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2014 AFP

Liquidity Survey Report of Survey ResultsUnderwritten by

Association for Financial Professionals4520 East-West Highway, Suite 750Bethesda, MD 20814Phone 301.907.2862 Fax 301.907.2864 www.AFPonline.org

2014 AFP Liquidity SurveyIntroduction and Key Findings

July 2014

Underwritten by

There are signs that the market disruptions of recent years may be moving into the rear-view mirror. In today’s economic climate, financial professionals are showing signs of confidence and optimism as they plan for the road ahead and continue to seek insights around best practices for attaining corporate objectives while preserving and leveraging corporate capital. As the sponsor of the AFP Liquidity Survey for the third consecutive year, RBS Citizens understands the importance of bringing the latest information and ideas to the marketplace.

This year’s survey received 740 responses from a diverse group of companies and will help to gauge the latest ideas financial managers have and the challenges and opportunities they face in today’s marketplace. Here are some of the themes that were noteworthy throughout the survey and tell us what respondents do, how they do it - and what “keeps them up at night”.

Instant replay Safety and liquidity continue to be the top priorities among survey respondents at 68% and 28%, respectively. As long as yield remains scarce in the marketplace it remains a very distant third.

All time high Even with the end of TAG (Transaction Account Guarantee) program and unlimited FDIC insurance coverage no longer available, an all-time high of 52% of all corporate cash remains with banks. This is a record percentage for the history of the AFP Liquidity Survey. This is not surprising, given the lack of attractive alternatives in the market, and a viable ECR (Earnings Credit Rate) available to help offset cash management fees.

No resolution Money market fund regulation questions are still swirling, leaving uncertainty the only descriptor for this vehicle.

Light at the end? With rough roads hopefully in the rear-view mirror, there are good signs of increased optimism down the road coming from respondents. U.S. businesses appear to be more confident. According to the AFP Corporate Cash Indicators™, U.S. businesses are willing to put their cash to work toward increased capital expenditures, debt pay downs, and new merger and acquisition activity - all boding well for future economic growth.

At RBS Citizens and Citizens Bank, we want to be your guide to help you take advantage of every opportunity to maintain safety and liquidity and help you prepare and position your cash management needs for better times that are hopefully on the horizon.

We welcome any feedback to the survey and the opportunity to work with you to meet your business objectives.

Sincerely,

Matthew B. RichardsonSenior Vice President, Treasury Solutions

©2014 Association for Financial Professionals, Inc. All Rights Reserved www.AFPonline.org 1

2014 AFP Liquidity Survey

Introduction Companies face a number of challenges when deciding how to manage their cash holdings. The business and regulatory climate remains one of middling economic growth and uncertainty. At the same time, the historic ultra-low interest rate environment greatly reduces the opportunity to generate yield. Consequently, organizations’ Treasury functions remain focused on ensuring the safety of their companies’ historically large cash and short-term investment holdings and main-taining corporate liquidity.

But changes appear to be on the horizon. The labor market continues to regain its footing and inflation is moving back towards long-term trends. As a result, the Federal Reserve has begun to gradually ratchet back its accommodative monetary policies. During the first half of 2014, the Fed slowed its asset purchasing program—a program which resulted in the Fed’s balance sheet burgeon-ing to more than $4.3 trillion by May 2014. It is likely that sometime in 2015 or early 2016 the Fed will also begin to push up short-term interest rates by raising the fed funds target rate above the current near-zero percent level where it has been since December 2008.

Another sign of change is how organizations are accumulating cash. More specifically, the rate of growth of cash accumulation has slowed, as reported in the quarterly AFP Corporate Cash Indicators™.1 This is a reflection of the growing confidence of U.S. businesses about their future prospects and they are thus more willing to use their cash to make capital investments, hire work-ers, engage in merger and acquisition activity, pay out dividends and repurchase company stock.

What has not changed is companies’ heavy reliance on bank deposits as their investment vehicles of choice. While access to unlimited FDIC insurance under the Transaction Account Guarantee (TAG) program ended a year and a half ago, 52 percent of all corporate cash holdings are still maintained at banks—the largest share reported since the Association for Financial Professionals® began tracking such activity. One reason for this high level of bank deposits is the lack of strong investment alternatives that generate yield. Another is the availability of Earned Credit Rates (ECRs) which help many organizations defray cash management and other banks fees.

Still another factor is the continued regulatory uncertainty surrounding money market funds (MMFs). It has been a year since the U.S. Securities and Exchange Commission (SEC) proposed reforms for these investment vehicles. Among those proposals was one that would allow float-ing of the net asset value (NAV) for prime institutional funds, an approach that ultimately could temper the perceived safety of the investment vehicle that had made these MMFs attractive as repositories for corporate short-term cash. In recent years, as proposals for regulating MMFs have been discussed, some organizations have moved significant proportions of their cash holdings away from MMFs and back into banks. Several questions arise from this. What, if anything, will occur should the SEC finally move ahead on its proposed regulatory changes? If companies move to liquidate some or all of their cash holdings, where then would these funds go?

To gauge these and other current and emerging trends in organizations’ cash and short-term investment holdings, investment policies and strategies, the Association for Financial Profes-sionals® (AFP) conducted its ninth annual Liquidity Survey in May 2014. The survey generated 740 responses which are the basis of this report. (For more details about the survey, see page 29.) Results from this survey report can provide financial professionals with critical benchmarks on short-term investment holdings and strategies.

AFP thanks RBS Citizens and Citizens Bank for underwriting the 2014 AFP Liquidity Survey. The Research Department of the Association for Financial Professionals designed the survey questionnaire, analyzed the survey results and produced the report and is solely responsible for its content.

1. www.AFPonline.org/CCI

2 www.AFPonline.org ©2014 Association for Financial Professionals, Inc. All Rights Reserved


Key Findings • Thirty-six percent of survey respondents report that their organizations held greater cash

balances during the first quarter of 2014 than in the first quarter of 2013. Fewer than one in four indicate their organizations reduced cash and short-term investment balances

during that same period, while for 41 percent of respondent organizations there was no significant change. > Key reasons why companies built up cash balances include:

- Generation of greater operating cash flow (cited by 73 percent of survey respondents) - Accessing debt markets (18 percent) - Acquisition of a company or launch of new operations (18 percent)

> Key reasons why companies reduced cash balances include: - Increased capital expenditures (43 percent) - Decreased operating cash flows (36 percent) - Retiring debt (28 percent)- Acquisition of a company or launch of new operations (20 percent)- Increased stock repurchases and/or dividends (20 percent)

• Three in four organizations (76 percent) have a written document defining their policies for short-term investments. > Safety remains the driving principle of organizations’ investment strategies. Slightly more

than two-thirds of respondents (68 percent) indicate that safety is the most important short-term investment objective for their organizations while 28 percent of respondents

report their organizations’ most important cash investment policy objective is liquidity (these results are essentially unchanged from those in the 2013 Liquidity Survey).

> Beyond bank deposits, the most widely cited permissible investment vehicles are Treasury securities, money market funds and commercial paper.

> On average, organizations permit 4.4 investment vehicles beyond bank deposits for their short-term investment portfolio, a slight decrease from the average 4.6 vehicles reported in the 2013 survey.

• Fifty-two percent of short-term investment balances are maintained in bank deposits, a slightly larger share than the 50 percent reported in the 2013 survey and the largest share reported since AFP began conducting the Liquidity Survey in 2006. As recently as 2008, the average bank-deposit allocation was only 25 percent. > Seventy-five percent of all cash balances are maintained in banks, money market funds and

Treasury securities. In 2006, the percentage of short-term investments holdings maintained in the same instruments was 56 percent.

> Organizations invest in an average of 2.7 vehicles for their cash and short-term investment balances, matching the average reported in the 2013 survey report.

> Seventy percent of short-term investment portfolios are maintained in investments with maturities of 30 days or less. Four out of five financial professionals do not anticipate any change in the tenor of their organizations’ investment portfolios over the next year.



Holdings of Cash and Short-Term InvestmentsA continuing uneven economic recovery and uncertainty about future business and regulatory conditions have led to a still cautiously optimistic business outlook, a view reflected in organiza-tions’ cash and short-term investment decisions. Thirty-six percent of organizations held greater cash balances during the first quarter of 2014 than in the first quarter of 2013. Twenty-three percent of organizations reduced their cash and short-term investment balances during that time frame while 41 percent had no significant change.

Year-over-year changes in cash and short-term investment balances are similar across key organizational demographics. But there are some differences. As in 2013, organizations that are net investors are more likely than net borrowers to have increased their cash holdings dur-ing the past year (40 percent versus 28 percent).

It is important to note that variation in cash holdings can be seasonal and is dependent on current economic conditions. As companies weigh their business prospects against business environment uncertainty, many build up their cash balances and keep that cash on the sidelines, awaiting better economic conditions and/or the right growth opportunity, thus creating variabil-ity in the measurement of cash holdings.

Overall Change in Cash and Short-Term Investment Balances During the Past Year(Percentage Distribution)

Annual Annual All Revenues Revenues Net Net Investment Non- Publicly Privately Responses Under At Least Borrower Investor Grade Investment Owned Held $1 Billion $1 Billion Grade

Much larger(+15%) 11% 9% 12% 6% 13% 11% 8% 12% 10%

Somewhat larger 25 25 24 22 27 24 28 25 23

No significant change 41 45 33 47 34 40 39 34 44

Somewhat smaller 13 15 16 13 16 15 14 14 17

Much smaller (-15%) 10 6 15 12 10 10 11 14 7



Three in five organizations hold some amount of their cash outside of the U.S. The share in-creases to three-quarters for publicly owned organizations; one in three of these companies holds at least half of their cash outside of the U.S. Large organizations are also more likely than smaller ones to maintain cash in international investments. Two-thirds of large organizations—those with at least $1 billion in annual revenues—hold cash outside the U.S. versus just under half of organizations with annual revenues under $1 billion that do so. The difference may reflect what are typically more complex financial, tax and operational considerations of many large, public companies or companies that see growth in emerging markets outside the U.S.

Percentage of Organization’s Cash and Short-Term Investments Outside the U.S.(Percentage Distribution)


Zero Percent 40% 51% 32% 39% 42% 41% 38% 24% 43%

Less than 10 percent 19 20 19 19 21 19 23 18 23

10-24 percent 11 9 13 10 12 10 12 13 11

25-49 percent 7 4 10 6 8 8 7 11 7

50-74 percent 9 6 13 9 10 9 12 17 6

At least 75 percent 14 10 13 18 8 17 8 16 10

More than half of financial professionals whose organizations have non-U.S. cash holdings report significant changes to their companies’ average balances over the past year. More organiza-tions increased their average balances of both U.S. and non-U.S. cash holdings than decreased them, a pattern consistent with their overall shifts in balances.

Organizations adjust cash and short-term investment balances in order to meet different business needs and objectives. As more companies look to grow from business opportunities overseas, cash will continue to grow in those non-U.S. markets as well and based on results grew at an increasing pace from 2013 to 2014. Much of organizations’ cash balances outside the U.S. remain in the country where the cash was generated rather than quickly repatriated back to the U.S. A mix of tax policies that dis-incentivize the repatriation of these funds, more complex operations and (at least in some cases) better business prospects outside of the U.S. suggest that many companies will grow their cash balances outside the U.S. for the foreseeable future.

Change in Cash and Short Term Balances Over the Past Year: U.S. and Non-U.S. Cash Holdings(Percentage Distribution of Organizations with Cash and Short-Term Investment Holdings Outside of the U.S.)

Much Somewhat No Significant Somewhat Much Larger (+15%) Larger Change Smaller Smaller (-15%)

Within the U.S. 14% 18% 46% 11% 11%

Outside the U.S. 14 31 42 10 4



A few factors account for much of the change in overall cash balances, with one—operating cash flow—particularly important. Similar to results in the 2013 survey, most organizations that increased their cash holdings during the past 12 months did so because they generated higher operating cash flow (cited by 73 percent of respondents). The next most commonly cited causes of greater cash holdings are an organization’s decision to increase debt outstanding or accessing debt markets (18 percent) and generating additional revenues resulting from an acquisition of a company or the launch of new operations (16 percent).

For those organizations that had smaller cash holdings compared to a year ago, the key reasons for the reduced cash holdings include:

• Increased capital expenditures (cited by 43 percent of survey respondents) • Decreased operating cash flows (36 percent) • Paid back/retired debt (28 percent)• Merger/Acquisition activity (20 percent)• Increased share repurchases/dividends (20 percent). The relationship between cash flow and cash holdings is not surprising. Similar to last year’s

survey results, companies are looking for the ability to generate cash internally from operations and spending cash on increased capital expenditures. Other leading drivers of change, such as increasing capital expenditures, paying down debt and the recent pickup in acquisition activ-ity may reflect increased corporate confidence in future prospects and therefore bode well for economic growth in the future.

Leading Causes of the Net Change in Organization’s Cash Holdings(Percent of Respondents Citing Increased or Decreased Cash Holdings)

100%

80%

60%

40%

20%

0%

73%

18% 18%

43%

36%28%

Increased holdings

Incr

ease

d op

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cash

flow

Incr

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Incr

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Dec

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Paid

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Dec

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20%

Incr

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20%16%



Just over half of financial professionals anticipate their organizations will maintain current levels of cash balances during the next 12 months. A larger share of survey respondents indicates their organizations are likely to see cash balances increase over the next year rather than decrease: three in ten respondents anticipate their organizations will grow their cash balances over the next 12 months while 18 percent expect cash balances to contract.

The expected growth of cash and short-term investment balances in the next 12 months is fairly consistent across organizational categories. Expected changes in cash holdings reflect underlying fluctuations in business outlook and operations. These changes in cash balances could also be tied to an increase or decrease in free cash flow generation, merger and acquisition activity, capital expenditures, share repurchases and possible dividends.

Expected Change in Cash and Short-Term Investment Balances Over the Next Year(Percentage Distribution)


Larger 30% 31% 29% 32% 29% 29% 33% 30% 36%

About the Same 51 52 49 51 50 52 48 52 43

Smaller 18 17 21 17 21 19 19 17 21



Business outlook is an implicit driver of anticipated levels of change in organizations’ cash holdings over the next 12 months. Among those survey respondents who anticipate their organi-zations will increase cash holdings, three-quarters (77 percent) see such action will be the direct result of increased operating cash flow.

Forty-three percent of financial professionals from organizations that expect to decrease their cash holdings in the next 12 months believe their organizations will do so primarily because of an increase in capital expenditures. In addition, a quarter of those anticipating a decline in cash cite paying down or retiring debt and acquisition of a company/subsidiary or launching a company as main reasons for such action. Twenty-two percent of respondents from these same organizations anticipate a decrease in U.S. cash holdings will result from a decrease in operating cash flows.

Primary Drivers of Anticipated Change in Short-Term Cash Balances over the Next 12 Months(Percent of Organizations Anticipating an Increase or Decrease in Cash Holdings)

100%

80%

60%

40%

20%

0%

77%

17% 16%

43%

25% 24%

Increased holdings

Incr

easin

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13%



Primary Drivers of Anticipated Change in Short-Term Cash Balances over the Next 12 Months(Percent of Respondents)

Organizations Expecting Organizations Expecting U.S. Cash Holdings to U.S. Cash Holdings to Increase Over the Next 12 Months Decrease Over the Next 12 Months

Increasing operating cash flow 77% 8%

Shortening/decreasing working capital cash conversion cycle 17 9

Decreasing capital expenditures 16 2

Acquiring company/subsidiary and/or launched new operations 13 24

Increasing capital expenditures 13 43

Increasing debt outstanding/accessed debt markets 12 10

Paying back/retiring debt 11 25

Issuing equity 8 1

Increasing share repurchases or dividends 5 17

Lengthening/increasing working capital cash conversion cycle 5 5

Divesting company/subsidiary and/or closed operations 4 5

Decreasing operating cash flow 3 22



Investment Policies Written investment policies are widely used for setting parameters for managing cash and short-term investments. Such documents typically outline the permitted investment vehicles and the percentage of an organization’s portfolio that may be allocated to those vehicles. Policies can specify the maximum maturity and the minimum credit rating required for each investment vehicle. Maintaining a written investment policy is considered a best practice and often is part of an organization’s efforts to comply with Sarbanes-Oxley regulations (SOX).

Seventy-six percent of organizations have a written document in place defining their short-term investment policies. Most large, investment-grade and publicly held organizations have such written guidelines, but a significant percentage of smaller organizations, those with non-investment grade credit ratings and those that are privately held do not. Thirty-nine percent of privately held companies, 37 percent of organizations with annual revenues under $1 billion and 36 percent of non-investment grade organizations do not have written cash investment policies.

Prevalence of Written Cash Investment Policies(Percent of Organizations)

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

All responses

Annual revenue under $1 billion

Annual revenue at least $1 billion

Net borrower

Net investor

Investment grade

Non-investment grade

Publicly owned

Privately held

76%

64%

87%

67%

83% 82%

64%

87%

61%



When setting their cash investment policies, many organizations strive to balance their desire for safety and liquidity against a competitive rate of return. Safety of principal remains paramount: slightly more than two-thirds (68 percent) of respondents indicate that safety is the most important short-term investment objective for their organizations. While this share is unchanged from the percentage in the 2013 survey, it is a decrease from that reported in the surveys conducted during and immediately after the last recession. The percentage peaked in 2009 at 84 percent, reflecting the flight to safety during the financial crisis.

Twenty-eight percent of survey respondents indicate their organizations’ most important cash investment policy objective is liquidity. While this share is off a percentage point from the figure in the 2013 survey, it remains significantly above the 21 percent in the 2012 survey and the 18 percent in 2011.

One definition of liquidity is having cash when an organization needs it in order to meet short-term obligations. As companies look to position their cash holdings to respond to changing business climates, many of the leading factors underlying growing or declining cash balances may also be driving the increased importance of liquidity in their investment objectives. For example, compa-nies that are accessing debt markets, making acquisitions, paying dividends, exercising buybacks, increasing capital expenditures, and experiencing changes in operating cash flows are all potential candidates for greater focus on liquidity, both domestically and internationally.

Positioning one’s company to perform optimally requires good liquidity management. Treasury departments are becoming more strategic partners within their organizations as they leverage their expertise in providing the necessary liquidity in supporting the company. Although safety of prin-cipal remains paramount, companies are becoming increasingly comfortable with counterparty risk and concentration risk, as evidenced by a high allocation of corporate cash in bank deposits.

With liquidity more of a focus for a significant share of organizations, yield has remained a distant third as a short-term investing principle. The percentage of financial professionals citing return as the most important investment objective is a mere four percent. The reality of the current low-yield environment remains a headwind for any organization whose primary cash or short-term investment objective is return.

With the Federal Reserve slowly moving to end its asset purchasing program—and begin-ning to plan for an eventual hike in interest rates—the question is whether yield will become an important consideration if/when interest rates begin to rise in the future. If and when rates rise, organizations will want to be well-positioned to take advantage of an economic environment that offers the possibility of earning yield. Such preparation includes reviewing the organization’s investment policy to ensure that the maturity and credit quality mix enables the organization to generate the yield pickup accordingly.

The Most Important Objective of Organizations’ Cash Investment Policy(Percentage Distribution)

68%

28%

4%

Safety

Liquidity

Yield



Most organizations monitor their investment policies as part of their normal management functions. Corporate investment policies undergo periodic review to adjust for many factors. Among them are changes in the financial condition of an organization, changes to an organiza-tion’s risk tolerance, changes in overall market conditions and evolving preferences of an organi-zation’s Board of Directors or its management.

While not all organizations that maintain written cash investment policies review or update the policies regularly, the percentage of organizations that do review them on a regular basis continues to increase, highlighting the importance organizations are placing on monitoring investment policies. Seventy-nine percent of organizations with written investment policies review the policies on a regu-lar basis, down slightly from the 84 percent in 2013 but close to the 81 percent in the 2012 survey.

A majority of organizations that review their investment policies do so at least on an annual basis. Overall, 43 percent of organizations review and/or update the policies once a year. Seven-teen percent of organizations with written investment policies review/update them even more frequently, including nine percent that do so every quarter.

Frequency of Review/Update of Cash Investment Policy(Percentage Distribution of Organizations with a Written Cash Investment Policy)

At nearly half of organizations, investment polices call out and/or separate the cash holdings used for day-to-day liquidity from the rest of the company’s cash and short-term investment holdings. This includes a policy stipulating the amount of cash holdings that are set aside for day-to-day liquidity versus other uses. Smaller organizations, those that are net investors and those that hold an investment-grade credit rating are more likely to have investment policies that separate the cash used for day-to-day liquidity than are other organizations.

Organizations With Investment Policies that Call Out/Separate Cash Holdings Used for Day-to-Day Liquidity(Percentage Distribution)

43%

21% 7%8%

19%

Once a quarter

Every six months

Once a year

Every 2-4 years

Not on a regular basis

49%51%Policies call out/separate cash holdings

Policies do not call out/separate cash holdings



Current Strategy Most organizations have a list of permissible investment vehicles they can hold in their short-term investment portfolios; virtually all companies include bank deposits as an allowable place to store cash. Beyond banks, the most prevalent place to place cash is Treasury bills, cited by 63 percent of organizations. But that is a significant decrease from the 72 percent in the 2013 survey and well below the 82 percent of organizations that included Treasury bills on their list of permitted investment vehicles in 2012.

The list of widely cited permissible investment vehicles also includes:• “Pure” Treasury money market mutual funds (2-a7) (cited by 47 percent of survey respondents)• Commercial paper (45 percent)• Diversified money market mutual funds (2-17) (41 percent). On average, organizations permit 4.4 investment vehicles beyond bank deposits for their

short-term investment portfolio—more than the 4.2 vehicles reported in 2013 but less than the 4.9 vehicles in the 2011 survey. Larger organizations allow a greater number of investment options than do smaller companies. Among organizations reporting revenue figures, those with annual revenues of at least $1 billion permit the use of an average of 4.9 investment vehicles for their short-term investments in addition to bank deposits. By comparison, smaller organizations (with annual revenues of less than $ billion) permit an average of 4.1 investment vehicles. There is a similar relationship in organizations that are net investors versus those that are net borrow-ers: net investors allow for an average of 4.8 investment vehicles while net borrowers allow for an average of 4.0 investment vehicles.



Permissible Investment Vehicles per Organization’s Short-Term Investment Policy in Addition to Bank Deposits (Percent of Respondents)

Annual Annual All Revenues Revenues Net Net Investment Non- Publicly Privately 2013 Survey Responses Under At Least Borrower Investor Grade Investment Owned Held All $1 Billion $1 Billion Grade Respondents

Treasury bills 63% 57% 68% 50% 73% 66% 57% 64% 52% 72%

“Pure” Treasury money market mutual funds (2-a7) 47 41 55 43 52 52 41 55 35 59

Commercial paper 45 34 54 40 50 50 36 49 34 55

Diversified money market mutual funds (2-17) 41 32 51 36 47 44 39 49 31 51

Agency securities 36 29 40 25 44 39 31 33 28 42

Repurchase agreements 35 31 38 31 39 39 28 35 28 38

Eurodollar deposits (U.S. dollar denominated time deposits at banks outside the United States) 29 13 42 34 27 30 32 45 24 29

Municipal securities 28 30 28 20 36 33 20 24 25 31

Asset-backed securities 21 19 22 14 27 23 15 18 19 23

Separately managed account 20 17 24 16 24 23 16 20 18 22

Enhanced cash funds (e.g., cash plus) 17 17 21 14 21 18 17 19 14 21

Variable rate demand notes 13 13 13 9 16 14 11 13 12 15

Auction rate securities 4 4 3 4 4 4 5 4 4 5

Mean number of investment vehicles 4.4 4.1 4.9 4 4.8 4.6 4.3 4.5 4 4.6



In addition to specifying permissible investment vehicles, cash investment policies often dictate the maximum proportion of an organization’s cash and short-term investment balances that can be allocated to the vehicles. Such policies are intended to diversify exposures and minimize risk.

A majority of organizations allow at least half of their cash and short-term investment bal-ances in a few vehicles: bank deposits, Treasury bills and pure money market funds. Fewer organizations have light restrictions on other investment vehicles, including agency securities (47 percent), diversified money market mutual funds (47 percent), Eurodollar (40 percent) and separately managed accounts (36 percent).

At the same time, investment policies at a large number of organizations place stricter limits on allocations for a number of investment vehicles. At least half of organizations do not permit more than a quarter of their investment portfolios to be placed in:

• Auction rate securities (cited by 88 percent of survey respondents)• Asset-backed securities (68 percent)• Variable rate demand securities (65 percent)• Municipal securities (62 percent)• Enhanced cash funds (56 percent)• Commercial paper (54 percent)• Repurchase agreements (51 percent).

Allowable Percentage of Short-Term Portfolio That Organizations Can Allocate to InvestmentVehicle per Short-term Investment Policy(Percentage Distribution of Organizations Permitting the Investment Vehicle)

50% or More 25-49% Up to 25% of Portfolio of Portfolio of Portfolio

Bank deposits 62% 9% 29%

Treasury bills 54 12 34

“Pure” Treasury money market mutual funds 53 13 34

Agency securities 47 18 35

Diversified money market mutual funds 47 21 32

Eurodollar 40 13 46

Separately managed accounts 36 21 44

Repurchase agreements 32 17 51

Enhanced cash funds 30 15 56

Commercial paper 22 24 54

Variable rate demand 19 16 65

Municipal securities 18 20 62

Asset-backed securities 15 17 68

Auction rate securities 6 6 88



Current Allocations Five years after the end of the last recession, businesses continue to be very conservative with their short-term investment portfolios. This is best demonstrated by the typical organization, which currently maintains more than half–52 percent–of its short-term investment portfolio in bank deposits. This is a two-percentage increase from the 50 percent reported in 2013 and the highest share reported in the nine-year history of the AFP Liquidity Survey.

Companies keep their cash and short-term investment holdings in relatively few invest-ment vehicles. Organizations invest in an average of 2.7 vehicles for their cash and short-term investment balances, unchanged from 2013 but more than the average of 2.4 investment vehicles reported in the 2012 survey. Larger organizations, along with those that are net investors, those with investment grade credit ratings and those that are publicly owned, tend to place their cash and short-term investment portfolios in a greater number of investment vehicles than do other organizations.

Overall, many organizations continue to allocate most of their short-term investment bal-ances—an average of 75 percent in 2014—in three safe and liquid investment vehicles: bank deposits, MMFs and Treasury securities. Even so, organizations are shying away from MMFs: MMFs account for only 16 percent of organizations’ short-term investment portfolios, a share matching the 2013 survey figure but below the 19 percent reported in 2012 and significantly less than the 30 percent reported in 2011. Larger organizations with at least $1 billion in revenues continue to allocate more of their short-term investments to money market funds than do smaller organizations (20 percent of the portfolio versus 11 percent).

Current Percentage of Short-Term Portfolio Allocated to Specific Investment Vehicles(Mean Percentage Distribution of Cash and Short-Term Investment Holdings)

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

% of short-term investments in bank deposits, MMFs and Treasury bills

% of short-term investments in bank deposits

56%

2006 2007 2008 2009 2010 2011 2012 2013 2014

23%

60%

27%

73%

25%

78%

37%

74%

42%

78%

42%

74%

51%

74%

50%

75%

52%



Current Percentage of Short-Term Portfolio Allocated to Specific Investment Vehicles(Mean Percentage Distribution of Cash and Short-Term Investment Holdings)


Bank deposits 52% 57% 48% 65% 42% 45% 68% 52% 61% 50%

Diversified money market mutual funds (2-17) 9 6 12 – 11 10 9 12 7 10

Treasury bills 7 6 7 3 10 8 2 8 5 8

“Pure” Treasury money market mutual funds (2-a7) 7 5 8 6 7 8 3 8 6 6

Agency securities 4 4 4 1 6 5 3 1 3 3

Eurodollar deposits (U.S. dollar denominated time deposits at banks outside the United States) 4 3 5 5 3 4 4 5 5 4

Commercial paper 4 3 4 1 4 4 3 4 3 4

Repurchase agreements 2 2 2 1 2 2 1 1 1 3

Municipal securities 2 2 1 1 2 2 1 2 1 2

Enhanced cash funds (e.g., cash plus) 2 2 1 6 2 2 1 2 1 2

Separately managed accounts 2 2 3 1 3 3 1 2 1 3

Asset-backed securities 2 1 2 1 2 2 – 1 2 1

Variable rate demand notes – 1 – – 1 1 – 1 1 1

Auction rate securities – – – 3 – – – – – –

Other 4 5 2 4 4 4 4 2 5 5

Mean number of investment vehicles used 2.7 2.6 2.8 2.1 3.2 3.0 2.1 2.7 2.4 2.7



Those organizations with cash and short-term investment holdings outside of the United States manage those cash and holdings similarly as they do their domestic holdings. That is, most of cash and short-term investment holdings are maintained in banks, money market funds and government securities. Fifty-six percent of non-U.S. cash holdings are maintained in bank-type investments (including certificates of deposit [CDs], time deposits, etc.). An-other 15 percent of these cash holdings are held in money market mutual funds while eight percent are in government securities. Organizations that are net borrowers, those without investment grade ratings and those that are privately held keep an even greater percentage of their non-U.S. cash holdings in banks.

Current Percentage of Short-Term Portfolio Allocated to Specific Investment Vehicles—Outside of the U.S.(Mean Percentage Distribution of Cash and Short-Term Investment Holdings Among Organizations with Cash Outside of the U.S.)


Bank-type investments (CDs, Time Deposits, etc.) 56% 58% 58% 65% 51% 53% 71% 56% 64%

Money market mutual funds 15 12 15 9 19 16 12 16 12

Government-type securities 8 8 8 5 10 8 5 8 5

Commercial paper 3 3 3 2 4 3 3 3 3 Other 17 19 16 19 16 21 10 17 17



As noted above, banks have become in recent years the dominant repositories where organiza-tions place their cash and short-term investment holdings. This is partly the result of a flight to safety that has not significantly ebbed since the end of the last recession and the relative lack of investment opportunities that generate yield.

When financial professionals are deciding where to place their organization’s cash and short-term investment, they consider a number of factors. The top two determinants are, perhaps, self-evident: the organization’s relationship with their bank(s) (72 percent) and the credit quality of the bank(s) (65 percent). Respondents from larger organizations, those that are net investors and those that are publicly owned are more likely than other companies to cite both factors as major determinants in choosing a bank to hold their cash and short-term investment holdings.

Another important factor for many organizations is the ability to generate earning credit rates (ECRs) from their deposits (41 percent). For the past couple of years, ECRs have been enticing vehicles in which to place excess bank balances that would normally be placed in money market funds and/or Treasury securities. In recent times, ECRs have offered above-market rates of return compared to similar investment options that offer safety, liquidity and yield, in that order. Banks will continue to have a need for more stable longer term balances—especially with pending impacts from Basel III. But this will come with more scrutiny and stable deposit availability from the company being worth more to the bank.

Additional factors considered by organizations when choosing the banks to hold their cash include:• Simplicity of working with the bank (cited by 36 percent of survey respondents)• Compelling rates offered on deposits by the bank (36 percent, but of particular interest by

larger organizations, those that are net investors, those that have investment grade ratings and those that are publicly owned).

Major Determinants for Which Banks to Use When Investing in Bank Deposits(Percent of Respondents)


Overall relationship with bank 72% 67% 75% 72% 71% 71% 73% 78% 69%

Credit quality of bank 65 58 71 58 69 67 60 72 59

Earning credit rates 41 39 41 39 41 40 40 41 34

Simplicity of working with bank 36 41 32 37 36 34 41 37 36

Compelling rates offered on deposits 36 30 41 31 41 41 26 44 28

Ability to determine how to apply ECR 10 6 13 10 10 11 7 9 8

Basel III consideration 6 33 7 4 6 7 2 7 5

Other 3 4 3 2 4 3 2 2 4



Three-quarters of financial professionals indicate that their organizations generate earning credit rates from their bank deposits. Larger organizations, those that are net investors, those with investment grade credit rateings and those that are publicly owned are more likely than other companies to generate ECRs from their bank deposits.

Generally ECRs are used to defray only traditional cash management fees. An example is organizations may generate monthly bank fees that are defrayed by earning credits generated by holding excess cash balances. In some industries such as real estate, companies are able to al-locate their earnings credits across a wider spectrum of cash management products. Many banks are exploring ways for companies to allocate unused earnings credit over and above what their monthly spend is so that they do not forego those earnings. Some organizations have moved to a quarterly billing cycle to recoup some of those costs.

In addition, some organizations not only are able to defray traditional cash management fees, but they also use ECRs to pay other bank fees such as custodian and escrow fees. Eighteen percent of organizations use ECRs to defray both traditional cash management and other fees.

Use of Earning Credit Rates to Defray Cash Management Fees(Percentage Distribution)


My organization does not generate ECRs from its bank deposits 23% 29% 16% 29% 18% 20% 27% 20% 28%

ECRs defray only traditional cash management fees 59 50 68 57 61 61 56 61 58

ECRs defray both traditional cash management and other fees 18 20 16 14 20 18 17 19 14



Organizations rely on several bank instruments for their cash and short-term investments which currently constitute half the typical organization portfolio. The most commonly used bank products are time deposits and non-interest bearing accounts. Fifty-five percent of finan-cial professionals report their organizations use time deposits while 51 percent indicate their organizations use non-interest bearing accounts. The share of companies using time deposits has shifted in recent years. But the use of non-interest bearing accounts has declined by seven percentage points since 2012 before the ending of the TAG (Transaction Account Guarantee) program. Structured certificates of deposits and other products are less commonly used vehicles, with fewer than one in four organizations using each.

Instruments Used When Investing in Bank Deposits(Percent of Organizations that Maintain Cash and Short-Term Investment Holdings at Banks)


Time Deposits (e.g., CDs) 55 49 60 52 57 60 46 62 49 48

Non-interest bearing deposit accounts 51 49 53 52 51 50 54 48 53 55

Structured bank deposit product (e.g., FICA) 26 26 25 29 24 28 32 28 26 24

Structured certificates of deposits (e.g., CDARS) 13 15 12 8 17 14 8 11 13 15



Maturity Financial professionals report that their organizations continue to place most of their short-term investment portfolios into instruments with very short maturities. On average, 70 percent of all short-term investment holdings are in vehicles with maturities of one month or less, a five-percentage point increase from 2013 but off two points from 2012. Another 13 percent of short-term investments are held in instruments with maturities of between 31 and 90 days. Net investors and those with invest-ment grade credit ratings manage their cash in instruments with longer maturity horizons.

Four in five financial professionals expect their organizations to maintain the current profile for maturity within their short-term investment portfolios over the next year. The expected stability in the tenor of holdings within short-term investment portfolios appears to reflect the relative clarity regard-ing interest rates over the near term or there is no additional value in extending maturities at this point: the yield pickup is not worth extending. Only 12 percent of survey respondents report that their orga-nizations expect to lengthen the average maturity of their short-term investment portfolios, with seven percent expecting their organizations to further shorten the average maturity over the next year.

One reason for such trends: an increasing number of companies segment their cash into different buckets. For example, companies are reviewing how much cash they need on hand for operating needs, and discerning if there is an opportunity for longer maturities in either core (medium term) or strategic (longer term) investment vehicles. Segmenting cash is done in conjunction with monitoring the yield curve, and companies explore different asset classes and credit quality in structuring their short-term portfolios. As liquidity has increased in importance relative to last year in terms of investment objectives, the ability to meet obligations could be another driver for the fluctuation in the ways organizations are managing investment maturities.

Organization’s Short-Term Investment Portfolio in Terms of Maturity(Mean Percentage Distribution)


0-30 days 70% 66% 75% 81% 63% 67% 81% 77% 71%

31-90 days 13 13 12 8 16 14 10 12 12

91-180 days 7 8 5 4 8 7 4 5 6

181-365 days 5 6 4 4 6 6 3 3 6

More than a year 5 7 4 3 7 6 3 2 4

Expectations for Change in Average Maturity of Holdings Over Next 12 Months(Percentage Distribution)


Lengthen 12% 9% 16% 9% 50% 14% 10% 11% 11%

Keep the same 81 82 79 85 77 80 84 84 81

Shorten 7 9 5 6 7 6 6 5 8



ResourcesThe vast majority of financial professionals identify banks as resources their organizations use to access opening cash and short-term investment holdings information. Among the infor-mation shared by banks to support organizations in their cash and short-term investment strategies is economic indicators and trends, the direction of the bond market, yield-curve changes and credit ratings information. Larger companies typically have more cash and also have more resources to help them manage that cash and often use outside data providers that feed information to treasury workstations and/or money fund portals. More than five in six survey respondents indicate banks are an important information resource, with little variation by organization type. Other information resources used include:

• Data feeds from information sources (cited by 29 percent of survey respondents)• Money market portals (29 percent)• Money market funds (28 percent)• Custodians (24 percent).

Resources Utilized to Access Operating Cash and Short-Term Investment Holdings Information (Percent of Organizations)


Banks 87% 90% 85% 91% 84% 85% 91% 86% 90%

Data feeds from information sources 29 24 35 25 31 33 20 31 22

Money market portals 29 15 41 24 31 30 25 38 19

Money market funds 28 25 29 20 33 32 19 28 22

Custodians 24 23 25 12 33 28 14 18 25



Money Market Funds (MMFs) When selecting money market funds, 73 percent of financial professionals cite yield as a primary consideration. Indeed, yield is the leading factor in the current survey, up sharply from the 54 percent in the 2013 survey. Fund ratings are the second most common driver in the selection of funds, cited by 69 percent of financial professionals, followed by both fund sponsorship status as part of a bank relationship and counterparty risk, each cited by 51 percent of survey respondents.

Even as allocations to money market funds declined during the survey period, yield is the primary driver behind fund selection. On par with fund ratings, the popularity of yield likely reflects the transparency in reporting requirements and regulations enacted several years ago, along with a more positive outlook on credit expectations and counterparty risk of underly-ing investments. Also notable is the third-place ranking of fund sponsor (as part of the bank relationship) as the primary factor in selecting a fund. With many companies allocating over half of their balances to bank deposits and almost half of the money market funds selected as part of a bank relationship mix, one might infer there is an even greater focus in incorporating money market funds in the bank relationship process.

Primary Drivers to Select a Money Market Fund(Percent of Organizations that Permit MMFs as an Investment Vehicle)


Yield 73% 75% 71% 70% 73% 74% 68% 71% 77%

Fund ratings 69 76 66 74 67 68 78 72 67

Fund sponsor as part of our overall bank relationship mix and support 51 48 54 56 50 50 58 60 53

Counterparty risk of underlying instruments 51 41 57 55 48 50 53 51 50

Diversification of underlying instruments 44 46 43 38 48 46 36 40 37

Investment manager for separately managed accounts or manages other investment products for us 6 5 4 2 6 5 4 3 8

Other 6 6 4 5 7 7 3 2 7



Reforms in rules governing money market funds (MMFs) continue to be a top priority for policymakers overseeing investment practices. The Securities and Exchange Commission (SEC) offered its most recent proposals in June 2013. Proposed changes include those that would (1) require the value of MMF shares to fluctuate for prime funds and (2) limit redemptions or charge fees for full redemptions of MMF holdings. The first proposal, most commonly referred to as floating the net asset value (NAV), would require MMF shares to fluctuate on prime insti-tutional funds and allows for government funds to hold up to 20 percent in non-governmental securities. This would remove the special exemptions that allow MMFs to use amortized-cost accounting and rounding to maintain stable NAVs. The second rule change would effectively limit or charge fees for full redemptions of MMF holdings. Under such a reform scenario, funds could impose liquidity fees, potentially coupled with temporary “gates” on redemptions.

The floating NAV has been integral to several reform proposals in recent years. From the perspective of many treasurers, a floating NAV would undermine the safety of principal that has made money market funds attractive investment vehicles. Should the SEC enact a floating NAV rule, many organizations will have to revise their investment policies and look for alternative investments that offer comparable safety, liquidity and yield.

Accounting treatment would also have to be taken into consideration, determining if the classifications of “Hold to Maturity,” “Available for Sale,” or “Actively Traded” rules apply. To investors, this presents new decisions and challenges. Having possible mark to market account-ing for a product that does not fluctuate much and has potential income statement impacts is not all that appealing to investors.

To help with the accounting treatment, last year the IRS proposed Notice 2013-48 to estab-lish a de minimis exception to the wash sale rules for certain redemptions of shares of money market funds with a floating NAV. A floating NAV fund most likely would not have same-day availability either, as security prices are dependent on outside parties that would most likely have next day availability, undermining the liquidity of same day funds. For purchasers of MMFs, the return of principal is still a more important driver of the investment decision than is return on principal. For a large number of institutional investors, the potential for loss of principal would preclude investing in floating NAV MMFs. At the time of publication of the 2014 AFP Liquidity Survey report, it will have been over a year since the SEC announced its MMF proposals; none of the proposed rule changes have gone into effect.

U.S. businesses make their investment decisions based on a variety of factors unique to their organizations. In many instances, MMFs are the investment option that most closely matches the risk/return profile companies seek to hold surplus operating cash, as specified by an organi-zation’s investment policy. Changing to a floating NAV would significantly alter the risk/return profile of MMFs. Indeed, nearly three-quarters of financial professionals indicate that their organizations would take significant action should the SEC enact rules that prime MMFs must operate with a floating NAV even as government MMFs maintain a stable NAV. Nearly half of organizations currently investing in prime funds would pull some or all of their holdings cur-rently in prime funds out of the financial instruments.



Anticipated Actions Should the SEC Rule that Prime MMFs Operate with a Floating NAV and Government MMFs Operate with a Stable NAV(Percent of Organizations Currently Investing in Prime MMFs)


Not invest in prime funds altogether 27% 28% 26% 35% 22% 25% 32% 27% 29%

Move some money out of prime funds 23 16 29 16 27 24 22 25 21

Move money into government MMFs or bank products due to stability 28 26 31 25 31 28 33 29 24

Alter our investment policy to accommodate only stable NAV options 21 18 23 21 21 22 18 24 19

Make no significant changes to how my organization invests in prime MMFs 28 26 30 28 28 29 25 23 35

Other 5 6 4 3 6 5 4 5 2



Anticipated Actions Should the SEC Rule that Government MMFs Would Be Able to Invest Up to 20 Percent of Assets in Non-Government Securities While Maintaining a Stable NAV(Percent of Organizations Currently Investing in Government MMFs)

Most organizations would not make significant changes to how they invest in government money market funds should the SEC allow government MMFs to hold up to 20 percent in non-government securities while maintaining a stable NAV. Were they to take any sort of action, it would most likely be in the form of monitoring the funds for their holdings and exposures (22 percent). This might mean that relying on outside data sources for additional information or money fund portals will help manage the additional administrative burden to validate the funds still fit in with an organization’s investment policy mandate.

Fewer organizations would divest of some or all of its current government MMF holdings: eight percent of organizations would divest some of its current government NAV holdings while five percent would divest of all current government MMF holdings.


Take no significant action 50% 56% 46% 59% 45% 46% 59% 44% 61%

Continue to monitor fund prospectus, holdings, exposures, or government MMF holdings 27 19 33 20 30 29 21 31 18

Continue to invest in government MMFs 22 21 23 20 24 23 20 23 19

Move money out of government MMFs 8 6 9 6 9 9 5 8 6

Divest all of its current government MMF holdings 5 3 6 3 6 5 4 6 4



Two in five financial professionals are concerned that the SEC’s pending rules on MMFs will impact the commercial paper market’s ability to be a source of liquidity for many companies in the future. Many of the largest buyers of commercial paper are money market funds. If a com-pany is a direct or indirect issuer, the demand for its paper could fall as a result of the supply of funding coming from stable value money market funds if prime funds were to float.

Expected Impact on Ability of Organizations to Issue Commercial Paper from Possible SEC Rulings on MMFs(Percentage Distribution)


It will be more difficult for companies to provide liquidity though direct or indirect commercial paper issuance 40% 40% 38% 39% 39% 39% 41% 41% 38%

It will be about the same in terms of difficulty for companies to provide liquidity through direct or indirect commercial paper issuance 51 50 53 50 52 52 51 51 53

It will be less difficult for companies to provide liquidity through direct or indirect commercial paper issuance 10 11 9 11 9 10 9 8 9



Conclusion The management of corporate cash and short-term investment in 2014 is relatively stable when compared to that in 2013. Still, there are a number of macroeconomic and regulatory shifts that could alter the picture in the near future.

More than half of corporate cash sits as bank deposits and there are few signs that organiza-tions’ reliance on bank deposits as their primary investment vehicles will change, at least in the near future. There are a number of reasons why banks are, and will likely remain, an important repository for corporate cash and short-term investment holdings. These include safety as the primary investment goal of two-thirds of organizations, the dearth of opportunities to earn sig-nificant yield from other investments and the ability to generate earnings credit rates from bank deposits. For those organizations with international operations, banks are even more important destinations for non-U.S. cash holdings.

Another factor is the regulatory uncertainty surrounding money market funds. SEC propos-als, such as those that would float the net asset value (NAV) for prime funds, could make MMFs ineligible for inclusion in many organizations’ investment portfolios. Policymakers in Washing-ton DC have been discussing these concepts for a number of years and the SEC released a set of proposals over a year ago. As of mid-June 2014, no final action had taken place.

The mere anticipation that changes to MMFs are in the offing (along with the relative lack of yield generated by MMFs) has led to an orderly liquidation by a number of organizations. In 2007, 31 percent of corporate cash and short-term investment holdings were maintained in MMFs. That percentage has dropped to 16 percent in 2014, with much of this cash rolling into banks. The ques-tion is: If/when the SEC finally acts, will organizations pull even more of their funds out of MMFs, or have the already adjusted to what they perceived to be the “new normal?”

But is there change in the air? The health of the economic recovery will impact cash invest-ment decisions during the remainder of 2014 and in the future. The quarterly AFP Corporate Cash Indicators™ reveal a gradual improvement in corporate confidence, as manifested by a slow-er pace of cash accumulation. At the same time, the Federal Reserve has started a very measured pullback from its historically accommodative monetary policies. Thus far, this has only affected long-term rates. But sometime in 2015 (or perhaps later) as the central bank raises the fed funds target rate, short-term rates are expected to inch up. Whether the ability to generate yield is enough to pique corporate investor interest in investment vehicles outside of those thought to be traditionally ultra-safe (i.e., bank deposits, MMFs and Treasury securities) remains to be seen.

Finally, the impact of domestic and international regulatory changes may alter how organiza-tions manage their cash and short-term investment holdings. As noted above, final SEC rule-making on MMFs could have a dramatic impact on whether (and how) organizations use the investment vehicle in their portfolios. Further, the implementation of Basel III, with its stricter capital ratio requirements for banks and the European Central Bank’s recent move to a negative deposit rate, could have a significant and detrimental impact on organizations’ ability to rely on banks as repositories for so much of their cash and short-term investment holdings.



About the Survey In May 2014, the Association for Financial Professionals® (AFP) conducted a 29-question survey on strategies associated with the management of short-term investments. AFP received 505 responses from its corporate practitioner members. After adjusting for mis-delivered email, the response rate was approximately seven percent. An additional 335 responses were received from corporate practitioners who are not AFP members. The combined 740 responses are the basis of this report.

AFP thanks RBS Citizens and Citizens Bank for underwriting the 2014 AFP Liquidity Survey. The survey questionnaire and report were produced by the Research Department of the Associa-tion for Financial Professionals, which is solely responsible for the content of the report.

The demographic profile of the survey respondents mirrors that of AFP’s membership. The following tables summarize the characteristics of the survey respondents where organization-level demographics are provided.

Annual Revenues (USD)(Percentage Distribution)

Under $50 million 14%

$50-99.9 million 4

$100-249.9 million 9

$250-499.9 million 7

$500-999.9 million 14

$1-4.9 billion 32

$5-9.9 billion 9

$10-20 billion 6

Over $20 billion 5

Ownership Type(Percentage Distribution)

Publicly owned 42%

Privately held 39

Non-profit (not-for-profit) 9

Government (or government owned entity) 10

Net Borrower or Net Investor(Percentage Distribution)

Net Investors 41%

Net borrower 59

Organizations’ Credit Ratings(Percentage Distribution

Investment grade 71%

Non-investment grade 29



Leading Causes of Net Change in Organization’s Cash Holdings Over Previous 12 Months(Percent of Respondents)

Appendix

Organizations with Organizations with U.S. Cash Holdings Increasing U.S. Cash Holdings Decreasing Over the Past 12 Months Over the Past 12 Months

Increased operating cash flow 73% 14%

Increased debt outstanding/accessed debt markets 18 17

Acquired company/subsidiary and/ or launched new operations 18 20

Decreased capital expenditures 6 5

Increased capital expenditures 12 43

Paid back/retired debt 12 28

Shortened/Decreased working capital cash conversion cycle 15 4

Issued equity 9 1

Divested company/subsidiary and/or closed operations 6 7

Increased share repurchases or dividends 10 20

Decreased operating cash flow 4 36

Lengthened/increased working capital cash conversion cycle 6 6



The Most Important Objective of Organizations’ Cash Investment Policy(Percentage Distribution)


Safety 68% 65% 73% 67% 71% 69% 71% 70% 63%

Liquidity 28 30 25 29 27 28 26 29 31

Yield 4 4 1 3 2 3 3 2 5

Frequency of Review/Update of Cash Investment Policy(Percentage Distribution of Organizations with a Written Cash Investment Policy)


Once a quarter 9% 10% 7% 7% 9% 10% – 10% 6%

Every six months 8 6 8 6 8 8 5 8 8

Once a year 43 39 45 36 46 43 43 42 39

Every 2-4 years 19 24 18 22 19 19 26 16 27

Not on a regular basis 21 21 23 29 19 21 25 25 21

Organizations With Investment Policies that Call Out/Separate Cash Holdings Used for Day-to-Day Liquidity(Percentage Distribution)


Policies Call Out/ Separate Cash Holdings 49% 52% 43% 43% 49% 50% 35% 48% 47%

Policies Do Not Call Out/ Separate Cash Holdings 51 48 57 57 51 50 65 52 53

AFP ResearchAFP Research provides financial professionals with proprietary and timely research that drives business performance. The AFP Research team is led by Managing Director, Research and Strategic Analysis, Kevin A. Roth, PhD, who is joined by a team of research analysts. AFP Research also draws on the knowledge of the Association’s members and its subject matter experts in areas that include bank relationship management, risk management, payments, and financial accounting and reporting. AFP Research also produces AFP EconWatch, a weekly economic newsletter. Study reports on a variety of topics, including AFP’s annual compensation survey, and AFP EconWatch, are available online at www.AFPonline.org/research.

About the Association for Financial ProfessionalsHeadquartered outside Washington, D.C., the Association for Financial Professionals (AFP) is the professional society that represents finance executives globally. AFP established and administers the Certified Treasury ProfessionalTM and Certified Corporate FP&A ProfessionalTM credentials, which set standards of excellence in finance. The quarterly AFP Corporate Cash IndicatorsTM serve as a bellwether of economic growth. The AFP Annual Conference is the largest networking event for corporate finance professionals in the world.

AFP, Association for Financial Professionals, Certified Treasury Professional, and Certified Corporate

Financial Planning & Analysis Professional are registered trademarks of the Association for Financial

Professionals.© 2014 Association for Financial Professionals, Inc. All Rights Reserved.

General Inquiries [email protected]

Web Site www.AFPonline.org

Phone 301.907.2862

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