California Initiative Update Mission Statement The California Initiative will invest in traditionally underserved markets primarily but not exclusively located i by npu97223

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									California Initiative
      Update
Mission Statement

         The California Initiative will invest in traditionally
        underserved markets primarily, but not exclusively,
       located in California. The objective is to discover and
     invest in opportunities that may have been bypassed or
        not reviewed by other sources of investment capital.



                                  Objectives


 • To earn attractive risk-adjusted returns
 • As an ancillary benefit, to have a meaningful impact on the economic
   infrastructure of California Underserved Markets

                                                                          2
Underserved Market Opportunity

             Underserved markets are less
           efficient and have the potential to
              provide superior investment
                      performance

                          Investment
                          Opportunity

 • Companies located in areas where access to institutional equity
   capital is limited
 • Companies that employ workers who reside in economically
   disadvantaged areas
 • Companies with female and/or minority management

                                                                     3
    California Initiative Partners
                                                        MIDDLE                  GROWTH/                 CORPORATE /
       SEED                   VENTURE                   MARKET                 EXPANSION                  BUYOUT



                                                                                                       Yucaipa
                                                                            Green Equity               Corporate
                          Pacific Community        Opportunity             Investors                  Initiatives Fund
                           Ventures                  Capital                Nogales Investors
                          American River           Provender Capital
                           Ventures
   Garage                DFJ Frontier
    Entrepreneurs
    Fund




                                               Bank of America Fund-of-Funds




     Fund           Fund           Fund              Fund         Fund           Fund            Fund             Fund




                                                                                                                           4
History & Milestones
 May 2001    CalPERS Investment Committee approved the California Initiative
               Program
              $475 million of commitment
              10 partnerships
November     First investment made by California Initiative Fund
  2001
November     Staff presented an initial update on the Program -
  2004         Approximately 21% of the Program’s capital invested
               Investment Committee directed staff to enhance reporting of
               the Program, including a thorough assessment of the ancillary
               benefits
March 2005   Staff completed project design and subsequently engaged Pacific
               Community Ventures (“PCV”) and LP Capital Advisors
               (“LPCA”) to assess the ancillary benefits of the Program
December     Initial assessment and report completed by PCV and LPCA
  2005       Over 50% of the Program’s Capital invested


                                                                               5
California Initiative Performance

Investment returns to date are less meaningful due to the young age of
the Program (i.e. the J-Curve Effect that affects all private equity fund
investments)
Results As Of                September 30, 2005       June 30, 2004
Total Cash In                $253.1 million (53%)     $99.5 million (21%)
Total Cash Out               $7.9 million             $5.3 million
Reported Value + Cash Out    $251.6 million           $74.9 million
Net Gain (Loss) 1            $(1.4) million           $(24.7) million
Multiple on Invested Capital 1.0x                     0.8x
Net IRR 1                    (0.4)%                   (22.4)%
1-Year Net IRR               16.3%                    (11.1)%




                                                                            6
Ancillary Benefits Assessment
Underserved Market Benchmarks
● Companies located in areas where access to
  institutional equity capital is limited:
      ~ Companies located outside the top 100 postal codes for
        receiving venture capital investment. (These top 100 postal
        codes received 30% of venture capital investment dollars
        between 2000 and 2005.)

● Companies that employ workers who reside in
  economically disadvantaged areas:
      ~ Companies where at least 25% of California employees
        live in a zip code designated economically disadvantaged.

● Companies with female and/or minority
  management:
      ~ Companies where at least one officer (e.g. CEO, COO,
        CFO, CIO) is female or ethnic/racial minority.

                                                                      8
Strong Presence in California
● Of 68 companies1:
         48 are headquartered in California
         51 employ a significant proportion of their workforce in California
         37 have been in the portfolio for one year or more
         Since investment, these companies have created nearly 2,500
          jobs, including nearly 600 in California

● CA Initiative companies employ over 5,000 Californians,
  including approximately 2,000 who live in economically
  disadvantaged areas of the state

● Over 170 distribution, retail and other facilities located
  across California
  1   Active California Initiative companies (as reported in the Initial Assessment Report)
                                                                                              9
Location




             75% of California
           Initiative Companies
            are Headquartered
           or Have a Significant
                 Presence in
                  California




                                   10
Comparison to Benchmarks
●   Of 68 companies, 65 are directly impacting underserved markets
●   Of the 48 companies headquartered in California, 45 are directly impacting underserved
    markets
●   Many companies reach underserved markets in multiple ways

                                  Nearly 100% of California Initiative Companies Meet At Least One Underserved Market
                                                                         Benchmark

                           100%


                           90%                                     65
                                                                Companies

                           80%


                           70%
    Percent of Companies




                           60%

                                                                                               39
                           50%                                                              Companies


                           40%


                           30%


                                                                                                                        18
                           20%
                                                                                                                     Companies

                           10%
                                    3 Companies

                            0%
                                  Meet 0 benchmarks      Meet at least 1 benchmark   Meet at least 2 benchmarks   Meet 3 benchmarks




                                                                                                                                      11
Comparison to Benchmarks
Of the 68 Companies:
● 51 companies (75%) are headquartered in areas of US where access to
    institutional equity is limited; 35 of these are in California.
● 39 companies (57%) have at least one female or minority owner or officer
    (e.g. CEO, CFO, COO, CIO).
● 32 companies (47%) have a workforce where at least 25% of California
    employees live in disadvantaged areas.
                                          Each of the Benchmarks Has Been Reached by More Than Half of the Companies

                            80%



                            70%
                                                  51
                                               Companies

                            60%


                                                                                             39
     Percent of Companies




                            50%                                                           Companies


                                                                                                                                   32
                            40%                                                                                                 Companies



                            30%



                            20%



                            10%



                            0%
                                  Located in area that has not traditionally   Diversified ownership or management   Employs workers from economically
                                    received institutional equity capital                                                  disadvantaged areas




                                                                                                                                                         12
Banc of America Capital Access Funds
 Invested in 8 private equity partnerships, 2 others
  approved
 All 10 partnerships contribute to meeting at least
  one California Initiative objective:
  • 7 focus on ethnic minority opportunities
  • 5 focus on employing workers from disadvantaged
    areas
  • 2 improving access to capital, capitalizing financial
    institutions that serve low income/minority communities
  • 8 have at least one female or minority partner
  • 8 have offices in California

                                                              13
California Initiative Summary
 Performance is improving
   ● Climbing out of the J-Curve
   ● Real value being created in the portfolio
   ● Still fairly early in Program’s life (limited liquidity to date)


 Partners continue to find attractive opportunities in CA

 The analysis and reporting of financial results and ancillary benefits of
  the California Initiative are greatly enhanced

 Staff will provide the Investment Committee with regular updates on
  financial and non-financial highlights of the Program

 Ancillary benefits assessment report to be completed annually


                                                                              14
California Initiative: Case Study
    Company         Graphic Press (www.graphicpress1.com)
CalPERS Partner     Nogales Investors
    Company         High end minority owned commercial printer in Commerce, CA
   Description         Received Corporate Plus Distinction-signifying top minority supplier status
                       Named by Fortune Magazine as a top minority owned business in the US
                       Named by Hispanic Business Magazine as Top 101 Minority -Owned Business
                       Strong Revenue Growth since Investment

  Meeting the        Graphic Press is located in an area where access to institutional
   California         equity capital is limited
   Initiative        Nearly 50% of the Company’s employees reside in economically
  Underserved         disadvantaged California communities
    Market           40% of the Co.’s officers are either female or ethnic minority
  Benchmarks
Nogales Investors’  Actively utilized their network to refer new clients
   Value Add        Focused management on minority supplier opportunities
                    Implemented initiative to improve operating margins
                    Obtained significant third-party growth capital resulting in
                     workforce expansion (which is 70% minority)

                                                                                                      15

								
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