LEGACY SECURITIES PUBLIC-PRIVATE

INVESTMENT PROGRAM

Pro

g p ram U

pdate 

–

Q J, uarter Ended 

June 30, 2010

July 19, 2010
OVERVIEW

IntroductionThis is the third 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 by PPIF. As of June 30, 2010, thhave completed their fundraising and have closed on approximately $7.4 billion of privatequity capital, which was matched 100 percent by Treasury, representing $14.7 billion of capital. Treasury has also provided $14.7 billion of debt capital, representing $29.4 billiopurchasing power. As of June 30, 2010, PPIFs have drawn-down approximately $16.2 btotal capital which has been invested in Eligible Assets and cash equivalents pending inveSummary of Capital by PPIF ($ in Millions)

Closed Equity and Debt Ca

Closing Private Treasury Treas

Fund

Closing

Date

Private

Equity

Treasury

Equity

Treas

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 Legacy 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,

 

Welli S i i d llington 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 $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.

y qy
PORTFOLIO HOLDINGS – SUMMARY BY SECTOR

The total market value of Non-Agency RMBS and CMBS held by all PPIFs was approximNon-Agency RMBS(2)– $13.5 billion CMBS – $2.4 billionbillion as of June 30, 2010. Approximately 85% of the portfolio holdings are Non-Agen15% are CMBS. The charts below show composition of Eligible Assets by sector(1).

$1,421 

$955 

7% $444 

18%

$435 

18%

$5,127 

38%

$ ,

11%

$6,019 $9

38

$624 

26%

,

45%

($ 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 $2 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 J 30 2010 P i d t f lPrime

100.0%

Alt-A

100.0%

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

Median Price: 79.6 Median Price: 63.3

46.5% 47.5%

40.0%60.0%80.0%

30.9%

48.1%

40.0%60.0%80.0%

3.3% 2.7%

0.0%

20.0%

< 40 40 - 60 60 - 80 80 - 100

10.2% 

0.0%

20.0%

< 40 40 - 60 60 - 80 

Subprime

80.0%

100.0%

Option ARM

80.0%

100.0% Median Price: 54.8 Median Price: 58.1

26.5% 30.7% 24.7%

18.1%

20.0%40.0%60.0%

5.8%

53.7%

33.1%

20.0%40.0%60.0%

0.0%

< 40 40 - 60 60 - 80 80 - 100

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 JuPi d t f l

100.0% 100.0%

Super Senior AM

100.0% Median Price: 82.6

Prices are expressed as a percent of par value.

Median Price: 94.3 

AM

40.0%60.0%80.0%

27 4%

40.0%60.0%80.0%

0.0% 0.0% 0.0%

0.0%

20.0%

< 40 40 - 60 60 - 80 80 - 100

0.0% 1.6%

27.4%

0.0%

20.0%

< 40 40 - 60 60 - 80 

AJ

80.0%

100.0% Median Price: 76.2

4.7%

14.0%

39.5% 41.9%

20.0%40.0%60.0%

4.7%

0.0%

< 40 40 - 60 60 - 80 80 - 100

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 PPinitial capital draw) as reported by each fund manager. Performance will vary among PPdifferent risk/return objectives, leverage ratios, and sector allocations among other reasoinfluence of these factors as well as others on performance may evolve over time based oconditions. Moreover, PPIFs are in the early stages of their three-year investment periodperiod during which Eligible Assets may be purchased) and early performance may be disproportionately impacted by structuring and transaction costs and the pace of capital dby each PPIF. Because of this, industry practice counsels that, at this stage, any performanalysis done on these funds would not generate meaningful results and it would be premdraw any long-term conclusions about the performance of individual PPIFs or PPIP in gthe data reported below. It should be noted that the current and past performance of a Pindicative of its future performance. 

Performance Since Incep( J , ) tion (As of June 30, 2010)

Fund Inception Date

Cumulative Net 

Performance 

Since Inception (1)(2)

N

Ra

Sinc

AG GECC PPIF Master Fund, L.P. 11/12/09 25.6% AllianceBernstein Legacy Securities Master Fund L P AllianceBernstein Legacy Securities Master Fund, L.P. 10/23/09 10/23/09 11 6%. Blackrock PPIF, L.P. 10/16/09 20.9% Invesco Legacy Securities Master Fund, L.P. 10/13/09 14.0% Marathon Legacy Securities Public-Private Investment Partnership, L.P. 12/15/09 12.5% Oaktree PPIP Fund, L.P. 02/19/10 4.3% RLJ Western Asset Public/Private Master Fund, L.P. 11/23/09 13.7% RLJ Western Asset Public/Private Master Fund, L.P. 11/23/09 13.7% Wellington Management Legacy Securities PPIF Master Fund, LP 10/19/09 9.0% (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.