November 26, 1997
Report to Shareholders:
During the third calendar quarter ended September 30, 1997 the Fund's total
return was 9.16% compared to 7.49% for the Standard & Poor's 500 and 14.88% for
the Russell 2000.
For the six months ended September 30, 1997, the Fund's total return was
26.68%. In comparison, the S&P 500 increased 26.27% and the Russell 2000
increased 33.50%. Cash at September 30 was 3.24% of net assets.
Long-term performance of the Fund is shown below for time periods ended
September 30, 1997 as well as the one year return.
<TABLE>
Average Annual Total Return*
----------------------------
July 14, 1969**
1 year 5 years 10 years 15 Years 28.2 years
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nicholas Fund
(Distributions Reinvested) ........... +36.35% +18.84% +14.89% +17.61% +14.23%
Standard & Poor's 500 ................... +40.43% +20.75% +14.74% +18.61% +12.58%
(Dividends Reinvested)
Russell 2000 (Dividends Reinvested) ..... +33.19% +20.51% +12.23% +15.38% N/A
Consumer Price Index .................... + 2.15% + 2.70% + 3.46% + 3.40% + 5.39%
Ending value of $10,000 invested in
Nicholas Fund (Distributions Reinvested) $13,635 $23,708 $40,080 $113,914 $426,862
</TABLE>
As was stated in the May 1997 Report to Shareholders, large
company stocks were continuing to outperform small company stocks. Since
then the opposite has occurred. This trend is favorable for Nicholas Fund
since we tend to include the ownership of small and mid-size stocks. Two
other characteristics of the current stock market; high price volatility and
extreme sensitivity of individual stocks to company specific developments;
are creating investment opportunities. We are attempting to benefit from
this situation while staying true to our investment philosophy. Lastly, we
are pleased to announce that we have been named to the annual Forbes Honor
Roll for the thirteenth time in the last sixteen years. We believe
consistency of philosophy and performance over the long-term are the reasons
for this accomplishment.
Management would like to thank all shareholders for the confidence they
have placed in the long-term investment philosophy of the Fund. We
appreciate your patience and support.
Sincerely,
/s/ Albert O. Nicholas
-------------------
Albert O. Nicholas
President
*Total returns are historical and include change in share price and
reinvestment of dividends 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 is June 30, 1969.
- ---------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
- ---------------------------------------------------------------------
<TABLE>
Six Months
Ended 9/30/97 Year ended March 31,
----------------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $67.11 $63.81 $52.22 $51.10 $52.91 $49.68 $42.99
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .18 .40 .57 .69 .74 .75 .70
Net gains or (losses) on securities
(realized and unrealized) 17.53 8.64 15.68 4.46 (.68) 5.20 7.49
------ ------ ------ ------ ------ ------ ------
Total from investment operations 17.71 9.04 16.25 5.15 .06 5.95 8.19
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends (from net
investment income) (.14) (.42) (.57) (.71) (.82) (.68) (.68)
Distributions (from capital gains) (1.06) (5.32) (4.09) (3.32) (1.05) (2.04) (.82)
------ ------ ------ ------ ------ ------ ------
Total distributions (1.20) (5.74) (4.66) (4.03) (1.87) (2.72) (1.50)
------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $83.62 $67.11 $63.81 $52.22 $51.10 $52.91 $49.68
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
TOTAL RETURN 26.68%** 14.68% 32.38% 10.88% 0.04% 12.41% 19.33%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $4,997.7 $3,989.5 $3,655.3 $3,004.4 $2,941.2 $3,013.4 $2,234.1
Ratio of expenses to average net asset .72%* .72% .74% .77% .78% .76% .78%
Ratio of net investment income
to average net assets .47%* .61% .87% 1.34% 1.40% 1.53% 1.60%
Portfolio turnover rate 16.65%* 15.18% 25.70% 29.82% 33.39% 10.20% 14.58%
Average commission rate paid by the
Fund on portfolio investment
transactions*** $0.0484 $0.0473 $0.0492 -- -- -- --
*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.
</TABLE>
The accompanying notes to financial statements are an integral
part of these statements.
- ---------------------------------------------------------------------
Top Ten Equity Holdings
September 30, 1997 (Unaudited)
- ---------------------------------------------------------------------
Percentage of
Total Net Assets
Mercury General Corporation 4.42%
Freddie Mac 4.25
Fannie Mae 4.23
General Motors Corporation - Class H 3.37
Travelers Group Inc. 2.96
Tyco (US) International Ltd. 2.88
SunAmerica, Inc. 2.59
Berkshire Hathaway Inc. 2.33
Circuit City Stores, Inc. 2.22
Wells Fargo & Company 2.20
------
Total of top ten holdings 31.45%
- ---------------------------------------------------------------------
Schedule of Investments
September 30, 1997 (unaudited)
- ---------------------------------------------------------------------
Shares or Quoted
Principal Market
Amount Value
- ------------- ----------
(Note 1(a))
COMMON STOCKS - 95.81%
Agriculture - 0.98%
1,250,000 Monsanto Company 48,750,000
-------------
Banks and Finance - 22.27%
272,000 Edwards (A.G.), Inc. 13,974,000
4,500,000 Fannie Mae 211,500,000
1,528,875 Fifth Third Bancorp 99,950,203
891,400 Firstar Corporation 32,313,250
6,021,200 Freddie Mac 212,247,300
2,084,000 Marshall & Ilsley Corporation 105,502,500
200,000 Merrill Lynch & Co., Inc. 14,837,500
1,000,000 Norwest Corporation 61,250,000
645,000 Security Capital Corporation (WI) + 71,353,125
2,168,000 Travelers Group Inc. 147,966,000
336,900 U.S. Bancorp 32,510,850
400,000 Wells Fargo & Company 110,000,000
-------------
1,113,404,728
-------------
Business Services - 3.19%
686,000 Cintas Corporation 50,592,500
66,600 Cresent Operating, Inc. * 1,340,325
200,000 Interim Services Inc. * 5,625,000
2,762,400 Wallace Computer Services, Inc. + 101,863,500
-------------
159,421,325
-------------
Consumer Products and Services - 7.46%
450,000 American Express Company 36,843,750
1,668,300 Cooper Tire & Rubber Company 44,314,219
833,900 CSS Industries, Inc. * + 30,333,112
550,000 Gillette Company (The) 47,471,875
500,000 Kimberly-Clark Corporation 24,468,750
755,000 Leggett & Platt, Incorporated 33,644,688
570,000 Nike, Inc. - Class B 30,210,000
1,692,600 Valspar Corporation (The) 53,105,325
898,400 Walt Disney Company (The) 72,433,500
-------------
372,825,219
-------------
Food and Beverage - 3.75%
800,000 Coca-Cola Company (The) 48,750,000
1,683,000 International Dairy
Queen, Inc.-Class A * + 39,576,755
720,000 International Dairy
Queen, Inc.-Class B * + 17,820,000
1,710,500 McDonald's Corporation 81,462,562
-------------
187,609,317
-------------
Health Care Products - 7.34%
1,000,000 Abbott Laboratories 63,937,500
568,000 American Home Products Corporation 41,464,000
1,000,000 Amgen Inc. * 47,937,500
1,411,800 Elan Corporation plc * 70,678,237
400,000 Medtronic, Inc. 18,800,000
900,000 Pfizer Inc. 54,056,250
1,600,000 Stryker Corporation 69,900,000
-------------
366,773,487
-------------
Health Care Services - 8.41%
2,376,300 Apria Healthcare Group, Inc. * 32,080,050
903,150 Cardinal Health, Inc. 64,123,650
422,900 Health Care and Retirement
Corporation * 15,726,594
1,193,750 Health Management Associates,
Inc. - Class A * 37,752,344
2,570,000 Magellan Health Services, Inc. * + 81,597,500
1,940,100 MedPartners, Inc. * 41,590,894
2,985,000 Quorum Health Group, Inc. * 72,945,937
1,802,905 Vencor,Inc. * 74,369,831
-------------
420,186,800
-------------
Industrial Products and Services - 5.93%
1,000,000 Airgas, Inc. * 16,937,500
468,600 General Cable Corporation 16,635,300
900,000 Marshall Industries * + 34,875,000
220,000 Solutia Inc. 4,400,000
1,178,325 Thermo Electron Corporation * 47,133,000
1,753,900 Tyco International (US) Inc. 143,929,419
1,330,200 Wausau Paper Mills Company 32,589,900
-------------
296,500,119
-------------
Insurance - 10.84%
838,777 Foremost Corporation of America + 49,487,843
2,522,800 Mercury General Corporation + 220,745,000
794,800 Mutual Risk Management Ltd. 40,385,775
305,000 Progressive Corporation (The) 32,673,125
1,368,500 Protective Life Corporation 69,109,250
3,300,000 SunAmerica, Inc. 129,318,750
-------------
541,719,743
-------------
Investment Management - 1.16%
619,950 Franklin Resources, Inc. 57,732,844
-------------
Media, Communications and Entertainment - 5.41%
250,000 Cincinnati Bell Inc. 7,109,375
2,550,000 General Motors Corporation - Class H 168,618,750
1,623,100 LCI International, Inc. * 43,215,038
1,357,100 Loral Space & Communications Ltd. 27,990,187
415,466 Pulitzer Publishing Company 23,473,829
-------------
270,407,179
-------------
Real Estate - 1.79%
969,000 Crescent Real Estate Equities, Inc. 38,881,125
619,800 National Health Investors, Inc. 24,094,725
1,000,000 Reckson Associates Realty Corp. 26,625,000
-------------
89,600,850
-------------
Retail Trade - 8.56%
1,800,000 AutoZone, Inc. * 54,000,000
2,750,000 Circuit City Stores, Inc. -
Circuit City Group 110,859,375
656,500 Circuit City Stores, Inc.-
CarMax Group * 10,873,281
1,250,000 Consolidated Stores Corporation * 52,343,750
1,200,000 Home Depot, Inc. (The) 62,550,000
1,262,000 Kohl's Corporation * 89,602,000
1,093,300 OfficeMax, Inc. * 16,604,494
1,200,000 Walgreen Co. 30,750,000
-------------
427,582,900
-------------
Technology - 5.07%
1,270,000 Electronic Data Systems Corporation 45,085,000
1,000,000 Hewlett-Packard Company 69,562,500
800,000 Intel Corporation 73,850,000
900,000 Motorola, Inc. 64,687,500
-------------
253,185,000
-------------
Transportation - 0.70%
1,272,089 Heartland Express, Inc. * 35,141,459
-------------
Miscellaneous - 2.95%
2,600 Berkshire Hathaway Inc. Class A* 116,480,000
900,000 Leucadia National Corporation 30,937,500
-------------
147,417,500
-------------
TOTAL COMMON STOCKS
(cost $2,218,705,386) 4,788,258,470
-------------
CONVERTIBLE BONDS - 0.95%
$12,140,000 National HealthCare L.P.
6.00%, due July 1, 2000
(cost $24,763,363) 47,239,775
-------------
SHORT-TERM INVESTMENTS - 3.05%
Commercial Paper - 2.92%
10,000,000 Cooper Industries, Inc.
6.40%, due October 1, 1997 10,000,000
5,000,000 Lockheed Martin Corporation
5.68%, due October 1, 1997 5,000,000
4,000,000 Lockheed Martin Corporation
5.68%, due October 6, 1997 3,996,844
3,000,000 Boston Scientific Corporation
5.67%, due October 7, 1997 2,997,165
7,000,000 Mattel, Inc.
5.68%, due October 7, 1997 6,993,373
10,000,000 American Bankers Insurance Group, Inc.
5.73%, due October 9, 1997 9,987,267
5,000,000 Mattel, Inc.
5.67%, due October 9, 1997 4,993,700
5,750,000 Tyson Foods, Inc.
5.63%, due October 9, 1997 5,742,806
4,000,000 Hughes Electronics Corporation
5.71%, due October 14, 1997 3,991,752
5,900,000 HarnischfegerIndustries, Inc.
5.70%, due October 15, 1997 5,886,922
10,186,000 American Bankers Insurance Group, Inc.
5.73%, due October 16, 1997 10,161,681
4,000,000 Banta Corporation
5.70%, due October 17, 1997 3,989,867
5,000,000 Quad/Graphics, Inc.
5.70%, due October 20, 1997 4,984,958
10,990,000 Fiserv, Inc.
5.70%, due October 21, 1997 10,955,198
5,000,000 Schreiber Foods, Inc.
5.70%, due October 22, 1997 4,983,375
3,300,000 Banta Corporation
5.70%, due October 23, 1997 3,288,505
5,000,000 Banta Corporation
5.70%, due October 24, 1997 4,981,792
5,500,000 Cox Enterprises, Inc.
5.70%, due October 27, 1997 5,477,358
5,000,000 Crown, Cork & Seal Co., Inc.
5.72%, due October 28, 1997 4,978,550
4,000,000 Banta Corporation
5.70%, due October 29, 1997 3,982,267
14,000,000 Tyson Foods, Inc.
5.66%, due October 30, 1997 13,936,168
4,000,000 Mattel, Inc.
5.72%, due November 3, 1997 3,979,027
5,500,000 Boston Scientific Corporation
5.70%, due November 4, 1997 5,470,391
5,000,000 Lockheed Martin Corporation
5.68%, due November 6, 1997 4,971,600
-------------
145,730,566
-------------
Variable Rate Demand Notes - 0.13%
207,640 General Mills, Inc.
5.13% due October 1, 1997 207,640
3,944,775 Johnson Controls, Inc.
5.17%, due October 1, 1997 3,944,775
804,797 Pitney Bowes Credit Corporation
5.14%, due October 1, 1997 804,797
1,791,710 Warner-Lambert Company
5.13%, due October 1, 1997 1,791,710
-------------
6,748,922
-------------
TOTAL SHORT-TERM INVESTMENTS
(cost $151,953,237) 152,479,488
-------------
TOTAL INVESTMENTS
(cost $2,395,421,986) 4,987,977,733
-------------
CASH AND RECEIVABLES, NET OF
LIABILITIES - 0.19% 9,700,995
-------------
TOTAL NET ASSETS (Basis of
percentages disclosed above) $4,997,678,728
-------------
-------------
* Nondividend paying security.
+ This company is affiliated with the Fund as defined in Section 2(a)(3)
of the Investment Company Act of 1940, in that the Fund holds 5% or
more of its outstanding voting securities.
The accompanying notes to financial statements are an
integral part of this schedule.
Statement of Assets and Liabilities
September 30, 1997 (unaudited)
- ---------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value (Note 1 (a)) -
Nonaffiliated issuers (cost $2,120,798,439) -
see accompanying schedule of investments................................... $4,340,325,898
Affiliated issuers (cost $274,623,547)
see accompanying schedule of investments (Note 5).......................... 647,651,835
-------------
Total investments....................................................... 4,987,977,733
-------------
Cash.............................................................................. 1,065,151
-------------
Receivables --
Investment securities sold................................................... 13,661,540
Dividends and interest....................................................... 3,622,469
-------------
Total receivables....................................................... 17,284,009
-------------
Total assets............................................................ 5,006,326,893
-------------
LIABILITIES:
Payables --
Investment securities purchased.............................................. 5,408,630
Management fee (Note 2)...................................................... 2,550,956
Other payables and accrued expenses.......................................... 688,579
-------------
Total liabilities....................................................... 8,648,165
-------------
Total net assets........................................................ $4,997,678,728
-------------
-------------
NET ASSETS CONSIST OF:
Fund shares issued and outstanding............................................... $2,223,534,530
Net unrealized appreciation on investments (Note 3).............................. 2,592,029,496
Accumulated undistributed net realized gains on investments...................... 174,737,399
Accumulated undistributed net investment income.................................. 7,377,303
-------------
$4,997,678,728
-------------
-------------
NET ASSET VALUE PER SHARE ($.50 par value, 200,000,000 shares authorized)
offering price and redemption price ($4,997,678,728/59,767,121 shares
outstanding).................................................................... $83.62
------
------
</TABLE>
The accompanying notes to financial statements are an
integral part of this statement.
Statement of Operations
For the Six Months Ended September 30, 1997 (unaudited)
- ---------------------------------------------------------------------
<TABLE>
<S> <C>
INCOME:
Dividends --
Nonaffiliated issuers .............................................................$ 17,719,689
Affiliated issuers (Note 5)........................................................ 3,194,828
Interest................................................................................ 6,213,467
-------------
27,127,984
-------------
EXPENSES:
Management fee (Note 2)................................................................. 14,999,427
Transfer agent fees..................................................................... 985,585
Custodian fees.......................................................................... 131,909
Postage and mailing fees................................................................ 121,411
Registration fees....................................................................... 93,109
Printing................................................................................ 44,144
Telephone............................................................................... 21,495
Legal fees.............................................................................. 15,774
Audit and tax consulting fees........................................................... 11,975
Directors' fees......................................................................... 3,797
Other operating expenses................................................................ 201
16,428,827
------------
Net investment income......................................................... 10,699,157
------------
NET REALIZED GAINS ON INVESTMENTS (Note 1 (b)):
Nonaffiliated issuers .................................................................. 164,390,942
Affiliated issuers (Note 5) ............................................................ 10,492,541
-------------
174,883,483
-------------
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS....................................... 874,420,460
-------------
Net gain on investments................................................................. 1,049,303,943
-------------
Net increase in net assets resulting from operations.................................. $1,060,003,100
-------------
-------------
</TABLE>
The accompanying notes to financial statements are an
integral part of this statement.
Statements of Changes in Net Assets
For the Six Months Ended September 30, 1997 (unaudited)
and the Year Ended March 31, 1997
- ---------------------------------------------------------------------
<TABLE>
Six Months
Ended 9/30/97
(Unaudited) 1997
-------------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income................................................ $ 10,699,157 $ 23,381,414
Net realized gains on investments (Note 1 (b))....................... 174,883,483 221,339,536
Net increase in unrealized appreciation on investments............... 874,420,460 282,923,851
Net increase in net assets resulting ------------- -------------
from operations........................................... 1,060,003,100 527,644,801
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.1407 and $0.4179 per share, respectively)...................... (8,350,251) (24,092,988)
Distributions from net realized gains on investment transactions
($1.0643 and $5.3166 per share, respectively)...................... (63,180,320) (305,905,425)
------------- -------------
Total distributions......................................... (71,530,571) (329,998,413)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued (1,825,219 and 3,206,018
shares, respectively).............................................. 137,014,418 193,274,295
Net asset value of shares issued in distributions from net investment
income and net realized gains (929,488 and 4,795,847 shares,
respectively) ..................................................... 67,285,626 310,941,521
Cost of shares redeemed (2,431,012 and 5,842,762 shares,
respectively)...................................................... (184,582,545) (367,673,135)
Increase in net assets derived from capital share ------------- -------------
transactions 19,717,499 136,542,681
------------- -------------
Total increase in net assets 1,008,190,028 334,189,069
------------- -------------
NET ASSETS, at the beginning of the period (including undistributed net
investment income of $5,028,397 and $5,739,971, respectively)........... 3,989,488,700 3,655,299,631
------------- -------------
NET ASSETS, at the end of the period (including undistributed net investment
income of $7,377,303 and $5,028,397, respectively)......................$4,997,678,728 $3,989,488,700
------------- -------------
------------- -------------
</TABLE>
The accompanying notes to financial statements are an
integral part of these statements.
Notes to Financial Statements
September 30, 1997 (unaudited)
- ---------------------------------------------------------------------
(1) Summary of Significant Accounting Policies --
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
potencial. The following is a summary of the significant accounting
policies of the Fund:
(a) Each equity security 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. 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. Variable rate 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 estimated.
(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, 1997, based on investment cost for Federal tax purposes is as
follows:
<TABLE>
<S> <C>
Aggregate gross unrealized appreciation on investments........... $2,617,533,001
Aggregate gross unrealized depreciation on investments........... (25,503,505)
-------------
Net unrealized appreciation ................................ $2,592,029,496
-------------
-------------
</TABLE>
(4) Investment Transactions --
For the six months ended September 30, 1997, the cost of purchases and
the proceeds from sales of investment securities, other than short-term
obligations, aggregated $364,267,329 and $463,977,941, respectively.
(5) Transactions with Affiliates --
Following is an analysis of transactions for the six months ended
September 30, 1997 with "affiliated companies" as defined by the
Investment Company Act of 1940:
<TABLE>
Amount of
Share Activity Amount of Capital Gain
--------------------------------------------- Dividends Realized
Balance Balance Credited on Sale
Security Name 3/31/97 Purchases Sales 9/30/97 to Income of Shares
------------- ------- --------- ----- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CSS Industries, Inc. 789,200 44,700 -- 833,900 $ -- $ --
Formost Corporation of
America 888,777 -- 50,000 838,777 466,440 700,900
Heilig-Meyers Company (a) 3,150,000 -- 3,150,000 -- 206,500 9,791,641
International Dairy
Queen, Inc.
Class A 1,683,000 -- -- 1,683,000 -- --
Class B 720,000 -- -- 720,000 -- --
Magellan Health Services Inc.2,570,000 -- -- 2,570,000 -- --
Marshall Industries 900,000 -- -- 900,000 -- --
Mercury General Corporation 2,522,800 -- -- 2,522,800 1,463,224 --
Security Capital
Corporation (WI) (b) 645,000 -- -- 645,000 387,000 --
Wallace Computer
Services, Inc. 1,985,200 777,200 -- 2,762,400 671,664 --
---------- -----------
$3,194,828 $10,492,541
---------- -----------
---------- -----------
</TABLE>
(a) As of September 30, 1997, the Fund is no longer affiliated with this
company.
(b) Subsequent to the report date, Security Capital Corporation merged
with Marshall & Ilsley Corporation. The Fund received cash and
shares of Marshall & Ilsley Corporation in consideration for the
shares of Security Capital Corporation.
Historical Record (Unaudited)
- ---------------------------------------------------------------------
<TABLE>
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 0.5750 0.6100 15.8 times 87,699
March 31, 1987............... 39.94 0.8820 0.1870 16.3 102,386
March 31, 1988............... 32.15 1.8400 4.0340 14.1 98,557
March 31, 1989............... 35.27 1.0250 0.4510 13.2 113,155
March 31, 1990............... 37.72 0.9240 1.0540 14.9 127,360
March 31, 1991............... 42.99 0.7900 0.2250 16.9 149,179
March 31, 1992............... 49.68 0.6790 0.8240 19.4 178,015
March 31, 1993............... 52.91 0.6790 2.0420 18.5 200,098
March 31, 1994............... 51.10 0.8175 1.0470 16.7 200,182
March 31, 1995............... 52.22 0.7070 3.3170 17.2 221,970
March 31, 1996............... 63.81 0.5650 4.0945 21.0 293,836
March 31, 1997.............. 67.11 0.4179 5.3166 21.7 336,973
September 30, 1997........... 83.62 0.1407 (a) 1.0643 (a) 25.9 426,862
*Date of Initial Public Offering.
**Based on latest 12 months accomplished earnings.
***Assuming reinvestment of all distibutions.
</TABLE>
(a) Paid May 21, 1997 to shareholders of record May 15, 1997.
Range in quarter end price/earnings
ratios since December 31, 1974
High Low
------------------------ -------------------
September 30, 1997 25.9 March 31, 1982 8.3
AUTOMATIC INVESTMENT PLAN - AN UPDATE (UNAUDITED)
The Nicholas Family of Funds' Automatic Investment Plan provides a simple
method to dollar cost average into the fund(s) of your choice.
Dollar cost averaging involves making equal systematic investments over
an extended time period. A fixed dollar investment will purchase more
shares when the market is low and fewer shares when the market is high.
The automatic investment plan is an excellent way for you to become a
disciplined investor.
The following table illustrates what dollar cost averaging can achieve.
Please note that past performance is no guarantee of future results.
Nicholas Company recommends dollar cost averaging as a practical
investment method. It should be consistently applied for long periods
(5-10 years or more) so that investments are made through several market
cycles. The table will be updated and appear in future financial reports
issued by the Nicholas Family of Funds.
<TABLE>
Nicholas II
______________________________
<S> <C> <C>
$1,000 initial investment on 7-14-69 9-30-87
$100 invested on the last day of each month following
the date of the initial investment (in years) 28.2 10
Total cash invested $ 34,900 $13,000
Total dividends and capital gains distributions reinvested $206,388 $ 6,973
Total full shares owned 9/30/97 7,613 417
Total market value on 9/30/97 $636,624 $34,884
</TABLE>
The results above assume purchase on the last day of the month. The
Nicholas Automatic Investment Plan actually invests on the 20th of each
month (or on the alternate date specified by the investor). Total market
value includes reinvestment of all distributions.
NICHOLAS FAMILY OF FUNDS DECEMBER DISTRIBUTION SCHEDULE
-------------------------------------------------------
FUND RECORD DATE EX-DIVIDEND DATE PAYMENT DATE
--------- ----------- ---------------- -------------
NICHOLAS II 12/24/97 12/26/97 12/31/97
NICHOLAS FUND 12/26/97 12/29/97 12/31/97
NICHOLAS LIMITED
EDITION 12/29/97 12/30/97 12/31/97
NICHOLAS EQUITY
INCOME 12/29/97 12/30/97 12/31/97
NICHOLAS INCOME 12/29/97 12/30/97 12/31/97
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
Senior Vice President and Treasurer
CANDACE L. LESAK
Vice President
MARK J. GIESE
Assistant Vice President
KATHLEEN A. EVANS
Assistant Vice President
TRACY C. EBERLEIN
Assistant Vice President
MARK J. GIESE
Assistant Vice President
Investment Adviser
NICHOLAS COMPANY, INC.
Milwaukee, Wisconsin
414-272-6133 or 800-227-5987
Custodian and Transfer Agent
FIRSTAR TRUST COMPANY
Milwaukee, Wisconsin
414-276-0535 or 800-544-6547
Counsel
DAVIS & KUELTHAU, S.C.
Milwaukee, Wisconsin
Auditors
ARTHUR ANDERSON LLP
Milwaukee, Wisconsin
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.
