What is the meaning of Reserve Fund?

Reserve Fund is a reasonably required reserve fund is maintained to secure the timely payment of principal and interest to bond holders. ·For governmental or 501©(3) bonds Section 148(d) permits issuers to invest up to 10% of the proceeds of an issue in a reserve fund. This may apply only to the proceeds from the sale of a Series. ·There are additional reserve fund limits for bonds other that governmental or 501©(3) bonds. ·A reserve is ordinarily not allowed if the bonds are general obligation bonds. ·Revenue rulings have established alternatively that a reserve fund is reasonably required if the fund is the lesser of maximum annual debt service or 125% of average annual debt service. ·Both Section 148(d) and the revenue rulings must be complied with.