SEMIANNUAL REPORT
- -----------------
NICHOLAS FUND, INC.
700 North
Water Street
Milwaukee,
Wisconsin 53202
September 30, 1996
<PAGE>
November 28, 1996
Report to Shareholders:
Nicholas Fund had good relative performance in the third calendar quarter.
During this period, the Fund's net asset value per share increased 3.91% versus
3.09% for the Standard & Poor's 500 and 0.34% for the Russell 2000.
For the six months ended September 30, 1996, the Fund's return was 6.54%.
In comparison, the S&P 500 increased 7.72% and the Russell 2000 increased
5.36%. Cash at September 30 was 6.0% of net assets.
Long-term performance of the Fund is shown below for time periods ended
September 30, 1996.
<TABLE>
<CAPTION>
Average Annual Total Return*
-----------------------------------------------------
July 14, 1969**
1 year 5 years 10 years 15 years 27.2 years
------ ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Nicholas Fund (Distributions Reinvested) +22.32% +14.20% +13.54% +16.75% +13.49%
Standard & Poor's 500 (Income Reinvested) +20.32% +15.21% +14.97% +16.61% +11.67%
Russell 2000 (Income Reinvested) +13.13% +15.76% +11.91% +13.84% N/A
Consumer Price Index +2.88% +2.86% +3.69% +3.63% +5.51%
Ending Value of $10,000 invested in
Nicholas Fund (Distributions Reinvested) $12,232 $19,427 $35,604 $102,035 $313,057
</TABLE>
* 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.
** Date of initial public offering. Starting time period for Standard &
Poor's 500 and the Consumer Price Index was June 30, 1969.
In addition to our constant emphasis on investment performance, I want
shareholders to know that our administrative staff is continuing to do its job
effectively and in an extremely cost-conscious manner. This effort is an
important part of achieving good investment results. As most of you know, we
are a pure no-load mutual fund with no front or rear-end sales charges and no
12b-1 fees. The total annual expenses (which include management fees) of
running Nicholas Fund amounts to about .74% of assets compared to approximately
1.4% for the average domestic stock fund. I'm very pleased and proud of the
accomplishments of this segment of our operation.
Lastly, it is a pleasure to announce that David O. Nicholas has been
appointed co-manager of the Nicholas Fund, Inc., effective October 30, 1996, by
the Nicholas Company Board of Directors. At the same time, I will continue my
investment management responsibilities as a co-manager. David has earned this
opportunity through his successful tenure as portfolio manager of Nicholas II,
Inc., and Nicholas Limited Edition, Inc. since March, 1993. Having managed
Nicholas Fund for the past 27 years, I welcome David's input as we work
together to maintain a sound, consistent, above-average investment record. This
change was made to assure consistency and continuity of investment management
as we move forward to the next millennium.
Sincerely,
/s/ Albert O. Nicholas
Albert O. Nicholas
President
<PAGE>
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1996 (UNAUDITED)
- ------------------------------------------------------------------------------
QUOTED
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 1(A))
--------- -----------
COMMON STOCKS - 93.3%
AGRICULTURE - 1.0%
1,050,000 Monsanto Company $ 38,325,000
-------------
BANKS AND FINANCE - 20.0%
272,000 Edwards (A.G.), Inc. 7,922,000
1,505,300 Federal Home Loan Mortgage Corporation 147,331,238
4,500,000 Federal National Mortgage Association 156,937,500
1,097,250 Fifth Third Bancorp 63,777,656
336,900 First Bank System, Inc. 22,530,187
445,700 Firstar Corporation 21,505,025
2,084,000 Marshall & Ilsley Corporation 62,780,500
2,085,350 Mercury Finance Company 25,024,200
1,000,000 Norwest Corporation 40,875,000
645,000 Security Capital Corporation (WI) + 41,763,750
1,626,000 Travelers Group Inc. 79,877,250
350,000 Wells Fargo & Company 91,000,000
-------------
761,324,306
-------------
BUSINESS SERVICES - 3.4%
686,000 Cintas Corporation 38,416,000
1,561,300 Micro Warehouse, Inc. * 40,203,475
1,850,000 Wallace Computer Services, Inc. 52,262,500
-------------
130,881,975
-------------
CONSUMER PRODUCTS AND SERVICES - 9.7%
989,750 Clayton Homes, Inc. 21,774,500
1,568,300 Cooper Tire & Rubber Company 33,914,488
651,700 CSS Industries, Inc. * + 14,989,100
500,000 Eastman Kodak Company 39,250,000
750,000 Gillette Company (The) 54,093,750
741,500 Hillenbrand Industries, Inc. 27,064,750
100,000 Kimberly-Clark Corporation 8,812,500
755,000 Leggett & Platt, Incorporated 22,178,125
478,367 Monro Muffler Brake, Inc. * + 9,507,544
275,000 NIKE, Inc. - Class B 33,412,500
250,000 Pittson Brink's Group 7,843,750
846,300 Valspar Corporation (The) 41,680,275
898,400 Walt Disney Company (The) 56,936,100
-------------
371,457,382
-------------
FOOD AND BEVERAGE - 3.6%
1,000,000 Coca-Cola Company (The) 50,875,000
1,683,000 International Dairy Queen, Inc. - Class A * + 34,501,500
720,000 International Dairy Queen, Inc. - Class B * + 14,220,000
760,500 McDonald's Corporation 36,028,688
-------------
135,625,188
-------------
HEALTH CARE PRODUCTS - 8.5%
1,090,000 Abbott Laboratories 53,682,500
468,000 American Home Products Corporation * 29,835,000
730,000 Amgen Inc. * 46,081,250
1,361,800 Elan Corporation PLC * 40,683,775
877,800 Forest Laboratories, Inc. * 31,710,525
200,000 Medtronic, Inc. 12,825,000
750,000 Pfizer Inc 59,343,750
1,600,000 Stryker Corporation 48,200,000
-------------
322,361,800
-------------
HEALTH CARE SERVICES - 8.5%
1,882,500 Apria Healthcare Group, Inc. * 35,296,875
616,600 Cardinal Health, Inc. 50,946,575
225,900 Health Care and Retirement Corporation * 5,308,650
1,051,950 Health Management Associates, Inc. - Class A * 26,167,256
2,570,000 Magellan Health Services Inc. * + 53,327,500
300,000 MedPartners/Mullikin, Inc. * 6,825,000
100,000 Patterson Dental Company * 2,675,000
1,783,000 Quorum Health Group, Inc. * 44,129,250
1,657,905 Vencor,Inc. * 53,467,436
1,450,000 VIVRA Incorporated * 47,306,250
-------------
325,449,792
-------------
INDUSTRIAL PRODUCTS AND SERVICES - 7.0%
403,000 Lockheed Martin Corporation 36,320,375
800,000 Marshall Industries * 24,100,000
1,373,000 Stant Corporation + 14,759,750
1,013,825 Thermo Electron Corporation * 41,059,913
2,212,000 Tyco International Ltd. 95,392,500
2,017,000 Watts Industries, Inc. 39,583,625
742,500 Wausau Paper Mills Company 14,293,125
-------------
265,509,288
-------------
INSURANCE - 9.8%
527,250 AFLAC Incorporated 18,717,375
577,500 Cincinnati Financial Corporation 33,061,875
888,777 Foremost Corporation of America + 48,882,735
2,480,000 Mercury General Corporation + 116,560,000
794,800 Mutual Risk Management Ltd. 23,049,200
1,518,500 Protective Life Corporation 57,323,375
2,200,000 SunAmerica, Inc. 75,900,000
-------------
373,494,560
-------------
INVESTMENT MANAGEMENT - 0.7%
413,300 Franklin Resources, Inc. 27,432,787
-------------
MEDIA, COMMUNICATIONS AND ENTERTAINMENT - 3.7%
665,300 Loral Space & Communications Ltd. * 10,478,475
311,600 Pulitzer Publishing Company 17,800,150
2,000,000 General Motors Corporation - Class H 115,500,000
-------------
143,778,625
-------------
REAL ESTATE - 0.3%
177,300 Meditrust 6,139,013
219,700 National Health Investors, Inc. 7,332,487
-------------
13,471,500
-------------
RETAIL TRADE - 9.6%
380,000 Arbor Drugs, Inc. 8,265,000
1,460,000 AutoZone, Inc. * 42,340,000
2,700,000 Circuit City Stores, Inc. 97,537,500
1,404,000 Consolidated Stores Corporation * 56,160,000
3,050,000 Heilig-Meyers Company + 47,656,250
800,000 Home Depot, Inc. (The) 45,500,000
1,262,000 Kohl's Corporation * 45,432,000
600,000 Walgreen Co. 22,200,000
-------------
365,090,750
-------------
TECHNOLOGY - 4.2%
750,000 Hewlett-Packard Company 36,562,500
470,000 Intel Corporation 44,855,860
800,000 Motorola, Inc. 41,300,000
650,000 Texas Instruments Incorporated 35,831,250
-------------
158,549,610
-------------
TRANSPORTATION - 0.7%
535,000 American Freightways Corporation * 4,748,125
726,393 Heartland Express, Inc. * 20,520,602
-------------
25,268,727
-------------
MISCELLANEOUS - 2.6%
2,400 Berkshire Hathaway Inc. * 77,160,000
877,500 Leucadia National Corporation 21,279,375
-------------
98,439,375
-------------
TOTAL COMMON STOCKS
(cost $2,063,849,025) 3,556,460,665
-------------
CONVERTIBLE BONDS - 0.7%
$10,290,000 National HealthCare L.P.
6.00%, due July 1, 2000
(cost $19,756,800) 25,236,225
SHORT-TERM INVESTMENTS - 6.5%
COMMERCIAL PAPER - 6.4%
$ 4,000,000 NEC Industries Inc.,
5.59%, due October 1, 1996 4,000,000
7,000,000 NEC Industries Inc.,
5.50%, due October 1, 1996 7,000,000
6,000,000 Payco American Corporation,
5.50%, due October 2, 1996 5,999,083
7,500,000 Columbia/HCA Healthcare Corporation,
5.50%, due October 3, 1996 7,497,708
6,500,000 American Bankers Insurance Group, Inc.,
5.51%, due October 3, 1996 6,498,012
5,000,000 Kerr-McGee Credit Corporation,
5.47%, due October 3, 1996 4,998,481
4,000,000 Harnischfeger Industries, Inc.
5.55%, due October 4, 1996 3,998,150
5,000,000 Harnischfeger Industries, Inc.,
5.55%, due October 4, 1996 4,997,708
4,000,000 A.O. Smith Corporation,
5.55%, due October 7, 1996 3,996,300
4,000,000 Houston Industries Incorporated,
5.55%, due October 7, 1996 3,996,300
4,379,000 Schreiber Foods, Inc.,
5.55%, due October 8, 1996 4,374,274
7,500,000 Tupperware Corporation
5.55%, due October 8, 1996 7,491,979
6,000,000 Houston Industries Incorporated,
5.58%, due October 9, 1996 5,992,560
5,000,000 Payco American Corporation,
5.55%, due October 9, 1996 4,993,833
12,000,000 A.O. Smith Corporation,
5.55%, due October 10, 1996 11,983,350
8,000,000 Fiat Finance U.S.A., Inc.,
5.55%, due October 11, 1996 7,987,667
6,000,000 Fiserv, Inc.
5.55%, due October 11, 1996 5,990,750
10,000,000 Cox Enterprises, Inc.,
5.48%, due October 15, 1996 9,978,689
9,000,000 Harnischfeger Industries, Inc.,
5.55%, due October 16, 1996 8,979,187
5,000,000 Source One Mortgage Services Corporation,
5.54%, due October 16, 1996 4,988,458
3,000,000 A.O. Smith Corporation,
5.55%, due October 17, 1996 2,992,600
5,000,000 American Bankers Insurance Group, Inc.,
5.56%, due October 17, 1996 4,987,644
8,000,000 Harnischfeger Industries, Inc.,
5.55%, due October 18, 1996 7,979,033
7,000,000 Cox Enterprises, Inc.,
5.55%, due October 21, 1996 6,978,417
4,200,000 Mattel, Inc.,
5.55%, due October 22, 1996 4,186,403
7,980,000 Source One Mortgage Services Corporation,
5.55%, due October 22, 1996 7,954,165
10,000,000 Houston Industries, Incorporated,
5.55%, due October 23, 1996 9,966,083
4,000,000 Mosinee Paper Corporation,
5.60%, due October 23, 1996 3,986,311
4,000,000 American Bankers Insurance Group, Inc.,
5.53%, due October 24, 1996 3,985,868
5,000,000 Harnischfeger Industries, Inc.,
5.55%, due October 24, 1996 4,982,271
3,000,000 AMCORE Financial, Inc.
5.55%, due October 25, 1996 2,988,900
5,000,000 Fiat Finance, U.S.A., Inc.,
5.50%, due October 25, 1996 4,981,667
3,800,000 Schreiber Foods, Inc.,
5.55%, due October 28, 1996 3,784,182
4,000,000 Columbia/HCA Healthcare Corporation,
5.62%, due October 29, 1996 3,982,516
15,000,000 Cox Enterprises, Inc.,
5.54%, due October 30, 1996 14,933,058
5,000,000 Manpower, Inc.,
5.55%, due October 31, 1996 4,976,875
10,000,000 Cox Enterprises, Inc.,
5.50%, due November 4, 1996 9,948,056
7,000,000 Fiserv, Inc.,
5.60%, due November 8, 1996 6,958,622
8,485,000 NEC Industries, Inc.,
5.60%, due November 18, 1996 8,421,645
-------------
244,716,805
-------------
VARIABLE DEMAND NOTES - 0.1%
1,621,800 Johnson Controls, Inc.,
5.22%, due October 1, 1996 1,621,800
14,550 Sara Lee Corporation
5.17%, due October 1, 1996 14,550
520,000 Warner-Lambert Company,
5.17%, due October 1, 1996 520,000
-------------
2,156,350
-------------
TOTAL SHORT-TERM INVESTMENTS
(cost $245,830,545) 246,873,155
-------------
TOTAL INVESTMENTS 3,828,570,045
-------------
LIABILITIES, NET OF CASH
AND RECEIVABLES - (0.5%) (16,443,364)
-------------
TOTAL NET ASSETS (Basis of
percentages disclosed above) $3,812,126,681
=============
+ This company is affiliated with the Fund; that is, the Fund holds 5% or more
of its outstanding voting Securities. Such companies are defined in Section
2(a)(3), of the Investment Company Act of 1940.
* Nondividend paying security.
The accompanying notes to financial statements are an integral part of
this schedule.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments in securities at market value (Note 1 (a)) -
Nonaffiliated issuers (cost $2,099,680,458) - see accompanying schedule of investments...... $3,432,401,916
Affiliated issuers (cost $229,755,912) - see accompanying schedule of investments (Note 5).. 396,168,129
--------------
Total investments 3,828,570,045
--------------
Cash........................................................................................... 375,257
Receivables --
Dividends and interest...................................................................... 3,247,275
--------------
Total assets........................................................................... 3,832,192,577
--------------
LIABILITIES:
Payables --
Investment securities purchased............................................................. 17,619,234
Management fee (Note 2)..................................................................... 1,858,980
Other payables and accrued expenses......................................................... 587,682
--------------
Total liabilities...................................................................... 20,065,896
--------------
Total net assets.......................................................................
$3,812,126,681
==============
NET ASSETS CONSIST OF:
Fund shares issued and outstanding............................................................. $2,145,601,116
Net unrealized appreciation on investments (Note 3)............................................ 1,498,091,065
Accumulated undistributed net realized gains on investments.................................... 160,290,164
Accumulated undistributed net investment income................................................ 8,144,336
--------------
$3,812,126,681
==============
NET ASSET VALUE PER SHARE ($.50 par value, 200,000,000 shares authorized)
offering price and redemption price ($3,812,126,681 / 58,509,598 shares
outstanding)................................................................................... $65.15
======
</TABLE>
The accompanying notes to financial statements are an integral part of
this statement.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------
<S> <C>
INCOME:
Dividends --
Nonaffiliated issuers .............................................................. $ 16,403,112
Affiliated issuers (Note 5)......................................................... 2,885,420
Interest................................................................................. 5,557,855
------------
24,846,387
------------
EXPENSES:
Management fee (Note 2).................................................................. 11,936,807
Transfer agent fees...................................................................... 982,105
Custodian fees........................................................................... 119,594
Postage ................................................................................. 116,589
Printing................................................................................. 69,141
Registration fees........................................................................ 61,628
Legal fees............................................................................... 34,069
Telephone................................................................................ 27,568
Audit and tax consulting fees............................................................ 12,200
Directors' fees.......................................................................... 7,593
Insurance................................................................................ 5,014
Other operating expenses................................................................. 2,299
------------
13,374,607
------------
Net investment income.......................................................... 11,471,780
------------
NET REALIZED GAINS ON INVESTMENTS (Note 1 (b)):
Nonaffiliated issuers ................................................................... 160,497,141
Affiliated issuers (Note 5) ............................................................. 23,600
------------
160,520,741
------------
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS....................................... 63,405,881
------------
Net gain on investments................................................................. 223,926,622
------------
Net increase in net assets resulting from operations.................................... $235,398,402
============
</TABLE>
The accompanying notes to financial statements are an integral part of
this statement.
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND THE YEAR ENDED MARCH 31, 1996
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED 9/30/96
(UNAUDITED) 1996
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income................................................ $ 11,471,780 $ 28,786,310
Net realized gains on investments (Note 1 (b))....................... 160,520,741 310,441,936
Net increase in unrealized appreciation on investments............... 63,405,881 585,991,652
-------------- --------------
Net increase in net assets resulting from operations........ 235,398,402 925,219,898
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.1590 and $0.5650 per share, respectively)...................... ( 9,067,415) (31,690,147)
Distributions from net realized gains on investment transactions
($2.5930 and $4.0945 per share, respectively)...................... (147,830,702) (228,973,671)
-------------- --------------
Total distributions......................................... (156,898,117) (260,663,818)
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued (1,499,011 and 3,493,644
shares, respectively).............................................. 93,847,588 204,221,865
Net asset value of shares issued in distributions from net investment
income and net realized gains (2,342,525 and 4,323,439 shares,
respectively) ..................................................... 148,188,123 245,904,717
Cost of shares redeemed (2,616,261 and 8,069,427 shares,
respectively)...................................................... (163,708,946) (463,785,946)
-------------- --------------
Increase (decrease) in net assets derived from capital share
transactions 78,326,765 (13,659,364)
-------------- --------------
Total increase in net assets 156,827,050 650,896,716
-------------- --------------
NET ASSETS, at the beginning of the period (including undistributed net
investment income of $5,739,971 and $8,643,808, respectively).......... 3,655,299,631 3,004,402,915
-------------- --------------
NET ASSETS, at the end of the period (including undistributed net
investment income of $8,144,336 and $5,739,971, respectively).......... $3,812,126,681 $3,655,299,631
============== ==============
</TABLE>
The accompanying notes to financial statements are an integral part of
these statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(FOR A SHARES OUTSANDING THROUGHOUT EACH PERIOD)
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED MARCH 31,
ENDED 9/30/96 -------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $63.81 $52.22 $51.10 $52.91 $49.68 $42.99
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .20 .57 .69 .74 .75 .70
Net gains or (losses) on securities
(realized and unrealized) 3.89 15.68 4.46 (.68) 5.20 7.49
Total from investment operations 4.09 16.25 5.15 .06 5.95 8.19
LESS DISTRIBUTIONS:
Dividends (from net
investment income) (.16) (.57) (.71) (.82) (.68) (.68)
Distributions (from capital gains) (2.59) (4.09) (3.32) (1.05) (2.04) (.82)
Total distributions (2.75) (4.66) (4.03) (1.87) (2.72) (1.50)
NET ASSET VALUE, END OF PERIOD $65.15 $63.81 $52.22 $51.10 $52.91 $49.68
TOTAL RETURN 6.54%** 32.38% 10.88% 0.04% 12.41% 19.33%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $3,812.1 $3,655.3 $3,004.4 $2,941.2 $3,013.4 $2,234.1
Ratio of expenses to average net asset .74%* .74% .77% .78% .76% .78%
Ratio of net investment income
to average net assets 0.62%* .87% 1.34% 1.40% 1.53% 1.60%
Portfolio turnover rate 16.54%* 25.70% 29.82% 33.39% 10.20% 14.58%
Average commission rate paid by the
Fund on portfolio investment
transactions*** $0.0462 $0.0492 -- -- -- --
</TABLE>
*Annualized
**Not annualized
***Disclosure of this rate is required by the Securities and Exchange
Commission on a prospective basis beginning with the Fund's 1996 fiscal year
end.
The accompanying notes to financial statements are an integral part of
these statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 (UNAUDITED)
- -------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
The Nicholas Fund, Inc. (the "Fund") is an open-end, diversified
management company registered under the Investment Company Act of 1940, as
amended. The primary objective of the Fund is capital appreciation in
which income is a secondary consideration. To achieve its objective, the
Fund invests in a diversified list of common stocks having growth
potential. The following is a summary of the significant accounting
policies of the Fund.:
(a) Each security, excluding short-term investments, is valued at the last
sale price reported by the principal security exchange on which the
issue is traded, or if no sale is reported, the latest bid price.
Variable demand notes are valued at cost which approximates market
value. U.S. Treasury Bills and commercial paper are stated at market
value with the resultant difference between market value and original
purchase price being recorded as interest income. Investment
transactions are recorded no later than the first business day after
the trade date. Cost amounts, as reported on the schedule of
investments and the statement of assets and liabilities, are the same
for Federal income tax purposes.
(b) Net realized gains and losses on common stocks and bonds were computed
on the basis of specific certificates.
(c) Provision has not been made for Federal income taxes or excise taxes
since the Fund has elected to be taxed as a "regulated investment
company" and intends to distribute substantially all taxable income to
its shareholders and otherwise comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies.
(d) Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Non-cash dividends, if any, are recorded at fair
market value on date of distribution.
(e) 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.
(2) INVESTMENT ADVISER AND MANAGEMENT AGREEMENT --
The Fund has an agreement with Nicholas Company, Inc. (with whom certain
officers and directors of the Fund are affiliated) to serve as investment
adviser and manager. Under the terms of the agreement, a monthly fee is
paid to the investment adviser based on 1/16th of 1% (.75 of 1% on an
annual basis) of the average net asset value up to and including $50
million and 2/37th of 1% (.65 of 1% on an annual basis) of the average net
asset value in excess of $50 million. Also, the investment adviser may be
reimbursed for clerical and administrative services rendered by its
personnel. This advisory agreement is subject to an annual review by the
Directors of the Fund.
(3) NET UNREALIZED APPRECIATION --
Aggregate gross unrealized appreciation (depreciation) as of September 30,
1996, based on investment cost for Federal tax purposes is as follows:
Aggregate gross unrealized appreciation on investments.$1,528,968,045
Aggregate gross unrealized depreciation on investments.. (30,876,980)
--------------
Net unrealized appreciation ..................... $1,498,091,065
==============
(4) INVESTMENT TRANSACTIONS --
For the six months ended September 30, 1996, the cost of purchases and the
proceeds from sales of investment securities, other than short-term
obligations, aggregated $288,354,346 and $485,853,751, respectively.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996 (UNAUDITED)
- ------------------------------------------------------------------------------
(5) Transactions with Affiliates --
Following is an analysis of transactions for the six months ended September
30, 1996 with "affiliated companies" as defined by the Investment Company
Act of 1940:
<TABLE>
<CAPTION>
Amount of
Amount of Capital Gain
Dividends Realized
Share Activity Credited on Sale
------------------------------------------- to Income of Shares
Balance Balance in Fiscal in Fiscal
Security Name 3/31/96 Purchases Sales 9/30/96 1997 1997
------------- ------- --------- ----- ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
CSS Industries, Inc. 601,700 50,000 -- 651,700 $ -- $ --
Formost Corporation of
America 888,777 -- -- 888,777 479,940 --
Heilig-Meyers Company 3,000,000 50,000 -- 3,050,000 420,000 --
International Dairy
Queen, Inc.
Class A 1,683,000 -- -- 1,683,000 -- --
Class B 720,000 -- -- 720,000 -- --
Magellan Health Services Inc.2,155,900 414,100 -- 2,570,000 -- --
Mercury General
Corporation 2,430,000 50,000 -- 2,480,000 1,190,400 --
Monro Muffler Brake, Inc.(b) 483,367 -- 5,000 478,367 -- 23,600
Protective Life
Corporation (a) 1,518,500 -- -- 1,518,500 546,660 --
Security Capital Corporation 645,000 -- -- 645,000 193,500 --
Stant Corporation 1,373,000 -- -- 1,373,000 54,920 --
---------- ----------
$2,885,420 $ 23,600
========== ==========
</TABLE>
(a) As of September 30, 1996, the Fund is no longer affiliated with this
company.
(b) The share activity has been adjusted to reflect a stock split.
- ------------------------------------------------------------------------------
HISTORICAL RECORD (UNAUDITED)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Adjusted for Two-for-One Stock Split June 15, 1979)
Net Investment Dollar
Net Income Capital Gain Weighted Growth of An
Asset Value Distributions Distributions Price/Earnings Initial $10,000
Per Share Per Share Per Share Ratio** Investment***
----------- -------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
July, 14, 1969*.............. $ 6.59 $ -- $ -- -- $ 10,000
March 31, 1986............... 35.26 0.575 0.610 15.8 times 87,699
March 31, 1987............... 39.94 0.882 0.187 16.3 102,386
March 31, 1988............... 32.15 1.840 4.034 14.1 98,557
March 31, 1989............... 35.27 1.025 0.451 13.2 113,155
March 31, 1990............... 37.72 0.924 1.054 14.9 127,360
March 31, 1991............... 42.99 0.790 0.225 16.9 149,179
March 31, 1992............... 49.68 0.679 0.824 19.4 178,015
March 31, 1993............... 52.91 0.679 2.042 18.5 200,098
March 31, 1994............... 51.10 0.8175 1.047 16.7 200,182
March 31, 1995............... 52.22 0.707 3.317 17.2 221,970
March 31, 1996............... 63.81 0.5650 4.0945 21.0 293,836
September 30, 1996........... 65.15 0.1590 (a) 2.5930 (a) 20.5 313,057
* Date of Initial Public Offering (a) Paid May 22, 1996 to shareholder of
** Based on latest 12 months accomplished earnings record May 16, 1996
*** Assuming reinvestment of all distibutions
Range in quarter end price/earnings
ratios since December 31, 1974
High Low
-------------- -------------
6/30/96 21.3 3/31/82 8.3
</TABLE>
<PAGE>
CAN YOU AFFORD NOT TO INVEST IN AN IRA?
The maximum yearly IRA contribution is the less of $2,000 or 100% of your
compensation. Every year that you contribute this amount you may also deduct
it from your Federal income taxes, unless you (or your spouse) are an eligible
participant in an employer-sponsored retirement plan and your adjusted gross
income exceeds certain limits as defined by the Internal Revenue Code. This
deduction can lead to substantial savings, especially when you look at the
relationship between higher tax brackets and the net cost of investing. The
table below illustrates a schedule of tax brackets, resulting tax savings, and
the net cost of investing $2,000 in an IRA, assuming full deductibility of your
contributions.
TABLE I
FEDERAL TAX FEDERAL TAX NET COST OF INVESTING
BRACKETS SAVINGS $2,000 IN AN IRA
----------- ----------- ---------------------
15% $300 $1,700
28% 560 1,440
31% 620 1,380
36% 720 1,280
39.6% 792 1,208
Even if you are an eligible participant in an employer-sponsored retirement
plan, you may still make a non-deductible IRA contribution (subject to the
$2,000/100% of compensation limit). Another tax advantage to investing in an
IRA is that any amounts received from dividends, interest, etc., accumulate tax
deferred, whether or not your contribution is fully deductible. Taxes will
have to be paid when you receive distributions.
Finally, Table II shows the various amounts accumulated in a IRA under
different annual rates of return, based on a $2,000 annual year end
contribution. These figures are purely hypothetical since investment returns
are rarely constant year to year. Yet, one can get a good idea that investing
in an IRA plan provides a good nest egg for retirement.
TABLE II
Amounts accumulated in an IRA
After 8% 10% 12% 15%
10 years $ 28,973 $ 31,874 $ 35,096 $ 40,606
20 years 91,524 114,550 144,104 204,880
30 years 226,566 328,980 482,660 869,480
40 years 518,113 885,180 1,534,180 3,558,000
- ------------------------------------------------------------------------------
Top Ten Equity Holdings
September 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------
Percentage of
Total Net Assets
Federal National Mortgage Association 4.12%
Federal Home Loan Mortgage Corporation 3.86%
Mercury General Corporation 3.06%
General Motors Corporation - Class H 3.03%
Circuit City Stores, Inc. 2.56%
Tyco International Ltd. 2.50%
Wells Fargo & Company 2.39%
Travelers Group Inc. 2.10%
Berkshire Hathaway Inc. 2.02%
SunAmerica, Inc. 1.99%
<PAGE>
OFFICERS AND DIRECTORS
ALBERT O. NICHOLAS
President and Director
ROBERT H. BOCK
Director
MELVIN L. SCHULTZ
Director
RICHARD SEAMAN
Director
DAVID L. JOHNSON
Executive Vice President
THOMAS J. SAEGER
Executive Vice President and Secretary
DAVID O. NICHOLAS
Senior Vice President
LYNN S. NICHOLAS
Senior Vice President
JEFFREY T. MAY
Vice President and Treasurer
CANDACE L. LESAK
Vice President
CHRISTINA M. MOURADIAN
Assistant Treasurer
Custodian and Transfer Agent
FIRSTAR TRUST COMPANY
Milwaukee
(414) 276-0535
Counsel
DAVIS & KUELTHAU, S.C.
Milwaukee
Auditors
ARTHUR ANDERSEN LLP
Milwaukee
MEMBER OF
==================
NO-LOAD
100% MUTUAL FUND
COUNCIL
==================
- ---------------------------------------------------------------------
This report is submitted for the information of shareholders of the
Fund. It is not authorized for distribution to prospective investors
unless preceded by an effective prospectus.
