Fund Description

The fund was incepted in January 1986 and is managed by Waddell & Reed Investment Management Company (WRIMCO). The fund seeks to provide a high level of income that is not subject to federal income tax. The fund seeks to achieve its goal by investing in a diversified portfolio of tax-exempt municipal bonds. However, a significant portion, up to 40%, of the fund's dividends paid to shareholders each year may be a tax preference item for purposes of the federal alternative minimum tax (AMT). The fund invests primarily in bonds rated in the lower tier of investment grade (BBB by S&P and Baa by Moody's) or lower, including bonds rated below investment grade, or junk bonds. The fund typically invests in municipal bonds with remaining maturities of 10 to 30 years. The fund declares dividends from net investment income daily and pays them monthly. Capital gains, if any, are paid annually.