915 18.7 21.0

Tactical Opportunistic Investments 2005 705,547,981 555,573,906 197,609,133 353,276,709 336,106,334 19.2 22.3

Tactical Credit 2014 211,181,393 114,600,175 89,306,806 14,876,252 104,432,615 6.0 8.1

Total Tactical 2004 1,779,854,374 1,386,856,318 460,245,619 900,686,928 768,005,864 43.9 51.4

Total Current Portfolio

New Mexico State Investment Council 2004 2,714,854,374 2,145,362,219 640,289,957 994,674,237 1,748,955,101 100.0 100.0

NCREIF Fund Index – Open End Diversified Core Equity “NFI-ODCE Value Weight”

Strategic Core Investments

Tactical Value-Added Investments

Tactical Opportunistic Investments

Tactical Credit



Third Quarter 2016

Portfolio Composition ($)

Total Plan Assets Allocation Market Value Unfunded Commitments Remaining Allocation

5 Year (%)

19,666,810,636

Performance Summary Quarter (%) 1 Year (%) 3 Year (%)

INC APP TGRS TNET INC APP TGRS TNET INC APP TGRS TNET INC APP TGRS TNET TGRS TNET

Strategic Core Investments

Strategic Core Investments 980,949,237 1.2 1.4 2.5 2.3 4.8 6.9 11.9 10.7 5.0 8.5 13.8 12.4 5.0 9.0 14.3 12.9 14.8 13.4 2Q11 12.7 1.4

Tactical Value-Added Investments

Tactical Value-Added Investments 327,466,915 1.5 1.8 3.3 2.7 5.9 14.7 21.2 17.1 5.9 14.7 21.3 17.1 6.3 9.3 15.9 12.8 9.0 5.9 3Q04 3.6 1.2

Tactical Opportunistic Investments

Tactical Opportunistic Investments 336,106,334 1.2 2.4 3.5 2.8 2.3 10.5 13.0 9.8 4.8 10.6 15.9 11.7 3.6 11.5 15.4 11.3 6.0 3.0 2Q05 1.9 1.1

Tactical Credit

Tactical Credit 104,432,615 2.3 -0.2 2.1 0.9 13.5 -3.2 10.0 4.2 8.9 5.7 1Q14 5.9 1.0

Total Tactical 768,005,864 1.5 1.8 3.3 2.5 4.7 11.3 16.4 12.6 5.7 12.0 18.2 14.0 5.3 9.5 15.2 11.7 7.5 4.4 3Q04 2.8 1.1

Total Portfolio

New Mexico State Investment Council 1,748,955,101 1.3 1.6 2.9 2.4 4.8 8.8 13.8 11.5 5.3 10.1 15.8 13.2 5.1 9.0 14.4 11.9 7.2 4.6 3Q04 5.4 1.2

Indices

NCREIF Fund Index – Open End Diversified Core Equity “NFI-ODCE Value Weight” 1.1 0.9 2.1 1.8 4.6 5.3 10.1 9.1 4.8 7.3 12.5 11.4 5.0 7.1 12.4 11.3 8.1 7.1 3Q04

NCREIF Property Index "NPI" 1.2 0.6 1.8 4.8 4.3 9.2 5.1 6.0 11.3 5.4 5.6 11.2 9.1 3Q04

FTSE EPRA/NAREIT Developed Index in USD 1.5 15.9 8.6 13.2 8.6 3Q04

Net

IRR

Equity

Multiple


Third Quarter 2016

Returns (%)Market Value

($)

Quarter 1 Year 3 Year 5 Year Inception TWR

Calculation

Inception

INC APP TGRS TNET INC APP TGRS TNET INC APP TGRS TNET INC APP TGRS TNET TGRS TNET

Legacy Portfolio

Legacy Portfolio 156,156,067 1.2 -0.3 0.9 0.7 3.6 2.6 6.4 5.1 7.9 1.4 9.6 7.7 6.6 2.7 9.6 7.6 5.3 2.9 3Q04 -0.3 1.0

New Portfolio 2011 Inception

New Portfolio 2011 Inception 1,592,799,033 1.3 1.8 3.1 2.5 5.0 9.5 14.8 12.4 4.7 12.0 17.2 14.4 4.9 11.3 16.6 14.0 16.6 14.1 2Q11 14.0 1.3

Total Portfolio

New Mexico State Investment Council 1,748,955,101 1.3 1.6 2.9 2.4 4.8 8.8 13.8 11.5 5.3 10.1 15.8 13.2 5.1 9.0 14.4 11.9 7.2 4.6 3Q04 5.4 1.2

Indices

NCREIF Fund Index – Open End Diversified Core Equity “NFI-ODCE Value Weight” 1.1 0.9 2.1 1.8 4.6 5.3 10.1 9.1 4.8 7.3 12.5 11.4 5.0 7.1 12.4 11.3 8.1 7.1 3Q04

NCREIF Property Index "NPI" 1.2 0.6 1.8 4.8 4.3 9.2 5.1 6.0 11.3 5.4 5.6 11.2 9.1 3Q04

FTSE EPRA/NAREIT Developed Index in USD 1.5 15.9 8.6 13.2 8.6 3Q04

Inception TWR

Calculation

Inception

Net

IRR

Equity

Multiple


Third Quarter 2016

Returns (%)Market Value

($)

Quarter 1 Year 3 Year 5 Year

Advisory Disclosures and Definitions

Disclosure

Trade Secret and Confidential.

Past performance is not indicative of future results.

Investing involves risk, including the possible loss of principal.

Returns are presented on a time weighted basis and shown both gross and net of underlying third party fees and expenses and may include income, appreciation and/or other earnings. In addition, investment level Net IRR’s and equity multiples

are reported.

The Townsend Group, on behalf of its client base, collects quarterly limited partner/client level performance data based upon inputs from the underlying investment managers. Data collection is for purposes of calculating investment level

performance as well as aggregating and reporting client level total portfolio performance. Quarterly limited partner/client level performance data is collected directly1 from the investment managers via a secure data collection site.

1In select instances where underlying investment managers have ceased reporting limited partner/client level performance data directly to The Townsend Group via a secure data collection site, The Townsend Group may choose to input

performance data on behalf of its client based upon the investment managers quarterly capital account statements which are supplied to The Townsend Group and the client alike.

Benchmarks

The potential universe of available real asset benchmarks are infinite. Any one benchmark, or combination thereof, may be utilized on a gross or net of fees basis with or without basis point premiums attached. These benchmarks may also utilize

a blended composition with varying weighting methodologies, including market weighted and static weighted approaches.

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