Supplement Dated September 15, 1998 to the
Prospectus Dated October 29, 1997
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FLAGSHIP UTILITY INCOME FUND
a series of The Flagship Admiral Funds Inc.
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The Board of Directors of the Flagship Admiral Funds Inc. recently approved
a series of proposed changes to the Flagship Utility Income Fund, and have
called a shareholder meeting to consider the changes. As described more fully
below, these changes would: (i) expand investment flexibility by eliminating
the Fund's policy of concentrating its portfolio in utility securities,
enabling the Fund to better pursue its investment objectives; (ii) enhance the
fund's ability to distribute its shares by making the fund's 12b-1 Plans more
competitive, potentially creating greater economies of scale and over time
lowering operating costs through increased fund assets; and (iii) increase
operating and potential cost efficiencies by standardizing the Fund's corporate
structure with other Nuveen Mutual Funds.
Over the past five years, utility industry deregulation, increasing
competition, new industry entrants, and rapid technological change have
significantly altered the utility sector's historical investment
characteristics. Those changes have reduced the investment opportunities in
the utility sector that are consistent with the Fund's objectives of current
income and long-term growth of income and capital. The Board believes that
permitting the Fund to invest a substantial portion of its assets outside the
utility industry would enhance the Fund's ability to meet its investment
objectives by enabling it to access the broader range of attractive investment
opportunities available in today's markets. The Board also approved minor
revisions to several of the Fund's fundamental investment policies that will
standardize these policies with those of other Nuveen Mutual Funds.
In connection with the expanded scope of portfolio management activities,
and in order to align management fee levels with industry averages for
competitive funds having comparable investment objectives and policies, the
Board approved a new investment advisory agreement that increases the Fund's
management fee to 0.75% (from 0.50%) of average daily net assets. The
Fund's Adviser at the same time has voluntarily agreed to reimburse the Fund
for its operating expenses (which exclude Rule 12b-1 fees) through at least
July 31, 1999 so that the Fund's annual operating expenses would be capped at
0.95% of average net assets, which would be less than the current annual
operating expenses of 1.17%.
The Board approved changes to the Fund's Service and Distribution Plans that
would increase the Class A and Class C 12b-1 service fee and the Class C
12b-1 distribution fee to 0.25% (from 0.20%) and to 0.75% (from 0.55%),
respectively, of average daily net assets. These changes are expected to
enhance the Fund's ability to distribute its shares by standardizing the Fund's
12b-1 service and distribution fees with those of Nuveen's other taxable funds
and by aligning those fees with competitive funds having comparable
investment objectives and policies. Expanded distribution is expected to
increase Fund assets, thereby helping to create greater economies of scale that
over time are expected to reduce fund operating costs by more than the
increase in 12b-1 fees.
The Board approved a tax-free reorganization (the "Reorganization") of the
Fund's corporate structure. The Reorganization is intended to promote
operational and potential cost efficiencies by standardizing the Fund's
organizational structure with that of Nuveen's other mutual funds. Under the
terms of the Reorganization, the Fund will transfer all of its assets and
liabilities to, and Fund shareholders will become holders of the same number
of shares of, the Nuveen Dividend and Growth Fund of Nuveen Investment
Trust IV, a newly-organized Massachusetts business trust which has a
