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Sun Mountain CapitalNew Mexico Private Equity Program
Performance Update – Q2 2017
Presented to
The New Mexico State Investment Council
November 2017
1
Disclaimer
This presentation is for informational purposes only and is not intended to be, nor should it be construed or used as an offer to sell, or a solicitation of anoffer to buy, interests in any proposed investment fund to be managed by Sun Mountain Capital Advisors, L.L.C.
The following presentation relies on information provided by third parties, including the New Mexico State Investment Council (“NMSIC”), NMSIC’sGeneral Partners and/or Invient, NMSIC’s data provider. The analysis included herein is dependent on such information being complete and accurate in allmaterial respects. Additionally, analysis may utilize or involve forward-looking information that is derived in part from longer-term historical data providedby third-party sources. Certain information contained in this presentation constitutes “forward-looking statements,” which can be identified by the use offorward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “target,” “project,” “estimate,” “intend,” “continue,” or “believe” orthe negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results, actualperformance may differ materially from those reflected or contemplated in such forward-looking statements.
Investing in financial markets involves a substantial degree of risk. There can be no assurance that the investment objectives described herein will beachieved. Investment losses may occur, and investors could lose some or all of their investment. No guarantee or representation is made that thisinvestment program, including, without limitation, its investment objectives, diversification strategies or risk monitoring goals, will be successful, andinvestment results may vary substantially over time. Investment losses may occur from time to time. Nothing herein is intended to imply that theinvestment methodologies may be considered “conservative,” “safe,” “risk free” or “risk averse.”
In addition, projected results, if any, are based on a number of assumptions, including returns, fund size, economic terms, targeted investment allocationand other factors. Due to various risks and uncertainties, the projections in this presentation may differ materially from actual results or changesignificantly if any one or more of the assumptions are changed. As such, undue reliance should not be placed on such information.
Economic development data including employment, payroll and dollars spent in the State of New Mexico is collected quarterly for both active companiesin the New Mexico Private Equity Investment Program (“NMPEIP”) as well as those in which portfolio funds no longer have an active interest. For activecompanies, Sun Mountain Capital Advisors, L.L.C. conducts quarterly surveys of fund managers to collect economic development data. For companies nolonger obligated to report to NMPEIP fund managers, data is based on the most recent and materially reliable of 1) last reported data, 2) direct outreachto companies to collect data or 3) independently verified data provided by third party entities. Annually, Sun Mountain Capital Advisors, L.L.C. reviews fundmanager data submissions by directly contacting a sampling of underlying portfolio companies to verify accuracy of data.
Nothing herein is intended to serve as investment advice, a recommendation of any particular investment or type of investment, a suggestion of merits ofpurchasing 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 CapitalAdvisors, L.L.C. or the NMSIC.
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NMPEIP Q2 2017 Performance Summary
• In the second quarter, the Program had net deployed capital of $266.1 million versus the statutory cap of $441.5 million
• Net deployed capital represented 5.4% of the Severance Tax Permanent Fund (“STPF”), and is on track to achieve the approved long term target allocation of 5.0%
• The financial performance of the Program continues to be adversely impacted by investments made before 2004
* IRR data based on Invient report as of 6/30/2017. Invient manages all of the data on behalf of the NMSIC, and Sun
Mountain Capital Advisors, L.L.C. has access to the data. 1 yr., 3 yr. and 5 yr. IRR data represents the IRR performance of
the program for the 1, 3 and 5 years preceding 6/30/2017, respectively. “Prior to 2004” includes all funds that received the
initial commitment before 12/31/2003. “2004 to Present” includes all funds that have received the initial commitment after
1/1/2004.
Internal Rate of Return*
Fund Group 1 yr. 3 yr. 5 yr. Inception
NMPEIP Aggregate 9.7% 6.8% 7.4% 0.9%
2004 to Present 9.1% 8.0% 9.2% 5.2%
Prior to 2004 18.7% -4.2% -3.0% -5.7%
3
• Since 2004, the program has improved from -22.7% IRR to 0.9% IRR
2004 to Present – Financial Performance Snapshot
• Source: All performance data is from Invient.
IRR data represents the period end IRR performance. For
instance in 2004, that represents the 12/31/2004 performance.
Further, for 2017, the IRR is as of 06/30/2017.
4
-14.0%
-12.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
$-
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
Net
IRR
Per
iod
Cas
h F
low
s ($
in t
ho
usa
nd
s)
Investment Performance
Contributed in the Year Distributed in the Year IRR As of Period End
• In 2014 the NMSIC approved a pacing plan calling for a 5% allocation of the STPF and annual commitments of $30-35 million
• The NMSIC has approved commitments averaging $30.5 million per year since then
• As of June 31, 2017 the program is at 5.4% and on pace to achieve its long-term allocation of 5.0%
• Many new and well qualified funds have entered the potential investment pipeline since the NMPEIP statute was modified in 2016
• Based on guidance from the State Investment Council, a new pacing plan for the NMPEIP will be developed and presented for review in 2018
Net Capital Deployed is 5.4% of the Severance Tax Permanent Fund
5
Fund of Funds Program*
• $338 million of capital deployed into companies active in New Mexico by funds in the program as of June 30, 2017
• An additional $2 billion invested into New Mexico companies by outside funds participating in investment syndicates with funds in the program
Summary of Program Economic Impact in Q1 2017
* Numbers based on Sun Mountain Capital Advisor’s, L.L.C. internal survey of NMPEIP funds and underlying companies as
of 06/30/2017. Only companies that report their data are included. If a company is sold from the NMPEIP, the most recent
employment number is used. Data is accurate to the best of Sun Mountain Capital Advisor’s, L.L.C knowledge. Further, job
numbers were corroborated by the New Mexico Economic Development Department in 2015. 6
NMPEIP Impact Summary as of 6/30/17Total Investment in New Mexico Portfolio Companies
A) Investment by Funds with NMPEIP Participation $339,102,947B) External Investment Caused by Funds with NMPEIP Participation $2,008,985,519
Total VC Investment in NM Companies $2,348,088,465Investment Multiplier (B / A) 5.9x
Categorization of NM Portfolio CompaniesActive Companies 31 41.9%Companies Exited at a Gain 15 20.3%Companies Exited at a Loss 28 37.8%
Number of Companies funded 74 100.0%
NM Economic Impact Q2 2017NM Purchases $25,877,398
NM Payroll $29,066,708NM Economic Impact $54,944,106
Total Current Full-Time Jobs 1,543Average Salary of Jobs Created $75,351Average Salary in New Mexico1 $44,160
Source: Survey of participating NMPEIP fund managers and NM companies for active companies and most recent verified data for exited companies1 Source: New Mexico wage and salary disbursements and total wage and salary employees from the U.S. Dept. of Commerce, Bureau of Economic Analysis
74 New Mexico Companies
7
New Mexico Companies as of 6/30/17
Advent Solar Earthstone MicroOptical Devices Seclarity
Agilvax Eclipse Aviation MIOX Skorpios Technologies
Altaview Technologies Elisar Software Nanocrystal Southwest Med Tech
Altela Enerpulse NanoMR Sundrop
American Clay Entrada Noribachi Surfect Technologies
Amtech Exagen Diagnostics Nuvita TCI Medical
Aspen Avionics Figaro OnQueue Technologies Teucrium Trading
Avasca Growstone Patchwork Systems Tred
Avisa Pharma Holochip Phase-I TriLumina
Azano Infantelligence POSLavu TruTouch Technologies
BayoTech InnovASIC Protalex VeraLight
Bioreason Intellicyt ProtoHIT Vertical Power
Boomtime Introbotics Puente Partners Vibrant
BounceChat Iosil Energy Quasar WellKeeper
Comet Solutions JackRabbit Systems Respira Therapeutics xF Technologies
Consolidated Energy Kinetisis RiskSense Zia Laser
Controlled Recovery Lumidigm SBA Materials ZTEC Instruments
Desert Power Mesofuel Seamless Medical
Dining Gift Services Metaphor Seattle Fish Company
Status Key
Active (31) Exited at a Gain (15) Exited at a Loss (28)
Note: NMPEIP participants and the SIC directly have invested in 72 New Mexico-based companies,
with 2 additional companies funded by SIC National Program participants
Service Overview
• In late Q4 2016 Sun Mountain Capital began the Distributed Asset Services
• Primary goal was to monitor the portfolio to help the SIC achieve liquidity
Liquidation Progress
• Two significant liquidity events have occurred:
• Summer Winds Garden Center –
Net proceeds of $409,770 an increase from the carrying value of $242,094 (as of 12/31/2016)
• rfXcel Partial Liquidation –
Net proceeds of $3,962,722 for selling 1/3 of the NMSIC’s shares in rfXcel. Transaction provides liquidity in excess of the total prior carrying value and keeps an 11% ownership in the entity
• Net proceeds from liquidation to date exceed the carrying value of all private assets when Sun Mountain began the service1
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Distributed Asset Services Update
1 - Based on the carrying value as of 12/31/2016 of the non-publicly traded holdings within the NMSIC Severance Tax Distribution and NMSIC Private Equity Stock Distribution accounts.
• Program is currently tracking to the pacing plan approved by the SIC
• The number of qualified investment opportunities has continued to increase due to the 2016 change in the NMPEIP program requirements
• We are evaluating potential new commitments for the Program
• Currently 3 funds are in advanced stages of due diligence for a potential commitment from the NMPEIP
• Program financial returns are improving steadily from the 1993-2003 era
• Since 2004, NMPEIP investments have produced a positive financial return in line with national benchmarks
• Program is having a positive impact on the New Mexico economy
Summary of Key Points
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Thank You for Your Time
10
Capital Invested by Sector: Active NMPEIP Program Sector Concentration
11
Technology(Excluding Software)
22%
Software11%
Healthcare30%
Healthcare Devices5%
Energy7%
Aviation15%
Cleantech9%
Other1%
NMPEIP Investment by Sector: Active Companies
NMPEIP Status Overview and Summary of Partnership Commitments
12
Unaudited Performance Data as of 6/30/17
Number of Fund Commitments 35
Capital Committed (Total) $469.1
Capital Committed (Net of Dist.'s Received) $308.0
Capital Drawn $427.2
% of Capital Committed (Total) 91.1%
Distributions Received $161.1
% of Capital Drawn 37.7%
Outstanding Deployed Capital $266.1
Outstanding Deployed Capital as % of STPF 5.4%
Portfolio Carrying Value $303.0
Total Portfolio Value $464.1
% of Capital Drawn 108.6%
Portfolio Multiple of Invested Capital 1.09x
Portfolio IRR 0.9%
Note: Returns calculated using reported Carrying Values as of 6/30/17
and data provided by Invient
Severance Tax Permanent Fund ('STPF') currently $4,906.1 millionas of 6/30/17
All Fund Commitment Summary Commitment Funded Percent NM Investment Value ($)2
Return2
Fund
as of 6/30/17 Vintage Dollars % of Fund To Date Funded Invest 1 Realized Unrealized 3Total 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 $3.8 $0.0 $3.8 0.94x -0.9% Yes
CVM Equity Fund V 1998 $3.0 50.0% $3.0 100.0% $1.1 $1.7 $0.0 $1.7 0.58x -6.1% Yes
Murphree Venture Partners IV, L.P. 1998 $4.0 38.5% $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 4.4% $5.0 100.0% $10.1 $2.5 $1.5 $4.0 0.80x -1.7%
Valley Ventures II, L.P. 1998 $3.0 10.3% $3.0 100.0% $18.4 $2.6 $0.0 $2.6 0.87x -1.6% Yes
Vestor Partners, L.P. 1998 $2.5 4.3% $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 $0.9 $0.1 $1.0 0.19x -12.2% Yes
Murphree Venture Partners V, L.P. 2000 $3.0 20.0% $3.0 100.0% $2.2 $1.0 $0.2 $1.2 0.41x -10.4% In Process
Red River Ventures, L.P. 2000 $7.2 24.4% $7.2 100.0% $12.8 $6.0 $0.0 $6.0 0.83x -2.7%
Tullis/Dickerson Capital Focus III, L.P.4
2001 $15.0 11.8% $15.0 100.0% $25.2 $13.9 $4.4 $18.3 1.22x 4.2%
Wasatch Venture Fund III, LLC 2001 $8.7 15.0% $8.6 99.0% $41.6 $4.6 $2.6 $7.2 0.84x -2.4%
Altira Technology Fund IV, L.P. 2002 $10.0 15.6% $10.0 100.0% $14.3 $14.2 $0.0 $14.2 1.42x 6.1% Yes
Blue Sage Capital, L.P. 2002 $10.0 6.9% $7.6 76.4% $10.0 $26.0 $4.0 $30.0 3.86x 21.9%
ITU Ventures West I, L.P. 2002 $15.0 45.5% $15.0 100.0% $15.3 $6.0 $0.0 $6.0 0.41x -15.5% Yes
Valley Ventures III, L.P. 2002 $6.7 15.0% $6.5 98.0% $14.9 $2.3 $0.0 $2.3 0.35x -12.0% Yes
New Mexico Co-Investment Partners, L.P.5
2003 $62.0 100.0% $62.0 100.0% $163.7 $13.3 $0.0 $13.3 0.21x -23.4% YesvSpring II, L.P.4
2003 $20.0 23.6% $20.0 100.0% $91.9 $0.0 $5.2 $5.2 0.26x -11.4%
Flywheel I, L.P. 2004 $15.0 48.6% $15.0 100.0% $52.8 $10.1 $6.0 $16.1 1.08x 1.0%
Verge I, L.P. 2004 $10.0 65.6% $10.0 100.0% $50.6 $7.3 $2.4 $9.6 0.96x -0.6%
Wasatch New Mexico Fund, LLC 2004 $12.0 99.0% $12.0 100.0% $47.0 $1.4 $2.7 $4.1 0.35x -11.5%
ITU Ventures III NM, L.P. 2005 $2.3 99.0% $2.3 100.0% $0.0 $0.1 $0.0 $0.1 0.04x -73.6% Yes
Psilos Group Partners IIIB, L.P. 2006 $15.0 99.0% $15.0 100.0% $28.8 $8.0 $11.4 $19.5 1.30x 4.4%
Village Ventures Fund II-B, L.P. 2006 $15.0 99.0% $17.5 116.6% $3.2 $14.4 $11.0 $25.4 1.45x 7.0%
NMSIC Co-Investment Fund, L.P. (Classic) 2007 $30.0 100.0% $24.3 80.8% $372.8 $7.1 $16.3 $23.4 0.79x -5.1%
NMSIC Co-Investment Fund, L.P. (Focused) 2007 $62.5 100.0% $62.4 99.8% $853.4 $1.9 $113.1 $115.0 1.78x 8.1%
vSpring III, L.P.4 2007 $15.0 11.9% $15.0 100.0% $13.2 $0.5 $13.6 $14.0 0.93x -0.9%
EPIC Venture Fund IV, LLC 2008 $10.0 17.2% $8.8 88.2% $10.0 $6.0 $12.0 $18.0 1.99x 11.8%
NMSIC Co-Investment Fund, L.P. (2013) 2013 $20.0 100.0% $17.9 89.3% $63.3 $0.3 $32.9 $33.2 1.80x 21.1%
NMSIC Co-Investment Fund, L.P. (2014) 2014 $40.0 100.0% $33.5 83.6% $0.0 $0.2 $52.0 $52.2 1.51x 32.5%
EPIC Venture Fund V, LLC 2016 $10.0 13.3% $1.4 13.5% $59.5 $0.0 $1.2 $1.2 N/M N/M
New Mexico Catalyst Fund, L.P. 2016 $10.0 52.6% $0.7 6.8% $0.0 $0.0 $0.3 $0.3 N/M N/M
Phoenix Venture Partners II, L.P. 2016 $10.0 13.3% $2.1 20.8% $0.0 $0.0 $1.9 $1.9 N/M N/M
Psilos Group Partners III Subsidiary, L.P. 2016 $2.0 8.0% $2.0 100.0% $0.0 $0.0 $3.0 $3.0 N/M N/M
Trinity Capital Fund III, L.P. 2016 $5.0 6.7% $5.0 100.0% $0.0 $0.0 $5.1 $5.1 N/M N/M
NMSIC Co-Investment Fund, L.P. (2017) 2017 $40.0 100.0% $0.0 0.0% $0.0 $0.0 $0.0 $0.0 N/M N/M
Program Totals $469.1 19.6% $427.2 91.1% $2,057.8 $161.1 $303.0 $464.1 1.09x 0.9% 12 of 35
Source: Invient reporting
Notes:
1) Includes both direct fund investments and caused to invest dollars into New Mexico companies. Sourced from Invient reporting, GP reporting and Sun Mountain Capital analysis
Variance from total external dollars in New Mexico companies due to exclusion of previously raised capital and accounting for overlapping caused to invest dollar allocations
2) Investment Values and Return calculations based upon asset values from 6/30/17
3) Fair Market Value as determined by Fund GPs under ASC 820 as of the report date
4) Firm managing the fund has changed name: Tullis/Dickerson is now called Tullis Health Investors, vSpring is now called Signal Peak Capital
5) New Mexico Co-Investment Partners, L.P. data includes one SIC direct investment for reporting purposes
NMPEIP Carrying Value Quarter Over Quarter
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NM PEIP Changes in Q1 2017 Reported Value
Early VC Later VC Buyout Total
Reported Valuation as of Q4 2016 $164.4 $131.0 $3.3 $298.8
Contributions to General Partners ($2.1) ($1.9) ($0.1) ($4.1)
Distributions from General Partners $2.1 $0.0 $0.4 $2.5
Change in Value ($0.0) $2.5 $0.5 $3.0
Reported Valuation as of Q1 2017 $164.5 $131.6 $4.1 $300.2
Source: Invient reporting
NM PEIP Changes in Q2 2017 Reported Value
Early VC Later VC Buyout Total
Reported Valuation as of Q1 2017 $164.5 $131.6 $4.1 $300.2
Contributions to General Partners ($0.2) ($0.1) ($0.1) ($0.4)
Distributions from General Partners $4.0 $0.0 $0.4 $4.3
Change in Value $1.1 ($1.2) $0.4 $0.3
Reported Valuation as of Q2 2017 $169.3 $130.3 $4.8 $304.4
Source: Invient reporting
