SIC Meeting Materials 5-27-14

State of New Mexico
STATE INVESTMENT COUNCIL

41 Plaza La Prensa
Santa Fe, New Mexico 87507
Phone: (505) 476-9500
Fax: (505) 424-2510

STATE INVESTMENT COUNCIL MEETING AGENDA
GOVERNORS CABINET ROOM, STATE CAPITOL
SANTA FE, NEW MEXICO
TUESDAY, MAY 27, 2014, 9 AM

1. Opening Matters
a. Roll call & introduction of guests (Governor Martinez, Chair) (5 min)
b. Approval of agenda
c. Approval of minutes, April 22, 2014

2. Investment matters: Investments Requiring Vote (120 min)
a. Private Equity Investment Advisory Committee report (Linda Eitzen)
b. Vote: Ares Special Situations Fund IV, L.P. (Vince Smith & LP Capital)
c. Vote: Epic Ventures V, L.P. (Smith & Sun Mountain Capital)
d. Investment Committee report (Harold Lavender)
e. Vote: Brookfield Real Estate Finance Fund IV (Smith & Townsend)
f. Vote: Real Return Investment Policy update (Smith & Geraldine Barlow)

3. Other Investment Matters: Investment Performance, Market Updates & Private Equity Reporting (90 min)
a. 4Q Real estate performance review (Townsend)
b. 4Q 2013 National private equity performance review (LP Capital)
c. 4Q 2013 NMSIC Co-Investment Fund review (LP Capital)
d. 4Q 2013 New Mexico Private Equity Investment Program performance review (Sun Mountain)
e. National private equity reporting Items (informational)
f. New Mexico Private Equity Investment Program reporting items (informational)
g. SIC performance report, TUCS, & monthly activity summary (Smith & RV Kuhns)

4. State Investment Officers Report (Steve Moise) (10 min)

5. Finance Matters: Committee & Informational Reports: Vote/ Discussion (10 min)
a. CFO report (Brent Shipp)

6. Governance Matters: Committee Reports: Discussion (15 min)
a. Governance Committee report (Scott Smart)

7. Closing Matters (Governor Martinez) (5 min)
a. Old or new business
b. Next Sic meeting date: Monday, June 30, 2:30 pm, Santa Fe, NM

8. Public Comment Period (Governor Martinez) (10 min)

9. Vote to Enter Executive Session Pursuant to NMSA, 1978: (Governor Martinez) (30 min)
a. 10-15-1(H)(2) Limited Personnel Matters: employee hiring, retention & compensation
b. 10-15-1(H)(7) Ongoing or pending litigation: investment matters & related legal issues

10. Adjournment

SUSANA MARTINEZ
GOVERNOR
STEVEN K. MOISE
STATE INVESTMENT OFFICER

ROBERT VINCE SMITH, CFA
DEPUTY STATE INVESTMENT OFFICER

Motions for voting items at May 27, 2014 SIC Meeting
Suggested wording:

(1b) Approval of Agenda
I move to approve the agenda for todays meeting.
(1c) Approval of minutes
I move that the State Investment Council approve the meeting minutes for April 22, 2014.
(2b) Ares Special Situations Fund IV, L.P. (LP Capital)
Based upon the recommendation of the Private Equity Investment Advisory Committee, LP Capital
Advisors and Staff, I move that the SIC approve a commitment of $75 million from the National Private
Equity Program to Ares Special Situations Fund IV, L.P. (the Fund), and subject to and contingent
upon New Mexico state law, New Mexico State Investment Council policies, negotiation of final terms
and conditions and completion of appropriate paperwork.

(2c) EPIC Ventures V, L.P. (Sun Mountain Capital)
Based upon the recommendation of Private Equity Investment Advisory Committee, Sun Mountain
Capital and Staff, I move that the SIC approve a commitment of the lesser of 10% of the total committed
capital (including the SICs commitment) or $10 million from the New Mexico Private Equity Program to
EPIC Ventures V, L.P. (the Fund), and subject to and contingent upon New Mexico state law, New
Mexico State Investment Council policies, negotiation of final terms and conditions and completion of
appropriate paperwork.
(2e) Brookfield Real Estate Finance Fund IV (Townsend)
Based upon the recommendation of the Council Investment Committee, the Townsend Group and
Staff, I move that the SIC approve a commitment of $75 million to Brookfield Real Estate Finance Fund
IV, subject to and contingent upon New Mexico state law, New Mexico State Investment Council
policies, negotiation of final terms and conditions and completion of appropriate paperwork.
(2f) Real Return Investment Policy
Based upon the recommendation of the Council Investment Committee and staff, I move that the
SIC approve its updated Real Return Investment Policy, as presented to and discussed by members of the
Council today.
(9a&b) Executive Session
I move that the State Investment Council enter executive session, pursuant to NMSA 1978 Section
10-15-1(H)(7), to discuss ongoing or pending litigation: PE Secondary sale, investment matters and
related legal issues; and to discuss as allowed under Section 10-15-1(H)(2), Limited Personnel Matters:
employee hiring, retention and compensation.

ACTION SUMMARY


April 22, 2014

Item Action Page #

APPROVAL OF AGENDA Approved 3

APPROVAL OF MINUTES
March 25, 2014 Approved 3

INVESTMENT MATTERS: DISCUSSION OR VOTE
Investment Committee report Informational 3
First Reserve Energy Infrastructure Fund II $100 million investment 3
Real Return Asset Allocation Study Approved 6

OTHER INVESTMENT MATTERS
SIC performance report & monthly activity summary Informational 7
LGPF & STPF Financial Model Review Informational 7
NM Private Equity Program reporting items Informational 8

STATE INVESTMENT OFFICERS REPORT Informational 8

FINANCE MATTERS: COMMITTEE AND
INFORMATIONAL REPORTS
Audit Committee report Informational 9
CFO report Informational 9

GOVERNANCE MATTERS: DISCUSSION
Governance Committee report Informational 10

CLOSING MATTERS
Old & New Business [none] 10
Next meeting date: 5/27/2014 10

EXECUTIVE SESSION 11

2015 COUNCIL BUDGET AUTHORIZATION 11
All SIC employees employed at SIO for more than
one year, classified and GovEx, receive 3%
increase Approved

PUBLIC COMMENT PERIOD 11

New Mexico State Investment Council: April 22, 2014 2
MINUTES OF THE

NEW MEXICO STATE INVESTMENT COUNCIL

Santa Fe, New Mexico

April 22, 2014

1. OPENING MATTERS

a. Roll call and introduction of guests: quorum present

A regular meeting of the New Mexico State Investment Council was called to order on this date at
9:00 a.m. in the Governors Cabinet Room of the State Capitol Building, Santa Fe, New Mexico. A quorum
was present:

Members Present:
Mr. Peter Frank, Public Member, Vice Chair
Ms. Linda Eitzen, Public Member
Mr. Tim Jennings, Public Member
Mr. Harold Lavender, Public Member
Mr. Leonard Lee Rawson, Public Member
Mr. Scott Smart, Public Member
Mr. John Young, Public Member

Members Absent:
The Honorable Susana Martinez, Governor
Dr. Thomas E. Clifford, Secretary of Finance & Administration
The Honorable James B. Lewis, State Treasurer
The Honorable Ray Powell, Commissioner of Public Lands

Attorney General Representative:
None.

Staff and Committee Members Present:
Mr. Steven K. Moise, State Investment Officer
Mr. Vince Smith, Deputy State Investment Officer
Mr. Evan Land, General Counsel
Mr. Bruce Brown, Deputy Counsel
Mr. Greg Kulka, Director of Private Equity
Mr. Brent Shipp, Chief Financial Officer
Mr. Wade Franks, Stable Value Director
Ms. Geraldine Barlow, Real Return Director
Mr. Charles Wollmann, Director of Communications
Ms. Kerri Segell, Executive Assistant

Guests Present:
[See Sign-in Sheet.]

b. Approval of agenda

Ms. Eitzen moved approval of the agenda, as published. Mr. Lavender seconded the motion.

Mr. Rawson moved an amendment that the Region III Housing Authority be discussed during
Executive Session. Mr. Jennings seconded the amendment.

The motion to approve the agenda, as amended, passed unanimously by voice vote.

c. Approval of minutes: March 25, 2014

Ms. Eitzen requested the following correction to the last sentence of the PEIAC report on page 4:
PEIAC has been very pleased with the performance of the program after it changed its focus in 2014
2004.

Mr. Smart moved approval of the minutes of the March 25, 2014, meeting, as amended. Mr.
Lavender seconded the motion, which passed unanimously by voice vote.

2. INVESTMENT MATTERS: INVESTMENTS REQUIRING VOTE

a. Investment Committee Report (Harold Lavender)

Mr. Lavender stated that the summary notes for the April 10 CIC meeting were in the Council
packet.

Mr. Lavender noted that reconstruction of the portfolios is largely over and the CIC is now at the
next phase, where it is spending significantly more time than before on asset allocation and related
issues. In addition to an excellent presentation of the Real Return Asset Allocation Study, there was also a
very helpful education session on agriculture investing.

b. Vote: First Reserve Energy Infrastructure Fund II (Vince Smith & Townsend)

Ms. Barlow stated that The Townsend Group is recommending a $100 million commitment to First
Reserve Energy Infrastructure II (First Reserve II) for the NMSICs Real Assets Portfolio. She commented
that First Reserve is very different but complementary to the other exposures the NMSIC has within
energy; they are primarily a contracted and regulated energy strategy relative to the other assets in the
portfolio, which are more focused on E&P and upstream development and growth.

Jack Koch, consultant with The Townsend Group, summarized Townsends report.

-- First Reserve is a $2 billion real assets fund focused on the acquisition and management of
energy infrastructure assets. There is a hard cap of $2.5 billion, which they anticipate reaching by the end
of May.

-- The fund is sponsored by First Reserve, an employee owned private equity firm headquartered
in Greenwich and founded in 1983 by William Macaulay and John Hill.

-- First Reserve is one of the most active global investors across the energy value chain through
two primary strategies: high return private equity buyouts since 1992, and lower return energy
infrastructure since 2009. Fund II will follow a similar strategy to the 2009 vintage $1.23 billion First
Reserve Energy Infrastructure Fund I.

-- First Reserve II is seeking a 14 percent gross return (11-12 percent net). Importantly, it has an
average cash yield of 7-11 percent.

-- Primary strategy is targeting existing operating assets within the energy space with long-term
contracts already in place. The primary targets are contracted power; contracted midstream; contracted
energy assets, and regulated transmission and distribution.

-- These assets are expected to have long-term revenue streams, which is based on the long-term
contracts that are in place.

-- Since the 1980s, First Reserve has raised over $23 billion in equity commitments from investors
and deployed approximately $20.4 billion through 13 prior energy related partnerships. The bulk of this is
through the buyout series, which invested $19.7 billion in 118 portfolio companies, generating a 32.4
percent gross IRR on realized investments and a 25.4 percent gross IRR (16.4 percent net) on all
investments as of June 30, 2013.

-- Infrastructure Fund I has invested $654 million since 2009 in seven platform investments
generating a net IRR of 14.5 percent since inception. While the fund is largely unrealized at this point, the
cash flow has been very strong. Over 2012 and 2013, there was respectively an 8.9 and 10.3 percent
current cash yield, which greatly reduces the risk profile of these investments because a significant
amount of capital is returned through annual cash flow distributions.

Mr. Koch said Townsend likes First Reserve because they are specialists in the energy space. For the
last 30 years, energy and global energy is where they focus. Over that time period, they have established
very strong relationships In Fund I, six out of seven of the transactions were acquired off-market. These
strategic relationships will also be very important moving into Fund II. He noted that fees are generally
better than what Townsend sees in the market.

First Reserve managing directors Mark Florian and Cathleen Ellsworth introduced themselves and
made a presentation.

Ms. Eitzen asked why First Reserve has chosen to take such a shotgun approach to the energy area
in this fund, since it requires them to have an incredible range of skills.

Mr. Florian responded that they are focused on power in midstream, and within that area there are
about 400 companies they can potentially talk to about creating these joint ventures. He said if they find
ten great opportunities, they can pick the one or two they think have the best risk and return
characteristics for the fund.

Ms. Ellsworth added that these areas lend themselves to the types of contracts First Reserve is
looking for.

Ms. Eitzen asked to what degree these contracts are subject to regulatory risks.

Mr. Florian responded that, in the case of utilities or companies using their pipelines, those are
typically directly with corporate counterparties. If there is an additional expense because of regulatory
changes within those contracts, such as with power plants, there is often a pass-through back to the utility
or counterparty. He added that this is something that First Reserve needs to focus on and worry about;
and within these contractual arrangements, they work on de-risking as much as possible.

Ms. Ellsworth said First Reserve recognizes regulatory risks and structures the contracts in a way
that protects them from those changes to the extent possible.

Ms. Ellsworth stated that not all of the contracts have regulatory risk. The area with the greatest
regulatory risk is currently renewables, which is about a one-fourth of the portfolio.

In terms of exit strategies, Ms. Eitzen asked who is going to buy it from them; and if these are long-
term contracts, why isnt this an open-end fund.

Mr. Florian responded that, when they originally set up the fund, they had a bunch of investors who
wanted two different things. Some wanted 10-year funds, which is what they were used to, while others
said they preferred perpetual funds. First Reserve tried to balance that, with a long-term buy-and-hold
investment thesis with a final determination date for the fund.

Ms. Ellsworth said the buyers would be MLPs back to the corporate partners, or a utility or another
infrastructure fund; or in some cases, they can take public an MLP or an IPO. She said they think a lot
about whom they are selling to and model what the residual value would be to the buyer in year 12, for
example.

Responding to Ms. Eitzen, Ms. Barlow said this investment sits in the energy portfolio, which is at
about $400 million, or about 1.2 times the estimated allocation for the energy space. This is prudent
because some of the capital has yet to be drawn down, and it may well take two or three years to be fully
invested. By that time, it is expected that some of the managers will have started returning capital.

Responding to Mr. Jennings on what insurance First Reserve carries for natural disasters, Mr. Florian
said First Reserve has property casualty insurance, environmental insurance and business interruption
insurance.

Mr. Jennings asked how First Reserve decides how much money to invest in operations and
maintenance.

Mr. Florian responded that there are three or four ways to triangulate the appropriate O&M
structure, including plant management and the expertise management teams at the companies; First
Reserves operating partners inside the fund who are knowledgeable about O&M; and using outside
consultants. He said First Reserve has long-term service agreements with the original equipment
manufacturers at the power plants.

Mr. Smart asked if the cash yield expectation for renewable projects is less than it would be for a
gas or coal generation plant.

Mr. Florian responded that it is higher. First Reserve looks at a renewable project as an asset that
lasts 25 years with zero value at the end, so they structure their investments into those areas with higher
returns than might be implied by their IRR target. He agreed that these are large-scale projects; for
instance, their largest project has 260,000 solar panels.

Mr. Lavender stated that Townsend has cited the possible retirement of Chairman Bill Macaulay as
an issue and asked for comment.

Mr. Koch responded that if Mr. Macaulay is not in his seat within the first 30 months from the close,
the investment period would be suspended (First Reserve would stop investing) and a new plan would be
presented to the advisory board.

Mr. Koch added that the infrastructure team is a second strategy of First Reserve, and Townsend
underwrote the first fund they have investors in Fund I very much looking at the First Reserve platform.
In this case, the individuals in place in the infrastructure plan would do very well on their own outside of
the First Reserve platform.

Based on the recommendations of the Council Investment Committee, the Townsend Group and
NMSIC staff, Mr. Lavender moved that the State Investment Council approve investment of $100
million in First Reserve Energy Infrastructure Fund II, L.P., subject to and contingent upon New Mexico
state law, New Mexico State Investment Council policies, negotiation of final terms and conditions and
completion of appropriate paperwork. Mr. Young seconded the motion.

Mr. Lavender stated that the Council Investment Committee and advisory member Gene Sanger
unanimously endorsed this commitment.

Responding to Vice Chair Frank, Ms. Ellsworth said First Reserve would make their valuations
available to the NMSIC for review. She said there are no preexisting investments in Fund II.

The motion passed unanimously by voice vote.

c. Vote: Real Return Asset Allocation Study (Smith & Geraldine Barlow)

Marcia Beard and Matthias Bauer of RV Kuhns were also present for this item.

Mr. Smith presented a background report.

Mr. Smith stated that RVK developed return risk and correlation assumptions for each of the
underlying asset classes and then ran them through the optimizer with some appropriate constraints to
develop an efficient frontier. From that, two efficient portfolios (proposed portfolios #1 and #2) have
been selected for NMSIC review.

Mr. Smith commented that the process followed was somewhat more sophisticated than that
followed with the initial allocation study done in 2011 and likely builds a more effective portfolio.

Ms. Barlow reviewed a comparison of the current model allocations to the actual SIC portfolio. The
comparison chart noted that the Real Assets portfolio is in the build-up stage and so there are differences
between the current drawn value of those asset classes versus the commitment.

NMSIC members discussed the two proposed portfolios.

Proposed percentages for portfolio #2:

Emerging Markets Debt (Local): 10
TIPS: 5
Bank Loans: 10
Infrastructure: 15
Timber: 25
Energy: 25
Agriculture: 10
Total: 100 percent

Expected Return: 7.99
Risk (Standard Deviation): 11.76

Ms. Barlow said NMSIC staff recommends proposed portfolio #2 for the following reasons:

Maximizes exposure to the less liquid assets, increasing access to the illiquidity premium;
Captures an expected rate of return nearer to that of U.S. and international equities. This
will be important later in the asset allocation process for LGPF and STPF as it will reduce the
pressure on the allocation model to allocate to stocks for their higher returns;
Sits closer to the constrained efficient frontier;
It has a stronger relationship to inflation than proposed portfolio #1 and this measure is
consistent with a number of the other model portfolios; and
Is executable from a practical perspective over the short to medium term (next 18-24
months).

Mr. Lavender stated that portfolio #2 was unanimously approved by all of those present at the
Council Investment Committee meeting of April 10. He commended Mr. Smith, Ms. Barlow and RVK
for an excellent report and presentation.

Based on the recommendations of the Council Investment Committee and SIC staff, Mr.
Lavender moved that the State Investment Council approve proposed portfolio #2, as reviewed
and discussed by the Council today. Mr. Rawson seconded the motion, which passed unanimously
by voice vote.

3. OTHER INVESTMENT MATTERS: INVESTMENT PERFORMANCE, MARKET UPDATES
& PRIVATE EQUITY REPORTING

a. SIC Performance Report & monthly activity summary (Smith & RV Kuhns)

Mr. Smith presented the February report and preliminary numbers for the March quarter.

Commenting on the Monthly Investment Summary, Mr. Smith said the economic expansion that has been in
place since Q3 2009 has created complacency in the marketplace among institutional investors. He said his monthly
summary lists some things the NMSIC is doing to avoid complacency. Following the Annual Investment Plan
continuously and staying focused on the longer-term outlook has staff actively engaging the future in the following
ways:

-- Building the income component of the total rate of return, which the NMSIC has been doing for the last
two years.

-- Reducing exposure to publicly traded equity and traditional core fixed income investments, and thinking
hard about reducing exposure to the credit cycle. This fall, staff will have a structure study on fixed income that will
address reducing credit risk.

-- Initiating an asset allocation study, which by policy calls for completing one every three years. While it
happens to be scheduled for this year, the timing in this case is very good. Reviewing the asset mix, assumptions,
return targets and financial models during a period of good times helps avoid the prospect of becoming complacent.

b. LGPF & STPF Financial Model Review (Smith & Todd Frybarger)

Mr. Frybarger made this presentation.

Vice Chair Frank and Mr. Lavender said they felt the 1 percent real growth factor should be included in both the
Full Objectives and Partial Objectives LGPF financial model.

Mr. Frybarger reviewed the financial model summary of the STPF and assumptions that were used in creating
the model.

Mr. Smith noted that, on an inflation-adjusted basis and including 1 percent growth, the STPF needs $6.9 billion
at the 50-year point. What is expected instead is $2.7 billion -- one-third of the money in inflation-adjusted dollars
that will be needed 50 years from now. He commented that the fund will likely fail to deliver in the future in the
same manner as it does today.

Mr. Moise noted that severance tax collections are now at about $450 million a year with only $52.1 million of
that being added to the endowment.

Mr. Smith stated that, had the NMSIC been successful in its request this year to the legislature to increase
inflows by 12.5 percent, it would have doubled the probability of success of attaining the full objective at 50 years
from 14.7 percent probability to 28.7 percent.

Mr. Rawson said this begs the question of how much the NSMSIC would really need to have. Mr. Frybarger
responded that it would take an estimated $140 million a year.

Vice Chair Frank suggested that additional information be added to the chart so people can understand a range
of probabilities.

c. New Mexico Private Equity Program reporting items (informational)

[No discussion.]

4. STATE INVESTMENT OFFICERS REPORT (Steve Moise)

Mr. Moise announced that Bruce Brown will become a member of the New Mexico Bar, and congratulated him.

Mr. Moise congratulated Brent Shipp, who has become a Chartered Alternative Investment Analyst (CAIA). Mr.
Shipp is also a CPA, CFA and a CMA (Certified Management Accountant).

Mr. Moise thanked Susan Buchroeder for preparing the April CIC summary notes.

Investment Matters

-- Current NAV is $19.168 billion.

-- Distributions over the last 12 months to the state have totaled $705.2 million.

Council Matters

-- May SIC and committee meetings:

a. SIC Tuesday 5/27 at 9:00 a.m., Cabinet Room
b. Audit no May meeting
c. Governance Friday 5/16, 10:00 am, teleconference
d. Investment Thursday 5/8 at 11:00 a.m., SIC offices
e. PEIAC Thursday 5/8, 9:00 am, SIC offices

-- Legislative matters (legislative working group):

a. Constitutional amendment vote 11/4 strategy

-- Steve and Charlie will be meeting with various newspaper editorial boards around the state beginning in May.
In addition, the pace of speaking engagements will be stepped up, and all Council members are invited to participate with
him and Mr. Wollmann at other venues; suggestions for venues are welcome. The monthly dashboard now includes
information on the proposed constitutional amendment.

-- The working group was in favor of again pursuing the STPF inflow increases in 2015.

-- The working group is discussing updating the SIC statute, which is out of date.

Mr. Moise said the SIC Management Team has prepared the past years Accomplishments and Goals.

b. Internal audit IT

-- The internal audit process is moving along. Further report on this later in this meeting.

Office administration

-- The office is still recruiting for two individuals to fill vacancies in Accounting and in IT.

-- There are two new hires, Kelley Koehler (financial analyst) and Kellie Horvath (administrative assistant). Thanks
to Mr. Shipp and Ms. Segell for their hard work, and particularly to Ms. Segell for her willingness over the past six months
to take on duties that were not part of her job description.

-- The Governance Committee will be discussing a new compensation-related matter today in closed session.

-- In closed session, staff will discuss the liability coverage that the NMSIC has been pursuing for the last four
years.

External Relations

-- Artesia Rotary, Portales Rotary and Hobbs Rotary will be hosting him and Mr. Wollmann on May 20, 21 and 22
respectively.

-- Staff is very pleased that the NM Oil & Gas Association and the Independent Producers Association of NM have
invited them to speak to their fall conferences regarding the constitutional amendment, and in addition telling them what
the SIC is all about.

-- There are delays in launching the new website. DoIT has informed NMSIC staff that a special exception
authorization is needed to outsource the website. Although a letter of authorization is expected, it is possible the site may
not be rolled out until July 1.

5. FINANCE MATTERS: COMMITTEE & INFORMATIONAL REPORTS: VOTE/DISCUSSION

a. Audit Committee report (Peter Frank)

-- The quarterly audits have been completed, and there were no exceptions.

-- The committee finalized the internal audit report on manager selection.

-- The internal auditor is working on portfolio monitoring, which will be heard by the committee in June. Next on
the committee agenda will be a compliance audit report on IT risks.

-- Bruce Brown is moving well on the compliance program, which the Audit Committee is overseeing.

-- The external audit for the next three years will be put out for bid, and that process will begin in the next
month or two.

b. CFO report (Brent Shipp)

Mr. Shipp presented budget to actual comparisons through March 31, 2014.

Mr. Shipp distributed and reviewed the draft FY15 budget, which included a comparison of the FY15 appropriation
request and the Executive and LFC recommendations.

6. GOVERNANCE MATTERS: COMMITTEE REPORTS: DISCUSSION

a. Governance Committee Report (Scott Smart)

Mr. Smart stated that the Governance Committee met last Friday. He commended the Management Teams
Accomplishments and Goals report, which also received a strong endorsement from the Governance Committee.

Other highlights of the committee meeting:

-- Discussed the strategic plan, with a change suggested by Ms. Eitzen that will be incorporated in the document.

-- The Chair and Vice Chair will not be present at the May SIC meeting. It is typical for the Chair of the
Governance Committee to step into the Vice Chair role when that occurs. This decision was made at the Governance
Committee last week; if this is a problem, Council members are asked to advise him or Mr. Moise.

-- The Council will be meeting on June 30 (afternoon) and July 1 (morning) instead of June 24 and July 22.

Mr. Moise added that there might be committee meetings scheduled in the morning of June 30.

-- Discussed the internal audit report that REDW prepared with respect to the process now followed with the
selection of managers. He said REDW reviewed the process and found it to be robust and appropriate.

-- REDW also recommended that Council and committee members sign a code of conduct. He said staff is
looking into making revisions to the current Code.

Mr. Smart said the committee briefly discussed the ongoing compliance program. Office employees and staff have
signed a Code of Ethics. He asked if this will be developed further, and Mr. Land said Bruce Brown is making changes to the
Code of Ethics that will go to the Governance Committee for review.

-- Discussed the JPA agreements that allow other agencies within the state with at least $10 million in assets to
participate in a wider range of the investment pools overseen by the NMSIC.

-- Mr. Land briefed the committee on progress with D&O coverage.

Vice Chair Frank suggested that the Council endorse the Accomplishments and Goals report.

Mr. Land said action could not be taken at this meeting because of notification requirements, but said general
consensus from the Council would be helpful.

Vice Chair Frank asked if there was consensus that this document should be the guidepost for the year in evaluating
performance. He commented, I see full one hundred percent consensus.

7. CLOSING MATTERS (Governor Martinez)

a. Old or new business

None.

b. Next SIC meeting date: Tuesday, May 27, 9am, Santa Fe, NM

8. PUBLIC COMMENT PERIOD

[Agenda was reprioritized and this item moved to follow Executive Session.]

9. VOTE TO ENTER EXECUTIVE SESSION PURSUANT TO NMSA 1978

a. 10-15-1(H)(2) Limited Personnel Matters: employee hiring and retention & compensation
b. 10-15-1(H)(7) Ongoing or pending litigation: PE secondary sale; investment matters & related legal
issues

Vice Chair Frank moved to enter executive session for the purposes stated on the agenda. Mr. Rawson seconded
the motion, which passed on the following roll call vote:

For: Ms. Eitzen; Mr. Jennings; Mr. Lavender; Mr. Rawson; Mr. Smart; Mr. Young; Vice Chair Frank.

Against: None.

[Council was in executive session from 11:45 until 12:10.]

Vice Chair Frank affirmed that the only matters discussed in executive session were those listed on the agenda.

10. VOTE: 2015 COUNCIL BUDGET AUTHORIZATION

Mr. Smart moved, based on the SICs existing statutory authority in Section 8, paragraph e of the General
Appropriation Act of 2014 relating to non-general fund appropriation, which includes the SICs budget, that all SIC
employees who have been employed at the State Investment Office for more than one year, including both classified
and GovEx employees, receive a 3 percent increase in compensation or salary either as a raise or as a cost of living
adjustment, respectively. Mr. Lavender seconded the motion, which passed unanimously by voice vote.

PUBLIC COMMENT PERIOD

Kay Lynde Grotbeck asked that the NMSIC either approve or disapprove of all litigation matters. She said public
funds should be publicly recognized, and the NMSIC could approve litigation matters and settlements, etc., without
revealing strategic information to the public.

Mr. Jennings noted that the Attorney General has statutory authority in many such matters and so the NMSIC
cannot deal with all litigation.

Vice Chair Frank stated that all of the NMSICs litigation settlements are a matter of public record.

11. ADJOURNMENT

Its business completed, the State Investment Council adjourned the meeting at 12:15 p.m.

Approved:

Scott Smart, Acting Vice-Chair
Governance Committee Chair


Tab 2

2. Investment Matters: Investments Requiring Vote

a. Private Equity Investment Advisory Committee report (Linda Eitzen)
b. Vote: Ares Special Situations Fund IV, L.P. (Vince Smith & LP Capital)
c. Vote: Epic Ventures V, L.P. (Smith & Sun Mountain Capital)
d. Investment Committee report (Harold Lavender)
e. Vote: Brookfield Real Estate Finance Fund IV (Smith & Townsend)
f. Vote: Real Return Investment Policy update (Smith & Geraldine Barlow)

Confidential and Proprietary

Ares Special Situations Fund IV, L.P.

Investment Summary
New Mexico State Investment Council
April 29, 2014

ARES SPECIAL SITUATIONS FUND IV, L.P. INVESTMENT SUMMARY

2

Organizational Overview
Ares Management (Ares or the Firm) was founded in 1997 as an affiliate of Apollo Management and became an
independent firm in 2002. Ares has approximately 700 employees, including over 300 investment professionals, and is
headquartered in Los Angeles, California with 14 other offices in the U.S., Europe and Asia. The Firm manages four
platforms, including: Tradable Debt Group ($28 billion), Direct Lending Group ($27 billion), Private Equity Group ($10
billion), and Real Estate Group ($9 billion). The Ares Special Situations Funds are part of the Tradable Debt Group.

The Tradable Debt Group manages three special situations funds including Ares Special Situations Fund I (ASSF I),
Ares Special Situations Fund II (ASSF II) and Ares Special Situations Fund III (ASSF III) and is currently raising Ares
Special Situations Fund IV (ASSF IV).

Strategy
The Fund will focus on dislocated and out-of-favor assets, primarily first and second-lien bank loans and high yield
bonds as well as equities and other securities in reorganized entities that are trading at stressed or distressed levels.
The Fund will also opportunistically invest in collateralized loan obligation equity and debt, asset-based portfolios and
non-performing loans.

Team
The Funds investment activities will be managed by J eff Moore and Darryl Schall, both ASSF Portfolio Managers,
and Greg Margolies, Head of Ares Tradable Credit Group.
The Tradable Credit Group has industry analysts who monitor over 1,000 companies and 30 industries.
The Fund will be able to utilize the resources of the Tradable Credit Group as well Ares other platforms.

Performance
ASSF III closed in 2010 and is focused on credit and special situations investments.

Alignment
The Funds terms are generally consistent with other similar funds.
Ares is an SEC-registered investment advisor under the U.S. Investment Advisers Act of 1940.

Strategic Fit
The Fund fits into the Special Situations category of the NM SIC target allocation, which has a 15% to 25% target
allocation within the National Private Equity portfolio. Ares is an existing relationship for NM SIC, with commitments to
ASSF I and ASSF III.

This investment summary was prepared by LP Capital Advisors (LPCA) for the sole use of the New Mexico State
Investment Council (NM SIC) and is subject to LPCAs more detailed Confidential Investment Memorandum (the
Investment Memorandum), which was previously provided to the NM SIC. As further described in the Investment
Memorandum, no assurance can be given that a partnerships investment objectives will be achieved, and past
performance is no indication of future results.

Copyright 2014 by LP Capital Advisors LLC.

Confidential Not for Publication or Distribution
Presentation on Ares Special Situations Fund IV
May 27, 2014
2
Disclaimer
These materials are not an offer to sell, or the solicitation of an offer to purchase, any security, the offer and/or sale of which can only be made by definitive offering documentation !ny offer or solicitation with respect to
any securities that may be issued by any investment vehicle "each, an #!res $und%& managed by !res 'anagement ((C or any of its affiliated entities "collectively, #!res%& will be made only by means of definitive offering
memoranda, which will be provided to prospective investors and will contain material information that is not set forth herein, including ris) factors relating to any such investment !ny such offering memoranda will
supersede these materials and any other mar)eting materials "in whatever form& provided by !res to prospective investors *n addition, these materials are not an offer to sell, or the solicitation of an offer to purchase
securities of !res 'anagement, (P "#!res (P%&, the parent of !res 'anagement ((C *n the +nited ,tates, !res $und securities may be offered through our affiliate , !res *nvestor ,ervices ((C, a bro)er-dealer registered
with the ,.C, and a member of $*N/! and ,*PC
*n ma)ing a decision to invest in any securities of an !res $und, prospective investors should rely only on the offering memorandumfor such securities and not on these materials, which contain preliminary information that
is sub0ect to change and that is not intended to be complete or to constitute all the information necessary to ade1uately evaluate the conse1uences of investing in such securities !res ma)es no representation or warranty
"e2press or implied& with respect to the information contained herein "including, without limitation, information obtained from third parties& and e2pressly disclaims any and all liability based on or relating to the
information contained in, or errors or omissions from, these materials3 or based on or relating to the recipient4s use "or the use by any of its affiliates or representatives& of these materials3 or any other written or oral
communications transmitted to the recipient or any of its affiliates or representatives in the course of its evaluation of !res !res underta)es no duty or obligation to update or revise the information contained in these
materials
The recipient should conduct its own investigations and analyses of !res and the relevant !res $und and the information set forth in these materials Nothing in these materials should be construed as a recommendation to
invest in any securities that may be issued by an !res $und or as legal, accounting or ta2 advice 5efore ma)ing a decision to invest in any !res $und, a prospective investor should carefully review information respecting !res
and such !res $und and consult with its own legal, accounting, ta2 and other advisors in order to independently assess the merits of such an investment
These materials are not intended for distribution to, or use by, any person or entity in any 0urisdiction or country where such distribution or use would be contrary to law or regulation
These materials contain confidential and proprietary information, and their distribution or the divulgence of any of their contents to any person, other than the person to whom they were originally delivered and such
person6s advisors, without the prior consent of !res is prohibited The recipient is advised that +nited ,tates securities laws restrict any person who has material, nonpublic information about a company from purchasing or
selling securities of such company "and options, warrants and rights relating thereto& and from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such
person is li)ely to purchase or sell such securities The recipient agrees not to purchase or sell such securities in violation of any such laws
*n the +nited 7ingdom, this document is intended only for distribution to professional clients and eligible counterparties, as defined by the $inancial ,ervices and 'ar)ets !ct 2888 "$inancial Promotion& 9rder 288:, and such
other persons to whom financial promotions can be issued within the scope of available e2emptions *nvestments should only be made by persons with professional e2perience of participating in unregulated collective
investment schemes and any other person who receives this document should not rely upon it *n other ..! countries, these materials are available for distribution only to persons regarded as professional clients "or the
e1uivalent& in their home 0urisdiction
Notice to !ustralian /esidents; The financial services are provided by !res 'anagement ((C or !res 'anagement (imited3 !res 'anagement ((C and !res 'anagement (imited are e2empt from the re1uirement to hold an
!ustralian financial services license under the Corporations !ct "Cth& 288:3 !res 'anagement ((C is regulated by the +, ,ecurities and .2change Commission under +, laws, which differ to !ustralian laws3 and !res
'anagement (imited is regulated by the +7 $inancial ,ervices !uthority under +7 laws, which differ to !ustralian laws
These materials may contain #forward-loo)ing% information that is not purely historical in nature, and such information may include, among other things, pro0ections, forecasts or estimates of cash flows, yields or returns,
scenario analyses and proposed or e2pected portfolio composition The forward-loo)ing information contained herein is based upon certain assumptions about future events or conditions and is intended only to illustrate
hypothetical results under those assumptions "not all of which will be specified herein& Not all relevant events or conditions may have been considered in developing such assumptions The success or achievement of
various results and ob0ectives is dependent upon a multitude of factors, many of which are beyond the control of !res No representations are made as to the accuracy of such estimates or pro0ections or that such
pro0ections will be reali<ed !ctual events or conditions are unli)ely to be consistent with, and may differ materially from, those assumed Prospective investors should not view the past performance of !res as indicative of
future results
These materials also contain information about !res and certain of its personnel and affiliates and the historical performance of other investment vehicles whose portfolios are managed by !res or its affiliates !res
ac1uired !/.! Property Partners in =uly 28:> *nformation about certain assets and funds and the performance of such assets and funds discussed in this presentation relate to funds that were managed by !/.! Property
Partners or its affiliates prior to the full integration of !/.! Property Partners into the !res Platform This information has been supplied by !res to provide prospective investors with information as to its general portfolio
management e2perience *n addition, an investment in one !res $und will be discrete froman investment in any other !res $und !s such, neither the reali<ed returns nor the unreali<ed values attributable to one !res $und
are directly applicable to an investment in any other !res $und !n investment in an !res $und "other than in publicly traded securities of !res Capital Corporation& is illi1uid and its value is volatile and can suffer from
adverse or une2pected mar)et moves or other adverse events *nvestors may suffer the loss of their entire investment
This may contain information obtained from third parties, including ratings from credit ratings agencies such as ,tandard ? Poor4s /eproduction and distribution of third party content in any form is prohibited e2cept with
the prior written permission of the related third party Third party content providers do not guarantee the accuracy, completeness, timeliness or availability of any information, including ratings, and are not responsible for
any errors or omissions "negligent or otherwise&, regardless of the cause, or for the results obtained from the use of such content T@*/D P!/TA C9NT.NT P/9B*D./, C*B. N9 .DP/.,, 9/ *'P(*.D E!//!NT*.,,
*NC(+D*NC, 5+T N9T (*'*T.D T9, !NA E!//!NT*., 9$ './C@!NT!5*(*TA 9/ $*TN.,, $9/ ! P!/T*C+(!/ P+/P9,. 9/ +,. T@*/D P!/TA C9NT.NT P/9B*D./, ,@!(( N9T 5. (*!5(. $9/ !NA D*/.CT, *ND*/.CT,
*NC*D.NT!(, .D.'P(!/A, C9'P.N,!T9/A, P+N*T*B., ,P.C*!( 9/ C9N,.F+.NT*!( D!'!C.,, C9,T,, .DP.N,.,, (.C!( $..,, 9/ (9,,., "*NC(+D*NC (9,T *NC9'. 9/ P/9$*T, !ND 9PP9/T+N*TA C9,T, 9/ (9,,.,
C!+,.D 5A N.C(*C.NC.& *N C9NN.CT*9N E*T@ !NA +,. 9$ T@.*/ C9NT.NT, *NC(+D*NC /!T*NC, Credit ratings are statements of opinions and are not statements of fact or recommendations to purchase, hold or sell
securities They do not address the suitability of securities or the suitability of securities for investment purposes, and should not be relied on as investment advice
>
Ares Special Situations un! I"
#a$le o% Contents
.2ecutive ,ummary "G&
9verview of !res 'anagement "H&
!res ,pecial ,ituations $und *B "I&
G
&xecutive Summary
J
&xecutive Summary
Ares Special Situations un! I" '(SS)* is a continuation o% t+e success%ul investment strate,y
implemente! in Ares- t+ree pre!ecessor %un!s %ocuse! on ,lo$al !istresse! !e$t an! special situations
K $ourth global special situations fund
K (ead Portfolio 'anagers have over 2J years of industry e2perience which cover numerous distressed cycles
K $unds : > have generated a gross *// of 28HL "282 '*C& and a net *// of :H:L ":M2 '*C&
":&
Expertise
K Capitali<e on current themes; new regulation driving ban)s to shed assets and developing corporate credit bubble
K *nvestment in stressed and distressed opportunities including;
K Corporate debt instruments
K /escue-capital opportunities
K ,pecialty finance opportunities
Strategy
K Robust sourcing model: Cross-sourcing from the NMG billion !res Platform
"2&
K Proprietary insight; Differentiated mar)et intelligence and research using insights e2changed among the >:8
*nvestment Professionals
K Experience: Comprehensive multi-asset e2perience and ability to evaluate broad range of investment
opportunities by the dedicated and e2perienced ,,$ Team
Competitive
Edge
Ares experienced and tenured SSF Team has a demonstrated trac record o! identi!ying attractive
relative value opportunities through multiple maret cycles and across various geographies
Corporate and consumer asset bac)ed investments
Post-reorgani<ation securities
Non-performing portfolios
Note; Past performance is not indicative of future results $unds presented on this slide are closed to new investors
: Performance through 'arch >:, 28:G
2 !res 'anagement, (P is the parent to several registered investment advisers, including !res 'anagement ((C !+' refers to the assets of the funds, alternative asset companies and other entities and accounts that
are managed or co-managed by !res *t also includes funds managed by *vy @ill !sset 'anagement, (P, a wholly owned portfolio company of !/CC, and a registered investment adviser *t includes drawn and undrawn
amounts, including certain amounts that are sub0ect to regulatory leverage restrictions and/or borrowing base restrictions !+' amounts are as of December >:, 28:> and are unaudited Certain amounts are
preliminary and remain sub0ect to change, and differences may arise due to rounding
H
.verview o% Ares Mana,ement
M
Ares Mana,ement .verview
Ares "anagement# $%P% &'Ares() is a publicly traded# leading global alternative asset manager *ith approximately +,-
billion o! assets under management
&.)
O ,ince our inception in :PPM, we have adhered to a disciplined investment philosophy that focuses on delivering compelling
ris)-ad0usted investment returns throughout mar)et cycles
/e have !our distinct but complementary investment groups that have the ability to invest across the capital structure
O Ee believe each group is a mar)et leader that has demonstrated a consistent investment trac) record
Tradable Credit 0irect $ending Private E1uity Real Estate
A leading participant in the
tradable, non-investment grade
corporate credit markets
One of the largest self-originating
direct lenders to the U.S. and
European middle markets
One of the most consistent
performing private equity managers
in the U.S. ith a groing
international presence
A leading participant in the real
estate private equity markets
and a groing direct lender
!ssets +nder
'anagement
N2I billion N2M billion N:8 billion NP billion
,trategies
(ong-9nly Credit
!lternative Credit
+, Direct (ending
.uropean Direct (ending
+, / .uropean $le2ible Capital
China Crowth Capital
/eal .state Debt
/eal .state .1uity
: !res 'anagement, (P is the parent to several registered investment advisers, including !res 'anagement ((C !+' refers to the assets of the funds, alternative asset companies and
other entities and accounts that are managed or co-managed by !res *t also includes funds managed by *vy @ill !sset 'anagement, (P, a wholly owned portfolio company of !/CC, and a
registered investment adviser *t includes drawn and undrawn amounts, including certain amounts that are sub0ect to regulatory leverage restrictions and/or borrowing base restrictions
!+' amounts are as of December >:, 28:> and are unaudited Certain amounts are preliminary and remain sub0ect to change, and differences may arise due to rounding
I
Ares Special Situations un! I"
P
Ares SS I" #eam
$ead Port!olio "anagers 2 3nvestment Committee
4reg "argolies
@ead of !res Tradable Credit, ,enior Partner
"2H years&
!res 'anagement Senior !artner, "ead of
#radable $redit %roup
'errill (ynch ? Co &anaging 'irector, "ead of
%lobal (everaged )inance and $apital
$ommitments
D5 Capital 'e<<anine $und $o-"ead *
&anaging 'irector
5e!! "oore
Portfolio 'anager, ,pecial ,ituations
">> years&
!res 'anagement !ortfolio &anager,
(ion !dvisors Senior $redit Analyst
.2ecutive (ife *nsurance Company of
California +ice !resident
Deloitte and Touche Senior &anager
0arryl Schall
Portfolio 'anager, ,pecial ,ituations
">2 years&
!res 'anagement !ortfolio &anager,
Tudor *nvestment Corporation - !roduct
&anager
Trust Company of the Eest - !ortfolio
&anager, 'irector of "igh ,ield -esearch
Additional "embers o! the Ares SSF 3nvestment Committee
677aval 0esai
@ead of .uropean Tradable Credit
":P years&
5ohn 8issic
Co-$ounder, ,enior Partner
">P years&
Tony Ressler
Co-$ounder, C.9
"2P years&
0avid Sachs
,enior Partner
">> years&
Additional "embers o! the Ares SSF Team
8eith Ashton
Portfolio 'anager, +,
":J years&
677aval 0esai
Portfolio 'anager,
.urope
":P years&
5e!!rey 8ramer
Portfolio 'anager, +,
"2M years&
Pietro Stella
Portfolio 'anager,
.urope
":M years&
Charles Arduini
,enior !nalyst, +,
":J years&
Alan 9art
,enior !nalyst, .urope
":: years&
:incent Salerno
,enior !nalyst, +,
":H years&
"atthe* Sheahan
,enior !nalyst, +,
":H years&
;en7amin Tys<a
,enior !nalyst, +,
":2 years&
Tim =eiger
,enior !nalyst, .urope
":2 years&
Steve 8im
!nalyst, +,
":> years&
3an Smith
Trader
":2 years&
#+e SS team +as experience mana,in, $ot+ per%ormin, an! !istresse! cre!it an! +ave expertise in
restructurin,s, $an/ruptcy %inancin,s, port%olio purc+ases an! asset0$ac/e! investin,
$everage Support o! 3nvestment Pro!essionals !rom both the Tradable Credit 4roup &-- additional pro!essionals) > ;roader Ares Plat!orm
Note; !s of 'arch >:, 28:G Aears referenced represents number of years of relevant e2perience
:8
Clobal Trading Team
$aura Rogers
:P years
@ead Trader
Evan Cascio
:2 years
Trader
Tracy "ancuso
:I years
Trader
3an Smith
:2 years
Trader
8evin Ter<ic
:8 years
.uro Trader
5ason Ed*ards
I years
Trading !ssistant
:ictoria Tunberg
I years
Trading !ssistant
Portfolio 'anagement
8eith Ashton
!sset 5ac)ed *nvestments
:J years
Seth ;ru!sy
'ulti-,trategy Credit,
,enior Partner
2G years
Americo Cascella
+, Credit
28 years
677aval 0esai
@ead of .urope Tradable
Credit
:P years
5ohn Eanes
+, Credit
:8 years
Fran?ois 4auvin
.uro Credit
22 years
5e!!rey 8ramer
+, !sset 5ac)ed
*nvestments
2M years
5ohn $eupp
+, Credit
2J years
4reg "argolies
@ead of !res Tradable
Credit, ,enior Partner
2H years
5e!! "oore
,pecial ,ituations
>> years
0avid Sachs
,enior Partner
>> years
0arryl Schall
'ulti-,trategy Credit ?
,pecial ,ituations
>2 years
Pietro Stella
.uro !sset 5ac)ed
*nvestments
:M years
Deep 1 &xperience! #eam
Note; !s of 'ay 28:G Aears referenced represents number of years of relevant e2perience
+, Tradable Credit
Andrea Cullen
Director of /esearch
:G years
Consumer Products,
$ood/5everage, /etail
5enni!er 8o<ici
Chief 9perating
9fficer, TCC
:M years
Shane "engel
Client Portfolio
'anager, TCC
:P years
Russell Almeida
,enior !nalyst
:8 years
@omebuilding, 5ldg
Products, *ndustrial,
'anufacturing, ,ervices
Charles Arduini
,enior !nalyst
:J years
!sset 5ac)ed
*nvestments
;en ;onsall
,enior !nalyst
P years
Chemicals, 'idstream /
Propane / /efining
=hen 4uo
,enior !nalyst
I years
!sset 5ac)ed
*nvestments
;rad 9ill
,enior !nalyst
P years
,upermar)ets,
Cable/,atellite,
5roadcasting
Sung 9ong
,enior !nalyst
:> years
$inancials, Telecom
"ie 9uddleston
,enior !nalyst
:2 years
.nergy, Paper /
Pac)aging
Chris "athe*son
,enior !nalyst
:8 years
Printing / Publishing,
Diversified 'edia,
Technology,
'etals/'ining
Samantha "ilner
,enior !nalyst
:G years
!erospace/Defense,
!utomotive,
Transportation,
.1uipment /ental
5e!! "oore
,enior !nalyst
>> years
@ealthcare "!cute
and Non-!cute&
5enni!er Pullen
,enior !nalyst
:> years
Technology ",oftware&,
+tilities
:incent Salerno
,enior !nalyst
:H years
!sset 5ac)ed
*nvestments
"atthe* Sheahan
,enior !nalyst
:H years
Distressed / ,pecial
,ituations
;en7amin Tys<a
,enior !nalyst
:2 years
!sset 5ac)ed
*nvestments
9o*ard /ang
,enior !nalyst
:M years
Caming, /estaurants, 'edia
Content, (odging/(eisure
.. 5unior Analysts
!veraging I years of e2perience
5usiness Development / *nvestor /elations
-@ Pro!essionals
2e $elieve our experience an! !eep in!ustry expertise is a source o% competitive a!vanta,e
.urope Tradable Credit
Ailesh 0esai
,enior !nalyst
:J years
Consumer, $ood/5everage,
/estaurants ? $ood
,ervice, /etail,
,upermar)ets
Alan 9art
,enior !nalyst
:: years
!sset 5ac)ed
*nvestments
4raham "artin
,enior !nalyst
2J years
!erospace/Defense,
!utos, .1uipment
/ental, $inancials,
Caming /(odging,
@ome 5uilding ? /.,
Paper ? Pac)aging,
Transportation
Aicolo Perari
,enior !nalyst
:> years
5roadcasting, Cable ?
,atellite, Diversified
'edia, @ealthcare, Print ?
Publishing,
Technology/,oftware,
Telecom
0avid /ood
,enior !nalyst
:J years
Chemicals, .nergy,
*ndustrials, 'etals ?
'ining, 9il ? Cas,
,ervices, +tilities
Tim =eiger
,enior !nalyst
:2 years
!sset 5ac)ed
*nvestments
@ 5unior Analysts
!veraging M years of e2perience
::
#+e Ares 3lat%orm is Critical %or Sourcin,
Tradable Credit
Ares SSF 3nvestment Team selects investment ideas
a!ter a thorough dueBdiligence process
0irect $ending Private E1uity Real Estate
4o$ust sourcin, mo!el an! ori,ination capa$ilities usin, t+e Ares 3lat%orm
Ares 3nvestment 4roups
$everaging investment ideas sourced by CD.E investment pro!essionals across over .@ cities globally
J88Q direct institutional
relationships
Coverage of over :,888
companies across >8Q
industries
(ocal direct origination
capacity
!ctive dialogue with
sponsors, capital
providers and local 0oint
venture partners
9ngoing discussions
with top financial
institutions
!ccess to broader
ban)ing and capital
mar)et relationships
.nhanced access to deal
flow through tenured
team in local mar)ets
R:,>88 transactions or
RNJ8 billion in
investments reviewed
annually
Note; !s of December >:, 28:>
EPIC VENTURE FUND V
FILLING THE GAP BETWEEN STRUCTURALLY
RESTRICTED VENTURE FIRMS AND THE
LIMITED CAPITAL OF ANGELS
1
OP AL F I NANCI AL GROUP EMERGI NG MANAGER OF THE Y EAR 2009
EPIC FUND V SUMMARY
2
EPIC FUNDS THE GAP
WE FOCUS ON ROUNDS
BETWEEN ANGELS AND
LATER STAGE VCS
EPIC FOCUSES ON TECH
CLOUD, STORAGE,
SECURITY, MOBILE,
MEDIA &
ENTERTAINMENT
EPIC LEADS THE REGION
WE SEE ALL EARLY-
STAGE DEALS IN THE
MOUNTAIN STATES
EPIC GETS EXITS
TRACK RECORD OF
SUCCESSFUL INVESTING
OVER MUTIPLE FUNDS

EPIC MANAGING DIRECTORS
3
NICK EFSTRATIS
Managing Director
Bus Dev., Excite.com
Bus Dev., NetDocuments
CCO, MACC
Founding Team, NetDocuments
Co-Founder, RanchLife
Adventures
Co-Founder, EPIC Ventures
Wasatch Venture Fund / EPIC
Ventures and MACC
(15 Years Inv. Exp.)
BS, BYU
MBA, BYU
KENT MADSEN
Managing Director
CEO, MACC
Prod Dev. new vehicle ventures,
China, Ford
Advanced Research, Ford
CEO, MACC Private Equities
Co-Founder, EPIC Ventures
Wasatch Venture Fund / EPIC
Ventures and MACC
MA and BS, Penn
MSE, Michigan
MBA, Wharton
CHRIS STONE
Managing Director
CEO, Streamserve
Vice Chairman / Office of CEO,
EVP, Novell
Director Software Dev.,
Data General
CEO, SiCortex
Co-Founder, Tilion
Founder / CEO, Object
Management Group

Novell Ventures
Wasatch Venture Fund /
EPIC Ventures

BS, Univ. of NH
AMP/MBA, Harvard
OPERATI NG
ENTREPRENEURI A
L
FI NANCI AL
EDUCATI ON
I NVESTMENTS

NEW MEXICO TECH STARTUP ECOSYSTEM
Katie represents EPIC within NMs startup community

President, board member connecting NM
entrepreneurs with investors

Board member, selection committee -
bringing a startup accelerator to Abq

ABQ STARTUP WEEKEND J udge -
empowering entrepreneurs to launch
successful ventures

Venture Acceleration Fund (VAF) Review
committee member non-dilutive seed
capital to startups in Northern NM

Board member providing resources, training
and expertise for entrepreneurs in NM

Other involvement includes: NM Venture Capital Association, UNM (Biz
plan competition judge, guest speaker, advisor to STC Venture Lab,
TVC (advisor, workshops, speaker), InnovateAbq
EPIC VENTURES IN NEW MEXICO
4
KATIE
SZCZEPANIA
K RICE
14 yrs experience in
strategy, engineering,
consulting, startups, and
venture capital
Based in NM since 2004

Deep network within
technology and
entrepreneurial
community

Albuquerque Top 40
Under 40, 2013
EXPERI ENCE
EDUCATI ON
NEW MEXI CO
BS, MIT
MBA, University of
Chicago
EPIC ADVISORY BOARD
5
J IM SORENSON
CEO, Sorenson Companies (EPIC Co-investor)
LARRY AUGUSTIN
Founder, VA Linux (VA Software); CEO,
SugarCRM
ROB RYAN
Founder & former CEO, Ascend Communications
(IPO, Lucent Bought for $23 Billion); Advisor and
Board Member, RightNow (Oracle)
RAY BINGHAM
MD, General Atlantic Partners; Board Member,
Oracle
PAUL CORMIER
President of Products and Strategy, Red Hat
SHANE ROBISON
CEO, Fusion IO; Former EVP and Chief Strategy
and Technology Officer, Hewlett Packard
HENRY EYRING
EVP, Brigham Young University; Former Partner,
Monitor
DEREK SMITH
Founder and former CEO, Oakley Networks
(Raytheon); Sr. Advisor,
Cyber Policy Office of Secretary of Defense
TAYLOR RANDALL
Dean, University of Utah Business School

EPIC Ventures V, LP 1

EPIC VENTURES V, LP

Investment Analysis Summary
May 27, 2014

EPIC Ventures (Epic or the Firm) is raising EPIC Ventures V, LP (Fund V or the Fund), a $75
million early stage venture capital fund. The Fund will continue the Firms approach of investing in
the Intermountain West region and specifically in New Mexico.

Team
Fund V will be lead by the same team that lead EPIC Ventures IV (Fund IV), consisting of Nick
Efstratis, Kent Madsen and Chris Stone (the Managing Directors). The Managing Directors are
supported by three senior level investment professionals, a Chief Financial Officer and a team of
analysts. Katie Rice is EPIC's New Mexico-based investment professional and is based in
Albuquerque. In addition to the investment team, the Fund is supported by an advisory board
comprised of senior leaders in the technology industry.

Strategy
EPIC is targeting $75 million of capital commitments to be deployed across a number of
investments in early stage companies. The Funds strategy is focused on technology in the mobile,
cloud computing, data and security, media and entertainment and IT sectors. Sun Mountain Capital
believes that there are several key factors that will determine the effectiveness of the strategy:
Focus on sectors aligned with the Managing Directors experience and domain expertise
Investing at a stage where the Managing Directors can add value to the company
Identifying opportunities that are overlooked by national VC firms

Fit With New Mexico
EPIC has been actively investing in New Mexico for over a decade. Out of the three prior funds
which have received an investment from the New Mexico State Investment Council, EPIC has
invested in nine New Mexico-based companies. The EPIC team includes a very active investment
professional located in Albuquerque, Katie Szczepaniak Rice.

Fit With the New Mexico Private Equity Investment Program Pacing Plan
The recommendation to invest in Fund V is consistent with the New Mexico State Investment
Councils pacing and allocation plan for the New Mexico Private Equity Investment Program, as
determined by the Council in February 2014.

EPIC Ventures V, LP 2

This document is intended for the sole use of the New Mexico State Investment Council (NMSIC)
and summarizes aspects of Sun Mountain Capital's in-depth Investment Analysis Report, which was
previously provided to the NMSIC. Note that an investment in the Fund is risky, and there can be no
assurances that the Fund's investment objectives will be achieved or that its investment program
will be successful. In considering any performance data contained herein, investors should bear in
mind that past performance is not indicative of future results.
THE
TOWNSEND
GROUP

RECOMMENDATION TO INVEST IN
BROOKFIELD REAL ESTATE FINANCE FUND IV

TO: New Mexico State Investment Council

FROM: The Townsend Group

DATE: May 27, 2014

RE: Recommendation to commit $75 million to Brookfield Real Estate Finance Fund IV

SUMMARY RECOMMENDATION

The Townsend Group (Townsend) recommends a commitment of $75 million to Brookfield Real Estate
Finance Fund IV (BREF IV) for the New Mexico State Investment Councils (NMSIC) credit portfolio within
the non-core tactical real estate portfolio. BREF IV is targeting an $850 million closed-end real estate
investment vehicle sponsored by Brookfield Asset Management (BAM). The Fund strategy includes new
loan origination focused on higher yielding loans to commercial real estate borrowers for acquisitions
and refinancing targeting all property types across the US. Consistent with NMSICs 2014 Real Estate
Investment Plan objectives, BREF IV provides NMSIC exposure to a manager with experience originating
and executing debt investments in the core and value add real estate space.

This recommendation to invest in BREF IV has been vetted with NMSIC Staff and meets the following
portfolio and performance objectives:

1. Addresses NMSICs 10% real estate target allocation, diversifying vintage year exposure within core
strategic and non-core tactical sectors;
2. Will increase the overall cash yield of the real estate portfolio and should reduce overall volatility
given the returns are not linked to valuations;
3. Addresses the need for non-core tactical investments within the portfolio based upon an over-
commitment to non-core tactical strategies within an acceptable range to reach the target
exposure;
4. Provides a net return target which is expected to exceed that of NMSICs benchmark NFI-ODCE.

2

BREF IV SUMMARY (SEE ATTACHMENT A FOR THE FULL INVESTMENT REVIEW)

Strategy
BREF IV is a US commercial real estate mezzanine lending vehicle. The Funds primary strategy is to
originate higher yielding US commercial real estate debt targeting a low double digit unlevered IRR,
primarily in the form of current income. Additional details of the Funds strategy are listed below.

On average, the debt investments will be subordinate to a third-party first mortgage lender;
with BREF IV providing sub-debt in the form of a mezzanine loan subject to an inter-creditor
agreement.
Loans will predominantly be structured with LIBOR-based floating rate current pay coupons.
On average, BREF IV capital will represent 60-80% of the underlying property appraised value
upon origination.
The portfolio will target office, retail, multifamily, industrial, hospitality, and other property
types.
BREF IV will generally target individual investments in prime locations within larger Metropolitan
Statistical Areas (MSAs).
The Fund will utilize a small amount of fund-level leverage.
Returns will comprise coupon payments and fees paid by the borrower with underwriting
assuming repayment at maturity.
Though Brookfield will typically hold investments to their respective maturity, this is an active
strategy, given ongoing monitoring, as the Fund may sell certain investments prior to maturity if
they believe value would be maximized at a specific time, rather than passively holding these
assets until maturity.

Comparative Advantages / Issues and Concerns
The primary advantages of BREF IV are:
Strong sponsor;
Sponsor alignment;
Historical performance; and
Attractive investment characteristics.

Although Townsend believes BREF IV represents an attractive investment opportunity for NMSIC, the
following concerns should be considered prior to making this investment:
Trending market;
Large fund size;
Long fund term;
Lenient leverage permissibility; and
Key person risk.

Alternatives Considered
Townsend and NMSIC Staff reviewed all relevant institutional competitors of BREF IV available in the
market.
3

NMSIC REAL ESTATE PORTFOLIO ANALYSIS WITH BREF IV

The pacing model for NMSICs 2014 Real Estate Investment Plan calls for approximately $158 million in
new non-core tactical commitments in 2014 to maintain appropriate exposure to the Real Estate
Investment Policy investment targets. The proposed $75 million commitment to BREF IV is in
compliance with each of the main parameters established by NMSICs approved Real Estate Investment
Policy outlined below.

Target Allocations for the Overall Real Estate Portfolio, and to Core and Non-Core Assets
NMSICs target allocation to real estate is currently 8%. This allocation was approved by the State
Investment Council at its August 28, 2012 meeting along with the plan to continue incrementally
increasing the real estate allocation to 10% of NMSIC total plan assets. As of December 31, 2013, on a
funded basis, real estate exposure is approximately 6.1% of total fund assets. Inclusive of all existing
unfunded commitments expected to be drawn and accounting for the proposed $75 million
commitment to BREF IV, NMSICs real estate exposure would be approximately 9.5%. Real estate
commitments continue to be recommended to maintain the targeted 10% funded real estate allocation
to account for distributions per the pacing model.

The Real Estate Investment Policy also establishes risk management policies for the total portfolio,
including ranges and targets for real estate investment strategies as presented in Exhibit 1 below.

Exhibit 1. NMSIC Real Estate Portfolio Sub-Allocations
Type Range
Core: Strategic 40%-70%
Non-Core: Tactical 30%-60%
Public Real Estate Investment Trusts 0%-10%

As of December 31, 2013, NMSICs portfolio had an approximate 44% sub-allocation to non-core tactical
investments (based on market value). With no REIT investments, the portfolio had an approximate 56%
sub-allocation to core. While these allocations are below and above the current targets for non-core
and core, respectively, they are well within the established policy ranges. When including existing
unfunded commitments expected to be called and the recommended $75 million investment to BREF IV,
NMSICs non-core tactical portfolio exposure increases to approximately 55%. It is important to note
that the increase to 55% non-core tactical exposure assumes unfunded balances are called immediately.
Given the closed-end nature of the non-core portfolio, commitments are called over two to four year
investment periods while capital is expected to be returned from existing investments. Also it is
expected that approximately $200 million will be returned from exits relating to NMSICs portfolio over
the next 12-24 months which represents approximately 18% of the portfolios 4Q13 market value.

Exhibit 2 shows the result of adding the BREF IV investment at both the 8% current interim target and
the ultimate 10% target real estate allocation. The non-core tactical investments drive the over-
commitment for the total portfolio in the range of approximately 1.2x, which is within Townsends
recommended range and is accounted for in Townsends pacing model for NMSICs portfolio. Townsend
recommends that investors over-commit to non-core tactical strategies within an acceptable range to
reach the target exposure as closed-end funds do not provide investors with sustained market exposure
equal to the amount of the funds respective commitments.

4

Exhibit 2. NMSICs Real Estate Portfolio Status Relative to Target Allocations Including Proposed BREF IV
At the 8% current interim target, the portfolio is over-committed to the non-core tactical sub-allocation by
approximately $300 million, while at the 10% target, the non-core tactical real estate allocation is over-committed by
approximately $135 millionthe allocations at both interim targets are within policy ranges and represent acceptable
over-commitment multiples. As previously mentioned NMSIC expects to have approximately $200m of capital
returned from its legacy tactical portfolio over the next 12-24 months so over a broader horizon NMSIC is still
conservative on its over-commitment to tactical.

Investment Objectives
The stated return objective for NMSICs real estate portfolio is to outperform the NFI-ODCE index on a
net of fees basis over rolling five-year periods. BREF IVs target net return is supportive of this objective
as it is expected to exceed that of the NFI-ODCE.

Commitment Size
NMSICs policy with respect to investment size limitations states that the amount of equity that may be
invested in a single investment is limited to no more than 25% of the total real estate allocation
determined at the time of the initial investment. According to NMSICs investment policy, a single
investment is defined as any single stand-alone investment made or any single investment within a
commingled investment vehicle. The proposed $75 million commitment to BREF IV is in compliance
with the stated investment size constraint.

Diversification Analysis
NMSIC does not have a target diversification constraint for sectors or regions but seeks to be prudently
diversified as part of the portfolios overall risk management efforts. While the policy permits a
significant amount of flexibility with respect to property type diversification (+/- 15% of NFI-ODCE
weight), NMSIC should only take measured risk when warranted. Exhibit 3 displays NMSICs property
type and geographic diversification versus the NFI-ODCE before and after an investment in BREF IV.
1

The portfolio remains underweight most property types due to the exposure to other, given that the

1
Source: Diversification charts calculated by The Townsend Group based on NMSICs 4Q13 diversification, including all new commitments and the proposed $75
million BREF IV commitment.
Funded
NAV
Funded
NAV
Unfunded
Unfunded
Remaining
Allocation
Remaining
Allocation
-400,000,000
-200,000,000
0
200,000,000
400,000,000
600,000,000
800,000,000
1,000,000,000
1,200,000,000
Strategic Portfolio
(Core)
Tactical Portfolio
(Non-Core)
Sub-Portfolio Snapshot estimated as of 12.31.13*
8% Target Allocation
*Unfunded includes all newcommitments and projected $75 million to BREF IV
Funded
NAV
Funded
NAV
Unfunded
Unfunded
Remaining
Allocation
Remaining
Allocation
-200,000,000
0
200,000,000
400,000,000
600,000,000
800,000,000
1,000,000,000
1,200,000,000
Strategic Portfolio
(Core)
Tactical Portfolio
(Non-Core)
Sub-Portfolio Snapshot estimated as of 12.31.13*
10% Target Allocation
*Unfunded includes all newcommitments and projected $75 million to BREF IV
5

NFI-ODCE consists primarily of the five primary property types. Assets in the other property type
category include: self-storage, land, recreational vehicle investments, golf course, and mixed use. Many
of these vehicles/ strategies represent the key focus for exits and disposals over the next 12-24 months.
It should be mentioned that while NMSICs index is the ODCE, it can still seek to outperform the ODCE
by investing outside the ODCE parameters. A good example of this is that the ODCE has no international
exposure, yet a properly structured real estate portfolio should consider diversifying by country.

Exhibit 3. NMSIC Total Real Estate Portfolio: Current and Projected Diversification (BREF IV)

*Other comprises alternative property types (e.g. storage, senior housing, medical, etc.).

*Other comprises alternative property types (e.g. storage, senior housing, medical, etc.).

Manager Concentration Evaluation
NMSIC has a maximum manager exposure limit of 35%. NMSIC currently has real asset exposure to
Brookfield through three prior commitments, a $100 million commitment to Brookfield Infrastructure
Fund II, a $100 million commitment to Brookfield Timberlands Fund V and a $24.8 million commitment
to Brookfield Capital Partners III. Based on commitment amounts, the proposed $75 million
commitment to BREF IV will result in Brookfield manager exposure of approximately 10.5% in NMSICs
real estate and real assets portfolio and approximately 1.7% of total plan assets.

2
3
.
42
6
.
5
1
1
.
3
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5
.
6
4
.
8
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Apartment Office Industrial Retail Hotel Other*
Property Type Diversification (%)
NMSIC - Current NMSIC - Projected NFI-ODCE
1
8
.
7
8
.
4
4
.
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.
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NE ME ENC WNC SE SW MTN Pacific Ex-US
Geographic Diversification (%)
NMSIC - Current NMSIC - Projected NFI-ODCE
6

Leverage Evaluation
Per NMSICs leverage policy, the non-core tactical portfolio has a maximum loan-to-value (LTV)
limitation of 75%. As of 4Q13, the non-core tactical portfolios weighted average leverage was
approximately 48%. When including unfunded capital as of 4Q13, the non-core tactical portfolios
expected leverage is approximately 55%. Inclusive of all commitments to date and utilizing the
maximum allowable leverage for BREF IV, the resulting NMSIC non-core tactical portfolios expected
leverage would be approximately 53% which remains compliant with the respective policy. Additionally,
as mentioned, this is considered an active strategy in which continual monitoring will take place with
regards to investment status, performance, and leverage. Based upon historic leverage usage it is
expected that Brookfield will continue prudent and asset specific use of leverage in Fund IV.

Placement Agents
According to its submission for compliance with the Transparency and Disclosure (T&D) Policy and as
discussed with Staff and the Townsend Group, Brookfield was not represented in any capacity by a third
party sales agent in connection with this potential investment. NMSICs General Counsel has approved
Brookfields T&D submission which will be posted to the NMSIC website, following approval of the
investment by the Council Investment Committee and full State Investment Council, if so approved, for
the required amount of time prior to execution of the subscription documents.

Disclaimer: This is a public version of the investment recommendation cover memo. Portions of the
original document have been removed for confidentiality purposes.

Brookfield Asset Management Inc. A Global Alternative Asset Management Company Focused on Real Estate, Renewable Power, Infrastructure and Private Equity
Presentation to the New Mexico State Investment Council
May 2014

Brookfield Real Estate Finance Fund IV
Please see Notice to Recipients on slide 12 For Institutional and Qualified Investor Use Only
2
Brookfield Asset Management Inc.
Executive Summary Brookfield Real Estate Finance Fund IV
Brookfield Real Estate Finance Fund IV is a continuation of the same real estate debt
strategy that Brookfield has successfully executed throughout the past decade
OFFERING
Brookfield Asset Management (together with its affiliates, Brookfield) is raising a
commercial real estate debt fund to invest primarily in the U.S. (BREF IV or the Fund)

BREF IV will be Brookfields primary private U.S. commercial real estate debt vehicle

STRATEGY Lend against high-quality properties in strategic locations

Invest in real estate finance related transactions in a risk position senior to traditional
equity and subordinate to traditional first mortgages

Employ an aggressive and proactive approach to asset management

BROOKFIELD
ADVANTAGE
Brookfield is one of the largest property investors and operators worldwide

BREF IV will be managed by the same team that has been active and successfully
investing with a similar strategy since 2002

3
The Brookfield Advantage
EXPERIENCED
MANAGEMENT
Senior members of Brookfield Real Estate Financial Partners (BREF Partners) have
on average over 20 years experience and have successfully invested similar strategies
at Brookfield since 2002
Extensive relationships with borrowers, brokers and financing sources

COORDINATED
ORGANIZATION
Affiliation with major industry leading real estate owner and operator provides access to
real time market data and property management expertise
Ability to make decisions quickly disciplined and systematic credit assessment and
due diligence process
The Fund will utilize combined resources of BREF Partners and Brookfield to pursue
real estate transactions to create unique opportunities

FOCUS ON CAPITAL
PRESERVATION
Lending against high-quality property assets at a valuation below intrinsic value
Performs thorough due diligence on all potential investments
Utilizes conservative levels of leverage across all market cycles

ALIGNMENT OF
INTEREST
Brookfield invests significant amounts of capital alongside investors as true partners
Senior management control and own a significant percentage of Brookfield

4
BREF IV Investment Strategy

STRATEGY

Real estate quality is a primary driver of investment decision
Utilize BREF Partners unique combination of real estate and finance expertise to invest
in real estate debt instruments

INVESTMENT
APPROACH
Target the 60% to 80% loan-to-value tranche to allow for high current returns while still
benefiting from an equity cushion
Each investment requires an in-depth understanding of the underlying real estate on a
case-by-case, market specific basis
Investment success benefits from, but is not dependent on, a macro improvement in
real estate prices
Leverage experience owning and operating properties to maximize return in a default
situation

GEOGRAPHY

Targeting high-quality properties in strategic locations
Focus on investments in the U.S.

INTEGRATED TEAM

Fully vertically integrated team includes origination, underwriting, closing, asset
management and financial reporting functions
Senior management has extensive experience investing through multiple market cycles

5
Targeted Investment Types
BREF Partners anticipates the Fund will:
Originate whole loans and sell or syndicate senior positions to third parties
Originate subordinate loans jointly with senior lenders
Originate mezzanine loans or preferred equity that is subordinate to existing long term senior debt
Provide capital to recapitalize transactions provide funds to pay TI/LC
(1)
costs, reduce senior debt
Purchase newly originated subordinate debt

In summary, BREF Partners takes an active approach to origination where it seeks to maximize its rights
and create value

The Fund will target investments in real estate finance transactions in a risk
position senior to traditional equity and subordinate to traditional first mortgages
or investment-grade corporate debt on predominantly transitional properties

1) Tenant Improvements and Leasing Commissions.
6
Brookfield Asset Management
100 year history of owning and operating assets with a focus on property, renewable power,
infrastructure and private equity
Disciplined investment approach is focused on value-oriented acquisitions, operational value-add and
capital preservation to deliver attractive risk-adjusted returns
Experienced team of ~700 investment professionals
Global reach with local presence in key markets, including New York, Toronto, So Paulo, London, Sydney,
Hong Kong, Mumbai and Dubai
Brookfield is publicly listed on the New York and Toronto stock exchanges under the symbols BAM, BAM.A,
respectively and on the NYSE Euronext under the symbol BAMA

Brookfield Asset Management is a global investor, operator and asset manager of
high-quality real assets with over $175 billion of assets
Property
Brookfield Asset
Management
Private Equity Infrastructure Renewable Power
7
The Brookfield Advantage in Action
Brookfields established sector-specific property platforms offer BREF Partners
access to real time market data

Note: Represents a sample of Brookfield operating companies and affiliates as of December 31, 2013.
1) Includes assets held through our approximate 22% interest in Canary Wharf Group plc (Canary Wharf).
HOTEL & OTHER

~$5.0 BILLION

~8 Hotels with 7,500
Rooms

OFFICE

~$41.6 BILLION

175
1
Properties

~100 million sq. ft.

Development Potential
~30 million sq. ft.
MULTIFAMILY

~$7.4 BILLION

25,500 Apartments Owned

~53,000 Apartments
Managed
RETAIL

~$48.4 BILLION

172
1
Regional Malls

~153 million sq. ft.

$2.0B Re-development
Pipeline

INDUSTRIAL

~$3.5 BILLION

236 Industrial Properties
~68 million sq. ft.

Development Potential
~79 million sq. ft.

Brookfield Property Group

$105 Billion
1
8
Target Property Types
40%
40%
10%
10%
BREF IV will target investments with underlying exposure to sectors in which
Brookfield has significant experience
Office

Retail, Multifamily &
Industrial
Hospitality
Other
BREF IV Target Sector Allocation
(1)
1) Indicative target allocation for BREF IV. There can be no guarantee that diversification or asset allocations will be met or that the Fund will be able to implement its investment strategy or achieve its
instrument objectives.

9
Current Market Opportunity
Increased maturities are creating opportunity for the Fund to provide gap capital
Supply / demand imbalance should create a robust lending environment
Improving CRE fundamentals, especially in major markets, are boosting transaction volumes &
performance
Macro-economic conditions remain favorable to lenders
Brookfield believes continued market dislocation, slow growth in the U.S., low
inflation and improving real estate fundamentals are creating a compelling market
opportunity
10
Conclusion
Brookfield believes BREF IV is a compelling and timely investment opportunity for
Limited Partners

Industry-leading
Real Estate
Owner / Operator
Experienced investment team
with extensive relationships
Enhance due diligence from
an owners perspective
Active & aggressive asset
management, including the
ability to own/operate
foreclosed assets
Compelling combination of
real estate & finance expertise

Proven
Investment
Strategy
Lending at what Brookfield
believes to be below intrinsic
value, (60% to 80%) of capital
structure
Focusing on control positions
Leveraging Brookfield platform
through investment cycle
Demonstrated track record of
innovation, strong performance
& current income
Opportune Time
to Invest
Significant need for debt
capital
Continued dislocation
providing opportunities for
non-traditional lenders
Favorable structures and
pricing

+ +
11
BREF IV Senior Investment Team Biographies
Andrea Balkan, Managing Partner
Andrea is a Managing Partner of Brookfield Real Estate Financial Partners, based in New York. Andrea will be responsible for the overall
management of the activities of the Fund. Andrea has over 28 years of experience in real estate finance, capital markets, investing and asset
management. Prior to joining Brookfield in 2002, Andrea was a Director at Merrill Lynch in New York in the Investment Banking and Debt Capital
Markets groups (1998 to 2002), where she was responsible for conduit and large loan origination business, and before that, a Managing Director at
Chase Manhattan Bank where she was a member of the management team that developed Chase Manhattan Banks top tier CMBS business.
Andrea holds a B.A. from Wesleyan University and successfully completed Chemical Banks credit training program in 1987.

Terry Hoyt, Senior Vice President
Terry is a Senior Vice President of Brookfield Real Estate Financial Partners, based in New York. Terry will be responsible for the structuring,
closing and asset management of transactions included in the Fund. Terry has over 25 years of experience in closing real estate transactions,
including nine years of experience in real estate finance and capital markets at Merrill Lynch and J P Morgan. Prior to joining Brookfield in 2003,
Terry was at Merrill Lynch and was responsible for the closing and securitization of all large loan transactions. Terry holds a B.A. from Monmouth
University.

Justin Monge, Senior Vice President
J ustin is a Senior Vice President of Brookfield Real Estate Financial Partners, based in New York. J ustin will be responsible for the investor
relations and finance functions of the Fund. J ustin has over 20 years of experience in real estate finance and investment. Prior to joining Brookfield
in 2003, J ustin was a Director at Deutsche Bank where he served as a member of the management team of DB Realty Mezzanine Investment
Funds. During his nine year tenure at Deutsche Bank/Bankers Trust, he served in various capacities within the firms real estate investment
banking, real estate private equity and asset management operations. J ustin holds an A.B. from Harvard College and an M.B.A. from Columbia
University Graduate School of Business.

Chris Reilly, Senior Vice President
Chris is a Senior Vice President of Brookfield Real Estate Financial Partners, based in New York. Chris will be responsible for the origination,
underwriting, and asset management of transactions included in the Fund and has over 22 years of real estate finance and capital markets
experience. Prior to joining Brookfield in 2012, Chris was a Managing Director at Natixis Real Estate Capital Markets, ran the Large Loan Group at
UBS, and was an Executive Director at Morgan Stanley (2000-2006) focused on the origination and distribution of commercial real estate loans.
Prior to Morgan Stanley, Chris was a Credit Analyst at Fitch Ratings (1995-2000). Chris holds a B.S. from the Stern School of Business at New
York University.

John Lee, Senior Vice President
J ohn is a Senior Vice President of Brookfield Real Estate Financial Partners, based in New York. J ohn will be responsible for the underwriting and
asset management of transactions included in the Fund and has over 20 years of experience in real estate finance and portfolio management. Prior
to joining Brookfield in 2008, J ohn was at Countrywide in the Commercial Real Estate Group (2006-2008). Before that he was at Deutsche
Bank/Bankers Trust in the DB Realty Mezzanine Group, Real Estate Portfolio Management Group and Investment Management Group (1994-
2006). J ohn holds a B.S. from St. J ohns University.

12
Notice to Recipients
This document has been prepared to provide recipients with the opportunity to determine their preliminary interest regarding an investment in Brookfield Real Estate Finance Fund IV (the Fund) and may not be
used or reproduced for any other purpose. This document does not constitute an offer to sell or a solicitation of an offer to buy securities in any jurisdiction. Any such offer will be made only by means of the Funds
offering materials (collectively, the Offering Materials) and is subject to the terms and conditions contained therein. The information set forth herein does not purport to be complete. The Offering Materials contain
additional information about the terms and conditions of an investment in the Fund and risk disclosures that are important to any investment decision regarding the Fund. This document is qualified in its entirety by
the Offering Materials which should be read completely before a prospective investor considers making an investment in the Fund.
This document is confidential and is intended solely for the information of the person to whom it has been delivered. It may not be reproduced or transmitted, in whole or in part, to third parties except as agreed in
writing by Brookfield Asset Management Inc. (BAM together with its affiliates, Brookfield). In addition, if the recipient is subject to section 552(a) of title 5 of the United States Code (commonly known as the
Freedom of Information Act) or any other public disclosure law, rule or regulation of any governmental or non-governmental entity, it is acknowledged that the information contained herein is confidential, proprietary
and a trade secret. Certain information contained herein may constitute material non-public information in respect of Brookfield Asset Management Inc. or any of its publicly-traded affiliates and may not be used to
trade in securities or other financial interests on the basis of any such information.
Brookfield Private Advisors LLC, a wholly owned subsidiary of BAM, is a registered broker dealer with the SEC and a FINRA Member. Certain employees of Brookfields Private Funds Group may be registered with
Brookfield Private Advisors LLC. None of Brookfield, its officers, employees, agents or affiliates makes any express or implied representation, warranty or undertaking with respect to this document. This document
has been prepared for institutional and qualified investors only. It has not been filed with FINRA.
An investment in the Fund is speculative and involves significant risks, including loss of the entire investment. There can be no guarantees that the Funds investment objective will be achieved or that the investment
will be successful. Interests in the Fund will be illiquid as there will be no secondary market for such interests and none is expected to develop. There will be restrictions on transferring interests in the Fund. The
Funds investments may be leveraged and its investment performance may be volatile. An investment in the Fund is suitable only for sophisticated investors and requires the financial ability and willingness to accept
the risks and lack of liquidity that are characteristic of an investment in the Fund described herein. Any references to committed capitalinclude all pledged commitments.
Except where otherwise indicated herein, the information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and will not be updated or otherwise revised to
reflect information that subsequently becomes available or circumstances existing or changes occurring after the date hereof.
Certain information contained in this presentation constitutes forward-looking statements, which can be identified by the use of forward-looking terminology such as may, will, should, expect, anticipate,
target, project, estimate, intend, continue, or believe, or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the
actual performance of the Fund may differ materially from those reflected or contemplated in such forward-looking statements. Although Brookfield believes that the anticipated future results, performance or
achievements for the Fund expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-
looking statements and information because they involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Fund to differ materially
from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information. Factors that could cause actual results to differ materially from those set
forward in the forward-looking statements or information include but are not limited to: general economic conditions; changes in interest and exchange rates; availability of equity and debt financing and risks
particular to underlying portfolio company investments.
In considering investment performance information contained herein, prospective investors should bear in mind that past performance is not necessarily indicative of future results and there can be no guarantee that
the Fund will achieve comparable results, that the Fund will be able to make investments similar to the historic investments presented herein (because of economic conditions, the availability of investment
opportunities or otherwise), that targeted returns, diversification or asset allocations will be met or that the Fund will be able to implement its investment strategy or achieve its investment objectives. Any information
regarding prior investment activities and returns contained herein has not been calculated using generally accepted accounting principles and has not been audited or verified by the Funds auditor or any
independent party. Unless otherwise indicated, internal rates of return (including targeted rates of return) are presented on a gross basis (i.e., they do not reflect management fees, carried interest, taxes,
transaction costs and other expenses to be borne by investors in the Fund, which in the aggregate are expected to be substantial and which would reduce the actual returns experienced by an investor). Nothing
contained herein should be deemed to be a prediction or projection of future performance of the Fund.
This document includes Brookfields estimates of the projected performance of certain unrealized investments currently held by other funds, including any predecessor funds, and investment programs managed by
Brookfield. Although this information is forward-looking by its nature and actual results are likely to differ, perhaps materially, from these estimates, Brookfield believes that the estimates have a reasonable basis.
Actual returns on unrealized investments will depend on, among other factors, future operating results, the value of the assets and market conditions at the time of disposition, legal and contractual restrictions on
transfer that may limit liquidity, any related transaction costs and the timing and manner of sale, all of which may differ from the assumptions and circumstances on which the valuations used in the prior performance
data contained herein are based. Accordingly, the actual realized returns on unrealized investments may differ materially from the returns indicated herein. Brookfield will provide more detailed information on the
material factors or assumptions that were applied in making the projections and the material factors that could cause actual results to differ materially from the projections to any investor on request.
Certain of the information contained herein is based on or derived from information provided by independent third party sources. While Brookfield believes that such information is accurate as of the date it was
produced and that the sources from which such information has been obtained are reliable, Brookfield does not guarantee the accuracy or completeness of such information, and has not independently verified such
information or the assumptions on which such information is based.
Nothing contained herein should be construed as legal, business or tax advice. Each prospective investor should consult its own attorney, business adviser and tax advisor as to legal, business, tax and related
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This document is not intended to be made available to any person in Australia who is not a wholesale client (within the meaning of the Corporations Act 2001 (Cth) of Australia). Any offer or invitation in Australia to
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U.S. Internal Revenue Service Circular 230 Notice: To ensure compliance with U.S. Internal Revenue Service Circular 230, prospective investors are hereby noti fied that: (a) any discussion of federal
tax issues contained or referred to herein is not intended or written to be used, and cannot be used, by prospective investors for the purpose of avoiding penalties that may be imposed on them under
the U.S. Internal Revenue Code; (b) such discussion is written in connection with the promotion or marketing by the Fund of the transactions or matters addressed herein; and (c) prospective
investors should seek advice based on their particular circumstances from an independent tax advisor.
Unless otherwise noted, all references to $or Dollarsare to U.S. Dollars. All time-sensitive representations are made as of December 2013, unless otherwise expressly indicated.
Page 1 of 7
State of New Mexico
41 Plaza La Prensa
Santa Fe, New Mexico 87507
Phone: (505) 476-9500
Fax: (505) 424-2510
\

MEMORANDUM

DATE: May 27, 2014
TO: Council Investment Committee
FROM: Robert Vince Smith, CFA, Deputy State Investment Officer
Geraldine Barlow, Director Real Return
Lisa Bacon, CAIA, Real Assets Investment Analyst

SUBJECT: Recommendation to adopt the Real Return Investment Policy

Summary Recommendation
The Real Return portfolio has historically been comprised of Real Assets (60%) and Financial Assets
(40%).
The Real Assets component of the Real Return allocation is currently comprised of a number of sub
allocations (infrastructure, timberland, energy, and farmland) which have historically been governed by
individual investment policies (Prior Policies). These Prior Policies were adopted by the SIC in March
2013 (refer to Attachment B for the Prior Policies). No formal policy has been adopted to date for the
Financial Assets allocation, which includes inflation linked financial instruments.
SIC Staff has developed a Real Return Investment Policy (Real Return Policy) for the following
reasons:
Provides for a more comprehensive and holistic approach to Real Return as an asset group;
Allows for a more tactical approach to allocating capital between Real Assets and Financial
Assets during market cycles;
Enables a more strategic approach in allocating capital to and managing capital returned from
illiquid strategies over the long term; and
Provides increased flexibility to accommodate for differences in the geographic availability of
strategies within Real Assets.

In summary, the proposed Real Return Policy is intended to supersede the existing individual investment
policies for infrastructure, energy, timberland, and farmland and in-turn, address the Financial Assets in
order to provide a single comprehensive framework for the Real Return allocation.

SIC Staff recommends the Council adopt the Real Return Policy as set out in Attachment A. It is
important to note that the Council will still have full discretion over each individual investment
recommended by SIC Staff and its Consultants.

SUSANA MARTINEZ
GOVERNOR
STEVEN K. MOISE
STATE INVESTMENT OFFICER

ROBERT VINCE SMITH, CFA
DEPUTY STATE INVESTMENT OFFICER

Page 2 of 7
The balance of this memorandum provides a detailed explanation of the changes from the Prior Policies.
A marked version of the Real Return Policy against the four Prior Policies has not been provided due to
the complexity of this approach.

Summary of Policy Revisions
A summary of the revisions and additions to the prior investment policies are set out in detail below.
References to the new Sections in the Real Return Policy are also indicated.

1. Inclusion of a Mission Statement (Section 2, pg. 1) A statement has been included to align the
implementation of the Policy with the SICs Mission, Vision and Values. The inclusion of the mission
statement strengthens the Policy.

2. Objectives (Section 3, pg. 1) The objectives for the Real Return Portfolio have been expanded
compared to the Prior Policies to include two additional objectives being i) To provide diversification
from other asset classes; and ii) Reduce the overall SIC portfolio volatility. These additions strengthen
the Policy.

3. Portfolio Allocation (Section 4, pg. 2) The Real Return Policy combines the Real Assets Target
(6%) and the Inflation Related Target (4%) to provide an overall Real Return Target (10%). The targeted
allocation between Real Assets and Inflation Related (now Financial Assets) is considered in a range as
follows
Real Assets, 60% - 80%; and
Financial Assets, 20% - 40%.

The range for Real Assets is consistent with the Prior Policies which indicated the allocation to Real
Assets, for example, would be 6% with a permitted range of +/- 2%. There is no prior policy statement
for Financial Assets.

It is noted that these proposed ranges in the Real Return Policy are in line with the recent Real Return
Asset Study and the Recommended Portfolio approved by the Council in April 2014.

4. Sub Allocations within Real Assets (Section 4A, pg. 2) The allocation targets in the Prior
Policies were typically established as a fixed percentage with a variation of +/- 5%. For example, the
infrastructure allocation target was 30% of Real Assets with the flexibility to range between 25% and
35%. The Real Return Policy sets a broader allocation range for each sub asset class for the following
reasons:
Accommodates for timing differences often encountered when managers are in and out of the
market raising capital. For example, SIC may be underweight Timberland due to high quality
managers being out of market with the view that it is more prudent to wait for those managers to
return to the market to raise capital, rather than allocating to lower quality managers; and
Allows more flexibility to allocate capital with a longer term horizon. For example SIC may be at
the top end of its range for a sub-asset class, e.g. 40% for Energy, if SIC considers the
opportunity in the market to be strong or anticipates a large return of capital from its current
investments in that sub asset class, or both. The long term allocation for each asset class is likely
to be well within the range.

Page 3 of 7

The table below presents the target allocation ranges in the Prior Policies compared to the target range
proposed in the Real Return Policy.

Sub-Allocation Prior Policies Real Return
Investment Policy
Allocation Range % of
Real Assets
Allocation Range % of
Real Assets
Agriculture Policy established but
no formal allocation
0% - 15%
Commodities 10% 0% - 10%
Energy 25%-35% 0% - 40%
Infrastructure 25%-35% 0% - 40%
Timberland 25%-35% 0% - 40%
Other N/A 0%- 15%

We note that the proposed ranges for the Real Return Policy are in line with the
recommended Portfolio in the Real Return Asset Study approved by the SIC in April 2014.

5. Portfolio Benchmarks (Section 4B, pg. 3) This section outlines the proposed benchmarks for
each sub asset class and the Real Return Portfolio overall. The key difference from the Prior Policies is
that each sub asset class now has a more specific short term benchmark. The indices specified for each
sub asset class were used by the Funds Consultant in the Real Return Asset Study approved by the
Council in April 2014. Given some of the limitations in the Real Asset class indices (versus the more
liquid asset classes) a broader longer term benchmark is also referenced.

In terms of standard deviation, there is a broad range of risk profiles within the Real Return Portfolio.
The objective is to manage the Real Return Portfolio to an overall targeted standard deviation of 10% -
12%. This range is consistent with the Recommended Portfolio from the April 2013 Real Return Asset
Study.

6. Portfolio Construction (Section 5, pp. 4-10) The changes to portfolio construction include adding
a series of general principles (refer Section 5A on pg. 4) and a number of specific portfolio construction
parameters (refer to Section 5B).

Portfolio construction parameters are considered at a macro Real Return level or where more
appropriate, a Real Asset or Financial Asset level. This allows the SIC to approach portfolio construction
in a more strategic fashion. For example, the strategic and tactical parameters will now apply to Real
Assets overall (and in-turn Financial Assets) instead of individually applying to each of the sub-asset
classes e.g. infrastructure, timberland, energy, and farmland. This enables the SIC to be overweight to
tactical opportunities in its Farmland/Agriculture allocation, for example, and overweight to strategic
investments in its infrastructure allocation, so long as the strategic and tactical targets are met overall
within the Real Asset portfolio.

Page 4 of 7
The table below presents the existing target, new proposed target and rationale for the changes in the
Real Return Policy

Portfolio
Construction
Parameter
Existing Target New Target (%) Discussion
Strategic
Investments
Real Assets :60%-100%
Financial Assets: N/A
Real Assets: 60%-100%
Financial Assets: 40% -
100%

Real Assets will have a greater strategic focus given
they are more illiquid.
Tactical
Investments
Real Assets :0% - 40%
Real Assets: 0%-40%
Financial Assets: 0% - 60%

The allocation amongst Financial Assets likely to be
more tactical than Real Assets
OECD Real Assets: 90%-
100%

Real Return: 80%-100% This allocation will now apply to the overall Real
Return Portfolio rather than to individual sub asset
groups.

Non OECD Real Assets: 0%- 10%

Real Return: 0% - 20% This allocation will now apply to the overall Real
Return Portfolio rather than to individual sub asset
groups. Both Timberland and Farmland strategies are
likely to involve some non OECD exposure. Similarly
the Financial Assets portfolio has an allocation to
Emerging Markets Debt.

Single Asset
Investment
Limitation
Real Assets Single
investment limitation:
Infrastructure : 25%
limit of
infrastructure
portfolio
Energy: 35% limit
of energy portfolio
Farmland: 35%
limit
Timberland: 35%
limit

Financial Assets: No
limit established.
An investment in a single
asset may be no greater
than 5% of Real Return,
i.e. no greater than
approximately $80m based
on the current fund size.
New overarching parameter is not materially different
than Prior Policy sub asset class limits. Note that this
parameter relates to investment in single assets e.g.
co-investments or funds focused on a single asset.
Manager
Concentration
Real Assets
For each of
Infrastructure, Energy,
Farmland and
Timberland a single
Fund Sponsor may be
no greater than 20% of
the combined Real
Assets and Real Estate
Programs by
commitment.

No greater than 35% of
Real Return (i.e. no greater
than 3.5% of the SIC
portfolio)
Previous limitation represented around 3.2% of the
SIC portfolio. New limitation is only slightly higher at
3.5% of the SIC portfolio which is well within the
10% limitation.

Manager selection will also consider what other
exposures exist within SICs portfolio.
Leverage Real Assets
Infrastructure: 75%
limit
Energy: 75% limit
Farmland: 50%
limit
Timberland: 30%
limit

Financial Assets: No
limit established.

Real Assets: 65%
maximum

Considered at the Real Asset level rather than for
each sub asset class.

Financial Assets: SIC Staff and Consultants will
consider the use of leverage at the fund level.
Page 5 of 7

Qualitative parameters will be considered in terms of sizing SICs recommended investment relative to
the size of proposed funds being considered. SIC will generally seek to be no greater than 25% of any
fund (excluding GP commitment) and conversely will seek to ensure it maximizes its governance rights
in larger funds. Refer to Section 5B on page 10 for further detail.

7. Program Implementation (Section 5C, pg. 10) The approach to program implementation was
not modified from the Prior Policies.

8. Risk Management The risk management areas in the Prior Policies of asset and geographic
diversification, size of investments and manager concentration are included in the portfolio construction
parameters as they are portfolio construction considerations rather than a risk management tool after the
portfolio has been constructed. In practice, Staff and the Consultant(s) monitoring of the Real Return
Portfolio will review and report on the Portfolios compliance with the Real Return Policy and this
process will identify any material variances to the Investment Committee and Council.

9. Portfolio Oversight (Section 6, pg. 11)

A. Roles and Responsibilities - The roles and responsibilities of each of the Council and Investment
Committee, Staff, Fund Sponsors, and the Consultant are primarily unchanged. A number of
additions have been made as follows for consistency and clarification purposes
Staff:
1) An additional responsibility has been added to work with the Consultant(s) to evaluate
and recommend commingled fund, joint venture and separate account investments to
the Council and Investment Committee. This simply mirrors an existing obligation of
the Consultant to work with Staff to evaluate and recommend commingled fund, joint
venture and separate account investments to the Council and Investment Committee
2) The monitoring function has been expanded to ensure monitoring includes compliance
with the Real Return Policy.

Consultant role - this section was adjusted to consider that there may be more than one
consultant involved in the Real Return portfolio, as is currently the case.

B. Reporting - This section has been modified to accommodate more than one Consultant being
responsible for elements of the Real Return portfolio, as is currently the case. From a practical
perspective, if more than one Consultant is responsible for the Real Return portfolio Staff may
combine the Consultant(s) reports to produce a Real Return Performance Measurement Report for
the Council.

Page 6 of 7
Attachment A: Real Return Investment Policy, May 2014

Page 7 of 7
Attachment B: Prior individual Investment Policies for Infrastructure, Energy, Timberland and
Farmland

Real Return Investment Policy

MAY 27, 2014

2
Background

The Real Return Investment Policy replaces the individual policies for Real
Assets and incorporates Financial Assets.
The Council will continue to be the sole decision making entity to review and
approve individual investments as recommended by SIC Staff and its
Consultants.
The new Real Return Policy provides for a strategic and long term approach
to building the Real Return portfolio.

3
Material Revisions

Real Return Portfolio Allocation:
Real Assets (60%-80%) was previously 60% with a permitted range of +/- 20%.
Financial Assets (20%-40%).

Broader allocation ranges for Real Assets:
Enables a longer term strategic view to portfolio construction; and
Allows for differences in availability of strategies in market.

Portfolio Benchmarks:
Portfolio will be measured against a blended custom index; and
The overall objective will be to construct the portfolio to achieve an overall standard deviation of
no greater than 12% p.a.

Portfolio Construction Criteria:
Non OECD Exposure previously 0%-10%, now 0% - 20%.
Manager concentration limit lifted marginally from 3.2% to 3.5% of SIC portfolio.
Leverage new combined limit of 65% (debt to enterprise value) introduced for Real Assets.
Guidelines introduced for Financial Assets.

4
Recommendation

SIC Staff recommends the Council adopt the Real Return Policy as set out in
Attachment A of the Memorandum.

NEW MEXICO

Real Return Portfolio
Investment Policy Statement

May 2014

Table of Contents

CONTENTS

Page

I. Executive Summary ............................................................................................................. 1

2. Mission ................................................................................................................................ 1

3. Objectives of the Real Return Program .............................................................................. 1

4. Portfolio Allocation ............................................................................................................. 2
A. Sub Allocations within the Real Asset Portfolio...................................................... 2
B. Performance Benchmarks ....................................................................................... 3

5. Portfolio Construction......................................................................................................... 4
A. General Principles ................................................................................................... 4

B. Specific Portfolio Construction Parameters ............................................................ 4
1. Strategic versus Tactical .............................................................................. 4
2. Asset Type Diversification ........................................................................... 6
3. Geographic Diversification .......................................................................... 7
4. Size of Investments ..................................................................................... 8
5. Manager Concentration .............................................................................. 8
6. Leverage ...................................................................................................... 9
7. Commitment Sizing and Governance Rights .............................................. 9

C. Program Implementation ..................................................................................... 10

D. Risk Management ................................................................................................. 11

6. Portfolio Oversight ............................................................................................................ 11
A. Roles and Responsibilities ..................................................................................... 11
B. Reporting............................................................................................................... 14

- 1 -

1. EXECUTIVE SUMMARY

The New Mexico State Investment Council (the SIC) has been authorized to allocate a portion
of the New Mexico Land Grant Permanent Fund and the Severance Tax Permanent Fund
(collectively the Funds) to a selection of real return investments, including both tangible
(real) assets, as well as financial securities that are designed to provide the total portfolio
with alternative sources of investment return (to stocks and bonds) as well as inflation
protection.

This Investment Policy sets forth the objectives, investment guidelines, and processes
governing the SIC Real Return Portfolio. This Investment Policy also sets forth the standard of
care governing the management of the Portfolio.

This Investment Policy also sets forth the roles and responsibilities of the Council, the SICs
investment staff (the Staff), and the SICs external consultants (the Consultants) relating to
the oversight and management of the Real Return Portfolio.

2. MISSION

The Real Return Investment policy will be executed in a manner that is consistent with the SICs
Mission, Vision and Values.

The SICs Mission is to protect and grow the states permanent endowment funds for current
and future generations through prudent, professional investment management. The Real
Return allocation will play a key role in delivering on this objective by providing stable and
reliable income, capital preservation, diversification and measured growth. Section 3 expands
further on the objectives of the allocation.

3. OBJECTIVES OF THE REAL RETURN PROGRAM

The key objectives of the SICs Real Return Portfolio are as follows:
Generate stable, reliable income;
Produce an attractive risk-adjusted return;
Provide diversification from other asset classes;
Reduce the overall SIC portfolio volatility;
Provide an inflation hedge; and
Capital preservation.

- 2 -

4. PORTFOLIO ALLOCATION
The long term target allocation for Real Return is 10% of the Funds assets. The table below sets
out the broad allocation ranges for the Real Assets and Financial Assets within the Real Return
Portfolio.

Real Return
Portfolio
Component
Strategies Percentage of
Real Return
Portfolio
Overall Target
Allocation within
SIC Portfolio
Real Assets Infrastructure, Energy, Timberland,
Farmland / Agriculture, Commodities
and other real assets
60% - 80%
10%
Financial Assets TIPS, Bank Loans, Securitized Loans,
Sovereign Bonds, Low Duration
Emerging Markets Debt
20%-40%
Specific sub allocations within the Financial Assets component are not contemplated given that
allocation is expected to be more tactical than the Real Assets allocation. Broad target
allocation ranges within the Real Asset allocation are set out below.

A. Sub-allocations within the Real Asset allocation
The Real Assets allocation has been established with a number of sub-allocations. The table
below shows the target sub-allocations within Real Assets. The ranges are intended to provide
flexibility for overall management of the portfolio and to allow a more tactical approach when
strategies of interest are in and out of market.
The Real Assets component overall is targeted to represent between 60% - 80% of the Real
Return allocation at any point in time.

Sub-Allocation Real Assets (60% - 80% of Real
Return)
Percent of SIC
Portfolio
(Real Assets 60%)
Percent of SIC
Portfolio
(Real Assets 80%)
Allocation Range % of Real
Assets
Agriculture 0% - 15% 0% - 0.9% 0% - 1.2%
Commodities 0% - 10% 0% - 0.6% 0% - 0.8%
Energy 0% - 40% 0% - 2.4% 0% - 3.2%
Infrastructure 0% - 40% 0% - 2.4% 0% - 3.2%
Timberland 0% - 40% 0% - 2.4% 0% - 3.2%
Other 0%- 15% 0% - 2.4% 0% - 3.2%

- 3 -

B. Performance Benchmarks

The table below sets out the benchmarks for each asset class and the overall expected standard
deviation for the Real Return Portfolio. To the extent new asset types are added to the
portfolio, particularly in the case of the Financial Assets, an appropriate benchmark will be
established in consultation with the Funds Consultant and the Council.

Asset Class Benchmark Real Return
Expected
Annual
Standard
Deviation
Agriculture Short Term: NCREIF
1
Farmland Index
Longer Term: Inflation + 3%
10%-12%
Commodities Dow Jones-UBS Commodity Index (Total Return)
Energy Short Term: Thomson One Energy Pooled Returns
Long Term: Inflation + 3%
Infrastructure Short Term: Equal blend of DJ Brookfield Infrastructure
Index and 10 year US Treasury Rate + 4%
Timberland Short Term: NCREIF Timberland Index
Longer Term: Inflation + 3%
TIPS Barclays Capital US Treasury: US TIPS Index

Floating Rate
Bank Loans
Credit Suisse Leveraged Loan Index
Emerging
Market Debt
JPMorgan GBI-EM Global Diversified TR Index (Loc Cur)

TOTAL
PORTFOLIO
Short Term: Custom Blended Index

For reporting purposes, the Portfolio will be measured against a custom blend of indices
representative of the recommended portfolio developed in consultation with the Funds
Consultant. The longer term benchmark for real return will be 3% plus inflation (as measured by
the United Stated Bureau of labor Statistics Consumer Price Index for all Urban Consumers: CPI-
U) as measured over a full market cycle or 5 years (greater of).

1
National Council of Real Estate Investment Fiduciaries.

- 4 -

5. PORTFOLIO CONSTRUCTION

A. General principles

Portfolio construction will be guided by the following general principles:
Broad allocation ranges to strategic and tactical strategies;
Strategic allocations to asset classes based on return and risk profile over a full cycle;
Market opportunities and conditions;
Geographic availability of various sub asset classes;
Timing of various strategies being in market versus portfolio needs;
Building sustainable and aligned relationships with managers and other investment
partners and leveraging those relationships across strategies; and
Securing governance rights (e.g., Advisory Board seats) to maximize the protection
of SICs investments, where possible.

B. Specific portfolio construction parameters

The following section discusses specific portfolio parameters in more detail that are intended to
apply to the Real Return portfolio at an aggregate level.

1. Strategic versus tactical

Strategic investments will provide the Portfolios foundation exposure with the objective to
provide a meaningful portion of the return from current income with more modest returns
from appreciation.

In general, strategic investments represent the core exposure to the respective real return
category, with the objective of generating a meaningful (but not necessarily majority) portion of
the total return from current income (i.e., cash yield), and the balance from capital
appreciation, as applicable for the category. The risk-return profiles for strategic investments
represent the low- to mid-range within respective categories.

The Council recognizes that pure strategic exposure is difficult to execute outside of direct
investments and often managers will pursue both strategic as well as tactical investments
within their portfolios. Further, depending on the asset class and the particular cycle, there may
be other reasons to allocate differently between strategic and tactical.

- 5 -

In general, tactical investments will consist of a wider range of strategies and risk-return
profiles, individually and collectively, than those targeted for strategic investments. They would
be expected to offer little or no current income, compared to their strategic counterparts, and
generate the majority or all of the total return from capital appreciation. The risk-return
profiles for tactical investments represent the upper-mid to high end of the range within
respective sub-asset categories.

A manager may not be considered for inclusion in the Real Return Portfolio if SIC staff, in
consultation with its Consultant(s), believes the proposed commitment would result in an over-
exposure to the broad portfolio construction parameters.

The table below sets out a number of parameters which is intended to guide the categorization
of strategic and tactical investments.

Sub Asset
Class
Strategic Tactical
Timberland Operating timberlands which include even age
class distribution and species diversification; or
Primarily developed timberland markets in the
OECD.

May be OECD or Ex OECD;
May derive a higher proportion of their returns
from Highest and Best Use (HBU) conversion; or
May include pre-merchantable timber or
Greenfield development; and
Energy Midstream energy with a high proportion of the
revenue streams guaranteed by contract or
concession;
Upstream where commodity price risk is
substantially mitigated or hedged; or
Power generation, transmission, and distribution
that generally involves contracted cash flows,
and renewables (such as wind, solar, and hydro
power) that have contracted cash flows or
otherwise benefit from regulatory or tariff
support.

Upstream energy assets; land and resource
rights acquisition; extraction and development
of energy resources; and early-stage or new
production, processing, and transportation
facilities and infrastructure;
Investment in management teams executing
strategies in the upstream or midstream sectors;
or
Strategies may incorporate elements of resource
extraction and/or development risk,
construction risk; operational and management
risk, leverage or interest rate risk, commodity
price risk, refinancing risk, regulatory risk,
environmental risk; and social or political risk.

Infrastructure Assets have limited competition as a result of
natural monopolies, government regulation or
concessions and generate a reliable income
stream with relatively low asset value volatility;
Assets that benefit from high barriers to entry,
economies of scale, inelastic demand for the
product or service being provided, and are
generally long in duration (10+ years); or
Relatively high current income component which
represents a significant majority of the expected
total return.

May involve elements of construction risk;
operational and management risk; leverage or
interest rate risk; refinancing risk, regulatory
risk; environmental risk; and social or political
risk; or
May involve green-field construction,
development or early stage ramp-up strategies
or listed equities.

- 6 -

Sub Asset
Class
Strategic Tactical
Farmland /
Agriculture
Primarily land assets leased to third party
operators; or
Income component will represent a majority of
the total expected return.

May involve development (i.e. developing raw
land to add capital value), developmental crops ,
operator only model, own and operate model,
crop purchase contracts in lieu of cash rent,
water rights, processing rights, farm equipment
and value added crop handling, storage and
processing facilities,
May involve non-OECD or emerging countries;
9or
Publicly traded companies engaged in
agriculture (>50% of revenues derived from
agricultural pursuits) may also be considered

Financial
Assets
Floating rate government debt (TIPS);
Bank loans; and
Other floating rate asset backed debt.

Short duration emerging market sovereign debt;
and
Short duration of floating rate credit oriented
domestic/foreign debt.

2. Asset Type Diversification

The portfolio will not have definitive constraints on asset diversification. The overall Real
Return Portfolio will seek diversification by asset type, revenue drivers, and geography in an
effort to mitigate portfolio volatility. The SIC recognizes that real assets are relatively illiquid
and individual assets are not of uniform size and quality. Furthermore, the Real Asset program
will be implemented primarily through vehicles where the SIC has limited control over the asset
type distribution other than through selection of the strategy itself. In contrast, Financial
Assets are more liquid and diversification can be more easily achieved.

The following table details some guidelines that will be taken into consideration when
considering asset type diversification. The key guiding principles in relation to asset type will be
ensuring the targeted balance between Strategic and Tactical is maintained in the Fund.

- 7 -

Asset Class Asset Type Diversification Considerations
Agriculture Input type e.g. food , fuel, feed;
Crop type: permanent or row crop; and
Growing seasons.
Energy Source: oil, natural gas, processed oil and gas products, coal, other mined or extracted
energy sources, power, and renewables;
Revenue type: volume based, commodity price based, take or pay, fixed, and fixed with
indexation; and
Value chain: upstream (e.g., reserve-based exploration, acquisition, development, and
production), midstream (e.g., infrastructure, gathering systems, pipelines, processing
facilities, transportation, and related service industries), and downstream (e.g., power
plants, and energy distribution).
Timberland Species e.g., softwoods, hardwoods, woody, non woody;
Age Class e.g., emerging growth, established growth and mature growth; and
Product Type e.g., pulpwood, chip-n-saw, mature saw-timber.
Infrastructure Revenue Type: e.g., regulated , partially regulated, and contracted;
Sector: e.g., transportation, energy, water; and
Stage of maturity: stabilized/ mature, growth and development.

Financial
Assets
Issuer/ Counterparty;
Floating rate structure;
Duration;
Credit profile;
Domestic / foreign; and
Sovereign / corporate.

3. Geographic Diversification

The Real Return Portfolio is intended to be diversified globally. The majority of the portfolio will
be located in the developed economies around the world (generally, those member nations in
the OECD) however, investments in emerging economies will be permitted, provided that the
combined total exposure to non-OECD regions remains below 20% of the Real Return Portfolio
(measured by market value exposure).

- 8 -

4. Investment Concentration

The Fund will diversify to reduce the impact of a single investment on the performance of the
Real Return Portfolio. There are separate considerations for each of the Real Assets and
Financial Asset Allocations.

For Real Assets, in order to mitigate the risk of a single investment, the amount of equity that
may be invested in a single investment is limited to no more than 5% of the overall total long
term Real Return Portfolio Target. Single investment is defined as any single stand-alone
investment or co-investment, or any commingled investment vehicle which focuses on a single
asset. Commingled investment vehicles, such as open-end or closed-end funds, partnerships,
and other investment vehicles which hold multiple investments are considered multi-
investment vehicles, and the aggregation of the underlying investments within the portfolios is
not considered a single investment.

In addition, SIC staff and its consultants will review each managers proposed underlying
investment concentration limit in considering selection of the manager and the strategy.
Typically, SIC prefers managers to limit concentration to any single asset within their portfolio
to less than 20% of the fund strategy.

In the Financial Assets allocation, managing concentration risk is important in minimizing capital
loss and volatility. Comingled strategies or separate accounts within Financial Assets will
typically be more diversified than the strategies in the Real Asset allocation due to the
difference in investment universe size and execution time frames.

5. Manager Diversification

Manager relationships are very important in the Real Asset classes due to the difficulty and cost
of accessing these asset classes, and the illiquidity of most of the Fund structures. The SIC will,
however, take a measured approach to its concentration to individual manager/fund sponsor or
its affiliated entities.

As a result, the SIC will limit a single fund sponsor to managing no more than 35% of the total
Real Return Program (by commitment), which represents approximately 3.5% of the overall SIC
portfolio. This target is below the Fund requirement of 10% recognizing that it is more difficult
to re-allocate or withdraw funds from less liquid strategies.

The Real Return manager selection process will also take into account any current manager
exposures outside the Real Return portfolio that may exist.

- 9 -

6. Leverage

The use of leverage by fund sponsors is particularly relevant to the Real Assets allocation and
will be monitored by the SIC Staff and Consultant(s) on a quarterly basis to mitigate imprudent
risks. The Real Assets Portfolio leverage in aggregate is not intended to exceed 65% (by market
value of debt to enterprise value) at any quarter end measurement date. To ensure compliance
with this limitation, no manager will be selected for the portfolio if the addition of the
commitment at maximum permissible leverage would cause the Real Assets Portfolio to exceed
this limitation.

Most of the strategies that will fall within the Financial Asset allocation are credit strategies and
therefore the same leverage considerations for Real Assets will not directly apply to the
Financial Asset allocation and thus Financial Assets will be excluded from this leverage
calculation. SIC Staff and its Consultants however will review each managers intended use of
leverage at the fund level within Financial Asset strategies to ensure its appropriateness in the
market cycle.

7. Commitment Sizing and Governance Rights

Governance Rights and voting power are important considerations in sizing Real Asset
investments due to their lack of liquidity. Fund strategies in Real Assets typically vary in size
from $250 million dollars to multi-billion dollar funds.

For Real Asset strategies, the SIC will generally seek to be less than 25% of a comingled fund
(excluding GP commitment) as a method to ensure the strategy is more broadly supported by
the institutional investment community. In addition, for larger Real Asset fund strategies, the
SIC will consider sizing its commitment so it is positioned to secure an Advisory Board seat to
enhance the protection and value of SICs investment. Advisory Board seats enhance the
visibility and monitoring ability for Limited Partners on the General Partners strategy and
enable input into a range of decisions the General Partner may make from time to time. The
Advisory Board typically also plays a key role if they Key Man clause is triggered or in the event
of a suspension of the Investment Period and in some cases bankruptcy of the General Partner.

It may not always be possible or practical to secure an Advisory Board seat, thus other factors
that will be considered in considering the investment include considering the extent of the SICs
relationship with the Manager, the actual voting power in the fund, the uniqueness of the
strategy, and the extent of the market opportunity.

- 10 -

The following table summarizes the key parameters for portfolio construction discussed above:

Investment Allocation Real Assets Financial Assets
Strategic 60%-100% 40%-100%
Tactical 0%-40% 0%-60%
OECD 80%-100%
Non OECD 0%-20%
Investment Concentration No greater than 5% of the Real Return
Portfolio in a single asset
Manager Concentration No greater than 35% of Real Return
Leverage 65% maximum N/A

C. Program Implementation

The Funds shall acquire exposure to Real Assets primarily through commingled fund vehicles
(open end and closed end) and, to a lesser extent, joint venture limited partnerships and
separate accounts. The appropriate structure shall be determined by the Council, Staff, and
Consultant(s) in developing and managing the performance and liquidity of the Real Assets
Portfolio.

Commingled fund investments by nature are discretionary relationships, where the sponsor or
manager of the fund has ultimate control over the investment decision-making process and the
investor typically has limited rights with respect to the management of the commingled fund.
The term for a traditional commingled fund in the real assets universe ranges from 10 to 20
years and may also be open ended. Contract negotiations with managers considered for
inclusion in the Real Assets Portfolio will include side letter language that requires the manager
to notify SIC in advance of any prospective real assets acquisitions in the state of New Mexico.

Exposure within the Financial Asset allocation is expected to be primarily gained via a co-
mingled fund or separate account. In some cases, SIC staff may recommend the exposure is
best achieved and executed on a direct basis.

The table below identifies the most common methods of access among the permissible
investment vehicles for the Real Return Portfolio.

- 11 -

Real Return Portfolio Implementation
Permitted Investment Vehicles
Private Fund Direct / Indirect
Listed Public
Companies
Other Special
Partnerships and
Trusts
2

- Unlisted
- Closed-End or
Open-End
- Club structures
- Joint venture
- Co-invest interest
- Separate account
- Engaged in real
assets-related
business(es) or
assets
- Individually or
collectively listed
(e.g., ETFs)
- Publicly traded
- Privately traded

D. Risk Management

Consultant(s) and Staff shall monitor compliance with risk management policies quarterly
through the performance measurement process, and periodically report to the Council on the
policy items below, as provided for under Section 6.B.

All real return investments shall be subject to the prudent investor rule as codified in the New
Mexico statutes which stipulates that a fiduciary's performance is measured on the
performance of its entire portfolio, rather than individual investments. Further, all investments
will be required to comply with applicable local, state, and federal statutes.

6. PORTFOLIO OVERSIGHT

The portfolio oversight procedures set forth below are divided into roles and responsibilities,
and reporting.

A. Roles and Responsibilities

The Real Return portfolio will be planned, implemented and monitored under the oversight of
the full Council, with the coordinated support of the Investment Committee, Staff, fund

2
For example, these may include Real Estate Investment Trusts (REITs) in the agriculture and timber sectors, and Master Limited
Partnerships (MLPs) in the energy sector.

- 12 -

sponsors, and Consultant(s). The description of the major responsibilities of each participant is
set forth below.

1. Council and Investment Committee

The role of the Council is to ensure that the assets of the Funds are effectively managed in
accordance with the laws of the State of New Mexico and the Investment Objectives and
Policies of the Council. The Investment Committee will typically review investment materials
and recommendations prior to advancement to the full Council, but final review, consent, and
approval authority is vested in the Council. The responsibilities of the Council and Investment
Committee are listed below.

Establish the objectives and risk management policies for the Real Return Portfolio. The
Council will perform this role by reviewing and approving, or amending and approving as
appropriate, the Real Return Investment Policy submitted by SIC Staff or its Consultant(s)
on an annual basis.

Review and approve, or amend and approve, the Annual Investment Plan for Real Return
before or during the first quarter of the year. During the fourth quarter of the year, the
Council and Investment Committee will review the Annual Investment Plan for its
appropriateness and to identify any desired changes.

Select, retain or remove the fund sponsors and any other parties deemed appropriate.
The Council and Investment Committee shall approve any capital allocations to individual
fund sponsors.

Review the performance of the Real Return Portfolio, along with the fund sponsors, and
its compliance with the objectives and policies established by the Council and Investment
Committee. For this review, the Consultant(s) will provide the Council and Investment
Committee with quarterly Performance Measurement Reports.

Review and approve new investments.

2. Staff

The Staff reports to the Council and its role shall be to monitor the activities and work in
conjunction with the Consultant(s) to provide input to the Council and Investment Committee on
all such matters concerning Real Return investments. The Staffs role and responsibilities shall
include the following:

Prepare the Real Return Investment Policy and Annual Investment Plan in consultation with
its Consultant(s) and submit these to the Council and Investment Committee for approval;

- 13 -

Work with the Consultant(s) to evaluate and recommend commingled fund, joint venture
and separate account investments to the Council and Investment Committee;

Work with the Consultant(s) to monitor fund sponsors and issue Requests for Proposals
(RFPs) or Invitations to Bid (ITBs) for manager searches where relevant;

Work with the Consultant(s) to develop specific capital allocation recommendations
contained in the Annual Investment Plan and submit the same to the Council and
Investment Committee for approval;

Prepare funding procedures and coordinate the receipt and distribution of capital with the
fund sponsors with the assistance of Consultant(s); and

Monitor the performance of the Real Return Portfolio, its fund sponsors, Consultant(s), and
the compliance of the Program with the investment planning and management documents
and this Policy.

3. Fund Sponsors

Fundamentally, the fund sponsors will acquire, sell and manage Real Return investments
consistent with the respective documents governing the relationship between the SIC and fund
sponsors and any other program documentation developed by Consultant(s) and/or Staff and
approved by the Council and Investment Committee. The fund sponsors shall provide the
Council and Investment Committee, Staff and Consultant(s) with such information as may be
required to properly monitor the fund sponsors and its investments.

A fund sponsor may serve the SIC as a fiduciary, or may serve as fiduciary to the pooled vehicles
in which the SIC invests. Fund sponsors will perform this role in compliance with the
investment planning and management documents created by the SIC. Each quarter the fund
sponsors shall provide performance measurement data in the form and substance as required
by the SIC and its Consultant(s) and in compliance with this Real Return Investment Policy.

4. Consultant(s)

While the Staff has the active day-to-day role of managing the Real Return Portfolio, the
Consultant(s) works for and reports to the Council. Thus, the Consultant(s) shall perform the
following services:

Work with Staff to prepare the Real Return Investment Policy and Annual Investment Plan
and provide the Consultant(s)s review and recommendation to the Council, Investment
Committee and Staff;

- 14 -

Work with Staff to develop shortlists of fund sponsors and perform searches for fund
sponsors and other professionals, and report on such searches with Staff to the Council and
Investment Committee as required under the applicable search policy;

Work with Staff to evaluate and recommend commingled fund, joint venture, and separate
account investments to the Council and Investment Committee;

Prepare quarterly Performance Measurement Reports for relevant measurement periods
for the Real Return Portfolio, its fund sponsors, and investments; and

Review and monitor the investment activity in the Portfolio and the performance of the
fund sponsors and the Portfolio.

The Consultant(s) will promptly advise the Council, Investment Committee and Staff of any
material changes in the capital markets that would influence its Real Return Investment Policy
or Annual Investment Plan. The Consultant(s) will inform the Council, Investment Committee,
and Staff of any significant changes with respect to the fund sponsors that might influence the
fund sponsors ability to continue to provide services to the Funds. The Consultant(s) shall
provide the Council, Investment Committee, and Staff with relevant research materials as
needed or as directed by the Council/Investment Committee or Staff. The Consultant(s) will
serve the New Mexico State Investment Council as a fiduciary to the Funds.

B. Reporting

The Council, Investment Committee and Staff will receive reports from its fund sponsors and
Consultant(s) that will contain information to enable the Fund to evaluate the performance of
its Real Return Portfolio.

1. Quarterly Report. The fund sponsors will submit to the Council, via Staff, and Consultant(s)
its quarterly report within 60 days of the end of each quarter (except for the fourth
quarter of each year). The report will record the performance for the relevant
measurement periods, the performance relative to indices and benchmarks, cash flow
information, fees, costs and market value. The Consultant(s) shall report any major issues
to the Council, Investment Committee and Staff.
2. Quarterly Performance Data. The fund sponsors will also submit its quarterly
performance data to the Council, via Staff, and Consultant(s) within 75 days of the end of
each quarter. The Consultant(s) relies on the timely submission of this data by the fund
sponsors in order to deliver its performance report to the Council, Investment Committee
and Staff.

- 15 -

3. Audited Annual Financial Statements. Each fund sponsor will submit a consolidated
annual financial statement to the Council, via Staff, and Consultant(s) within 120 days of
the end of the fourth quarter.
4. Performance Measurement and Portfolio Analytics Report. Following each quarter, the
Consultant(s) shall submit to the Council and Staff the Performance Measurement Report
(PMR), which contains quantitative performance of the Real Return Portfolio using data
as provided by the fund sponsors.
The Consultant(s) will submit its portfolio management report to the Council, Investment
Committee, and Staff within 90 days of the end of the quarter or 10 days after last
manager submission (latter of). It will evaluate the compliance of the Real Return
Portfolio with the Policy and Investment Plans; the performance of the Real Return
Portfolio, its fund sponsors, and the investments for the relevant measurement periods
and relative to indices and benchmarks; a statement of significant initiatives being
undertaken; a statement of relevant and capital market information; and a statement of
significant events in the Real Return program.
In practice, if there is more than one Consultant responsible for a number of elements of
the Real Return portfolio, Staff may combine the Consultants reports to produce a Real
Return Report for the Council.
5. Other Reports. The Consultant(s) and fund sponsors shall provide, in a timely manner,
such other reports as the SIC may determine useful to the administration of the Real
Return Portfolio. The fund sponsors shall provide reports and other disclosures as set
forth by the documents governing SICs investment with each fund sponsor.

NEW MEXICO

Infrastructure Portfolio

June 2012

The Townsend Group
Cleveland San Francisco Hong Kong London

Table of Contents

Page

I. Objectives of the Infrastructure Program ........................................................................... 1
A. Role of the Infrastructure Portfolio ......................................................................... 1
B. Portfolio Allocation ................................................................................................. 1
C. Performance Benchmark ........................................................................................ 2

II. Portfolio Construction......................................................................................................... 2
A. Strategic Portfolio ................................................................................................... 3
B. Tactical Portfolio ..................................................................................................... 3
C. Program Implementation ....................................................................................... 3
D. Risk Management ................................................................................................... 4
5. Leverage ...................................................................................................... 5

III. Portfolio Oversight .............................................................................................................. 5
A. Roles and Responsibilities ....................................................................................... 5
1. Council/Investment Committee ................................................................. 6
2. Staff ............................................................................................................. 6
3. Fund Sponsor .............................................................................................. 7
4. Consultant ................................................................................................... 7
B. Reporting................................................................................................................. 8
1. Quarterly Report ........................................................................................ 8
2. Quarterly Performance Data ...................................................................... 8
3 Audited Annual Financial Statements ......................................................... 9
4. Performance Measurement and Portfolio Analytics Report ...................... 9
5. Other Reports ............................................................................................. 9

- 1 -

(collectively the Funds) to a selection of tangible assets that are designed to provide the total
portfolio with alternative sources of investment return (to stocks and bonds) as well as inflation
protection, collectively referred to as real return assets. This Investment Policy sets forth the
objectives, investment guidelines and processes governing the SIC Real Return Portfolio
dedicated to infrastructure assets (the Infrastructure Portfolio or Portfolio). This
Investment Policy also sets forth the purpose of the Infrastructure Portfolio allocation and the
standard of care governing the management of the Portfolio. It additionally describes the roles
and responsibilities of the Council, the SICs investment staff (the Staff), and the SICs external
consultants (the Consultants) relating to the oversight and management of the Infrastructure
Portfolio.

I. OBJECTIVES OF THE INFRASTRUCTURE PROGRAM

A. Role of Infrastructure Portfolio

The primary objectives of the SICs Infrastructure Portfolio, in order of priority, are
as follows:

1. Generate stable, reliable income;

2. Produce an attractive risk-adjusted return;

3. Provide an inflation hedge; and

4. Preserve capital

All infrastructure investments shall be subject to the prudent investor rule as
codified in the New Mexico statutes which stipulates that a fiduciary's performance
is measured on the performance of the entire portfolio rather than individual
investments. Further, all investments shall comply with applicable local, state, and
federal statutes.

B. Portfolio Allocation
The Funds long term target allocation to Real Assets is 6% with a permitted range of
+/- 2%. Infrastructure investments are expected to account for 30% of the Real
Assets allocation (+/- 5%), or 1.8% (+/- 0.3%) of combined Fund assets.

- 2 -

C. Performance Benchmark

The Funds objectives are to generate a total return, net of investment management
fees, of 6.5% to 7.0% from infrastructure with an expected standard deviation of 10-
12% per annum. For reporting purposes the Portfolio will be compared to a real
return benchmark of 3% plus inflation (as measured by the United Stated Bureau of
labor Statistics Consumer Price Index for all Urban Consumers: CPI-U) as measured
over a full market cycle or 5 years (greater of).

II. PORTFOLIO CONSTRUCTION

Portfolio construction will be driven by (i) broad allocation ranges to strategic and
tactical infrastructure investments and (ii) market opportunities and conditions. The
Portfolio will target strategic infrastructure projects as well as tactical non-core
projects in accordance with the following guidelines (as measured by gross market
value of the underlying portfolio investments):

Allocation Ranges:
Strategic infrastructure investments: 60 - 100%
Tactical infrastructure investments: 0 40%
Publicly traded infrastructure investments 0 10%
Non-US, non-Organization for Economic Co-operation and Development (OECD)
infrastructure investments 0 10%

The Council recognizes that pure strategic exposure is difficult to execute outside of
direct investments and most managers will pursue both strategic as well as tactical
investments within their portfolios. SIC staff and the Consultant will assign a
category to each underlying investments within a managers portfolio for the
Real Estate
10%
Inflation-
Related 4%
Real Assets
6%
Absolute
Return
8%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
Real Return, Real Estate and Absolute Return Portfolio
$
i
n

M
i
l
l
i
o
n
s
Timber
30%
Infrastructure
30%
Energy
30%
Commodities
10%
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
Real Assets Portfolio
$
i
n

M
i
l
l
i
o
n
s
Long Term Target Allocations

- 3 -

purpose of monitoring SICs exposures. In an effort to comply with the permissible
ranges, a manager will not be considered for inclusion in the Infrastructure Portfolio
if the proposed commitment would result in an overexposure to tactical investments
at the managers stated maximum allocation.

A. Strategic Portfolio

The lowest risk class of infrastructure that will attain the objectives of the Real
Return Program are assets that operate in an environment of limited competition as
a result of natural monopolies, government regulation or concessions and generate
a reliable income stream with relatively low asset value volatility. These are defined
as strategic infrastructure investments. These investments are institutional quality
assets that benefit from high barriers to entry, economies of scale, inelastic demand
for the product or service being provided, and are generally long in duration (10+
years). These assets offer relatively high current income returns (long-term average
yield of 6%-8% gross), and as a result, a greater predictability of total returns. The
income component typically represents a significant majority of the expected total
return for strategic investments. These investments are of comparatively lower risk
and provide a stable foundation for the SICs Infrastructure Portfolio.

B. Tactical Portfolio

The tactical portfolio will consist of a wide range of investments representing
differing levels of risk and return derived from the underlying assets. Elevated risks
in the tactical portfolio as compared with the strategic portfolio may include
construction risk; operational and management risk; leverage or interest rate risk;
refinancing risk, regulatory risk; environmental risk; and social or political risk. The
tactical component of the Portfolio can be further divided into greenfield
construction, development or early stage ramp-up strategies and listed equities.
Consistent with the SICs desired risk profile, the portfolio will target a range of 0 to
40% for these tactical investments in the Infrastructure Portfolio.


The Funds shall acquire exposure to infrastructure assets primarily through
commingled fund vehicles (open end and closed end) and, to a lesser extent, joint
venture limited partnerships and separate accounts. The appropriate structure shall
be determined by the Staff and Consultant in developing and managing the
performance and liquidity of the Infrastructure Portfolio.

Commingled fund investments by nature are discretionary relationships, where the
sponsor or manager of the fund has ultimate control over the investment decision-

- 4 -

making process and the investor typically has limited rights with respect to the
management of the commingled fund. The term for a traditional commingled fund
in the infrastructure universe ranges from 10 to 20 years, exclusive of extension
options. Contract negotiations with managers considered for inclusion in the
Infrastructure Portfolio will include side letter language that requires the manager to
notify SIC in advance of any prospective infrastructure acquisitions in the state of
New Mexico.

The table below includes all of the permissible vehicles for the Infrastructure
Portfolio.

Infrastructure Portfolio Implementation
Global Opportunity Set (Developed and Emerging Markets)
Interest in a real property asset (e.g. toll road or parking garage) and/or interest in owning and
operating entity (e.g. utility company)
Private Fund Direct / Indirect Listed Companies REITs
- Unlisted
- Closed-End or
Open-End
- Private secured
debt
- Co-invest interest
- Commingled
funds
- Separate account
- Engaged in
Infrastructure
business
- Publicly Traded
- Privately Traded

D. Risk Management

Consultant and Staff shall monitor compliance with risk management policies
quarterly through the performance measurement process.


The portfolio will not have definitive constraints on asset diversification. The
Infrastructure Portfolio will seek diversification by asset type, revenue drivers,
and geography in an effort to mitigate portfolio volatility. The SIC recognizes
that infrastructure assets are relatively illiquid and properties are not of
uniform size and quality; furthermore, the program will be implemented
primarily through vehicles where SIC has limited control over the asset type
distribution other than through selection of the strategy itself.

- 5 -


The Infrastructure Portfolio is intended to be diversified globally. A majority of
the assets will be located in the developed economies around the world
(generally, those member nations in the OECD); however, investments in
emerging economies will be permitted, provided that the combined total
exposure to non-US, non-OECD regions remain below 10% of the Infrastructure
Portfolio (measured by market value exposure).

3. Size of Investments

The Fund does not want the failure of a single investment to have a significant
or material impact on the performance of the Infrastructure Portfolio. In order
to mitigate this risk, the amount of equity that may be invested in a single
investment is limited to no more than 25% of the total Infrastructure Portfolio
determined at the time of initial investment.

4. Manager Concentration

The Fund does not want to have excessive exposure to any individual
manager/fund sponsor or its affiliated entities. As a result, the Fund will limit a
single fund sponsor to managing no more than 20% of the total combined Real
Assets + Real Estate Programs (by commitment).

5. Leverage

The use of leverage by fund sponsors will be monitored by the SIC Staff and
Consultant on a quarterly basis to mitigate imprudent risks. The Infrastructure
Portfolio leverage in aggregate is not intended to exceed 75% (by market value
of debt and equity) at any quarter end measurement date. To ensure
compliance with this limitation, no manger may be selected for the portfolio if
the addition of the commitment at maximum permissible leverage would
cause the Infrastructure Portfolio to exceed this limitation.

III. PORTFOLIO OVERSIGHT

The portfolio oversight procedures set forth below are divided into roles and
responsibilities, reporting and search procedures.


- 6 -

The Infrastructure Portfolio, as a component of the Real Return Portfolio, will be
planned, implemented and monitored through the coordinated efforts of the
Council/Investment Committee, Staff, fund sponsors, and Consultant. The
description of the major responsibilities of each participant is set forth below.

1. Council/Investment Committee

The role of the Council/Investment Committee is to ensure that the assets of
the Funds are effectively managed in accordance with the laws of the State of
New Mexico and the Investment Objectives and Policies of the Council. The
responsibilities of the Council/Investment Committee include:

Establish the objectives and risk management policies for the
Infrastructure Portfolio. It will perform this role by reviewing and
approving, or amending and approving, the Infrastructure Investment
Policy submitted by the Consultant before or during the first quarter of
the year;

Review and approve, or amend and approve, the Annual Investment Plan
for Infrastructure before or during the first quarter of the year. During
the fourth quarter of the year, the Council/Investment Committee will
review the Annual Investment Plan for its appropriateness and to identify
any desired changes;

Select, retain and remove the fund sponsors and any other parties
deemed appropriate. The Council/Investment Committee shall approve
any capital allocations to individual fund sponsors;

Review the performance of the Infrastructure Portfolio, along with the
fund sponsors, and its compliance with the objectives and policies
established by the Council/Investment Committee. For this review, the
Consultant will provide the Council/Investment Committee with quarterly
Performance Measurement Reports;

Review and approve new investments;

2. Staff

The Staffs role shall be to monitor the activities and work in conjunction with the
Consultant to provide input to the Council/Investment Committee on all such
matters concerning Infrastructure investments. The Staffs monitoring
responsibilities shall include the following:

- 7 -

Work with the Consultant to prepare the Infrastructure Investment Policy
and Annual Investment Plan and submit these to the Council/Investment
Committee for approval;

Work with the Consultant to monitor fund sponsors and issue Requests for
Proposals (RFPs) or Invitations to Bid (ITBs) for manager searches;

Work with the Consultant to develop specific capital allocation
recommendations contained in the Annual Investment Plan and submit the
same to the Council/Investment Committee for approval;

Prepare funding procedures and coordinate the receipt and distribution of
capital with the fund sponsors with the assistance of Consultant; and

Monitor the performance of the Infrastructure Portfolio, its fund sponsors,
Consultant, and the compliance of the Program with the investment
planning and management documents.

3. Fund Sponsors

Fundamentally, the fund sponsors will acquire, sell and manage infrastructure
investments consistent with the respective documents governing the
relationship between the Fund and fund sponsors and any other program
documentation developed by Consultant and/or Staff and approved by the
Council/Investment Committee. The fund sponsors shall provide the
Council/Investment Committee, Staff and Consultant with such information as
may be required to properly monitor the fund sponsors and its investments.

A fund sponsor may serve the SIC as a fiduciary, or may serve as fiduciary to
the pooled vehicles in which the SIC invests. Fund sponsors will perform this
role in compliance with the investment planning and management documents
created by the SIC. Each quarter the fund sponsors shall provide performance
measurement data in the form and substance as required by the SIC and its
Consultant and in compliance with this Infrastructure Investment Policy.

4. Consultant

The Staff has the active day-to-day role of managing the Infrastructure
Portfolio. Thus, the Consultant shall perform the following services:

Work with Staff to prepare the Infrastructure Investment Policy and Annual
Investment Plan and provide its review and recommendation to the
Council/Investment Committee and Staff;

- 8 -

Work with Staff to perform searches for fund sponsors and other
professionals, and report on such searches with Staff to the
Council/Investment Committee as required under the applicable search
policy;

Work with Staff to evaluate and recommend commingled fund, joint
venture and separate account investments to the Council;

Prepare quarterly Performance Measurement Reports for relevant
measurement periods for the Infrastructure Portfolio, its fund sponsors and
investments; and

Review and monitor the investment activity in the Portfolio and the
performance of the fund sponsors and the Portfolio.

The Consultant will promptly advise the Council/Investment Committee and
Staff of any material changes in the capital markets that would influence its
Infrastructure Investment Policy or Annual Investment Plan. The Consultant
will inform the Council/Investment Committee and Staff of any significant
changes with respect to the organizations of its fund sponsors that might
influence the fund sponsors ability to continue to provide services to the
Funds. The Consultant shall provide the Council/Investment Committee and
Staff with relevant research materials as needed or as directed by the
Council/Investment Committee or Staff. The Consultant will serve the New
Mexico State Investment Council as a fiduciary to the Funds.

B. Reporting

The Council/Investment Committee and Staff will receive reports from its fund
sponsors and Consultant that will contain information to enable the Fund to
evaluate the performance of its Infrastructure Portfolio.

1. Quarterly Report. The fund sponsors will submit to Consultant and Staff its
quarterly report within 60 days of the end of each quarter (except for the
fourth quarter of each year). The report will record the performance for the
relevant measurement periods, the performance relative to indices and
benchmarks, cash flow information, fees, costs and market value. The
Consultant shall report any major issues to the Council/Investment Committee
and Staff.

performance data to the Consultant within 75 days of the end of each quarter.

- 9 -

The Consultant relies on the timely submission of this data by the fund
sponsors in order to deliver its performance report to the Council/Investment
Committee and Staff.

3. Audited Annual Financial Statements. Each fund sponsor will submit a
consolidated annual financial statement to the Consultant and Staff within 120
days of the end of the fourth quarter.

4. Performance Measurement and Portfolio Analytics Report. Following each
quarter, the Consultant shall submit to the Staff the Performance
Measurement Report (PMR), which contains quantitative performance of the
Infrastructure Portfolio using data as provided by the fund sponsors.

The Consultant will submit its portfolio management report to Staff and
Council/Investment Committee within 90 days of the end of the quarter or 10
days after last manager submission (latter of). It will evaluate the compliance
of the Infrastructure Portfolio with the Policy and Investment Plans; the
performance of the Infrastructure Portfolio, its fund sponsors, and the
investments for the relevant measurement periods and relative to indices and
benchmarks; a statement of significant initiatives being undertaken; a
statement of relevant infrastructure and capital market information; and a
statement of significant events in the real assets program.

5. Other Reports. The Consultant and fund sponsors shall provide, in a timely
manner, such other reports as the SIC may determine useful to the
administration of the Infrastructure Portfolio. The fund sponsors shall provide
reports and other disclosures as set forth by the documents governing SICs
investment with each fund sponsor.

NEW MEXICO

Energy Portfolio

March 2013

Table of Contents

Page

I. Objectives of the Energy Program ...................................................................................... 1
A. Role of the Energy Portfolio .................................................................................... 1
B. Portfolio Allocation .................................................................................................. 1

2. Energy Sector/Source Diversification ......................................................... 6
3. Energy and Resource Value Chain Diversification ...................................... 6
7. Leverage ...................................................................................................... 7

1. Council and Investment Committee ........................................................... 8
2. Staff ............................................................................................................. 8
3. Fund Sponsors ............................................................................................. 9
4. Consultant ................................................................................................... 9
B. Reporting............................................................................................................... 10
1. Quarterly Report ...................................................................................... 10
2. Quarterly Performance Data .................................................................... 11
3 Audited Annual Financial Statements ....................................................... 11
4. Performance Measurement and Portfolio Analytics Report .................... 11
5. Other Reports ........................................................................................... 11

- 1 -

dedicated to energy assets (the Energy Portfolio or Portfolio). This Investment Policy also
sets forth the purpose of the Energy Portfolio allocation and the standard of care governing the
management of the Portfolio. It additionally describes the roles and responsibilities of the
Council, the SICs investment staff (the Staff), and the SICs external consultants (the
Consultants) relating to the oversight and management of the Energy Portfolio.

I. OBJECTIVES OF THE ENERGY PROGRAM

A. Role of Energy Portfolio

The primary objectives of the SICs Energy Portfolio, in order of priority, are as
follows:

2. Generate stable, reliable income;
4. Preserve capital.

All energy investments shall be subject to the prudent investor rule as codified in the
New Mexico statutes which stipulates that a fiduciary's performance is measured on
the performance of the entire portfolio rather than individual investments. Further,
all investments shall comply with applicable local, state, and federal statutes.

The Funds long term target allocation to Real Assets is 6% with a permitted range
of +/- 2%. Energy investments are expected to account for 30% of the Real Assets
allocation (+/- 5%), or 1.8% (+/- 0.3%) of combined Fund assets. The chart below
shows the four main categories in the SIC Real Return portfolio, including Real
Assets, as well as the four suballocations under Real Assets, including Energy.

- 2 -

SIC Real Return, Real Estate, Absolute Return Allocations

fees, of 6.5% to 7.0% from energy with an expected standard deviation of 10-12%
per annum. For reporting purposes the Portfolio will be compared to a real return
benchmark of 3% plus inflation (as measured by the United States Bureau of Labor
Statistics Consumer Price Index for all Urban Consumers: CPI-U) as measured over a
full market cycle or 5 years (greater of).

Portfolio construction will be driven by: (i) broad allocation ranges to strategic and
tactical energy investments; and (ii) market opportunities and conditions. The Portfolio
will target core strategic energy investments as well as tactical non-core investments in
accordance with the guidelines in the table below (as measured by gross market value of
the underlying portfolio investments).

Allocation Ranges
These ranges will be achieved over time; however, as the portfolio is constructed investments may exceed these ranges.
Allocations Ranges
Strategic energy investments 60 - 100%
Tactical energy investments 0 - 40%
Publicly traded energy investments 0 - 10%
Non-US, non-Organization for Economic Cooperation and
Development (OECD) energy investments
0 - 10%

Absolute Return
8%
Timberland
30%
Real Estate
10%
Infrastructure
30%
Inflation-Related
4%
Energy
30%
Real Assets
6%
Commodities 10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Real Return, Real Estate, and Absolute Return Portfolio Real Assets Portfolio

- 3 -

investments within their portfolios. SIC staff and the Consultant will assign a
category to each underlying investment within a managers portfolio for the purpose
of monitoring SICs exposures. In an effort to comply with the permissible ranges, a
manager will not be considered for inclusion in the Energy Portfolio if the proposed
commitment would result in an overexposure to tactical investments at the
managers stated maximum allocation.

Strategic investments will comprise the Portfolios core exposure to energy with the
objective to provide a meaningful portion of the total return from current income
with the balance from capital appreciation. The strategic allocation will include, but
not be exclusive to, investments in midstream energy assets and financing deals
that typically involve one or more of the following: gathering, processing, storing,
and/or transporting extracted raw energy sources; intermediate products; and/or
consumable energy forms. These investments typically involve an ownership of, or
some other claim on, the revenue stream generated from operations and/or sales,
as well as participation in revenue growth and capital appreciation. The revenue
streams may be guaranteed by contract or concession, or vary according to demand
and other market factors.
The strategic allocation will also include: upstream hydrocarbon development not
involving exploration where commodity price risk is substantially mitigated or
hedged; power generation, transmission, and distribution that generally involves
contracted cash flows; and renewables (such as wind, solar, and hydro power) that
have contracted cash flows or otherwise benefit from regulatory or tariff support.
The strategic allocation will comprise energy investments that target total returns in
the approximate range of 7% to 20% (gross), meaningful yields (e.g., at least 4%),
and/or equity multiples in the 1.25 to 1.5 range. This risk-return profile represents
investments that are of comparatively lower risk within the energy sector with
respect to the existence, extractability, commercial viability of and demand for the
energy source(s) and operation(s) involved. Investments in assets other than those
enumerated above can be considered for the strategic allocation if they are
generally consistent with this risk-return profile.
In addition to private funds and direct/indirect investment vehicles, investments in
Master Limited Partnerships (MLPs) will be considered part of the strategic portfolio.
MLPs typically target midstream energy assets and operations, including intra- and
inter-state pipelines in particular, but also related infrastructure and facilities. MLPs
typically provide a meaningful portion of their total return from current income.

- 4 -


The tactical portfolio will consist of a range of investments representing levels of risk
and return derived from the underlying assets that will be higher, individually and
collectively, than the risk and/or returns targeted for the strategic portfolio.
Elevated risks in the tactical portfolio as compared with the strategic portfolio may
include one or more of the following: resource extraction and/or development risk;
construction risk; operational and management risk; leverage or interest rate risk;
commodity price risk, refinancing risk, regulatory risk; environmental risk; and social
or political risk. The tactical allocation will include, but not be exclusive to,
investments in upstream energy assets and financing deals that typically involve
one or more of the following: exploration; land and resource rights acquisition;
extraction and development of energy resources; and early-stage or new
production, processing, and transportation facilities and infrastructure.

The tactical allocation will comprise energy investments that target total returns in
the approximate range of 15% to 25% (gross), and/or equity multiples at 2.0 or
higher. Investments in the tactical portfolio will be expected to generate the
majority of their total returns from capital appreciation, with only a small or no
current income (yield) component. Midstream investments, as generally targeted for
the strategic allocation, will be instead considered for the tactical allocation if they
are more consistent with the tactical portfolios higher risk-return profile. The
tactical component would also include investments in publicly traded equities.


The Funds shall acquire exposure to energy assets primarily through commingled
fund vehicles (open end and closed end) and, to a lesser extent, joint venture limited
partnerships, separate accounts, and publicly traded securities. The appropriate
exposure vehicles shall be determined by the Council, Staff, and Consultant in
developing and managing the performance and liquidity of the Energy Portfolio.

sponsor or manager of the fund has ultimate control over the investment decision-
making process and the investor typically has limited rights with respect to the
in the energy universe ranges from 10 to 12 years, exclusive of extension options.
Contract negotiations with managers considered for inclusion in the Energy Portfolio
will include side letter language that requires the manager to notify SIC at the
earliest public announcement of any prospective energy acquisitions in the state of
New Mexico.

- 5 -

The table below includes all of the permissible vehicles for the Energy Portfolio.

Energy Portfolio Implementation
Interest in a real property asset (e.g. pipelines and processing facilities), interest in owning
and operating entity (e.g. gas-fired power plant), and/or providing financing to energy
development and operations.
Private Fund Direct/Indirect Listed Companies
Master Limited
Partnerships (MLPs)
Unlisted
Closed-End or
Open-End
Private secured
debt
Co-invest
interest
Commingled
funds
Separate
account
Engaged in
Energy business
Publicly Traded
Privately Traded

D. Risk Management

Consultant and Staff shall monitor compliance with risk management policies quarterly
through the performance measurement process, and periodically report to the Council
on the policy items below, as provided for under Section III.B.

The portfolio will not have definitive constraints on asset diversification, except
as provided by the broad allocation ranges established above for overall
Portfolio Construction. The Energy Portfolio will seek diversification by asset
type, financial interest in real property or a companys capital structure, and
revenue drivers, in an effort to mitigate portfolio volatility. The SIC recognizes
that energy assets are relatively illiquid and properties are not of uniform size
and quality; furthermore, the program will be implemented primarily through
vehicles where the SIC has limited control over the asset type distribution
other than through selection of the strategy itself.

While it is expected there will be some overlap in the types of individual assets
held by investments in the Energy and Infrastructure Portfolios (covered under
a separate policy), there are clear differences in the mandates and focus of the
funds that will be considered for each portfolio, respectively. Energy
investments will target opportunities related to oil, natural gas, electricity,
coal, renewables, and other energy-related resource extraction (e.g., mining)

- 6 -

and transportation (e.g., tankers) assets and activities. Infrastructure
investments may target similar energy assets, depending on the sponsors
strategy, but these will be part of a broader focus that also will include assets
in several, if not all, of the following sectors: transportation (e.g., airports,
ports, freight rail, toll roads); water supply/treatment; waste management;
and social infrastructure (e.g., hospitals, schools). SIC Staff and the Consultant
will monitor the total and sub-sector energy exposures in the Infrastructure
Portfolio in categories comparable to those developed for the Energy portfolio
to understand and measure the exposure to energy sectors across the entire
Real Assets portfolio.

2. Energy Sector/Source Diversification
The portfolio will not have definitive constraints or targets for diversification
by energy sector or source. The Energy Portfolio is intended to be diversified
among such sectors and sources including, but not limited to oil, natural gas,
processed oil and gas products, coal, other mined or extracted energy sources,
power, and renewables, as is possible through selection of investment
sponsors and as market opportunities permit.

3. Energy and Resource Value Chain Diversification
The portfolio will not have definitive constraints or targets for diversification
by the position of an investment, in whole or in part, along the energy and
resource value chain, except as dictated by the overall allocation ranges
established for Portfolio Construction, with respect in particular to strategic
and tactical allocations. The Energy Portfolio is intended to be diversified
among major positions on the energy and resource value chain including, as
possible through the selection of investment sponsors and as market
opportunities permit: upstream (e.g., reserve-based exploration, acquisition,
development, and production); midstream (e.g., infrastructure, gathering
systems, pipelines, processing facilities, transportation, and related service
industries); and downstream (e.g., power plants, and energy distribution).

The Energy Portfolio is intended to be diversified globally. A majority of the
assets will be located in the developed economies around the world (generally,
those member nations in the OECD); however, investments in emerging
economies will be permitted, provided that the combined total exposure to
non-US, non-OECD regions remain below 10% of the Energy Portfolio
(measured by market value exposure).

- 7 -

or material impact on the performance of the Energy Portfolio. In order to
mitigate this risk, the amount of equity that may be invested in a single
investment is limited to no more than 35% of the total Energy Portfolio
determined at the time of initial investment. Single investment is defined as
any single stand-alone investment made, or any single investment within a
commingled investment vehicle. Commingled investment vehicles, such as
open-end or closed-end funds, partnerships and other investment vehicles
which hold multiple investments are considered multi-investment vehicles, and
the aggregation of the underlying investments within them are not considered
a single investment.


7. Leverage
The use of leverage by fund sponsors will be monitored by the SIC Staff and
Consultant on a quarterly basis to mitigate imprudent risks. The Energy
Portfolio leverage in aggregate is not intended to exceed 75% (by market value
of debt and equity) at any quarter end measurement date. To ensure
compliance with this limitation, no manager may be selected for the portfolio
if the addition of the commitment at maximum permissible leverage would
cause the Energy Portfolio to exceed this limitation.




The Energy Portfolio, as a component of the Real Return Portfolio, will be planned,
implemented and monitored under the oversight of the full Council, with the
coordinated support of the Investment Committee, Staff, fund sponsors, and
Consultant. The description of the major responsibilities of each participant is set
forth below.

- 8 -

1. Council and Investment Committee
The role of the Council is to ensure that the assets of the Funds are effectively
managed in accordance with the laws of the State of New Mexico and the
Investment Objectives and Policies of the Council. The Investment Committee
will typically review investment materials and recommendations prior to
advancement to the full Council, but final review, consent, and approval
authority is vested in the Council. The responsibilities of the Council and
Investment Committee include those listed below.

Establish the objectives and risk management policies for the Energy
Portfolio. The Council will perform this role by reviewing and approving,
or amending and approving, the Energy Investment Policy submitted by
the Consultant before or during the first quarter of the year.

for Energy before or during the first quarter of the year. During the
fourth quarter of the year, the Council and Investment Committee will
review the Annual Investment Plan for its appropriateness and to identify
any desired changes.

deemed appropriate. The Council and Investment Committee shall
approve any capital allocations to individual fund sponsors.

Review the performance of the Energy Portfolio, along with the fund
sponsors, and its compliance with the objectives and policies established
by the Council and Investment Committee. For this review, the
Consultant will provide the Council and Investment Committee with
quarterly Performance Measurement Reports.

Review and approve new investments.

2. Staff
The Staff reports to the Council and its role shall be to monitor the activities and
work in conjunction with the Consultant to provide input to the Council and
Investment Committee on all such matters concerning Energy investments. The
Staffs monitoring responsibilities shall include the following:

Work with the Consultant to prepare the Energy Investment Policy and
Annual Investment Plan and submit these to the Council and Investment

- 9 -


recommendations contained in the Annual Investment Plan and submit the
same to the Council and Investment Committee for approval;


Monitor the performance of the Energy Portfolio, its fund sponsors,

3. Fund Sponsors
Fundamentally, the fund sponsors will acquire, sell and manage energy
Council and Investment Committee. The fund sponsors shall provide the
Council and Investment Committee, Staff and Consultant with such
information as may be required to properly monitor the fund sponsors and its
investments.

Consultant and in compliance with this Energy Investment Policy.

4. Consultant
While the Staff has the active day-to-day role of managing the Energy Portfolio,
the Consultant works for and reports to the Council. Thus, the Consultant shall
perform the following services:

Work with Staff to prepare the Energy Investment Policy and Annual
Investment Plan and provide the Consultants review and recommendation
to the Council, Investment Committee, and Staff;

- 10 -

professionals, and report on such searches with Staff to the Council and
Investment Committee as required under the applicable search policy;

venture and separate account investments to the Council and Investment
Committee;

measurement periods for the Energy Portfolio, its fund sponsors and
investments; and


The Consultant will promptly advise the Council, Investment Committee and
Staff of any material changes in the capital markets that would influence its
Energy Investment Policy or Annual Investment Plan. The Consultant will
inform the Council, Investment Committee and Staff of any significant changes
with respect to the organizations of its fund sponsors that might influence the
fund sponsors ability to continue to provide services to the Funds. The
Consultant shall provide the Council, Investment Committee and Staff with
relevant research materials as needed or as directed by the Council and
Investment Committee or Staff. The Consultant will serve the New Mexico
State Investment Council as a fiduciary to the Funds.

B. Reporting

The Council, Investment Committee, and Staff will receive reports from its fund
evaluate the performance of its Energy Portfolio.

1. Quarterly Report
The fund sponsors will submit to Council, via Staff, and Consultant its quarterly
report within 60 days of the end of each quarter (except for the fourth quarter of
each year). The report will record the performance for the relevant
measurement periods, the performance relative to indices and benchmarks, cash
flow information, fees, costs and market value. The Consultant shall report any
major issues to the Council, Investment Committee and Staff.

- 11 -

2. Quarterly Performance Data
The fund sponsors will also submit its quarterly performance data to the
Council, via Staff, and Consultant within 75 days of the end of each quarter.
sponsors in order to deliver its performance report to the Council, Investment

3. Audited Annual Financial Statements
Each fund sponsor will submit a consolidated annual financial statement to the
Council, via Staff, and Consultant within 120 days of the end of the fourth
quarter.

4. Performance Measurement and Portfolio Analytics Report
Following each quarter, the Consultant shall submit to the Council and Staff
the Performance Measurement Report (PMR), which contains quantitative
performance of the Energy Portfolio using data as provided by the fund
sponsors.

The Consultant will submit its portfolio management report to the Council,
Investment Committee, and Staff within 90 days of the end of the quarter or
10 days after last manager submission (latter of). It will evaluate the
compliance of the Energy Portfolio with the Policy and Investment Plans; the
performance of the Energy Portfolio, its fund sponsors, and the investments
for the relevant measurement periods and relative to indices and benchmarks;
a statement of significant initiatives being undertaken; a statement of relevant
energy and capital market information; and a statement of significant events in
the real assets program.

5. Other Reports
The Consultant and fund sponsors shall provide, in a timely manner, such other
reports as the SIC may determine useful to the administration of the Energy
Portfolio. The fund sponsors shall provide reports and other disclosures as set
forth by the documents governing SICs investment with each fund sponsor.

NEW MEXICO

Timberland Portfolio

June 2012

The Townsend Group

Table of Contents

Page

I. Objectives of the Timberland Program ............................................................................... 1
A. Role of the Timberland Portfolio ............................................................................ 1
C. Performance Benchmark ....................................................................................... 2

2. Species Type Diversification........................................................................ 5
3. Age Class and Product Type Diversification ................................................ 5
6. Leverage ...................................................................................................... 6

2. Staff ............................................................................................................. 7
3. Fund Sponsors ............................................................................................. 8
4. Consultant ................................................................................................... 8
B. Reporting................................................................................................................. 9
3 Audited Annual Financial Statements ....................................................... 10
4. Performance Measurement and Portfolio Analytics Report .................... 10
5. Other Reports ........................................................................................... 10

- 1 -

dedicated to Timberland assets (the Timberland Portfolio or Portfolio). This Investment
Policy also sets forth the purpose of the Timberland Portfolio allocation and the standard of
care governing the management of the Portfolio. It additionally describes the roles and
responsibilities of the Council, the SICs investment staff (the Staff), and the SICs external
consultants (the Consultants) relating to the oversight and management of the Timberland
Portfolio.

I. OBJECTIVES OF THE TIMBERLAND PROGRAM

A. Role of Timberland Portfolio

The primary objectives of the SICs Timberland Portfolio, in order of priority, are as
follows:



3. Preserve capital

4. Generate stable, reliable income

All timber investments shall be subject to the prudent investor rule as codified in the
New Mexico statutes which stipulates that a fiduciary's performance is measured on
the performance of the entire portfolio rather than individual investments. Further,
all investments shall comply with applicable local, state, and federal statutes.

+/- 2%. Timber investments are expected to account for 30% of the Real Assets
allocation (+/- 5%), or 1.8% (+/- 0.3%) of combined Fund assets.

- 2 -


The Funds objectives are to generate a total return of 6.5% to 7.0%, net of
investment management fees, from its timber investments with a standard
deviation of 8% - 10% per annum. For reporting purposes the portfolio will be
compared to The NCREIF Timberland Index (NTI) over the short term and a real
return benchmark of 3% plus inflation (as measured by the United Stated Bureau of
labor Statistics Consumer Price Index for all Urban Consumers: CPI-U) as measured
over a full market cycle or 5 years ( greater of).


tactical timber investments and (ii) market opportunities and conditions. The
Portfolio will invest in both strategic timber investments as well as tactical non-core
projects in accordance with the following guidelines (as measured by market value
of underlying portfolio investments):

Allocation Ranges:
Strategic timberland investments: 60 - 100%
Tactical timberland investments: 0 40%
Publicly traded timberland investments: 0 10%
timberland investments 0 10%

investments within their portfolios. SIC Staff and Consultant will assign a category to
each underlying investments within a managers portfolio for the purpose of
Real Estate
10%
Inflation-
Related 4%
Real Assets
6%
Absolute
Return
8%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$
i
n

M
i
l
l
i
o
n
s
Timber
30%
Infrastructure
30%
Energy
30%
Commodities
10%
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
$
i
n

M
i
l
l
i
o
n
s

- 3 -

monitoring SICs exposures. In an effort to comply with the permissible ranges, a
manager will not be considered for inclusion in the Timber Portfolio if the proposed
commitment would result in an overexposure to tactical investments at the
managers stated maximum allocation.


Strategic timberland investments are characterized by and will target the following:
Developed timberland markets including Canada, United States, Australia,
New Zealand, and Northern Europe;
Operating timberlands which include even age class distribution;
Operating timberlands which include species diversification;
Rely primarily on in-place infrastructure to achieve targeted returns; and
Are expected to derive only a small portion of the return from higher and
better use (HBU) conversion or are expected to achieve the primary
performance objective if HBU conversion is assigned no value.

These investments are expected to derive a significant portion, 60-70%, of their
return from biological growth of the trees. Consequently, this aspect of the Portfolio
will aid in the long-term returns and will be largely independent of the factors that
determine returns for other assets classes; providing significant correlations benefits
to the broad Fund Portfolio.

Additional drivers of performance within strategic portfolio will include land prices
as well as management strategies. As indicated, higher and better use tactics (e.g.
transforming timberland into real estate developments) will be assigned no value
and should not be contemplated as part of the proforma underwritten returns.


Tactical timberland investments are characterized by and will target the following:
May be located outside of the United States within emerging markets
(South America, Africa, Eastern Europe, Russia, and Southeast Asia
(including China);
May derive a higher proportion of their returns from HBU conversion;
May include per-merchantable timber or Greenfield development; and
May rely less on the use of existing infrastructure

Consistent with the SICs desired risk profile, the Portfolio will target a range of 0 to
40% for these tactical investments in the Timberland Portfolio.

- 4 -


The Funds shall acquire exposure to timberland assets primarily through
commingled fund vehicles (open end and closed end) and, to a lesser extent, joint
venture limited partnerships and separate accounts. Additionally, the Funds may
utilize the public market for timber investment. The appropriate structure shall be
determined by the Staff and Consultant in developing and managing the
performance and liquidity of the timberland Portfolio.

sponsor or manager of the fund has control over the investment decision-making
process, and the investor typically has limited rights with respect to the
in the timber universe ranges from 7 to 10 years, exclusive of extension options.

The table below includes all of the permissible vehicles for the Timber Portfolio.

Timberland Portfolio Implementation
Interest in a parcel of timberland or collection of properties and/or interests in owning and operating
entities
- Unlisted
- Closed-End or
Open-End
- Separate Account
- Operating
Companies
- Engaged in
Timberland
business
- Publicly Traded
- Privately Traded

D. Risk Management

New Mexico SIC will diversify the Portfolio by investing with Timberland Investment
Management Organization(s) (TIMOs or TIMO) that pursue different strategies
to achieve efficient diversification by geography, species, age class, and product
type. In addition, TIMOs that pursue both small and large tract transactions will be
considered. Timberland tracts shall be comparable in quality to those held by other
institutional investors or the forest products industry to enhance exit strategies as
well as located within strong market areas, ideally with multiple wood using facilities
of various types (e.g. sawmills, pulp mills, and collection yards).

- 5 -


The Portfolio will be diversified through global timberland investments.
Investments in both domestic and international markets are permitted with
relative proportion of each type at a given time to be determined based on the
prevailing marketing conditions. The majority of the assets will be located in
the US and other developed economies around the world. SIC recognizes that
other countries offer attractive risk-adjusted returns due to favorable
population demographics, strong economic growth prospects and strong
domestic wood products converting and consuming economies. Given that
tactical investments may be located in the emerging markets (e.g. Brazil), the
emerging market exposure will be limited to a maximum of 40%. All
timberland investments will be made with consideration of the SICs legislative
constraints regarding international exposure.

2. Species Type Diversification

The Portfolio will be broadly diversified by species to facilitate exposure,
thereby reducing risk, to a variety of product types and end markets. The
Portfolio will primarily include both softwood and hardwood species
groups and will also permit exposure to other varieties such as non-traditional
woody and non-woody species.

Softwoods generally are conifers such as pine, fir, hemlock, spruce, and
cedar.
Hardwoods generally are deciduous such as oak, maple, cherry, walnut,
and elm.
Non-traditional woody generally are tropical tree species such as bamboo
and teak.
Non-woody generally are grasses and underbrush such as switchgrass,
used in producing cellulosic ethanol.

3. Age Class and Product Type Diversification

Product type diversification is often a subset of age class diversification, given
that timberland develops into successive product classes at different stages of
its life (e.g. emerging growth, established growth and mature growth). New
Mexico SIC will diversify the Portfolio among the major product types (e.g.
pulpwood, chip-n-saw and mature sawtimber) in order to minimize market risk
or price dependence within a certain harvest period.

- 6 -


or material impact on the performance of the Timber Portfolio. In order to
investment is limited to no more than 35% of the total Timber Portfolio


single fund sponsor to management of no more than 20% of the total
combined Real Assets + Real Estate Programs (by commitment).

6. Leverage

The minority of timberland investments utilize leverage within their
investment vehicles. The use of leverage by fund sponsors will be monitored
by the SIC Staff and Consultant on a quarterly basis to mitigate imprudent risks.
It is expected that the loan-to-value for the total Timberland Portfolio will not
exceed 30% (by market value of debt and equity) at any quarter end
measurement date. To ensure compliance with this limitation, no manger may
be selected for the portfolio if the addition of the commitment at maximum
permissible leverage would cause the Timber Portfolio to exceed this
limitation.

The SIC recognizes that timberland assets are relatively illiquid and investment may
not be of uniform size and quality; furthermore, the program will be implemented
primarily through vehicles where SIC has limited control other than through
selection of the strategy itself.




The Timberland Portfolio, as a component of the Real Return Portfolio, will be

- 7 -




Establish the objectives and risk management policies for the Timberland
Portfolio. It will perform this role by reviewing and approving, or
amending and approving, the Timberland Investment Policy submitted by
the Consultant before or during the first quarter of the year;

for Timberland before or during the first quarter of the year. During the
fourth quarter of the year, the Council/Investment Committee will review
the Annual Investment Plan for its appropriateness and to identify any
desired changes;


Review the performance of the Timberland Portfolio, along with the fund
by the Council/Investment Committee. For this review, the Consultant
will provide the Council/Investment Committee with quarterly


2. Staff

matters concerning timberland investments. The Staffs monitoring
responsibilities shall include the following:

Work with the Consultant to prepare the Timberland Investment Policy and
annual Investment Plan and submit these to the Council/Investment

- 8 -


recommendations contained in the Investment Plan submit the same to
the Council/Investment Committee for approval;


Monitor the performance of the Timberland Portfolio, its fund sponsors,

3. Fund Sponsors

Fundamentally, the fund sponsors will acquire, sell and manage Timberland

Consultant and in compliance with this Timberland Investment Policy.

4. Consultant

The Staff has the active day-to-day role of managing the Timberland Portfolio.
Thus, the Consultant shall perform the following services:

Work with Staff to prepare the Timberland Investment Policy and annual


- 9 -

policy;


measurement periods for the Timberland Portfolio, its fund sponsors and
investments; and


Staff of any material changes in the capital markets that would influence the
Timberland Investment Policy or Annual Investment Plan. The Consultant will
inform the Council/Investment Committee and Staff of any significant changes
Consultant shall provide the Council/Investment Committee and Staff with
relevant research materials as needed or as directed by the

B. Reporting

sponsors and Consultant that will contain information to enable the Council to
evaluate the performance of its Timberland Portfolio.

and Staff.


- 10 -


Timberland Portfolio using data as provided by the fund sponsors.

The Consultant will submit its portfolio management report to Staff and
of the Timberland Portfolio with the Policy and Investment Plans; the
performance of the Timberland Portfolio, its fund sponsors, and the
investments for the relevant measurement periods and relative to indices and
benchmarks; a statement of significant initiatives being undertaken; a
statement of relevant Timberland and capital market information; and a
statement of significant events in the real assets program.

administration of the Timberland Portfolio. The fund sponsors shall provide

NEW MEXICO

Farmland Portfolio

June 2012

The Townsend Group

Table of Contents

Page

I. Objectives of the Farmland Program .................................................................................. 1
A. Role of the Farmland Portfolio ............................................................................... 1

5. Leverage ...................................................................................................... 5

2. Staff ............................................................................................................. 7
3. Fund Sponsor .............................................................................................. 7
4. Consultant ................................................................................................... 8
B. Reporting................................................................................................................. 9
3 Audited Annual Financial Statements ......................................................... 9
4. Performance Measurement and Portfolio Analytics Report ...................... 9
5. Other Reports ............................................................................................. 9

- 1 -

protection, collectively referred to as Real Return assets. This Investment Policy sets forth the
dedicated to Farmland assets (the Farmland Portfolio or Portfolio). This Investment Policy
also sets forth the purpose of the Farmland Portfolio allocation and the standard of care
governing the management of the Portfolio. It additionally describes the roles and
responsibilities of the Council, the SICs investment staff (the Staff), and the SICs external
consultants (the Consultants) relating to the oversight and management of the Farmland
Portfolio.

I. OBJECTIVES OF THE FARMLAND PROGRAM

A. Role of Farmland Portfolio

The primary objectives of the SICs Farmland Portfolio, in order of priority, are as
follows:


2. Provide an inflation hedge;

3. Preserve capital; and

4. Generate stable, reliable income

All farmland investments shall be subject to the prudent investor rule as codified in
the New Mexico statutes which stipulates that a fiduciary's performance is
measured on the performance of the entire portfolio rather than individual
investments. Further, all investments shall comply with applicable local, state, and
federal statutes.

+/- 2%. Farmland investments do not currently have a dedicated allocation with the
Real Assets Program.

- 2 -


fees, of 6.5% to 7.0% from farmland with a standard deviation of 10% - 12% per
annum. For reporting purposes the portfolio will be compared to the NCREIF
Farmland Index (NFI) over the short term and a real return benchmark of 3% plus
inflation (as measured by the United Stated Bureau of Labor Statistics Consumer
Price Index for all Urban Consumers: CPI-U) as measured over a full market cycle or
5 years (greater of).


tactical farmland investments and (ii) market opportunities and conditions. The
Portfolio will invest in both strategic farmland investments as well as tactical non-
core projects in accordance with the following guidelines (as measured by market
value of underlying portfolio investments):

Allocation Ranges:
Strategic farmland investments: 60 - 100%
Tactical farmland investments: 0 40%
Publicly traded farmland investments 0 10%
farmland investments 0 10%

investments within their portfolios. SIC Staff and the Consultant will assign a
category to each underlying investments within a managers portfolio for the
Real Estate
10%
Inflation-
Related 4%
Real Assets
6%
Absolute
Return
8%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$
i
n

M
i
l
l
i
o
n
s
Timber
30%
Infrastructure
30%
Energy
30%
Commodities
10%
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
$
i
n

M
i
l
l
i
o
n
s

- 3 -

purpose of monitoring SICs exposures. In an effort to comply with the permissible
ranges, a manager will not be considered for inclusion in the Farmland Portfolio if
the proposed commitment would result in an overexposure to tactical investments
at the managers stated maximum allocation.


Strategic investments will provide the Portfolios foundation exposure with the
objective to provide a meaningful portion of the return from current income with
more modest returns from appreciation. The strategic allocation will represent a
majority of the Farmland Portfolio and will consist primarily of land assets leased to
third party operators in order to generate stable income. The strategic portfolio will
be diversified by input type (fuel, food or fiber), crop type (row vs. permanent crop),
and geographic region as well as management style (leased vs. operating) to protect
the portfolio from an overexposure to a single or highly correlated revenue source.
The income component typically represents a significant majority of the expected
total return for strategic investments. These investments are of comparatively
lower risk and provide a stable foundation for the SICs Farmland Portfolio.


Tactical opportunities in farmland investing include but are not limited to: greenfield
development (i.e. developing raw land to add capital value), developmental crops
(i.e. non-income generating for the first several years), land leases that incorporate
commodity risk or crop purchase contracts in lieu of cash rent, water rights,
processing rights, farm equipment and value added crop handling, storage and
processing facilities, and properties in non-OECD or emerging countries. Publicly
traded companies engaged in agriculture (>50% of revenues derived from
agricultural pursuits) may also be used up to a maximum of 10% of the total
farmland allocation.

Consistent with the SICs desired risk profile, the Portfolio will target a range of 0 to
40% for these tactical investments in the Farmland Portfolio.


The Funds may acquire exposure to farmland assets through commingled fund
vehicles (open end and closed end) as well as joint venture limited partnerships and
separate accounts. The appropriate structure shall be determined by the Staff and
Consultant in developing and managing the performance and liquidity of the
Farmland Portfolio.

- 4 -

Separate accounts offer the investor with the highest degree of control and
customization and may also be the most cost effective implementation option. They
may also be less diversified than a commingled option and will require more staff
resources for oversight and monitoring. Conversely, the commingled fund
investments by nature are discretionary relationships, where the sponsor or
manager of the fund has control over the investment decision-making process, and
the investor typically has limited rights with respect to the management of the
commingled fund. The term for a traditional commingled fund in the farmland
universe ranges from 7 to 10 years, exclusive of extension options.

The table below includes all of the permissible vehicles for the Farmland Portfolio.

Farmland Portfolio Implementation
Own / Operate: Row Crops (harvested from soil) and Permanent Crops (grow on trees/vines)
- Unlisted
- Closed-End or
Open-End
- Separate Account
- Operating
Companies
- Engaged in
Agriculture
business
- ETF
- Publicly Traded
- Privately Traded

D. Risk Management

Consultant and Staff shall monitor compliance with risk management policies
quarterly through the performance measurement process.


The Farmland Portfolio will seek diversification by crop type in an effort to
mitigate portfolio volatility. Crop type diversification may be broken down by
input type (food, fuel or feed, supported by variant demand drivers), as well as
permanent or row crop and growing seasons. The portfolio is intended to be
biased towards row crops which are planted annually and represent lower risk
as compared with permanent crops because the investors exposure is limited
to a single years harvest. Permanent crops (almonds, apples and wine grapes,

- 5 -

for example) may be pursued tactically. These crops provide the opportunity
for higher income returns but also exhibit more volatility.


The Farmland Portfolio is intended to be diversified globally in order to
mitigate the risks from specific geographic characteristics such as climate, soil
conditions, weather, water supply, economies, currencies, regulatory regimes,
etc. A majority of the assets will be located in the developed economies
around the world (generally, those member nations in the OECD) however,
investments in emerging economies will be permitted, provided that the
combined total exposure to non-US, non-OECD regions remains below 10% of
the Farmland Portfolio. All farmland investments will be made with
consideration to the SICs legislative constraints regarding the international
exposure of the Total Portfolio.


or material impact on the performance of the Farmland Portfolio. In order to
investment is limited to no more than 35% of the total Farmland Portfolio



5. Leverage

Farmland investments have historically involved only very modest utilization of
leverage. Regardless, the use of leverage by fund sponsors will be monitored
by the SIC Staff and Consultant on a quarterly basis to mitigate imprudent risks.
It is expected that the loan to value for the total Farmland Portfolio will not
exceed 50% (by market value of debt and equity) at any quarter end
measurement date. To ensure compliance with this limitation, no manger may
be selected for the portfolio if the addition of the commitment at maximum
permissible leverage would cause the Farmland Portfolio to exceed this
limitation.

- 6 -

The SIC recognizes that farmland assets are relatively illiquid and properties are not
of uniform size and quality; furthermore, the program will be implemented primarily
through vehicles where SIC has limited control other than through selection of the
strategy itself.


responsibilities, reporting and search procedures


The Farmland Portfolio, as a component of the Real Return Portfolio, will be



Establish the objectives and risk management policies for the Farmland
Portfolio. It will perform this role by reviewing and approving, or
amending and approving, the Farmland Investment Policy submitted by
the Staff and the Consultant before or during the first quarter of the year;

for Farmland before or during the first quarter of the year. During the
fourth quarter of the year, the Council/Investment Committee will review
the Investment Plan for its appropriateness and to identify any desired
changes;


Review the performance of the Farmland Portfolio, along with the fund
by the Council/Investment Committee. For this review, the Consultant

- 7 -

will provide the Council/Investment Committee with quarterly


2. Staff

matters concerning Farmland investments. The Staffs monitoring responsibilities
shall include the following:

Work with the Consultant to prepare the Farmland Investment Policy and
Annual Investment Plan and submit these to the Council/Investment


recommendations contained in the Annual Investment Plan submit the
same to the Council/Investment Committee for approval;


Monitor the performance of the Farmland Portfolio, its fund sponsors,

3. Fund Sponsors

Fundamentally, the fund sponsors will acquire, sell and manage farmland


- 8 -

Consultant and in compliance with this Farmland Investment Policy.

4. Consultant

The Staff has the active day-to-day role of managing the Farmland Portfolio.
Thus, the Consultant shall perform the following services:

Work with the Staff to prepare the Farmland Investment Policy and annual

Work with the Staff to perform searches for fund sponsors and other
policy;

Work with the Staff to evaluate and recommend commingled fund, joint

measurement periods for the Farmland Portfolio, its fund sponsors and
investments; and


Staff of any material changes in the capital markets that would influence the
Farmland Investment Policy or Annual Investment Plan. The Consultant will
inform the Council/Investment Committee and Staff of any significant changes
Consultant shall provide the Council/Investment Committee and Staff with
relevant research materials as needed or as directed by the

- 9 -

B. Reporting

evaluate the performance of its Farmland Portfolio.

and Staff.



Farmland Portfolio using data as provided by the fund sponsors. The
Consultant will submit its Portfolio Measurement Report to Staff and
of the Farmland Portfolio with the Policy and Investment Plans; the
performance of the Farmland Portfolio, its fund sponsors, and the investments
for the relevant measurement periods and relative to indices and benchmarks;
a statement of significant initiatives being undertaken; a statement of relevant
farmland and capital market information; and a statement of significant events
in the Real Assets program.

administration of the Farmland Portfolio. The fund sponsors shall provide
Tab 3

3. Other Investment Matters: Investment Performance, Market Updates & Private Equity Reporting

a. 4Q Real estate performance review (Townsend)
b. 4Q 2013 National private equity performance review (LP Capital)
c. 4Q 2013 NMSIC Co-Investment Fund review (LP Capital)
d. 4Q 2013 New Mexico Private Equity Investment Program performance review (Sun
Mountain)
e. National private equity reporting Items (informational)
f. New Mexico Private Equity Investment Program reporting items (informational)
g. SIC performance report, TUCS, & monthly activity summary (Smith & RV Kuhns)

Nat i onal Pr i vat e Equi t y Pr ogr am
Per f or manc e Updat e Q4 2013
Presented to the
Private Equity Investment Advisory Committee of
The New Mexico State Investment Council
May 8, 2014 May 8, 2014
The following presentation relies on information provided by third parties including the
DI SCLAI MER
The following presentation relies on information provided by third parties, including the
New Mexico State Investment Council ( NM SIC ), NM SICs General Partners and/or
Invient, NM SICs data provider. The analysis included herein is dependent on such
information being complete and accurate in all material respects. Additionally, the
analysis utilizes forward-looking information that is derived in part from longer-term analysis utilizes forward-looking information that is derived in part from longer-term
historical data provided by third-party sources and considerable effort is made to use
available information to forecast these returns and cash flow patterns.
In addition projected results if any are based on a number of assumptions including
DI SCLAI MER
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 may differ
materially from actual results or change significantly if any one or more of the
assumptions are changed As such undue reliance should not be placed on such assumptions are changed. As such, undue reliance should not be placed on such
information.
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 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.
NM SIC 1
Quarter-over-quarter private equity performance increased with a net gain of $73 million
PERFORMANCE DASHBOARD
NM SIC National Private Equity Performance (by Investment Strategy)
As of December 31, 2013 ($ in millions)
# of Net Net Total Net Mul ti pl e
1
Net IRR
1
Strategy Funds Commi t. Contri buted Di stri buted NAV Val ue 12/31/2013 12/31/2012 12/31/2013 12/31/2012
A ti C i t t Acti ve Commi tments
Venture Capital 19 257.4 $ 250.3 $ 148.1 $ 79.5 $ 227.6 $ 0.91x 0.84x (1.8%) (3.3%)
Growth Equity 15 344.3 220.6 119.8 176.2 296.0 1.34x 1.32x 8.0% 8.3%
Buyout 69 2,064.1 1,408.2 1,220.1 966.3 2,186.4 1.55x 1.46x 11.9% 11.2%
Special Situations 22 685.0 448.1 308.4 281.4 589.8 1.32x 1.28x 8.5% 8.3%
Sub-total 125 3,350.8 $ 2,327.1 $ 1,796.5 $ 1,503.3 $ 3,299.8 $ 1.42x 1.34x 8.9% 8.0%
Li qui dated Funds 15 74.9 69.0 151.1 - 151.1 2.19x 2.61x 28.0% 28.8%
Sol d Funds 38 186.3 166.4 274.0 - 274.0 1.65x 1.65x 31.1% 31.1%
Grand Total 178 3,612.1 $ 2,562.5 $ 2,221.6 $ 1,503.3 $ 3,724.9 $ 1.45x 1.39x 11.8% 11.4%
Source: Invient.
1
Performance since inception
Cumulative Investment Performance
$3,000
$4,000
a
s
h

F
l
o
w
s

/

V
20%
30%
R
R
$0
$1,000
$2,000
2006 2007 2008 2009 2010 2011 2012 Q4 2013
C
u
m
u
l
a
t
i
v
e

C
a
N
A
V
0%
10%
N
e
t

I
R
NM SIC 2
Source: Invient
Net Contributed NAV Net Distributed
Inception-to-date Net IRR
QUARTER-OVER-QUARTER PERFORMANCE
All investment strategies generated positive performance during the quarter g g p p g q
In Q4 2013, Buyout funds generated a net gain of $44.6 million, or 61% of the total net gain
Venture capital, growth equity and special situations strategies also generated net gains
84 funds reported net gains compared to 27 funds reporting net losses p g p p g
NM SIC Private Equity Portfolio - Quarterly NAV Changes
$1,750
$48.7
$79.2
$73.2
$40.6
$113.2
$73.3
$1,500
$1,459.9
$1,502.7 $1,503.3
6/30/13 NAV Net
Contributions
Net
Distributions
Net Gain 9/30/13 NAV Net
Contributions
Net
Distributions
Net Gain 12/31/13 NAV
$1,250
NM SIC 3
Source: Invient
DI VERSI FI CATI ON: VI NTAGE YEAR
The Program has exposure across multiple vintage years
More than 50% of exposure is in funds with vintage years 2008 or later as of December 31, 2013
Private equity strategy targets $500 million of commitments per year to six to eight managers
The SIC has approved four commitments totaling $350 million in 2014
Diversification and Pacing by Vintage Year - NM SIC National Private Equity Program Active Commitments
As of December 31, 2013 ($ in millions) , ($ )
Paci ng by Vi ntage Year Exposure by Vi ntage Year
$350.0
$400.0
$450.0
1997-2004
14%
2013
15%
$150.0
$200.0
$250.0
$300.0
2005
9%
2006
14%
2012
13%
$-
$50.0
$100.0
14%
2007
12% 2008
9%
2009
6%
2010
0%
2011
8%
NM SIC 4
Source: Invient. Does not include liquidated or sold funds. Exposure defined as net asset value plus unfunded commitments.
Vintage year defined by the first cash flow of the fund.
DI VERSI FI CATI ON: STRATEGY
The portfolio is within strategy allocation targets
Strategy Allocation
Target Al l ocati on NAV Unfunded Total Exposure
Strategy Low Hi gh $ % $ % $ %
Venture Capital 0% - 10% 79.5 $ 5.3% 8.0 $ 0.8% 87.4 $ 3.4%
Growth Equity 10% - 20% 176.2 11.7% 124.2 11.8% 300.3 11.8%
Buyout 50% - 70% 966.3 64.3% 661.0 63.1% 1,627.3 63.8%
Special Situations 15% - 25% 281.4 18.7% 255.2 24.3% 536.6 21.0%
Total
1,503.3 $ 100.0% 1,048.3 $ 100.0% 2,551.6 $ 100.0%
Source: Data from Invient and target allocations from January 24, 2012 strategy presentation to NM SIC. Target allocation refers to portfolio's total exposure (NAV + Unfunded).
Diversification by Strategy - NM SIC National Private Equity Program Active Commitments
As of December 31, 2013
By Commi tment By Exposure
Growth Equi ty
Speci al
Si tuati ons
20%
Growth Equi ty
Speci al
Si tuati ons
22%
Buyout
62%
Venture Capi tal
8%
Growth Equi ty
10%
Buyout
64%
Venture Capi tal
3%
Growth Equi ty
13%
NM SIC 5
Source: Invient. Does not include liquidated or sold funds. Exposure defined as net asset value plus unfunded commitments.
DI VERSI FI CATI ON: GEOGRAPHY AND I NDUSTRY
Portfolio is concentrated in North America and diversified across industries
Geographic diversification is based on the headquarters of the underlying portfolio companies
The portfolio is below target in Asia and Emerging Markets (target of 10% to 20%) and above
target in North America (target of 60% to 70%)
The underlying companies are diversified across a number of industries, with consumer
companies having the largest allocation, although 1% lower than during the prior quarter
There were no significant changes in diversification compared to last quarter
Underlying Portfolio Company Diversification (By Remaining Value)
As of December 31, 2013
Geography Industry
Asi a + Emergi ng
Markets
3%
Un-
cl assi fi ed
5%
Other
7%
Europe
17%
5%
Consumer
32%
I d t i l /
Informati on
Technol ogy
12%
7%
North Ameri ca
75%
Energy
3%
Fi nanci al s
11%
Heal thcare
14%
Industri al s /
Materi al s
21%
NM SIC 6
Source: Invient. Does not include liquidated or sold funds.
14%
Copyright 2014 by LP Capital Advisors LLC.

New Mexico Private Equity Investment Program

Q4 2013 Review

May 2014

2
New Mexico Private Equity Investment Program Overview

The New Mexico Private Equity Investment Program (NMPEIP or Program) was
established in 1993 to make investments into private equity funds which in turn invest into
NM-based companies

For many years the Program was managed as a differential rate (below market rate) program

Since 2004, the Program has been managed with financial returns as the primary focus
Fiduciary-based approach with economic development benefits as a secondary consideration
Prudent Investor investment standard vs. differential rate investments

Financial returns significantly improved since 2004
1

With Sun Mountain as the Program Advisor no third party marketers or placement agents
have been used and no placement fees have been paid

1
Source: Invient (SICs private equity record keeper); as of 12/31/13
3
NMPEIP Financial Performance Comparison
1993-2003 vs. 2004-Present
Metric 1993-2003 2004-Present Difference
Internal Rate of Return -18.2% 4.4% +22.6%
Since Inception Returns $-56.5M $35.4M $91.9M
Distributions to the SIC $5.0M $107.4M $102.4M
Non-Program Investment
Into NM-based
Companies
$0.5B $1.4B +180%
Source: Invient (SICs private equity record keeper) as of 9/30/13
Program focused on economic
development
Program focused on financial returns
Advisor - Sun Mountain Capital
4
Program is in compliance with the statute
$252.8 million in net deployed capital versus a statutory cap of $401.4 million
Programs net deployed capital represents 5.7% of the Severance Tax Permanent Fund (STPF), on
track to achieve the NMPEIPs long term target allocation of 5.0%
Individual company ownership concentration levels are below statutory caps

Program financial performance has improved since 2004
Program IRR since inception has improved from -18.2% to -0.5%
NMPEIP investments have performed in line with national venture benchmarks

Program funds and their portfolio companies continue to make progress

Program impact on New Mexico is substantial
29 funds have received commitments and invested in 67 New Mexico-based companies
Capital multiplier of 6.5x has resulted in over $2.0 billion of capital invested into NM companies

NMPEIP Q4 2013 Update Summary
Source: Invient (SICs private equity record keeper); as of 12/31/13
5
NMPEIP Status Overview and Summary of Partnership Commitments
All Fund Commitment Summary Commitment Funded Percent NM Investment Value ($)
2
Return
2
Fund
as of 12/31/13 Vintage Dollars % of Fund To Date Funded
Invest
1
Realized Unrealized
3
Total Multiple IRR Liquidated
ARCH Venture Fund II, L.P. 1993 $1.2 3.9% $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 3.7% $4.0 100.0% $0.0 $3.7 $0.1 $3.8 0.95x -0.8% In Process
CVMEquity Fund V 1998 $3.0 2.6% $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 13.8% $4.0 100.0% $4.9 $0.1 $0.0 $0.1 0.02x -71.8% Yes
Tullis/Dickerson Capital Focus II, L.P.
4
1998 $5.0 10.0% $5.0 100.0% $10.1 $2.4 $1.6 $4.0 0.79x -2.0% Yes
Valley Ventures II, L.P. 1998 $3.0 50.0% $3.0 100.0% $18.4 $2.6 $0.0 $2.6 0.87x -1.6% Yes
Vestor Partners, L.P. 1998 $2.5 24.0% $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 30.0% $5.0 100.0% $9.6 $0.0 $1.5 $1.5 0.30x -9.9% In Process
Murphree Venture Partners V, L.P. 2000 $3.0 20.0% $3.0 100.0% $2.2 $0.9 $2.0 $3.0 1.00x -0.5%
Red River Ventures, L.P. 2000 $7.2 5.5% $7.2 100.0% $12.8 $3.6 $1.8 $5.4 0.76x -5.1%
Tullis/Dickerson Capital Focus III, L.P.
4
2001 $15.0 11.8% $15.0 100.0% $51.4 $13.3 $5.7 $18.9 1.26x 5.6%
Wasatch Venture Fund III, LLC 2001 $8.7 12.4% $8.7 100.0% $41.3 $4.0 $3.3 $7.2 0.83x -3.3%
Altira Technology Fund IV, L.P. 2002 $10.0 15.6% $10.0 100.0% $14.3 $14.1 $1.7 $15.8 1.58x 7.9%
Blue Sage Capital, L.P. 2002 $10.0 6.9% $7.6 76.4% $10.0 $17.7 $11.5 $29.3 3.83x 23.3%
ITU Ventures West I, L.P. 2002 $15.0 53.6% $15.0 100.0% $15.3 $5.9 $0.9 $6.9 0.47x -12.7% Yes
Valley Ventures III, L.P. 2002 $6.7 15.0% $6.5 98.0% $14.9 $1.0 $0.9 $1.9 0.29x -18.1%
New Mexico Co-Investment Partners, L.P.
5
2003 $62.0 100.0% $62.0 100.0% $161.7 $10.0 $3.2 $13.2 0.21x -23.2%
vSpring II, L.P.
4
2003 $20.0 23.6% $20.0 100.0% $91.8 $0.0 $6.1 $6.1 0.31x -14.5%
Flywheel I, L.P. 2004 $15.0 46.9% $15.0 100.0% $52.4 $8.0 $8.3 $16.2 1.08x 1.3%
Verge I, L.P. 2004 $10.0 47.6% $10.0 100.0% $50.6 $2.5 $6.9 $9.4 0.94x -1.2%
Wasatch New Mexico Fund, LLC 2004 $12.0 17.1% $12.0 100.0% $46.9 $0.0 $4.0 $4.0 0.34x -16.6%
ITU Ventures III NM, L.P. 2005 $2.3 1.9% $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 5.0% $13.8 92.0% $28.8 $8.0 $12.1 $20.2 1.46x 8.9%
Village Ventures Fund II-B, L.P. 2006 $15.0 10.7% $14.5 96.6% $3.2 $5.0 $27.0 $32.0 2.21x 17.9%
NMSIC Co-Investment Fund, L.P. (Classic) 2007 $30.0 100.0% $25.0 83.3% $347.2 $0.5 $28.4 $28.9 1.15x 4.6%
NMSIC Co-Investment Fund, L.P. (Focused) 2007 $62.5 100.0% $60.4 96.6% $780.6 $1.9 $70.7 $72.5 1.20x 4.3%
vSpring III, L.P.
4
2007 $15.0 9.9% $15.0 100.0% $18.0 $0.3 $10.7 $10.9 0.73x -7.4%
EPIC Venture Fund IV, LLC 2008 $10.0 17.2% $7.7 77.0% $7.0 $0.0 $11.6 $11.7 1.49x 12.5%
NMSIC Co-Investment Fund, L.P. (2013) 2013 $20.0 100.0% $7.0 34.8% $6.6 $0.0 $12.1 $12.2 1.70x N/A
Program Totals
7
$392.1 11.1% $365.2 93.2% $1,868.3 $112.4 $231.9 $344.4 0.9x -0.5% 10 of 29
Source: Invient reporting
Notes:
1) Incl udes both di rect fund i nvestments and caused to i nvest dol l ars i nto NewMexi co compani es. Sourced fromInvi ent reporti ng, GP reporti ng and Sun Mountai n Capi tal anal ysi s
2) Investment Val ues and Return cal cul ati ons based upon asset val ues from12/31/13
3) Fai r Market Val ue as determi ned by Fund GPs under FASB 157 as of the report date
4) Fi rmmanagi ng the fund has changed name: Tul l i s/Di ckerson i s nowcal l ed Tul l i s Heal th Investors, vSpri ng i s nowcal l ed Si gnal Peak Capi tal
5) NewMexi co Co-Investment Partners, L.P. data i ncl udes one SIC di rect i nvestment for reporti ng purposes
6) Total NMPEIP commi tment as a percentage of combi ned fund si zes; excl udes the co-i nvestment funds
7) As of the reporti ng date, ful l reporti ng has not been recei ved fromBl ue Sage Capi tal , NewMexi co Co-Investment Partners, Wasatch NewMexi co or Verge I
6
Unaudited Performance Data as of 12/31/13
Number of Fund Commitments 29
Capital Committed (Total) $392.1
Capital Committed (Net of Dist.'s Received) $279.7
Capital Drawn $365.2
% of Capital Committed (Total) 93.2%
Distributions Received $112.4
% of Capital Drawn 30.8%
Outstanding Deployed Capital $252.8
Outstanding Deployed Capital as % of STPF 5.7%
Portfolio Carrying Value $231.9
Total Portfolio Value $344.3
% of Capital Drawn 94.3%
Portfolio Multiple of Invested Capital 0.9x
Portfolio IRR -0.5%
Note: Returns calculated using reported Carrying Values as of 12/31/13
and data provided by Invient
Severance Tax Permanent Fund ("STPF") currently $4,460.040 million
as of 12/31/13
6
NMPEIP Carrying Value Quarter Over Quarter
NM PEIP Changes in Q3 2013 Reported Value
Early VC Later VC Buyout Total
Reported Valuation as of Q2 2013 $115.3 $73.9 $13.4 $202.6
Contributions to General Partners $3.7 $0.2 $0.0 $3.9
Distributions from General Partners ($0.1) ($5.3) $0.0 ($5.4)
Change in Value $3.0 $15.0 $0.0 $18.0
NM PEIP Changes in Q4 2013 Reported Value
Early VC Later VC Buyout Total
Contributions to General Partners $3.4 $0.2 $0.0 $3.6
Distributions from General Partners ($2.2) ($0.2) $0.0 ($2.4)
Change in Value $11.1 $0.5 ($0.1) $11.6
7
Recent NMPEIP Vintages Tracking National Benchmarks
Since 2004, performance has tracked
national venture capital benchmarks
40% of vintages are above median and
80% are in the top three quartiles

2004-Present Vintage Cumulative
1
st
quartile: 20% 20%
2
nd
quartile: 20% 40%
3
rd
quartile: 40% 80%
4
th
quartile: 20% 100%
NMPEIP v National Benchmarks
NMPEIP Cambridge Associates Thomson
Vintage Net IRR Quartile Quartile
1993 44.8% Second First
1994 N/A N/A N/A
1995 N/A N/A N/A
1996 (0.8%) Fourth Fourth
1997 N/A N/A N/A
1999 N/A N/A N/A
2000 (5.7%) Third Fourth
2001 2.3% Second Second
2002 (1.3%) Third Third
2004 (5.2%) Third Fourth
2005 (1.2%) Third Third
2006 17.9% First First
2007 2.7% Fourth Third
2008 12.5% Second Second
2009 N/A N/A N/A
2010 N/A N/A N/A
2011 N/A N/A N/A
2012 N/A N/A N/A
Source: Invi ent reporti ng (as of 12/31/13) and most recentl y avai l abl e nati onal
benchmarks (Cambri dge Associ ates as of 9/30/13 and Thomson data as of 6/30/13)
Note: No fund commi tments were made i n years l abel ed "N/A"
8
NMPEIP Activity Highlights

Verge I
Verge made a distribution in Q4 2013 related to
the sale of ZTEC Instruments.

Valley Ventures III
Progress continued on liquidating the Funds
remaining portfolio holdings.

Blue Sage Capital
During 2013, Blue Sage Capital retired the Funds
remaining SBA leverage.

International Venture Fund I
At the end of 2013, IVF I entered into a liquidating
trust to complete the dissolution of the Fund.

NMPEIP Funds New Mexico Portfolio Companies

Lumidigm
Following the close of Q4 2013, Lumidigm was
acquired by HID Global.

xF Technologies
xF obtained all of the necessary building permits
for its Albuquerque-based pilot plant and began
construction.

Exagen Diagnostics
The company closed a significant new financing
round. The proceeds will be used to fund growth
initiatives and sales force expansion.

TriLumina
During Q4 2013, the Company was awarded a
$900,000 research grant by the Israel-U.S.
Binational Industrial Research and Development
Foundation (BIRD).

9
67 New Mexico Companies
New Mexico Companies as of 12/31/13
Advent Solar Elisar Software MicroOptical Devices Skorpios Technologies
Altaview Technologies Enerpulse MIOX Southwest Med Tech
Altela Entrada Nanocrystal Sundrop
American Clay Exagen Diagnostics NanoMR Surfect Technologies
Amtech Figaro Noribachi TCI Medical
Aspen Avionics Growstone Nuvita Teucrium Trading
Avasca Holochip OnQueue Technologies Tred
Avisa Pharma Infantelligence Patchwork Systems TriLumina
Bioreason InnovASIC Phase-I TruTouch Technologies
Boomtime Intellicyt POSLavu VeraLight
Comet Solutions Introbotics Protalex Vertical Power
Consolidated Energy Iosil Energy ProtoHIT Vibrant
Controlled Recovery JackRabbit Systems Puente Partners WellKeeper
Desert Power Kinetisis Quasar xF Technologies
Dining Gift Services Lumidigm Respira Therapeutics Zia Laser
Earthstone Mesofuel Seattle Fish Company ZTEC Instruments
Eclipse Aviation Metaphor Seclarity
Status Key
Active (39) Exited at a Gain (9) Exited at a Loss (19)
Note: NMPEIP participants and the SIC directly have invested in 65 New Mexico-based companies,
with 2 additional companies funded by SIC National Program participants
10
Capital Invested by Sector: Active NMPEIP Program Sector Concentration
11
Significant Economic Impact
NMPEIP Impact Summary as of 12/31/13
Total Investment in New Mexico Portolio Companies
A) Investment by Funds with NMPEIP Participation $282,954,458
B) External Investment Caused by Funds with NMPEIP Participation $1,852,944,997
Total VC Investment in NM Companies $2,143,331,454
Investment Multiplier (B / A) 6.5x
Categorization of NM Portfolio Companies
Active Companies 39 58.2%
Companies Exited at a Gain 9 13.4%
Companies Exited at a Loss 19 28.4%
Number of Companies funded 67 100.0%
NM Economic Impact Q4 2013
NM Purchases $28,534,104
NM Payroll $22,671,157
NM Economic Impact $51,205,261
Total Current Full-Time Jobs 1,371
Average Salary of Jobs Created $66,145
Average Salary in New Mexico
1
$40,905
Source: Survey of parti ci pati ng NMPEIP fund managers and NM compani es
1
Source: New Mexi co wage and sal ary di sbursements and total wage and sal ary empl oyees from the U.S. Dept. of
Commerce, Bureau of Economi c Anal ysi s. Average determi ned by di vi di ng di sbursements by empl oyees
12
Summary of Key Points
Program is currently in compliance and is evaluating potential new commitments per the
approved pacing plan

Program financial returns are improving steadily
Since 2004, NMPEIP investments have performed in line with national benchmarks and have
produced a positive financial return for the NMSIC

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

13
Disclaimer
The preceding presentation relies on information provided by third parties, including the New Mexico State
Investment Council (NMSIC), NMSICs General Partners and/or Invient, NMSICs data provider. The analysis
included herein is dependent on such information being complete and accurate in all material respects.
Additionally, analysis may utilize or involve forward-looking information 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 may differ materially from actual results or change significantly if any one or
more of the assumptions are changed. As such, undue reliance should not be placed on such information.

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 from Sun Mountain Capital Advisors or the New Mexico State Investment Council.

Investment Performance Analysis
Period Ended: March 31, 2014
General Market Commentary Land Grant Asset Allocation vs. InterimTarget
*Severance Tax Asset Allocation vs. InterimTarget NMSIC Performance Attribution Summary
NMSIC Total Fund - Schedule of Investable Assets
Long-Term
Target (%)
Asset
Allocation
($)
Asset
Allocation
(%)
Interim
Target
(%)
Differences
(%)
Land Grant Total Fund Composite 13,680,844,820 100.00 100.00 0.00
US Equity 4,881,466,277 35.68 35.00 0.68
Non-US Equity 1,866,068,994 13.64 15.00 -1.36
Fixed Income 3,124,071,493 22.84 20.00 2.84
Absolute Return 942,001,007 6.89 7.00 -0.11
Private Equity 1,228,234,965 8.98 10.00 -1.02
Real Estate 982,443,731 7.18 8.00 -0.82
Real Return 615,496,501 4.50 5.00 -0.50
Cash Equivalent 41,061,853 0.30 0.00 0.30
Federal Reserve chair Janet Yellen addressed the subpar U.S. job market, reassuring
investors that interest rates would be kept low for some time after the Feds monthly
bond purchases are phased out, which most expect by the end of 2014.
Residents of Crimea voted overwhelmingly in favor of joining Russia after its local
parliament called for a referendum decried foul by the West. Russia incurred sanctions on
officials, downward pressure on the ruble and further decreases in foreign investment.
Equity markets posted mixed returns in March as the S&P 500 (Cap Wtd) Index returned
0.84% and the MSCI EAFE (Net) Index returned -0.64%. Emerging markets returned
3.07% as measured by the MSCI EM (Net) Index.
The Barclays US Aggregate Bond Index returned -0.17% in March, outperforming the
Barclays US Treasury Intermediate Term Index return of -0.41%.
Absolute return strategies, as measured by the HFN FOF Multi-Strat Index, returned
-0.69% for the month and 6.30% over the trailing one-year period.
Crude oil's price fell by 0.98% in March but has increased by 4.47% over one year.
100.00
31.00
15.00
16.00
8.00
10.00
10.00
10.00
0.00
Long-Term
Target (%)
Asset
Allocation
($)
Asset
Allocation
(%)
Interim
Target
(%)
Differences
(%)
Severance Tax Total Fund (Ex. ETI) Composite 4,256,942,944 100.00 100.00 0.00
US Equity 1,554,041,452 36.51 35.00 1.51
Non-US Equity 649,102,278 15.25 15.00 0.25
Fixed Income 956,565,993 22.47 20.00 2.47
Absolute Return 303,215,320 7.12 7.00 0.12
Private Equity 377,080,900 8.86 10.00 -1.14
Real Estate 260,568,503 6.12 8.00 -1.88
Real Return 138,448,227 3.25 5.00 -1.75
Cash Equivalent 17,920,272 0.42 0.00 0.42
The Land Grant Total Fund's relative underperformance over the last 3 years was
primarily driven by manager performance in equities, particularly US equities.
However, asset allocation positioning relative to the target allocation was favorable, as an
under allocation to non-US equity and real return proved helpful.
Over the last year portfolio positioning has deviated from the target allocation, as
residuals intended for other asset classes are temporarily held as fixed income.
Despite that variance, strong value add by managers within US equity, fixed income, and
alternative assets led to overall outperformance by the Total Fund.
T. Rowe Price LC Growth, Seizert, and Donald Smith provided the best relative
performance, while the MFS Int'l, Templeton, BlackRock Emg, and DuPont have not
been able to add value since their inception late in 2013.
The Total Fund also benefitted from the timing of large transactions over the last year.
100.00
31.00
15.00
16.00
8.00
10.00
10.00
10.00
0.00
MTD QTD CYTD FYTD
1
Year
3
Years
5
Years
10
Years
NMSIC Total Fund Composite 0.91 2.02 2.02 12.01 13.04 8.57 13.02 6.61
Land Grant Total Fund Composite 0.95 2.01 2.01 11.92 12.99 8.63 13.15 6.73
Land Grant Policy Index 0.70 1.82 1.82 11.62 12.31 9.42 15.72 6.60
Difference 0.25 0.19 0.19 0.30 0.68 -0.79 -2.57 0.13
Severance Tax Total Fund Composite 0.95 1.98 1.98 11.86 12.76 8.11 12.50 6.07
Severance Tax Policy Index 0.70 1.82 1.82 11.62 12.31 9.42 15.45 6.68
Difference 0.25 0.16 0.16 0.24 0.45 -1.31 -2.95 -0.61
Periods Ending
Beginning
Market Value ($)
Net
Cash Flow ($)
Gain/Loss ($)
Ending
Market Value ($)
%Return
CYTD 18,751,981,477 20,163,501 379,312,864 19,151,457,842 2.02
As of March 31, 2014
Performance shown is gross of fees. Performance is annualized for periods greater than one year. Fiscal year ends June 30.
*Severance Tax target allocation excludes economically targeted investments and the state private equity program.
Page 1
Allocation
Market
Value ($)
%
Performance (%)
MTD QTD CYTD FYTD
1
Year
3
Years
5
Years
10
Years
2013 2012 2011 2010 2009
NMSIC Total Fund Composite 19,151,457,842 100.00 0.91 2.02 2.02 12.01 13.04 8.57 13.02 6.61 16.26 14.26 -0.93 14.55 18.69
Land Grant Total Fund Composite 13,680,844,820 71.44 0.95 2.01 2.01 11.92 12.99 8.63 13.15 6.73 16.28 14.45 -0.87 14.44 19.30
Land Grant Policy Index 0.70 1.82 1.82 11.62 12.31 9.42 15.72 6.60 16.01 14.10 2.48 14.50 20.67
Difference 0.25 0.19 0.19 0.30 0.68 -0.79 -2.57 0.13 0.27 0.35 -3.35 -0.06 -1.37
Severance Tax Total Fund Composite 4,515,494,375 23.58 0.95 1.98 1.98 11.86 12.76 8.11 12.50 6.07 15.61 13.52 -0.39 12.82 18.59
Severance Tax Policy Index 0.70 1.82 1.82 11.62 12.31 9.42 15.45 6.68 16.01 14.10 2.48 14.71 18.61
Difference 0.25 0.16 0.16 0.24 0.45 -1.31 -2.95 -0.61 -0.40 -0.58 -2.87 -1.89 -0.02
NMSIC Global Equity Composite 9,570,757,495 49.97 0.17 1.15 1.15 17.52 18.86 9.67 18.59 8.05 27.18 16.32 -7.00 18.26 41.50
Global Equity Custom Index 0.63 1.46 1.46 17.82 18.66 11.15 20.08 8.05 26.81 16.93 -3.84 15.57 34.39
Difference -0.46 -0.31 -0.31 -0.30 0.20 -1.48 -1.49 0.00 0.37 -0.61 -3.16 2.69 7.11
NMSIC US Equity Composite 6,910,520,290 36.08 -0.21 1.84 1.84 19.83 23.52 12.53 20.06 8.52 34.12 16.02 -4.34 19.00 38.89
R 3000 Index 0.53 1.97 1.97 19.40 22.61 14.61 21.93 7.86 33.55 16.42 1.03 16.93 28.34
Difference -0.74 -0.13 -0.13 0.43 0.91 -2.08 -1.87 0.66 0.57 -0.40 -5.37 2.07 10.55
NMSIC Non-US Equity Composite 2,660,237,205 13.89 1.17 -0.62 -0.62 11.84 7.57 1.87 15.49 7.49 10.88 16.27 -14.99 12.13 56.12
Non-US Equity Custom Index 0.85 0.25 0.25 14.07 9.67 3.16 15.53 8.11 12.03 17.79 -14.54 12.12 49.14
Difference 0.32 -0.87 -0.87 -2.23 -2.10 -1.29 -0.04 -0.62 -1.15 -1.52 -0.45 0.01 6.98
NMSIC Fixed Income Composite 4,390,878,898 22.93 0.20 2.38 2.38 4.81 2.76 6.76 9.42 4.24 1.74 12.78 6.65 17.12 4.74
Fixed Income Custom Index -0.03 1.79 1.79 2.20 0.32 2.07 4.86 1.42 -1.41 0.69 6.25 10.89 6.04
Difference 0.23 0.59 0.59 2.61 2.44 4.69 4.56 2.82 3.15 12.09 0.40 6.23 -1.30
NMSIC US Core Bonds Pool 2,952,253,615 15.42 0.01 2.51 2.51 4.60 1.40 5.86 5.79 5.07 -0.34 11.29 4.92 11.07 -0.33
Barclays US Agg Bond Index -0.17 1.84 1.84 2.28 -0.10 3.75 4.80 4.46 -2.02 4.21 7.84 6.54 5.93
Difference 0.18 0.67 0.67 2.32 1.50 2.11 0.99 0.61 1.68 7.08 -2.92 4.53 -6.26
NMSIC Credit & Structured Finance Pool 949,501,935 4.96 0.90 2.85 2.85 6.11 9.87 11.60 29.89 N/A 11.61 19.67 16.03 46.02 37.65
C&SF Primary Benchmark 0.30 2.15 2.15 2.23 2.82 -4.66 5.01 N/A 1.45 -12.07 -2.18 31.02 4.64
Difference 0.60 0.70 0.70 3.88 7.05 16.26 24.88 N/A 10.16 31.74 18.21 15.00 33.01
C&SF Secondary Benchmark 0.22 2.41 2.41 2.49 3.09 -4.58 5.07 N/A 1.45 -12.07 -2.18 31.02 4.64
Difference 0.68 0.44 0.44 3.62 6.78 16.18 24.82 N/A 10.16 31.74 18.21 15.00 33.01
Asset Allocation & Performance - Composites
Performance shown is gross of fees, except for Credit & Structured Finance, Absolute Return, Real Estate, Real Return, and Private Equity investments, which are shown
net of fees. Performance is annualized for periods greater than one year. RVK endorses GIPS and calculates performance for composites and investment managers using
different methodologies. Fiscal year ends June 30.
Page 2
Asset Allocation & Performance - Composites
Allocation
Market
Value ($)
%
Performance (%)
MTD QTD CYTD FYTD
1
Year
3
Years
5
Years
10
Years
2013 2012 2011 2010 2009
NMSIC Unconstrained Fixed Income Pool 489,123,347 2.55 -0.03 0.72 0.72 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
3 Month LIBOR + 2.5% 0.23 0.68 0.68 2.07 2.78 2.86 2.93 4.65 2.79 3.02 2.78 2.84 3.52
Difference -0.26 0.04 0.04 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
NMSIC Cash Equivalent Composite 61,638,976 0.32 0.00 0.19 0.19 0.20 0.54 1.17 0.88 2.43 1.06 0.00 2.52 0.20 0.56
BofA ML 3 Mo US T-Bill Index 0.00 0.01 0.01 0.05 0.07 0.08 0.12 1.65 0.07 0.11 0.10 0.13 0.21
Difference 0.00 0.18 0.18 0.15 0.47 1.09 0.76 0.78 0.99 -0.11 2.42 0.07 0.35
NMSIC Absolute Return Composite 1,267,357,820 6.62 -0.18 1.56 1.56 6.97 8.49 4.19 5.88 N/A 10.68 6.50 -3.92 4.65 11.43
HFRI FOF Comp Index -0.77 0.45 0.45 5.87 5.92 2.34 4.89 3.10 8.96 4.79 -5.72 5.70 11.47
Difference 0.59 1.11 1.11 1.10 2.57 1.85 0.99 N/A 1.72 1.71 1.80 -1.05 -0.04
NMSIC Private Equity Composite (Ex. State) 1,605,316,126 8.38 4.79 4.90 4.90 12.37 15.93 10.85 8.08 11.68 12.94 14.86 10.03 11.02 -11.25
80/20 Cambridge PE Index (Lagged 1 Qtr) 0.00 0.00 0.00 8.77 13.22 12.25 13.48 13.06 16.62 14.12 15.20 16.36 -9.94
Difference 4.79 4.90 4.90 3.60 2.71 -1.40 -5.40 -1.38 -3.68 0.74 -5.17 -5.34 -1.31
Venture Econ All Prvt Eq Index (Lagged 1 Qtr) 7.33 7.33 7.33 15.24 20.84 14.50 15.51 13.11 16.57 14.34 12.33 15.77 -6.33
Difference -2.54 -2.43 -2.43 -2.87 -4.91 -3.65 -7.43 -1.43 -3.63 0.52 -2.30 -4.75 -4.92
Townsend Reported Real Estate 1,082,589,554 5.65 3.80 3.80 3.80 9.80 12.34 10.26 1.93 N/A 10.50 9.63 10.34 -6.44 -32.07
NCREIF ODCE Index (Net) (Lagged 1 Qtr) 2.94 2.94 2.94 10.21 12.90 12.53 2.71 6.16 11.97 10.47 17.18 6.01 -35.70
Difference 0.86 0.86 0.86 -0.41 -0.56 -2.27 -0.78 N/A -1.47 -0.84 -6.84 -12.45 3.63
NCREIF/Townsend Wtd Benchmark (Lagged 1 Qtr) 3.00 3.00 3.00 9.91 12.35 12.28 2.65 N/A 12.07 10.46 17.01 3.64 -37.07
Difference 0.80 0.80 0.80 -0.11 -0.01 -2.02 -0.72 N/A -1.57 -0.83 -6.67 -10.08 5.00
NMSIC Real Return 753,944,805 3.94 1.13 2.14 2.14 5.26 7.39 N/A N/A N/A 8.40 N/A N/A N/A N/A
Real Return Custom Index 0.44 3.20 3.20 4.74 0.05 1.82 4.68 4.78 -2.72 4.90 2.77 7.53 8.92
Difference 0.69 -1.06 -1.06 0.52 7.34 N/A N/A N/A 11.12 N/A N/A N/A N/A
different methodologies. Fiscal year ends June 30.
Page 3
Figure 2: Total Value Added:0.68% Figure 1: Total Fund Performance
Figure 4: Total Mgr Value Added:0.52%
Manager Value Added
0.00% 0.40% 0.80% -0.40 % -0.80 %
0.00%
0.11%
-0.05 %
0.22%
0.15%
0.22%
-0.38 %
0.24%
Asset Allocation Value Added
0.00% 0.50% 1.00% -0.50 % -1.00 %
-0.11 %
0.17%
-0.03 %
-0.05 %
-0.02 %
-0.53 %
0.33%
0.04%
Figure 3: Total Asset Allocation:-0.20 %
Land Grant Total Fund Composite vs. Land Grant Policy Index
Total Fund Attribution
1 Year Ending March 31, 2014
Performance shown is gross of fees. Calculation is based on monthly periodicity. Total Value Added: The percentage over- or underperformance of the total fund as
compared to the benchmark for the specified time period. Average Active Weight: The average percentage over- or underweight to each investment relative to the policy
weights. Asset Allocation Value Added: How the variance of the fund's actual allocation from the policy weights added or subtracted from total fund performance.
Manager Value Added: The portion of total value added attributable to the relative performance of the fund's investments, relative to the individual benchmarks that
represent them in the Land Grant Policy Index. Other: The contribution of other residual factors, including estimation error and transaction timing. See Glossary for
additional information regarding the Total Fund Attribution calculation.
Page 4
Figure 2: Total Value Added:-0.80 % Figure 1: Total Fund Performance
Figure 4: Total Mgr Value Added:-1.06 %
Manager Value Added
0.00% 0.80% -0.80 % -1.60 %
0.00%
0.04%
-0.10 %
-0.16 %
0.08%
0.30%
-0.26 %
-0.97 %
0.00% 0.30% 0.60% -0.30 % -0.60 %
-0.08 %
0.14%
-0.07 %
-0.07 %
-0.04 %
-0.22 %
0.27%
0.18%
Figure 3: Total Asset Allocation:0.12%
Land Grant Total Fund Composite vs. Land Grant Policy Index
3 Years Ending March 31, 2014
represent them in the Land Grant Policy Index. Other: The contribution of other residual factors, including estimation error and transaction timing. See Glossary for
Page 5
Figure 2: Total Value Added:0.45% Figure 1: Total Fund Performance
Figure 4: Total Mgr Value Added:0.49%
Manager Value Added
0.00% 0.30% 0.60% -0.30 % -0.60 %
0.00%
0.00%
0.07%
-0.03 %
0.06%
0.15%
0.24%
-0.22 %
0.22%
0.00% 0.50% 1.00% -0.50 % -1.00 %
-0.08 %
-0.20 %
0.28%
-0.03 %
-0.01 %
-0.02 %
-0.43 %
0.37%
-0.18 %
Figure 3: Total Asset Allocation:-0.30 %
Severance Tax Total Fund Composite vs. Severance Tax Policy Index
1 Year Ending March 31, 2014
represent them in the Severance Tax Policy Index. Other: The contribution of other residual factors, including estimation error and transaction timing. See Glossary for
Page 6
Figure 2: Total Value Added:-1.31 % Figure 1: Total Fund Performance
Figure 4: Total Mgr Value Added:-1.54 %
Manager Value Added
0.00% 0.80% -0.80 % -1.60 %
0.00%
0.00%
0.03%
-0.12 %
-0.45 %
0.08%
0.23%
-0.20 %
-1.10 %
0.00% 0.30% 0.60% -0.30 % -0.60 %
-0.05 %
-0.17 %
0.17%
-0.04 %
0.17%
0.02%
-0.13 %
0.37%
-0.03 %
Figure 3: Total Asset Allocation:0.33%
Severance Tax Total Fund Composite vs. Severance Tax Policy Index
3 Years Ending March 31, 2014
represent them in the Severance Tax Policy Index. Other: The contribution of other residual factors, including estimation error and transaction timing. See Glossary for
Page 7
Allocation
Market
Value ($)
%
Performance (%)
MTD QTD CYTD FYTD
1
Year
3
Years
5
Years
10
Years
2013 2012 2011
Since
Incep.
Inception
Date
US Equity
NMSIC US Equity Composite 6,910,520,290 36.08 -0.21 1.84 1.84 19.83 23.52 12.53 20.06 8.52 34.12 16.02 -4.34 5.37 05/01/1999
R 3000 Index 0.53 1.97 1.97 19.40 22.61 14.61 21.93 7.86 33.55 16.42 1.03 4.94
NMSIC US Large Cap Equity Composite 5,913,792,087 30.88 -0.24 1.59 1.59 19.01 22.10 12.07 19.01 8.44 32.57 16.32 -4.63 4.63 05/01/1999
R 1000 Index 0.64 2.05 2.05 19.25 22.41 14.75 21.73 7.80 33.11 16.43 1.50 4.68
NMSIC US Large Cap Active Pool 2,458,360,151 12.84 -1.31 1.04 1.04 18.96 22.22 10.80 18.03 8.18 32.34 15.45 -6.46 4.16 05/01/1999
Wellington Management Company 758,801,754 3.96 1.75 2.93 2.93 16.17 19.50 N/A N/A N/A 28.72 N/A N/A 23.72 06/01/2012
R 1000 Value Index 2.39 3.02 3.02 17.80 21.57 14.80 21.75 7.58 32.53 17.50 0.39 26.98
Brown Brothers Harriman 604,265,770 3.16 1.76 2.04 2.04 14.72 17.76 N/A N/A N/A 28.51 N/A N/A 22.42 07/01/2012
R 1000 Index 0.64 2.05 2.05 19.25 22.41 14.75 21.73 7.80 33.11 16.43 1.50 23.45
J.P. Morgan Asset Management 751,173,696 3.92 -5.00 -1.17 -1.17 21.52 24.32 N/A N/A N/A 34.13 N/A N/A 19.25 06/01/2012
T. Rowe Price LC Growth 344,118,932 1.80 -4.63 0.22 0.22 28.25 34.25 N/A N/A N/A 45.43 N/A N/A 28.71 06/01/2012
R 1000 Growth Index -1.01 1.12 1.12 20.73 23.22 14.62 21.68 7.86 33.48 15.26 2.64 22.55
NMSIC US Large Cap Index Pool 2,910,940,565 15.20 0.63 2.04 2.04 19.21 22.41 14.60 20.55 8.57 33.10 16.09 1.18 5.26 05/01/1999
NT Russell 1000 Index Fund 2,910,433,936 15.20 0.63 2.03 2.03 19.21 22.41 N/A N/A N/A 33.10 16.31 N/A 17.49 08/01/2011
R 1000 Index 0.64 2.05 2.05 19.25 22.41 14.75 21.73 7.80 33.11 16.43 1.50 17.65
NMSIC US Large Cap Enhanced Index Pool 544,491,371 2.84 -0.01 1.66 1.66 18.34 20.16 N/A N/A N/A 32.03 N/A N/A 24.19 06/01/2012
PanAgora Asset Management 544,491,371 2.84 -0.01 1.66 1.66 18.34 20.16 N/A N/A N/A 32.03 N/A N/A 24.49 06/01/2012
R 1000 Index 0.64 2.05 2.05 19.25 22.41 14.75 21.73 7.80 33.11 16.43 1.50 24.81
NMSIC US Small/Mid Cap Equity Composite 996,728,202 5.20 0.00 3.40 3.40 24.69 31.52 N/A N/A N/A 42.39 14.00 N/A 14.16 05/01/2011
R 2500 Index -0.36 2.30 2.30 21.25 24.01 13.95 25.33 9.43 36.80 17.88 -2.51 13.26
NMSIC US Small/Mid Cap Active Pool 698,555,843 3.65 -0.14 3.55 3.55 24.90 33.28 15.30 24.15 9.58 43.97 13.70 -2.65 9.24 11/01/1998
Seizert Capital Partners 239,140,929 1.25 0.49 2.38 2.38 24.79 34.72 N/A N/A N/A 49.44 22.61 N/A 32.26 01/01/2012
R Mid Cap Index -0.27 3.53 3.53 20.85 23.51 14.39 25.55 10.05 34.76 17.28 -1.55 24.46
Donald Smith & Company 219,516,311 1.15 1.35 8.17 8.17 29.65 31.51 N/A N/A N/A 32.42 19.90 N/A 27.18 01/01/2012
R 2000 Value Index 1.24 1.78 1.78 19.69 22.65 12.74 23.33 8.07 34.52 18.05 -5.50 23.79
Cortina Asset Management 239,898,603 1.25 -2.07 0.75 0.75 20.57 32.63 N/A N/A N/A 49.08 7.72 N/A 23.85 01/01/2012
R 2000 Growth Index -2.46 0.48 0.48 22.61 27.19 13.61 25.24 8.87 43.30 14.59 -2.91 24.93
NMSIC US Small/Mid Cap Index Pool 91,243,715 0.48 -0.72 2.73 2.73 22.56 25.41 N/A N/A N/A 33.79 N/A N/A 28.97 01/01/2013
NT Extended Equity Market Index Fund 91,243,715 0.48 -0.72 2.73 2.73 22.56 25.41 N/A N/A N/A 33.79 N/A N/A 28.97 01/01/2013
R 2500 Index -0.36 2.30 2.30 21.25 24.01 13.95 25.33 9.43 36.80 17.88 -2.51 30.85
Asset Allocation & Performance - Composites & Managers
different methodologies. Since Inception date shown represents the first full month following initial funding. Fiscal year ends June 30.
Page 8
Allocation
Market
Value ($)
%
Performance (%)
MTD QTD CYTD FYTD
1
Year
3
Years
5
Years
10
Years
2013 2012 2011
Since
Incep.
Inception
Date
NMSIC US Small/Mid Cap Enhanced Index Pool 206,928,644 1.08 0.80 3.18 3.18 25.21 28.61 N/A N/A N/A 40.57 N/A N/A 35.45 12/01/2012
BlackRock Alpha Tilts 206,899,283 1.08 0.80 3.19 3.19 25.21 28.62 N/A N/A N/A 40.59 N/A N/A 25.46 02/01/2012
R 2000 Index -0.68 1.12 1.12 21.16 24.90 13.18 24.31 8.53 38.82 16.34 -4.18 21.52
Non-US Equity
NMSIC Non-US Equity Composite 2,660,237,205 13.89 1.17 -0.62 -0.62 11.84 7.57 1.87 15.49 7.49 10.88 16.27 -14.99 6.05 05/01/1999
Non-US Equity Custom Index 0.85 0.25 0.25 14.07 9.67 3.16 15.53 8.11 12.03 17.79 -14.54 6.38
NMSIC Non-US Developed Markets Composite 1,370,424,639 7.16 -0.10 0.35 0.35 17.65 16.59 7.29 15.76 6.18 22.22 17.61 -11.38 4.68 05/01/1999
MSCI EAFE Index (Net) -0.64 0.66 0.66 18.72 17.56 7.21 16.02 6.53 22.78 17.32 -12.14 4.23
NMSIC Non-US Developed Markets Active Pool 1,248,908,395 6.52 -0.05 0.37 0.37 N/A N/A N/A N/A N/A N/A N/A N/A 12.55 09/01/2013
LSV Int'l Large Cap Value 278,030,456 1.45 0.58 0.83 0.83 N/A N/A N/A N/A N/A N/A N/A N/A 14.26 09/01/2013
MSCI ACW Ex US Value Index (Net) 0.44 0.71 0.71 17.61 13.80 4.01 15.80 7.27 15.04 16.97 -13.20 13.33
T. Rowe Price Int'l Core 344,192,866 1.80 -0.61 -0.09 -0.09 N/A N/A N/A N/A N/A N/A N/A N/A 14.72 09/01/2013
Schroder Int'l Alpha 4,934 0.00 0.03 -8.48 -8.48 N/A N/A N/A N/A N/A N/A N/A N/A -1.78 09/01/2013
Russell Transition Mgmt Non-US Developed 95,583 0.00 1.85 4.98 4.98 N/A N/A N/A N/A N/A N/A N/A N/A -21.67 09/01/2013
MFS Int'l Large Cap Growth 341,042,886 1.78 -0.14 -0.78 -0.78 N/A N/A N/A N/A N/A N/A N/A N/A 3.24 10/01/2013
MSCI ACW Ex US Growth Index (Net) 0.07 0.30 0.30 14.25 10.84 4.27 15.22 6.93 15.49 16.67 -14.21 4.98
Templeton Int'l Small Cap Equity 285,541,670 1.49 0.12 1.86 1.86 N/A N/A N/A N/A N/A N/A N/A N/A 7.13 10/01/2013
MSCI ACW Ex US Sm Cap Index (Net) 0.13 3.47 3.47 21.66 16.28 5.52 21.18 9.31 19.73 18.52 -18.50 8.26
NMSIC Non-US Developed Markets Index Pool 121,516,245 0.63 -0.58 0.15 0.15 17.74 16.69 7.32 15.78 6.19 22.56 17.61 -11.38 4.69 05/01/1999
Alliance Bernstein MSCI EAFE Int'l Index 120,940,665 0.63 -0.58 0.15 0.15 17.78 16.72 7.29 16.11 6.55 22.59 17.53 -11.44 6.21 06/01/1998
NMSIC Non-US Emerging Markets Composite 1,289,812,566 6.73 2.56 -1.63 -1.63 5.02 -3.69 -6.08 13.87 10.10 -3.55 14.10 -21.95 9.53 05/01/1999
MSCI Emg Mkts Index (Net) 3.07 -0.43 -0.43 7.24 -1.43 -2.86 14.48 10.11 -2.60 18.23 -18.42 9.21
NMSIC Non-US Emerging Markets Active Pool 772,633,140 4.03 2.38 -2.25 -2.25 N/A N/A N/A N/A N/A N/A N/A N/A 5.44 09/01/2013
BlackRock Emg Mkts Opp Fund 263,892,277 1.38 2.59 -1.97 -1.97 N/A N/A N/A N/A N/A N/A N/A N/A -0.15 10/01/2013
DuPont Capital Management 507,352,226 2.65 2.27 -2.40 -2.40 N/A N/A N/A N/A N/A N/A N/A N/A 4.89 09/01/2013
SSGM Transition Mgmt Non-US Emerging 1,388,637 0.01 0.26 0.67 0.67 N/A N/A N/A N/A N/A N/A N/A N/A 21.18 09/01/2013
Page 9
Allocation
Market
Value ($)
%
Performance (%)
MTD QTD CYTD FYTD
1
Year
3
Years
5
Years
10
Years
2013 2012 2011
Since
Incep.
Inception
Date
NMSIC Non-US Emerging Markets Index Pool 517,179,426 2.70 2.83 -0.69 -0.69 7.05 -1.83 -5.48 14.31 10.31 -2.61 14.10 -21.95 9.67 05/01/1999
Alliance Bernstein Emerging Markets Index 517,179,426 2.70 2.83 -0.68 -0.68 7.05 -1.82 N/A N/A N/A -2.61 N/A N/A 1.97 11/01/2012
Fixed Income
NMSIC Fixed Income Composite 4,390,878,898 22.93 0.20 2.38 2.38 4.81 2.76 6.76 9.42 4.24 1.74 12.78 6.65 5.48 05/01/1999
Fixed Income Custom Index -0.03 1.79 1.79 2.20 0.32 2.07 4.86 1.42 -1.41 0.69 6.25 3.34
NMSIC US Core Bonds Pool 2,952,253,615 15.42 0.01 2.51 2.51 4.60 1.40 5.86 5.79 5.07 -0.34 11.29 4.92 5.89 05/01/1999
Barclays US Agg Bond Index -0.17 1.84 1.84 2.28 -0.10 3.75 4.80 4.46 -2.02 4.21 7.84 5.41
PIMCO Barclays US Universal 1,249,535,877 6.52 -0.23 2.01 2.01 3.43 0.34 4.86 N/A N/A -0.69 11.44 N/A 4.86 04/01/2011
Prudential Barclays US Universal 850,104,087 4.44 0.06 2.68 2.68 5.70 2.64 6.96 N/A N/A 0.77 11.23 N/A 6.96 04/01/2011
Loomis Sayles Barclays US Universal 851,740,467 4.45 0.30 3.08 3.08 5.43 1.89 6.35 N/A N/A -0.84 10.77 N/A 6.35 04/01/2011
Barclays US Unv Bond Index -0.09 1.95 1.95 2.94 0.51 4.23 5.74 4.78 -1.35 5.53 7.40 4.23
NMSIC Credit & Structured Finance Pool 949,501,935 4.96 0.90 2.85 2.85 6.11 9.87 11.60 29.89 N/A 11.61 19.67 16.03 2.11 04/01/2006
C&SF Primary Benchmark 0.30 2.15 2.15 2.23 2.82 -4.66 5.01 N/A 1.45 -12.07 -2.18 N/A
C&SF Secondary Benchmark 0.22 2.41 2.41 2.49 3.09 -4.58 5.07 N/A 1.45 -12.07 -2.18 N/A
NMSIC Unconstrained Fixed Income Pool 489,123,347 2.55 -0.03 0.72 0.72 N/A N/A N/A N/A N/A N/A N/A N/A 0.68 12/01/2013
PIMCO Unconstrained 251,965,491 1.32 -0.22 0.89 0.89 N/A N/A N/A N/A N/A N/A N/A N/A 0.59 12/01/2013
Loomis Sayles Unconstrained 202,157,004 1.06 0.20 0.64 0.64 N/A N/A N/A N/A N/A N/A N/A N/A 0.93 12/01/2013
Cash Unconstrained 35,000,853 0.18 0.00 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0.00 02/01/2014
3 Month LIBOR + 2.5% 0.23 0.68 0.68 2.07 2.78 2.86 2.93 4.65 2.79 3.02 2.78 0.45
NMSIC Cash Equivalent Composite 61,638,976 0.32 0.00 0.19 0.19 0.20 0.54 1.17 0.88 2.43 1.06 0.00 2.52 4.09 07/01/1988
BofA ML 3 Mo US T-Bill Index 0.00 0.01 0.01 0.05 0.07 0.08 0.12 1.65 0.07 0.11 0.10 3.70
Absolute Return
NMSIC Absolute Return Composite 1,267,357,820 6.62 -0.18 1.56 1.56 6.97 8.49 4.19 5.88 N/A 10.68 6.50 -3.92 2.76 09/01/2005
Mariner Matador, LLC 446,583,682 2.33 -0.06 1.82 1.82 8.48 11.14 5.16 5.87 N/A 14.75 6.01 -5.34 3.99 10/01/2005
AAM High Desert Fund 414,675,538 2.17 -0.55 1.29 1.29 8.35 9.33 5.86 N/A N/A 12.83 10.31 -3.98 5.87 12/01/2010
Crestline Enchantment Fund Class A 351,429,171 1.83 0.10 1.79 1.79 5.79 7.05 2.92 5.43 N/A 7.16 3.84 -1.52 3.30 10/01/2005
Crestline Enchantment Fund Class B 32,402,838 0.17 0.00 0.00 0.00 -3.69 -2.31 -0.48 3.14 N/A -2.04 3.54 0.71 0.13 06/01/2006
Crestline Offshore Recovery 8,392,345 0.04 0.00 -0.16 -0.16 -3.94 -7.56 -1.63 14.96 N/A -5.50 5.35 -3.07 14.27 02/01/2009
Austin Capital Safe Harbor QP Fund 7,582,382 0.04 0.00 -0.37 -0.37 -20.63 -21.96 -12.64 -7.41 N/A -21.36 -2.27 -16.86 -4.12 10/01/2005
CT Preferred Investors Management LLC 3,741,985 0.02 0.00 0.00 0.00 0.10 0.24 0.59 3.20 N/A -2.12 4.61 0.21 -0.91 11/01/2005
ARS Pool (Cash Account) 2,549,880 0.01 0.00 0.00 0.00 0.01 0.01 0.37 0.21 N/A 1.11 0.00 0.00 1.74 09/01/2005
Page 10
Allocation
Market
Value ($)
%
Performance (%)
MTD QTD CYTD FYTD
1
Year
3
Years
5
Years
10
Years
2013 2012 2011
Since
Incep.
Inception
Date
HFRI FOF Comp Index -0.77 0.45 0.45 5.87 5.92 2.34 4.89 3.10 8.96 4.79 -5.72 2.78
Private Equity
NMSIC Private Equity Composite (Ex. State) 1,605,316,126 8.38 4.79 4.90 4.90 12.37 15.93 10.85 8.08 11.68 12.94 14.86 10.03 4.07 06/01/2001
Private Equity Pooled Funds 1,602,565,717 8.37 4.80 4.91 4.91 12.39 15.96 N/A N/A N/A 12.95 16.22 N/A 10.90 07/01/2011
80/20 Cambridge PE Index (Lagged 1 Qtr) 0.00 0.00 0.00 8.77 13.22 12.25 13.48 13.06 16.62 14.12 15.20 11.47
Venture Econ All Prvt Eq Index (Lagged 1 Qtr) 7.33 7.33 7.33 15.24 20.84 14.50 15.51 13.11 16.57 14.34 12.33 13.71
Real Estate
Townsend Reported Real Estate 1,082,589,554 5.65 3.80 3.80 3.80 9.80 12.34 10.26 1.93 N/A 10.50 9.63 10.34 2.25 10/01/2004
NCREIF ODCE Index (Net) (Lagged 1 Qtr) 2.94 2.94 2.94 10.21 12.90 12.53 2.71 6.16 11.97 10.47 17.18 5.93
NCREIF/Townsend Wtd Benchmark (Lagged 1 Qtr) 3.00 3.00 3.00 9.91 12.35 12.28 2.65 N/A 12.07 10.46 17.01 6.79
Real Return
NMSIC Real Return 753,944,805 3.94 1.13 2.14 2.14 5.26 7.39 N/A N/A N/A 8.40 N/A N/A 7.82 06/01/2012
Real Return Custom Index 0.44 3.20 3.20 4.74 0.05 1.82 4.68 4.78 -2.72 4.90 2.77 2.80
ETI
NMSIC Economically Targeted Investments 37,258,768 0.19 -1.20 -1.35 -1.35 -2.44 -2.63 -1.56 -2.14 -1.15 -1.15 -0.32 -2.12 -1.82 07/01/1998
BofA ML 3 Mo US T-Bill Index 0.00 0.01 0.01 0.05 0.07 0.08 0.12 1.65 0.07 0.11 0.10 2.38
Severance Tax State PE Program 221,292,663 1.16 2.41 2.34 2.34 11.83 10.44 7.76 2.66 -0.44 6.85 13.11 11.39 -5.07 08/01/2001
Cambridge VC Index (Lagged 1 Qtr) 0.00 0.00 0.00 11.04 13.84 11.32 10.09 8.48 15.15 7.54 20.66 0.12
Venture Econ All Prvt Eq Index (Lagged 1 Qtr) 7.33 7.33 7.33 15.24 20.84 14.50 15.51 13.11 16.57 14.34 12.33 9.35
NMSIC Total Fund Composite 19,151,457,842 100.00 0.91 2.02 2.02 12.01 13.04 8.57 13.02 6.61 16.26 14.26 -0.93 5.00 01/01/2000
Page 11
NMSIC Total Fund - Schedule of Investable Assets
Allocation
Market
Value ($)
%
Perf. (%)
QTD
1
Year
Loomis Sayles Barclays US Universal 851,740,467 4.45 3.08 1.89
NMSIC Credit & Structured Finance Pool 949,501,935 4.96 2.85 9.87
NMSIC Unconstrained Fixed Income Pool 489,123,347 2.55 0.72 N/A
NMSIC Cash Equivalent Composite 61,638,976 0.32 0.19 0.54
NMSIC Economically Targeted Inv. 37,258,768 0.19 -1.35 -2.63
SIC Managed Core Bonds Fund 873,184 0.00 0.00 0.01
NMSIC Absolute Return Composite 1,267,357,820 6.62 1.56 8.49
Mariner Matador, LLC 446,583,682 2.33 1.82 11.14
AAM High Desert Fund 414,675,538 2.17 1.29 9.33
Crestline Enchantment Fund Class A 351,429,171 1.83 1.79 7.05
Crestline Enchantment Fund Class B 32,402,838 0.17 0.00 -2.31
Crestline Offshore Recovery 8,392,345 0.04 -0.16 -7.56
Austin Capital Safe Harbor QP Fund 7,582,382 0.04 -0.37 -21.96
CT Preferred Investors Management LLC 3,741,985 0.02 0.00 0.24
ARS Pool (Cash Account) 2,549,880 0.01 0.00 0.01
NMSIC Private Equity Composite 1,826,608,789 9.54 4.59 15.29
Townsend Reported Real Estate 1,082,589,554 5.65 3.80 12.34
NMSIC Real Return 753,944,805 3.94 2.14 7.39
Waterfall Eden Fund, LP 167,548,713 0.87 3.44 N/A
ING Real Return 154,705,573 0.81 1.13 N/A
Credit Suisse Bank Loan 129,119,996 0.67 1.19 N/A
J.P. Morgan Infrastructure Partners 67,691,343 0.35 7.36 N/A
Real Return Pool (Cash Account) 58,505,940 0.31 0.00 0.01
Natural Gas Partners X, L.P. 44,248,173 0.23 -1.12 11.85
EIG Energy Fund XV 38,736,118 0.20 0.21 10.73
Global Infrastructure Partners II 30,286,303 0.16 7.66 30.59
Brookfield Global Timber V 19,779,936 0.10 -0.38 N/A
Brookfield Infrastructure II 12,729,939 0.07 -1.64 N/A
Brookfield Capital Partners III 11,816,072 0.06 14.56 19.99
EIG Energy Fund XVI 9,038,104 0.05 -14.50 N/A
EnCap Investments, L.P. 7,667,123 0.04 8.01 -14.23
Alterna II 2,071,456 0.01 -24.08 N/A
Allocation
Market
Value ($)
%
Perf. (%)
QTD
1
Year
NMSIC Total Fund Composite 19,151,457,842 100.00 2.02 13.04
NMSIC US Equity Composite 6,910,520,290 36.08 1.84 23.52
NT Russell 1000 Index Fund 2,910,433,936 15.20 2.03 22.41
Wellington Management Company 758,801,754 3.96 2.93 19.50
J.P. Morgan Asset Management 751,173,696 3.92 -1.17 24.32
Brown Brothers Harriman 604,265,770 3.16 2.04 17.76
PanAgora Asset Management 544,491,371 2.84 1.66 20.16
T. Rowe Price LC Growth 344,118,932 1.80 0.22 34.25
Cortina Asset Management 239,898,603 1.25 0.75 32.63
Seizert Capital Partners 239,140,929 1.25 2.38 34.72
Donald Smith & Company 219,516,311 1.15 8.17 31.51
BlackRock Alpha Tilts 206,899,283 1.08 3.19 28.62
NT Extended Equity Market Index Fund 91,243,715 0.48 2.73 25.41
SIC Managed Large Cap Index 495,838 0.00 5.96 7.23
BlackRock Transition 29,361 0.00 -13.69 -8.07
Northern Trust Transition 10,791 0.00 3.71 6.85
NMSIC Non-US Equity Composite 2,660,237,205 13.89 -0.62 7.57
Alliance Bernstein Emerging Markets Index 517,179,426 2.70 -0.68 -1.82
DuPont Capital Management 507,352,226 2.65 -2.40 N/A
T. Rowe Price Int'l Core 344,192,866 1.80 -0.09 N/A
MFS Int'l Large Cap Growth 341,042,886 1.78 -0.78 N/A
Templeton Int'l Small Cap Equity 285,541,670 1.49 1.86 N/A
LSV Int'l Large Cap Value 278,030,456 1.45 0.83 N/A
BlackRock Emg Mkts Opp Fund 263,892,277 1.38 -1.97 N/A
Alliance Bernstein MSCI EAFE Int'l Index 120,940,665 0.63 0.15 16.72
SSGM Transition Mgmt Non-US Emerging 1,388,637 0.01 0.67 N/A
Reclaims (Jarislowksy Fraser) 575,580 0.00 0.03 20.14
Russell Transition Mgmt Non-US Developed 95,583 0.00 4.98 N/A
Schroder Int'l Alpha 4,934 0.00 -8.48 N/A
NMSIC Fixed Income Composite 4,390,878,898 22.93 2.38 2.76
PIMCO Barclays US Universal 1,249,535,877 6.52 2.01 0.34
Prudential Barclays US Universal 850,104,087 4.44 2.68 2.64
Periods Ending
Beginning
Market Value ($)
Net
Cash Flow ($)
Gain/Loss ($)
Ending
Market Value ($)
%Return
FYTD 17,094,085,920 4,854,507 2,052,517,415 19,151,457,842 12.01
Asset Allocation, Performance & Schedule of Investable Assets
Allocations shown may not sum up to 100% exactly due to rounding. Performance shown is gross of fees, except for Credit & Structured Finance, Absolute Return, Real Estate,
Real Return, and Private Equity, which are net of fees. Market values and performance are preliminary and subject to change. RVK endorses GIPS and calculates performance
for composites and investment managers using different methodologies. Fiscal year ends June 30.
Page 12
Capital Markets Review
3 Yr 5 Yr 7 Yr 10 Yr 20 Yr 30 Yr
Treasury Yield Curve 03/31/14 02/28/14 03/31/13 03/31/11

Market Indicators 03/31/14 02/28/14 03/31/13 20 Yr 40 Yr 3 Month 0.03% 0.05% 0.07% 0.09%
Federal Funds Rate 0.06% 0.06% 0.13% 3.06% 5.68% 6 Month 0.05% 0.07% 0.10% 0.17%
Breakeven Inflation - 1 Year 1.79% 2.02% 2.32% 1.17% 1.17% 1 Year 0.11% 0.10% 0.12% 0.27%
Barclays US Agg Bond Index - Yield 2.39% 2.28% 1.86% 4.98% 5.66% 10 Year 2.72% 2.65% 1.85% 3.47%
Barclays US Agg Bond Index - OAS 0.44% 0.44% 0.56% 0.70% 0.69% 20 Year 3.31% 3.31% 2.71% 4.29%
Barclays US Agg Credit Index - OAS 1.03% 1.06% 1.30% 1.56% 1.54% 30 Year 3.56% 3.58% 3.10% 4.51%
Barclays US Corp: HY Index - OAS 3.58% 3.63% 4.57% 5.90% 5.90%
Capacity Utilization 79.20% 78.80% 78.00% 78.90% 79.80% Market Performance MTD QTD CYTD 1 Yr 3 Yr 5 Yr 10 Yr
Unemployment Rate 6.70% 6.70% 7.50% 6.00% 6.50% S&P 500 (Cap Wtd) 0.84 1.81 1.81 21.86 14.66 21.16 7.42
PMI - Manufacturing 53.70% 53.20% 51.50% 52.10% 51.70% R 2000 -0.68 1.12 1.12 24.90 13.18 24.31 8.53
Baltic Dry Index - Shipping 1,362 1,258 910 1,619 1,443 MSCI EAFE (Net) -0.64 0.66 0.66 17.56 7.21 16.02 6.53
Consumer Conf (Conf Board) 82.30 78.30 61.90 93.49 90.91 MSCI EAFE SC (Net) -0.53 3.36 3.36 23.26 9.40 21.70 8.61
CPI YoY (Headline) 1.50% 1.10% 1.50% 2.40% 4.20% MSCI EM (Net) 3.07 -0.43 -0.43 -1.43 -2.86 14.48 10.11
CPI YoY (Core) 1.70% 1.60% 1.90% 2.20% 4.20% Barclays US Agg Bond -0.17 1.84 1.84 -0.10 3.75 4.80 4.46
PPI YoY 1.70% 1.30% 1.10% 2.30% 3.80% BofA ML 3 Mo US T-Bill 0.00 0.01 0.01 0.07 0.08 0.12 1.65
M2 YoY 6.10% 6.40% 7.40% 5.90% 6.60% NCREIF ODCE (Gross) N/A 2.47 2.47 13.71 13.04 7.30 7.17
US Dollar Total Weighted Index 76.86 76.77 76.25 86.60 94.47 Wilshire US REIT 0.93 10.13 10.13 4.42 10.52 29.24 8.19
WTI Crude Oil per Barrel $102 $103 $97 $51 $40 HFN FOF Multi-Strat -0.65 0.76 0.76 6.34 2.62 4.54 2.88
Gold Spot per Oz $1,284 $1,326 $1,597 $331 $341 DJ -UBS Cmdty (TR) 0.41 6.99 6.99 -2.10 -7.37 4.24 0.43
All datacourtesy of Bloomberg Professional Service. Performanceis annualized for periods greater than oneyear.
20- and 40-year averageGold spot prices areadjusted for inflation. CPI figures areseasonally adjusted.
NCREIF performanceis reported quarterly; MTD and QTD returns areshown as "N/A" on interim-quarter months.
Performancefor theHFN FOF Multi-Strat Index is preliminary and subject to change.
Treasury Yield Curve
Crude oil's price fell by 0.98% during the month but has increased by 4.47% over one year.
General Market Commentary
Equity markets posted mixed returns in March as the S&P 500 (Cap Wtd) Index returned 0.84% and the MSCI
EAFE (Net) Index returned -0.64%. Emerging markets returned 3.07% as measured by the MSCI EM (Net)
Index.
The Barclays US Aggregate Bond Index returned -0.17% in March, outperforming the Barclays US Treasury
return of -0.41%, as measured by the Barclays US Treasury Intermediate TermIndex. International fixed
income markets returned -0.02%, as measured by the Citi Non-US World Government Bond Index.
Public real estate, as measured by the Wilshire US REIT Index, returned 0.93% in March and 29.24% over the
trailing five-year period.
The Venture Economics All Private Equity Index returned 17.69% for the trailing one-year period and 10.38%
for the trailing five-year period ending September 2013.
Absolute return strategies, as measured by the HFN FOF Multi-Strat Index, returned -0.65% for the month and
6.34% over the trailing one-year period.
Federal Reserve chair J anet Yellen addressed the subpar U.S. job market, reassuring investors that interest
rates would be kept low for some time after the Feds monthly bond purchases are phased out, which most
expect by the end of 2014.
Residents of Crimea voted overwhelmingly in favor of joining Russia, merely days after its local parliament
called for a referendumdecried foul by the West. Russia incurred sanctions on select officials, downward
pressure on the ruble and further decreases in foreign investment.
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
3/31/2014 2/28/2014 3/28/2013 3/31/2011
Page 13
Performance Related Comments
Performance shown is gross of fees unless otherwise noted. Fiscal year ends on June 30th.
Performance is annualized for periods greater than one year.
Absolute Return market values are lagged 1 month and provided by J.P. Morgan. Performance for Absolute Return is preliminary and shown as of the most current month end.
Historical performance for Crestline Enchantment Fund Class A shares prior to January 2011 consists of Crestline Partners LP. Class B shares before this date consist of Vintage Classic LLC.
Performance for Mariner Matador, LLC prior to August 2008 consists of Mariner Select LP.
Real Estate, Private Equity, and Real Return investments assume a 0.00% return during interim months. Real Estate and Private Equity investments are lagged 1 quarter.
Since Inception performance shown for the HFRI FOF Comp Index is as of October 1, 2005.
Indices show N/A for since inception returns when the fund contains more history than the corresponding benchmark.
Since Inception dates reflect first month of reliable and verifiable data and may not reflect the actual full month following initial funding.
RVK began calculating performance in May 2011 using data provided by J.P. Morgan. Historical performance prior to this date was provided by NEPC.
PIMCO Unconstrained, Loomis Sayles Unconstrained, and Brookfield Infrastructure II were funded in November 2013.
CustomIndex Comments
Land Grant Policy Index is based on the target allocation and currently consists of 30% Russell 1000 Index, 5% Russell 2500 Index, 9% MSCI EAFE Index (Net), 6% MSCI Emerging Markets
Index (Net), 14% Barclays US Aggregate Bond Index, 6% Credit and Structure Finance Composite, 7% HFRI FOF Composite Index (Lagged 1 Month), 10% 80/20 Cambridge Private Equity
Index (Lagged 1 Quarter), 8% NCREIF ODCE Index (Net) (Lagged 1 Quarter), and 5% Real Return Custom Index.
Severance Tax Policy Index is based on the target allocation and currently consists of 30% Russell 1000 Index, 5% Russell 2500 Index, 9% MSCI EAFE Index (Net), 6% MSCI Emerging Markets
Index (Net), 14% Barclays US Aggregate Bond Index, 6% Credit and Structure Finance Composite, 7% HFRI FOF Composite Index (Lagged 1 Month), 10% 80/20 Cambridge Private Equity
Index (Lagged 1 Quarter), 8% NCREIF ODCE Index (Net) (Lagged 1 Quarter), and 5% Real Return Custom Index.
Global Equity Custom Index consists of 70% Russell 3000 Index, 18% MSCI EAFE Index (Net), 12% MSCI Emg Mkts Index (Net).
Non-US Equity Custom Index consists of 60% MSCI EAFE Index (Net) and 40% MSCI Emg Mkts Index (Net).
Fixed Income Custom Index consists of the Barclays US Agg Bond Index prior to March 2007 and is calculated using beginning of month weights applied to each corresponding primary
benchmark return thereafter.
C&SF Primary Benchmark consists of 45% ABX.HE.BBB-06-1, 45% S&P LTSA 1100 Names Index, and 10% CDX 15 (Lagged 1 Month) through December 31, 2013, and 50% BofA ML US
High Yield Master II Index, 50% Credit Suisse Leveraged Loan Index thereafter.
C&SF Secondary Benchmark consists of 45% ABX.HE.BBB-06-1, 45% S&P LTSA 1100 Names Index, and 10% CDX 15 (Lagged 1 Month) through December 31, 2013, and 33% BofA ML US
High Yield Master II Index, 33% Credit Suisse Leveraged Loan Index, and 33% Barclays US Corporate Investment Grade Index thereafter.
80/20 Cambridge Private Equity Index is lagged 1 quarter and is a blend of 80% Cambridge Private Equity Index and 20% Cambridge Venture Capital Index. Q1 2014 performance is not yet
available, so it assumes a 0.00% return.
Venture Economics All Private Equity Index is lagged 1 quarter.
NCREIF/Townsend Weighted Benchmark is calculated by Townsend, lagged 1 quarter, and is a weighted benchmark based on target allocations to each real estate sector in the universe.
Real Return Custom Index consists of 35% Barclays US Treasury: US TIPS Index, 25% Dow-Jones UBS Commodity Index (TR), 20% NCREIF Timberland Index, and 20% CPI + 3%.
Absolute Return Strategies
Fund of Hedge Funds - Event Driven
Mariner Matador, LLC
Fund of Hedge Funds - Equity Hedge
AAM High Desert Fund
Fund of Hedge Funds - Relative Value
Crestline Enchantment Fund Class A
Liquidation
Crestline Enchantment Fund Class B
Crestline Offshore Recovery
Austin Capital Safe Harbor QP Fund
CT Preferred Investors Management LLC
Addendum
Page 14
Public Funds $1 Billion or Larger Performance Analysis
March 31, 2014
Wilshire TUCS(TM)
Trust Universe Comparison Service
The Market Environment
March 31, 2014

Global stock markets stumbled slightly out of the gate in the first quarter of 2014,
but still managed to post gains by quarter-end. The year started with signs of a
manufacturing slowdown in China and increased volatility in emerging market
currencies, as well as an unusually harsh winter that held back retail sales and
residential real estate sales activity in the U.S. This unnerving market environment
drove many investors into safe-haven assets including gold and U.S. Treasury paper.
However, the U.S. economy still managed to expand, with fourth quarter 2013
growth in real Gross Domestic Product coming in at a 2.6% annual rate, albeit down
from the finalized 4.1% rate in the third quarter. Janet Yellen assumed the position of
chairperson of the Federal Reserve with the March meeting; her initial comments
suggested a possible rate hike in mid-2015, although subsequent statements seemed
to soften that assertion. At the end of the quarter, the conflict between Russia and
Ukraine over control of the Crimea loomed large over capital markets; oil and gas
prices, already trending upward over the quarter in the face of heightened demand,
reversed a retreat from near-term peaks and ended the quarter with another price
rally. Consumer-level inflation in the U.S. jumped in 2014; the Consumer Price
Index, All Urban Consumers (CPI-U) rose 1.39% in the first quarter, again reversing
the 0.47% price retreat seen in the fourth quarter of 2013. The ten-year breakeven
inflation rate ended the quarter at 2.23%, a scant basis point lower than its level as of
year-end 2013.

The U.S. stock market, represented by the Wilshire 5000 Total Market IndexSM,
rose 2.04% in the first quarter of 2013, besting the 1.81% return of the Standard &
Poors 500 Index and marking the seventh consecutive quarter of positive
performance for U.S. equities. Small-capitalization stocks outpaced larger-cap issues
in the first quarter, with the Wilshire US Small-Cap IndexSM returning 2.57%
versus the 1.95% return of the Wilshire US Large-Cap IndexSM. Micro-cap stocks
yielded even better performance, with the Wilshire US Micro-Cap IndexSM posting
a strong 4.46% gain. Reflecting investor rotation into less-volatile stocks, value-
oriented equities outperformed growth-oriented issues (Wilshire US Large-Cap
Value IndexSM, 2.70%; Wilshire US Large-Cap Growth IndexSM, 1.04%; Wilshire
US Small-Cap Value IndexSM, 2.93%; Wilshire US Small-Cap Growth IndexSM,
2.16%). Reinforcing the theme of markets favoring value, the strongest economic
sectors of the Wilshire 5000 during the first quarter were Utilities (9.55%), Health
Care (5.87%) and Financials (3.14%); the weakest performance was posted by
Consumer Discretionary (-2.14%), Telecommunication Services (0.32%) and
Consumer Staples (0.47%) stocks. Public-market real estate stocks staged a
remarkable rally in the first quarter despite the harsh weather plaguing much of the
country, with lower interest rates providing support; the Wilshire U.S. Real Estate
Securities Index returned 9.99% over the quarter, the strongest performers of the
broad stock sectors as well as real assets in general.
Most of the drop in U.S. interest rates occurred in January, with the bellwether 10-
year U.S. Treasury rate dropping from 3.04% to 2.67% from December 31, 2013 to
January 31, 2014; bonds in that maturity remained fairly range-bound for the rest of
the quarter before settling at 2.73% as of March 31, 2014. However, over the quarter
the yield on two-year U.S. Treasuries actually rose six basis points to 0.44%, while
the 30-year U.S. Treasury yield fell 40 bps to 3.56%, resulting in a flatter overall
yield curve, with the short end stubbornly trading at near-zero rates. Unsurprisingly,
long-term Treasury security prices soared while shorter-term paper yielded much
flatter performance (Barclays U.S. Treasury Long, 7.10%; Barclays U.S. Treasury 1-
3 Years, 0.14%). Credit spreads continued to tighten as investors sought yield
anywhere they could find it, be it investment-grade (Barclays U.S. Investment-Grade
Corporate, 2.94%) or high-yield (Barclays U.S. High Yield, 2.98%). Mortgage- and
asset-backed securities also managed to outperform Treasuries (Barclays U.S.
Securitized, 1.55%; Barclays U.S. Treasury, 1.34%), helping the Barclays U.S.
Aggregate achieve a 1.84% return in the first quarter, its strongest performance since
the second quarter of 2012.

Global stock markets dealt with lingering concerns over economic and political
uncertainty, especially in emerging market economies; the turmoil between Russia
and Ukraine late in the quarter exacerbated tensions and drove some investors to sell
stocks and rotate into classic safe-haven assets. However, developed markets
managed flat to slightly-positive performance overall (MSCI EAFE net dividends:
0.28% local currency, 0.66% U.S. dollar). European stocks exhibited stronger
performance than Asia-Pacific equities, as stronger economic growth and attractive
fundamentals brought buyers back into the fold (MSCI Europe, net: 1.82% local,
2.1% USD; MSCI Pacific, net: 4.68% local, 2.51% USD). Despite the events
unfolding in eastern Europe and the considerable drag of a sluggish China, emerging
market stocks ended the quarter with only slight losses, despite gains in March
(MSCI Emerging Markets, net: 0.53% local, 0.43% USD). Developed market
global bonds actually enjoyed somewhat stronger performance than U.S. paper
(Barclays Global Aggregate Ex-US: dollar-hedged, 2.16%; USD terms, 2.79%),
while emerging-market debt lagged slightly behind (Barclays Emerging Markets
Local Currency Government Universal: dollar-hedged, 1.02%; USD terms, 1.68%).
1
Quarter Ending March 31, 2014
1 Quarter 2 Quarters 3 Quarters 1 Year 5 Years 10 Years

Market Index Returns

S&P 500 1.80 12.51 18.41 21.86 21.15 7.42
Wilshire 5000 2.04 12.35 19.13 22.42 21.74 7.91
Dow Jones Industrial -0.15 10.05 12.38 15.65 19.83 7.48
MSCI EAFE (Net) 0.66 6.41 18.72 17.56 16.01 6.53
Citigroup Broad 1.82 1.67 2.25 -0.07 4.55 4.57
Barclays Govt/Credit 1.98 1.94 2.31 -0.26 5.08 4.41
Citigroup World Govt 2.67 1.55 4.48 1.37 3.84 4.23
91-Day Treasury Bill 0.01 0.03 0.05 0.07 0.11 1.65
Consumer Price Index 1.39 0.92 1.03 1.35 2.09 2.33

S & P 500 Sector Performance

Energy 0.79 9.21 14.84 14.41 14.88 12.19
Materials and Services 2.86 13.82 25.55 23.29 17.61 7.67
Industrials 0.14 13.68 23.81 27.29 22.96 7.55
Consumer Discretionary -2.80 7.71 16.10 24.01 26.86 8.06
Consumer Staples 0.50 9.21 10.09 10.65 16.91 8.63
Health Care 5.81 16.52 24.47 29.25 20.05 8.31
Financials 2.61 13.21 16.46 24.91 21.70 -0.76
Information Technology 2.28 15.84 23.51 25.59 20.23 7.15
Telecom 0.47 5.96 1.30 2.32 10.41 5.79
Utilities 10.09 13.17 13.38 10.28 12.53 8.60
Wilshire TUCS(TM)
2
Historical Perspective
Quarter Ending March 31, 2014
Wilshire TUCS(TM)
3
Performance Comparison
Total Returns of Master Trusts - Public : Plans > $1 Billion
Cumulative Periods Ending : March 31, 2014
Percentile Rankings 1 Qtr 2 Qtrs 3 Qtrs 1 Year 2 Years 3 Years 4 Years 5 Years 7 Years 10 Years
5th 3.25 8.47 14.56 15.70 13.16 10.28 11.66 17.09 6.97 8.20
25th 2.42 7.90 13.46 14.06 12.40 9.67 10.90 15.11 5.85 7.43
50th 2.07 7.31 12.30 12.53 11.47 8.99 10.35 13.94 5.42 7.07
75th 1.83 6.31 11.00 10.33 10.08 8.10 9.27 13.22 4.97 6.57
95th 1.41 3.97 6.26 4.22 5.88 5.63 6.88 9.31 4.28 5.58

No. Of Obs 78 77 77 77 76 75 73 72 71 67

LAND GRANT 2.01 (57) 7.22 (53) 11.93 (56) 13.00 (38) 11.38 (53) 8.63 (62) 9.99 (58) 13.16 (75) 5.15 (63) 6.73 (70)
NEW MEXICO SIC 2.02 (57) 7.33 (47) 12.03 (55) 13.06 (38) 11.38 (53) 8.59 (63) 9.90 (63) 12.98 (76) 5.01 (70) 6.60 (71)
SEVERANCE TAX 1.98 (57) 7.31 (50) 11.86 (59) 12.76 (46) 10.97 (56) 8.11 (73) 9.42 (72) 12.49 (83) 4.32 (93) 6.07 (90)
Wilshire TUCS(TM)
4
Total Returns of Master Trusts - Public : Plans > $1 Billion
Consecutive Time Periods: March 31, 2014
Percentile Rankings Mar. 14 Dec. 13 Sep. 13 Jun. 13 Mar. 13 Mar. 14 Mar. 13 Mar. 12 Mar. 11 Mar. 10
5th 3.25 6.03 6.11 1.58 6.51 15.70 12.78 9.71 17.07 43.90
25th 2.42 5.60 5.36 0.82 5.45 14.06 10.95 5.06 15.24 35.81
50th 2.07 5.06 4.65 0.05 4.76 12.53 10.24 4.26 14.22 31.09
75th 1.83 4.24 4.21 -0.53 4.30 10.33 9.32 3.66 12.75 25.63
95th 1.41 1.82 1.79 -2.57 1.79 4.22 7.35 2.65 8.54 16.73

No. Of Obs 78 77 78 78 78 77 77 76 74 73

LAND GRANT 2.01 (57) 5.11 (48) 4.39 (63) 0.96 (16) 4.98 (39) 13.00 (38) 9.77 (67) 3.34 (84) 14.17 (51) 26.76 (66)
NEW MEXICO SIC 2.02 (57) 5.20 (43) 4.38 (64) 0.92 (19) 4.93 (40) 13.06 (38) 9.73 (68) 3.22 (85) 13.93 (55) 26.18 (69)
SEVERANCE TAX 1.98 (57) 5.23 (40) 4.24 (72) 0.80 (25) 4.55 (61) 12.76 (46) 9.20 (76) 2.60 (95) 13.48 (61) 25.66 (73)
Wilshire TUCS(TM)
5
Total Equity Returns of Master Trusts - Public : Plans > $1 Billion
5th 2.27 11.53 19.99 22.85 19.71 14.13 15.79 24.76 7.53 9.38
25th 1.91 10.33 18.80 20.04 16.42 12.08 13.51 20.79 5.40 7.88
50th 1.62 9.42 17.75 18.96 15.69 11.13 12.36 20.01 4.83 7.41
75th 1.40 8.60 17.08 17.02 14.57 9.71 11.50 18.70 4.19 6.83
95th 1.15 6.93 13.08 13.06 12.54 7.98 9.79 17.65 3.15 6.36

No. Of Obs 54 50 50 49 46 45 39 37 32 28

NEW MEXICO SIC 1.15 (95) 9.42 (50) 17.54 (60) 18.88 (54) 14.64 (68) 9.66 (79) 11.48 (77) 18.55 (81) 6.00 (12) 8.03 (17)
Total Equity Custom Be 1.41 (73) 9.65 (37) 17.68 (54) 18.31 (56) 15.27 (56) 10.82 (54) 12.16 (52) 19.90 (52) 5.28 (31) 8.05 (13)
Russell 3000 1.97 (15) 12.27 (1) 19.40 (7) 22.61 (5) 18.53 (5) 14.62 (1) 15.31 (10) 21.93 (15) 6.60 (5) 7.86 (25)
MSCI World Ex US (N) 0.51 (100) 5.30 (99) 15.92 (81) 12.31 (96) 10.32 (99) 4.15 (100) 6.33 (100) 15.52 (100) 1.70 (99) 7.12 (60)
Wilshire TUCS(TM)
6
US Equity Returns of Master Trusts - Public : Plans > $1 Billion
5th 2.89 13.89 23.15 27.42 21.46 18.95 22.03 31.01 8.15 10.54
25th 2.26 12.52 20.08 23.66 18.86 14.85 15.79 22.79 6.84 8.40
50th 1.98 12.07 19.02 22.50 18.11 14.32 15.07 21.55 6.42 7.37
75th 1.68 10.53 17.09 18.96 15.81 12.02 13.15 19.96 4.64 6.73
95th 1.34 6.24 12.73 13.24 12.04 7.30 9.23 15.27 3.58 5.94

No. Of Obs 62 57 57 56 53 52 45 43 36 31

NEW MEXICO SIC 1.85 (66) 12.07 (50) 19.83 (33) 23.52 (30) 17.87 (53) 12.52 (69) 13.83 (70) 20.02 (72) 7.28 (14) 8.50 (18)
Russell 3000 1.97 (50) 12.27 (39) 19.40 (37) 22.61 (46) 18.53 (38) 14.62 (36) 15.31 (40) 21.93 (38) 6.60 (36) 7.86 (31)
Wilshire TUCS(TM)
7
Non-US Equity Returns of Master Trusts - Public : Plans > $1 Billion
5th 2.87 8.77 19.99 19.18 15.90 9.43 15.44 25.32 9.33 12.54
25th 1.21 6.74 17.83 15.26 13.16 6.68 8.71 17.65 3.15 8.74
50th 0.83 6.00 16.58 13.20 11.82 5.72 7.88 16.62 2.43 7.58
75th 0.51 5.50 15.52 11.37 10.72 4.68 7.04 15.59 0.50 6.26
95th -0.24 3.41 9.37 6.11 6.48 1.22 2.54 12.55 -0.82 4.04

No. Of Obs 62 56 56 55 49 49 42 39 33 26

NEW MEXICO SIC -0.62 (99) 3.03 (97) 11.91 (87) 7.62 (89) 6.38 (99) 1.86 (90) 4.62 (89) 15.44 (77) 1.98 (56) 7.47 (54)
MSCI World Ex US (N) 0.51 (75) 5.30 (82) 15.92 (69) 12.31 (61) 10.32 (81) 4.15 (85) 6.33 (87) 15.52 (75) 1.70 (59) 7.12 (54)
Wilshire TUCS(TM)
8
Total Fixed Income Returns of Master Trusts - Public : Plans > $1 Billion
5th 3.31 4.74 7.86 6.64 9.94 8.63 9.02 13.22 8.94 7.70
25th 2.75 3.34 4.83 1.87 4.71 6.50 6.41 9.51 6.45 5.73
50th 2.35 2.89 4.06 0.83 3.53 5.02 5.72 8.13 5.96 5.27
75th 2.04 2.36 3.04 0.21 2.89 4.34 4.96 6.86 5.33 4.81
95th 1.70 1.72 1.29 -0.94 1.50 2.95 4.21 5.23 4.14 4.20

No. Of Obs 57 51 51 50 47 45 37 35 31 27

NEW MEXICO SIC 2.39 (48) 3.83 (17) 4.83 (25) 2.78 (15) 6.72 (13) 6.79 (19) 8.65 (8) 9.54 (22) 4.18 (92) 4.30 (91)
Barclays US Univ Indx 1.95 (78) 2.18 (83) 2.94 (79) 0.51 (66) 2.59 (81) 4.23 (79) 4.60 (81) 5.73 (90) 5.18 (85) 4.78 (75)
Wilshire TUCS(TM)
9
Total Private Equity Returns of Master Trusts - Public : Plans > $1 Billion
5th 7.32 14.64 17.68 21.76 24.15 15.40 17.37 15.88 11.56 15.23
25th 4.88 10.50 13.79 18.54 15.92 14.12 15.26 14.82 10.21 14.46
50th 4.38 8.42 11.62 15.89 14.06 11.82 13.44 12.73 8.43 11.70
75th 2.97 5.71 8.66 10.18 9.88 8.83 10.96 8.73 5.91 9.55
95th 0.14 2.65 3.08 3.25 5.19 -3.05 5.66 5.12 4.33 6.11

No. Of Obs 52 47 46 45 42 39 36 32 27 18

NEW MEXICO SIC 4.59 (38) 9.29 (37) 12.33 (38) 15.29 (52) 13.57 (57) 11.18 (52) 12.62 (55) 7.96 (81) 8.41 (54) 10.30 (68)
Wilshire TUCS(TM)
10
Total Real Estate Returns of Master Trusts - Public : Plans > $1 Billion
5th 10.47 10.27 15.40 15.36 25.16 19.62 23.25 26.34 5.68 11.89
25th 4.54 7.53 9.63 13.29 13.11 13.27 15.02 10.33 2.93 9.72
50th 3.16 6.25 7.80 11.80 11.18 11.09 12.01 4.74 1.22 7.31
75th 1.84 4.99 6.45 10.18 9.23 10.35 10.88 2.48 -0.24 2.87
95th -4.32 0.00 1.35 0.28 2.38 2.50 6.32 -2.11 -4.08 1.79

No. Of Obs 43 43 43 42 40 39 34 31 26 17

NEW MEXICO SIC 3.32 (45) 4.99 (75) 7.37 (60) 12.45 (35) 9.23 (75) 9.53 (85) 6.32 (96) -2.11 (95) -1.09 (83)
NCREIF Property Indx 2.74 (57) 5.34 (62) 8.07 (45) 11.17 (60) 10.84 (55) 11.69 (45) 12.76 (40) 7.89 (37) 5.10 (5) 8.65 (31)
Wilshire RESI 9.99 (8) 9.16 (10) 6.10 (77) 4.61 (91) 9.12 (75) 10.38 (72) 13.83 (37) 29.31 (1) 1.92 (29) 8.21 (37)
Wilshire TUCS(TM)
11
Monthly Investment Summary
For the Month Ending March, 2014

Global financial markets continued the trend of choppy, sideways action in March. Both U.S. and foreign
equities rose less than 1% on the month, in very low-volatility action. Yields on Treasuries rose modestly
in the belly of the curve (2-10yrs) by around 15bps and though credit spreads tightened slightly, the
fixed income markets benchmark showed a 17 bps loss.
Land Grant Permanent Fund (LGPF) and the Severance Tax Permanent Fund (STPF) returns are not
available as of this writing, and nor is the composite finalized, but returns on the month should come in
around a positive 70-90bps. This should be ahead of benchmarks by a few basis points, stretching the
trailing one-year performance premium over the policy benchmark to 74 basis points ahead of
expectations, as we generally expect 50-75bps on average in trailing one-year periods over a cycle with
higher excess return in the weaker periods and less in the stronger periods. Total fund composite is still
in excess of 13% on the year; the three year period has compounded at north of 8.50% and five years
trailing remains above 13% compounded annually. The RVK preliminary monthly flash performance
report for March, 2013 is available.
Portfolio Activity
Portfolio activity in March was again light; primarily funding of capital calls in the Real Return portfolio.

Asset allocation Portfolio weights for both the LGPF and STPF were quite close to the interim policy
targets; with the slowdown and choppiness in the stock market, pressures on rebalancing bands are
minimal.
Strategy selection No changes to strategies in the month.
Active portfolio management Global equity performance backed up relative to the Councils passive
benchmark again in the month, with the trailing one-year premium cycling down to just 20 basis points.
Investment management fees for the global equity portfolio are approximately 30 basis points, and our
over-the-cycle expectation for excess return is 60-90bps. Month-to-month this number can be volatile;
as you recall it was 70bps for the trailing one-year period last month. At issue are the domestic large-
cap growth managers T. Rowe Price and JP Morgan, as discussed below.
The domestic equity portfolio pulled back sharply against the benchmark on the month, losing 21 bps
against a positive 53 basis point return for the Russell 3000 index. On a trailing one-year basis the
portfolio continues to run ahead of the benchmark by approximately 90bps or a little over 3.5x fees, but
recently, the Councils growth managers have taken a downward turn. Staff has been in discussions
with the managers and as of yet remains unconcerned. On the trailing one-year numbers, T. Rowe Price
remains an unexpectedly-high 1,100 basis points ahead of their benchmark and JPMorgan a more
modest 110 basis points.
The small-cap managers resumed their out-performing way in the month, moving ahead by 13bps on
the month, bringing the one-year total to nearly 1,000bps excess return. The international equity
portfolio at long last put up a good month as the emerging markets perked up. On the trailing one-year,
the portfolio lags by a little over 200bps, though perhaps is finally on an improving trend.
While absolute returns are low in fixed income, active management performance remains very good,
showing around 250bps over a barely-positive benchmark in the one year timeframe. Those markets
are changing, however, as the credit cycle ages, and staff and consultant are beginning discussions
regarding strategy and manager line-up as of now with plans for a structure study to be presented to the
Council in September.
Market Environment
Last month in this space we discussed complacency the ongoing need of being continually diligent to
not become complacent in our actions or expectations; the increased risk of complacency after a period
of strong returns and low volatility like weve just come through; and some of the things that we are
doing to avoid becoming complacent and avoid suffering the potential consequences of complacency.
Through not written about here first, we have, in our CIC and Council meetings, also recently discussed
innovation, another timely topic. In summary, with the back-to-back equity market 100-year-floods
in the first decade of the 2000s (the severe market declines of 2000-2001 and 2008-2009) and the 50-
year-low interest rates that presently exist, public fund fiduciaries have challenged themselves and their
investment staffs, consultants and managers to revisit the 60/40 portfolio construction model and to
perhaps build a better mousetrap to address the future. From this challenge has sprung many ideas
some mere re-hash of past strategies or extreme implementations of accepted strategies; some truly
unique; some even radical. Weve mainly concluded that there isnt really a great deal new under the
sun, and of the truly unique innovations, the jury remains out regarding the efficacy of most. Ergo,
adopting untested strategies must be done with much caution -- and perhaps be limited to new ideas
based solidly on tested and proven principles as, generally, we concluded, public funds are funds to be
handled conservatively and not to be broadly experimented with.
Well leave this section with those two summaries this month and with the expectation that this section
of the Monthly Summary will continue to morph from solely a simple recap of the economic and
financial markets scene into one that will center around discussion of broader themes, like the two
above.
Tab 4: State Investment Officers Report (Moise)

A. Investment Matters
1. Current NAV and distributions
2. Investment performance

B. Council Matters
1. June/July SIC & committee meetings:
a. SIC Monday 6/30 @ 2:30pm; & Tuesday, 7/1 @ 9:00am, Cabinet Room
b. Audit Monday 6/30 at 1:00pm, Governors small conference room
c. Governance Friday 6/20 @ 10:00am, teleconference
d. Investment Thursday 6/12 @ 11:00am, SIC offices
e. PEIAC no June, July or August meetings
2. Legislative matters:
a. Constitutional amendment 5 - vote 11/4 strategy update
b. 2015 legislative agenda
Increasing STPF contributions
Updating SIC enabling statute
Liability protections
Council fiduciary responsibilities
3. Strategic plan implementation progress

C. Office Administration
1. Staffing:
a. Sourcing 2 positions accounting & IT
b. Pending compensation-related matters
2. D&O/E&O

D. External Relations:
1. Artesia Rotary May 20, Portales Rotary May 21, Hobbs Rotary May 22 (& editorial boards in each city)
2. Press kit
3. Website
4. SWF Consortium
NEW MEXICO STATE INVESTMENT COUNCIL
DASHBOARD

May 2014

FY CONTRIBUTIONS vs. DISTRIBUTIONS

l

Performance % (as of 3/31/14)
7.5% Target
CYTD 1 yr 3 yr 5 yr 10 yr
LGPF 2.01 12.99 8.63 13.15 6.73
STPF 1.98 12.76 8.11 12.50 6.07
P Pe en nd di in ng g R RF FP Ps s
Real Assets TIPS
Real Assets Currency
Real Assets Commodities
Real Estate - REIT
Real Assets MLP
Fund wide Transition manager

15
6
RFP Chart
Completed
Contract
process
RFPs to be
issued
Active RFP
Mission
To protect and grow the states permanent endowment
funds for current and future generations, through prudent,
professional investment management.
Total Assets
(as of 6/30 of each year)

2007 $16.141,324.154
2008 $15,218,664,865
2009 $11,811,170,294
2010 $12.999,636,673
2011 $15.452,135,573
2012 $15,409,412,731
2013 $17,168,943,863
11.4% increase FY12FY13

Fund Statistics
Current NAV: $19.364 (5/14/14)
LGPF - $13.712B (3/31/14)
STPF - $ 4.506B (3/31/14)

2013 High NAV: $18.618B (12/31/13)
2013 Low NAV: $16.188B (1/2/13)
FY 13 Distributions: $703,019,232 (LG & ST)
FY 13 Contributions: $505,817,455 (LG & ST)
LGPF Contributions LGPF Distributions
2010 $330,275,443 2010 $525,512,604
2011 $411,495,508 2011 $535,903,008
2012 $529,037,726 2012 $553,418,316
2013 $505,817,116 2013 $526,846,548

STPF Contributions STPF Distributions
2010 $3,488,067 2010 $187,072,285
2011 $7,617,058 2011 $184,570,731
2012 $103,888,028 2012 $183,423,504
2013 $339 2013 $176,172,684

$0
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
$600,000,000
$700,000,000
$800,000,000
2010 2011 2012 2013
ST Distributions
LG Distributions
ST Contributions
LG Contributions
3/31/14 TUCS
PERFORMANCE COMPARISION:
Returns (%)
LG ST
Ranking
LG ST
1 qtr 2.01 1.98 57 57
1 yr 13.00 12.76 38 46
3 yrs 8.63 8.11 62 73
5 yrs 13.16 12.49 75 83
10 yrs 6.73 6.07 70 90

LGPF PORTFOLIO STRUCTURE/ASSET ALLOCATION CHANGES

2010 Interim Target Actual 3/31/14 Target
US Eq 45% US Eq 35% US Eq 35.68% US Eq 31%
Intl Eq 15% Intl Eq 15% Intl Eq 13.64% Intl Eq 15%
FI 20% FI 20% FI 22.84% FI 16%
Real Ret 0% Real Ret 5% Real Ret 4.50% Real Ret 10%
Core RE 5% Core RE 8% Core RE 7.18% Core RE 10%
Abs Ret 5% Abs Ret 7% Abs Ret 6.89% Abs Ret 8%
PE 10% PE 10% PE 8.98% PE 10%

RECENT SIC COMMITMENTS
Date Firm Asset Type Commitment
1/28/14 Blackstone Real Estate Partners Asia Real estate $50M
1/28/14 Exeter Industrial Value Fund III Real estate $35M
1/28/14 TPG Asia VI, L.P Private equity $100M
1/28/14 TPG Opportunities Partners III, L.P. Private equity $50M
2/25/14 Vista Equity Partners Fund V, L.P. Private equity $100M
2/25/14 NGP Agribusiness Follow-On Fund, L.P Private equity $50M
3/25/14 EnCap Flatrock Midstream Fund III Real return $25M
3/25/14 FS Equity Partners Vii, L.P. Private equity $75M
3/25/14 NMSIC Co-investment Fund
additional commitment
NM private
equity
$40M
4/22/14 First Reserve Energy Infrastructure
Fund II
Real return $100M

M Ma ay y I It te em ms s o of f I In nt te er re es st t
SIC COMBINED JUNE/JULY MEETING SCHEDULE
Governors Cabinet Room

6/30/2014 7/1/2014
TIME
MONDAY TUESDAY
9:00 AM

INVESTMENT VOTING ITEMS
FIA Timber
Return Target review &
vote

State Land Office report
SIO report
Financial matters
Governance matters

10:00 AM

11:00 AM
12:00 PM

1:00 PM

AUDIT COMMITTEE

2:30 PM

Opening matters - approval of
May minutes, etc.

OTHER INVESTMENT MATTERS
Investment performance report
RVK assumption review
Investment environment
Efficient frontier modeling
PEIAC reporting items

3:00 PM

4:00 PM

BUDGET / STAFF UPDATE:
Total Adjusted Budget FY14: $51,979,550
Actual Expenses YTD: $23,467,784 (4/30/14) Total Obligations: $46,706,563
(4/30/14)

31 authorized FTEs - 24 positions currently filled
Open positions: 1 Administrative, 1 Accounting position, 1 IT

Tab 5 CFO report

1. FY 14 Budget-to-Actual Comparison:
The report provided is for the ten month period ending April 30
th
. No budget shortfalls
are expected through the end of the current fiscal year.
2. Audit Contract:
The draft audit contract and the public accountant (IPA) recommendation was
submitted to OSA on March 21
st
for approval

. The approval process was completed on
May 9
th
.
3. Audit Services Request for Proposal:
A request for proposal for audit services for FY 15 will be started soon although no formal
selection for external auditor can be made until OSA prints its list of approved firms in late
February of 2015.
4. Budget for FY 15:
The budget for FY 15 was submitted by the due date of May 1
st
.

PreparedBy:
BrentShipp
Date:
05/09/14
StateInvestmentCouncil
BUDGETTOACTUALCOMPARISONS
G:\Kerri\Committees\Audit\CopyofSICBudgettoActualComparisonforAprFY14v3(forSIC).xls Page2
B+C= E+F= D-G= H-I=
A B C D E F G H I J
FY13 FY14 FY14 FY14 FY14 FY14 FY14 FY14 FY14 FY14
PRIORYEAR PROJECTED
ACTUAL ORIGINAL BUDGET ADJUSTED EXPENDED ENCUMBERED TOTAL UNOBLIGATED EXPENDITURES BALANCE
DESCRIPTION CATEGORY EXPENSES# BUDGET^ ADJUSTMENTS BUDGET YR-TO-DATE YR-TO-DATE OBLIGATIONS BALANCE TOYREND* AVAILABLE
PersonalServices 200 3,233,514 3,704,700 403,000 4,107,700 3,174,577 - 3,174,577 933,123 591,928 341,195
&EmployeeBenefits
ContractualServices 300 27,754,307 47,412,050 (403,000) 47,009,050 19,730,192 23,164,209 42,894,402 4,114,648 - 4,114,648
OtherOperatingCosts 400 643,452 862,800 - 862,800 563,015 74,570 637,585 225,215 - 225,215
Other 500 - - - - - - - - - -
TOTAL 31,631,273 51,979,550 - 51,979,550 23,467,784 23,238,779 46,706,563 5,272,987 591,928 4,681,059
# PrioryearactualexpensesareYTD.
^ Category200budgetincludes$46,200relatedtoapproved1%salaryincreaseonoriginalbudget.
StateInvestmentCouncil
CategoryTotals
Tenmonthsthrough4/30/2014
Page2

B+C= E+F= H-I=
A B C D E F G H I J
SHARE PRIOR YR PROJECTED
CHARTFIELD CHART ACTUAL ORIGINAL BUDGET ADJUSTED EXPENDED ENCUMB TOTAL UNOBLIGATED EXPENDITURES BALANCE
DESCRIPTION FIELD EXPENSES BUDGET ADJUSTMENTS BUDGET YR-TO-DATE YR-TO-DATE OBLIGATIONS BALANCE TO YR END* AVAILABLE

Exempt Perm Pos-F/T-P/T 520100 775,952 812,000 57,000 869,000 735,055 0 735,055 133,945 133,195 750
Classified Permanent F/T 520300 1,657,051 1,914,000 (79,000) 1,835,000 1,289,189 0 1,289,189 545,811 297,346 248,465
Paid Unused Sick Leave 520600 9,722 10,000 4,700 14,700 8,688 0 8,688 6,012 6,000 12
Overtime & Other Prem. Pay 520700 475 6,000 0 6,000 475 0 475 5,525 5,000 525
Annual/Comp Paid Separ 520800 1,029 1,000 31,300 32,300 27,411 0 27,411 4,889 750 4,139
Group Insurance Prem. 521100 174,390 201,000 0 201,000 151,768 0 151,768 49,232 28,813 20,420
Retirement Contributions 521200 366,313 454,000 (6,300) 447,700 335,149 0 335,149 112,551 71,427 41,124
FICA 521300 164,160 203,000 (8,000) 195,000 136,768 0 136,768 58,232 32,936 25,296
Wkrs Comp Assessment 521400 238 200 0 200 199 0 199 1 0 1
GSD Wkrs Comp Premium 521410 2,181 3,000 0 3,000 2,100 0 2,100 900 830 70
Unemployment Comp. Pre. 521500 2,166 9,000 0 9,000 8,791 0 8,791 209 89 120
Employee Liability Ins. Pre. (3) 521600 31,254 35,200 403,300 438,500 438,500 0 438,500 0 0 0
Retiree Health Care Contr. 521700 48,582 56,000 0 56,000 40,486 0 40,486 15,514 15,341 173
Other Employee Benefits 521900 0 300 0 300 0 0 0 300 200 100
200 3,233,514 3,704,700 403,000 4,107,700 3,174,577 0 3,174,577 933,123 591,928 341,195
Professional Services 535200 27,007,222 44,672,200 (426,000) 44,246,200 19,036,081 21,096,357 40,132,438 4,113,762 0 4,113,762
Other Services 535300 47,047 57,500 16,000 73,500 34,907 38,014 72,921 579 0 579
Audit Services 535400 118,503 112,350 0 112,350 112,350 0 112,350 0 0 0
Attorney Services 535500 520,023 2,500,000 0 2,500,000 483,736 2,016,265 2,500,000 0 0 0
Information Technology Services 535600 61,513 70,000 7,000 77,000 63,119 13,573 76,692 308 0 308
300 27,754,307 47,412,050 (403,000) 47,009,050 19,730,192 23,164,209 42,894,402 4,114,648 0 4,114,648
Empl. I/S Mileage & Fares 542100 2,170 3,500 0 3,500 3,360 0 3,360 140 0 140
Empl. I/S Meals & Lodging 542200 102 700 2,000 2,700 2,141 0 2,141 559 0 559
Board & Comm I/S Travel 542300 23,021 25,000 0 25,000 16,973 3,500 20,473 4,527 0 4,527
Transp - Fuel & Oil 542500 325 3,000 0 3,000 121 379 500 2,500 0 2,500
Transp - Transp Insurance 542700 0 200 0 200 0 0 0 200 0 200
State Transp. Pool Charges 542800 1,596 1,500 700 2,200 1,566 534 2,100 100 0 100
Maint - Furn, Fix, Equip. 543200 0 1,000 0 1,000 0 0 0 1,000 0 1,000
Maint - Property Insurance 543400 1,041 1,000 200 1,200 1,100 0 1,100 100 0 100
Information Technology Maint 543820 14,220 30,000 0 30,000 6,120 511 6,631 23,369 0 23,369
Supplies - Inventory Exempt IT 544000 51,786 52,800 0 52,800 37,532 1,912 39,444 13,356 0 13,356
Supplies - Office Supplies 544100 9,081 8,000 1,000 9,000 7,731 698 8,430 570 0 570
Supplies - Field Supplies 544400 90 0 0 0 0 0 0 0 0 0
Supplies - Invent. Exempt 544900 644 1,000 3,500 4,500 3,447 654 4,101 399 0 399
Reporting & Recording 545600 0 2,000 0 2,000 0 0 0 2,000 0 2,000
GSD-ISD Services 545700 7,294 8,500 0 8,500 3,464 0 3,464 5,036 0 5,036
DOIT HCM Assessment Fees 545710 9,920 11,200 0 11,200 11,200 0 11,200 0 0 0
Printing & Photo Svcs. 545900 281 500 1,000 1,500 353 136 489 1,011 0 1,011
Postage & Mail Services 546100 7,926 9,500 0 9,500 3,857 5,575 9,432 68 0 68
Bond Premiums (1) 546200 0 100,000 (25,400) 74,600 0 0 0 74,600 0 74,600
Rent of Land & Buildings 546400 277,159 287,000 0 287,000 253,252 25,235 278,486 8,514 0 8,514
Rent of Equipment 546500 16,576 18,000 0 18,000 14,891 165 15,056 2,944 0 2,944
Communications 546600 3,604 9,100 0 9,100 3,079 2,150 5,229 3,871 0 3,871
GSD Communications 546610 53,800 53,000 0 53,000 35,843 0 35,843 17,157 0 17,157
Subscriptions & Dues 546700 51,326 75,000 0 75,000 30,587 29,993 60,581 14,420 0 14,420
State Investment Council
Detail of Expenditures & Encumbrances
Ten months through 4/30/2014
Page3

B+C= E+F= H-I=
A B C D E F G H I J
SHARE PRIOR YR PROJECTED
CHARTFIELD CHART ACTUAL ORIGINAL BUDGET ADJUSTED EXPENDED ENCUMB TOTAL UNOBLIGATED EXPENDITURES BALANCE
DESCRIPTION FIELD EXPENSES BUDGET ADJUSTMENTS BUDGET YR-TO-DATE YR-TO-DATE OBLIGATIONS BALANCE TO YR END* AVAILABLE
Detail of Expenditures & Encumbrances
Ten months through 4/30/2014
Employee Training & Educ. 546800 28,852 20,000 0 20,000 17,552 1,620 19,172 828 0 828
Advertising 546900 1,065 5,000 0 5,000 3,495 1,255 4,750 250 0 250
DO-IT Assessment fee 547100 0 0 0 0 0 0 0 0 0
Misc. Expense 547900 965 2,500 0 2,500 1,817 96 1,913 587 0 587
Prior Yr Bills (2) 547999 39,269 65,000 17,000 82,000 81,965 0 81,965 35 0 35
Information Technology Equip. 548300 0 10,000 0 10,000 0 0 0 10,000 0 10,000
Empl. O/S Mileage & Fares 549600 23,933 40,800 0 40,800 13,534 20 13,554 27,246 0 27,246
Empl. O/S Meals & Lodging 549700 17,406 18,000 0 18,000 8,036 137 8,173 9,827 0 9,827
400 643,452 862,800 0 862,800 563,015 74,570 637,585 225,215 0 225,215
0
Other Financing Uses 555100 0 0 0 0 0 0 0 0 0 0
.
500 0 0 0 0 0 0 0 0 0 0
Total 31,631,273 51,979,550 0 51,979,550 23,467,784 23,238,779 46,706,563 5,272,987 591,928 4,681,059
(2) SIC is budgeting for prior year bills paid out of current budget. Current budget is largely for year-end quarterly billings of investment managers exceeding the encumbrance.
(3) Investigated General Liability rates of $438,500. Received approval for a budget transfer for $403,000 from the 300s which was the difference to the existing budget amount.
Prepared by: Brent Shipp
Date: 05/09/14
(1) The State's Budget Review System (BRS) automatically calculated 100K for the Bond Premiums, we have researched and this expenditure has not occurred over the last several years. We have
budgeted 100K until we know more about the need for such an expenditure.
New Mexico
Investment Holdings Report
April 30, 2014
FY 2014
Description
Managed Net Assets
Land Grant Permanent Fund
Severance Tax Permanent Fund
Tobacco Settlement Permanent Fund
Water Permanent Fund
Third Party Investors Asset Allocation
Third Party Investors Allocation by Pool
Change in Market Values for Month by Asset Class
Change in Market Values for Month for Investment Pools Detail by Manager
Change in Market Values for Month for Permanent Funds
Change in Market Values for Month for Third Party Investors
Notes to Investment Holdings Report 18
Index
April 30, 2014
FY 2014
Page No.
1
2
3
4
5
14-17
6
7
8
9-11
12-13

Managed Net Assets
April 30, 2014
Cash & Accrued Other Assets % of
Securities Income & Liabilities Net Assets Total
Equities
Domestic Equities:
Large Cap Pools
Large Cap Active Pool 2,349,752,312 97,671,202 2,170,374 2,449,593,887 12.72%
Large Cap Index Pool 2,925,329,633 462,279 - 2,925,791,912 15.20%
Large Cap Enhanced Index Pool 544,456,211 1,705,997 (551,652) 545,610,557 2.83%
Total Large Cap Equities 5,819,538,155 99,839,478 1,618,722 5,920,996,355 30.76%
Small/Mid Cap Pool
Mid/Small Cap Pool 624,859,511 54,896,486 (2,664,903) 677,091,095 3.52%
Small/Mid Cap Index Pool 88,889,791 8 88,889,799 0.46%
Small/Mid Cap Enhanced Index Pool 199,662,929 854,785 366,065 200,883,779 1.04%
Total Small/Mid Cap Equities 913,412,232 55,751,280 (2,298,838) 966,864,673 5.02%
Total Domestic Equities 6,732,950,387 155,590,758 (680,116) 6,887,861,015 35.78%
International Pools
Non-US Developed Markets Index Pool 120,201,845 4,282,997 - 124,484,843 0.65%
Non-US Emerging Markets Index Pool 516,964,406 3,065,580 - 520,029,985 2.70%
Non-US Developed Markets Active Pool 1,241,342,776 24,774,893 (316,848) 1,265,800,821 6.58%
Non-US Emerging Markets Active Pool 756,196,083 16,547,578 (1,199,971) 771,543,690 4.01%
Total International Equities 2,634,705,111 48,671,048 (1,516,819) 2,681,859,339 13.93%
Total Equities 9,367,655,497 204,261,805 (2,196,935) 9,569,720,355 49.71%
Fixed Income
Core Bonds Pool 3,042,420,377 57,554,054 (116,247,206) 2,983,727,224 15.50%
Unconstrained Fixed Income Pool 406,457,846 93,128,921 (8,556,374) 491,030,393 2.55%
Credit & Structured Finance 918,762,244 40,499,850 959,262,094 4.98%
Total Fixed Income 4,367,640,467 191,182,825 (124,803,581) 4,434,019,696 23.03%
Other Securities and Cash 126,231,953 40,611,736 166,843,689 0.87%
Real Estate 1,161,819,588 87,320,657 1,249,140,244 6.49%
Real Return 703,682,612 89,224,623 (3,353,263) 789,553,972 4.10%
Absolute Return 1,261,010,204 2,549,901 1,263,560,106 6.56%
Private Equity 1,574,527,294 200,622,518 (16,666) 1,775,133,145 9.22%
Stock Distributions/Private Equity 2,736,682 2,736,682 0.01%
Total Managed Net Assets 18,439,072,343 901,394,282 (89,758,709) 19,250,707,888 100.00%
1

Long-Term
Target
Cash / Cash Equivalents / Accruals 86,035,511 0.63% 0.00%
Equities:
Large Cap Active Pool 1,773,785,601 12.89%
Large Cap Index Pool 2,022,157,512 14.70%
Large Cap Enhanced Index Pool 414,245,967 3.01%
Small/Mid Cap Active Pool 441,902,753 3.21%
Small/Mid Cap Index Pool 57,323,871 0.42%
Small/Mid Cap Enhanced Index Pool 154,706,630 1.11%
Total US Equities 4,864,122,334 35.36% 31.00%
Non-US Developed Markets Index Pool 2,200,550 0.02%
Non-US Emerging Markets Index Pool 348,850,769 2.54%
Non-US Developed Markets Active Pool 949,350,612 6.90%
Non-US Emerging Markets Active Pool 578,657,770 4.21%
Total Non-US Equities 1,879,059,701 13.66% 15.00%
Total Equities 6,743,182,035 48.92% 46.00%
Core Bonds:
Fixed Income Pool 1,963,878,896 14.28% 7.00%
Unconstrained Fixed Income Pool 440,462,008 3.20% 4.00%
Credit & Structured Finance 747,939,778 5.44% 5.00%
Total Fixed Income 3,152,280,682 22.92% 16.00%
Real Estate 987,287,108 7.18% 10.00%
Real Assets 650,998,808 4.73% 10.00%
Private Equity:
Private Equity 1,196,907,170 8.70% 10.00%
Absolute Return 939,178,896 6.83% 8.00%
Total Fund Net Assets 13,755,870,210 100.00% 100.00%
Market Value % of Net Assets
Land Grant Permanent Fund
April 30, 2014
2
Long-Term
Target
Cash / Cash Equivalents / Accruals 15,965,529 0.35% 0.00%
Equities:
Large Cap Active Pool 578,173,567 12.83%
Large Cap Index Pool 623,438,053 13.83%
Large Cap Enhanced Index Pool 131,364,594 2.91%
Small/Mid Cap Enhanced Index Pool 46,177,147 1.02%
Total US Equities 1,548,103,602 34.34% 31.00%
Non-US Developed Markets Index Pool 25,878,215 0.57%
Non-US Emerging Markets Index Pool 118,582,719 2.63%
Non-US Developed Markets Active Pool 316,450,205 7.02%
Non-US Emerging Markets Active Pool 192,885,922 4.28%
Total Non-US Equities 653,797,061 14.50% 15.00%
Total Equities 2,201,900,662 48.84% 46.00%
Core Bonds:
Fixed Income Pool 703,791,931 15.61% 7.00%
Unconstrained Fixed Income Pool 50,568,384 1.12% 4.00%
Credit & Structured Finance 211,320,835 4.69% 5.00%
Total Fixed Income 965,681,150 21.42% 16.00%
Economically Targeted Investments 40,611,736 0.90% 0.00%
Real Estate 261,853,136 5.81% 10.00%
Real Assets 138,555,163 3.07% 10.00%
Private Equity:
Private Equity 355,421,033 7.88%
Private Equity New Mexico 222,804,937 4.94%
Stock Distributions/Private Equity 2,736,682 0.06%
Total Private Equity 580,962,652 12.88% 10.00%
Absolute Return 302,307,189 6.71% 8.00%
Total Fund Net Assets 4,507,837,217 100.00% 100.00%
Severance Tax Permanent Fund
April 30, 2014
3

Long-Term
Target
23,211,205 10.75%
Equities:
Large Cap Index Pool 96,131,622 44.50% 46.00%
Small/Mid Cap Active Pool 1,328,074 0.61% 11.00%
Total US Equities 115,182,139 53.32% 57.00%
Non-US Developed Markets Pool 15,357,062 7.11% 7.00%
Non-US Emerging Markets Pool 3,348,006 1.55% 3.00%
Total Equities 133,887,207 61.98% 67.00%
Core Bonds 41,861,883 19.38% 23.00%
Absolute Return 17,057,050 7.90% 10.00%
Total Fund Net Assets (excl. cash) 192,806,140
Total Fund Net Assets 216,017,345 100.00% 100.00%
Tobacco Settlement Permanent Fund
April 30, 2014
Cash / Cash Equivalents / Accruals
4
Long-Term
Target
1,019,492 2.11%
Equities:
Large Cap Active Pool 102,825 0.21% 45.00%
Small/Mid Cap Active Pool 1,607,555 3.32% 10.00%
Total US Equities 25,353,327 52.39% 55.00%
Non-US Developed Markets Pool 3,970,012 8.20% 7.00%
Non-US Emerging Markets Pool 1,236,156 2.55% 3.00%
Total Equities 30,559,495 63.14% 65.00%
Core Bonds 11,792,916 24.37% 25.00%
Absolute Return 5,018,080 10.37% 10.00%
Total Fund Net Assets (excl. cash) 47,370,491
Total Fund Net Assets 48,389,983 100.00% 100.00%
Market Value
Cash / Cash Equivalents / Accruals
% of Net Assets
Water Permanent Fund
April 30, 2014
5

Third Party Investors Asset Allocation
April 30, 2014
Cash / Cash Equivalents 0.00 0.00%
Equities:
Large Cap Active Pool 97,531,888 13.50%
Total US Equities 335,101,242 46.37%
Non-US Developed Markets Pool 77,078,972 10.67%
Non-US Emerging Markets Pool 48,012,150 6.64%
Total Non-US Equities 125,091,122 17.31%
Total Equities 460,192,364 63.69%
Core Bonds 262,403,001 36.31% 36.31%
Total Third Party Ownership 722,595,365 100.00% 100.00%
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N
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12
M
a
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V
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I
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A
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R
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M
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V
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F
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C
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D
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T
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C
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P
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(
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A
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A
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R
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A
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)

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U
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C
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B
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P
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N
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D
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M
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E
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M
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T
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W
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P
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P
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(
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13
M
a
r
k
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t

V
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l
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I
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t
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r
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A
s
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G
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-

R
e
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l
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d
M
a
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V
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F
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N
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3
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C
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D
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T
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C
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M
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P
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I
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t
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N
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S
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N
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B
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I
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N
M
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M
T

P
l
a
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/
D
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/
A
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F
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N
M
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M
T

E
n
d
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w
m
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F
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(
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1
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I
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B
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6

1
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6
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3
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2
8
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4
6
8
,
8
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1

14
M
a
r
k
e
t

V
a
l
u
e
I
n
t
e
r
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A
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-

R
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M
a
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V
a
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F
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N
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m
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3
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3
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/
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4
C
o
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b
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t
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s
D
i
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b
u
t
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F
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&

U
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C
h
a
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i
n

M
a
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t

V
a
l
u
e
4
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3
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/
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4
N
M

T
e
c
h

R
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e
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F
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x

P
o
o
l
1
5
,
6
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2
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3

-

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(
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,
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1
5
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7
5
7
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4
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I
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t
m
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t

i
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C
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e

B
o
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d
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P
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l
2
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5
5
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-

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1
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6
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2
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3
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1
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,
8
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9
1
,
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1
8
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3
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N
M

S
c
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f
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t
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e

B
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d

a
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d

V
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y

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A
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P
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l
1
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1
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9
,
7
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1

-

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1
2
0

(
5
,
5
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7
)

1
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1
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5
,
3
4
4

I
n
v
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s
t
m
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n
t

i
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S

M
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d
/
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m
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C
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p

P
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l
1
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2
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9
3

-

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3

(
3
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,
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6
)

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,
2
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9
0

I
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t

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C
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B
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P
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l
4
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6
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1

-

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1

3
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,
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4
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6

I
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s
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m
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t

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N
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S

D
e
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d

M
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t
s

P
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l
8
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1

-

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3

9
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6
5
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8
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9

I
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n
t

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N
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E
m
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M
a
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k
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s

P
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l
9
3
3
,
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5

-

2
,
5
7
1

4
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2

9
3
6
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6
4
8

8
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6
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1
,
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8

(
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,
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)

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N
M

R
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t
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r
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H
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h

C
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3
2
3
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3
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2

1
,
0
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-

-

-

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5
3
,
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2
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(
2
6
5
,
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)

5
3
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15
M
a
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V
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17

Notes to Report
April 30, 2014

Page 8 reflects the summary of activity in the State Investment Councils portfolio for the
month ended April 30, 2014. Items to note:

The monthly contribution from the State Land Office was $64,898,641; an increase of
$1,877,933.16 from March.

The Land Grant Permanent Fund contributions include the Federal Taylor Grazing
proceeds of $145,524.

The Tobacco Settlement Permanent Fund received $21,124,002 in Tobacco settlement
proceeds.

The monthly beneficiary distributions of $44,596,384 and $14,206,054 from the
permanent funds are reflected for Land Grant Permanent Fund (LGPF) and Severance
Tax Permanent Fund (STPF), respectively.

The bimonthly transfers to the Administration fund from the LGPF and STPF are
reflected in the fees column as $6,400,000 and $2,200,000, respectively.
Contributions, distributions and rebalancing by Third Party Clients are reflected on pages 14
thru 17. The significant contribution was from New Mexico Retiree Health Care Authority for
$8,000,000.

The total on page 11 reflects only the investment pools included on page 8 as a sub-total.

The total on page 13 is inclusive of the permanent funds and exclusive of the third party
investors.

18
Tab 6

a. Governance Matters: Committee & Informational Reports: Discussion

a. Governance Committee Report (Smart)

TAB 7
Closing Matters

a. Old or new business (Governor Martinez)
b. Next SIC meeting date: Monday, June30, 2:30pm; Tuesday, July 1, 9:00am, Santa Fe

TAB 8
a. Public Comment Period (Governor Martinez)

TAB 9
Vote to Enter Executive Session Pursuant to NMSA, 1978: (Governor Martinez)

a. 10-15-1(H)(2) Limited Personnel Matters: employee hiring and retention
b. 10-15-1(H)(7) Ongoing or pending litigation: PE secondary sale

TAB 11
Adjournment

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STATE INVESTMENT COUNCIL

Treasury Yield Curve 03/31/14 02/28/14 03/31/13 03/31/11

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