LEGACY SECURITIES PUBLIC-PRIVATE

INVESTMENT PROGRAM

Pro

g p ram U

pdate 

–

Q p, uarter Ended Se

ptember 30, 2011

October 21, 2011
OVERVIEW

IntroductionThis is the eighth quarterly report on the Legacy Securities Public-Private Investment Program (“PPIP”). 

includes a summary of PPIP capital activity, portfolio holdings and current pricing, and program and funperformance. Treasury expects to provide additional information as the program continues to mature in quarterly reports. 

PPIP Overview PPIP OverviewPPIP is designed to support market functioning and facilitate price discovery in the mortgage-backed secallowing banks and other financial institutions to re-deploy capital and extend new credit to households aThe investment objective of PPIP is to generate attractive returns for taxpayers and private investors throopportunistic investments in Eligible Assets (as defined below) by following predominantly a buy and hoUnder the program, Treasury has committed $22.1 billion of equity and debt in public-private investmen(“PPIFs”) established by private sector fund managers for the purpose of purchasing Eligible Assets. The and private investors have also committed capital to the funds. PPIFs have eight-year terms which may b

consecutive periods of up to one-year each, up to a maximum of two years. To qualify for purchase by a securities must have been issued p gy rior to 2009 and have originally been rated AAA – or an eq 

uivalent rat

more nationally recognized statistical rating organizations – without ratings enhancement and must be sethe actual mortgage loans, leases, or other assets (“Eligible Assets”).Please see page 9 of this program update for a glossary of terms used throughout this document. Additioon PPIP can also be found at www.financialstability.gov.Neither this report nor the information contained herein constitutes an offer to sell or the solicitation of any securities. Any such offer or solicitation with respect to any PPIF may only be made by the applicablThis presentation has not been reviewed by any of the fund managers.The performance-related returns and valuations in this report are calculated using an independent third-p

h d l d ffi i l T i d i h Fi i l S h P id 

methodology and are not official Treasury estimates as reported in the Financial Statements or the Presid

Furthermore, performance-related returns, as used in this report, may differ materially from estimates rep

Financial Statements or the President’s Budget, which are calculated pursuant to the requirements of the Credit Reform Act of 1990. Treasury’s Financial Statements and the President’s Budget can be found at 

www.financialstability.gov and www.whitehouse.gov/omb/budget, respectively.
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, re$29.4 billion of total purchasing power. Summary of Capital Commitments by PPIF ($ in Millions)

Closed Equity and Debt Capital Co

Closing Private Treasury Treas

Fund Date Equity Equity DAG 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 Legacy Securities Master Fund L P Invesco Legacy Securities Master Fund, L.P. 09/30/09 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 Wellington Management Legacy Securities PPIF Master Fund, LP 10/01/09 10/01/09 1 149 , 1 149 , 2 

, 

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

$ 

(1) Excludes the effect of any repayments or reductions in the amount of outstanding obligations.(2) 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 F

a 1.13x multiple of paid in capital on Treasury's equity.
CAPITAL ACTIVITY

Set forth below is a summary of equity and debt paid in capital(1) by PPIF. As of September 30PPIFs have drawn-down approximately $23.1 billion of the total capital committed (78.5% of purchasing power), which has been invested in Eligible Assets and cash equivalents pending inaddition, Treasury has received approximately $887 million in net cumulative equity distributioapproximately $179 million in cumulative interest payments and approximately $940 million in d bt i i l t f th PPIF f S t b 30 2011 debt principal payments from the PPIFs as of September 30, 2011. Summary of Paid in Capital by PPIF ($ in Millions)

Fund

Inception 

Date

Purchasing 

Power(1)

Private

Equity

Treasury

Equity

Treasury

Debt Total

Private

Equity

Treasu

Equ

%

Purchasing

Power

Gross Paid in Capital(1) Gross D

q y q y q y q 

AG GECC PPIF Master Fund, L.P. 11/12/09 4,973 $ 1,117 $ $1,117 $2,235 4,470 $ 89.9% 99 $ 

$ 

AllianceBernstein Legacy Securities Master Fund, L.P. 10/23/09 4,602 1,035 1,035 2,070 4,141 90.0% 132 1

 

Blackrock PPIF, L.P. 10/16/09 2,780 528 528 1,053 2,109 75.9% 2 

 

Invesco Legacy Securities Master Fund, L.P.(3) 10/13/09 3,424 581 581 1,162 2,324 67.9% 468 4

 

Marathon Legacy Securities Public-Private Investment Partnership, 12/15/09 1,898 475 475 894 1,843 97.1% 9 

 

O k PPIP F d L P Oaktree PPIP Fund, L.P. 02/19/10 02/19/10 4 643 , 340 340 679 1 359 , 29 3%. 41 

RLJ Western Asset Public/Private Master Fund, L.P. 11/23/09 2,482 621 621 1,241 2,482 100.0% 79 

 

Wellington Management Legacy Securities PPIF Master Fund, LP 10/19/09 4,598 1,149 1,149 2,041 4,340 94.4% 76 

 

Total Paid in Capital (1) $ 5,846 29,400 $ 5,846 $ 11,375 $ 23,068 $ 78.5% 907 $ 9

$ 

(1) Excludes the effect of any repayments or reductions in the amount of outstanding obligations.(2) Excludes the effects of management fees and expenses attributable to either Private Equity or Treasury Equity(3) On 9/26/11, Invesco notified Treasury that the Investment Period for the PPIF was terminated. As a result, Treasury's debt obligation was reduced by approximately $550 m

amount of debt funded and outstanding at this time ($345 million). Treasury's equity obligation will be reduced upon the wind-up and liquidation of the fund.

Excludes the effects of management fees and expenses attributable to either Private Equity or Treasury Equity.
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 – $4.7 Billionof September 30, 2011. Approximately 77% of the portfolio holdings are Non-Agency RMBS CMBS. The charts below show composition of Eligible Assets by sector(1).

$398 

8% $707 15%

$1 741

$1,288 

8%

$5,335 

34%

$1,741

11%

$1,397 

30%

$7,465 

S p r S ni r AM AJ Oth 

47%

Prime Alt-A S bprim Subprime Opti n ARM Option ARM Super Senior AM AJ Othe

($ in Millions) ($ in Millions)

(1) Please see page 9 for a glossary of Non-agency RMBS and CMBS sector definitions. (2) Non-agency RMBS chart excludes $33 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 2011 Prices are expressed as a percent of par valuePrime

100.0%

Alt-A

100.0%

September 30, 2011. Prices are expressed as a percent of par value.

Median Price: 75.4 Median Price: 60.7

58.3%

40.0% 31.6%60.0%80.0%

34.7%

43.5%

40.0%60.0%80.0%

3.5% 6.6%

0.0%

20.0%

< 40 40 - 60 60 - 80 80 +

13.2% 

0.0%

20.0%

< 40 40 - 60 60 - 80 

Subprime

80.0%

100.0%

Option ARM

80.0%

100.0% Median Price: 50.3 Median Price: 57.8

39.6%

22.1% 23.9%

20.0% 14.3%40.0%60.0%

13.8%

47.4%

34.9%

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

87.5% 100.0%

Super Senior AM

100.0% Median Price: 87.5

Prices are expressed as a percent of par value.

Median Price: 103.1

AM

40.0%60.0%80.0%

40.0%60.0%80.0%

0.0%

12.5%

0.0%

0.0%

20.0%

< 40 40 - 60 60 - 80 80 +

0.0% 0.0%

11.5%

0.0%

20.0%

< 40 40 - 60 60 - 80 

AJ

62.5%

80.0%

100.0% Median Price: 74.0

0 0%

5.6%

31.9%

20.0%40.0%60.0%

0.0%

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. 
Set forth below is a summary of performance of Treasury’s equity since inception for the prog

fund manager. Note performance will vary among PPIFs due to different risk/return objective

PERFORMANCE

fund manager. Note performance will vary among PPIFs due to different risk/return objective

ratios, and sector allocations among other reasons. The influence of these factors as well as othperformance may evolve over time based on market conditions. PPIFs have been investing for approximately two years and have approximately one year remaining on their three-year investperiods. Performance to date may be disproportionately impacted by the pace of capital deploy

each PPIF. Because of this, industry practice counsels that, at this stage, any performance analthese funds would not generate meaningful results and it would be premature to draw any longconclusions about the performance of individual PPIFs or PPIP in general from the data repoIt should be noted that the current and past performance of a PPIF is not indicative of its futuper

formance. 

Performance Since Inception as of September 30, 2011 ($ in Millions) 

Program - Cumulative Performance

Capital 

Commitment (1)

Paid in 

Capital

Net Cumulative 

Distributions (2)

Net Ending 

Capital (2)

Fund Inception Date

Net Time Weighted 

Cumulative Return 

Since Inception (1)(2)

Net Internal 

Rate of Return 

Since Inception (1)(3)

Treasury Equity 7,350 $ 5,846 $ 887 $ 5,743 $ (2) Net of management fees and expenses attributable to Treasury's equity.(3) Calculated as the sum of Net Cumulative Distributions received and Ending Capital balance of Treasury's equity position as a multiple of Paid in Capital.(1) Excludes the effect of any repayments or reductions in the amount of outstanding obligations.

Fund Inception Date Since Inception Since Inception AG GECC PPIF Master Fund, L.P. 11/12/09 42.0% 13.1% AllianceBernstein Legacy Securities Master Fund, L.P. 10/23/09 24.4% 12.7% Blackrock PPIF, L.P. 10/16/09 33.1% 13.4% Invesco Legacy Securities Master Fund, L.P. 10/13/09 27.2% 19.5% Marathon Legacy Securities Public-Private Investment Partnership, L.P. 12/15/09 21.8% 6.2% Oaktree PPIP Fund, L.P. 02/19/10 16.8% 3.7% 

, / /

RLJ Western Asset Public/Private Master Fund, L.P. 11/23/09 31.9% 15.7% Wellington Management Legacy Securities PPIF Master Fund, LP 10/19/09 5.2% -3.3% (1) Net of management fees and expenses attributable to Treasury's equity.(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.(4) Calculated as the sum of Net Cumulative Distributions received and Ending Capital balance of Treasury's equity position as a multiple of Paid in Capital.
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 kd 

ac ed 

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 underlcollateral / 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, or characteristics that do not meet the standards for Prime loans. An Alt-A loan may have a borro

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 score less.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 that by 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 highcredit enhancement. Credit enhancement refers to the percentage of the underlying mortgage pbalance 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 CMBS securitization 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.