February 25, 1998
Report to Fellow Shareholders:
It is pleasing to report another year of solid performance for Nicholas
Income Fund. Total return for 1997 was 13.13% with distributions reinvested,
better than last years 12.37% and above our long term average annual rate.
Results of the lastest one, five, ten and fifteen year periods ended December
31, 1997 are shown below:
Average Annual Total Return*
--------------------------------------------
1 Year 5 Years 10 Years 15 Years
------ ------- -------- --------
Nicholas Income Fund
(Distributions Reinvested) +13.13% +10.74% +10.00% +10.63%
Consumer Price Index
(Inflation) + 1.70% + 2.60% + 3.42% + 3.42%
Ending value of $10,000 invested
in Nicholas Income Fund
(Distributions Reinvested) $11,313 $16,651 $25,937 $45,506
As one can see from the table above, Nicholas Income Fund has provided a
substantial return over inflation for many years. For the fifteen year period
ended December 31, 1997, the margin of return over inflation has been 7.21% on
an average annual basis. We also take pride in the fact that Nicholas Income
Fund has earned Morningstar's five star (*****) rating for its overall
risk-adjusted performance as of December 31, 1997 based on a comparison of 1371
fixed income funds eligible for the overall rating. The Fund's three, five and
ten year ratings were also five stars, as of December 31, 1997, based on a
comparison of 1371, 771 and 323 fixed income funds, respectively. The top ten
percent of funds in their respective categories receive five stars.*
At December 31, 1997, total net assets of Nicholas Income Fund were $254
million. Cash and equivalents were 9.67%. The 30-day SEC yield annualized
on Nicholas Income Fund was 7.77%
Thank you for your interest in the Nicholas Income Fund.
Sincerely,
/S/ Albert O. Nicholas
------------------
Albert O. Nicholas
President
*Total returns are historical and include change in share price and
reinvestment of dividend and capital gain distributions. Past
performance is no guarantee of future results. Principal value and
return will fluctuate so an investment, when redeemed, may be worth
more or less than original cost. Morningstar proprietary ratings
reflect historical risk-adjusted performance. The ratings are subject
to change monthly. Morningstar's overall rating is based on the
Fund's three, five and ten year average annual returns in excess
of 90-day Treasury bill returns with appropriate fee adjustments and
a risk factor that reflects the Fund's performance below 90-day
Treasury bill returns.
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the year)
- ---------------------------------------------------------------------
<TABLE>
Year ended December 31,
----------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR....... $3.53 $3.42 $3.21 $3.52 $3.38 $3.34 $3.01 $3.44 $3.68 $3.64
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... .30 .30 .30 .30 .30 .31 .35 .39 .38 .38
Net gains (losses) on
securities (realized
and unrealized)........ .15 .11 .21 (.31) .13 .03 .33 (.43) (.24) .03
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations........... .45 .41 .51 (.01) .43 .34 .68 (.04) .14 .41
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS*:
Dividends (from net
investment income)..... (.29) (.30) (.30) (.30) (.29) (.30) (.35) (.39) (.38) (.37)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF
YEAR................... $3.69 $3.53 $3.42 $3.21 $3.52 $3.38 $3.34 $3.01 $3.44 $3.68
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL RETURN.............. 13.13% 12.37% 16.16% (0.17)% 12.95% 10.33% 23.05% (1.03)% 3.94% 11.55%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(millions)............... $254.2 $185.7 $162.1 $140.9 $158.3 $119.1 $79.9 $60.6 $75.4 $78.2
Ratio of expenses to
average net assets....... .50% .55% .58% .59% .62% .69% .76% .77% .81% .83%
Ratio of net investment
income to average net
assets................... 8.29% 8.55% 8.72% 8.75% 8.42% 9.23% 10.70% 11.74% 10.46% 10.03%
Portfolio turnover rate... 32.2% 33.2% 29.2% 29.2% 39.1% 56.1% 27.5% 40.4% 39.6% 11.9%
* The Fund distributed no capital gains for the time periods listed.
</TABLE>
See notes to financial statements.
TOP TEN ISSUERS
December 31, 1997
- ---------------------------------------------------------------------
Percentage
Name of Net Assets
Stater Brothers Holdings, Inc.................3.58%
Cablevision Systems Corporation...............3.45
McDermott (J. Ray), S.A.......................3.37
Century Communications Corporation............3.34
Paging Network, Inc...........................3.31
Vencor, Inc...................................3.04
Greyhound Lines, Inc..........................2.99
Canandaigua Wine Company, Inc.................2.97
Meditrust Corporation, Paired ctf.............2.94
Adelphia Communications Corporation...........2.93
------
Total of top ten issuers..................31.92%
------
------
SCHEDULE OF INVESTMENTS
December 31, 1997
- ----------------------------------------------------------------------
Quoted
Shares or Market
Principal Value
Amount (Note A)
- --------- --------
NON-CONVERTIBLE BONDS - 76.50%
CONSUMER PRODUCTS AND SERVICES - 18.80%
7,000,000 Brown Group, Inc.
9.50%, 10/15/06..................................... 7,315,000
5,500,000 Coca-Cola Bottling Group Southwest, Inc.
9.00%, 11/15/03..................................... 5,637,500
6,875,000 Greyhound Lines, Inc.
11.50%, 4/15/07..................................... 7,596,875
1,000,000 Outboard Marine Corp.
8.25%, 3/15/98...................................... 1,001,527
3,600,000 Outboard Marine Corp.
8.625%, 3/15/01..................................... 3,668,954
6,200,000 Paging Network, Inc.
10.125%, 8/1/07..................................... 6,448,000
2,000,000 Paging Network, Inc.
8.875%, 2/1/06...................................... 1,960,000
7,000,000 Playtex Family Products Corp.
9.00%, 12/15/03..................................... 7,113,750
7,000,000 Viacom, Inc.
8.00%, 7/7/06....................................... 7,052,500
----------
47,794,106
----------
DIVERSIFIED PRODUCTS AND SERVICES - 11.54%
3,750,000 Borg-Warner Security Corporation
9.125%, 5/1/03...................................... 3,829,688
2,400,000 IDEX Corp.
9.75%, 9/15/02...................................... 2,490,000
3,300,000 Mark IV Industries, Inc.
8.75%, 4/1/03....................................... 3,481,500
8,000,000 McDermott (J. Ray), S.A.
9.375%, 7/15/06..................................... 8,570,000
4,150,000 Sequa Corp.
8.75%, 12/15/01..................................... 4,212,250
1,000,000 Sequa Corp.
9.625%, 10/15/99.................................... 1,032,500
5,000,000 Unisys Corp.
11.75%, 10/15/04.................................... 5,712,500
-----------
29,328,438
-----------
FINANCE AND INSURANCE- 0.99%
1,000,000 American Annuity Group, Inc.
11.125%, 2/1/03....................................... 1,031,789
1,000,000 Litchfield Financial Corp.
10.00%, 11/1/04...................................... 1,025,000
475,000 Litchfield Financial Corp.
8.875%, 11/1/03.................................... 470,250
-----------
2,527,039
-----------
FOOD AND BEVERAGES - 7.11%
3,000,000 ARA Group, Inc.
8.50%, 6/1/03....................................... 3,126,483
7,500,000 Canandaigua Wine Company, Inc.
8.75%, 12/15/03..................................... 7,556,250
3,000,000 Chiquita Brands International, Inc.
9.125%, 3/1/04...................................... 3,157,500
1,000,000 Chiquita Brands International, Inc.
9.625%, 1/15/04..................................... 1,060,000
3,000,000 Fleming Companies, Inc.
10.625%, 7/31/07.................................... 3,165,000
-----------
18,065,233
-----------
FOOD RETAILER - 3.58%
4,470,000 Stater Brothers Holdings, Inc.
11.00%, 3/1/01...................................... 4,928,175
4,000,000 Stater Brothers Holdings, Inc.
9.00%, 7/1/04....................................... 4,180,000
-----------
9,108,175
-----------
HEALTH CARE - 9.21%
3,000,000 Beverly Enterprises, Inc.
9.00%, 2/15/06...................................... 3,120,000
5,000,000 Genesis Health Ventures, Inc.
9.25%, 10/1/06...................................... 5,093,750
3,000,000 Magellan Health Services Inc.
11.25%, 4/15/04..................................... 3,326,250
4,000,000 Quorum Health Group, Inc.
8.75%, 11/1/05...................................... 4,125,000
7,750,000 Vencor, Inc.
8.625%, 7/15/07..................................... 7,740,312
-----------
23,405,312
-----------
MEDIA, COMMUNICATIONS AND ENTERTAINMENT - 24.01%
5,000,000 Adelphia Communications Corporation
9.875%, 3/1/05...................................... $ 5,281,250
2,000,000 Adelphia Communications Corporation
11.875%, 9/15/04.................................... 2,175,000
6,700,000 American Radio Systems Corporation
9.00%, 2/1/06....................................... 7,169,000
8,000,000 Cablevision Systems Corporation
9.875%, 5/15/06..................................... 8,780,000
8,250,000 Century Communications Corporation
8.875%, 1/15/07..................................... 8,497,500
5,000,000 Cinemark USA, Inc.
9.625%, 8/1/08...................................... 5,187,500
2,000,000 Comcast Cellular Communications, Inc.
9.50%, 5/1/07....................................... 2,085,000
5,000,000 Comcast Corporation
9.375%, 5/15/05..................................... 5,306,250
4,000,000 Heritage Media Corporation
8.75%, 2/15/06...................................... 4,220,000
5,000,000 Hollinger International, Inc.
9.25%, 2/1/06....................................... 5,250,000
2,000,000 Young Broadcasting Inc.
10.125%, 2/15/05.................................... 2,090,000
5,000,000 Young Broadcasting Inc.
9.00%, 1/15/06...................................... 5,000,000
-----------
61,041,500
-----------
TECHNOLOGY - 1.26%
3,000,000 Advanced Micro Devices, Inc.
11.00%, 8/1/03...................................... 3,210,000
-----------
TOTAL NON-CONVERTIBLE BONDS
(cost $187,751,189)................................. 194,479,803
-----------
CONVERTIBLE BONDS - 4.25%
7,531,000 Emeritus Corporation
6.25%, 1/1/06....................................... 6,561,384
4,500,000 Tenet Healthcare Corporation
6.00%, 12/1/05...................................... 4,235,625
-----------
TOTAL CONVERTIBLE BONDS
(cost $10,426,300)................................ 10,797,009
-----------
STOCKS - 9.58%
5,000 Homestead Savings Convertible
Preferred, Series A, $2.95 *......................... 5,000
100,000 Healthcare Realty Trust Incorporated................. 2,893,750
130,000 Hospitality Properties Trust......................... 4,273,750
204,272 Meditrust Corporation, Paired ctf.................... 7,481,462
130,000 National Health Investors, Inc....................... 5,443,750
110,000 Omega Healthcare Investors, Inc...................... 4,248,750
-----------
TOTAL STOCKS
(cost $18,020,199)................................. 24,346,462
-----------
SHORT-TERM INVESTMENTS - 8.02%
Commercial Paper - 6.45%
$3,000,000 Banta Corporation
6.35%, due January 5, 1998........................... 2,998,413
2,000,000 WICOR Industries, Inc.
6.30%, due January 5, 1998........................... 1,998,950
5,500,000 Harnischfeger Industries, Inc.
6.35%, due January 7, 1998........................... 5,495,149
1,800,000 Manpower, Inc.
6.35%, due January 7, 1998........................... 1,798,413
4,100,000 Quad/Graphics, Inc.
6.20%, due January 8, 1998........................... 4,095,763
-----------
16,386,688
-----------
Variable Rate Demand Notes - 1.57%
468,655 General Mills, Inc.
5.33%, due January 2, 1998........................... 468,655
2,374,865 Johnson Controls, Inc.
5.33%, due January 2, 1998........................... 2,374,865
335,781 Warner-Lambert Company
5.49%, due January 2, 1998........................... 335,781
814,116 Wisconsin Electric Power Company
5.49%, due January 2, 1998........................... 814,116
-----------
3,993,417
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $20,359,143)................................... 20,380,105
-----------
TOTAL INVESTMENTS
(cost $236,556,831).................................. 250,003,379
-----------
CASH AND RECEIVABLES,
NET OF LIABILITIES - 1.65%........................... 4,202,609
-----------
TOTAL NET ASSETS
(Basis of percentages
disclosed above).................................... $254,205,988
------------
------------
* This security has been classified as non-income producing.
See notes to financial statements.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
- ---------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value (cost $236,556,831) (Note A)............ $250,003,379
Interest and dividends receivable............................................ 5,653,152
------------
Total assets............................................................ 255,656,531
------------
LIABILITIES:
Payables-
Dividends payable............................................................ 1,298,302
Management fee (Note C)...................................................... 79,613
Other payables and accrued expenses.......................................... 72,628
------------
Total liabilities....................................................... 1,450,543
------------
Total net assets........................................................ $254,205,988
------------
------------
NET ASSETS CONSIST OF:
Fund shares issued and outstanding................................................ $247,492,109
Net unrealized appreciation on investments (Note B)............................... 13,425,586
Accumulated net realized losses on investments.................................... (7,434,375)
Accumulated undistributed net investment income................................... 722,668
------------
$254,205,988
------------
------------
NET ASSET VALUE PER SHARE ($.01 par value, 100,000,000 shares authorized),
offering price and redemption price ($254,205,988/68,804,921
shares outstanding)............................................................... $3.69
-----
-----
See notes to financial statements.
</TABLE>
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
- ---------------------------------------------------------------------
INCOME: (Note A)
Interest...................................... $17,274,549
Dividends..................................... 1,521,750
Other......................................... 524,737
----------
Total income............................. 19,321,036
----------
EXPENSES:
Management fee (Note C)....................... 809,091
Transfer agent fees........................... 120,657
Registration fees............................. 51,158
Legal fees.................................... 30,677
Postage and mailing fees...................... 24,653
Audit and tax consulting fees................. 14,500
Custodian fees................................ 11,417
Printing...................................... 10,904
Pricing service fees.......................... 9,433
Directors' fees............................... 9,000
Insurance..................................... 8,544
Telephone..................................... 4,191
Other operating expenses....................... 727
-----------
Total expenses................................ 1,104,952
------------
Net investment income.................... 18,216,084
-----------
NET REALIZED GAIN ON INVESTMENTS................... 1,781,466
NET INCREASE IN UNREALIZED APPRECIATION
ON INVESTMENTS................................... 7,724,030
-----------
Net gain on investments.................. 9,505,496
-----------
Net increase in net assets
resulting from operations................ $27,721,580
-----------
-----------
See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
- ----------------------------------------------------------------------
<TABLE>
1997 1996
----------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income........................................... $ 18,216,084 $14,578,760
Net realized gain (loss) on investments......................... 1,781,466 458,971
Net increase in unrealized appreciation on investments.......... 7,724,030 5,006,476
------------ ------------
Net increase in net assets resulting from operations....... 27,721,580 20,044,207
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.2903 and $0.2960 per share, respectively)................. (18,102,607) (14,615,595)
----------- ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued (21,707,323 and 10,614,891
shares, respectively)......................................... 79,140,388 36,879,473
Net asset value of shares issued in distributions from net
investment income (3,765,603 and 3,051,652 shares,
respectively)................................................. 13,707,776 10,528,296
Cost of shares redeemed (9,318,378 and 8,444,524
shares, respectively)......................................... (33,929,068) (29,248,401)
----------- -----------
Increase in net assets derived from
capital share transactions............................... 58,919,096 18,159,368
----------- -----------
Total increase in net assets............................... 68,538,069 23,587,980
----------- -----------
NET ASSETS:
Beginning of year (including undistributed net
investment income of $609,191 and $646,026, respectively).... 185,667,919 162,079,939
------------ ------------
End of year (including undistributed net
investment income of $722,668 and $609,191, respectively)..... $254,205,988 $185,667,919
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
- ---------------------------------------------------------------------
Note A -- Summary of significant accounting policies:
The Fund is an open-end diversified investment company. The primary
objective of the Fund is high current income consistent with the preservation
and conservation of capital values.
Securities valuation -- Market values of most debt securities are based
on valuations provided by a pricing service, which determines valuations for
normal, institutional-size trading units of securities using market
information, transactions for comparable securities and various other
relationships between securities which are generally recognized by
institutional traders. Other securities, excluding short-term investments,
are generally valued at the last sale price reported by the principal
security exchange on which the issue is traded or the NASDAQ national market
system. If no sale is reported, the latest bid price is used. U.S. Treasury
Bills and commercial paper, if any, are stated at market value with the
resultant difference between market value and original purchase price being
recorded as interest income. Variable rate demand notes are valued at cost
which approximates market value.
Securities transactions and related investment income -- Securities
transactions are recorded no later than the first business day after the
trade date (date the order to buy or sell is executed). Gains or losses on
sales of investments are calculated on an identified cost basis. Dividend
income is recorded on the ex-dividend date and interest income is recorded on
the accrual basis. Distributions to shareholders are recorded on the
ex-dividend date.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from the estimates.
Note B -- Income taxes:
No provision has been made for Federal income taxes or excise taxes
because it is the policy of the Fund to distribute all taxable net income and
qualify as a "regulated investment company" under the provisions in the
Internal Revenue Code applicable to regulated investment companies. The Fund
is not subject to State of Wisconsin income taxes. As of December 31, 1997,
the Fund has approximately $7,434,000 of net capital losses which may be used
to offset capital gains in future years. Capital loss carryovers of
approximately $3,366,000 will expire in 1998, $482,000 in 1999, $2,081,000 in
2000, and $1,505,000 in 2003.
At December 31, 1997, the net unrealized appreciation based on cost was
as follows (the Fund's book and Federal income tax cost of investment assets
were substantially identical):
Aggregate gross unrealized appreciation for all
investments in which there was an excess of
value over tax cost......................... $14,047,766
----------
Aggregate gross unrealized depreciation for all
investments in which there was an excess of
tax cost over value......................... ( 622,180)
-----------
-----------
Net unrealized appreciation............ $13,425,586
-----------
-----------
Note C -- Expenses:
The Fund has an investment advisory agreement with Nicholas Company,
Inc. (with whom certain officers and directors of the Fund are affiliated) to
serve as investment adviser and manager. The management fee of Nicholas
Company, Inc. is payable at an annual rate of 1/2 of 1% of the average daily
net assets of the Fund up to and including $50,000,000. On average daily net
assets over $50,000,000 up to and including $100,000,000, the management fee
is reduced to an annual rate of 4/10 of 1% and on average daily net assets
over $100,000,000, the fee is further reduced to an annual rate of 3/10 of
1%. Nicholas Company, Inc. has agreed to reduce such management fee by any
operating expenses (other than management fee) incurred by the Fund in excess
of 1/2 of 1% of average daily net assets.
At December 31, 1997, liabilities of the Fund included $79,613 payable to
the investment adviser.
Note D -- Investment portfolio transactions:
For the year ended December 31, 1997, the cost of purchases and the
proceeds from sales of investments, other than short-term obligations,
aggregated $115,769,466 and $64,592,824, respectively.
Independent Auditors' Report
- -----------------------------
To the Board of Directors and Shareholders
of Nicholas Income Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of
Nicholas Income Fund, Inc., including the schedule of investments, as of
December 31, 1997, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the ten years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at December 31, 1997 by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Nicholas Income
Fund, Inc. as of December 31, 1997, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the ten years in the
period then ended, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
January 15, 1998
HISTORICAL RECORD (unaudited)
- ---------------------------------------------------------------------
Net Investment Growth of
Net Income An Initial
Asset Value Distributions $10,000
Per Share Per Share Investment**
----------- ------------- ------------
November 21, 1977*........... $ 5.10 $ $10,000
December 31, 1987............ 3.64 0.4660 22,560
December 31, 1988............ 3.68 0.3710 25,164
December 31, 1989............ 3.44 0.3830 26,155
December 31, 1990............ 3.01 0.3970 25,886
December 31, 1991............ 3.34 0.3460 31,853
December 31, 1992............ 3.38 0.2955 35,143
December 31, 1993............ 3.52 0.2890 39,695
December 31, 1994............ 3.21 0.3010 39,626
December 31, 1995............ 3.42 0.2950 46,029
December 31, 1996............ 3.53 0.2960 51,721
December 31, 1997............ 3.69 0.2903 58,514
* Initial date under Nicholas Company, Inc. management.
** Assuming reinvestment of distributions.
The Fund distributed no capital gains for the time periods listed.
NICHOLAS FAMILY OF FUNDS
Services Offered
- ---------------------------------------------------------------------
* IRAs
*Traditional *Educational
*Roth *SEP
*Self-employed Master Retirement Plan
*Money Purchase *Profit Sharing
*Automatic Investment Plan
*Direct Deposite of Distributions
*Systematic Withdrawl Plan
*Monthly Automatic Exchange between Funds
*Telephone Redemption (Regular accounts only)
*Telephone Exchange
*24-hour Automated Account Information (800-544-6547)
Please call a shareholder representative for further information on
the above services or with any other questions you may have regarding
the Nicholas Family of Funds.
800-227-5987
OFFICERS AND DIRECTORS
ALBERT O. NICHOLAS
President and Director
FREDERICK F. HANSEN
Director
JAY H. ROBERTSON
Director
MELVIN L. SCHULTZ
Director
DAVID L. JOHNSON
Executive Vice President
THOMAS J. SAEGER
Executive Vice President and Secretary
JEFFREY T. MAY
Senior Vice President and Treasurer
DAVID O. NICHOLAS
Senior Vice President
CANDACE L. LESAK
Vice President
KATHLEEN A. EVANS
Assistant Vice President
Investment Adviser
NICHOLAS COMPANY, INC.
414-272-6133 or 800-227-5987
Custodian and Transfer Agent
FIRSTAR TRUST COMPANY
414-276-0535 or 800-544-6547
Counsel
MICHAEL, BEST & FRIEDRICH
Milwaukee, WI
Auditors
DELOITTE & TOUCHE LLP
Milwaukee, WI
This report is submitted for the information of shareholders of
the Fund. It is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective
prospectus.
ANNUAL REPORT
NICHOLAS INCOME
FUND, INC.
700 North
Water Street
Milwaukee,
Wisconsin 53202
December 31, 1997
