Using Alternative Securities to

1
Atlanta Capital Management Company
NAST Treasury Management Conference
Using Alternative Securities to Achieve Yield and
Credit Stability
James A. Womack, CFA December 7, 2004
2
Traditional public fund investment guidelines
tend to give public funds these characteristics

• Very Short Term
• Total Liquidity
• No Price Fluctuation
• Highest Quality
• Easy To Do
• Easy To Audit
• Low Yield

Maximum Safety...
Reduced Investment Income
3
Operating Funds Yield Nearly Almost 4 Less Than
They Did A Few Years Ago
Yields on surplus operating funds are near all
time lows. One way to increase portfolio yield
is to increase credit exposure. However...
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Credit Risk Is Asymmetric Even When Economic
Times are Good.
SP Investment Grade Credit Quality Ratings
Changes
Number of changes
Ratio
Ratio of downgrades to upgrades
1.91
1.45
1.99
1.96
3.14
5.63
3.65
1.67
0.91
YTD
Upgrades
Downgrades
Data as of September 30, 2004
Source SP, Lehman Brothers
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Any Mistake Can Cost You Plenty Particularly in
a Lower Yielding Operating Fund.
Days from Downgrade to Default 127 Days 79
Days 72 Days 39 Days 3 Days 2 Days
Company Dresser Industries Pacific Gas
Electric WorldCom K-Mart Polaroid Enron
Date Downgraded to Junk August 11,
2003 January 17, 2001 May 10, 2002 December
14, 2001 July 12, 2001 November 30, 2001
Date Company Declared Bankruptcy December 16,
2003 April 6, 2001 July 21, 2002 January 22,
2002 July 15, 2001 December 2, 2001
Bonds were rated BBB and ratings were
withdrawn not downgraded on August 11, 2003.
Source Bloomberg, Atlanta Capital Management
Co. company names used for illustration only.
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Question Are There Other Options Available?
Answer YES!
Many government entities are turning to
non-traditional government backed and AAA rated
securities.
Specifically, mortgage-backed and asset-backed
securities.
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Traditional Mortgage-Backed Securities Cash
Flow Profile
Homeowner
Bank
Trustees
Guaranteed Timely Principal Interest Payments
Government Sponsored Entity (Ginnie Mae, Fannie
Mae, Freddie Mac)
Investors receive pro-rata share of interest,
principal, and principal prepayments. Investors
have uncertainty about when they get principal
back.
Investors
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Collateralized Mortgage Obligations (CMOs) Cash
Flow Profile
Homeowner
Bank
Trustees
Guaranteed Timely Principal Interest Payments
Government Sponsored Entity (Ginnie Mae, Fannie
Mae, Freddie Mac)
Classes Increase Cash Flow Certainty
Investor certainty is increased. Investors in
short-term, intermediate-term and long-term
securities can now participate in the
mortgage-backed securities market.









Class 3
Class 2
Class 1
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ABS Backed by Auto Loan Receivables Typical
Senior Subordinate Structure
Class
Rating
Size
Percent
A1 A2-A A2-B A3 A4
AAA AAA AAA AAA AAA
410,000,000 200,000,000 650,000,000 392,000,000 24
9,260,000
93.0
B A 60,200,000 5th Loss Protection 3.0
C BBB 40,135,000 4th Loss Protection
2.0
D BB 40,135,000 3th Loss Protection
2.0
Reserve Account 2nd Loss Protection 0.8
Reserve Account 1st Loss Protection 1.0
Total Loss Protection for Senior Note Holders
8.8
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Losses Have Averaged Less Than 1 Well Below the
8.8 Subordination
Fitch Ratings Prime Auto Loan Cumulative Net
Loss Index
Percent
Source Fitch RatingsBloomberg
Data as of November 2004
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Over Ten Years and Through Two Recessions, AAA-Rat
ed ABS Rarely Got Downgraded
Fitch Ratings Asset-Backed Securities Transition
Matrix 1991-2001
One-Year Transition
Downgrade Downgrade Downgrade To
Below Rating Category No Change To AA-Rated
To A-Rated A-Rated Default AAA 99.6 0.2
0.2 0.1 0.0
Fitch Ratings Asset-Backed Securities Transition
Matrix 1991-2001
Two-Year Transition
Downgrade Downgrade Downgrade To
Below Rating Category No Change To AA-Rated
To A-Rated A-Rated Default AAA 99.6 0.1
0.2 0.1 0.0
Source Fitch Ratings
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AAA Rated Asset-Backeds Typically Yield About
The Same or More Than A Rated Corporate Bonds
AAA Rated Asset-Backed Yields vs. Similar
Maturity A1 Rated Industrials
Percent
Source Lehman Brothers and Bloomberg
Data as of September 30, 2004
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CMOs and ABS Are Well Suited for Short-Term
Portfolios
Key credit distinctions of CMO ABS vs. Credit
CMO ABS Corporate Bonds Event
Risk None Significant Diversification Thousands
of Borrowers Single Credit Ratings
Oversight Continuous Reactive
Key structural distinctions of CMO ABS vs.
Credit
CMO ABS Corporate Bonds Coupon
Payments Monthly Semi-annually Principal
Payment Monthly At Maturity Principal
Window Predictable Fixed