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IMPORTANT INFORMATION FOR SHAREHOLDERS OF
NUVEEN FLAGSHIP KENTUCKY LIMITED TERM MUNICIPAL BOND FUND
The following is a brief overview of the proposal to be voted upon at the April
15, 1999 shareholder meeting. It should be read in conjunction with your fund's
proxy statement, which was mailed to you earlier. If you would like another copy
of the proxy statement, please call us at the number listed below.
YOUR VOTE IS VERY IMPORTANT.
If you have not already done so, please fill out and return the enclosed proxy
card in a timely fashion. Thank you for your support of the Nuveen family of
mutual funds.
Q. WHAT ARE SHAREHOLDERS BEING ASKED TO VOTE ON AT THE UPCOMING SPECIAL
SHAREHOLDER MEETING ON APRIL 15?
A. The Board of Trustees for the Nuveen Flagship Kentucky Limited Term Municipal
Bond Fund (the "Kentucky Limited Term Fund") has called a Special Shareholder
Meeting for Thursday, April 15, 1999 at which you will be asked to vote on a
reorganization (the "Reorganization") of your fund into the Nuveen Flagship
Kentucky Municipal Bond Fund (the "Kentucky Fund").
Q. ARE THERE ANY DIFFERENCES BETWEEN THE FUNDS?
A. The Kentucky Fund is substantially the same as the Kentucky Limited Term Fund
in its philosophy, investment objectives and policies and day-to-day
portfolio management except that the Kentucky Limited Term Fund maintains a
weighted average portfolio maturity between 1 and 7 years while the Kentucky
Fund maintains a weighted average portfolio maturity between 15 and 30 years.
In evaluating the Reorganization, the Kentucky Limited Term Fund shareholders
should consider the impact of investing in a long-term municipal bond fund.
Q. WHAT ADVANTAGES WILL THIS PRODUCE FOR FUND SHAREHOLDERS?
A. We expect the proposed Reorganization to (i) lower gross operating expenses
as a percentage of net assets due to the Kentucky Fund's larger net assets
and greater economies of scale; (ii) improve portfolio diversification; (iii)
lower portfolio transaction costs; and (iv) retain the exemption of dividends
from the Kentucky state personal income tax. The Board believes that these
potential benefits, together with the potentially higher distributions from
the Kentucky Fund, should offset the risks associated with investments in a
long term bond fund.
Q. HAS THE FUND'S BOARD OF TRUSTEES APPROVED THE PROPOSAL?
A. Yes. The Board of Trustees for the Kentucky Limited Term Fund unanimously
agreed that this Reorganization is in your best interests and recommends that
you vote in favor of it.
Q. WHAT IS THE TIMETABLE FOR THE REORGANIZATION?
A. Effective December 31, 1998, the Kentucky Limited Term Fund was closed to new
investors; existing investors, however, may continue to make additional
purchases and reinvest dividends. If approved by shareholders on April 15,
1999, the Reorganization is expected to take effect on April 23, 1999.
Q. WILL I RECEIVE NEW SHARES IN EXCHANGE FOR MY CURRENT SHARES?
A. Yes. Upon approval and completion of the Reorganization, shareholders of the
Kentucky Limited Term Fund will exchange their shares for shares of the
Kentucky Fund based upon a specified exchange ratio determined by the ratio
of the respective net asset values of the funds. You will receive Kentucky
Fund shares whose aggregate value at the time of issuance will equal the
aggregate value of your Kentucky Limited Term Fund shares on that date.
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Q. IF I OWN SHARES IN CERTIFICATE FORM, WILL I NEED TO EXCHANGE THEM FOR
CERTIFICATES OF MY NEW FUND?
A. Certificates for Kentucky Fund shares will not be issued automatically as
part of the Reorganization, although we will send you certificates upon
request. If you currently own Kentucky Limited Term Fund shares in
certificate form, you will need to return these certificates to Nuveen in
order to receive new certificates for your Kentucky Fund shares.
If you prefer, however, you may exchange your certificates for book entry
shares. These shares are held in a convenient computerized system that
enables shareholders to receive a complete and accurate record of their
holdings without having to worry about the safekeeping of certificates or the
expense involved with replacing a lost or stolen certificate. Just complete
the appropriate section of the Letter of Transmittal requesting book entry
shares. Regardless of the way you choose to hold your shares after the
Reorganization, certificates should be returned to the fund's transfer agent
by certified mail as soon as possible.
Q. WILL I HAVE TO PAY ANY FEES OR EXPENSES IN CONNECTION WITH THE
REORGANIZATION?
A. You will pay no fees or sales charges directly in connection with the
implementation of the proposed changes. However, the costs associated with
the Reorganization will be borne by the Kentucky Limited Term Fund. These
costs are estimated to be $0.066 per share. The costs are expected to be more
than offset over time by the anticipated lower operating costs of the
Kentucky Fund.
Q. HOW DO MANAGEMENT FEES AND OTHER FUND OPERATING EXPENSES COMPARE BETWEEN THE
TWO FUNDS?
A. The Kentucky Fund has a higher investment management fee schedule than the
Kentucky Limited Term Fund. Total gross operating expenses (before waivers
and reimbursements) as a percentage of net assets for the Kentucky Fund are
lower than those for the Kentucky Limited Term Fund, reflecting the larger
net assets and greater economies of scale of the Kentucky Fund. For the past
fiscal year, net operating expenses (after waivers and reimbursements) as a
percentage of net assets for the Kentucky Limited Term Fund were lower than
those for the Kentucky Fund, but only because of voluntary expense
waivers/reimbursements by Nuveen. There can be no assurance that Nuveen will
continue these waivers/reimbursements for the Kentucky Limited Term Fund if
the Reorganization is not approved.
Q. WILL THIS REORGANIZATION CREATE A TAXABLE EVENT FOR ME?
A. The Reorganization is intended to be done on a tax-free basis for federal
income tax purposes. Therefore, you will recognize no gain or loss for
federal income tax purposes as a result of the Reorganization. In addition,
the tax basis and holding period of the Kentucky Fund shares you receive will
be the same as the tax basis and holding period of your Kentucky Limited Term
Fund shares.
Q. CAN I EXCHANGE OR REDEEM MY KENTUCKY LIMITED TERM FUND SHARES BEFORE THE
REORGANIZATION TAKES PLACE?
A. You may exchange your Kentucky Limited Term Fund shares for shares of any
other Nuveen Mutual Fund, or redeem your shares, at any time. If you choose
to do so, your request will be treated as a normal exchange or redemption of
shares and will be a taxable transaction for federal income tax purposes.
Nuveen will waive any deferred sales charge that would otherwise apply to a
redemption or exchange of shares.
Q. HOW DO I VOTE MY SHARES?
A. You can vote your shares by completing and signing the enclosed proxy
card(s), and mailing them in the enclosed postage-paid envelope. If you need
any assistance, or have any questions regarding the proposals or how to vote
your shares, please call your financial adviser or Nuveen at (800) 621-7227
weekdays from 7:00 a.m. to 7:00 p.m. Central time.
Q. WILL NUVEEN CONTACT ME?
A. You may receive a call from D.F. King, our proxy solicitation agent, to
verify that you received your proxy materials and to answer any questions you
may have about the Reorganization.
