Reserve fund

The owners funds, or equity, include the issued capital (i.e. the face value of the company s shares), capital reserves (funds received in ways distinct from operating profits, such as premiums on the sale of shares) and revenue reserves, which are the accumulated annual profits earned. The long-term loans include not only the sums borrowed from hanks and finance houses as well as bonds issued by the company, but also the provisions for future potential (but as yet unknown) costs for example the sums a company involved in asbestos liability litigation would prudently set aside against possible penalties and costs. Current liabilities include all bills received but not yet paid (for goods and services), and any short-term loans, due within a year, such as bank overdrafts. 

A second method may be used in which the company assumes all the risk and no payments are made into a reserve fund. This method is designated as self-assumption of risk. Partial self-insurance may be obtained through the purchase of deductible insurance from regular agencies. The purchaser assumes the risk up to a certain amount and the insurance company agrees to pay for any additional losses. 

Self-insurance is being considered for one portion of a chemical company. The fixed-capital investment involved is 50,000, and insurance costs for complete protection would amount to 400 per year. If self-insurance is used, a reserve fund will be set up under the company s jurisdiction, and annual insurance premiums of 300 will be deposited in this fund under an ordinary annuity plan. All money in the fund can be assumed to earn interest at a compound annual rate of 5 percent. Neglecting any charges connected with administration of the fund, how much money should be deposited in the fund at the beginning of the program in order to have enough money accumulated to replace a complete 50,000 loss after 10 years ... 

It was assumed that the power plant will be financed from revenue bonding. Therefore, reasonable estimates were made for interest on bonds, interest earned and expended during cor)struction, and bond discounts. Working capital and the debt reserve fund were assumed to be capitalized. By projecting all capital and operating costs with reasonable escalation factors, a life-cycle cost analysis was performed. Results of that analysis shown below indicate an estimate of required revenues to offset all costs. These projected costs are favorable when compared to alternative fossil fuel unit costs projected for the New England region. 

Take economic measures (e.g. to establish reserve funds or the coal industry development funds) to adjust the economic benefits of the coal industry, to avoid the coal industry huge economic benefits fluctuations, which is beneficial to protect coal resource, develop industry technology, and train personnel and ensure safe production and keep sustainable development. 

European RMBS transactions contain a combination of various features designed to protect investors from the impact of defaults on mortgages in the underlying collateral pool, including excess spread, reserve fund, and subordination of any lower priority notes. 

In European RMBS transactions, bonds are not generally written down when losses are incurred in the collateral pool. Instead, the losses are recorded in a principal deficiency ledger, which records the extent to which the balance outstanding on the notes exceeds the remaining assets. Usually, both excess spread and the reserve fund can be used to cover losses and so pay down the principal deficiency ledger. This mechanism is beneficial to holders of the lower-rated notes because the notes do not get written off immediately and any future excess spread will be used to cover the loss. 

The reserve fund consists of a cash amount that the issuer places on deposit at launch, which is available to cover any shortfalls in income and any principal losses during the life of a transaction. If the reserve fund is used, future excess spread will be retained until it is replenished up to its required balance. The required balance is usually a fixed monetary amount, but some transactions allow the reserve fund to amortise or even require it to increase depending on collateral performance. 

The cash flow waterfall encapsulates the subordination of the junior classes of notes. As all cash received is used to pay items on the senior notes first, this will inevitably mean that any loss that cannot be covered through trapping excess spread or from the reserve fund will result in a shortfall in the funds available to redeem the most junior class of notes. 

The credit enhancement for a particular class of notes is the sum of all the credit support provided by the subordinated notes (if any), the reserve fund, and the protection provided by the excess spread. As the collateral is paid down and the notes redeemed, the credit enhancement for all classes of notes will improve. This steady improvement is the main reason behind the ratings upgrades in European RMBS. 

An asset performance trigger event would occur if a principal deficiency is recorded in the Class A Principal Deficiency Ledger. This means that the total balance of realised losses that have not been covered by either the reserve fund or with excess spread exceed the aggregate outstanding amount of the subordinate notes. If this occurs, all receipts on the mortgages will be allocated to the issuers and the seller on a pro rata basis. The notes will start to redeem early with all the Class A notes being redeemed on a pro rata basis. When all the Class A notes have been redeemed in full, the Class B notes would be redeemed, and so on for all other classes of notes until all the notes are redeemed or the trust no longer has any assets. 

The reserve fund being used to cover a principal deficiency and not being replenished. 

Excess spread is available to build up the reserve fund to its required level and cover any principal deficiencies. For example, in the Holmes Financing transactions there is a mechanism whereby, if the yield on the mortgages falls below a certain specified level, excess spread will be trapped in a second reserve fund to provide additional credit enhancement as compensation for the reduction in excess spread. 

To date, the main reserve funds in master trust transactions have been standard fixed cash amounts that are available to the issuer to cover any shortfalls in income or principal losses during the life of the transaction. The reserve funds are built up to their required levels through trapped excess spread. 

The FIAT 1 issue benefits from a credit enhancement level of 11% from subordination of the unrated class M notes. The Globaldrive B issue benefits from 4% credit enhancement of the class B notes and a reserve fund, which builds up from 1.8% at the closing date to 2.75% of the balance of the initial pool. Fully funded, the Globaldrive B class A notes benefit from a total credit enhancement of 6.75%. The PPAF 1 issue benefits from a credit enhancement level of 33.3% from subordination of the class B and the class C notes (20.5% and 8.5%, respectively) and a cash reserve of 4.3% of the initial notes balance. 

There are two types of reserve funds cash reserve funds and excess servicing spread accounts. A cash reserve fund is a separate fund into which a portion of the profits from the bonds issuance have been deposited and invested in short-term hank securities. In a default, the cash in the fund is used to compensate investors who have suffered capital losses. A cash reserve fund is often set up in conjunction with another type of credit enhancement, such as a letter of credit. 

The resolutions, which were filed by the AFL-CIO Reserve Fund, call on the board of directors at Marathon Oil, Valero, Tesoro, and ConocoPhillips to disclose the board s oversight of process safety management, staffing levels, and the inspection and maintenance of refineries and other equipment. A similar proposal was also filed at Sunoco but was withdrawn when company officials agreed to comply with the request. 

In Japan, the Reserve Fund System for the Decommissioning of Nudear Power Plants was established in 1988 in order to secure necessary funds for decommissioning, and the fund for each plant has been reserved every year by each utility for the expenses necessary in future. 

In this system, the funds for dismantling are induded, but disposal costs for decommissioning wastes are not. The method for estimation of disposal cost shoxdd be established in accordance with the above establishment of regulatory system for disposal, and the disposal costs are to be reflected to the reserve fund system in future. 

Ruin probability Pruin insurer) where / insurer is the insurer s risk reserve ProbabiUty when insurer s reserve fund is depleted... 

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