1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[X] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FLAGSHIP ADMIRAL FUNDS INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
FLAGSHIP ADMIRAL FUNDS INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 was 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:
- --------------------------------------------------------------------------------
2
NUVEEN LOGO
November 13, 1998
Dear Flagship Utility Income Fund Shareholder:
On November 12, 1998, the Flagship Utility Income Fund held a special
shareholder meeting to approve changes to the organization and operation of the
fund. We adjourned the meeting until December 3, 1998 for certain proposals
because we did not receive enough votes to approve these proposals. The
adjournment will give us more time to solicit the necessary votes to pass the
proposals.
YOUR VOTE MAKES A DIFFERENCE. THE FUND INCURS ADDED COSTS TO MAIL PROXIES AGAIN
WHEN NOT ENOUGH SHAREHOLDERS VOTE. THE PROPOSALS ARE EXPECTED TO ENABLE THE FUND
TO OPERATE MORE EFFICIENTLY AND ENHANCE ITS ABILITY TO MEET ITS OBJECTIVES. THE
FUND'S BOARD OF DIRECTORS HAS APPROVED THE PROPOSALS AND UNANIMOUSLY RECOMMENDS
YOU VOTE IN FAVOR OF THEM.
We have enclosed a brief recap of the most commonly asked questions about the
proposals to help you make an informed decision. PLEASE TAKE A MOMENT TO REVIEW
THE PROXY MATERIALS AND THEN RETURN YOUR SIGNED PROXY CARD IN THE PREPAID
ENVELOPE. You may receive a follow up phone call to verify receipt of the
materials and to help you answer any questions.
Thank you for your continued confidence in Nuveen and our family of investments.
If you have any questions, please call Nuveen at (800) 257-8787.
Sincerely,
/s/ Tim Schwertfeger
- -----------------------
Timothy R. Schwertfeger
Chairman of the Board
3
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 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.
4
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.
------------------------------------------------------------------------------------------------------
JUNE 30, 1998
CURRENT PROPOSED AGREEMENT
CLASS A AGREEMENT AFTER WAIVERS/REIMBURSEMENT
------------------------------------------------------------------------------------------------------
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%
------------------------------------------------------------------------------------------------------
JUNE 30, 1998
CURRENT PROPOSED AGREEMENT
CLASS C AGREEMENT AFTER WAIVERS/REIMBURSEMENT
------------------------------------------------------------------------------------------------------
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%
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 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
5
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.