Federal Home Loan Bank of San Francisco Executive Performance Unit Plan 2006 Plan (For Performance Period Beginning January 1, 2006 and Ending December 31, 2008)

2.1

Bank —Federal Home Loan Bank of San Francisco.

2.2

Board —the Board of Directors of the Bank.

2.3

Dividend Potential —one of the performance factors, as defined by the Plan, which constitute a Performance Metric.

2.4

Extraordinary Occurrences —those events that, in the opinion and discretion of the Board, are outside the significant influence of the Participants or the Bank and are likely to have a significant unanticipated effect, whether positive or negative, on the Bank’s operating and/or financial results, including, without limit, movement in interest rates, changes in financial strategies or policies or significant change in Bank membership.

2.5

Final Award —the amount ultimately paid to an eligible executive under the Plan.

2.6

Market Penetration —one of the performance factors, as defined by the Plan, which constitute a Performance Metric.

2.7

Member —a member of the Bank.

2.8

Participant —an officer of the Bank who is eligible to participate as designated in the Plan.

2.9

Performance Metric —each performance factor that is taken into consideration under the Plan in determining the value of the Plan Award.

2.10

Performance Period —the three-year period beginning January 1, 2006 and ending on December 31, 2008.

2.11

Plan —the Federal Home Loan Bank of San Francisco Performance Unit Plan (“PUP”).

2.12

Plan Award —an amount that is provisionally determined at the end of the Performance Period subject to adjustment as provided in Section 4.3.

2.13

Plan Year —a calendar year (January 1 through December 31) within a performance period.

2.14

Target Award —the award that may be earned for achieving target performance levels under each Performance Metric.

3.1

The Plan is a cash-based long-term incentive plan that establishes individual three-year Target Awards expressed as a percentage of a Participant’s base salary on February 1, 2006. The Plan establishes incentive awards related to achievement of Bank performance over a three-year Performance Period. The 2006 Plan is effective January 1, 2006 and is based on performance from January 1, 2006 through December 31, 2008.

3.2

Performance Metrics for the Plan are Dividend Potential (weighted 60%) and Market Penetration (weighted 40%). Target Performance Metric levels reflect the Bank’s long-term performance expectations.

3.3

Dividend Potential is the primary measure the Bank uses to determine total rate of return and is expressed as the spread over the Bank’s benchmark yield on invested capital before any provisions for retained earnings or accounting impacts of FAS 133. The target Dividend Potential is consistent with the Bank’s strategic plan forecast, and reflects the Bank’s mission-consistent focus on Member’s mortgage finance business. The target, threshold and maximum Dividend Potential for the Performance Period are set forth in the table in Section 4.2.

3.4

Market Penetration is calculated using a 3-year average of Member cr