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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FLAGSHIP ADMIRAL FUNDS INC.
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(Name of Registrant as Specified In Its Charter)
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[NUVEEN LOGO]
IMPORTANT INFORMATION FOR SHAREHOLDERS OF THE
FLAGSHIP UTILITY INCOME FUND
The following is a brief overview of the proposals to be voted upon at the
November 12, 1998 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. WHY IS A SPECIAL SHAREHOLDER MEETING BEING HELD?
A. The Board of Directors of the Flagship Utility Income Fund has called a
special shareholder meeting for November 12, 1998 at which you will be asked
to vote on a series of proposed changes to your fund. These changes are
designed primarily to enhance the fund's ability to achieve its stated
investment objectives of current income and long-term growth of income and
capital.
Q. WHY ARE THESE CHANGES BEING RECOMMENDED?
A. The purposes of the proposed changes are to enable you to benefit from:
- - (i) EXPANDED INVESTMENT FLEXIBILITY by eliminating the fund's policy of
concentrating its portfolio in utility securities;
- - (ii) ENHANCEMENT OF THE FUND'S ABILITY TO DISTRIBUTE ITS SHARES by making the
fund's 12b-1 Plan more attractive to dealers, potentially creating greater
economies of scale and over time lowering operating costs through increased
fund assets; and
- - (iii) INCREASED OPERATING AND POTENTIAL COST EFFICIENCIES by standardizing
the fund's corporate structure with other Nuveen Mutual Funds.
The fund's Board of Directors has unanimously agreed that these proposals are
in your best interests and recommends that you vote in favor of them.
Q. HOW ARE THE FUND'S INVESTMENT POLICIES CHANGING?
A. The fund would be permitted to invest a substantial portion of its assets
outside the utility industry instead of concentrating its investments (at
least 65%) in the utility industry. The fund's Board of Directors also
approved other minor revisions to the fund's fundamental investment policies
that will standardize these policies with those of 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. This change will
enable the fund to invest in a broad range of fixed-income securities,
including investment grade and high yield corporate bonds, U.S. Treasury and
agency bonds, and mortgage- and asset-backed securities, and in stocks of
established, well-known companies in a variety of industries that offer high
current income or attractive appreciation potential.
Q. HOW ARE THE FUND'S PRICING OPTIONS CHANGING?
A. If approved, the fund's Class A and Class C 12b-1 service fee and the Class C
12b-1 distribution fee would increase to 0.25% (from 0.20%) and 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
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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. For example, certain
variable fund expenses (like expenses associated with printing fund
prospectuses) would be reduced as a percentage of fund assets as asset levels
increase. In addition, the fund's fixed costs (for example, audit fees) would
be spread over a larger asset base as asset levels increase. The fund will
also be expanding the range of available pricing options by offering Class B
and Class R shares.
Q. HOW WILL THE PROPOSED CHANGES AFFECT MANAGEMENT FEES AND ANNUAL FUND
OPERATING EXPENSES?
A. The fund's Board of Directors has approved a proposed increase in the
management fee to 0.75% (from 0.50%) of average daily net assets. This
proposed increase reflects the increased research and portfolio management
resources required to manage the fund under its proposed investment policy
and will align management fee levels with the industry average for
competitive funds having comparable investment objectives and policies. At
the same time, Nuveen has voluntarily agreed to reimburse the fund through at
least July 31, 1999 so that the fund's expenses (other than Rule 12b-1 fees)
would be capped at 0.95% of average net assets. This expense level would be
less than the current annual expenses (not including Rule 12b-1 fees) of
1.15%. Total fund expenses (including Rule 12b-1 fees) net of expense
reimbursements on an annual basis are expected to decline approximately 0.15%
for Class A shareholders and increase 0.05% for Class C shareholders. See the
tables below for an illustration of the effect of the proposal.
<TABLE>
<CAPTION>
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JUNE 30, 1998
CURRENT PROPOSED AGREEMENT
CLASS A AGREEMENT AFTER WAIVERS/REIMBURSEMENT
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<S> <C> <C>
Management fee .50% .75%
Other expenses .65% .20%
Total expenses other than 12b-1 fees 1.15% .95%
12b-1 fee .20% .25%
Total fund operating expenses including 12b-1 fees 1.35% 1.20%
</TABLE>
<TABLE>
<CAPTION>
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JUNE 30, 1998
CURRENT PROPOSED AGREEMENT
CLASS C AGREEMENT AFTER WAIVERS/REIMBURSEMENT
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<S> <C> <C>
Management fee .50% .75%
Other expenses .65% .20%
Total expenses other than 12b-1 fees 1.15% .95%
12b-1 fee .75% 1.00%
Total fund operating expenses including 12b-1 fees 1.90% 1.95%
</TABLE>
Q. WILL I HAVE TO PAY ANY FEES OR EXPENSES IN CONNECTION WITH THE PROPOSED
CHANGES?
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 shareholder meeting will be borne by the fund. These costs are estimated
to be approximately $0.03 per share. The fund's Board of Directors believes
these costs will be more than offset by the increased performance potential
created by the fund's enhanced ability to meet its investment objectives.
Q. WHY IS A REORGANIZATION OF THE FUND BEING RECOMMENDED?
A. The proposed tax-free reorganization of the fund's corporate structure will
standardize the fund's organizational structure with those of Nuveen's other
mutual funds. Standardization is designed to promote operational and
potential cost efficiencies.
Q. HOW WILL THE REORGANIZATION BE EFFECTED?
A. If the reorganization is approved, 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, a series of Nuveen
Investment Trust IV, a newly-organized Massachusetts business trust which has
a different Board of Trustees than the fund's current Board. As part of the
reorganization, Nuveen Institutional Advisory Corp., an affiliate of the
fund's current
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investment adviser, Nuveen Advisory Corp., will become the fund's investment
adviser. THE REORGANIZATION WILL NOT CHANGE THE FUND'S PORTFOLIO MANAGEMENT
PERSONNEL, ITS INVESTMENT OBJECTIVES AND POLICIES (OTHER THAN THE SPECIFIC
POLICY CHANGES DESCRIBED ABOVE), OR CREATE ANY TAX CONSEQUENCES FOR EITHER
THE FUND OR ITS SHAREHOLDERS.
Q. WHAT WILL HAPPEN TO THE VALUE OF MY INVESTMENT AND THE SHARES I OWN?
A. After approval and upon completion of the reorganization, all of the fund's
assets will be transferred, tax-free, to the Nuveen Dividend and Growth Fund.
Your fund shares will automatically convert into the same class and same
number of Dividend and Growth Fund shares with the same net asset value per
share. At the time of issuance, your investment in the Dividend and Growth
Fund will have the same value as your investment in the Utility Income Fund
on that date. Those shares will appear on your next shareholder or broker
statement.
Q. WHAT SHOULD I DO WITH MY CERTIFICATES?
A. No certificates for Dividend and Growth Fund shares will be issued as part of
the reorganization, although we will send you certificates upon request. If
you currently own fund shares in certificate form, you will need to return
these certificates to Nuveen in order to receive new certificates for your
Dividend and Growth Fund shares.
Q. WILL THE REORGANIZATION CREATE ANY TAX LIABILITY FOR ME?
A. You will recognize no gain or loss on the transaction and the tax basis and
holding period of the Dividend and Growth Fund shares you receive will be the
same as the tax basis and holding period of your fund shares. The
reorganization will not create any tax consequences for either the fund or
its shareholders. In addition, the fund will consummate the reorganization
only if it receives an opinion from the fund's tax counsel that the
reorganization will qualify as a tax-free reorganization.
Q. CAN I EXCHANGE OR REDEEM MY FUND SHARES BEFORE THE PROPOSED CHANGES TAKE
EFFECT?
A. You may exchange your 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.
Q. WHO SHOULD I CALL FOR FURTHER INFORMATION?
A. Your financial adviser will be able to answer any questions you have about
the proposed reorganization. You may also call Nuveen at 1-800-257-8787
weekdays from 7:00 a.m. to 7:00 p.m. Central time.
