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LEGACY SECURITIES PUBLIC-PRIVATE
INVESTMENT PROGRAM
Program Update – Quarter Ended June 30, 2011
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July 22, 2011

OVERVIEW
Introduction
This is the seventh quarterly report on the Legacy Securities Public-Private Investment Program (“PPIP”). This report
includes a summary of PPIP capital activity, portfolio holdings and current pricing, and program and fund
performance. Treasury expects to provide additional information as the program continues to mature in subsequent
quarterly reports.
PPIP Overview
PPIP is designed to support market functioning and facilitate price discovery in the mortgage-backed securities markets,
allowing banks and other financial institutions to re-deploy capital and extend new credit to households and businesses.
The investment objective of PPIP is to generate attractive returns for taxpayers and private investors through long-term
opportunistic investments in Eligible Assets (as defined below) by following predominantly a buy and hold strategy.
Under the program, Treasury has committed $22.1 billion of equity and debt in public-private investment funds
(“PPIFs”) established by private sector fund managers for the purpose of purchasing Eligible Assets. The fund managers
and private investors have also committed capital to the funds. PPIFs have eight-year terms which may be extended for
consecutive periods of up to one-year each, up to a maximum of two years. To qualify for purchase by a PPIF, the
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securities must have been issued prior to 2009 and have originally been rated AAA – or an equivalent rating by two or
more nationally recognized statistical rating organizations – without ratings enhancement and must be secured directly by
the 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. Additional 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 solicitation of an offer to buy
any securities. Any such offer or solicitation with respect to any PPIF may only be made by the applicable fund manager.
This 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-party market
methodology and are not official Treasury estimates as reported in the Financial Statements or the President’s Budget.
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Furthermore, performance-related returns, as used in this report, may differ materially from estimates reported in the
Financial Statements or the President’s Budget, which are calculated pursuant to the requirements of the Federal
Credit Reform Act of 1990. Treasury’s Financial Statements and the President’s Budget can be found at
2
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 have completed
their 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 total equity
capital commitments. Treasury has also provided $14.7 billion of debt capital commitments, representing
$29.4 billion of total purchasing power.
Summary of Capital Commitments by PPIF ($ in Millions)
Closed Equity and Debt Capital Commitments (1)
Private
Treasury
Treasury Purchasing
Equity
Equity
Debt
Power
$
1,243 $
1,243 $
2,487 $
4,973

Fund
AG GECC PPIF Master Fund, L.P.                                              

Closing
Date
10/30/09

AllianceBernstein Legacy Securities Master Fund, L.P.

10/02/09

1,150

1,150

2,301

4,602

Blackrock PPIF, L.P.

10/02/09

695

695

1,390

2,780

Invesco Legacy Securities Master Fund, L.P.
Fund L P

09/30/09

856

856

1,712
1 712

3,424
3 424

Marathon Legacy Securities Public-Private Investment Partnership, L.P.

11/25/09

475

475

949

1,898

Oaktree PPIP Fund, L.P.

12/18/09

1,161

1,161

2,322

4,643

RLJ Western Asset Public/Private Master Fund, L.P.

11/05/09

621

621

1,241

2,482

Wellington Management Legacy Securities PPIF Master Fund, LP
Fund

10/01/09

1,149
1 149

1,149
1 149

2,299
2 299

4,598
4 598

7,350 $

7,350 $

Total Program Closed Commitments

$

14,700 $

29,400

(1)

Excludes $4.1 billion in total purchasing power within UST/TCW Senior Mortgage Securities Fund, L.P., which was wound-up and liquidated during
1Q 2010. Treasury realized a profit of $20.1 million on its $156.3 million equity investment in UST/TCW Senior Mortgage Securities Fund, L.P., equal to
a 1.13x multiple of paid in capital on Treasury's equity.

3

CAPITAL ACTIVITY
Set forth below is a summary of equity and debt paid in capital(1) by PPIF. As of June 30, 2011, the PPIFs
have drawn-down approximately $22.2 billion of the total capital committed (75.6% of total purchasing
power), which has been invested in Eligible Assets and cash equivalents pending investment. In addition,
Treasury has received approximately $714 million in net cumulative equity distributions, approximately
$147 million in cumulative interest payments and approximately $777 million in cumulative debt principal
payments from the PPIFs as of J
t f
th PPIF
f June 30 2011
30, 2011.
Summary of Paid in Capital by PPIF ($ in Millions)
Paid in Capital(1)
%
Purchasing Private Treasury Treasury
Purchasing
Power E i
P
Equity E i
Equity
Debt
D b
Total
T l
Power
P
$
4,973 $1,117
$1,117
$2,235 $ 4,470
89.9%

Fund
F d
AG GECC PPIF Master Fund, L.P.

Inception
Date
D
11/12/09

AllianceBernstein Legacy Securities Master Fund, L.P.

10/23/09

4,602

1,035

1,035

2,070

4,141

90.0%

Blackrock PPIF, L.P.

10/16/09

2,780

528

528

1,053

2,109

75.9%

Invesco Legacy Securities Master Fund, L.P.

10/13/09

3,424

581

581

1,162

2,324

67.9%

Marathon Legacy Securities Public-Private Investment Partnership, L.P.

12/15/09

1,898

475

475

894

1,843

97.1%

Oaktree PPIP Fund, L.P.

02/19/10

4,643

183

183

366

732

15.8%

RLJ Western Asset Public/Private Master Fund, L.P.

11/23/09

2,482

621

621

1,241

2,482

100.0%

Wellington Management Legacy Securities PPIF Master Fund, LP

10/19/09

4,598

1,036

1,036

2,041

4,112

89.4%

29,400
29 400 $ 5 576 $ 5 576 $ 11 062 $ 22 214
5,576
5,576
11,062
22,214

75.6%
75 6%

Total P id i C i l
T l Paid in Capital
(1)

(1)

$

Excludes net cumulative equity distributions and cumulative debt principal payments.

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PORTFOLIO HOLDINGS – SUMMARY BY SECTOR
The total market value of Non-Agency RMBS and CMBS held by all PPIFs was approximately $21.3 billion as
of June 30, 2011. Approximately 79% of the portfolio holdings are Non-Agency RMBS and 21% are CMBS.
The charts below show composition of Eligible Assets by sector(1).
Non-Agency RMBS(2)– $16.9 Billion

CMBS – $4.4 Billion

$1,371
8%
$1,963
$1 963
12%

$762
17%

$478
11%

$5,537
33%

$1,435
32%

$1,765
40%

$7,962
47%

Prime
Prim

Alt-A
Alt A
Subprime
S bprim
($ in Millions)

Option
Opti n ARM

Super Senior
S p r S ni r

(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.

AM
AJ
Other
Oth r CMBS
($ in Millions)

5

PORTFOLIO HOLDINGS – NON-AGENCY RMBS
The charts below illustrate the range of market prices of Non-Agency RMBS held by all PPIFs as of June
30, 2011
30 2011. Prices are expressed as a percent of par value.
value
Prime
100.0%

Alt-A
100.0%

Median Price: 79.6

80.0%

80.0%
60.0%

46.3%

46.7%

60.0%

46.9%

40.0%

40.0%
20.0%
3.4%

20.0%

3.6%

30.0%
12.9%

10.2%

0.0%

0.0%
< 40

40 - 60

60 - 80

< 40

80 +

Subprime
100.0%

Median Price: 63.8

40 - 60

60 - 80

80 +

Option ARM
100.0%

Median Price: 54.4

80.0%

80.0%

60.0%

Median Price: 62.0

60.0%

40.0%

31.9%

24.7%

25.8%

20.0%

49.7%

40.0%
17.6%

0.0%

20.0%

27.5%
14.4%

8.5%

0.0%
< 40

40 - 60

60 - 80

80 +

< 40

40 - 60

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

60 - 80

80 +
6

PORTFOLIO HOLDINGS – CMBS
The charts below illustrate the range of market prices of CMBS held by all PPIFs as of June 30, 2011. Prices
are expressed as a percent of par value.
value
Super Senior
100.0%

AM
88.9%

Median Price: 106.8

100.0%

80.0%

80.0%

60.0%

60.0%

40.0%

98.7%

Median Price: 96.2

40.0%

20.0%
0.0%

20.0%

11.1%
0.0%
< 40

0.0%
40 - 60

60 - 80

0.0%
80 +

0.0%

0.0%

1.3%

< 40

40 - 60

60 - 80

80 +

AJ
100.0%

Median Price: 87.7

84.4%

80.0%
60.0%
40.0%
15.6%

20.0%
0.0%
0 0%

0.0%
0 0%

< 40

0.0%

40 - 60

60 - 80

80 +

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

7

PERFORMANCE
Set forth below is a summary of performance of Treasury’s equity since inception for the program and by
fund manager. Note performance will vary among PPIFs due to different risk/return objectives, leverage
ratios, and sector allocations among other reasons. The influence of these factors as well as others on
performance may evolve over time based on market conditions. PPIFs still remain in the early stages of
their three-year investment periods and early performance may be disproportionately impacted by
structuring and transaction costs and the pace of capital deployment by each PPIF. Because of this,
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h PPIF B
f thi
industry practice counsels that, at this stage, any performance analysis done on these funds would not
generate meaningful results and it would be premature to draw any long-term conclusions about the
performance of individual PPIFs or PPIP in general from the data reported to date. For example, if the
market value of the PPIFs were to remain at current levels going forward, then the net rates of return on
forward
Treasury’s equity investment would decrease simply due to the passage of time. It should be noted that the
current and past performance of a PPIF is not indicative of its future performance.
Performance Since Inception as of June 30, 2011 ($ in Millions)
Program - Cumulative P f
P
C
l i Performance
Treasury Equity

Capital
Commitment
C
i
$
7,350

$

Paid in
Capital
C i l
5,576

Net Cumulative
Distributions
Di ib i
$
714

(1)

Net Ending
Capital
C i l
$
6,221

(1)

Net Multiple of
Paid in Capital
P id i C i l
1.24x

(1)(2)

Net of management fees and expenses attributable to Treasury's equity.

(2)

(1)

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.

Fund
AG GECC PPIF Master Fund, L.P.                                              
AllianceBernstein Legacy Securities Master Fund, L.P.
Blackrock PPIF, L.P.
Invesco Legacy Securities Master Fund, L.P.
Marathon Legacy Securities Public-Private Investment Partnership, L.P.
Oaktree PPIP Fund, L.P.
RLJ Western Asset Public/Private Master Fund, L.P.
Wellington Management Legacy Securities PPIF Master Fund, LP

Inception Date
p
11/12/09
10/23/09
10/16/09
10/13/09
12/15/09
02/19/10
11/23/09
10/19/09

Net Time Weighted
Cumulative Return
Since Inception
p
65.4%
33.4%
39.9%
36.3%
34.3%
25.4%
39.6%
19.1%

(1)(2)

(1)

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.

Net Multiple of
Paid in Capital
p
1.35x
1.26x
1.28x
1.25x
1.19x
1.14x
1.31x
1.09x

Time-weighted geometrically linked return calculated on a consistent basis across all PPIFs.

(3)

(1)(3)

Net of management fees and expenses attributable to Treasury's equity.

(2)

Net Internal
Rate of Return
Since Inception
p
32.2%
21.4%
20.4%
24.1%
18.6%
19.1%
23.5%
8.3%

8

(1)(4)

GLOSSARY OF TERMS
Non-Agency Residential Mortgage-Backed Securities (RMBS)

Non-Agency R id i l M
N A
Residential Mortgage B k d S
Backed Securities (RMBS) T
i i (RMBS): Type of mortgage-backed security
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i
that is secured by loans on residential properties that are not issued or guaranteed by Fannie Mae, Freddie
Mac or Ginnie Mae, or any other United States federal government-sponsored enterprise (GSE) or a
United States federal government agency. Non-Agency RMBS are typically classified by underlying
collateral / type of mortgage (i.e. Prime, Alt-A, Subprime, Option ARM).
Prime: M
Pi
Mortgage l
loan made to a b
d
borrower with good credit that generally meets the l d ’ strictest
ih
d di h
ll
h lender’s i
underwriting criteria. Non-Agency Prime loans generally are loans that exceed the dollar amount eligible
for 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 other
characteristics that do not meet the standards for Prime loans. An Alt-A loan may have a borrower with a
lower FICO score, a hi h r l
l
r
r
higher loan-to-value r ti or li it d or no d
t
l ratio, r limited r
documentation compared t a Prime loan.
t ti
p r d to Pri l
Subprime: Mortgage loan made to a borrower with poor credit, typically having a FICO score of 620 or
less.
Option ARM: Mortgage loan that gives the borrower a set of choices of how much interest and principal
to pay each month. This may result in negative amortization (i.e. an increasing loan principal balance over
time).
i )
Commercial Mortgage-Backed Securities (CMBS)

Commercial Mortgage Backed Securities (CMBS): Type of mortgage-backed security that is secured
by loans on commercial properties such as office buildings, retail buildings, apartment buildings, hotels,
y
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etc. CMBS are typically classified by position in the capital structure (i.e. Super Senior, AM, AJ).
Super Senior: Most senior originally rated AAA bonds in a CMBS securitization with the highest level of
credit enhancement. Credit enhancement refers to the percentage of the underlying mortgage pool by
balance that must be written down before the bond experiences any losses. Super Senior bonds often
comprised 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 Senior bonds.
AJ: The most junior bond in a CMBS securitization that attained a AAA rating at issuance.
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