LEGACY SECURITIES PUBLIC-PRIVATE

INVESTMENT PROGRAM

Pro

g p ram U

pdate 

–

Q p, uarter Ended Se

ptember 30, 2010

October 20, 2010
OVERVIEW

IntroductionThis is the fourth quarterly report on the Legacy Securities Public-Private Investment Program 

This report includes a summary of PPIP capital activity, portfolio holdings and current pricingperformance. Treasury expects to provide additional information as the program matures in squarterly reports. 

PPIP OverviewPPIP is designed to support market functioning and facilitate price discovery in the mortgage-securities markets, allowing banks and other financial institutions to re-deploy capital and extento households and businesses The investment objective of PPIP is to generate attractive returto households and businesses. The investment objective of PPIP is to generate attractive retur

taxpayers and private investors through long-term opportunistic investments in Eligible Assets below) by following predominantly a buy and hold strategy. Under the program, Treasury has $22.1 billion of equity and debt in public-private investment funds (“PPIFs”) established by prfund manag pp p g g g p ers for the purpose of purchasing Eligible Assets. The fund managers and private 

also committed capital to the funds. PPIFs have eight-year terms which may be extended for periods of up to one-year each, up to a maximum of two years. To qualify for purchase by a Psecurities must have been issued prior to 2009 and have originally been rated AAA – or an equby two or more nationally recognized statistical rating organizations – without ratings enhancebe secured directly by the actual mortgage loans, leases, or other assets (“Eligible Assets”).Please see page 8 of this program update for a glossary of terms used throughout this docume

information on PPIP can also be found at www.financialstability.gov.

Neither this report nor the information contained herein constitutes an offer to sell or the soli

offer to buy any securities. Any such offer or solicitation with respect to any PPIF may only b

applicable fund manager. This presentation has not been reviewed by any of the fund manage
CAPITAL ACTIVITY

Set forth below is a summary of equity and debt capital commitments by PPIF. The PPIFs havtheir fundraising and have closed on approximately $7.4 billion of private sector equity capital commitments, which has been matched 100 percent by Treasury, representing $14.7 billion of capital commitments. Treasury has also provided $14.7 billion of debt capital commitments, r$29.4 billion of total purchasing power. As of September 30, 2010, the PPIFs have drawn-down approximately $18.6 billion of the totacommitted, which has been invested in Eligible Assets and cash equivalents pending investmenhas received approximately $159 million in cumulative gross equity distributions, approximatelin cumulative interest payments and approximately $72 million in cumulative debt principal pathe PPIFs as of September 30 2010 the PPIFs as of September 30, 2010.Summary of Capital Commitments by PPIF ($ in Millions)

Closed Equity and Debt Capital Co

F d

Closing 

D

Private

E i

Treasury

E i

Treas

D 

Fund Date Equity Equity D

AG GECC PPIF Master Fund, L.P. 10/30/09 1,243 $ 1,243 $ 2,

$ 

AllianceBernstein Legacy Securities Master Fund, L.P. 10/02/09 1,150 1,150 2,

 

Blackrock PPIF, L.P. 10/02/09 695 695 1,

 

Invesco Legy , ac Securities Master Fund, L.P. 09/ / 30 09 856 856 1 

,

Marathon Legacy Securities Public-Private Investment Partnership, L.P. 11/25/09 475 475 

 

Oaktree PPIP Fund, L.P. 12/18/09 1,161 1,161 2,

 

RLJ Western Asset Public/Private Master Fund, L.P. 11/05/09 621 621 1,

 

Wellington Management Legacy Securities PPIF Master Fund, LP 10/01/09 1,149 1,149 2,

 

Total Program Closed Commitments 7,350 $ 7,350 $ 14,

$ 

(1) Excludes $4.1 billion in total purchasing power within UST/TCW Senior Mortgage Securities Fund, L.P., which was wound-up and 

1Q 2010. Treasury realized a profit of $20.1 million on its $156.3 million equity investment in UST/TCW Senior Mortgage Securities Fa 12.9% cumulative return on Treasury's equity contribution.
PORTFOLIO HOLDINGS – SUMMARY BY SECTOR

The total market value of Non-Agency RMBS and CMBS held by all PPIFs was approximately Non-Agency RMBS(2)– $15.9 billion CMBS – $3.4 billionof September 30, 2010. Approximately 82% of the portfolio holdings are Non-Agency RMBS CMBS. The charts below show composition of Eligible Assets by sector(1).

$

$1,123 

7%

$373 

$677 11%

20%

$5,900 

37%

$1,651 

11%

$7,187 

45%

$980 

29%

($ in Millions) ($ in Millions)

Prime Alt-A Subprime Option ARM Super Senior AM AJ Othe

(1) Please see page 8 for a glossary of Non-agency RMBS and CMBS sector definitions. (2) Non-agency RMBS chart excludes $12 million of Other RMBS. 
PORTFOLIO HOLDINGS – NON-AGENCY RMBS

The charts below illustrate the range of market prices of Non-Agency RMBS held by all PPIFs September 30 2010 Prices are expressed as a percent of par valuePrime

100.0%

Alt-A

100.0%

September 30, 2010. Prices are expressed as a percent of par value.

Median Price: 81.2 Median Price: 64.6

38.2%

55.4%

40.0%60.0%80.0%

27 6%

47.5%

40.0%60.0%80.0%

3.7% 2.8%

0.0%

20.0%

< 40 40 - 60 60 - 80 80 +

9.9%

27.6%

0.0%

20.0%

< 40 40 - 60 60 - 80 

Subprime

80.0%

100.0%

Option ARM

80.0%

100.0% Median Price: 59.2 Median Price: 61.7

17.2%

33.6%

25.0% 24.1%

20.0%40.0%60.0%

7.1%

30.5%

49.6%

20.0% 40.0%60.0%

0.0%

< 40 40 - 60 60 - 80 80 +

0.0%

< 40 40 - 60 60 - 80 

Note: Pricing is based on UST valuation process on a consistent basis across all PPIFs. Excludes Other RMBS.
PORTFOLIO HOLDINGS – CMBS

The charts below illustrate the range of market prices of CMBS held by all PPIFs as of SeptemPrices are expressed as a percent of par value

86.7%

100.0%

Super Senior AM

100.0% Median Price: 92.3

Prices are expressed as a percent of par value.

Median Price: 99.7

AM

40.0%60.0%80.0%

40.0%60.0%80.0%

0.0%

6.7% 6.7%

0.0%

20.0%

< 40 40 - 60 60 - 80 80 +

0.0% 1.3%

10.7%

0.0%

20.0%

< 40 40 - 60 60 - 80 

AJ

80.0%

100.0% Median Price: 81.4

3 3% 3 3%

38.3%

55.0%

20.0%40.0%60.0%

3.3% 3.3%

0.0%

< 40 40 - 60 60 - 80 80 +

Note: Pricing is based on UST valuation process on a consistent basis across all PPIFs. Excludes Other CMBS. 
PERFORMANCE

Set forth below is a summary of performance since inception (the date on which each PPIF mcapital draw) as reported by each fund manager. As of September 30, 2010, the PPIFs have gecumulative gross unrealized equity gains in excess of funded capital of more than $1.5 billion in investors (Treasury and private investors) in addition to the cumulative equity distributions mainvestors to date. Note performance will vary among PPIFs due to different risk/return objecl ti d t ll ti th Th i fl f th f t leverage ratios, and sector allocations among other reasons. The influence of these factors as w

others on performance may evolve over time based on market conditions. Moreover, PPIFs rearly stages of their three-year investment periods (the time period during which Eligible Assetpurchased) and early performance may be disproportionately impacted by structuring and tran

and the pace of capital deployment by each PPIF Because of this industry practice counsels tand the pace of capital deployment by each PPIF. Because of this, industry practice counsels t

stage, any performance analysis done on these funds would not generate meaningful results anbe premature to draw any long-term conclusions about the performance of individual PPIFs ogeneral from the data reported to date. It should be noted that the current and past performanPPIF is not indicative of its future performance. 

Performance Since Inception (As of September 30, 2010)

Fund Inception Date

Net Time-Weighted 

Cumulative Return 

Since Inception (1)(2)

Ra

Sin

AG GECC PPIF Master Fund, L.P. AG GECC PPIF Master Fund, L.P. 11/12/09 11/12/09 42.3% AllianceBernstein Legacy Securities Master Fund, L.P. 10/23/09 26.4% Blackrock PPIF, L.P. 10/16/09 34.6% Invesco Legacy Securities Master Fund, L.P. 10/13/09 28.4% Marathon Legacy Securities Public-Private Investment Partnership, L.P. 12/15/09 26.0% Oaktree PPIP Fund, L.P. 02/19/10 9.7% RLJ Western Asset Public/Private Master Fund, L.P. 11/23/09 27.5% Wellington Management Legacy Securities PPIF Master Fund, LP 10/19/09 17.3% (1) Performance is net of management fees and expenses attributable to Treasury.(2) Time-weighted geometrically linked return calculated on a consistent basis across all PPIFs.(3) Dollar-weighted rate of return calculated on a consistent basis across all PPIFs.
GLOSSARY OF TERMS

Non-Agency Residential Mortgage-Backed Securities (RMBS)Non-A R id i l M B k d S i i (RMBS) Agency Residential Mortgage Backed Securities (RMBS): T f ype o mortgage-b k

ac e

that is secured by loans on residential properties that are not issued or guaranteed by Fannie MMac or Ginnie Mae, or any other United States federal government-sponsored enterprise (GSEUnited States federal government agency. Non-Agency RMBS are typically classified by undercollateral / type of mortgage (i.e. Prime, Alt-A, Subprime, Option ARM).

P ir me: M l d b i h d di h ll h l d ’ 

Mortgage loan made to a borrower with good credit that generally meets the lender’s s

underwriting criteria. Non-Agency Prime loans generally are loans that exceed the dollar amoufor purchase by the GSEs (jumbo loans), but may include lower balance loans as well.Alt-A: Mortgage loan made to a borrower with good credit but with limited documentation, ocharacteristics that do not meet the standards for Prime loans. An Alt-A loan may have a borr

l r FICO r hi h r l lower FICO score, a higher loan-to-val r ti r li it d r d t ti p r d t 

lue ratio, or limited or no documentation compared to a 

Subprime: Mortgage loan made to a borrower with poor credit, typically having a FICO scorless.Option ARM: Mortgage loan that gives the borrower a set of choices of how much interest anto pay each month. This may result in negative amortization (i.e. an increasing loan principal b

ti ) me .Commercial Mortgage-Backed Securities (CMBS)Commercial Mortgage Backed Securities (CMBS): Type of mortgage-backed security thaby pp g g p g loans on commercial properties such as office buildings, retail buildings, apartment buildingetc. CMBS are typically classified by position in the capital structure (i.e. Super Senior, AM, AJSuper Senior: Most senior originally rated AAA bonds in a CMBS securitization with the high

credit enhancement. Credit enhancement refers to the percentage of the underlying mortgage balance that must be written down before the bond experiences any losses. Super Senior bondcomprised 70% of a securitization and therefore had 30% credit enhancement at issuance.

AM: Mezzanine-level originally rated AAA bond. AM bonds often comprised 10% of a CMBsecuritization and therefore had 20% credit enhancement at issuance, versus 30% for Super SeAJ: The most junior bond in a CMBS securitization that attained a AAA rating at issuance.