As Filed with the Securities and Exchange Commission on May 14, 1999
File No. 2-30447
FORM N-1A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. ___
POST-EFFECTIVE AMENDMENT NO. 46
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 25
NICHOLAS FUND, INC.
(Exact Name of Registrant as Specified in Charter)
700 North Water Street, Suite 1010, Milwaukee, Wisconsin 53202
(Address of Principal Executive Offices)
(414) 272-6133
(Registrant's Telephone Number, including Area Code)
Davis & Kuelthau, S.C.
111 East Kilbourn Avenue, Suite 1400
Milwaukee, WI 53202-6613
(414) 276-0200
Albert O. Nicholas, President
Nicholas Fund, Inc.
700 North Water Street
Milwaukee, Wisconsin 53202
(Names and Addresses of Agents for Service)
It is proposed that the filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on pursuant to paragraph (b)
[ ] sixty (60) days after filing pursuant to paragraph (a)(1)
[X] on _July 30, 1999__ pursuant to paragraph (a) (1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on __________________ pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective
date for a previously filed post-effective
amendment.
Title of Securities Being Registered: Common Stock, $0.50 par value per
share.
Pursuant to Rule 24f-2, the Registrant hereby registers an indefinite
amount of securities. On _________, 199_,
Registrant filed the necessary Rule 24f-2 Notice and filing fee with the
Commission for its fiscal year ended
March 31, 1999.
Nicholas Fund, Inc.
FORM N-1A
PART A: PROSPECTUS
NICHOLAS FUND, INC.
Prospectus
July 30, 1999
The Fund's investment objective is capital appreciation in which
income is a secondary consideration. To achieve its objective, the Fund
invests in a diversified group of common stocks having growth potential.
This prospectus gives vital information about the Fund. For your
benefit and protection, please read it before you invest, and keep it on
hand for future reference.
Investment Adviser
NICHOLAS COMPANY, INC.
Minimum Initial Investment - $500
As with all mutual funds, the
Securities and Exchange Commission has not approved or disapproved
of the Fund's shares or determined whether this
prospectus is truthful or complete. Anyone
who tells you otherwise is committing a crime.
700 North Water Street
Suite 1010
Milwaukee, Wisconsin 53202
414-272-6133
800-227-5987
TABLE OF CONTENTS
Page
AN OVERVIEW OF THE FUND.......................................... _
FUND INVESTMENTS................................................. -
INVESTMENT RISKS................................................. -
FINANCIAL HIGHLIGHTS............................................. _
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE...................... _
THE FUND'S INVESTMENT ADVISER.................................... _
PRICING OF FUND SHARES........................................... -
PURCHASE OF FUND SHARES.......................................... _
REDEMPTION OF FUND SHARES........................................ _
EXCHANGE BETWEEN NICHOLAS FAMILY OF FUNDS........................ _
TRANSFER OF FUND SHARES.......................................... _
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAX STATUS.................. _
DIVIDEND AND DISTRIBUTION REINVESTMENT PLAN...................... _
SYSTEMATIC WITHDRAWAL PLAN....................................... _
INDIVIDUAL RETIREMENT ACCOUNTS................................... _
MASTER RETIREMENT PLAN........................................... _
YEAR 2000 ISSUES................................................. _
FOR MORE INFORMATION ABOUT THE FUND.......................... Back Cover
You should rely only on the information contained in this document
or incorporated by reference. The Fund has not authorized anyone to
provide you with information that is different.
This Prospectus is not an offer to sell, or a solicitation of
an offer to buy shares of the Fund to any person in any state or
jurisdiction where it is unlawful to make such an offer. Changes in the
affairs of the Fund have possibly occurred between the date of the
Prospectus and the time you receive it.
AN OVERVIEW OF THE FUND
GOALS
The Fund strives to increase the value of your shares (capital
appreciation), and to a lesser extent to provide income.
PRINCIPAL INVESTMENT STRATEGIES
To pursue the Fund's goal of increased value, the Fund primarily
invests in common stocks of domestic medium- and large-sized companies
having growth potential. The Fund believes a company's annual sales volume
and the market capitalization (the number of shares outstanding multiplied
by the per share price) are the factors most illustrative of a company's
size. In distinguishing company size in terms of sales volume, the Fund
considers a company's sales volume relative to peer companies in the
company's industry. In terms of market capitalization, the Fund generally
considers companies with market capitalizations up to $2.0 billion as
"small," between $2.0 billion and $7.5 billion as "medium" and greater than
$7.5 billion as "large." To a lesser extent, the Fund may invest in
companies with small market capitalizations. The Fund looks for
established companies with the potential for superior growth in sales and
earnings in a diversified group of industries. The Fund seeks companies
that are well positioned to take advantage of emerging long-term social and
economic trends, and have ample resources to sustain their growth. The
Fund's investment philosophy is basically a long-term growth philosophy,
based upon the assumption that if a company achieves superior growth in
sales and earnings, eventually the company's stock will achieve superior
performance. Income is not a significant factor in selecting the Fund's
investments.
It is anticipated that a major portion of the Fund's portfolio will be
invested in common stocks of the types of companies, and in the manner, as
described above, at all times. The Fund does not have a pre-set asset
allocation strategy which requires that the Fund maintain a specific
percentage of its assets in equity-related securities (i.e., stocks) and
income-related securities (i.e., bonds). In addition, there is no minimum
or maximum percentage of the Fund's assets which must be invested in the
securities of companies in any particular industry or group of industries.
For further information on the Fund's principal investment strategies
and how the Fund invests, see "Fund Investments" starting on page _.
PRINCIPAL RISKS OF INVESTING
As with any mutual fund, the Fund can not guarantee that it will meet
its goals or that its performance will be positive over any period of time.
The Fund's investments change in value. Consequently, the value of your
Fund shares may change. This may occur because a particular stock market
is rising or falling, or because of other specific factors affecting the
value of a particular investment of the Fund. If the value of the Fund
shares or the value of the Fund's investments go down, you may lose money.
Although the Fund will invest most of its assets in the securities of
large-sized companies, the Fund may face additional risks due to its
investments in small- and medium-sized companies. Securities of medium-
sized companies often fluctuate in price more than common stocks of larger
companies, such as many of those included in the Dow Jones Industrial
Average. During the history of the Fund, its price per share has often
been somewhat more volatile, in both "up" and "down" markets, than the Dow
Jones Industrial Average. If the value of the Fund's investments in small-
to medium-sized companies decreases, the value of the Fund's shares may
also go down.
The Fund also faces selection risk, which is the risk that the stocks
the Fund purchases will underperform markets or other mutual funds with
similar investment objectives and strategies. In addition, although the
Fund generally will invest in the common stocks of medium- and large-sized
companies, certain investments by the Fund and certain investment
techniques the Fund may use involve other risks, as described elsewhere in
this Prospectus.
Since there are risks inherent in all investments in securities, there
is no assurance that the Fund's objectives will be achieved. Before you
invest, please read "Investment Risks" starting on page _.
WHO MAY WANT TO INVEST
The Fund may be appropriate if you:
* Have longer time horizons
* Are willing to accept higher short-term risk along with
higher potential long-term returns
* Want to diversify their portfolios
* Are seeking a fund for the growth portion of an asset
allocation portfolio
* Are investing with long-term goals in mind, such as
retirement or to fund a child's future education
The Fund may NOT be appropriate if you:
* Are investing with a shorter time horizon in mind
* Are uncomfortable with an investment that will go up and
down in value
* Are looking for current income
PERFORMANCE INFORMATION
Mutual fund performance is commonly measured as total return. Total
return measures the price change in a share assuming reinvestment of all
dividends and capital gain distributions. All mutual funds must use the
same formula to calculate total return. The total returns that follow are
based on historical results and do not reflect the effect of taxes.
The bar chart and table which follow show the risks of investing in the
Fund. They show the variability of the Fund's total return over time and
how the Fund's historical performance compares with alternative broad
measures of market performance.
This bar chart shows the Fund's calendar year total returns for the
last ten years. (1)
BAR CHART PLOT POINTS
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
24.53% (4.81)% 41.98% 12.63% 5.90% (2.84)% 35.40% 19.78% 37.01% 13.12%
____________
(1) The Fund's fiscal year end is March 31. The Fund's calendar year-to-
date return (three months) as of March 31, 1999 was (0.72)%.
For the ten calendar years 1989 through 1998, the highest quarterly
return was 20.22% (for the quarter ended March 31, 1991) and the lowest
quarterly return was (17.70)% (for the quarter ended September 30, 1990).
This next table shows how the Fund's average annual returns for the
one, five and ten calendar years ending on December 31, 1998 (the Fund's
most recently completed calendar year) compare to the returns of the
Standard & Poor's 500 Index and the Lipper Mid Cap Fund Index.
ONE FIVE TEN
YEAR YEARS YEARS
----- ------ -----
THE FUND 13.12% 19.55% 17.23%
STANDARD & POOR'S 500 INDEX 28.58% 24.05% 19.20%
LIPPER MID CAP FUND INDEX 13.92% 15.20% 17.00%
The Standard & Poor's 500r Composite Stock Price Index is an
capitalization-weighted index that represents the average performance of a
group of stocks of 500 companies and is a widely used benchmark for large-
capitalization U.S. stocks. The Lipper Mid Cap Fund Index is an unmanaged
equally weighted index of the 30 largest mutual funds included in the
Lipper Mid Cap Fund category.
OF COURSE, THE FUND'S PAST PERFORMANCE IS NO GUARANTEE OF ITS FUTURE RETURNS.
FEES AND EXPENSES OF THE FUND
FUND INVESTORS PAY VARIOUS EXPENSES, EITHER DIRECTLY OR INDIRECTLY.
THE TABLE BELOW DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY
AND HOLD SHARES OF THE FUND.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchases................. None
Maximum Deferred Sales Charge (Load)............................. None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends...... None
Redemption Fee................................................... (1)
Exchange Fee..................................................... (2)
Maximum Account Fee.............................................. None
ANNUAL FUND OPERATING EXPENSES (3) (AS A PERCENTAGE OF AVERAGE NET ASSETS)
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees.................................................. 0.65%
Distribution [and/or Service] (12b-1) Fees (4)................... None
Other Expenses................................................... 0.06%
Total Annual Fund Operating Expenses............................. 0.71%
__________
(1) A fee of $12.00 is charged for each wire redemption.
(2) A fee of $5.00 is charged for each telephone exchange.
(3) Annual Fund Operating Expenses are based on expenses incurred for
the year ended March 31, 1999.
(4) Some mutual funds charge these fees to pay for advertising and other
costs of selling shares.
EXAMPLE: THIS EXAMPLE HELPS YOU COMPARE THE COSTS OF INVESTING IN THE
FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. (1)
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
THE EXAMPLE ASSUMES THAT YOU
INVEST $10,000 IN THE FUND FOR THE
TIME PERIODS INDICATED AND THEN
REDEEM ALL OF YOUR SHARES AT THE
END OF THOSE PERIODS. THE
EXAMPLE ALSO ASSUMES THAT YOUR
INVESTMENT HAS A 5% RETURN
EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES REMAIN
THE SAME. ALTHOUGH YOUR
ACTUAL COSTS MAY BE HIGHER OR
LOWER, BASED ON THESE
ASSUMPTIONS, YOUR COSTS WOULD BE: $73 $227 $395 $883
__________
(1) This Example is not be a representation of past or future expenses.
Actual expenses may be more or less than those shown.
For a further description of the fees paid to the Fund's adviser, The
Nicholas Company, Inc., see "The Fund's Investment Adviser" on page 12.
PORTFOLIO MANAGEMENT
Mr. Albert O. Nicholas and Mr. David O. Nicholas are Co-Portfolio
Managers of the Fund and are primarily responsible for the day-to-day
management of the Fund's portfolio. Albert O. Nicholas is President and a
Director of the Fund, a Director of the Adviser since 1967, served as
President of the Adviser since 1967 to 1998, and currently serves as the
Chief Executive Officer of the Adviser. David O. Nicholas is President and
Chief Investment Officer of Adviser, and has been employed by the Adviser
since 1985. For a further discussion of Messrs. Albert O. and David O.
Nicholas' experience, see "The Fund's Investment Adviser."
FUND INVESTMENTS
The Fund's main goal is increased share value over the long-term. It
strives to meet its goal by investing primarily in a diversified portfolio
of equity securities of large- and medium-sized U.S. companies, which it
believes, have growth potential.
The Fund believes a company's annual sales volume and market
capitalization (the number of shares outstanding multiplied by the per
share price) are the factors most illustrative of a company's size. To
determine company size in terms of sales volume, the Fund compares a
company's sales volume to peer companies in the company's industry. In
terms of market capitalization, the Fund uses the following standard:
MARKET CAPITALIZATION
---------------------
Small....................... 0 to $2.0 Billion
Medium...................... $2.0 Billion to $7.5 Billion
Large....................... Over $7.5 Billion
To pursue the Fund's goal it may also, to a lesser extent, invest in
companies with small capitalizations. The Fund's investment philosophy is
basically a long-term growth philosophy, based upon the assumption that if
a company achieves superior growth in sales and earnings, eventually the
company's stock will achieve superior performance.
The Fund looks for established companies with the potential for
superior growth in sales and earnings. These are companies that are well
positioned to take advantage of emerging, long-term social and economic
trends, and have ample financial resources to sustain their growth. The
Fund considers a number of factors in assessing a company's value,
including:
* a company's strategic position in its industry
* sales and earnings growth
* product development
* quality of management
* overall business prospects
* a company's price to earnings ratio (including an
analysis of such ratio in relation to the company's growth
rate and industry trends)
Income is not a significant factor in selecting the Fund's
investments. The Fund does not have a pre-set asset allocation strategy
which requires that it maintain a specific percentage of its assets in
equity-related securities (i.e., stocks) and income-related securities
(i.e., bonds). In addition, there is no minimum or maximum percentage of
the Fund's assets which must be invested in the securities of companies in
any particular industry or group of industries. But, the Fund may not
invest more than 5% of its total net assets in the securities of any one
company, and not more than 25% of the value of the Fund's total net assets
may be concentrated in companies in any particular industry or group of
industries. In addition, the Fund may not hold more than 10% of the voting
securities of any one company.
The Fund may hold an investment for any length of time, and will buy
or sell securities whenever the Fund sees an appropriate opportunity. It
does not buy stocks with a view toward a quick sale or to obtain short-term
trading profits (defined as profits on assets held less than twelve
months). The Fund may reduce or sell investments in companies if there is
an actual or perceived deterioration in the fundamentals of a company
(including the company's financial condition or performance, management-
related problems, product-line or service-line issues, or industry
problems). The Fund also may reduce or sell investments in companies if a
company's stock price appreciates excessively in relation to its
fundamental prospects. Investments in companies also may be sold if they
fail to realize their growth potential or if there are other more
attractive opportunities elsewhere.
The Fund expects that a major portion of its portfolio will be
invested at all times in common stocks of the types of companies, and in
the manner, already described. However, the Fund also may invest in the
securities of unseasoned companies (companies with a record of less than
three years of continuous operation) (but in no event in an aggregate
amount in excess of 5% of the Fund's total assets), debt securities and
preferred stock convertible into common stock, securities of other
investment companies (up to 5% of the Fund's total assets) and securities
offered in private placements. The Fund also may invest in certain higher-
risk securities and engage in other investment practices.
For liquidity or flexibility, the Fund may also invest in cash,
investment grade and non-investment grade fixed income securities, and
repurchase agreements. Cash and cash equivalent securities will be
retained by the Fund in an amount sufficient to provide moderate liquid
reserves so that the Fund has sufficient cash to meet shareholder
redemption requests and other operating expenses. The Fund usually will
not invest more than 5% of its total assets (at the time of purchase) in
non-investment grade fixed-income securities.
As a temporary defensive tactic because of adverse market, economic,
political or other conditions, the Fund also may invest in cash, investment
grade and non-investment fixed income securities and repurchase agreements.
During any period in which the Fund maintains such a temporary defensive
position, it may not achieve its investment objective.
INVESTMENT RESTRICTIONS WHICH MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL
The Fund's Board of Director's may change the following investment
restrictions without shareholder approval:
* No investments are permitted in any securities issued by a company if
one or more directors or shareholders or other affiliated persons of its
investment adviser beneficially own more than one-half of one percent
(0.5%) of such company's stock or other securities, and all of the
foregoing persons owning more than one-half of one percent (0.5%) together
own more than 5% of such companies stock or security
* Not more than 5% of its total net assets may be invested in equity
securities which are not readily marketable and in securities of companies
which have a record of less than three years' continuous operation
* No investments are permitted in interests in oil, gas or other mineral
exploration programs (but investments in interests in oil, gas or other
mineral activities are permitted)
* No investments are permitted in puts, calls, straddles, spreads or any
combination thereof
* Not more than 1% of its total net assets may be invested in restricted
securities.
* No purchase of securities of any company are permitted if, as a result
of such purchase, the Fund would hold more than 10% of all classes of the
securities of such company
* No investments are permitted in warrants, valued at the lower of cost
or market, which exceed 5% of the value of the Fund's net assets. Included
within that amount, but not to exceed 2% of the value of the Fund's net
assets, may be warrants which are not listed on the New York or American
Stock Exchange. Warrants acquired by the Fund in units or attached to
securities may be deemed to be without value
The Board will give advance notice to shareholders of any change to these
investment restrictions by filing with the SEC an amended Statement of
Additional Information.
All percentage limitations apply on the date of investment by the
Fund. Thus, if an investment satisfies a percentage restriction when it is
made, no violation of that restriction is created by changes afterwards in
the market value of the investment or the total assets of the Fund.
The Fund may use many different investment strategies in seeking its
investment objectives, and it has certain investment restrictions. These
strategies and certain of the restrictions and policies governing the
Fund's investments are explained in detail in the Fund's Statement of
Additional Information, which is incorporated by reference herein. If you
would like to learn more about how the Fund may invest, you should request
a copy of the Statement of Additional Information. To learn how to obtain
a copy of the Statement of Additional Information, see the back cover page
of this Prospectus.
INVESTMENT RISKS
THIS SECTION CONTAINS A SUMMARY DESCRIPTION OF THE GENERAL RISKS OF
INVESTING IN THE FUND. AS WITH ANY MUTUAL FUND, THERE CAN BE NO GUARANTEE
THAT THE FUND WILL MEET ITS GOALS OR THAT YOU WON'T LOSE MONEY ON YOUR
INVESTMENT. THERE IS NO GUARANTEE THAT THE FUND'S PERFORMANCE WILL BE
POSITIVE OVER ANY PERIOD OF TIME.
Because of the following risks, you could lose money on your
investment over the short- or long-term:
MARKET RISK. The value of the Fund's investments, and therefore, the
value of your Fund shares, may go up or down. Value changes in the Fund's
investments and consequently, your Fund shares may occur because a
particular stock market is rising or falling. Stock markets tend to run in
cycles, with periods when stock prices generally go up, known as "bull
markets," and periods when stock prices generally go down, referred to as
"bear markets." Stock prices in general may decline over short or extended
periods. Thus, there is a possibility that the value of the Fund's
investments will fall because of declines in the stock market, regardless
of the success or failure of the operations of the Fund's portfolio
companies. At other times, there are specific factors that may adversely
affect the value of a particular investment of the Fund, which in turn may
reduce the value of the Fund's investments, and consequently, your Fund
shares.
PORTFOLIO-SPECIFIC RISK. Because the Fund invests most of its assets
in the securities of large- and medium-sized companies, and to a lesser
extent the securities of small companies, the Fund may be subject to
additional risks. Small- to medium-sized companies often have a limited
market for their securities and limited financial resources, and are
usually more affected by changes in the economy. Securities of small- to
medium-sized companies also often fluctuate in price more than common
stocks of larger companies, such as many of those included in the Dow Jones
Industrial Average. Therefore, during the history of the Fund, its price
per share has often been somewhat more volatile than the Dow Jones
Industrial Average. If the value of the Fund's investments in small- and
medium-size companies decrease, the value of the Fund's shares also may go
down,
SELECTION RISK. The Fund also is subject to selection risk, which is
the risk that the stocks the Fund buys will underperform the markets or
other mutual funds with similar investment objectives and strategies.
OTHER RISKS RELATED TO CERTAIN PORTFOLIO INVESTMENTS AND STRATEGIES.
Although the Fund generally will invest in the common stocks of large- and
medium-sized companies, certain investments the Fund may acquire and
certain investment techniques the Fund may use entail other risks:
LIQUIDITY, INFORMATION AND VALUATION RISKS OF CERTAIN PORTFOLIO INVESTMENTS
From time to time, the Fund may acquire the securities of
unseasoned companies (i.e., companies which have a record of less than
three years continuous operation) and securities issued in private
placements (i.e., securities not registered for purchase by and sale
to the public under the Securities Act of 1933, as amended).
Securities of unseasoned companies and securities issued in private
placements may be illiquid or volatile making it potentially difficult
or impossible to sell them at the time and at the price the Fund would
like. In addition, important information about these types of
companies, securities or the markets in which they trade, may be
inaccurate or unavailable. Consequently, it may be difficult to value
accurately these securities as well.
These types of investments are made by the Fund when the Adviser
believes such investments offer the possibility of capital
appreciation. The Fund may not invest more than 5% of the Fund's
total assets in the securities of unseasoned companies. In addition,
the Fund may not invest more than 10% of the Fund's total assets in
bonds, debentures or other debt securities distributed in private
placements.
DEBT SECURITIES AND PREFERRED STOCK
From time to time, the Fund may acquire debt securities and
preferred stock that are convertible into or carry rights to acquire
common stock, and other debt securities, such as those selling at
substantial discounts.
Debt securities, such as bonds, involve credit risk, which is the
risk that the borrower will not make timely payments of principal and
interest. Debt securities also are subject to interest rate risk,
which is the risk that the value of the security may fall when
interest rates rise. In general, the market price of debt securities
with longer maturities will go up or down more in response to changes
in interest rates than shorter term securities. The Fund is not
limited as to the maturities of the debt securities in which it
invests.
The value of preferred stock and debt securities convertible into
common stock generally is affected by its stated dividend rate or
interest rate, as applicable, and the value of the underlying common
stock. Because of the conversion feature, the dividend rate or
interest rate on convertible preferred stock or convertible debt
securities generally is less than it would have been if the security
was not convertible. Therefore, the value of convertible preferred
stock and debt securities is affected by the factors that affect both
equity securities (such as stock market movements generally) and debt
securities (such as interest rates). Some convertible securities
might require the Fund to sell the securities back to the issuer or a
third party when it is disadvantageous to the Fund.
These types of investments are made by the Fund when the Adviser
believes they offer the possibility of appreciation in value.
CREDIT QUALITY OF FIXED INCOME SECURITIES
The Fund may temporarily invest in investment grade and non-
investment grade fixed income securities as a temporary defensive
measure when conditions warrant. "Investment grade fixed income
securities" are fixed income securities ranked in one of the top four
debt security rating categories of any of the nationally recognized
statistical rating organizations (`NRSROs"), or unrated but deemed by
the Adviser to be comparable in quality to instruments so rated on the
date of purchase. The Fund usually will not invest more than 5% of
its total assets in non-investment grade fixed income securities.
But, the Fund may keep a security if its credit quality is downgraded
to a non-investment grade level after purchase.
Non-investment grade securities tend to reflect individual
corporate developments to a greater extent, tend to be more sensitive
to economic conditions and tend to have a weaker ability to pay
interest and repay principal than higher rated securities. There
aren't as many buyers for lower rated securities as there are for
higher rated securities and they may be traded less. Consequently,
there may be market price volatility for these securities and limited
liquidity in the resale market. If the Fund invests in non-investment
grade fixed income securities, it may be subject to greater risk of a
decline in the value of its investments.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements, but only with a
member bank of the Federal Reserve System or a primary dealer in U.S.
Government securities. Under such agreements, the Fund buys U.S.
Government securities from the bank or primary dealer and
simultaneously agrees to sell the securities back to the bank or
primary dealer at a mutually agreed upon time and price. While the
underlying security is a U.S. Government security, the obligation of
the seller to repurchase the security is not guaranteed by the U.S.
Government. If the bank or primary dealer defaults on its repurchase
obligation or becomes insolvent, the Fund could lose money which could
reduce the its net asset value.
The Fund may not invest more than 20% of the its total net
assets, taken at market, in repurchase agreements. And within that
limit, repurchase agreements maturing in more than seven days may not
constitute more than 10% of the Fund's total net assets, taken at
market.
BORROWINGS
The Fund's exposure to market risk can increase if it borrows.
If it borrows money to make more investments than it otherwise could
or to meet redemptions, the Fund's share price may be subject to
greater fluctuation until the borrowing is paid off. The Fund may
make borrowings but only for temporary or emergency purposes and then
only in amounts not in excess of 5% of the lower of cost or market
value of its total net assets.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
The Fund may invest up to 5% of its total assets in securities of
other investment companies. Investments in these securities will
involve duplication of advisory fees and certain other expenses.
In view of the risks inherent in all investments in securities, there
is no assurance that the Fund's objectives will be achieved.
FINANCIAL HIGHLIGHTS
THE FOLLOWING FINANCIAL HIGHLIGHTS TABLE HELPS YOU UNDERSTAND THE
FUND'S FINANCIAL PERFORMANCE FOR THE PAST FIVE FISCAL YEARS ENDED MARCH 31,
1999. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A SINGLE FUND
SHARE. THE TOTAL RETURNS IN THE TABLE REPRESENT THE RATE THAT AN INVESTOR
WOULD HAVE EARNED (OR LOST) ON AN INVESTMENT IN THE FUND (ASSUMING
REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS). THE TABLE HAS BEEN
EXAMINED BY ARTHUR ANDERSEN LLP, INDEPENDENT PUBLIC ACCOUNTANTS, WHOSE
REPORT THEREON IS INCLUDED IN THE FUND'S ANNUAL REPORT FOR THE FISCAL YEAR
ENDED MARCH 31, 1999. THE TABLE SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED IN THE FUND'S ANNUAL
REPORT, WHICH ARE INCORPORATED BY REFERENCE INTO THE STATEMENT OF
ADDITIONAL INFORMATION AND WHICH MAY BE OBTAINED WITHOUT CHARGE BY CALLING
OR WRITING THE FUND.
<TABLE>
<CAPTION>
Financial Highlights
(For a share outstanding throughout each year)
- ---------------------------------------------------------------------
Year ended March 31,
--------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $67.11 $63.81 $52.22 $51.10 $52.91 $49.68 $42.99 $37.72 $35.27 $32.15
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .36 .40 .57 .69 .74 .75 .70 .80 .96 .97
Net gains or (losses) on securities
(realized and unrealized) 32.67 8.64 15.68 4.46 (.68) 5.20 7.49 5.48 3.46 3.63
------ ------ ------ ------ ------ ------ ------ ------ ------- ------
Total from investment operations 33.03 9.04 16.25 5.15 .06 5.95 8.19 6.28 4.42 4.60
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends (from net
investment income) ( .36) (.42) (.57) (.71) (.82) (.68) (.68) (.79) (.92) (1.03)
Distributions (from capital gains) (5.80) (5.32) (4.09) (3.32) (1.05) (2.04) (.82) (.22) (1.05) (.45)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (6.16) (5.74) (4.66) (4.03) (1.87) (2.72) (1.50) (1.01) (1.97) (1.48)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $93.98 $67.11 $63.81 $52.22 $51.10 $52.91 $49.68 $42.99 $37.72 $35.27
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN 50.98% 14.68% 32.38% 10.88% 0.04% 12.41% 19.33% 17.13% 12.55% 14.81%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions) $5,907.2 $3,989.5 $3,655.3 $3,004.4 $2,941.2 $3,013.4 $2,234.1 $1,642.8 $1,389.5 $1,172.3
Ratio of expenses to average net assets .71% .72% .74% .77% .78% .76% .78% .81% .82% .86%
Ratio of net investment income
to average net assets .44% .61% .87% 1.34% 1.40% 1.53% 1.60% 2.17% 2.56% 2.84%
Portfolio turnover rate 17.01% 15.18% 25.70% 29.82% 33.39% 10.20% 14.58% 21.85% 21.31% 24.03%
Average commission rate paid by the
Fund on portfolio investment
transactions* $0.0475 $0.0473 $0.0492 -- -- -- -- -- -- --
</TABLE>
PLEASE CONSIDER THE PERFORMANCE INFORMATION ABOVE IN LIGHT OF THE
FUND'S INVESTMENT OBJECTIVES AND POLICIES, AND MARKET CONDITIONS DURING THE
REPORTED TIME PERIODS. AGAIN, YOU MUST REMEMBER THAT HISTORICAL
PERFORMANCE DOES NOT NECESSARILY INDICATE WHAT WILL HAPPEN IN THE FUTURE.
THE VALUE OF YOUR FUND SHARES MAY GO UP OR DOWN.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Individual stock selection is the focal point of the Adviser's equity
philosophy. The Adviser's efforts are directed toward purchasing stocks
that represent good value based upon the criteria outlined below. It is
also the Adviser's strong conviction that superior long-term results are
achieved through the minimization of capital losses during adverse periods
in the general market. The Adviser primarily seeks stocks where the
price/earnings ratio is low in relation to earnings growth or where the
price is reasonable in relation to book value. Above average secular
earnings growth and strong current earnings momentum are important factors.
The two line graphs which follow compare the initial account value and
subsequent account values at the end of each of the most recently completed
ten fiscal years of the Fund to the same investment over the same periods
in two different sets of peer group indices. The graphs assume a $10,000
initial investment in the Fund and the indices at the beginning of the
first fiscal year.
The peer group in the first graph includes the Standard & Poor's 500r
Composite Stock Price ("S&P 500") Index. This peer group is consistent
with the peer group used in the performance graph which appeared in the
Fund's Prospectus, dated July 30, 1998. The peer group in the second graph
includes the Lipper Mid Cap Fund ("Lipper Mid Cap") Index and the S&P 500
Index. The Fund intends to use the peer group indices in the second graph
as its peer group indices in its performance graphs in Fund prospectuses in
future years. The Fund believes the returns of the Lipper Mid Cap and S&P
500 indices are more representative of the performance of large- and medium-
capitalized companies, which are the types of companies in which the Fund
primarily invests. Therefore, the Fund believes the Lipper Mid Cap and S&P
500 indices provide a more meaningful and representative basis of
comparison for Fund investors.
(The performance graph plot points are as follows:)
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
NICHOLAS FUND, INC. AND S&P 500 INDEX
FISCAL NICHOLAS % S&P 500 %
YEAR FUND VALUE RETURNS VALUE RETURNS
ENDED
- -------- ---------- ------- --------- --------
<S> <S> <S> <S> <S>
03/31/89 10,000.00 10,000.00
03/31/90 11,255.29 12.55% 11,927.22 19.27%
03/31/91 13,183.31 17.13% 13,646.12 14.41%
03/31/92 15,731.47 19.33% 15,152.67 11.04%
03/31/93 17,683.45 12.41% 17,460.32 15.23%
03/31/94 17,690.50 0.04% 17,717.38 1.47%
03/31/95 19,615.93 10.88% 20,470.66 15.54%
03/31/96 25,967.57 32.38% 27,043.79 32.11%
03/31/97 29,779.61 14.68% 32,405.65 19.83%
03/31/98 44,961.26 50.98% 47,960.36 48.00%
03/31/99 45,019.71 0.13% 56,813.66 18.46%
</TABLE>
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
NICHOLAS FUND, INC. AND S&P 500 INDEX AND
LIPPER MID CAP FUND INDEX
FISCAL NICHOLAS % S&P % MID CAP %
YEAR ENDED FUND RETURNS 500 RETURNS FUND RETURNS
VALUE VALUE VALUE
- ---------- --------- ------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
03/31/89 10,000.00 10,000.00 10,000.00
03/31/90 11,255.29 12.55% 11,927.22 19.27% 10,000.00
03/31/91 13,183.31 17.13% 13,646.42 14.41% 10,000.00
03/31/92 15,731.47 19.33% 15,152.67 11.04% 10,000.00
03/31/93 17,683.45 12.41% 17,460.32 15.23% 10,000.00
03/31/94 17,690.50 0.04% 17,717.38 1.47% 10,000.00
03/31/95 19,615.93 10.88% 20,470.66 15.54% 10,000.00
03/31/96 25,967.57 32.38% 27,043.79 32.11% 10,000.00
03/31/97 29,779.61 14.68% 32,405.65 19.83% 10,000.00
03/31/98 44,961.26 50.98% 47,960.36 48.00% 10,000.00
03/31/99 45,019.71 0.13% 56,813.66 18.46% 10,000.00
</TABLE>
The Fund's average annual total returns for the one year, five year
and ten year periods ended on the last day of the most recent fiscal year
are as follows:
One Five Ten
Year Ended Years Ended Years Ended
March 31, 1999 March 31, 1999 March 31, 1999
-------------- -------------- --------------
Average Annual
Total Return 0.13% 20.54% 16.24%
Past performance is not predictive of future performance.
THE FUND'S INVESTMENT ADVISER
Nicholas Company, Inc., located at 700 North Water Street, Suite 1010,
Milwaukee, Wisconsin 53202, is the Fund's investment adviser. The Adviser
furnishes the Fund with continuous investment service and is responsible
for overall management of the Fund's business affairs, subject to
supervision by the Fund's Board of Directors.
The Adviser is the investment adviser to five other mutual funds and
to approximately twenty-five institutions and individuals with substantial
investment portfolios. The additional mutual funds it advises are: Nicholas
Income Fund, Inc., Nicholas II, Inc., Nicholas Limited Edition, Inc.,
Nicholas Money Market Fund, Inc., and Nicholas Equity Income Fund, Inc. As
of March 31, 1999, the Adviser had approximately $8 billion assets under
management.
The annual fee paid to the Adviser is paid monthly and is based on the
average net asset value of the Fund, as determined by valuations made at
the close of each business day of the month.
The following table illustrates the calculation of the Adviser's
annual fee:
ANNUAL FEE CALCULATION
NET ASSET (BASED ON THE AVERAGE
VALUE OF THE FUND NET ASSET VALUE OF THE FUND)
------------------- ----------------------------
Up to and including $50,000,000 0.75 of 1%
In excess of $50,000,000 0.65 of 1%
Under the Investment Advisory Agreement with the Fund, the Adviser, at
its own expense and without reimbursement from the Fund, furnishes the Fund
with office space, office facilities and executive officers and executive
expenses (such as health insurance premiums for executive officers). The
Adviser also pays all sales and promotional expenses of the Fund, other
than expenses incurred in complying with laws regulating the issue or sale
of securities.
The Fund pays all of its operating expenses. Operating expenses
include, but are not limited to, fees paid for attendance at Board meetings
to directors who are not interested persons of the Adviser or officers or
employees of the Fund, salaries of administrative and clerical personnel,
association membership dues, auditing and accounting services, legal fees
and expenses, printing, fees and expenses of any custodian or trustees
having custody of Fund assets, postage, charges and expenses of dividend
disbursing agents, registrars and stock transfer agents, including the cost
of keeping all necessary shareholder records and accounts and handling any
problems related thereto, and certain other costs related to the
aforementioned items.
Albert O. Nicholas is President and a Director of the Fund, is Chief
Executive Officer and Chairman of the Board of the Adviser, and is a
controlling person of the Adviser through his ownership of 91% of the
outstanding voting securities of the Adviser . David O. Nicholas is
President, Chief Investment Officer and a Director of the Adviser, and a
Senior Vice President of the Fund. They are both Chartered Financial
Analysts.
Albert O. Nicholas was the portfolio manager of the Fund from its
inception in July 1969 through November 1996. Since November 1996, Albert
O. Nicholas and David O. Nicholas have been co-portfolio managers of the
Fund and are primarily responsible for the day-to-day management of the
Fund's portfolio. Albert O. Nicholas is also portfolio manager of and has
had responsibility for the day-to-day management of the portfolios of the
Nicholas Income Fund, Inc. and the Nicholas Equity Income Fund, Inc. since
the Nicholas Company, Inc. has served as investment adviser for such funds.
David O. Nicholas has been portfolio manager and primarily responsible for
day-to-day management of the portfolios of Nicholas II, Inc. and Nicholas
Limited Edition, Inc. since March 1993.
PRICING OF FUND SHARES
When you buy shares of the Fund, the price per share you pay is the
net asset value ("NAV") per share of the Fund. The NAV of a share of the
Fund is determined by dividing the total value in U.S. dollars of the
Fund's total net assets by the total number of shares outstanding at that
time. Net assets of the Fund are determined by deducting the liabilities
of the Fund from the total assets of the Fund. The NAV is determined as of
the close of trading on the New York Stock Exchange ("NYSE") on each day
the NYSE is open for unrestricted trading.
PURCHASE OF FUND SHARES
To Open An Account $500
INVESTMENTS To Add To An Account $100
MINIMUM $ Minimum Balance $500
[ICON]
The Fund's Automatic Investment Plan has a minimum
monthly investment of $50. Due to fixed expenses
incurred by the Fund in maintaining individual
accounts, the Fund reserves the right to redeem
accounts that fall below the $500 minimum investment
required due to shareholder redemption (but not solely
due to a decrease in net asset value of the Fund). In
order to exercise this right, the Fund will give
advance written notice of at least 30 days to the
accounts below such minimum.
APPLICATION You may apply to purchase shares of the Fund by
INFORMATION submitting an application to Nicholas Fund, Inc.,
c/o Firstar Mutual Fund Services, LLC ("Firstar"),
P.O. Box 2944, Milwaukee, Wisconsin 53201-2944.
See the back cover page of this Prospectus for
information on how to contact the Fund. The Fund
also has available an Automatic Investment Plan
for shareholders. You should contact the Fund for
additional information.
When you make a purchase, your purchase price per
share will be the net asset value ("NAV") per share
next determined after the time the Fund receives your
application in proper order. The NAV is calculated
once a day based on the closing market price for each
security held in the Fund's portfolio. The
determination of NAV for a particular day is applicable
to all purchase applications received in proper order
by the close of trading on the NYSE on that day
(usually 4:00 p.m., New York time).
Applications to purchase Fund shares
received in proper order on a day when the NYSE
is open for trading, prior to the close
of trading on that day, will be based on the NAV
as of the close of trading on that day.
Applications to purchase Fund shares
received in proper order after the close of
trading on the NYSE will be based on the
NAV as determined as of the close of trading on
the next day the NYSE is open.
Purchase of shares will be made in full and
fractional shares computed to three decimal places.
You should be aware that DEPOSIT in the U.S. mail
or with other independent delivery services, or
receipt at Firstar's Post Office Box, of purchase
applications DOES NOT constitute receipt by Firstar or
the Fund. DO NOT mail letters by overnight courier to
the Post Office Box address. OVERNIGHT COURIER
DELIVERY SHOULD BE SENT TO FIRSTAR MUTUAL FUNDS
SERVICES, LLC, THIRD FLOOR, 615 EAST MICHIGAN STREET,
MILWAUKEE, WISCONSIN 53202.
Your application to purchase Fund shares must be
in proper order to be accepted, may only be accepted by
the Fund or an authorized agent of the Fund and is not
binding until accepted. Applications must be
accompanied by payment in U.S. funds. Your check
should be drawn on a U.S. bank, savings and loan or
credit union. Checks are accepted subject to
collection at full face value in U.S. funds. The
transfer agent will charge a $20 fee against a your
account, in addition to any loss sustained by the Fund,
if any payment check is returned to the transfer agent
for insufficient funds. The Fund will not accept
applications under circumstances or in amounts
considered disadvantageous for shareholders. If you
open an account (including custodial accounts) without
a proper social security number or taxpayer
identification number, it may be liquidated. Proceeds
will be distributed to the owner(s) of record on the
first business day following the 60th day of
investment, net of the backup withholding tax amount.
WIRE PURCHASES You also may purchase Fund shares via
[ICON] the Federal Reserve wire system, please call Firstar
(414-276-0535 or 800-544-6547) with the
appropriate account information prior to sending the
wire. Firstar will provide you with a confirmation
number for the wire purchase which will ensure the
prompt and accurate handling of funds. To purchase
shares of the Fund by federal wire transfer, instruct
your bank to use the following instructions:
Wire To: Firstar Bank Milwaukee, N.A.
ABA 075000022
Credit: Firstar Mutual Funds
Services, LLC
Account 112-952-137
Further Credit: Nicholas Fund Inc.
(shareholder account number)
(shareholder registration)
The Fund and its transfer agent are not
responsible for the consequences of delays resulting
from the banking or Federal Reserve wire system, or
from incomplete wiring instructions.
CERTIFICATES The Fund won't issue certificates representing Fund
[ICON] shares unless the shareholder specifically requests
certificates in writing to the Fund. Signature guarantees
may be required. Certificates are mailed to requesting
shareholders approximately two weeks after receipt of
the request by the Fund. The Fund won't issue
certificates for fractional shares even if requested.
Where certificates are not requested, the Fund's
transfer agent, Firstar, will credit the shareholder's
account with the number of shares purchased. Written
confirmations are issued for all purchases of Fund
shares.
THIRD PARTY USE OF A PROCESSING INTERMEDIARY TO PURCHASE
PURCHASES FUND SHARES You can purchase shares of the Fund through
[ICON] certain broker-dealers, financial institutions or other
service providers ("Processing Intermediaries"). If you
do, the Processing Intermediary, rather than you, may be
the shareholder of record. Processing Intermediaries may
use procedures and impose restrictions in addition to
or different from those applicable to shareholders who
invest in the Fund directly. You should read the
program materials provided by the Processing
Intermediary in conjunction with this Prospectus before
you invest in the Fund this way.
Processing Intermediaries may charge fees
or other charges for the services they provide to their
customers. Such charges may vary among Processing
Intermediaries, but in all cases will be retained by
the Processing Intermediary and not remitted to the
Fund or the Adviser.
The Fund may also enter into an arrangement with
some Processing Intermediaries, which authorizes them
to process purchase orders on behalf of the Fund on an
expedited basis (an "Authorized Agent"). Receipt of
a purchase order by an Authorized Agent will be deemed
to be received by the Fund for purposes of determining
the NAV of the Fund shares to be purchased. If you
place a purchase order through an Authorized Agent,
you will pay the Fund's NAV per share next computed
after the receipt by the Authorized Agent of such
purchase order, plus any applicable transaction charge
imposed by the Authorized Agent.
Of course, you don't have to use the services of a
Processing Intermediary, or pay the fees that may be
charged for such services. You can invest directly with
the Fund without a sales charge.
REDEMPTION OF FUND SHARES
REDEMPTION You may redeem all or part of your Fund shares by
PRICE any of the following methods.
$ All redemptions will be processed immediately upon
[ICON] request and written confirmations will be
issued for all redemptions of Fund shares. The
redemption price will be the Fund's NAV next
computed after the time of receipt by
Firstar (or by an authorized agent of the Fund) of the
certificate(s), or written request in the proper order
as described below, or pursuant to proper telephone
instructions as described below.
Requests for redemption
of Fund shares received in proper order on a day
the NYSE is open for trading, prior to the close
of trading on that day, will be based on the NAV
as of the close of trading on that day.
Requests for redemption
of Fund shares received in proper order after the
close of trading on the NYSE will be based on the
NAV as determined as of the close of trading on
the next day the NYSE is open.
THE FUND WILL RETURN AND NOT PROCESS
REDEMPTION REQUESTS THAT CONTAIN RESTRICTIONS AS TO THE
TIME OR DATE REDEMPTIONS ARE TO BE EFFECTED.
If any of the shares you want redeemed were
purchased recently by personal or certified check, the
Fund reserves the right to hold payment up to 15 days
or until notified that investments made by check have
been collected, at which time your redemption request
will be processed and payment made.
WRITTEN If you redeem in writing, be sure that the
REDEMPTIONS redemption request is signed by eachshareholder in the
[ICON] exact manner as the Fund account is registered and
include the redemption amount and the shareholder
account number.
IF YOU HAVE CERTIFICATES
FOR YOUR SHARES, you may redeem them by delivering
to the Fund, c/o Firstar Mutual Funds Services,
LLC, P.O. Box 2944, Milwaukee, Wisconsin 53201-
2944, the certificate(s) for the full shares. The
certificate(s) must be properly endorsed or
accompanied by instrument of transfer, in either
case with signatures guaranteed by an eligible
"guarantor institution," which is a bank, savings
and loan association, a credit union, or a member
firm of a national securities exchange. A notary
public is not an acceptable guarantor.
IF YOU DON'T HAVE
CERTIFICATES FOR YOUR SHARES, you may redeem them
by delivering an original signed written request
for redemption addressed to Nicholas Fund, Inc.,
c/o Firstar Mutual Funds Services, LLC, P.O. Box
2944, Milwaukee, Wisconsin 53201-2944. If the
account registration is individual, joint tenants,
sole proprietorship, custodial (Uniform Transfer
to Minors Act), or general partners, the written
request must be signed exactly as the account is
registered. If the account is owned jointly, all
owners must sign.
YOU MAY NOT FAX YOUR REDEMPTION REQUEST.
The Fund may require additional supporting
documents for written redemptions made by corporations,
executors, administrators, trustees and guardians.
Specifically, Iif the account is registered in the name
of a corporation or association, the written request
must be accompanied by a corporate resolution signed by
the authorized person(s). A redemption request for
accounts registered in the name of a legal trust must
have a copy of the title and signature page of the
trust agreement on file or must be accompanied by the
trust agreement and signed by the trustee(s).
IF YOU ARE UNCERTAIN ABOUT WHAT DOCUMENTS
OR INSTRUCTIONS ARE NECESSARY IN ORDER TO REDEEM
SHARES, PLEASE WRITE OR CALL FIRSTAR 414-276-0535 OR
800-544-6547) PRIOR TO SUBMITTING A WRITTEN REDEMPTION
REQUEST. A WRITTEN REDEMPTION REQUEST WILL NOT BECOME
EFFECTIVE UNTIL ALL DOCUMENTS HAVE BEEN RECEIVED IN
PROPER ORDER BY FIRSTAR.
If you have an individual retirement
account ("IRA") or other retirement plan, you must
indicate on your written redemption requests whether or
not to withhold federal income tax. Unless a
redemption request specifies not to have federal income
tax withheld, the redemption will be subject to
withholding. Please consult your current Disclosure
Statement for any applicable fees.
OVERNIGHT You should be aware that DEPOSIT in the
DELIVERY mail or with other independent delivery services
[ICON] or receipt at Firstar's Post Office Box of
redemption requests DOES NOT constitute receipt by
Firstar or the Fund. DO Not mail letters
by overnight courier to the Post Office Box address.
OVERNIGHT COURIER DELIVERY SHOULD BE SENT TO FIRSTAR
MUTUAL FUNDS SERVICES, LLC, THIRD FLOOR, 615 EAST
MICHIGAN STREET, MILWAUKEE, WISCONSIN 53202.
TELEPHONE You can redeem your shares by telephone
REDEMPTIONS unless you decline that option in writing. This option
[ICON] does not apply to IRA accounts and master
retirement plans for which Firstar Bank Milwaukee,
N.A. acts as custodian Telephone
redemptions can only be made by calling Firstar 800-544-
6547 or 414-276-0535. In addition to account
registration information, you will be required to
provide the account number and social security number.
Telephone calls will be recorded.
Telephone redemption requests must be
received prior to the closing of the NYSE (usually 4:00
p.m., New York time) to receive that day's NAV. There
will be no exceptions due to market activity. During
periods of substantial economic or market changes, you
may have difficulty making a redemption by telephone.
If you are unable to contact Firstar by telephone, you
may redeem your shares by delivering the redemption
request in person or by mail. The maximum telephone
redemption is $50,000 per account/per business day.
The maximum telephone redemption for related accounts
is $100,000 per business day. The minimum telephone
redemption is $500 except when redeeming an account in
full.
The Fund reserves the right to refuse
telephone redemption if it is believed advisable to do
so. Procedures for redeeming Fund shares by telephone
may be modified or terminated at any time by the Fund
or Firstar. Neither the Fund nor Firstar will be
liable for following instructions communicated by
telephone that it reasonably believes to be genuine.
The Fund and Firstar will employ reasonable procedures
to confirm that instructions received by telephone are
genuine, and if they do not, they may be liable for
losses due to unauthorized or fraudulent instructions.
EFFECT OF For federal income tax purposes, a redemption
REDEMPTION generally is treated as sale of the shares being
[ICON] redeemed. You may recognize capital
gain or loss equal to the difference between the
redemption price and your cost basis for
the shares being redeemed. See "Dividends,
Distributions and Federal Tax Status" for further tax
information.
The Fund ordinarily pays for redeemed
shares within seven days after receipt of a request in
proper form, except as provided by the rules of the
Securities and Exchange Commission. Redemption
proceeds to be wired also ordinarily will be wired
within seven days after receipt of the request, and
normally will be wired on the next business day after a
NAV is determined. The Fund reserves the right to hold
payment up to 15 days or until satisfied that
investments made by check have been collected.
You may instruct Firstar to mail the
proceeds to the address of record or to directly mail
the proceeds to a pre-authorized bank account. The
proceeds may also be wired to a pre-authorized account
at a commercial bank in the United States. Firstar
charges a wire redemption fee of $12.00. Please
contact the Fund for the appropriate form if you are
interested in setting your account up with wiring
instructions.
SIGNATURE A signature guarantee of each owner is required to
GUARANTEES redeem shares in the following situations, for all
[ICON] size transactions:
* if you change the ownership on your account
* upon redemption of shares when certificates
have been issued for your account
* when you want the redemption proceeds sent
to a different address than is registered on
the account
* for both certificated and uncertificated shares,
if the proceeds are to be made payable to
someone other than the account owner(s)
* any redemption transmitted by federal wire
transfer to your bank not previously
set up with the Fund
* if a change of address request has been
received by the Fund or Firstar within 15
days of a redemption request
In addition, you must have your signature
guaranteed if you request redemption of $100,000 or
more from your account. Your redemption will not be
processed until the signature guarantee, if required,
is received in proper order. A notary public is not an
acceptable guarantor.
THIRD PARTY USE OF A PROCESSING INTERMEDIARY TO REDEEM
REDEMPTIONS FUND SHARES. As with the purchase of Fund shares, you
[ICON] may redeem shares of the Fund through certain
broker-dealers, financial institutions and
other service providers ("Processing Intermediaries").
You should read the program materials provided by the
Processing Intermediary before you redeem your shares
of the Fund this way. Then follow those instructions
and procedures.
Processing Intermediaries may charge fees
or other charges for the services they provide to their
customers. Such charges vary among Processing
Intermediaries, but in all cases will be retained by
the Processing Intermediary and not remitted to the
Fund or the Adviser.
The Fund also may enter into an arrangement
with some Processing Intermediaries authorizing them to
process redemption requests on behalf of the Fund on an
expedited basis (an "Authorized Agent"). Receipt of a
redemption request by an Authorized Agent will be
deemed to be received by the Fund for purposes of
determining the NAV of Fund shares to be redeemed. For
redemption orders placed through an Authorized Agent,
you will receive redemption proceeds which reflect the
NAV per share next computed after the receipt by the
Authorized Agent of the redemption order, less any
redemption fees imposed by the Authorized Agent.
You don't have to use the services of a
Processing Intermediary, or pay the fees that may be
charged for such services, unless you hold Fund shares
through a Processing Intermediary. Then you must
redeem your shares through such Processing
Intermediary. In such event, you should contact the
Processing Intermediary for instructions on how to
redeem. Otherwise if you originally invested directly
with the Fund, you can redeem Fund shares directly
through the Fund without a redemption charge.
EXCHANGE BETWEEN NICHOLAS FAMILY OF FUNDS
You may exchange Fund shares for shares of
other mutual funds for which Nicholas Company, Inc.
serves as the investment adviser.
EXCHANGES Nicholas Company, Inc. also is adviser to
the following funds which have investment objectives
and net assets as noted below:
<TABLE>
<CAPTION>
NET ASSETS AT
FUND INVESTMENT OBJECTIVE MARCH 31, 1999
---- -------------------- ------------------
<S> <C> <C>
Nicholas II, Inc. Capital appreciation; Income as
a secondary consideration $1,025,443,733
Nicholas Limited
Edition, Inc. (1) Long-term growth $ 316,277,568
Nicholas Equity Reasonable income; Moderate
Income Fund, Inc. long-term growth as a secondary
Consideration $ 25,020,850
Nicholas Income High current income consistent
Fund, Inc. with the preservation and
conservation of capital value $ 236,867,198
Nicholas Money High level of current income as
Market Fund, Inc. as is consistent with preserving
capital and liquidity $ 166,513,123
____________
</TABLE
(1) You should be aware that
Nicholas Limited Edition, Inc. is restricted in size
to ten million shares (without taking into account
shares outstanding as a result of capital gain and
dividend distributions). The exchange privilege into
that mutual fund may be terminated or modified at any
time or times when that maximum is reached.
If you choose to exercise the
exchange privilege, your shares will be exchanged at
their next determined NAV. If you exercise an
exchange into the Nicholas Money Market Fund, Inc. on
a day when the NYSE is open for trading but the
Federal Reserve Banks are closed, your shares of the
Fund will be redeemed on the day upon which the
exchange request is received; however, issuance of
your Nicholas Money Market Fund, Inc. shares will be
delayed one business day. In such a case, the
exchanged amount would be uninvested for this one-day
period.
If you are interested in
exercising the exchange privilege you must obtain the
appropriate prospectus from Nicholas Company, Inc.
An exchange constitutes a sale
for federal tax purposes and you may realize a
capital gain or loss upon the exchange, depending
upon whether the NAV at the time is more or less than
your cost basis. An exchange between the funds
involving master retirement plans and IRA accounts
generally is not a taxable transaction for federal
tax purposes. See "Dividends, Distributions and
Federal Tax Status" for further information.
The exchange privilege is
available only in states where shares of the fund
being acquired may legally be sold, and the privilege
may be terminated or modified only upon 60 days
advance notice to shareholders. You may exchange
shares of the Fund for shares of other available
Nicholas mutual funds directly through Nicholas
Company, Inc. without cost by written request.
EXCHANGE If you are interested in exercising the
BY exchange by mail privilege, you may obtain the
MAIL appropriate prospectus from Nicholas Company, Inc.
[ICON] Signatures required are the same as previously
explained under "Redemption of Fund Shares."
EXCHANGE You may also exchange by telephone among
BY all Nicholas mutual funds. Only exchanges of
TELEPHONE $500 or more may be executed using the telephone
[ICON] privilege. Firstar charges a $5.00 fee
for each telephone exchange. In an effort to
avoid the risks often associated with large
market timers, the maximum telephone exchange
per account per day is set at $100,000, with a
maximum of $l,000,000 per day for related accounts.
You are allowed four telephone exchanges per account
during any twelve month period.
Procedures for exchanging
Fund shares by telephone may be modified or
terminated at any time by the Fund or Firstar.
Neither the Fund nor Firstar will be responsible for
the authenticity of exchange instructions received by
telephone. Telephone exchanges can only be made by
calling Firstar at 414-276-0535 or 800-544-6547. You
will be required to provide pertinent information
regarding your account. Calls will be recorded.
TRANSFER OF FUND SHARES
You may transfer Fund shares in instances- such as the death of a
shareholder, change of account registration, change of account ownership
and in cases where shares of the Fund are transferred as a gift. You can
obtain documents and instructions necessary to transfer Fund shares by
writing or calling Firstar (414-276-0535 or 800-544-6547) or Nicholas
Company, Inc. (414-272-6133 or 800-227-5987) prior to submitting any
transfer requests.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAX STATUS
The Fund intends to qualify annually as a "regulated investment
company" under the Internal Revenue Code of 1986 and intends to take all
other action required to insure that little or no federal income or excise
taxes will be payable by the Fund. As a result, the Fund generally will
seek to distribute to its shareholders substantially all of its net
investment income and net realized capital gain in one or more
distributions for each fiscal year.
For federal income tax purposes Ddistributions by the Fund, whether
received in cash or invested in additional shares of the Fund, will be
taxable to the Fund's shareholders, except those shareholders that are not
subject to tax on their. The maximum tax rate on long-term capital gains
for sales of securities held greater than twelve months is 20%. Income
distributed from the Fund's net investment income and net realized short-
term capital gains are taxable to shareholders as ordinary income, whether
distributed in cash or additional shares. Distributions will usually be
made in May and December of each year. The Fund will provide information
to shareholders concerning the character and federal tax treatment of all
dividends and distributions.
At the time of purchase of Fund shares, the Fund may have
undistributed income or capital gains included in the computation of the
net asset value per share, Therefore, a dividend or capital gain
distribution received shortly after such purchase by a shareholder may be
taxable to the shareholder, although it is, in whole or in part, a return
of capital and may have the effect of reducing the net asset value per
share.
Under federal law, some shareholders may be subject to a 31% "backup
withholding" on reportable dividends, capital gain distributions (if any)
and redemption payments. Generally, shareholders subject to backup
withholding will be those (i) for whom a taxpayer identification number is
not on file with the Fund or who, to the Fund's knowledge, have furnished
an incorrect number; or (ii) who have failed to declare or underreported
certain income on their federal returns. When establishing an account, you
must certify under penalties of perjury that the taxpayer identification
number you give to the Fund is correct and that you are not subject to
backup withholding.
The foregoing tax discussion relates to federal income taxes only and
is not intended to be a complete discussion of all federal tax
consequences. You should consult with a tax adviser concerning the
federal, state and local tax aspects of an investment in the Fund.
DIVIDEND AND DISTRIBUTION REINVESTMENT PLAN
Unless you elect to accept cash in lieu of shares, all dividends and
capital gain distributions are automatically reinvested in additional
shares of the Fund through the Dividend and Distribution Reinvestment Plan
(the "Reinvestment Plan"). You may elect to accept cash on the application
to purchase shares, by telephone, or by separate written notification. All
reinvestments are at the net asset value per share in effect on the
dividend or distribution date and are credited to the shareholder's
account. Firstar will notify you of the number of shares purchased and the
price following each reinvestment period.
You may withdraw from or thereafter elect to participate in the
Reinvestment Plan at any time by giving written or telephonic notice to
Firstar. An election must be received by Firstar prior to the dividend
record date of any particular distribution for the election to be effective
for that distribution. If an election to withdraw from or participate in
the Reinvestment Plan is received between a dividend record date and
payment date, it shall become effective on the day following the payment
date. The Fund may modify or terminate the Reinvestment Plan at any time
on 30 days' written notice to participants.
SYSTEMATIC WITHDRAWAL PLAN
If you currently own $10,000 or more of Fund shares at the current
market value, you may open a Systematic Withdrawal Plan ( the "Plan") and
receive monthly, quarterly, semiannual or annual checks for any designated
amount. Firstar reinvests all income and capital gain dividends in shares
of the Fund. You may add shares to, withdraw shares from, or terminate the
plan, at any time. Each withdrawal may be a taxable event to you.
Liquidation of the shares in excess of distributions may deplete or
possibly use up the initial investment, particularly in the event of a
market decline, and withdrawals cannot be considered a yield or income on
the investment. In addition to termination of the Plan by the Fund or
shareholders, the Plan may be terminated by Firstar upon written notice
mailed to the shareholders. Please contact Nicholas Company, Inc. for
copies of the Plan documents.
INDIVIDUAL RETIREMENT ACCOUNTS
Individuals who receive compensation, including earnings from self-
employment may be able to establish a traditional IRA, a Roth IRA and/or an
Education IRA. The Fund offers prototype IRA plans for adoption by
individuals who qualify. A description of applicable service fees as well
as application forms are available upon request from the Fund. The IRA
documents also contain a disclosure statement which the Internal Revenue
Service requires to be furnished to individuals who are considering
adopting an IRA. It is important that you obtain up-to-date information
from the Fund before opening an IRA.
Qualifying individuals who have a traditional IRA may make deductible
contributions to it. Taxation of the income and gains paid to a
traditional IRA by the Fund is deferred until distribution from the IRA.
Qualifying individuals who maintain a Roth IRA may make non-
deductible contributions to it. However, the amounts within the Roth IRA
accounts accumulate tax-free and qualified distributions will not be
included in a shareholder's taxable income. The contribution limit is
$2,000 annually ($4,000 for joint returns) in aggregate with
contributions to traditional IRAs. Certain income phaseouts apply.
Like the Roth IRA, qualifying individuals may make non-deductible
contributions to an Education IRA, but the investment earnings accumulate
tax-free, and distributions used for higher education expenses are not
taxable. Contribution limits are $500 per account and certain income
phaseouts apply.
As long as the aggregate IRA contributions meet the Fund's minimum
requirement of $500, the Fund will accept any allocation of such
contribution between spousal, deductible and non-deductible accounts. The
acceptability of this calculation is the sole responsibility of the
shareholder. For this reason, it is advisable for you to consult with your
personal tax adviser to determine the deductibility of your IRA
contributions.
Because a retirement program involves commitments covering future
years, it is important that the investment objectives of the Fund be
consistent with the participant's retirement objectives. Premature
withdrawals from an IRA may result in adverse tax consequences.
Consultation with a tax adviser regarding the tax consequences is
recommended.
SELF-EMPLOYED MASTER RETIREMENT PLAN
The Fund has available a master retirement plan for self-employed
individuals. You may contact the Fund for additional information or if you
wish to participate in the plan. Consultation with a tax adviser regarding
the tax consequences of the plan is recommended.
YEAR 2000 ISSUES
The "Year 2000" issue presents a significant technological challenge
for the securities industry. Due to the limited memory and the high cost
of storage space associated with early computer equipment, the century was
implied rather than actually stored. As a result, many computer systems
are unable to interpret dates beyond 1999. Software and hardware that is
not designed to work across centuries may potentially malfunction on
January 1, 2000. Because dates are part of every securities transaction,
accurate date calculations are critical.
The Fund has focused on the "Year 2000" computer conversion issue and
management believes that there should be a smooth transition on the part of
suppliers of services to the Fund. The Fund's custodian bank and transfer
agent has reported that the necessary conversion process is in progress,
and it appears to have dedicated the appropriate level of resources to
solve the problem.
The Adviser has identified and is taking steps it believes are
reasonably designed to resolve potential problems and address the Year 2000
issue, although there can be no assurances that these steps will be
sufficient. The Adviser, which performs the Fund's internal accounting and
pricing functions, is in the process of re-engineering its hardware to
handle the century date, and has identified and is taking steps to resolve
potential software problems. Some systems are currently compliant.
Internal testing is ongoing, and the Fund expects that all systems will
have been converted by mid-1999.
In addition, there can be no assurances that the Year 2000 issue will
not have an adverse effect on issuers whose securities are held by the Fund
or on global markets generally.
PROSPECTUS
JULY 30, 1999
NICHOLAS FUND, INC.
FOR MORE INFORMATION ABOUT THE FUND:
The Fund's Statement of Additional Information ("SAI"),
dated July 30, 1999, contains more detailed information on all
aspects of Nicholas Fund, Inc., and is incorporated by
reference in this Prospectus. Additional information about the
Fund also is available in the Fund's Annual and Semi-Annual
Report to Shareholders.
To request a free copy of the current Annual/Semi-Annual
report or SAI, or to make shareholder inquiries, please write
or call: Nicholas Fund, Inc. 700 North Water Street, Milwaukee,
Wisconsin 53202, 800-227-5987 (toll-free). Additional
information about the Fund also can be obtained from the Fund's
Internet website at www.nicholasfunds.com.
In addition, you can review the Fund's reports and SAIs at
the Public Reference Room of the Securities and Exchange
Commission in Washington, D.C. Information on the operation of
the Public Reference Room may be obtained by calling the
Commission at 800-SEC-0330. Reports and other information
about the Fund also are available on the Commission's Internet
website at www.sec.gov. For a duplicating fee, copies of such
information may be obtained by writing the Public Reference
Section of the Commission, Washington, D.C. 20549-6000.
For the most current price and return information for the
Fund, you may call the Fund at 800-227-5987 (toll-free) or 414-
272-6133 or check the Fund's website at www.nicholasfunds.com.
You also can find the most current price of the Fund's shares
in the business section of your newspaper in the mutual fund
section under the heading "Nicholas Group" - "Nich". If you
prefer to obtain this information from an on-line computer
service, you can do so by using the ticker symbol "NICSX" or
cusip number 653735100.
INVESTMENT ADVISER
NICHOLAS COMPANY, INC.
Milwaukee, Wisconsin
414-272-6133 or 800-227-5987
TRANSFER AGENT CUSTODIAN
FIRSTAR MUTUAL FUND SERVICES, LLC FIRSTAR BANK MILWAUKEE, N.A.
Milwaukee, Wisconsin Milwaukee, Wisconsin
414-276-0535 or 800-544-6547
INDEPENDENT PUBLIC ACCOUNTANTS COUNSEL
ARTHUR ANDERSEN LLP DAVIS & KUELTHAU, S.C.
Milwaukee, Wisconsin Milwaukee, Wisconsin
NO LOAD - NO SALES CHARGE
NICHOLAS FUND, INC.
700 NORTH WATER STREET
SUITE 1010
MILWAUKEE, WISCONSIN 53202
www.nicholasfunds.com
INVESTMENT COMPANY ACT FILE NO. 2-30447
NICHOLAS FUND, INC.
FORM N-1A
PART B: STATEMENT OF ADDITIONAL INFORMATION
NICHOLAS FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
700 North Water Street, Suite 1010
Milwaukee, Wisconsin 53202
414-272-6133
800-227-5987
This Statement of Additional Information, which is not a
prospectus and contains information in addition to and more
detailed than that set forth in the current Prospectus of
Nicholas Fund, Inc. ("the Fund"), dated July 30, 1999. It is
intended to provide you with additional information regarding the
activities and operations of the Fund, and should be read in
conjunction with the Fund's current Prospectus and the Fund's
Annual Report for the fiscal year ended March 31,1999, which is
incorporated herein by reference, as they may be revised from
time to time. The Fund's Prospectus provides the basic
information you should know before investing in the Fund.
To obtain a free copy of the Fund's Prospectus and Annual
Report, please write or call the Fund at the address and
telephone number set forth above.
NO LOAD FUND - NO SALES OR REDEMPTION CHARGE
Investment Adviser
NICHOLAS COMPANY, INC.
July 30, 1999
TABLE OF CONTENTS
Page
INTRODUCTION............................................. -
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT
STRATEGIES............................................ -
INVESTMENT RESTRICTIONS.................................. -
INVESTMENT RISKS......................................... -
THE FUND'S INVESTMENT ADVISER............................ -
MANAGEMENT-DIRECTORS AND EXECUTIVE OFFICERS AND
PORTFOLIO MANAGER OF THE FUND........................ -
PRINCIPAL SHAREHOLDERS................................... -
PRICING OF FUND SHARES................................... -
PURCHASE OF FUND SHARES.................................. -
REDEMPTION OF FUND SHARES................................ -
SIGNATURE GUARANTEES..................................... -
EXCHANGE BETWEEN NICHOLAS FAMILY OF FUNDS................ -
TRANSFER OF FUND SHARES.................................. -
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAX STATUS.......... -
DIVIDEND AND DISTRIBUTION REINVESTMENT PLAN.............. -
SYSTEMATIC WITHDRAWAL PLAN............................... -
INDIVIDUAL RETIREMENT ACCOUNTS........................... -
MASTER RETIREMENT PLAN................................... -
BROKERAGE................................................ -
PERFORMANCE DATA......................................... -
CAPITAL STRUCTURE........................................ -
STOCK CERTIFICATES....................................... -
ANNUAL MEETING........................................... -
SHAREHOLDER REPORTS...................................... -
CUSTODIAN AND TRANSFER AGENT............................. -
COUNSEL AND AUDITORS..................................... -
FINANCIAL INFORMATION.................................... -
INTRODUCTION
Nicholas Fund, Inc. (the "Fund") was incorporated under the
laws of Maryland on July 10, 1968. The Fund is an open-end,
diversified management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act").
This type of investment company is commonly called a mutual fund.
As an open-end investment company, it obtains its assets by
continuously selling shares of its common stock, $.50 par value,
to the public. Proceeds from such sales are invested by the Fund
in securities of other companies. In this manner, the resources
of many investors are combined and each individual investor has
an interest in every one of the securities owned by the Fund.
The Fund provides each individual investor with diversification
by investing in the securities of many different companies in a
variety of industries and furnishes experienced management to
select and watch over its investments. As an open-end investment
company, the Fund will redeem any of its outstanding shares on
demand of the owner at their net asset value next determined
following receipt of the redemption request. The investment
adviser to the Fund is Nicholas Company, Inc. (the "Adviser").
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
The Fund's main goal is increased share value over the long-
term. It strives to meet its goal by investing primarily in a
diversified portfolio of equity securities of large- and medium-
sized U.S. companies, which it believes, have growth potential.
The Fund believes a company's annual sales volume and market
capitalization (the number of shares outstanding multiplied by
the per share price) are the factors most illustrative of a
company's size. To determine company size in terms of sales
volume, the Fund compares a company's sales volume to peer
companies in the company's industry. In terms of market
capitalization, the Fund uses the following standard:
MARKET CAPITALIZATION
---------------------
Small....................... 0 to $2.0 Billion
Medium...................... $2.0 Billion to $7.5 Billion
Large....................... Over $7.5 Billion
To pursue the Fund's goal it may also, to a lesser extent,
invest in companies with small capitalizations. The Fund's
investment philosophy is basically a long-term growth philosophy,
based upon the assumption that if a company achieves superior
growth in sales and earnings, eventually the company's stock will
achieve superior performance.
The Fund looks for established companies with the potential
for superior growth in sales and earnings. These are companies
that are well positioned to take advantage of emerging, long-term
social and economic trends, and have ample financial resources to
sustain their growth. The Fund considers a number of factors in
assessing a company's value, including:
* a company's strategic position in its industry
* sales and earnings growth
* product development
* quality of management
* overall business prospects
* a company's price to earnings ratio
(including an analysis of such ratio in relation
to the company's growth rate and industry trends)
Income is not a significant factor in selecting the Fund's
investments. The Fund does not have a pre-set asset allocation
strategy which requires that it maintain a specific percentage of
its assets in equity-related securities (i.e., stocks) and income-
related securities (i.e., bonds). In addition, there is no
minimum or maximum percentage of the Fund's assets which must be
invested in the securities of companies in any particular
industry or group of industries. But, the Fund may not invest
more than 5% of its total net assets in the securities of any one
company, and not more than 25% of the value of the Fund's total
net assets may be concentrated in companies in any particular
industry or group of industries. In addition, the Fund may not
hold more than 10% of the voting securities of any one company.
The Fund may hold an investment for any length of time, and
will buy or sell securities whenever the Fund sees an appropriate
opportunity. It does not buy stocks with a view toward a quick
sale or to obtain short-term trading profits (defined as profits
on assets held less than twelve months). The Fund may reduce or
sell investments in companies if there is an actual or perceived
deterioration in the fundamentals of a company (including the
company's financial condition or performance, management-related
problems, product-line or service-line issues, or industry
problems). The Fund also may reduce or sell investments in
companies if a company's stock price appreciates excessively in
relation to its fundamental prospects. Investments in companies
also may be sold if they fail to realize their growth potential
or if there are other more attractive opportunities elsewhere.
The Fund expects that a major portion of its portfolio will
be invested at all times in common stocks of the types of
companies, and in the manner, already described. However, the
Fund also may invest in the securities of unseasoned companies
(companies with a record of less than three years of continuous
operation) (but in no event in an aggregate amount in excess of
5% of the Fund's total assets), debt securities and preferred
stock convertible into common stock, securities of other
investment companies (up to 5% of the Fund's total assets) and
securities offered in private placements. The Fund also may
invest in certain higher-risk securities and engage in other
investment practices.
For liquidity or flexibility, the Fund may also invest in
cash, investment grade and non-investment grade fixed income
securities, and repurchase agreements. Cash and cash equivalent
securities will be retained by the Fund in an amount sufficient
to provide moderate liquid reserves so that the Fund has
sufficient cash to meet shareholder redemption requests and other
operating expenses. The Fund usually will not invest more than
5% of its total assets (at the time of purchase) in non-
investment grade fixed-income securities.
As a temporary defensive tactic because of adverse market,
economic, political or other conditions, the Fund also may invest
in cash, investment grade and non-investment fixed income
securities and repurchase agreements. During any period in which
the Fund maintains such a temporary defensive position, it may
not achieve its investment objective.
INVESTMENT RESTRICTIONS WHICH MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL
The Fund's Board of Director's may change the following
investment restrictions without shareholder approval:
* No investments are permitted in any securities issued by a
company if one or more directors or shareholders or other
affiliated persons of its investment adviser beneficially own
more than one-half of one percent (0.5%) of such company's stock
or other securities, and all of the foregoing persons owning more
than one-half of one percent (0.5%) together own more than 5% of
such companies stock or security
* Not more than 5% of its total net assets may be invested in
equity securities which are not readily marketable and in
securities of companies which have a record of less than three
years' continuous operation
* No investments are permitted in interests in oil, gas or
other mineral exploration programs (but investments in interests
in oil, gas or other mineral activities are permitted)
* No investments are permitted in puts, calls, straddles,
spreads or any combination thereof
* Not more than 1% of its total net assets may be invested in
restricted securities.
* No purchase of securities of any company are permitted if,
as a result of such purchase, the Fund would hold more than 10%
of all classes of the securities of such company
* No investments are permitted in warrants, valued at the
lower of cost or market, which exceed 5% of the value of the
Fund's net assets. Included within that amount, but not to
exceed 2% of the value of the Fund's net assets, may be warrants
which are not listed on the New York or American Stock Exchange.
Warrants acquired by the Fund in units or attached to securities
may be deemed to be without value
The Board will give advance notice to shareholders of any
change to these investment restrictions by filing with the SEC an
amended Statement of Additional Information.
All percentage limitations apply on the date of investment
by the Fund. Thus, if an investment satisfies a percentage
restriction when it's made, no violation of that restriction is
created by changes afterwards in the market value of the
investment or the total assets of the Fund.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions, which are
matters of fundamental policy and cannot be changed without the
approval of the holders of a majority of its outstanding shares
or, if it is less, 67% of the shares represented at a meeting of
shareholders at which 50% or more of the holders are represented
in person or by proxy:
1. The Fund will not purchase securities on margin,
participate in a joint trading account, sell securities short, or
act as an underwriter or distributor of securities other than its
own capital stock. The Fund will not lend money, except for:
(a) the purchase of a portion of an issue of publicly
distributed debt securities;
(b) the purchase of debt securities issued by the U.S.
Treasury or by other federal agencies, instrumentalities or
corporations with a simultaneous resale of such securities
to the seller for later delivery (on an agreed upon later
date or indefinitely), in an amount not to exceed 20% of the
total net assets, taken at market, of the Fund; provided,
however, that repurchase agreements maturing in more than
seven (7) days will not constitute more than 10% of the
total net assets, taken at market; and
(c) the purchase of a portion of bonds, debentures or
other debt securities of types commonly distributed
privately to financial institutions in an amount not to
exceed 10% of the Fund's total net assets, taken at market.
2. The Fund will not purchase or sell real estate or
interests in real estate, commodities or commodity futures. The
Fund may invest in the securities of real estate investment
trusts, but not more than 10% in value of the Fund's total net
assets will be so invested.
3. The Fund may make temporary bank borrowings (not in
excess of 5% of the lower of cost or market value of the Fund's
total assets) for emergency or extraordinary purposes.
4. The Fund will not pledge any of its assets.
5. Securities of other regulated investment companies will
not be purchased, except on the open market where no commission
or profits result, other than the broker's commission, or as a
part of a plan of merger, consolidation or reorganization
approved by shareholders of the Fund. No more than 5% of the
value of the Fund's total net assets will be invested in the
securities of other regulated investment companies.
6. Investments will not be made for the purpose of
exercising control or management of any company. The Fund will
not purchase securities of any issuer if, as a result of such
purchase, the Fund would hold more than 10% of the voting
securities of such issuer.
7. Not more than 5% of the Fund's total net assets, taken
at market value, will be invested in the securities of any one
issuer (excluding U.S. Government securities).
8. Not more than 25% of the Fund's total assets will be
concentrated in companies of any one industry or group of related
industries.
9. The Fund will not acquire or retain any security issued
by a company, if an officer or director of such company is an
officer or director of the Fund, or an officer or director or
shareholder or other interested person of the Adviser.
INVESTMENT RISKS
THIS SECTION CONTAINS A SUMMARY DESCRIPTION OF THE GENERAL
RISKS OF INVESTING IN THE FUND. AS WITH ANY MUTUAL FUND, THERE
CAN BE NO GUARANTEE THAT THE FUND WILL MEET ITS GOALS OR THAT YOU
WON'T LOSE MONEY ON YOUR INVESTMENT. THERE IS NO GUARANTEE THAT
THE FUND'S PERFORMANCE WILL BE POSITIVE OVER ANY PERIOD OF TIME.
Because of the following risks, you could lose money on your
investment over the short- or long-term:
MARKET RISK. The value of the Fund's investments, and
therefore, the value of your Fund shares, may go up or down.
Value changes in the Fund's investments and consequently, your
Fund shares may occur because a particular stock market is rising
or falling. Stock markets tend to run in cycles, with periods
when stock prices generally go up, known as "bull markets," and
periods when stock prices generally go down, referred to as "bear
markets." Stock prices in general may decline over short or
extended periods. Thus, there is a possibility that the value of
the Fund's investments will fall because of declines in the stock
market, regardless of the success or failure of the operations of
the Fund's portfolio companies. At other times, there are
specific factors that may adversely affect the value of a
particular investment of the Fund, which in turn may reduce the
value of the Fund's investments, and consequently, your Fund
shares.
PORTFOLIO-SPECIFIC RISK. Because the Fund invests most of
its assets in the securities of large- and medium-sized
companies, and to a lesser extent the securities of small
companies, the Fund may be subject to additional risks. Small-
to medium-sized companies often have a limited market for their
securities and limited financial resources, and are usually more
affected by changes in the economy. Securities of small- to
medium-sized companies also often fluctuate in price more than
common stocks of larger companies, such as many of those included
in the Dow Jones Industrial Average. Therefore, during the
history of the Fund, its price per share has often been somewhat
more volatile than the Dow Jones Industrial Average. If the
value of the Fund's investments in small- and medium-size
companies decrease, the value of the Fund's shares also may go
down,
SELECTION RISK. The Fund also is subject to selection risk,
which is the risk that the stocks the Fund buys will underperform
the markets or other mutual funds with similar investment
objectives and strategies.
OTHER RISKS RELATED TO CERTAIN PORTFOLIO INVESTMENTS AND
STRATEGIES. Although the Fund generally will invest in the
common stocks of large- and medium-sized companies, certain
investments the Fund may acquire and certain investment
techniques the Fund may use entail other risks:
LIQUIDITY, INFORMATION AND VALUATION RISKS OF CERTAIN
PORTFOLIO INVESTMENTS
From time to time, the Fund may acquire the securities
of unseasoned companies (i.e., companies which have a record
of less than three years continuous operation) and
securities issued in private placements (i.e., securities
not registered for purchase by and sale to the public under
the Securities Act of 1933, as amended). Securities of
unseasoned companies and securities issued in private
placements may be illiquid or volatile making it potentially
difficult or impossible to sell them at the time and at the
price the Fund would like. In addition, important
information about these types of companies, securities or
the markets in which they trade, may be inaccurate or
unavailable. Consequently, it may be difficult to value
accurately these securities as well.
These types of investments are made by the Fund when
the Adviser believes such investments offer the possibility
of capital appreciation. The Fund may not invest more than
5% of the Fund's total assets in the securities of
unseasoned companies. In addition, the Fund may not invest
more than 10% of the Fund's total assets in bonds,
debentures or other debt securities distributed in private
placements.
DEBT SECURITIES AND PREFERRED STOCK
From time to time, the Fund may acquire debt securities
and preferred stock that are convertible into or carry
rights to acquire common stock, and other debt securities,
such as those selling at substantial discounts.
Debt securities, such as bonds, involve credit risk,
which is the risk that the borrower will not make timely
payments of principal and interest. Debt securities also
are subject to interest rate risk, which is the risk that
the value of the security may fall when interest rates rise.
In general, the market price of debt securities with longer
maturities will go up or down more in response to changes in
interest rates than shorter term securities. The Fund is
not limited as to the maturities of the debt securities in
which it invests.
The value of preferred stock and debt securities
convertible into common stock generally is affected by its
stated dividend rate or interest rate, as applicable, and
the value of the underlying common stock. Because of the
conversion feature, the dividend rate or interest rate on
convertible preferred stock or convertible debt securities
generally is less than it would have been if the security
was not convertible. Therefore, the value of convertible
preferred stock and debt securities is affected by the
factors that affect both equity securities (such as stock
market movements generally) and debt securities (such as
interest rates). Some convertible securities might require
the Fund to sell the securities back to the issuer or a
third party when it is disadvantageous to the Fund.
These types of investments are made by the Fund when
the Adviser believes they offer the possibility of
appreciation in value.
CREDIT QUALITY OF FIXED INCOME SECURITIES
The Fund may temporarily invest in investment grade
and non-investment grade fixed income securities as a
temporary defensive measure when conditions warrant.
"Investment grade fixed income securities" are fixed income
securities ranked in one of the top four debt security
rating categories of any of the nationally recognized
statistical rating organizations (`NRSROs"), or unrated but
deemed by the Adviser to be comparable in quality to
instruments so rated on the date of purchase. The Fund
usually will not invest more than 5% of its total assets in
non-investment grade fixed income securities. But, the Fund
may keep a security if its credit quality is downgraded to a
non-investment grade level after purchase.
Non-investment grade securities tend to reflect
individual corporate developments to a greater extent, tend
to be more sensitive to economic conditions and tend to have
a weaker ability to pay interest and repay principal than
higher rated securities. There aren't as many buyers for
lower rated securities as there are for higher rated
securities and they may be traded less. Consequently, there
may be market price volatility for these securities and
limited liquidity in the resale market. If the Fund invests
in non-investment grade fixed income securities, it may be
subject to greater risk of a decline in the value of its
investments.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements, but only
with a member bank of the Federal Reserve System or a
primary dealer in U.S. Government securities. Under such
agreements, the Fund buys U.S. Government securities from
the bank or primary dealer and simultaneously agrees to sell
the securities back to the bank or primary dealer at a
mutually agreed upon time and price. While the underlying
security is a U.S. Government security, the obligation of
the seller to repurchase the security is not guaranteed by
the U.S. Government. If the bank or primary dealer defaults
on its repurchase obligation or becomes insolvent, the Fund
could lose money which could reduce the its net asset value.
The Fund may not invest more than 20% of the its total
net assets, taken at market, in repurchase agreements. And
within that limit, repurchase agreements maturing in more
than seven days may not constitute more than 10% of the
Fund's total net assets, taken at market.
BORROWINGS
The Fund's exposure to market risk can increase if it
borrows. If it borrows money to make more investments than
it otherwise could or to meet redemptions, the Fund's share
price may be subject to greater fluctuation until the
borrowing is paid off. The Fund may make borrowings but
only for temporary or emergency purposes and then only in
amounts not in excess of 5% of the lower of cost or market
value of its total net assets.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
The Fund may invest up to 5% of its total assets in
securities of other investment companies. Investments in
these securities will involve duplication of advisory fees
and certain other expenses.
In view of the risks inherent in all investments in
securities, there is no assurance that the Fund's objectives will
be achieved.
THE FUND'S INVESTMENT ADVISER
Nicholas Company, Inc., located at 700 North Water Street,
Suite 1010, Milwaukee, Wisconsin 53202, is the Fund's investment
adviser. The Adviser furnishes the Fund with continuous
investment service and is responsible for overall management of
the Fund's business affairs subject to supervision of the Fund's
Board of Directors. The Adviser is the investment adviser to
five other mutual funds and to approximately 25 institutions and
individuals with substantial investment portfolios. The five
other mutual funds advisers are Nicholas Income Fund, Inc.,
Nicholas II, Inc., Nicholas Limited Edition, Inc., Nicholas Money
Market Fund, Inc., and Nicholas Equity Income Fund, Inc., with
primary investment objectives and net assets set forth below.
</TABLE>
<TABLE>
<CAPTION>
NET ASSETS AT
FUND INVESTMENT OBJECTIVE MARCH 31, 1999
---- -------------------- ------------------
<S> <C> <C>
Nicholas II, Inc. Capital appreciation; Income as
a secondary consideration $1,025,443,733
Nicholas Limited
Edition, Inc. Long-term growth $ 316,277,568
Nicholas Equity Reasonable income; Moderate
Income Fund, Inc. long-term growth as a secondary
Consideration $ 25,020,850
Nicholas Income High current income consistent
Fund, Inc. with the preservation and
conservation of capital value $ 236,867,198
Nicholas Money High level of current income as
Market Fund, Inc. as is consistent with preserving
capital and liquidity $ 166,513,123
____________
</TABLE
The annual fee paid to the Adviser is paid monthly and is
based on the average net asset value of the Fund, as determined
by valuations made at the close of each business day of the
month. The annual fee is seventy-five one hundredths of one
percent (0.75 of 1%) of the average net asset value of the Fund
up to and including $50,000,000 and sixty-five one hundredths of
one percent (0.65 of 1%) of the average net asset value in excess
of $50,000,000. For the fiscal year ended March 31, 1999, the
net asset value of the Fund was $5,619,380,197.
Under the Investment Advisory Agreement with the Fund, the
Adviser, at its own expense and without reimbursement from the
Fund, furnishes office space, office facilities and executive
officers and executive expenses (such as health insurance
premiums for executive officers). The Adviser pays all executive
expenses and pays all sales and promotional expenses of the Fund,
other than expenses incurred in complying with laws regulating
the issue or sale of securities. The Fund pays for all of its
operating expenses, including, but not limited to, the costs of
preparing and printing its registration statements required under
the Securities Act, and the 1940 Act and any amendments thereto,
the expense of registering its shares with the Securities and
Exchange Commission and in the various states, the printing and
distribution costs of prospectuses mailed to existing
shareholders and to persons making unsolicited requests for
information, the cost of stock certificates, reports to
shareholders, interest charges, taxes and legal fees and
expenses. Also included are salaries of administrative and
clerical personnel, association membership dues, auditing, tax
and accounting services, fees and expenses of any custodian or
trustees having custody of Fund assets, printing and mailing
expenses, postage and charges and expenses of dividend disbursing
agents, registrars and stock transfer agents, including the cost
of keeping all necessary shareholder records and accounts and
handling any problems related thereto.
During the fiscal years ended March 31, 1999, 1998 and 1997,
the Fund paid the Adviser an aggregate of $36,413,678,
$32,093,490 and $25,060,663, respectively, in fees.
The agreement with the Adviser is not assignable and may be
terminated by either party, without penalty, on sixty days'
notice. Otherwise, the agreement continues in effect so long as
it is approved annually by (i) the Board of Directors or by a
vote of a majority of the outstanding shares of the Fund and (ii)
in either case, by the affirmative vote of a majority of
directors who are not parties to the agreement or "interested
persons" of the Adviser or of the Fund, as defined in the 1940
Act, as amended, cast in person at a meeting called for the
purpose of voting for such approval.
Albert O. Nicholas is President and a Director of the Fund,
is Chief Executive Officer and Chairman of the Board of the
Adviser, and is a controlling person of the Adviser through his
ownership of 91% of the outstanding voting securities of the
Adviser. Thomas J. Saeger, Executive Vice-President and
Secretary of the Fund, is Executive Vice-President and Assistant
Secretary of the Adviser. David L. Johnson is Executive
Vice-President of the Fund and Executive Vice-President of the
Adviser. He is a brother-in-law of Albert O. Nicholas. David O.
Nicholas is a Senior Vice-President of the Fund and President,
Chief Investment Officer and a Director of the Adviser. Lynn S.
Nicholas is Senior Vice-President of the Fund and Senior Vice-
President of the Adviser. David O. Nicholas and Lynn S. Nicholas
are the son and daughter, respectively, of Albert O. Nicholas.
Candace L. Lesak is Vice-President of the Fund, and is an
employee of the Adviser. Jeffrey T. May is a Senior Vice-
President and Treasurer of the Fund and Senior Vice-President and
Treasurer of the Adviser. David E. Leichtfuss, 100 East
Wisconsin Avenue, Milwaukee, Wisconsin is a Director and the
Secretary of the Adviser. Tracy C. Eberlein is an Assistant Vice
President of the Fund and employee of the Adviser. Mark J. Giese
is a Vice-President of the Fund and a Vice-President of the
Adviser. Mr. Leichtfuss is a partner with the law firm of
Michael, Best & Friedrich, Milwaukee, Wisconsin. Daniel J.
Nicholas, 2618 Harlem Boulevard, Rockford, Illinois is the only
other Director of the Adviser. Daniel J. Nicholas, a brother of
Albert O. Nicholas, is a private investor.
MANAGEMENT - DIRECTORS AND EXECUTIVE OFFICERS OF THE FUND
The overall operations of the Fund are conducted by the
officers of the Fund under the control and direction of its Board
of Directors. The Board of Directors governs the Fund and is
responsible for protecting the interests of shareholders. The
Board of Directors consists of individuals who meet periodically
throughout the year to oversee the Fund's activities and review
the Fund's performance. The following table sets forth the
pertinent information about the Fund's officers and directors as
of July 30, 1999:
Name, Age and Positions Principal Occupations
Address Held During Past
with Fund Five Years
- ------------------- ------------- -------------------------
* Albert O. President, Chief Executive Officer
Nicholas, 68 Director and Chairman of the
700 North Water and Board, Nicholas Company,
Street Co- Inc., the Adviser to the
Milwaukee, WI 53202 Portfolio Fund. He has been
Manager Portfolio Manager (Co-
Portfolio Manager, in the
case of the Fund, since
November, 1996) for, and
primarily responsible
for, the day-to-day
management of the
portfolios of the Fund,
Nicholas Equity Income
Fund, Inc. and Nicholas
Income Fund, Inc. since
the Adviser has served as
investment adviser for
such funds. He was the
Portfolio Manager for
Nicholas II, Inc. and
Nicholas Limited Edition,
Inc. from the date of
each such fund's
inception until March
1993. He is a Chartered
Financial Analyst.
Melvin L. Schultz, 66 Director Director and Management
3636 North 124th Street Consultant, Professional
Wauwatosa, WI 53222 Management of Milwaukee,
Inc. He is a Certified
Professional Business
Consultant and provides
financial advice to
members of the medical
and dental professions.
Richard Seaman, 73 Director Management Consultant, on
5270 North Maple an independent basis
Lane primarily in the areas of
Nashotah, WI 53058 mergers, acquisitions and
strategic planning.
Robert H. Bock, 67 Director Professor, University of
102 Commerce Wisconsin School of
1155 Observatory Business, Madison,
Drive Wisconsin. From 1973 to
Madison, WI 53706 1984 he was the Dean of
the School of Business at
the University of
Wisconsin.
David L. Johnson, 57 Executive Executive Vice-President,
700 North Water Vice- Nicholas Company, Inc.,
Street President the Adviser to the Fund,
Milwaukee, WI 53202 since 1980. He is a
Chartered Financial
Analyst.
Thomas J. Saeger, 55 Executive Executive Vice-President
700 North Water Vice- and Assistant Secretary,
Street President, Nicholas Company, Inc.,
Milwaukee, WI 53202 Secretary the Adviser to the Fund,
since 1969. He is a
Certified Public
Accountant.
Lynn S. Nicholas, 43 Senior Senior Vice-President,
700 North Water Vice- Nicholas Company, Inc.,
Street President the Adviser to the Fund,
Milwaukee, WI 53202 and employed by the
Adviser since 1983. She
is a Chartered Financial
Analyst.
David O. Nicholas, 38 Senior President, Chief
700 North Water Street Vice- Investment Officer and
Milwaukee, WI 53202 President, Director, Nicholas
Co- Company, Inc., the
Portfolio Adviser to the Fund and
Manager employed by the Adviser
since 1985. He has been
Portfolio Manager for,
and primarily responsible
for, the day-to-day
management of the
portfolios of Nicholas
II, Inc. and Nicholas
Limited Edition, Inc.
since March, 1993, and Co-
Portfolio Manager of the
Fund since November,
1996. He is a Chartered
Financial Analyst.
Jeffrey T. May, 43 Senior Senior Vice-President and
700 North Water Vice- Treasurer of Nicholas
Street President, Company, Inc., the
Milwaukee, WI 53202 Treasurer Adviser to the Fund and
employed by the Adviser
since 1987. He is a
Certified Public
Accountant.
Candace L. Lesak, 41 Vice- Employee of Nicholas
700 North Water President Company, Inc., the
Street Adviser to the Fund,
Milwaukee, WI 53202 since 1983. She is a
Certified Financial
Planner.
Tracy C. Eberlein, 38 Assistant Employee of Nicholas
700 N Water Street Vice- Company, Inc., the
Milwaukee, WI 53202 President Adviser to the Fund,
since 1985. She is a
Certified Financial
Planner.
Mark J. Giese, 28 Vice- Vice-President of
700 North Water Street President Nicholas Company, Inc.,
Milwaukee, WI 53202 the Adviser to the Fund,
and an employee of the
Adviser since 1994. He
is a Certified Public
Accountant and a
Chartered Financial
Analyst.
* Albert O. Nicholas is the only director of the Fund who is
an "interested person" in the Adviser, as that term is
defined in the Investment Company Act of 1940, as amended.
Albert O. Nicholas is Chief Executive Officer and a director
of the Adviser and owns 91% of the outstanding voting
securities of the Adviser.
Reference is made to the Section "The Fund's Investment
Adviser" for a description of the relationships of the officers
of the Fund to the Adviser and the family relationships between
directors of the Adviser and officers and directors of the Fund.
The aggregate remuneration paid by the Fund during fiscal
year 1999 to all Fund directors as a group amounted to $15,186.
No renumeration is paid to officers and directors of the Fund who
are "interested persons" of the Adviser.
The table below sets forth the aggregate compensation
received by all directors of the Fund during the fiscal year
ended March 31, 1999. No officers of the Fund receive any
compensation from the Fund, but rather, are compensated by the
Adviser in accordance with its Investment Advisory Agreement with
the Fund.
</TABLE>
<TABLE>
<CAPTION>
Aggregate Pension or Retirement Estimated Total Compensation
Compensation Benefits Accrued As Annual Benefits From Fund and Fund
Name and Position From the Fund Part of Fund Expenses Upon Retirement Complex Paid to Directors
- ------------------ ------------- --------------------- --------------- -------------------------
<S> <C> <C> <C> <C>
Albert O. Nicholas(2) $0 $0 $0 $0
Melvin L. Schultz(2) $5,000 $0 $0 $21,200
Richard Seaman(2) $5,000 $0 $0 $11,200
Robert H. Bock(2) $5,186 $0 $0 $11,386
</TABLE>
(1) During the fiscal year ended March 31, 1999, the Fund and
other funds in the Nicholas Fund Complex (i.e., those funds
which also have Nicholas Company, Inc. as its investment
adviser, namely Nicholas Equity Income Fund, Inc., Nicholas
II, Inc., Nicholas Limited Edition, Inc., Nicholas Income
Fund, Inc. and Nicholas Money Market Fund, Inc.) compensated
those directors who are not "interested persons" of the
Adviser in the form of an annual retainer per director per
fund and meeting attendance fees. During the fiscal year
ended March 31, 1999, the Fund compensated the disinterested
directors at a rate of $500 per director per meeting
attended and an annual retainer of $3,000 per director.
Except for reimbursement of out-of-pocket expenses, the
disinterested directors did not receive any other form or
amount of compensation from the Fund Complex during the
fiscal year ended March 31, 1999. All other directors and
officers of the Fund were compensated by the Adviser in
accordance with its Investment Advisory Agreement.
(2) Messrs. Albert O. Nicholas and Melvin L. Schultz are also
members of the Board of Directors of Nicholas Equity Income Fund,
Inc., Nicholas II, Inc., Nicholas Limited Edition, Inc., Nicholas
Income Fund, Inc. and Nicholas Money Market Fund, Inc Messrs.
Richard Seaman and Robert H. Bock are also members of the Board
of Directors of Nicholas Equity Income Fund, Inc. and Nicholas
II, Inc.
(3)
PRINCIPAL SHAREHOLDERS
All directors and executive officers of the Fund, as a group
(12 persons), beneficially own less than 1% of the outstanding
shares of the Fund.
PRICING OF FUND SHARES
When you buy shares of the Fund, the price per share you pay
is the net asset value ("NAV") per share of the Fund. The NAV of
a share of the Fund is determined by dividing the total value in
U.S. dollars of the Fund's total net assets by the total number
of shares outstanding at that time. Net assets of the Fund are
determined by deducting the liabilities of the Fund from the
total assets of the Fund. The NAV is determined as of the close
of trading on the New York Stock Exchange ("NYSE") on each day
the NYSE is open for unrestricted trading. The NYSE is open for
trading Monday through Friday except New Year's Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Martin Luther King Day, Thanksgiving Day and Christmas Day.
Additionally, if any of the aforementioned holidays falls on a
Saturday, the NYSE will not be open for trading on the preceding
Friday, and when any such holiday falls on a Sunday, the NYSE
will not be open for trading on the succeeding Monday, unless
unusual business conditions exist (such as the ending of a
monthly or yearly accounting period).
Equity securities traded on a stock exchange will ordinarily
be valued on the basis of the last sale price on the date of
valuation, or in the absence of any sale on that day, the closing
bid price. Most debt securities, excluding short-term
investments, are valued at the current evaluated bid price.
Securities for which there are no readily available market
quotations and other assets and liabilities of the Fund will be
valued at their then current fair value using methods determined
in good faith by the Board of Directors
PURCHASE OF FUND SHARES
MINIMUM INVESTMENTS. The minimum initial purchase is $500
and the minimum for any subsequent purchase is $100, except in
the case of reinvested dividends. The Automatic Investment Plan
has a minimum monthly investment of $50. Due to fixed expenses
incurred by the Fund in maintaining individual accounts, the Fund
reserves the right to redeem accounts that fall below the $500
minimum due to shareholder redemption (but not solely due to a
decrease in net asset value of the Fund). In order to exercise
this right, the Fund will give 30 days advance written notice to
the owners of accounts below such minimum.
APPLICATION INFORMATION. Applications for the purchase of
shares are made to Nicholas Fund, Inc., c/o Firstar Mutual Fund
Services, LLC ("Firstar"), P.O. Box 2944, Milwaukee, Wisconsin
53201-2944. The Firstar Trust Company acts as transfer agent and
custodian for the Fund. The Fund also has available an Automatic
Investment Plan for shareholders. You should contact the Fund
for additional information.
When you make a purchase, your purchase price per share will
be the NAV per share next determined after the time the Fund
receives the application is received in proper order. The
determination of NAV for a particular day is applicable to all
applications for the purchase of shares received by the close of
trading on the NYSE on that day (usually 4:00 p.m. New York
time).
* Applications to purchase Fund shares received in proper
order on a day the NYSE is open for trading, prior to the close
of trading on that day, will be based on the NAV as of the close
of trading on that day.
* Applications to purchase Fund shares received in proper
order after the close of trading on the NYSE will be based on the
NAV as determined as of the close of trading on the next day the
NYSE is open.
Purchase of shares will be made in full and fractional shares
computed to three decimal places.
You should be aware that DEPOSIT in the U.S. mail or with
other independent delivery services, or receipt at Firstar's Post
Office Box, of purchase applications DOES NOT constitute receipt
by Firstar or the Fund. DO NOT mail letters by overnight courier
to the Post Office Box address. OVERNIGHT COURIER DELIVERY
SHOULD BE SENT TO FIRSTAR MUTUAL FUND SERVICES, LLC, THIRD FLOOR,
615 EAST MICHIGAN STREET, MILWAUKEE, WISCONSIN 53202.
Your application to purchase Fund shares must be in proper
order to be accepted, may only be accepted by the Fund or an
authorized agent of the Fund and is not binding until accepted.
Applications must be accompanied by payment in U.S. funds. Your
payment check should be drawn on a U.S. bank, savings and loan or
credit union. Checks are accepted subject to collection at full
face value in U.S. funds. The transfer agent will charge a $20
fee against your account, in addition to any loss sustained by
the Fund, if any payment check is returned to the transfer agent
for insufficient funds. The Fund will not accept applications
under circumstances or in amounts considered disadvantageous to
shareholders. If you open an account (including custodial
accounts) without a proper social security number or tax
identification number, it may be liquidated. Proceeds will be
distributed on the first business day following the sixtieth
(60th) day of investment, net of the backup withholding tax
amount.
WIRE PAYMENTS. You also may purchase Fund shares via the
Federal Reserve wire system, please call Firstar (414-276-0535 or
800-544-6547) with the appropriate account information prior to
sending the wire. Firstar will provide you with a confirmation
number for the wire purchase which will ensure the prompt and
accurate handling of funds. To purchase shares of the Fund by
federal wire transfer, instruct your bank to use the following
instructions:
Wire To: Firstar Bank Milwaukee, N.A.
ABA 075000022
Credit: Firstar Mutual Fund Services, LLC
Account 112-952-137
Further Credit: Nicholas Fund, Inc.
(shareholder account number)
(shareholder registration)
The Fund and its transfer agent are not responsible for the
consequences of delays resulting from the banking or Federal
Reserve wire system, or from incomplete wiring instructions.
CERTIFICATES. The Fund won't issue certificates
representing Fund shares purchased unless the shareholder
specifically requests certificates in writing. Signature
guarantees may be required. Certificates are mailed to
requesting shareholders approximately two weeks after receipt of
the request by the Fund. The Fund won't issue certificates for
fractional shares even if requested. Where certificates are not
requested, the Fund's transfer agent, Firstar, will credit the
shareholder's account with the number of shares purchased.
Written confirmations are issued for all purchases of Fund
shares.
THIRD PARTY PURCHASES - USE OF A PROCESSING INTERMEDIARY TO
PURCHASE FUNDS SHARES. You can purchases share of the Fund
through certain broker-dealers, financial institutions or other
service providers ("Processing Intermediaries"). If you do, the
Processing Intermediary, rather than you, may be the shareholder
of record of the shares. Certain service providers may receive
compensation from the Fund for providing transfer agent type
services relating to the accounts held in street name.
Processing Intermediaries may use procedures and impose
restrictions in addition to or different from those applicable to
shareholders who invest in the Fund directly. You should read
the program materials provided by the Processing Intermediary in
conjunction with this Statement of Additional Information before
you invest in the Fund this way.
Processing Intermediaries may charge fees or other charges
for the services they provide to their customers. Such charges
may vary among Processing Intermediaries, but in all cases will
be retained by the Processing Intermediary and not remitted to
the Fund or the Adviser.
The Fund may also enter into an arrangement with some
Processing Intermediaries which authorizes them to process
purchase orders on behalf of the Fund on an expedited basis (an
"Authorized Agent"). Receipt of a purchase order by an
Authorized Agent will be deemed to be received by the Fund for
purposes of determining the NAV of the Fund shares to be
purchased. If you place a purchase order through an Authorized
Agent, you will pay the Fund's NAV per share next computed after
the receipt by the Authorized Agent of such purchase order, plus
any applicable transaction charge imposed by the agent.
Of course you don't have to use the services of a Processing
Intermediary, or pay the fees that may be charged for such
services. You can invest directly with the Fund without a sales
charge.
REDEMPTION OF FUND SHARES
REDEMPTION PRICE. You may redeem all or part of your Fund
shares by any of the following methods. All redemptions will be
processed immediately upon receipt and written confirmations will
be issued for all redemptions of Fund shares. The redemption
price will be the Fund's NAV next computed after the time of
receipt by Firstar (or by an authorized agent of the Fund) of the
certificate(s), or written request in the proper order as
described below, or pursuant to proper telephone instructions as
described below.
* Requests for redemption of Fund shares received in proper
order on a day the NYSE is open for trading, prior to the close
of trading on that day, will be based on the NAV as of the close
of trading on that day.
* Requests for redemption of Fund shares received in proper
order after the close of trading on the NYSE will be based on the
NAV as determined as of the close of trading on the next day the
NYSE is open.
THE FUND WILL RETURN AND NOT PROCESS REDEMPTION REQUESTS
THAT CONTAIN RESTRICTIONS AS TO THE TIME OR DATE REDEMPTIONS ARE
TO BE EFFECTED.
If any of the shares you want redeemed were made recently by
personal or certified check, the Fund reserves the right to hold
payment up to 15 days or until notified that investments made by
check have been collected, at which time your redemption request
will be processed and payment made.
WRITTEN REDEMPTIONS. If you redeem in writing, be sure that
the redemption request is signed by each shareholder, in the
exact manner as the Fund account is registered and include the
redemption amount and identifies the shareholder account number.
IF YOU HAVE CERTIFICATES FOR YOUR SHARES, you may redeem
them by delivering to the Fund, c/o Firstar Mutual Fund Services,
LLC, P.O. Box 2944, Milwaukee, Wisconsin 53201-2944, the
certificate(s) for the full shares. The certificate(s) must be
properly endorsed or accompanied by instrument of transfer, in
either case, with signatures guaranteed by an "eligible financial
institution," which is a bank, a savings and loan association, a
credit union or by a member firm of a national securities
exchange. A notary public is not an acceptable guarantor.
IF YOU DON'T HAVE CERTIFICATES FOR YOUR SHARES, you may
redeem by delivering an original signed written request for
redemption addressed to Nicholas Fund, Inc., c/o Firstar Mutual
Fund Services LLC, P.O. Box 2944, Milwaukee, Wisconsin 53201-
2944. If the account registration is individual, joint tenants,
sole proprietorship, custodial (Uniform Transfers to Minors Act),
or general partners the written request must be signed exactly as
the account is registered. If the account is owned jointly, all
owners must sign.
YOU MAY NOT FAX YOUR REDEMPTION REQUEST.
The Fund may require additional supporting documents for
written redemptions made by corporations, executors,
administrators, trustees and guardians. If the account is
registered in the name of a corporation or association, the
written request must be accompanied by a corporate resolution
signed by the authorized person(s). A redemption request for
accounts registered in the name of a legal trust must be
accompanied by the trust agreement and signed by the trustee(s).
If the trustee's(s') name is not registered on the account, a
copy of the trust document certified within the last 60 days is
required.
IF YOU ARE UNCERTAIN ABOUT WHAT DOCUMENTS OR INSTRUCTIONS
ARE NECESSARY IN ORDER TO REDEEM SHARES IN WRITING, PLEASE WRITE
OR CALL FIRSTAR ( 414-276-0535 OR 800-544-6547), PRIOR TO
SUBMITTING A WRITTEN REDEMPTION REQUEST. A WRITTEN REDEMPTION
REQUEST WILL NOT BECOME EFFECTIVE UNTIL ALL DOCUMENTS HAVE BEEN
RECEIVED IN PROPER ORDER BY FIRSTAR..
If you have an individual retirement account ("IRA") or
other retirement plan, you must indicate on your written
redemption requests whether or not to withhold federal income
tax. Redemption requests lacking an election not to have federal
income tax withheld will be subject to withholding. Please
consult your current Disclosure Statement for any applicable
fees.
You should be aware that DEPOSIT in the mail or with other
independent delivery services or receipt at Firstar's Post Office
Box of redemption requests DOES NOT constitute receipt by Firstar
or the Fund. DO NOT mail letters by overnight courier to the
Post Office Box address. OVERNIGHT COURIER DELIVERY SHOULD BE
SENT TO FIRSTAR MUTUAL FUNDS SERVICES, LLC, THIRD FLOOR, 615 EAST
MICHIGAN STREET, MILWAUKEE, WISCONSIN 53202.
TELEPHONE REDEMPTIONS. You can redeem your shares by
telephone unless you declined this option in writing. This
option does not apply to IRA accounts and master retirement plans
for which Firstar Bank Milwaukee, N.A. acts as custodian.
Telephone redemptions can only be made by calling Firstar 414-
276-0535 or 800-544-6547. In addition to account registration
information, shareholders will be required to provide the account
number and social security number. Telephone calls will be
recorded.
Telephone redemption requests must be received prior to the
closing of the NYSE (usually 4:00 p.m., New York time) to receive
that day's NAV. During periods of substantial economic or market
changes, you may have difficulty making a redemption by
telephone. If you are unable to contact Firstar by telephone,
you may redeem your shares by delivering the redemption request
in person or by mail. The maximum telephone redemption is
$50,000 per account/per business day. The maximum telephone
redemption for related accounts is $100,000 per business day.
The minimum telephone redemption is $500 except when redeeming an
account in full.
The Fund reserves the right to refuse a telephone redemption
if it is believed advisable to do so. Procedures for redeeming
Fund shares by telephone may be modified or terminated at any
time by the Fund or Firstar. Neither the Fund nor Firstar will
be responsible for the authenticity of redemption instructions
received by telephone which they reasonably believe to be
genuine. The Fund and Firstar will employ reasonable procedures
to confirm that instructions received by telephone are genuine,
and if they do not, they may be liable for losses due to
unauthorized or fraudulent instructions.
EFFECT OF REDEMPTION. For federal income tax purposes, a
redemption generally is treated as sale of the shares being
redeemed. You may recognize capital gain or loss equal to the
difference between the redemption price and your cost basis for
the shares being redeemed. See "Dividends, Distributions and
Federal Tax Status" for further tax information.
The Fund ordinarily pays for redeemed shares within seven
days after receipt of a request in proper order, except as
provided by the rules of the Securities and Exchange Commission.
Redemption proceeds to be wired also ordinarily will be wired
within seven days after receipt of the request, and normally will
be wired on the next business day after a net asset value is
determined. The Fund reserves the right to hold payment up to 15
days or until satisfied that investments made by check have been
collected.
You may instruct Firstar to mail the proceeds to the address
of record or to directly mail the proceeds to a pre-authorized
bank account. The proceeds may also be wired to a pre-authorized
account at a commercial bank in the United States. Firstar
charges a wire redemption fee of $12.00. Please contact the Fund
for the appropriate form if you are interested in setting your
account up with wiring instructions.
The right of redemption may be suspended and the date of
payment postponed for more than seven days for any period during
which the New York Stock Exchange is closed other than the
customary weekend and holiday closings, and may be suspended for
any period during which trading on the Exchange is restricted as
determined by the Securities and Exchange Commission, or the
Commission has by order permitted such suspension, or the
Commission has determined that an emergency exists as a result of
which it is not reasonably practicable for the Fund to dispose of
its securities or to determine fairly the value of its net
assets.
SIGNATURE GUARANTEES: A signature guarantee of each owner
is required to redeem shares in the following situations, for all
size transactions:
* if you change the ownership on your account
* upon redemption of shares when certificates have been
issued for your account
* when you want the redemption proceeds sent to a different
address than is registered on the account
* for both certificated and uncertificated shares, if the
proceeds are to be made payable to someone other than the account
owner(s)
* any redemption proceeds transmitted by federal wire
transfer to your bank not previously set up with the Fund
* if a change of address request has been received by the
Fund or Firstar Trust Company within the last 15 days.
In addition, you must have your signature guaranteed if you
request redemption of $100,000 or more from your account. Your
redemption will not be processed until the signature guarantee is
received in proper order. A notary public is not an acceptable
guarantor.
THIRD PARTY REDEMPTIONS -
USE OF A PROCESSING INTERMEDIARY TO REDEEM FUND SHARES.
As with the purchase of Fund shares, you may redeem shares
of the Fund through certain broker-dealers, financial
institutions and other service providers ("Processing
Intermediaries"). You should read the program materials provided
by the Processing Intermediary before you redeem your shares of
the Fund this way. Then follow those instructions and
procedures.
Processing Intermediaries may charge fees or other charges
for the services they provide to their customers. Such charges
vary among Processing Intermediaries, but in all cases will be
retained by the Processing Intermediary and not remitted to the
Fund or the Adviser.
The Fund also may enter into an arrangement with some
Processing Intermediaries authorizing them to process redemption
requests on behalf of the Fund on an expedited basis (an
"Authorized Agent"). Receipt of a redemption request by an
Authorized Agent will be deemed to be received by the Fund for
purposes of determining the NAV of Fund shares to be redeemed.
For redemption orders placed through an Authorized Agent, you
will receive redemption proceeds which reflect the NAV per share
next computed after the receipt by the Authorized Agent of the
redemption order, less any redemption fees imposed by the
Authorized Agent.
You don't have to use the services of a Processing
Intermediary, or pay the fees that may be charged for such
services, unless you hold Fund shares through a Processing
Intermediary. Then you must redeem your shares through such
Processing Intermediary. In such event, you should contact the
Processing Intermediary for instructions on how to redeem.
Otherwise if you originally invested directly with the Fund, you
can redeem Fund shares directly through the Fund without a
redemption charge.
EXCHANGE BETWEEN NICHOLAS FAMILY OF FUNDS
Shares of the Fund which have been outstanding at least 15
days may be exchanged for shares of other mutual funds for which
the Nicholas Company, Inc. serves as the investment adviser.
Nicholas Company, Inc. is also the investment adviser to the
following funds which have investment objectives and net assets
as noted below:
<TABLE>
<CAPTION>
NET ASSETS AT
FUND INVESTMENT OBJECTIVE MARCH 31, 1999
---- -------------------- ------------------
<S> <C> <C>
Nicholas II, Inc. Capital appreciation; Income as
a secondary consideration $1,025,443,733
Nicholas Limited
Edition, Inc. Long-term growth $ 316,277,568
Nicholas Equity Reasonable income; Moderate
Income Fund, Inc. long-term growth as a secondary
Consideration $ 25,020,850
Nicholas Income High current income consistent
Fund, Inc. with the preservation and
conservation of capital value $ 236,867,198
Nicholas Money High level of current income as
Market Fund, Inc. as is consistent with preserving
capital and liquidity $ 166,513,123
____________
</TABLE
If you choose to exercise the exchange privilege, your
shares will be exchanged at their next determined NAV. If you
exercise an exchange into the Nicholas Money Market Fund, Inc. on
a day when the NYSE is open for trading but the Federal Reserve
Banks are closed, your shares of the Fund will be redeemed on the
day upon which the exchange request is received; however,
issuance of your Nicholas Money Market Fund, Inc. shares will be
delayed one business day. In such a case, the exchanged amount
would not be invested for this one day period.
If you are interested in exercising the exchange privilege,
you must obtain the appropriate prospectus from Nicholas Company,
Inc.
An exchange constitutes a sale for federal tax purposes and
you may realize a capital gain or loss upon the exchange
depending upon whether the NAV at the time is more or less than
your cost basis. An exchange between the funds involving master
retirement plans and IRA accounts generally is not a taxable
transaction for federal tax purposes. See "Dividends,
Distributions and Federal Tax Status" for further tax
information.
The exchange privilege is available only in states where
shares of the fund being acquired may be legally sold and the
exchange privilege may be terminated or modified only upon 60
days' advance notice to shareholders. . Shareholders are
reminded, however, that Nicholas Limited Edition, Inc. is
restricted in size to 10 million shares, and that the exchange
privilege into that fund may be terminated or modified at a time
when the maximum is reached.
Exchange of shares can be accomplished in the following
ways:
EXCHANGE BY MAIL. If you are interested in exercising the
exchange by mail privilege you may obtain the appropriate
prospectus from Nicholas Company, Inc. Signatures required are
the same as previously explained under "Redemption of Fund
Shares."
EXCHANGE BY TELEPHONE. You may also exchange by telephone
among all Nicholas mutual funds. Only exchanges of $500 or more
will be executed using the telephone privilege. Firstar charges
a $5.00 fee for each telephone exchange. In an effort to avoid
the risks often associated with large market timers, the maximum
telephone exchange per account per day is set at $100,000 with a
maximum of $1,000,000 per day per related accounts. You are
allowed four telephone exchanges per account during any twelve
month period.
Procedures for exchanging Fund shares by telephone may be
modified or terminated at any time by the Fund or Firstar .
Neither the Fund nor Firstar will be responsible for the
authenticity of exchange instructions received by telephone.
Telephone exchanges can only be made by calling Firstar at 414-
276-0535 or 800- 544-6547. You will be required to provide
pertinent information regarding your account . Calls will be
recorded.
TRANSFER OF FUND SHARES
You may transfer shares of the Fund in instances such as the
death of a shareholder, change of account registration, change of
account ownership and in cases where shares of the Fund are
transferred as a gift. You can obtain documents and
instructions necessary to transfer Fund shares by writing or
calling Firstar (414-276-0535 or 800-544-6547) or Nicholas
Company, Inc. (414-272-6133 or 800-227-5987) prior to submitting
any transfer requests.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAX STATUS
The Fund intends to qualify annually as a "regulated
investment company" under the Internal Revenue Code of 1986 (the
"Code") and intends to take all other action required to insure
that little or no federal income or excise taxes will be payable
by the Fund. As a result, the Fund generally will seek to
distribute to its shareholders substantially all of its net
investment income and net realized capital gain in one or more
distributions for each fiscal year. However, the Code contains a
number of complex tests relating to qualification as a regulated
investment company which the Fund possibly might not meet in any
particular year. If the Fund does not qualify as a "regulated
investment company" under the Code, it would be treated for tax
purposes as an ordinary corporation, and all its taxable income
will be taxed to the Fund at corporate rates.
The Code generally imposes a 4% nondeductible excise tax on
a regulated investment company, such as the Fund, if it does not
distribute to its shareholders during the calendar year an amount
equal to 98% of the Fund's investment company income, with
certain adjustments, for such calendar year, plus 98% of the
Fund's capital gain net income for the one-year period ending on
October 31 of such calendar year. In addition, an amount equal
to any undistributed investment company taxable income or capital
gain net income from the previous calendar year must also be
distributed to avoid the excise tax. The excise tax is imposed
on the amount by which the Fund does not meet the foregoing
distribution requirements. The Fund intends to make
distributions necessary to avoid imposition of the excise tax.
For federal income tax purposes, distributions by the Fund,
whether received in cash or invested in additional shares of the
Fund, will be taxable to the Fund's shareholders, except those
shareholders that are not subject to tax on their income. The
maximum tax rate on long-term capital gains for sales of
securities held greater than twelve months is 20%. Income
distributed from the Fund's net investment income and net
realized short-term capital gains are taxable to shareholders as
ordinary income. Distributions usually will be made in May and
December of each year. The Fund will provide information to
shareholders concerning the character and federal tax treatment
of all dividends and distributions.
Dividends paid by the Fund to individual shareholders who do
not qualify for any dividends received exclusion; however,
corporate shareholders will be eligible for a dividends received
deduction, subject to a reduction for various reasons, including
the fact that the total dividends received from domestic
corporations in any one year are less than 100% of the Fund's
gross income.
At the time of purchase of Fund shares, the Fund may have
undistributed income or capital gains included in the computation
of the NAV per share. Therefore, a dividend or capital gain
distribution received shortly after such purchase by a
shareholder may be taxable to the shareholder, although it is, in
whole or in part, a return of capital and may have the effect of
reducing theNAV per share.
Under the Code, dividends declared by the Fund to
shareholders of record in December of any year will be deemed to
have been received by (and will be taxable to) shareholders as of
the record date, provided the dividend is actually paid by the
Fund before February 1 of the following year.
Under Federal law, some shareholders may be subject to a 31%
"backup withholding" on reportable dividends, capital gain
distributions (if any) and redemption payments. Generally,
shareholders subject to backup withholding will be those (i) for
whom a taxpayer identification number is not on file with the
Fund or who, to the Fund's knowledge, have furnished an incorrect
number; or (ii) who have failed to declare or underreported
certain income on their federal returns. When establishing an
account, you must certify under penalties of perjury that the
taxpayer identification number you give to the Fund is correct
and that you are not subject to backup withholding.
The foregoing tax discussion relates solely to u.s. federal
taxes and is not intended to be a complete discussion of all
federal tax consequences. You should consult with a tax adviser
concerning the federal, state and local tax aspects of an
investment in the fund.
DIVIDEND AND DISTRIBUTION REINVESTMENT PLAN
Unless you elect to accept cash in lieu of shares, all
dividends and capital gains distributions are automatically
reinvested in additional shares of the Fund through the Dividend
and Distribution Reinvestment Plan (the "Reinvestment Plan").
You may elect to accept cash on the application to purchase
shares of the Fund, by telephone, or by separate written
notification. All reinvestments are at the net asset value per
share in effect on the dividend or distribution date and are
credited to the shareholder's account in full shares and
fractional shares, if necessary. Firstar will notify you of the
number of shares purchased and the price following each
reinvestment period. As in the case of normal purchases, stock
certificates are not issued unless requested. In no instance
will a certificate be issued for a fraction of a share.
You may withdraw from or thereafter elect to participate in
the Reinvestment Plan at any time by giving written or telephonic
notice to Firstar . An election must be received by Firstar
prior to the dividend record date of any particular distribution
for the election to be effective for that distribution. If an
election to withdraw from or participate in the Reinvestment Plan
is received between a dividend record date and payment date, it
shall become effective on the day following the payment date.
The Fund may modify or terminate the Reinvestment Plan at any
time 30 days' written notice to participants.
SYSTEMATIC WITHDRAWAL PLAN
If you currently own $10,000 or more of Fund shares at the
current market value, you may open a Systematic Withdrawal Plan
(the "Plan") and receive monthly, quarterly, semiannual or annual
checks for any designated amount. Firstar reinvests all income
and capital gain dividends in shares of the Fund. You may add
shares to, withdraw shares from, or terminate the plan, at any
time. Each withdrawal may be a taxable event to the shareholder.
Liquidation of the shares in excess of distributions may deplete
or possibly use up the initial investment, particularly in the
event of a market decline, and withdrawals cannot be considered a
yield or income on the investment. In addition to termination of
the Plan by the Fund or shareholders, the Plan may be terminated
by Firstar upon written notice mailed to the shareholders.
Please contact Nicholas Company, Inc. for copies of the Plan
documents.
INDIVIDUAL RETIREMENT ACCOUNTS
Individuals who receive compensation, including earnings
from self-employment may be able to establish a traditional IRA,
a Roth IRA and/or an Education IRA. The Fund offers prototype
IRA plans for adoption by individuals who qualify. A description
of applicable service fees and application forms are available
upon request from the Fund. The IRA documents also contain a
disclosure statement which the IRS requires to be furnished to
individuals who are considering adopting an IRA. It is important
that you obtain up-to-date information from the Fund before
opening an IRA.
Qualifying individuals who have a traditional IRA may make
deductible contributions to it. Taxation of the income and
gains paid to a traditional IRA by the Fund is deferred until
distribution from the IRA.
Qualifying individuals who maintain a Roth IRA may make non-
deductible contributions to it. However, the amounts within
the Roth IRA accounts accumulate tax free and qualified
distributions will not be included in a shareholder's taxable
income. The contribution limit is $2,000 annually ($4,000 for
joint returns), in aggregate with contributions to traditional
IRAs. Certain income phaseouts apply.
Like the Roth IRA, qualifying individuals may make non-
contributions to an Education IRA, but the investment earnings
accumulate tax free, and distributions used for higher education
expenses are not taxable. Contribution limits are $500 per
account and certain income phaseouts apply.
As long as the aggregate IRA contributions meet the Fund's
minimum investment requirement of $500, the Fund will accept any
allocation of such contribution between spousal, deductible and
nondeductible accounts. The acceptability of this calculation is
the sole responsibility of the shareholder. For this reason, it
is advisable for you to consult with your personal tax adviser to
determine the deductibility of your IRA contributions.
Because a retirement program involves commitments covering
future years, it is important that the investment objectives of
the Fund be consistent with the participant's retirement
objectives. Premature withdrawals from an IRA may result in
adverse tax consequences. Consultation with a tax adviser
regarding the tax consequences is recommended.
SELF-EMPLOYED MASTER RETIREMENT PLAN
The Fund has available a master retirement plan for
self-employed individuals.. You may contact the Fund for any
additional information or if you wish to participate in the plan.
Consultation with a tax adviser regarding the tax
consequences of the plan is recommended.
BROKERAGE
The Adviser decides which securities to buy for the Fund and
when to sell them. It also selects the broker or dealer who
places the Fund's investment business and negotiates their
commissions The Adviser selects a broker or dealer to execute a
portfolio transaction on the basis that such broker or dealer
will execute the order as promptly and efficiently as possible
subject to the overriding policy of the Fund. This policy is to
obtain the best market price and reasonable execution for all its
transactions, giving due consideration to such factors as
reliability of execution and the value of research, statistical
and price quotation services provided by such broker or dealer.
The research services provided by brokers consist of
recommendations to purchase or sell specific securities, the
rendering of advice regarding events involving specific companies
and events and current conditions in specific industries, and the
rendering of advice regarding general economic conditions
affecting the stock market and the economy. The Fund and the
Adviser are not affiliated with any broker.
Purchases and sales of portfolio securities are frequently
placed, without any agreement or undertaking to do so, with
brokers and dealers who provide the Adviser with such brokerage
and research services. Section 28(e) of the Securities Exchange
Act of 1934 ("Section 28(e)") permits the Adviser, under certain
circumstances, to cause the Fund to pay a broker or dealer a
commission for effecting a transaction in recognition of the
value of the brokerage and research service provided by the
broker or dealer. Brokerage and research services include (i)
furnishing advice as to the value of securities, the advisability
of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of
securities; (ii) furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts; and (iii)
effecting securities transactions and performing functions
incidental thereto. Such commissions may be less than, equal to
or exceed the amount another broker would have charged for
effecting the transaction.
The Adviser believes it is important to its investment
decision-making process to have access to independent research.
The Adviser understands that since the brokers and dealers
rendering such services are compensated through commissions, such
services would be unilaterally reduced or eliminated by the
brokers and dealers if none of the Fund's transactions were
placed through them. While these services have value which
cannot be measured in dollars, the Adviser believes such services
do not reduce the Fund's or the Adviser's expenses. Higher
commissions may be paid by the Fund, provided (i) the Adviser
determines in good faith that the amount is reasonable in
relation to the services in terms of the particular transaction
or in terms of the Adviser's overall responsibilities with
respect to the accounts as to which it exercises investment
discretion; (ii) such payment is made in compliance with the
provisions of Section 28(e) and other applicable state and
federal law; and (iii) in the Adviser's opinion, the total
commissions paid by the Fund will be reasonable in relation to
the benefits to the Fund over the long term.
In instances where the Adviser determines that the
supplemental research and statistical services are of significant
value, it is the practice of the Adviser to place the Fund's
transactions with brokers or dealers who are paid a higher
commission than other brokers or dealers. However, commissions
paid are generally lower than those paid prior to the elimination
of fixed minimum rates in 1975 and are no higher than rates which
could be obtained from other brokers or dealers who would also
furnish comparable supplemental research and statistical
services. The Adviser utilizes research and other information
obtained from brokers and dealers in managing its other client
accounts. On the other hand, the Adviser obtains research and
information from brokers and dealers who transact trades for the
Adviser's other client accounts, which is also utilized by the
Adviser in managing the Fund's portfolio.
The following table shows the dollar amount of brokerage
commissions paid to firms by the Fund for certain research
services provided and the approximate dollar amount of the
transactions involved for the fiscal year ended March 31, 1999.
AMOUNT OF COMMISSIONS
PAID TO FIRMS THAT AMOUNT
PROVIDED RESEARCH BROKERAGE TRANSACTIONS
SERVICES(1) INVOLVED(1)
-------------------- ----------------------
The Fund $512,325 $342,366,850
(1)The provision of such research services was not
the only factor considered in the placement of all
noted business with such firms. In addition, the
amounts disclosed do not include commissions paid to
firms who provided unsolicited research services as
well as research customarily provided by brokerage
firms in the normal course of business.
The Adviser does not specifically negotiate commissions and
charges with a broker or dealer in advance of each transaction.
The approximate brokerage discount and charges are, however,
generally known to the Adviser prior to effecting the
transaction. In determining the overall reasonableness of the
commissions paid, the Adviser compares the commission rates to
those it pays on transactions for its other client accounts and
to the rates generally charged in the industry to institutional
investors such as the Fund. The commissions also are considered
in view of the value of the research, statistical and price
quotations services, if any, rendered by the broker or dealer
through whom a transaction is placed.
The Fund may effect portfolio transactions with brokers or
dealers who recommended the purchase of the Fund's shares. The
Fund may not allocate brokerage on the basis of recommendations
to purchase shares of the Fund.
Over-the-counter market purchases and sales are generally
transacted directly with principal market makers, who retain the
difference between their cost in a security and its selling
price. In some circumstances where, in the opinion of the
Adviser, better prices and executions are available elsewhere,
the transactions are placed through brokers who are paid
commissions directly.
Brokerage commissions paid by the Fund during the fiscal
year ended March 31, 1999, 1998 and 1997 totaled $3,215,976,
$2,171,882 and $1,501,852, respectively.
PERFORMANCE DATA
The Fund may quote a "total return" or an "average annual
total return" from time to time in advertisements or in
information furnished to present or prospective shareholders.
The "total return" of the Fund is expressed as a ratio of the
increase (or decrease) in value of a hypothetical investment in
the Fund at the end of a measuring period to the amount initially
invested. The "average annual total return" is determined by
discounting the "total return" for the number of time periods
represented. These values are computed according to the
following formulas:
P(1+T)n = ERV
or
Total Return = ERV - 1
---
P
Average Annual Total Return = nth root of ERV - 1
---
P
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the one, five and
ten year periods.
One Year Five Year Ten Year
-------- --------- --------
Total Return +0.13% 154.49% 350.22%
Average Annual
Total Return +0.13% 20.54% 16.24%
For purposes of these calculations, the following
assumptions are made: (1) all dividends and distributions by the
Fund are reinvested at the NAV calculated on the reinvestment
dates during the period; (2) a complete redemption at the end of
the period is made; (3) all recurring fees that are charged to
all shareholder accounts are included; and (4) the one year, five
year and ten year periods end on March 31, 1999.
These figures are computed by adding the total number of
shares purchased by a hypothetical $1,000 investment in the Fund
to all additional shares purchased within a one year period with
reinvested dividends and distributions, reducing the number of
shares by those redeemed to pay account charges, taking the value
of those shares owned at the end of the year and reducing it by
any deferred charges, and then dividing that amount by the
initial $1,000 investment. This computation does not reflect any
sales load or other nonrecurring charges, since the Fund is not
subject to such charges.
The "total return" and "average annual total return"
calculations are historical measures of performance and are not
necessarily indicative of future performance. Such measurements
will vary from time to time depending upon market conditions, the
composition of the Fund's portfolio, operating expenses, and the
distribution policy as determined by the Board of Directors.
These factors should be considered when evaluating the Fund's
performance.
In sales material, reports and other communications to
shareholders, the Fund may compare its performance to certain
indices, including but not limited to the Dow Jones Industrial
Average, the Standard & Poor's 500 Index, NASDAQ, the Russell
2000 Index and the United States Department of Labor Consumer
Price Index. The Fund also may include evaluations of the Fund
published by nationally recognized financial publications and
ranking services, such as Forbes, Money, Financial World,
Barron's, Lipper Analytical Services Mutual Fund Performance
Analysis , Morningstar, Inc., CDA Investment Technologies Inc.
and Value Line, Inc.
CAPITAL STRUCTURE
Nicholas Fund, Inc. is authorized to issue 200,000,000
shares of common stock, $0.50 par value. Each share has one vote
and all shares participate equally in dividends and other
distributions declared by the Fund, and in the residual assets of
the Fund in the event of liquidation. There are no conversion
or sinking fund provisions applicable to shares and holders have
no preemptive, rights and may not cumulate their votes in the
election of directors.
STOCK CERTIFICATES
The Fund will not issue certificates evidencing shares
purchased unless so requested in writing. Where certificates are
not issued, the shareholder's account will be credited with the
number of shares purchased, relieving shareholders of
responsibility for safekeeping of certificates and the need to
deliver them upon redemption. Written confirmations are issued
for all purchases of shares. Any shareholder may deliver
certificates to the Fund's transfer agent, Firstar, and direct
that his account be credited with the shares. A shareholder may
direct Firstar in writing at any time to issue a certificate for
his shares without charge. If a shareholder requests
certificates at any time other than in connection with an initial
purchase, the request must be accompanied by a signature
guarantee.
ANNUAL MEETING
Under the laws of the State of Maryland, registered
investment companies, such as the Fund, may operate without an
annual meeting of shareholders under specified circumstances if
an annual meeting is not required by the 1940 Act. The Fund has
adopted the appropriate provisions in its Articles of
Incorporation and will not hold annual meetings of shareholders
unless otherwise required to do so.
In the event the Fund is not required to hold annual
meetings of shareholders to elect Directors, the Board of
Directors of the Fund will promptly call a meeting of
shareholders of the Fund for the purpose of voting upon the
question of removal of any Director when requested in writing by
the record holders of not less than 10% of the outstanding shares
of common stock of the Fund. The affirmative vote of two-thirds
of the outstanding shares, cast in person or by proxy at a
meeting called for such purpose, is required to remove a director
of the Fund. The Fund will assist shareholders in communicating
with each other for this purpose pursuant to the requirements of
Section 16(c) of the 1940 Act.
SHAREHOLDER REPORTS
Shareholders will be provided at least semiannually with a
report or a current prospectus showing the Fund's portfolio and
other information. After the close of the Fund's fiscal year,
which ends March 31, an annual report or current prospectus
containing financial statements audited by the Fund's independent
public accountants, Arthur Andersen LLP, will be sent to
shareholders.
CUSTODIAN AND TRANSFER AGENT
Firstar Bank Milwaukee, N.A. ("Firstar Bank") acts as
Custodian of the Fund. Firstar , 615 East Michigan Street,
Milwaukee, Wisconsin 53202, acts as Transfer Agent and Dividend
Disbursing Agent of the Fund. As custodian, Firstar Bank holds
all securities and cash for the Fund, delivers and receives
payment for securities sold, receives and pays for securities
purchased, collects income from investments and performs other
duties, all as directed by the officers of the Fund. Firstar
Bank and Firstar do not exercise any supervisory function over
the management of the Fund, the purchase or sale of securities or
the payment of distributions to shareholders.
COUNSEL AND AUDITORS
Davis & Kuelthau, S.C., 111 East Kilbourn Avenue, Milwaukee,
Wisconsin 53202, counsel for the Fund, have passed upon the
legality of the shares of the Fund being offered by this
Prospectus. Arthur Andersen LLP, 100 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202 are the independent accountants for
the Fund.
FINANCIAL INFORMATION
The schedule of investments, financial statements and notes
thereto and the Report of Independent Public Accountants
contained in the Annual Report of the Fund for the fiscal year
ended March 31, 1999, which have been filed with the SEC pursuant
to Rule 30d-1 of the 1940 Act, are incorporated herein by
reference. You may obtain a free copy of the Annual Report by
writing or calling the Fund.
Nicholas Fund, Inc.
Form N-1A
PART C: OTHER INFORMATION
PART C. OTHER INFORMATION
Item 23. Exhibits:
All exhibits required to be filed with this Form N-1A, pursuant
to Item 23(b) are listed in the Exhibit Index appearing elsewhere
in this Registration Statement and (i) appear in their entirety,
herein or (ii) are incorporated by reference to previous filings
with the Securites and Exchange Commission, as indicated in such
Exhibit Index.
Item 24. Persons Controlled by or Under Common Control with the
Fund
The Registrant is not under common control with any other
person. The Registrant, Nicholas Income Fund, Inc., Nicholas II,
Inc., Nicholas Limited Edition, Inc., Nicholas Money Market Fund,
Inc., and Nicholas Equity Income Fund, Inc. share a common
investment adviser, Nicholas Company, Inc.; however, each such
fund has an independent Board of Directors responsible for
supervising the investment and business services provided by the
adviser. The Registrant does not control any other person.
Item 25. Indemnification
Article VII, Section 7 of the Registrant's By-Laws provides
for the indemnification of its officers and directors against
liabilities incurred in such capacities to the extent described
therein, subject to the provisions of the Maryland General
Business Corporation Law; such Section 7 is incorporated herein
by reference to the By-Laws of the Registrant previously filed
with the Securities and Exchange Commission. In addition, the
Registrant maintains a joint errors and omissions insurance
policy with a $2.0 million limit of liability under which the
Registrant, the Adviser and the other funds advised by the
Adviser, and each of their respective directors and officers, are
named insureds.
The investment adviser to the Registrant, Nicholas Company,
Inc., has, by corporate resolution, agreed to indemnify
Registrant's officers, directors and employees to the extent of
any deductible or retention amount required under insurance
policies providing coverage to such persons in connection with
liabilities incurred by them in such capacities.
Item 26. Business and Other Connections of the Investment
Adviser
None.
Item 27. Principal Underwriters
None.
Item 28. Location of Accounts and Records
All account, books or other documents required to be
maintained pursuant to Section 31(a) of the Investment Company
Act of 1940, as amended, and the rules of the Securities and
Exchange Commission promulgated thereunder, are located at the
offices of the Registrant, 700 North Water Street, Milwaukee,
Wisconsin 53202, and Firstar Mutual Fund Services, LLC, 615 East
Michigan Avenue, Milwaukee, Wisconsin 53202.
Item 29. Management Services
None.
Item 30. Undertakings
The Registrant's By-Laws provide that it will indemnify the
Officers and Directors of the Registrant for liabilities incurred
by them in any proceeding arising by reason of the fact that any
such person was or is a director or officer of the Registrant.
Insofar as indemnification for liability arising under the Act
may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the Act, or otherwise, the
Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public
policy as expressed in the Act and may, therefore, be
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
Subject to the terms and conditions of Section 15(d) of the
Securities Exchange Act of 1934, the undersigned Registrant
hereby undertakes to file with the Securities and Exchange
Commission such supplementary and periodic information, documents
and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
The undersigned Registrant hereby undertakes to deliver or
cause to be delivered with the prospectus, to each person to whom
the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the
prospectus and furnished pursuant to and meeting the requirements
of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934, as amended; and, where interim financial information
required to be presented by Article 3 of Regulation S-X are not
set forth in the prospectus, to deliver, or cause to be delivered
to each person to whom the prospectus is sent or given, the
latest semiannual report that is specifically incorporated by
reference in the prospectus.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, as amended, the
Registrant hereby certifies that it meets all of the requirements
for effectiveness of this Registration Statement under Rule
485(a) under the Securities Act of 1933, and has duly caused
this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Milwaukee,
State of Wisconsin, on the /s/ th day of May, 1999.
NICHOLAS FUND, INC.
By: /s/ Albert O. Nicholas
---------------------------
Albert O. Nicholas
President and Director
Pursuant to the requirements of the Securities Act of
1933,as amended, and the Investment Company Act of 1940, as
amended, the Amendment to the Registration Statement has been
signed below by the following persons in the capacities and on
May , 1999.
Signature Title
--------- -----
/s/ Albert O. Nicholas President (Principal Executive Officer)
------------------------ and Director
Albert O. Nicholas
/s/ Jeffrey T. May
------------------------ Senior Vice-President
Jeffrey T. May and Treasurer (Chief Accounting Office)
/s/ Melvin Schultz
------------------------ Director
Melvin L. Schultz
/s/ Richard Seaman
------------------------ Director
Richard Seaman
By: /s/ Jeffrey T. May
------------------------
Jeffrey T. May
Jeffrey T. May, as Attorney-In-Fact for
the above directors, under authority of
Powers of Attorney previously filed
LIST OF CONSENTS
1. Consent of Davis & Kuelthau, S.C.
(included in Exhibit (i)
2. Consent of Arthur Andersen LLP
(included as Exhibit (j))
EXHIBIT INDEX
Sequential
Exhibit No. Description Page No.
- ----------- ------------- -----------
(a) Articles of Incorporation of Registrant *
[incorporated by reference to Part II of
Registrant's Post-Effective Amendment No. 44,
as filed with the Commission on April 30,
1998, under header submission 485BPOS].
(b) By-Laws of Registrant [incorporated by *
reference to Part II of Registrant's Post-
Effective Amendment No. 44, as filed with the
Commission on April 30, 1998, under header
submission 485BPOS].
(c) Specimen certificate evidencing common stock, *
$.50 par value, of Registrant [incorporated
by reference to Part II of Registrant's Post-
Effective Amendment No. 44, as filed with the
Commission on April 30, 1998, under header
submission 485BPOS].
(d) Investment Advisory Agreement, dated July 17, *
1985, between Registrant and Nicholas
Company, Inc. [incorporated by reference to
Part II of Registrant's Post-Effective
Amendment No. 44, as filed with the
Commission on April 30, 1998, under header
submission 485BPOS].
(g) Custodian Agreement between Registrant and *
Firstar Trust Company, [incorporated by
reference to Part II of Registrant's Post-
Effective Amendment No. 44, as filed with the
Commission on April 30, 1998, under header
submission 485BPOS].
(i) Opinion of Davis & Kuelthau, S.C., concerning **
the legality of Registrant's common stock,
including attorney's consent to the use of
such opinion.
(j) Consent of Arthur Andersen LLP, independent **
public accountants.
(n) Financial Data Schedule meeting the --
requirements of Rule 483 under the Securities
Act of 1933.
* Powers of Attorney for Messrs. Schultz and *
Seaman, as required by Rule 402 under the
Securities Act of 1933.
____________________________________
*Incorporated by reference to previous filing as indicated.
**To be filed by amendment.
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