COIF Charities Deposit Fund - CCLA

Notes to the accounts7. Income ReserveThe Fund utilises a reserve which is accumulated out of revenue and held by the Board ontrust for depositors for the time being. The principal purpose of the income reserve is tofacilitate the payment of interest to depositors at each quarter end even though a proportion ofthe revenue earned by the Fund over the quarter will not be received until the maturity date ofindividual deposits.The reserve is also available as a provision against potential default of counterparties and isavailable to augment the Fund’s deposit rate.31.12.2011£’00031.12.2010£'000Income reserve at the start of the year 5,626 6,213Transfer from income reserve (101) (587)Income reserve at the end of the year 5,525 5,6268. Financial instrumentsThe main risks arising from the Fund’s financial instruments and the Manager’s policies formanaging these risks are summarised below.Currency riskThere was no foreign currency exposure within the Fund at 31 December 2011 (31.12.2010,£nil).Credit riskThe Fund is exposed to the risk regarding the repayment of deposits from the counterparty. Tominimise this, the assets of the Fund are strictly placed within agreed limits with a diversifiedlist of quality counterparties in order to achieve a very low overall level of risk and high securityof capital. The list of approved counterparties is constantly monitored and credit limitsimmediately amended following credit rating upgrades and downgrades.Interest rate riskThe Fund invests in fixed rate and floating rate deposits. Changes in the interest rate will resultin revenue either increasing or decreasing.15