November 10, 1999
Report to Fellow Shareholders:
Nicholas Fund declined 8.64% in the first six months of fiscal
year 2000 which ended September 30, 1999. In comparison, the Standard
& Poor's 500 Index and Russell 2000 Index increased 0.36% and 8.25%,
respectively. Cash and equivalents were 11.66% at September 30.
Average Annual Total Return*
July 14,
1969**
1 Year 5 Years 10 Years 15 Years 30.2 Years
------ ------- -------- -------- ----------
Nicholas Fund, Inc.
(Distributions
Reinvested)........ 8.20% 17.40% 13.45% 14.58% 13.55%
Standard & Poor's 500
Index (Dividends
Reinvested)........ 27.79% 25.02% 16.81% 17.97% 12.93%
Russell 2000 Index
(Dividends
Reinvested)........ 19.07% 12.38% 10.93% 11.74% NA
Consumer Price
Index.............. 2.63% 2.36% 3.00% 3.20% 5.16%
Ending value of $10,000
invested in Nicholas
Fund, Inc. (Distributions
Reinvested)........ $10,820 $22,306 $35,312 $77,035 $465,452
As noted above, the six-month period ended September 30, 1999 has
been difficult for Nicholas Fund; however, our long-term record
remains strong. Since inception over thirty years ago the average
annual total return through September 30, 1999 is 13.55%. The fact
remains that in the last six months ended September 30, Nicholas
Funds' relative performance has lagged.
The narrowness of the stock market has contributed to our
underperformance as large company stocks have outperformed small
company stocks. The Funds' holdings include mid- and small-cap
companies in addition to large-cap securities. Furthermore,
technology stocks, especially the large companies, have been superb
performers. While we have never been market weighted in technology,
we intend to increase our participation in this area in the future.
Technology continues to become a bigger factor in our lives and the
securities markets. Highflying internet stocks are also responsible
for making the market look better than it is overall. We have not
participated in internet issues as these companies generally have no
earnings and carry very high risk.
In addition, our short-term performance has been adversely
affected by the sectors we have emphasized. We are overweighted in
healthcare stocks which have been weak performers. Fear of
reimbursement cuts and government investigations have caused numerous
solid companies to be down significantly. We have selectively sold
securities in this sector which have not met our objectives. However,
we are retaining many positions that we believe have a bright future.
Out of favor financial stocks have also contributed to our
underperformance. Rising interest rates have affected this industry
group. This has been a lucrative sector for us in the past, and we
believe this will again be true in the future. At current price
levels, we have a positive view of bank and insurance stocks for the
long term.
While it has been difficult in the short-term to base our
investment decisions on fundamentals (and not stock price momentum),
we are adhering to our time-proven philosophy. It is our strategy to
buy growth companies at reasonable prices. We will continue to seek
stocks with relatively low price to earnings ratios. We often hold
contrary opinions to current "wisdom" and buy lesser known and out of
favor stocks. This may adversely affect our performance in the short-
term.
While willing to make adjustments, we remain confident in our
investment philosophy and program. It is a program of stock-picking
that we have practiced consistently for many years. While we may be
out of step in the short-term (under two years), our program has been
successful in the long-term. We feel that long-term investors will be
rewarded for their patience. "Staying the course" and patience are the
common denominators of most successful investment records.
We want to thank you for your investment in Nicholas Fund.
Sincerely,
/s/ Albert O. Nicholas /s/ David O. Nicholas
---------------------- ---------------------
Albert O. Nicholas David O. Nicholas
Co-Portfolio Manager Co-Portfolio Manager
* 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.
Financial Highlights
(For a share outstanding throughout each period)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year ended March 31,
Ended 9/30/99 --------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $85.20 $93.98 $67.11 $63.81 $52.22 $51.10
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .17 .51 .36 .40 .57 .69
Net gains (losses) on securities
(realized and unrealized) (6.85) (.43) 32.67 8.64 15.68 4.46
------ ------ ------ ------ ------ ------
Total from investment operations (6.68) .08 33.03 9.04 16.25 5.15
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
From net investment income (.05) (.59) (.36) (.42) (.57) (.71)
From capital gains (4.75) (8.27) (5.80) (5.32) (4.09) (3.32)
------ ------ ------ ------ ------ ------
Total distributions (4.80) (8.86) (6.16) (5.74) (4.66) (4.03)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $73.72 $85.20 $93.98 $67.11 $63.81 $52.22
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL RETURN (8.64)%** .13% 50.98% 14.68% 32.38% 10.88%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $4,782.8 $5,619.4 $5,907.2 $3,989.5 $3,655.3 $3,004.4
Ratio of expenses to average net assets .72%* .71% .71% .72% .74% .77%
Ratio of net investment income
to average net assets .40%* .58% .44% .61% .87% 1.34%
Portfolio turnover rate 12.88%* 25.04% 17.01% 15.18% 25.70% 29.82%
* Annualized.
** Not annualized.
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
- ------------------------------------------------------------------------------
Top Ten Portfolio Holdings
September 30, 1999 (unaudited)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percentage of
Net Assets
----------------
<S> <C>
Berkshire Hathaway Inc. - Class A ........ 4.55%
General Motors Corporation - Class H ..... 4.18%
Marshall & Ilsley Corporation ............ 3.99%
Citigroup Inc. ........................... 3.11%
Fannie Mae ............................... 3.01%
Freddie Mac .............................. 3.01%
American International Group, Inc. ....... 2.77%
Fifth Third Bancorp ...................... 2.76%
Mercury General Corporation .............. 2.59%
ADC Telecommunications, Inc. ............. 2.18%
------
Total of top ten .................... 32.15%
------
------
</TABLE>
Schedule of Investments
September 30, 1999 (unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares or Quoted
Principal Market
Amount Value
- ------------- -----------------
(Note 1(a))
<S> <C> <C>
COMMON STOCKS - 87.61%
Agriculture - 1.34%
1,800,000 Monsanto Company $ 64,237,500
--------------
Banks and Finance - 19.20%
3,378,000 Citigroup Inc. 148,632,000
2,300,000 Fannie Mae 144,181,250
2,168,812 Fifth Third Bancorp 131,958,764
3,044,392 Firstar Corporation 78,012,545
2,771,200 Freddie Mac 144,102,400
3,341,363 Marshall & Ilsley Corporation 190,666,526
700,000 Merrill Lynch & Co., Inc. 47,031,250
1,110,700 U.S. Bancorp 33,529,256
--------------
918,113,991
--------------
Business Services - 1.66%
1,372,000 Cintas Corporation 79,318,750
--------------
Consumer Products
and Services - 3.23%
534,500 Harley-Davidson, Inc. 26,758,406
1,510,000 Leggett & Platt, Incorporated 29,728,125
2,666,800 ServiceMaster Company (The) 42,835,475
1,692,600 Valspar Corporation (The) 55,326,863
--------------
154,648,869
--------------
Energy - 1.42%
150,000 Atlantic Richfield Company 13,293,750
700,000 Burlington Resources Inc. 25,725,000
200,000 Chevron Corporation 17,750,000
110,000 Mobil Corporation 11,082,500
--------------
67,851,250
--------------
Food and Beverage - 1.35%
1,500,000 McDonald's Corporation 64,500,000
--------------
Health Care Products - 11.81%
1,700,000 Abbott Laboratories 62,475,000
2,036,000 American Home Products Corporation 84,494,000
896,400 Boston Scientific Corporation * 22,129,875
1,493,600 Elan Corporation PLC * 50,128,950
415,000 Eli Lilly and Company 26,560,000
529,000 Guidant Corporation * 28,367,625
1,023,796 Medtronic, Inc. 36,344,758
1,200,000 Pfizer Inc. 43,125,000
1,700,000 Stryker Corporation 86,912,500
2,463,500 St. Jude Medical, Inc. * 77,600,250
1,534,927 Watson Pharmaceuticals, Inc. * 46,911,206
--------------
565,049,164
--------------
Health Care Services - 3.55%
1,315,725 Cardinal Health, Inc. 71,707,013
1,440,000 Manor Care, Inc. * 24,750,000
6,976,637 Health Management Associates, Inc. - Class A * 51,452,698
1,099,452 National HealthCare Corporation * + 7,696,164
1,580,000 PSS World Medical, Inc. * 14,121,250
--------------
169,727,125
--------------
Industrial Products
and Services - 5.80%
1,594,500 Fastenal Company 75,140,813
4,113,200 Republic Services, Inc. * 44,731,050
3,297,400 Sybron International Corporation * 88,617,625
1,851,825 Thermo Electron Corporation * 24,883,898
1,200,000 Vulcan Materials Company 43,950,000
--------------
277,323,386
--------------
Insurance - 9.85%
1,526,562 American International Group, Inc. 132,715,484
2,741,131 Foremost Corporation of America + 65,787,144
4,497,400 Mercury General Corporation + 123,959,587
1,739,600 Mutual Risk Management Ltd. 21,310,100
587,300 Progressive Corporation (The) 47,975,069
2,737,000 Protective Life Corporation 79,373,000
--------------
471,120,384
--------------
Investment Management - 0.93%
1,439,900 Franklin Resources, Inc. 44,276,925
--------------
Media and Entertainment - 4.48%
455,000 CBS Corporation * 21,043,750
918,600 Clear Channel Communications, Inc. * 73,373,175
771,819 Hearst-Argyle Television, Inc. * 16,594,108
470,866 Pulitzer Inc. 21,394,974
1,485,000 USA Networks, Inc. * 57,543,750
950,000 Walt Disney Company (The) 24,581,250
--------------
214,531,007
--------------
Real Estate - 0.48%
1,385,300 National Health Investors, Inc. + 22,770,869
--------------
Retail Trade - 5.89%
1,850,000 AutoZone, Inc. * 51,915,625
930,000 CVS Corporation 37,955,625
943,200 Home Depot, Inc. (The) 64,727,100
998,700 Kohl's Corporation * 66,039,038
2,400,000 Walgreen Co. 60,900,000
--------------
281,537,388
--------------
Technology and
Communications - 11.22%
2,490,000 ADC Telecommunications, Inc. * 104,424,375
183,900 Cincinnati Bell Inc. 3,574,556
3,488,900 General Motors Corporation - Class H * 199,739,525
400,500 Intel Corporation 29,762,156
300,000 International Business Machines Corporation 36,412,500
1,357,100 Loral Space & Communications Ltd. * 23,325,156
850,000 Motorola, Inc. 74,800,000
2,178,882 Qwest Communications International, Inc. * 64,413,199
--------------
536,451,467
--------------
Transportation - 0.85%
2,887,589 Heartland Express, Inc. * + 40,787,195
--------------
Miscellaneous - 4.55%
3,959 Berkshire Hathaway Inc. - Class A * 217,745,000
38 Berkshire Hathaway Inc. - Class B * 70,528
--------------
217,815,528
--------------
TOTAL COMMON STOCKS
(cost $2,228,486,915) 4,190,060,798
--------------
CORPORATE BONDS - 0.73%
$ 9,000,000 Textron Financial Corporation
5.58%, November 24, 1999 8,993,295
25,760,000 AT&T Capital Corporation
6.48%, December 3, 1999 25,784,601
--------------
TOTAL CORPORATE BONDS
(cost $34,792,369) 34,777,896
--------------
SHORT-TERM INVESTMENTS - 10.20%
Commercial Paper - 9.64%
15,000,000 ConAgra, Inc.
5.41%, due October 1, 1999 15,000,000
5,000,000 Banta Corporation
5.50%, due October 4, 1999 4,997,708
4,187,000 Fiserv, Inc.
5.45%, due October 4, 1999 4,185,098
2,000,000 Quad/Graphics, Inc.
5.45%, due October 4, 1999 1,999,092
16,500,000 ConAgra, Inc.
5.40%, due October 5, 1999 16,490,100
20,000,000 Marriott International, Inc.
5.45%, due October 6, 1999 19,984,861
9,325,000 Fiserv, Inc.
5.50%, due October 7, 1999 9,316,452
4,400,000 Manpower Inc.
5.50%, due October 7, 1999 4,395,967
9,500,000 Banta Corporation
5.50%, due October 8, 1999 9,489,840
8,000,000 Marriott International, Inc.
5.48%, due October 8, 1999 7,991,476
6,000,000 Banta Corporation
5.50%, due October 12, 1999 5,989,917
6,000,000 Quad/Graphics, Inc.
5.50%, due October 12, 1999 5,989,917
10,000,000 Marriott International, Inc.
5.45%, due October 13, 1999 9,981,833
25,054,000 Goodyear Tire & Rubber Company (The)
5.45%, due October 14, 1999 25,004,692
19,940,000 Goodyear Tire & Rubber Company (The)
5.52%, due October 14, 1999 19,900,253
9,000,000 Tyco International Group, S.A.
5.55%, due October 14, 1999 8,981,962
7,500,000 Goodyear Tire & Rubber Company (The)
5.50%, due October 15, 1999 7,483,958
10,000,000 Manpower Inc.
5.50%, due October 15, 1999 9,978,611
15,000,000 Fiserv, Inc.
5.45%, due October 18, 1999 14,961,396
20,000,000 Cox Enterprises, Inc.
5.50%, due October 19, 1999 19,945,000
15,000,000 Raytheon Company
5.45%, due October 19, 1999 14,959,125
16,700,000 Tandy Corporation
5.48%, due October 19, 1999 16,654,242
8,000,000 A.O. Smith Corporation
5.50%, due October 20, 1999 7,976,778
6,702,000 Fiserv, Inc.
5.50%, due October 20, 1999 6,682,546
4,000,000 Manpower Inc.
5.50%, due October 20, 1999 3,988,389
6,000,000 Tandy Corporation
5.47%, due October 20, 1999 5,982,678
6,000,000 Cox Enterprises, Inc.
5.50%, due October 22, 1999 5,980,750
12,335,000 Fiserv, Inc.
5.50%, due October 22, 1999 12,295,425
12,000,000 Raytheon Company
5.45%, due October 25, 1999 11,956,400
5,500,000 Tandy Corporation
5.47%, due October 26, 1999 5,479,108
10,000,000 Quad/Graphics, Inc.
5.50%, due October 27, 1999 9,960,278
6,000,000 A.O. Smith Corporation
5.50%, due November 1, 1999 5,971,583
3,000,000 Banta Corporation
5.50%, due November 1, 1999 2,985,792
20,000,000 Cox Communications, Inc.
5.52%, due November 2, 1999 19,901,867
5,000,000 Briggs & Stratton Corporation
5.50%, due November 3, 1999 4,974,792
2,000,000 Banta Corporation
5.50%, due November 4, 1999 1,989,611
2,000,000 Briggs & Stratton Corporation
5.50%, due November 4, 1999 1,989,611
3,252,000 Fiserv, Inc.
5.50%, due November 4, 1999 3,235,108
3,000,000 Universal Foods Corporation
5.50%, due November 4, 1999 2,984,417
6,500,000 Briggs & Stratton Corporation
5.50%, due November 5, 1999 6,465,243
17,000,000 Raytheon Company
5.51%, due November 8, 1999 16,901,126
17,500,000 Raytheon Company
5.50%, due November 12, 1999 17,387,708
8,000,000 A.O. Smith Corporation
5.55%, due November 15, 1999 7,944,500
8,000,000 Quad/Graphics, Inc.
5.50%, due November 17, 1999 7,942,555
7,500,000 Medallion Funding Corporation
5.57%, due November 23, 1999 7,438,498
10,000,000 Firstar Corporation
5.40%, due December 1, 1999 9,908,500
4,500,000 A.O. Smith Corporation
5.60%, due December 7, 1999 4,453,100
15,000,000 ConAgra, Inc.
5.46%, due December 17, 1999 14,824,825
--------------
461,282,688
--------------
Variable Rate Demand Note - 0.56%
26,557,024 Firstar Bank U.S.A., N.A.
5.05%, due October 1, 1999 26,557,024
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $486,519,637) 487,839,712
--------------
TOTAL INVESTMENTS
(cost $2,749,798,921) 4,712,678,406
--------------
CASH AND RECEIVABLES,
NET OF LIABILITIES - 1.46% 70,105,434
--------------
TOTAL NET ASSETS
(Basis of percentages
disclosed above) $4,782,783,840
--------------
--------------
</TABLE>
+ 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. (Note 5)
* Nondividend paying security.
The accompany notes to financial statements are an integral part of this
schedule.
Statement of Assets and Liabilities
September 30, 1999 (unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments in securities at market value (Note 1 (a)) -
Nonaffiliated issuers (cost $2,572,580,253) -
see accompanying schedule of investments .......... $4,451,677,447
Affiliated issuers (cost $177,218,668) -
see accompanying schedule of investments (Note 5) . 261,000,959
--------------
Total investments .............................. 4,712,678,406
--------------
Receivables --
Investment securities sold .......................... 70,750,307
Dividends and interest .............................. 2,781,041
--------------
Total receivables .............................. 73,531,348
--------------
Total assets ................................... 4,786,209,754
--------------
LIABILITIES:
Payables --
Management fee (Note 2) ............................. 2,682,897
Other payables and accrued expenses ................. 743,017
--------------
Total liabilities .............................. 3,425,914
--------------
Total net assets ............................... $4,782,783,840
--------------
--------------
NET ASSETS CONSIST OF:
Fund shares issued and outstanding ...................... $2,681,212,620
Net unrealized appreciation on
investments (Note 3) .................................... 1,961,559,410
Accumulated undistributed net realized
gains on investments .................................... 132,159,991
Accumulated undistributed net investment income ......... 7,851,819
--------------
$4,782,783,840
--------------
--------------
NET ASSET VALUE PER SHARE ($.50 par value, 200,000,000 shares authorized)
offering price and redemption price ($4,782,783,840/64,875,410 shares
outstanding) .............................................. $73.72
------
------
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
Statement of Operations
For the six months ended September 30, 1999 (unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INCOME: <C>
Dividends --
Nonaffiliated issuers ............................... $ 18,624,198
Affiliated issuers (Note 5) ......................... 4,673,796
Interest ................................................. 7,857,990
-------------
31,155,984
-------------
EXPENSES:
Management fee (Note 2) .................................. 18,187,774
Transfer agent fees ...................................... 1,367,059
Postage and mailing ...................................... 208,728
Custodian fees ........................................... 142,118
Registration fees ........................................ 91,295
Printing ................................................. 90,487
Telephone ................................................ 27,832
Legal fees ............................................... 25,103
Audit and tax consulting fees ............................ 11,900
Directors' fees .......................................... 7,593
Other operating expenses ................................. 1,115
-------------
20,161,004
-------------
Net investment income .......................... 10,994,980
-------------
NET REALIZED GAINS ON INVESTMENTS:
Nonaffiliated issuers .................................... 207,366,172
Affiliated issuers (Note 5) .............................. (75,083,150)
-------------
132,283,022
-------------
NET DECREASE IN UNREALIZED APPRECIATION ON INVESTMENTS ........ (595,304,272)
-------------
Net loss on investments ........................ (463,021,250)
-------------
Net decrease in net assets resulting
from operations ................................ $(452,026,270)
-------------
-------------
</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, 1999 (unaudited)
and the year ended March 31, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended 9/30/99 1999
------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income .............................................. $ 10,994,980 $ 32,344,013
Net realized gains on investments .................................. 132,283,022 677,496,197
Net decrease in unrealized appreciation on investments ............. (595,304,272) (713,780,961)
-------------- --------------
Net decrease in net assets resulting
from operations ........................................... (452,026,270) (3,940,751)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.0520 and $0.5880 per share, respectively) .................... (3,387,901) (37,283,083)
Distributions from net realized gains on investment transactions
($4.7433 and $8.2716 per share, respectively) .................... (309,035,390) (524,154,834)
-------------- --------------
Total distributions ....................................... (312,423,291) (561,437,917)
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued (1,592,007 and 4,909,542
shares, respectively) ............................................ 133,618,077 427,202,000
Net asset value of shares issued in distributions
to shareholders (3,388,830 and 6,048,038 shares, respectively) ... 290,592,167 523,117,516
Cost of shares redeemed (6,057,943 and 7,861,685 shares,
respectively) .................................................... (496,357,040) (672,764,933)
-------------- --------------
Increase (decrease) in net assets derived from capital share
transactions ............................................ (72,146,796) 277,554,583
-------------- --------------
Total decrease in net assets .............................. (836,596,357) (287,824,085)
-------------- --------------
NET ASSETS, at the beginning of the period (including undistributed net
investment income of $244,740 and $5,183,810, respectively) .......... 5,619,380,197 5,907,204,282
-------------- --------------
NET ASSETS, at the end of the period (including undistributed net
investment income of $7,851,819 and $244,740, respectively) .......... $4,782,783,840 $5,619,380,197
-------------- --------------
-------------- --------------
The accompanying notes to financial statements are
an integral part of these statements.
</TABLE>
Notes to Financial Statements
September 30, 1999 (unaudited)
- -------------------------------------------------------------------------------
(1) Summary of Significant Accounting Policies --
Nicholas Fund, Inc. (the "Fund") is an open-end, diversified management
investment company registered under the Investment Company Act of 1940, as
amended. The primary objective of the Fund is capital appreciation. To
achieve its objective, the Fund invests in a diversified group of common
stocks having growth potential. 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 last bid price. Most debt securities, excluding
short-term investments, are valued at current evaluated bid price.
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 generally 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 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 .75 of 1% on an annual basis of the
average net asset value up to and including $50 million and .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,
1999, based on investment cost for federal tax purposes is as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized appreciation on investments ..... $2,130,916,659
Aggregate gross unrealized depreciation on investments ..... (169,357,249)
--------------
Net unrealized appreciation ........................... $1,961,559,410
--------------
--------------
</TABLE>
(4) Investment Transactions --
For the six months ended September 30, 1999, the cost of purchases and the
proceeds from sales of investment securities, other than short-term
obligations, aggregated $338,759,404 and $951,182,194, respectively.
(5) Transactions with Affiliates -
Following is an analysis of fiscal 2000 transactions with "affiliated
companies" as defined by the Investment Company Act of 1940:
<TABLE>
<CAPTION> Amount of
Capital
Amount of Gain (Loss)
Dividends Realized
Share Activity Credited on Sale
__________________________________________ to Income of Shares
Balance Balance in Fiscal in Fiscal
Security Name 3/31/99 Purchases Sales 9/30/99 2000 2000
------------- --------- --------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Foremost Corporation of America 2,741,131 - - 2,741,131 $ 493,404 $ -
General Cable Corporation (a) 2,537,400 - 2,537,400 - 241,240 (21,181,349)
Heartland Express, Inc. 2,837,589 50,000 - 2,887,589 - -
Interim Services, Inc. (a) 2,396,000 - 2,396,000 - - (19,739,860)
Mercury General Corporation 4,435,600 61,800 - 4,497,400 1,888,908 -
National HealthCare Corporation 1,099,452 - - 1,099,452 - -
National Health Investors, Inc. 1,385,300 - - 1,385,300 2,050,244 -
Quorum Health Group, Inc. (a) 4,292,000 - 4,292,000 - - (34,161,941)
---------- ------------
$4,673,796 $(75,083,150)
---------- ------------
---------- ------------
</TABLE>
(a) As of September 30, 1999, the Fund is no longer affiliated with this
company.
Historical Record (unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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 16.3 102,387
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 16.9 149,180
March 31, 1992............... 49.68 0.6790 0.8240 19.4 178,011
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
March 31, 1998............... 93.98 0.3616 5.8002 30.0 508,762
March 31, 1999............... 85.20 0.5880 8.2716 31.7 509,446
September 30, 1999........... 73.72 0.0520 (a) 4.7433 (a) 29.2 465,452
* Date of Initial Public Offering.
** Based on latest 12 months accomplished earnings.
*** Assuming reinvestment of all distributions.
(a) Paid May 20, 1999 to shareholders of record May 19, 1999.
Range in quarter end price/earnings
ratios since December 31, 1974
High Low
------------------ ------------------
June 30, 1999 31.7 March 31, 1982 8.3
</TABLE>
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 Fund
______________________________
<S> <C> <C>
$1,000 initial investment on 7/14/69* 9/30/89
Number of years of investing $100 each month following
the date of initial investment 30.2 10
Total cash invested $ 37,300 $13,000
Total dividends and capital gains distributions reinvested $360,110 $10,436
Total full shares owned 9/30/99 9,448 392
Total market value on 9/30/99 $696,488 $28,981
</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.
* Date of initial public offering.
Dividend Distribution Schedule
NICHOLAS FAMILY OF FUNDS DECEMBER 1999 DISTRIBUTION SCHEDULE
<TABLE>
<CAPTION>
Fund Record Date Ex-Dividend Date Payment Date
- ---- ----------- ---------------- ------------
<S> <C> <C> <C>
Nicholas Fund, Inc. December 21 December 22 December 22
Nicholas II, Inc. December 22 December 23 December 23
Nicholas Limited
Edition, Inc. December 28 December 29 December 29
Nicholas Equity
Income Fund, Inc. December 29 December 30 December 30
Nicholas Income
Fund, Inc. December 29 December 30 December 30
</TABLE>
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
MARK J. GIESE, Vice President
CANDACE L. LESAK, Vice President
TRACY C. EBERLEIN, Assistant Vice President
Investment Adviser
NICHOLAS COMPANY, INC.
Milwaukee, Wisconsin
414-272-6133 or 800-227-5987
Transfer Agent
FIRSTAR MUTUAL FUND SERVICES, LLC
Milwaukee, Wisconsin
414-276-0535 or 800-544-6547
Custodian
FIRSTAR INSTITUTIONAL CUSTODY SERVICES
Milwaukee, Wisconsin
Auditors
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
Counsel
DAVIS & KUELTHAU, S.C.
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.
700 North Water Street
Milwaukee, Wisconsin 53202
www.nicholasfunds.com
September 30, 1999
