[ ] | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
(1) Title of each class of securities to which transaction applies: | |
(2) Aggregate number of securities to which transaction applies: | |
(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it is determined): | |
(4) Proposed maximum aggregate value of transaction: | |
(5) Total fee paid: | |
[ ] | Fee paid previously with preliminary materials. |
[ ] | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) Amount Previously Paid: | |
(2) Form, Schedule or Registration Statement No.: | |
(3) Filing Party: | |
(4) Date Filed: | |
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same.
Sincerely, | |
| |
Henry J. Herrmann | |
President |
A: MetLife, Inc.asset management company ("MetLife"New BlackRock"), that will have approximately $1 trillion in assets under management (the "Transaction"). BlackRock was (and remains) the parent company of State Street Research & Management Company ("State Street"), your Fund's current investment sub-adviser,BCM and BFM. New BlackRock will be governed by a board of directors with a majority of independent members. Although BlackRock has entered intoinformed the Board of Directors of W&R Target Funds, Inc. that it does not believe that the Transaction constitutes an agreement to sell SSRM Holding, Inc., including its subsidiary, State Street, to BlackRock, Inc., oneassignment of the largest publicly traded investment management firms inPrior Agreement of the United States The saleFund under the Investment Company Act of 1940, as amended, it is expectedpossible that the Transaction could be determined to be completed in January 2005 and, if completed, willsuch an assignment, which would result in the automatic termination of the Fund's current investment sub-advisory agreementPrior Agreement with State Street.BFM. Due to this uncertainty and t o prevent any potential disruption in services resulting from the completion of the Transaction, WRIMCO has proposed, a new sub-advisory agreement with BlackRock, an indirect, wholly owned subsidiary of BlackRock, Inc. Yourand the Board of Directors hasunanimously approved, the Interim Agreement and recommends that you approve, the new sub-advisory agreement between WRIMCO and BlackRock.
Q: Who is BlackRock Financial Management, Inc.?
A: BlackRock Financial Management, Inc. isProposed Agreement with BCM, an indirect, wholly owned subsidiaryaffiliate of BlackRock, Inc. BlackRock, Inc. is oneBFM, on substantially identical terms as the Prior Agreement with BFM. The Interim Agreement with BCM will become effective as of the largest publicly tradedcompletion of the Transaction and will remain in effect until the Proposed Agreement is approved by shareholders, but in no case for a period longer than 150 days; therefore, shareholder approval is sought for the Proposed Agreement. The sub-advisory fee rate payable by WRIMCO to BCM will remain the same under the Proposed Agreement as under the Prior Agreement.
Q: Who is theclients enhanced portfolio manager who will be managing my Fund?
A: Wayne J. Archambo will be primarily responsible for the management of the Fund. Mr. Archambo, CFA, is Managing Director and Portfolio Manager with BlackRock. Prior to joining BlackRock in 2002, he was a founding partner and Manager of Boston Partners Asset Management, L.P., since that company's inception in 1995. Mr. Archambo graduated from Nichols College with a BS in economics and finance and holds an MBA degree from Babson College. He is a member of the Boston Security Analysts Society.
capabilities.
Prior Agreement?
the Prior Agreement.
fund?
envelope, or take advantage of the telephonic or electronic voting procedures described on the proxy card.
solicitation, as well as the other costs of the special meeting of Fund shareholders.
1. |
| To approve a new |
2. | To transact any other business that properly comes before the Special Meeting. |
By Order of the Board of Directors, | |
Kristen A. Richards | |
Assistant Secretary | |
__________, 2006 | |
Overland Park, Kansas |
[ ], 2004Overland Park, Kansas
888-WADDELL. New BlackRock operates under the BlackRock name and is governed by a board of directors with a majority of independent members. New BlackRock will offer a full range of equity, fixed income, cash management and alternative investment products with strong representation in both retail and institutional channels, in the United States and in non-U.S. markets. As a result of the Transaction, it will have over 4,500 employees in 18 countries and a major presence in most key markets, including the United States, the United Kingdom, Asia, Australia, the Middle East and Europe. BCM is an affiliate of BFM and is the provider of the advisory services for all U.S. equity portfolios managed out of BlackRock's Boston office. days from the completion of the Transaction. Where applicable, such records are required to be maintained by the Sub-adviser for the period and in the place requ ired by Rule 31a-2 under the 1940 Act. received by the Sub-adviser as a result of trading activity with select brokers and dealers. Sub-adviser. Kansas and that the Agreement shall be construed and enforced in accordance with the laws of Maryland, the 1940 Act and the applicable rules and guidance issued by the SEC and its staff thereunder.[ ], 2004January 20, 2005November 16, 2006January 20, 2005November 16, 2006 at 2:3:00 p.m., Central time, and, if the Special Meeting is adjourned or postponed, at any adjournments or postponements of that meeting.[ ], 2004.________, 2006. Shareholders of record at the close of business on NovemberSeptember 15, 20042006 (the "record date") are entitled to vote at the Special Meeting.asthat may properly come before the Special Meeting or any adjournments or postponements thereof. Additional matters would only include matters that were not anticipated as of the date of this Proxy Statement.20032005 and Semi-Annual Report for the period ended June 30, 20042006 have previously been mailed to shareholders. This Proxy Statement should be read in conjunction with the Annual and Semi-Annual Reports. You can obtain copies of the those reports, without charge, by writing to Waddell & Reed, Inc., 6300 Lamar Avenue, P.O. Box 29217, Shawnee Mission, Kansas 66201-9217, or by calling 800-WADDELL.---- a new investment sub-advisory agreement between Waddell & Reed Investment Management Company ("WRIMCO") and BlackRock FinancialCapital Management, Inc. ("BlackRock"BCM") (the "Proposed Agreement"), with respect to the Fund.(except forto the contracting investment sub-adviser, its term and date) to theinterim sub-advisory agreement currently in effect for the Fund between WRIMCO and State Street Research &BCM (the "Interim Agreement") and to the prior sub-advisory agreement for the Fund between WRIMCO and BCM's affiliate, BlackRock Financial Management, CompanyInc. ("State Street"BFM") (the "Current"Prior Agreement"). On August 26, 2004, MetLife, The Interim Agreement with BCM, as approved by the Board, became effective upon the completion of the Transaction, as described below, and will remain in effect until the Proposed Agreement is approved by shareholders, but in no case for a period longer than 150 days.MetLife"Merrill Lynch") is contributing its investment management business, Merrill Lynch Investment Managers ("MLIM"), to BlackRock, Inc. ("BlackRock"), the parent company of State Street, entered into an agreementBCM, to sell SSRM Holdings, Inc., including its subsidiary State Street, toform a new asset management company ("New BlackRock") (the "Transaction").Inc. The sale is expected to be completed in January 2005. The Board is recommending the Proposed Agreementmanaged assets for the Fund because the Current Agreement will terminate when the sale is completed. The Investment Company Act of 1940, as amended (the "1940 Act"), provides generally that the sub-advisory agreement of an investment company must provide for automatic termination if assigned, such as when the investment sub-adviser or its parent company undergoes a significant change of ownership. The Current Agreement contains such a provision and, thus, will terminate upon completion of the sale transaction. BlackRock, Inc. is one of the largest publicly traded investment management firms in the United States with approximately $323 billion of assets under management at September 30, 2004. BlackRock, Inc. is a majority owned indirect subsidiary of The PNC Financial Services Group, Inc., one of the largest financial services companies in the United States. BlackRock, Inc. and its affiliates manage assets on behalf of institutional and individual investors worldwide through a variety of equity, fixed income, liquiditycash management and alternative investment products.has carefullythat it does not believe the Transaction constitutes an assignment of the Prior Agreement under the Investment Company Act of 1940, as amended, ("1940 Act"), it is possible that the Transaction could be determined to be such an assignment, resulting in the automatic termination of the Prior Agreement. Due to this uncertainty to prevent any potential disruption in sub-advisory services, WRIMCO proposed, and the Board unanimously approved, (1) termination of the Prior Agreement with BFM, (2) adoption of the Interim Agreement with BCM on substantially identical terms as the Prior Agreement, and (3) adoption of the Proposed Agreement with BCM on substantially identical terms as the Interim Agreement and the Prior Agreement. After the Transaction, BCM will provide equity portfolio management services to BFM's current clients, including the Fund. The sub-advisory fee rate payable to BCM will remain the same under the Proposed Agreement.hashave concluded that it is appropriate and in the best interestinterests of the Fund's shareholders for WRIMCO to enter into the Proposed Agreement for the Fund. Under the 1940 Act, WRIMCO cannot enter into the Proposed Agreement unless the Fund's shareholders of the Fund vote to approve the Proposed Agreement. The Meeting is being held to seek shareholder approval of the Proposed Agreement for the Fund. No change in advisorythe sub-advisory fee rate payable by WRIMCO or in the scope of services from those under the CurrentInterim Agreement or Prior Agreement is being proposed.BOARD OF DIRECTORS RECOMMENDSRECOMMEND THAT THE SHAREHOLDERS OF THE FUND VOTE TO APPROVE THE PROPOSED AGREEMENT FOR THE FUND.BlackRockBCM with respect to the Fund. On November 10, 2004,August 30, 2006, the Board, including all of the Directors who are not "interested persons" of the Corporation, WRIMCO, BCM or BlackRockMerrill Lynch (the "Disinterested Directors"), unanimously voted to approve the Proposed Agreement and to recommend the Proposed Agreement to Fund shareholders for approval. If approved by the shareholders, the Proposed Agreement will take effect on the later of the date of such approval or the date of completion of the BlackRock transaction with MetLife which is anticipated to occur in January 2005.approval. The Proposed Agreement will remain in effect untilthrough September 30, 20052007 and will continue in effect thereafter only if its continuance is specifically approved at least annually (i) by the vote of a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act) or by a majority of the Board of Directors and (ii) by the vote, cast in person at a meeting called for that purpose, of a majority of the Disinterested Directors. Theof Directors has considered the possibility that the BlackRock transaction with MetLife mightTransaction was anticipated to be completed before the date of the Special Meeting and receipt of shareholder approval of the Proposed Agreement. Accordingly, the Board, of Directors, including all of the Disinterested Directors, unanimously approved an interim sub-advisory agreement ("the termination of the Prior Agreement, effective upon the completion of the Transaction, and also approved the Interim Agreement")Agreement between WRIMCO and BlackRockBCM with respect to the Fund pursuant to Rule 15a-4 under the 1940 Act.BlackRockBCM to be escrowed pending approval by Fund shareholders of the Proposed Agreement. If the Proposed Agreement is not approved, BlackRockBCM will be entitled to receive from escrow the lesser of (i) any costs incurred in performing the Interim Agreement (plus interest earned on the amount while in escrow) andor (ii) the total amount in the escrow account (plus interest earned). The Interim Agreement will taketakes effect upon the completion of the BlackRock transaction with MetLife only ifTransaction since approval by Fund shareholders has not then been obtained by that date and will continue in effect for a perioduntil the earlier of up toshareholder approval of the Proposed Agreement or 150 days.the Board'stheir recommendation, please see the discussion under the heading "Evaluation by the Board."CurrentPrior and Proposed AgreementsCurrentPrior Agreement and to the Interim Agreement (apart from the provisions relating to Rule 15a-4) for the Fund. The date of the Proposed Agreement for the Fund will be the later of the date on which shareholders of the Fund approve the Proposed Agreement, or the date of the completion of the BlackRock transaction with MetLife, and the initial term of the Proposed Agreement if approved, expires on September 30, 2005.2007. The next several paragraphs briefly summarize some important provisions of both the Proposed Agreement, the Interim Agreement and the CurrentPrior Agreement, but for a complete understanding of the Proposed Agreement, you should read AppendixExhibit A. For purposes of the discussion below, the Proposed Agreement, the Interim Agreement and Currentthe Prior Agreement each will be referred to as the "Agreement."Agreement,"Services and Obligations UnderBCM and BFM each will be referred to as the Current Agreement, WRIMCO appointed State Street, and"Sub-adviser."BlackRock,BCM (an affiliate of BFM), to perform the portfolio selection services described below for the investment and reinvestment of the Fund's portfolio, subject to the supervision of WRIMCO and subject also to the control and direction of the Corporation's Board of Directors. State StreetBoard. The Sub-adviser is deemed, and BlackRock will be deemed to be an independent contractor and, except as expressly provided or authorized in the Agreement, State Streetthe Sub-adviser has no authority, and BlackRock will not have any authority, to act for or represent the Corporation or WRIMCO in any way or be deemed an agent of the Corporation or WRIMCO. Under the Agreement, each sub-adviserthe Sub-adviser provides the below-listed services and assumes the following obligations with respect to the Fund.objective,objectives, policies and restrictions of the Fund, and subject to the supervision of WRIMCO, each sub-adviserthe Sub-adviser has the sole and exclusive responsibility for the making and execution of all investment decisions for the Fund. The investment of the assets of the Fund are at all times subject to the applicable provisions of the Corporation's Articles of Incorporation and bylaws, as well as the registration statement, current prospectus and statement of additional information applicable to the Fund, and must conform to the investment objective,objectives, policies and restrictions of the Fund as set forth in such documents and as interpreted from time to time by the Board and by WRIMCO.each sub-adviserthe Sub-adviser is required to (i) obtain and evaluate pertinent economic, statistical, financial and other information affecting the economy generally and individual companies or industries, the securities of which are included in the Fund or are under consideration for inclusion therein; (ii) formulate and implement a continuous investment program for the Fund consistent with the investment objective and related investment policies of the Fund as described above;set forth in the Fund's registration statement, as amended; and (iii) take such steps as are necessary to implement the aforementioned investment program by placing orders for such purchases and sales of securities with broker-dealers, which may includeincluding the placing, or directing the placement through an affiliate (if any) of each sub-adviser,the Sub-adviser, of orders for such purchases and sales.each sub-adviserthe Sub-adviser arranges for the transmission to WRIMCO (or its designee) and the Custodiancustodian of the Fund on a daily basis such confirmations, trade tickets and other documents as may be necessary to enable them to perform their administrative responsibilities with respect to the Fund. Each sub-adviserThe Sub-adviser is required to render such reports to WRIMCO and/or the Board concerning the investment activity and portfolio composition of the Fund in such form and at such intervals as WRIMCO or the Board may from time to time require.Each sub-adviser will,The Sub-adviser, in the name of the Corporation, placeplaces or directdirects the placement of orders for the execution of portfolio transactions in accordance with the policies with respect thereto, as set forth in the Fund's registration statement.statement, as amended from time to time. In connection with the placement of orders for the execution of the Fund's portfolio transactions, each sub-adviserthe Sub-adviser is required to create and maintain all necessary brokerage records of the Corporation in accordance with all applicable law, rules and regulations, including but not limited to, records required by Section 31(a) of the 1940 Act. The Agreement provides that all records will be the property of the Corporation and each sub-adviserthe Sub-adviser shall make such records available for inspection and use by the Securities and Exchange Commission ("SEC"), the Corporation or any person retained by the Corporation.each sub-adviserthe Sub-adviser selects brokers and dealers for the execution of the Fund's transactions. In selecting brokers or dealers to execute such orders, each sub-adviserthe Sub-adviser is expressly authorized to consider the fact that a broker or dealer has furnished statistical, research or other information or services that enhance investment research and portfolio management capability generally. Also, in accordance with Section 28(e) of the Securities Exchange Act of 1934, as amended, each sub-adviserthe Sub-adviser may negotiate with and assign to a broker a commission which may exceed the commission which another broker would have charged for effecting the transaction if the sub-adviserSub-adviser determines in good faith that the amount of commission charged was reasonable in relation to the value of brokerage and/or research services (services that prov ideprovide lawful and appropriate assistance to each sub-adviserthe Sub-adviser in the performance of investment decision-making responsibilities) (as defined in Section 28(e)) provided by such broker. Under the Agreement, each sub-adviserthe Sub-adviser is required to render such reports, at such intervals and in such form as may be mutually agreed to WRIMCO and/or to the Board regarding the total amount and usage of all commissions generated as a result of trades executed for the Fund's portfolio, as well as information regarding third-party services, if any, received.sub-adviserSub-adviser deems the purchase or sale of a security to be in the best interest of the Fund as well as other customers, the Agreement permits the sub-adviser,Sub-adviser, to the extent permitted by applicable law, to aggregate the securities to be sold or purchased in order to obtain the best execution or lower brokerage commissions, if any. A sub-adviserThe Sub-adviser also may purchase or sell a particular security for one or more clients in different amounts. To the extent permitted by applicable law and regulations, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, are to be made in the manner a sub-adviserthe Sub-adviser considers to be the most equitable and consistent with its fiduciary obligations to the Fund and to such other clients.Each sub-adviserThe Sub-adviser is required to review all proxy solicitation materials and is responsible for voting and handling all proxies in relation to the securities held in the Fund.each sub-adviserthe Sub-adviser is entitled to rely on information that it reasonably believes to be accurate and reliable. Except as may otherwise be provided by the 1940 Act, neither of the sub-advisersSub-adviser nor theirits officers, directors, employees or agents shall be subject to any liability for any error of judgment or mistake of law or for any loss arising out of any investment or other act or omission in the performance of its duties under the Agreement or for any loss or damage resulting from the imposition by any government or exchange control restrictions which might affect the liquidity of the Fund's assets, or from acts or omissions of WRIMCO or custodians or other agents at the Corporation or the Fund or securities depositories, or from war or political act of any foreign government to which such assets might be exposed, provided that nothing in the Agreement will be deemed to protect, or purport to protec t, either sub-adviserprotect, the Sub-adviser against any liability to the CorporationFund or to its shareholders to which it would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties under the Agreement, or by reason of its reckless disregard of its obligations and duties under the Agreement.billion.billion of the Fund's average daily net assets. WRIMCO pays State Street,BFM, and under the Proposed Agreement would pay BlackRock,BCM, a sub-advisory fee at the annual rate of 0.50% of the Fund's average daily net assets managed by the sub-adviser.Current The Current and the Proposed Agreement provides that it continues in effect until September 30, 2004, and from year to year, thereafter, provided its continuance is specifically approved at least annually (i) by the vote of a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act) or by a majority of the entire Board and (ii) by the vote, cast in person at a meeting called for that purpose, of a majority of the Disinterested Directors. At a meeting held on August 29 and 30, 2006, the Board, with the Disinterested Directors voting separately, unanimously approved the continuation of the Prior Agreement until September 30, 2007, subject to termination upon completion of the Transaction, and unanimously approved the Interim Agreement. The CurrentPrior Agreement alsoterminates, and the Interim Agreement becomes effective, upon completion of the Transaction. The Interim Agreement remains in effect until the earlier of shareholder approval of the Proposed Agreement or 150 days from the date of the Transaction. The initial term of the Proposed Agreement, if approved by the Fund's shareholders, will continue until September 30, 2007.State Street,the Sub-adviser (10 days' written notice in the case of the Interim Agreement), or by either party to the Agreement upon 60 days' written notice to the other. The Current Agreement states that it will terminate automatically in the event of its assignment (as defined in the 1940 Act) or upon termination of WRIMCO's advisoryinvestment management agreement with the Fund. The Fund is the successor to the Advantus Small Company Value Portfolio ("Value Portfolio"), which was reorganized as the Fund on September 22, 2003. Current Agreement was submitted to Value Portfolio shareholders on September 19, 2003. On August 18, 2004, the Board, with the Disinterested Directors voting separately, unanimously approved the continuance of the Current Agreement until September 30, 2005.Proposed Agreement The Proposed Agreement also states that it can be terminated with respect to the Fund at any time, without the payment of any penalty, by a vote of a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act) or by a vote of majority of the entire Board on 60 days' written notice to BlackRock, or by either party to the Agreement upon 60 days' written notice to the other. The Proposed Agreement states that it will terminate automatically in the event of its assignment (as defined in the 1940 Act) or upon termination of WRIMCO's advisory agreement with the Fund.each sub-adviserthe Sub-adviser irrevocably submits to the jurisdiction of any state or United StatesU.S. federal court sitting in the State of Kansas.athe Board meeting held on November 10, 2004,August 30, 2006, all of the Board of Directors, including the Disinterested Directors, voted unanimously to approve the Proposed Agreement and to recommend that shareholders of the Fund vote to approve the Proposed Agreement. At that Board meeting, and for the reasons discussed below (see "Board Considerations" below), the Board, including the Disinterested Directors, unanimously approved the Interim Agreement and the Proposed Agreement and unanimously recommended approval of the Proposed Agreement by shareholders in order to assure continuity of investment sub-advisory services to the Fund after the completion of the Transaction.that approval and recommendation, the Directors considered a wide range of informationtheir evaluation of the type that they considered when they previously determined whether to continue the Current Agreement. As partproposed continuance of the approval process, WRIMCO requested that BlackRock provide certainPrior Agreement and as relevant information. In consideringto the Proposed Agreement, the Directors did not considerreviewed the nature and quality of services provided by BFM and considered the information provided by BFM in response to a request from the Disinterested Directors' legal counsel seeking certain relevant information in connection with the Directors' evaluation of the proposed continuance of the Prior Agreement. In determining whether to approve the proposed continuance of the Prior Agreement and whether to approve the Proposed Agreement, the Directors considered the best interests of the Fund and the overall fairness of the Prior Agreement and the Proposed Agreement, respectively. They considered the following factors to be of primary importance to their approval of the continuance of the Prior Agreement and their approval of the Proposed Agreement, without any one factor as determinative. Matters considered included:
Withtheir evaluation.
With respect to the overall fairness of the Proposed Agreement, the Directors considered among other things: (i) the strategic reasons for the Transaction, as presented by BlackRock to the Board; (ii) the reputation, financial strength and resources of BlackRock and BCM and the anticipated financial strength and resources of New BlackRock; (iii) that each of BlackRock, MLIM and BCM are experienced and respected asset management firms, and that BlackRock has advised the Board that, in connection with the Transaction, it intends to take steps to combine the investment management operations of BlackRock and MLIM, which is anticipated to enhance BlackRock's equity management capabilities; (iv) the current portfolio manager to the Fund will remain in place after the Transaction; (v) that BlackRock advised the Board that following the Transaction, there is not expected to be any diminution in the nature, quality and extent of services provided to the Fund and its shareholders by BCM, including compliance services; (vi) the certification from the Fund's Chief Compliance Officer regarding the compliance programs of BCM and its affiliates; (vii) the division of responsibilities between WRIMCO and BCM and the services provided by each of them; (viii) that BlackRock and MLIM would derive benefits from the Transaction and that as a result, they have a financial interest in the matters that were being considered; (ix) the fact that the Fund's total sub-advisory fee underfees will not increase by virtue of the Proposed Agreement wasbut, rather, will remain the same, as the sub-advisory fee paid under the Current Agreement. The Directors also considered the amount of the sub-advisory fee under the Proposed Agreement in comparison to an industry average sub-advisory fee for similarly-managed funds and the sub-advisory fee paid by a similar fund managed by Waddell & Reed Ivy Investment Company. In addition, the Directors considered information provided by BlackRock regarding its use of brokers or dealers in Fund transactions that would provide research and other services to BlackRock, and the benefits that would be derived by the Fund and by other clients of BlackRock from such services. The Directors considered the extent of the services to be provided by BlackRock, described in the Proposed Agreement, including that Bla ckRock would be responsible for formulating and implementing a continuous investment program for the Fund consistent with the Fund's investment objective and policies. Representatives from BlackRock which were present at the Board Meeting did note that they likely would recommend to the Directors that the Fund close to new investors once the assets in the Fund aggregated with the assets in another fund for which BlackRock serves as sub-adviser and which is managed by Waddell & Reed Ivy Investment Company, another investment adviser, reached approximately $400 million because of their belief that permitting additional assets to be invested in the Fund could be harmful to existing shareholders.
The Board did not consider the costs of the services to be provided and profits to be realized by BlackRock and its affiliates from its relationship with the Fund. This information was not deemed relevant in the context of a sub-advisory relationship where there was no increase in the sub-advisory fee to be paid by WRIMCO and no effect on the expenses borne by Fund shareholders.
The Directors also considered the terms of the current advisory agreement between the Corporation and the WRIMCO, with respect to the Fund, including the servicesfact that WRIMCO provides and the rate of advisory fee payablewill continue to WRIMCO. They also considered that: (a) WRIMCO was responsible for the selection, subject to Board and shareholder approval, of any sub-adviser to the Fund, as well as monitoring its performance; (b) WRIMCO would be responsible for BlackRock's compliance with the Fund's investment objective and policies and restrictions as well as compliance with the federal securities laws; and (c) WRIMCO was responsible for the overall success or failure of the Fund.
In addition, the Disinterested Directors received advice from independent legal counsel and met separately from the full Board with their counsel. Based on the Directors' deliberations and their evaluation of the information described above, the Board of Directors, includingbear all of the Disinterested Directors, unanimously approvedFund's sub-advisory fees; (x) the terms and conditions of the Proposed Agreement and concludedthe Prior Agreement are substantially identical (See "Comparison of Current and Proposed Agreements" above); and (xi) the Fund would not bear the costs of obtaining shareholder approval of the Proposed Agreement.
After carefully considering In reaching these determinations, the information described above,Directors concluded that: the Boardnature, extent and quality of Directors, including the Disinterested Directors, unanimously votedservices provided by BFM under the Prior Agreement, and anticipated to approvebe provided by BCM under the Proposed Agreement, for the Fund are adequate and appropriate; and that they retained confidence in BFM's and, as applicable, BCM's anticipated, overall ability to recommend thatmanage the Fund's shareholders vote to approve the Proposed Agreement.
Fund.
Under2006.
BFM or any of its affiliates during that period.
BlackRock
Wayne J. Archambo will be primarily responsible$1 trillion.
Name of Fund | Total Net Assets at June 30, 2006 (in millions) | Annual Management Fee as a % of Average Net Assets | Waivers, Reductions or Agreements to Waive or Reduce Management Fee |
Blackrock Small Cap Value Equity Portfolio | $102 | 0.55% of net assets up to $1 billion; 0.50% of net assets over $1 billion and up to $2 billion; 0.475% of net assets over $2 billion and up to $3 billion; and 0.45% of net assets over $3 billion | |
[Name of Fund] | $111 | 0.50% of net assets | |
[Name of Fund] | $174 | 0.50% of net assets | |
Name and Address | Status or Title with |
Lawrence | Chairman and Chief Executive Officer |
Ralph | President and Director |
Robert | Vice |
Robert | General Counsel, Secretary and Managing Director |
Susan L. | Vice Chairman and Chief Operating Officer |
Steven E. Buller | Chief Financial Officer and Managing Director |
Keith L. Anderson |
Vice Chairman |
Charles S. Hallac |
Vice Chairman |
Barbara G. Novick | Vice Chairman |
Paul L. Audet | Director |
Laurence J. Carolan | Director |
Kevin Klingert | Director |
John P. Moran | Director |
Mark Steinberg | Director |
100 Bellevue Parkway, Wilmington, DE 19809. Each Director and officer serves an indefinite term, until he or she dies, resigns, is removed or becomes disqualified. The Disinterested Directors and their principal occupations during the past five years are: and Principal Accounting Officer and Secretary General Counsel and Assistant Secretary Fund. As of the record date, the Fund had ___________ outstanding shares. A superseding proxy may also be executed by voting via telephone or internet. The superseding proxy need not be voted using the same method (mail, telephone, internet) as the original proxy vote. insert table] AGREEMENT WADDELL & REED INVESTMENT MANAGEMENT COMPANY W&R TARGET FUNDS, INC. BLACKROCK W&R TARGET FUNDS, INC. W&R TARGET SMALL CAP VALUE PORTFOLIO PLEASE DO NOT USE FINE POINT PENS. Financial,Capital Management, Inc., 40 East 52nd Street, New York, NY 10022.Board of Directors.Board. A majority of the Board members are Disinterested Directors. The Board elects the officers who are responsible for administering the Fund's day-to-day operations.ADDRESS AND AGE5658formerly, Dean, Washburn Law School (1988 to 2001)Director, Kansas Legal Services for Prisoners, Inc.6567enterprisesenterprises; President, Missouri Institute of Justice; Director, Salvation Army; Advisory Director, UMB Northland Board (Financial Services)7173Formerly, president, William and Flora Hewlett Foundation (19931999)the President, J. Paul Getty Trust (2004 to present); Professor, University of Utah (until 2005)5153Shareholder/Attorney, Levy & Craig, P.C. (1994 to present) (currently on leave of absence); formerly, (1995 to(until 2003); Chairman and Director, Greater Kansas City Community Foundation37398486(1995 to(until 2003); Director, Central Bank & Trust; Central Financial Corporation8082Retired6769(1980 to 2003)and Chancellor (1991 to 1999), University of Missouri at Kansas City (until 2003; Director, Ivy Funds, Inc.; Trustee, Ivy Funds6971RetiredDirectors consideredfollowing Director is "interested" by virtue of his current or former engagement as an officer of Waddell & Reed Financial, Inc. or its wholly owned subsidiaries, including the Corporation and its counsel to be "interested persons" (as defined in the 1940 Act)Fund's investment manager, WRIMCO, as well as by virtue of the Fund are:his personal ownership of shares of WDR.ADDRESS AND AGEKeith A. Tucker5963Chairman of the BoardDirectorChairman of the Board, Chief Executive OfficerWaddell & Reed (1998WDR (2005 to present); Principal Financial Officer of Waddell & Reed (1998 to 1999);President, CEO and Chairman of the Board and Director of Waddell & Reed, Inc., WRIMCO and WRSCO (1993 to present); Chairman of the Board and Director/Trustee of each of the funds in the Fund ComplexHenry J. Herrmann6300 Lamar AvenueOverland Park, KS 66202Age: 61PresidentDirectorPresident, Chief Investment Officer and Director of Waddell & Reed (1998 to present); Treasurer of Waddell & Reed (1998 to 1999); Director of Waddell & Reed, Inc.; President, Chief Executive Officer, Chief Investment Officer and Director of WRIMCO (1993 to present); President, Chief Executive OfficerCEO and DirectorChairman of Waddell & Reed Ivy Investment Management Company (WRIICO)(IICO), an affiliate of Waddell & ReedWDR (2002 to present); formerly, President and Chief Investment Officer (CIO) of WDR, WRIMCO and IICO (until 2005); President and Director/Trustee of each of the funds in the Fund ComplexFrank J. Ross, Jr.Polsinelli, ShaltonComplex; Director, Ivy Funds, Inc.; Trustee, Ivy Funds; Director, Austin, Calvert & Welte, P.C.700 West 47th StreetSuite 1000Kansas City, MO 64112Age: 51DirectorShareholder/Flavin, Inc., an affiliate of WRIMCO; Director, Polsinelli, Shalton & Welte, P.C.Ivy Services Inc. (ISI), a law firm (1980 to present)of the Corporation, the Corporation'sFund's principal officers are:ADDRESS AND AGETheodoreHoward
Kauten 6300 Lamar Avenue6237TreasurerPrincipal Financial OfficerSenior Vice President of WRSCO (2001 to present); Vice President (1987 to present), (1976 to present) and Principal Financial Officer (2002 to present) of each of the funds in the Waddell & Reed Fund Complex;Complex since 2006; Vice President of WRSCO (1988each of the funds in the Advisors Funds Complex since 2006; Assistant Treasurer of each of the funds in the Waddell & Reed Fund Complex from 2003 to 2001)2006; Senior Manager, Deloitte & Touche LLP from 2001 to 2003Kristen A. Richards3642WRIICOIICO (2002 to present); Vice President, Secretary and Associate General Counsel of each of the funds in the Fund Complex (2000 to present); Assistant Secretary of funds in the Fund Complex (1998 to 2000); Compliance Officer of WRIMCO (1998 to 2000)3840 Assistant Secretary and General Counsel of WDR, Waddell & Reed, WRIMCO and WRSCO (2000 to present); Senior Vice President and General Counsel of Waddell & Reed, Inc. WRIMCO and WRSCO (2000 to present); Senior Vice President, Assistant Secretary and General Counsel of WRIICOIICO (2002 to present); Vice President, General Counsel and Assistant Secretary of each of the funds in the Fund Complex (2000 to present)Assistant SecretaryVice President of Waddell & Reed (1998each of the funds in the Advisors Funds Complex since 2006; formerly, Senior Attorney and Compliance Officer for each of the Funds in the Fund Complex (2000 to 2000)2004)September 30, 2004,__________, 2006, the Corporation believes that its Directors and officers, as a group, owned less than 1% of the outstanding shares of the Portfolio.NovemberSeptember 15, 20042006 (the "record date") are entitled to be present and to vote at the Special Meeting or any adjourned meeting. The number of shares that you may vote is the total of the number shown on the proxy card accompanying this Proxy Statement. Shareholders are entitled to one vote for each full share and a proportionate vote for each fractional share held.Acco untsAccounts of a Participating Insurance Company will be voted in accordance with voting instructions received from its Policyowners. Each Participating Insurance Company will vote Fund shares attributable to its Policies as to which no timely instructions are received, and any Fund shares held by that Participating Insurance Company as to which Policyowners have no beneficial interest, in proportion to the voting instructions, including abstentions, which are received with respect to its Policies participating in the Fund. of all classes entitled to vote is a quorum for the transaction of business. In the event that a quorum of shareholders is not represented at the Special Meeting, the Special Meeting may be adjourned by a majority of the Fund's shareholders present in person or by proxy until a quorum exists. If there are insufficient votes to approve the Proposal, the persons named as proxies may propose one or more adjournments of the Special Meeting to permit additional time for the solicitation of proxies, in accordance with applicable law. Adjourned meetings must be held within a reasonable time after the date originally set for the meeting (but not more than 90 days after the record date). Solicitation of votes may continue to be made without any obligation to provide any additional notice of the adjournment. The persons named as proxies will vote in favo rfavor of such adjournment those proxies which they are entitled to vote in favor of the Proposal and will votev ote against any such adjournment those proxies to be voted against the Proposal.Insert Table]hasand Merrill Lynch have agreed to bear the total costs of the Special Meeting, which includes all the costs of preparing, printing and mailing the proxy materials for the Special Meeting of shareholders of the Corporation and all costs of solicitation of proxies, subject to certain conditions.proxies.Additional Proxy Solicitation Information The solicitation of proxies will be made primarily by mail, oral communications, telephone, or other permissible electronic means by representatives of the Corporation, Corporation affiliates, WRIMCO, WRIMCO affiliates. Total costs of the Special Meeting, including the costs of solicitation, are estimated at $__________ and will be borne by BlackRock.[ ], 200[4][PROPOSED AGREEMENT]_________________,___ day of ______, 2006, by and betweenWaddell & Reed Investment Management Company, a Kansas corporation, registered as an Investment Adviser under the Investment Advisers Act of 1940 (the "Adviser") and Blackrock FinancialBlackRock Capital Management, Inc., a Delaware corporation, registered as an Investment Adviser under the Investment Advisers Act of 1940 (the "Sub-Adviser"). 1. Appointment of Sub-Adviser In accordance with and subject to the Investment Management Agreement between the Funds and the Adviser dated July 23, 2003, the Adviser hereby appoints the Sub-Adviser to perform portfolio selection services described herein for investment and reinvestment of the Portfolio, subject to the control and direction of the Funds' Board of Directors, for the period and on the terms hereinafter set forth. The Sub-Adviser accepts such appointment and agrees to furnish the services hereinafter set forth for the compensation herein provided. The Sub-Adviser shall for all purposes herein be deemed to be an independent contractor and shall, except as expressly provided or authorized, have no authority to act for or represent the Funds or the Adviser in any way or otherwise be deemed an agent of the Funds or the Adviser. 2. Obligations of and Services to be Provided by the Sub-Adviser (a) The Sub-Adviser shall provide the following services and assume the following obligations with respect to the Portfolio of the Funds: (1)restrictionsrestrictio ns of the Po rtfolio,Portfolio, and subject to the supervision of the Adviser, the Sub-Adviser shall have the sole and exclusive responsibility for the making and execution of all investment decisions for the Portfolio. The Adviser agrees to promptly inform the Sub-Adviser in writing if such objective, policies or restrictions change and to deliver to the Sub-Adviser updated documents, if prepared.(2)(3)(4)(5) (b) The Sub-Adviser shall use the same skill and care in providing services to the Portfolio as it uses in providing services to fiduciary accounts for which it has investment responsibility. The Sub-Adviser will comply with all applicable rules and regulations of the Securities and Exchange Commission. (c) The Sub-Adviser shall (i) comply with all reasonable requests of the Funds (through the Adviser) for information, including information required in connection with the Trust's filings with the Securities and Exchange Commission (the "SEC") and state securities commissions, and (ii) provide such other services as the Sub-Adviser shall from time to time determine to be necessary or useful to the administration of the Funds. (d) The Sub-Adviser shall furnish to the Adviser for distribution to the Funds' Board of Directors periodic reports on the investment performance of the Portfolio and on the performance of its obligations under this Agreement and shall supply such additional reports and information as the Funds' officers or Board of Directors shall reasonably request. (e) On occasions when the Sub-Adviser deems the purchase or sale of a security to be in the best interest of the Portfolio as well as other customers, the Sub-Adviser, to the extent permitted by applicable law, may aggregate the securities to be so sold or purchased in order to obtain the best execution or lower brokerage commissions, if any. The Sub-Adviser also may purchase or sell a particular security for one or more customers in different amounts. On either occasion, and to the extent permitted by applicable law and regulations, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Sub-Adviser in the manner it considers to be the most equitable and consistent with its fiduciary obligations to the Portfolio and to such other customers. In no instance, however, will the Fund's assets be purc hased from or sold to the Adviser, the Sub-Adviser, the Funds' underwriter, or any affiliated person of either the Funds, the Adviser, the Sub-Adviser or the principal underwriter, acting as principal in the transaction, except to the extent permitted by the SEC and the 1940 Act. (f) Consistent with U.S. securities laws, the Sub-Adviser agrees to adopt written trade allocation procedures that are "fair and equitable" to its clients which are consistent with the investment policies set out in the prospectuses and statements of additional information (including amendments) of the Portfolio or as the Funds' Board of Directors may direct from time to time. The Sub-Adviser also agrees to effect securities transactions in client accounts consistent with the allocation system described in such written procedures, to keep accurate records of such transactions and to fully disclose such trade allocation procedures and practices to clients. (g) The Sub-Adviser shall review all proxy solicitation materials and be responsible for voting and handling all proxies in relation to the securities held in the Portfolio. The Adviser shall instruct the custodian and other appropriate parties providing services to the Portfolio to promptly forward misdirected proxies to the Sub-Adviser. The Sub-Adviser shall provide to the Advisor a copy of Sub-Adviser's written proxy voting policies and procedures, as adopted, including policies on addressing potential conflicts of interest and a copy of any summary of the procedures, if applicable. Sub-Adviser shall also be responsible for maintaining records with respect to the proxy votes cast for the Portfolio. The records shall conform to the applicable SEC proxy regulations. Records of all applicable proxy voting records will be provided to the Adviser within 3 business days of any request, written or oral (voting records should be available in hard and soft copy). (h) The Sub-Adviser shall review all notices, including but not limited to corporate action notices, and provide and respond to all corresponding requests for information in relation to the securities held in the Portfolio. The Adviser shall instruct the custodian and other appropriate parties providing services to the Portfolio to promptly forward misdirected corporate action notices to the Sub-Adviser. (i) The Sub-Adviser shall promptly notify the Adviser of any financial condition that is likely to impair the Sub-Adviser's ability to fulfill its commitment under this Agreement and/or any termination or resignation of senior (key) personnel. 3. Delivery of Documents to the Adviser. The Sub-Adviser has furnished the Adviser with copies of each of the following documents: (a) The Sub-Adviser's current Form ADV and any amendments thereto, if applicable; (b) The Sub-Adviser's most recent audited balance sheet; (c) Separate lists of persons whom the Sub-Adviser wishes to have authorized to give written and/or oral instructions to the custodian and the fund accounting agent of Trust assets for the Portfolio; and (d) The Code of Ethics of the Sub-Adviser as currently in effect. The Sub-Adviser will furnish the Adviser from time to time with copies, properly certified or otherwise authenticated, of all material amendments of or supplements to the foregoing, if any. Additionally, the Sub-Adviser will provide to the Adviser such other documents relating to its services under this Agreement as the Adviser may reasonably request on a periodic basis. Such amendments or supplements as to items (a) through (d) above will be provided within 30 days of the time such materials became available to the Sub-Adviser. 4. Expenses During the terms of this Agreement, the Sub-Adviser will pay all expenses incurred by it in connection with its activities under this Agreement. 5. Compensation In payment for the investment sub-advisory services to be rendered by the Sub-Adviser in respect of the Portfolio hereunder, the Adviser shall pay to the Sub-Adviser as full compensation for all services hereunder a fee computed at an annual rate which shall be a percentage of the average daily value of the net assets of the Portfolio. The fee shall be accrued daily and shall be based on the net asset values of all of the issued and outstanding shares of the Fund as determined as of the close of each business day pursuant to the Articles of Incorporation, Bylaws and currently effective Prospectus and Statement of Additional Information of the Funds. The fee shall be payable in arrears on the last day of each calendar month. The amount of such annual fee, as applied to the average daily value of the net assets of the Portfolio shall be as described in the schedule below:AssetsFee0.50% 6. Renewal and Termination This Agreement shall continue in effect until September 30, 2005, and from year to year thereafter provided such continuance is specifically approved at least annually by a vote of the holders of the majority of the outstanding voting securities of a Portfolio, or by a vote of the majority of the Funds' Board of Directors. And further provided that such continuance is also approved annually by a vote of the majority of the Funds' Board of Directors who are not parties to this Agreement or interested persons of parties hereto, cast in person at a meeting called for the purpose of voting on such approval. This Agreement may be terminated at any time without payment of penalty: (i) by the Funds' Board of Directors or by a vote of a majority of the outstanding voting securities of the class of capital stock of the Portfolio on sixty days' prior written notice, or (ii) by either party hereto upon sixty days' prior written notice to the other. This Agreement will terminate automatically upon any termination of the Investment Management Agreement between the Funds and the Adviser or in the event of its assignment. The terms "interested person," "assignment" and "vote of a majority of the outstanding voting securities" shall have the meanings set forth in the 1940 Act. 7. General Provisions (a) The Sub-Adviser may rely on information reasonably believed by it to be accurate and reliable. Except as may otherwise be provided by the 1940 Act, neit her the Sub-Adviser nor its officers, directors, employees or agents shall be subject to any liability for any error of judgment or mistake of law or for any loss arising out of any investment or other act or omission in the performance by the Sub-Adviser of its duties under this Agreement or for any loss or damage resulting from the imposition by any government or exchange control restrictions which might affect the liquidity of the Portfolio's assets, or from acts or omissions of custodians or securities depositories, or from any war or political act of any foreign government to which such assets might be exposed, provided that nothing herein shall be deemed to protect, or purport to protect, the Sub-Adviser against any liability to the Portfolio or to its shareholders to which the Sub-Adviser would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties hereunder, or by reason of the Sub-Adviser's reckless disregard of its obligations and dutie s hereunder. (b) The Adviser and the Funds' Board of Directors understand that the value of investments made for the Account may go up as well as down, is not guaranteed and that investment decisions will not always be profitable. The Adviser has not made and is not making any guarantees, including any guarantee as to any specific level of performance of the Portfolio. The Adviser and the Funds' Board of Directors acknowledge that each Portfolio is designed for the described investment objective and is not intended as a complete investment program. They also understand that investment decisions made on behalf of the Portfolio by Sub-Adviser are subject to various market and business risks. (c) This Agreement shall not become effective unless and until it is approved by the Board of Directors of the Funds, including a majority of the members who are not "interested persons" to parties to this Agreement, by a vote cast in person at a meeting called for the purpose of voting such approval, and by a majority of the outstanding voting securities of the class of capital stock of the Fund. (d) The Adviser understands that the Sub-Adviser now acts, will continue to act, or may act in the future, as investment adviser to fiduciary and other managed accounts, including other investment companies, and the Adviser has no objection to the Sub-Adviser so acting, provided that the Sub-Adviser duly performs all obligations under this Agreement. The Adviser also understands that the Sub-Adviser may give advice and take action with respect to any of its other clients or for its own account which may differ from the timing or nature of action taken by the Sub-Adviser with respect to the Portfolio. Nothing in this Agreement shall impose upon the Sub-Adviser any obligation to purchase or sell or to recommend for purchase or sale, with respect to the Portfolio, any security which the Sub-Adviser or its shareholders, directors, officers, employees or affiliates may purchase or sell for its or their own account(s) or for the account of any other client. (e) Except to the extent necessary to perform its obligations hereunder, nothing herein shall be deemed to limit or restrict the right of the Sub-Adviser, or the right of any of its officers, directors or employees who may also be an officer, director or employee of the Funds, or persons otherwise affiliated with the Funds (within the meaning of the 1940 Act) to engage in any other business or to devote time and attention to the management or other aspects of any other business, whether of a similar or dissimilar nature, or to render services of any kind to any other trust, corporation, firm, individual or association. 8. Confidential Treatment. It is understood that any information or recommendation supplied by the Sub-Adviser in connection with the performance of its obligations hereunder is to be regarded as confidential and for use only by the Adviser, the Fund or such persons as the Adviser may designate in connection with the Portfolio. It is also understood that any information supplied to the Sub-Adviser in connection with the performance of its obligations hereunder, particularly, but not limited to, any list of securities which, on a temporary basis, may not be bought or sold for the Portfolio, is to be regarded as confidential and for use only by the Sub-Adviser in connection with its obligation to provide investment advice and other services to the Portfolio. 9. Representations and Warranties. The Sub-Adviser hereby represents and warrants as follows: (a) The Sub-Adviser is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and such registration is current, complete and in full compliance with all material applicable provisions of the Advisers Act and the rules and regulations thereunder; (b) The Sub-Adviser has all requisite authority to enter into, execute, deliver and perform the Sub-Adviser's obligations under this Agreement; (c) The Sub-Adviser's performance of its obligations under this Agreement does not conflict with any law, regulation or order to which the Sub-Adviser is subject; and (d) The Sub-Adviser has reviewed the portion of (i) the registration statement filed with the SEC, as amended from time to time, for the Funds' ("Registration Statement"), and (ii) Funds' prospectuses and statements of additional information (including amendments) thereto, in each case in the form received from the Adviser with respect to the disclosure about the Sub-Adviser and the Funds of which the Sub-Adviser has knowledge and except as advised in writing to the Adviser such Registration Statement, prospectuses and statements of additional information (including amendments) contain, as of their respective dates, no untrue statement of any material fact of which the Sub-Adviser has knowledge and do not omit any statement of a material fact of which the Sub-Adviser has knowledge which was required to be stated therein or necessary to make the statements contained therein not misleading. 10. Use of Names. (a) The Sub-Adviser acknowledges and agrees that the names W&R Target Funds, Inc. and Waddell & Reed Investment Management Company, and abbreviations or logos associated with those names, are the valuable property of the Adviser and its affiliates; that the Funds, the Adviser and their affiliates have the right to use such names, abbreviations and logos; and that the Sub-Adviser shall use the names W&R Target Funds, Inc. and Waddell & Reed Investment Management Company, and associated abbreviations and logos, only in connection with the Sub-Adviser's performance of its duties hereunder. Further, in any communication with the public and in any marketing communications of any sort, the Sub-Adviser agrees to obtain prior written approval from the Adviser before using or referring to W&R Target Funds, Inc. and Waddell & Reed Investment Management Company, or the Portfolio or any abbreviations or logos associated with those names; provided that nothing herein shall be deemed to prohibit the Sub-Adviser from referring to the performance of the Portfolio in the Sub-Adviser's marketing material as long as such marketing material does not constitute "sales literature" or "advertising" for the Portfolio, as those terms are used in the rules, regulations and guidelines of the SEC and the National Association of Securities Dealers, Inc. (b) The Sub-Adviser acknowledges that the Portfolio and its agents may use the "Blackrock Financial" and "Blackrock Financial Management, Inc." names and the name of the responsible portfolio manager(s) in connection with accurately describing the activities of the Portfolio, including use with marketing and other promotional and informational material relating to the Portfolio. The Sub-Adviser hereby agrees and consents to the use of the Sub-Adviser's name upon the foregoing terms and conditions. 11. Reports by the Sub-Adviser and Records of the Portfolio. The Sub-Adviser shall furnish the Adviser monthly, quarterly and annual reports concerning transactions and performance of the Portfolio, including information required to be disclosed in the Funds' Registration Statement, in such form as may be mutually agreed. The Sub-Adviser shall permit the financial statements, books and records with respect to the Portfolio to be inspected and audited by the Funds, the Adviser or their agents at all reasonable times during normal business hours. The Sub-Adviser shall immediately notify and forward to both the Adviser and legal counsel for the Funds any legal process served upon it on behalf of the Adviser or the Funds. The Sub-Adviser shall promptly notify the Adviser of any changes in any information concerning the Sub-Adviser of which the Sub-Adviser become s aware that would be required to be disclosed in the Funds' Registration Statement. In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Sub-Adviser agrees that all records it maintains for the Portfolio are the property of the Portfolio and the Funds and further agrees to surrender promptly to the Funds or the Adviser any such records upon the Funds' or the Adviser's request. The Sub-Adviser further agrees to maintain for the Funds the records the Funds are required to maintain under Rule 31a-1(b) insofar as such records relate to the investment affairs of the Portfolio. The Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records it maintains for the Funds. 12. Indemnification. The Sub-Adviser agrees to indemnify and hold harmless the Adviser, any affiliated person within the meaning of Section 2(a)(3) of the 1940 Act ("affiliated person") of the Adviser and each person, if any, who, within the meaning of Section 15 of the Securities Act of 1933, as amended (the "1933 Act"), controls ("controlling person") the Adviser, against any and all losses, claims, damages, liabilities or litigation (including reasonable legal and other expenses), to which the Adviser, the Portfolio, the Funds or such affiliated person or controlling person may become subject under the 1933 Act, the 1940 Act, the Advisers Act, under any other statute, at common law or otherwise, arising out of the Sub-Adviser's responsibilities as sub-adviser of the Portfolio (1) to the extent of and as a result of the willful misconduct, bad faith, or gr oss negligence of the Sub-Adviser, any of the Sub-Adviser's employees or representatives or any affiliate of or any person acting on behalf of the Sub-Adviser, or (2) as a result of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, prospectuses or statements of additional information covering the Portfolio or the Funds or any amendment thereof or any supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement therein not misleading, if such a statement or omission was made in reliance upon written information furnished by the Sub-Adviser to the Adviser, the Funds or any affiliated person of the Adviser or the Funds expressly for use in the Funds' Registration Statement, or upon verbal information confirmed by the Sub-Adviser in writing expressly for use in the Funds' Registration Statement or (3) to the extent of, and as a result of, the failure of the Sub-Ad viser to execute, or cause to be executed, portfolio transactions according to the standards and requirements of the 1940 Act; provided, however, that in no case is the Sub-Adviser's indemnity in favor of the Adviser or any affiliated person or controlling person of the Adviser deemed to protect such person against any liability to which any such person would otherwise be subject by reason of willful misconduct, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties under this Agreement. The Adviser agrees to indemnify and hold harmless the Sub-Adviser against any and all losses, claims, damages, liabilities or litigation (including reasonable legal and other expenses), to which the Sub-Adviser or such affiliated person or controlling person may become subject under the 1933 Act, the 1940 Act, the Advisers Act, under any other statute, at common law or otherwise, arising out of the Adviser's responsibilities as investment manager of the Portfolio (1) to the extent of and as a result of the willful misconduct, bad faith, or gross negligence of the Adviser, any of the Adviser's employees or representatives or any affiliate of or any person acting on behalf of the Adviser, or (2) as a result of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, prospectuses or statements of additional information covering the Portfolio or the Funds or any amendmen t thereof or any supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement therein not misleading, if such a statement or omission was made by the Funds other than in reliance upon written information furnished by the Sub-Adviser, or any affiliated person of the Sub-Adviser, expressly for use in the Funds' Registration Statement or other than upon verbal information confirmed by the Sub-Adviser in writing expressly for use in the Funds' Registration Statement; provided, however, that in no case is the Adviser's indemnity in favor of the Sub-Adviser deemed to protect such person against any liability to which any such person would otherwise be subject by reason of willful misconduct, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties under this Agreement. 13. Assignment by the Sub-adviser. This Agreement shall not be assigned by the Sub-adviser to any other person or company without the Adviser's prior written consent. 14. Jurisdiction. The Sub-adviser irrevocably submits to the jurisdiction of any state or U.S. federal court sitting in the State of Kansas over any suit, action or proceeding arising out of or relating to this proposal and the agreement contemplated herein. The Sub-adviser irrevocably waives, to the fullest extent permitted by law, any objection which it may have to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that any such suit, action or proceeding brought in such a court has been brought in an inconvenient forum. The Sub-adviser agrees that final judgment in any such suit, action or proceeding brought in such a court shall be conclusive and binding upon the Sub-adviser, and may be enforced to the extent permitted by applicable law in any court of the jurisdiction of which the Sub-adviser is subject by a suit upon such judgment. Nothing in this Section 14 shall affect the right of the Adviser to serve process in any manner permitted by law or limit the right of the Adviser to bring proceedings against the Sub-adviser in the courts of any jurisdiction or jurisdictions. 15. Notices. All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered or sent by pre-paid first class letter post to the following addresses or to such other address as the relevant addressee shall hereafter notify for such purpose to the others by notice in writing and shall be deemed to have been given at the time of delivery.FINANCIALCAPITAL MANAGEMENT, INC. 19. Severability. Should any partForm of this Agreement be held invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors. 20. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all such counterparts shall constitute a single instrument.IN WITNESS WHEREOF, the parties have duly executed this Agreement.WADDELL & REED INVESTMENT MANAGEMENT COMPANYBy: ________________________Its: ________________________Date: ______________________BLACKROCK FINANCIAL MANAGEMENT, INC.By: ________________________Its: ________________________Date: ______________________Proxy Card
P.O. BOX 9132
HINGHAM, MA 02043-9132IMPORTANT: ELECTRONIC VOTING OPTIONS AVAILABLE
Fast, convenient, easy and available 24 hours a day!
Vote by Phone: Call toll-free 1-___-___-____. Follow the recorded instructions.
Vote on the Internet: Log on to www.proxyweb.com. Follow the on-screen instructions.
Vote by Mail: Check the appropriate boxes on the reverse side of this card, sign and date this card and return in the envelope provided.IF YOU VOTE BY TELEPHONE OR INTERNET, DO NOT MAIL YOUR CARD. *** CONTROL NUMBER: 999 999 999 999 99 *** *** CONTROL NUMBER: 999 999 999 999 99 ***
A Series of W&R TARGET FUNDS, INC.January 20, 2005November 16, 2006
The undersigned, having received Notice of the January 20, 2005November 16, 2006 Special Meeting of Shareholders of the above referenced portfolio (the "Fund"), a series of W&R Target Funds, Inc. (the "Corporation"), and the related Proxy Statement, hereby appoints Kristen A. Richards and Daniel C. Schulte as proxies, each with full power of substitution and revocation, to represent the undersigned and to vote all shares of the Fund that the undersigned is entitled to vote at the Special Meeting of Shareholders of the Fund to be held at 6300 Lamar Avenue, Overland Park, Kansas on January 20, 2005November 16, 2006 at 2:3:00 p.m. Central Time, and any adjournments or postponements thereof. The undersigned hereby revokes any and all proxies with respect to such shares previously given by me. This instruction may be revoked at any time prior to its exercise at the Special Meeting by execution of a subsequent proxy card, by written notice to the Secretary of the Corporation, or by voting in person at the Special Meeting.Me eting.
Dated: ____________________, 2006Dated: _____________________[]Signature(s) of Shareholder(s) (Please sign in Box)
PLEASE INDICATE VOTES ON OPPOSITE SIDE OF CARD.
Please fill in boxboxes as shown using black or blue ink or number 2 pencil. [[x]X]THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE CORPORATION.THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL.THIS PROXY WILL BE VOTED IN ACCORDANCE WITH YOUR SPECIFICATIONS. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF THE PROPOSAL.1:1. To approve a sub-advisory agreement between Waddell & Reed Investment Management Company and BlackRock FinancialCapital Management, Inc. with respect to the Fund.[ ] FOR [ ] AGAINST [ ] ABSTAIN The proxies are authorized to vote in their discretion on any other business that may properly come before the meeting or any adjournments or postponements thereof.
Form of Buckslip
W&R TARGET FUNDS, INC.
THREE EASY WAYS TO VOTEYOUR PROXY
The accompanying proxy statement discusses important matters affecting Small Cap Value Portfolio, a series of W&R Target Funds, Inc. Please take time to read the proxy statement, then cast your vote. There are three easy ways to vote -- choose the method that's most convenient for you. Please vote all proxy cards received.1. Vote by telephone. Just call our dedicated proxy voting number -- 1-__________. This is a toll-free number. It's available 24 hours a day, seven days a week. For each proxy, enter the 14-digit number printed on the upper portion of the card and follow the voice promptings to record your vote. 2. Vote by Internet. Visit the web site -- www.proxyweb.com and enter the 14-digit number. Then follow the voting instructions that will appear. Vote each card received separately. 3. Vote by mail. Simply fill out the proxy card(s) and return them to us in the enclosed postage paid envelope. Please do not return your cards if you vote by phone or Internet. [ ] FOR [ ] AGAINST [ ] ABSTAINThe proxies are authorized toin their discretion on any other business that may properly come before the meeting or any adjournments or postponements thereof.matters.YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. PLEASE SIGN AND DATE THIS PROXY CARD ON THE REVERSE SIDE AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.Please vote today!