November 24, 1995
OFIS Filer Support
SEC Operations Center
6432 General Green Way
Alexandria, VA 22312-2413
RE: N-30D filing
Ladies/Gentlemen:
ON BEHALF OF NICHOLAS II, INC. THIS ELECTRONIC DOCUMENT IS BEING
SUBMITTED PURSUANT TO EDGAR RULES ON ELECTRONIC FILING AND REGULATION S-T.
Sincerely,
/s/ Jeffrey T. May
------------------
Jeffrey T. May
Vice President
<PAGE>
NICHOLAS II, INC.
November 20, 1995
Report to Shareholders:
Nicholas II fund closed its fiscal year, September 30, 1995, at $30.07 per
share and $682 million in total net assets. The table below shows results for
the time periods ended September 30, 1995:
<TABLE>
<CAPTION>
Average Annual Total Return*
____________________________________
1 Year 5 Years 10 Years
______ _______ ________
<C> <C> <C>
Nicholas II
(Distributions Reinvested) +22.39% +17.01% +13.04%
NASDAQ OTC Composite
(Excludes Income) +36.54% +24.81% +14.05%
Standard & Poor's 500
(Income Reinvested) +29.71% +17.20% +15.95%
Russell 2000
(Includes Income) +23.36% +21.66% +12.76%
Ending value of $10,000
invested in Nicholas II
(Distributions Reinvested) $12,239 $21,935 $34,057
</TABLE>
*Total returns are historical and include change in share price and
reinvestment of dividend and capital gain distributions. Past performance is
no guarantee of future results. Principal value and return will fluctuate so
an investment, when redeemed, may be worth more or less than original cost.
During the Fund's fiscal year, the technology sector continued its torrid pace
as evidenced by the NASDAQ's strong performance, which is heavily weighted in
technology issues versus other indices. Nicholas II's overweighting in
financials and certain health care related stocks accounted for much of the
performance over the past twelve months. The one year performance of the Fund
is satisfying given management's investment style. In fact, a return of that
magnitude would be welcomed during any year. When compared to other indices,
Nicholas II's performance lags somewhat. However, this tends to happen when
the markets are in a period of strong upward movement. You cannot invest
conservatively with an eye toward preservation of capital and expect to
outperform during a speculative bull market. Our philosophy typically
outperforms market indices during weak market periods due to our conservatism
and intolerance to risk and volatility.
The longer-term record of Nicholas II is in line with our investment objectives
and basically mirrors the market averages. This is also satisfying considering
our risk level, as measured by beta or volatility which tends to be lower than
that of the overall market averages. In other words, the Fund has provided
comparable returns to the market with lower levels of risk.
The current five year returns for stock market averages and mutual funds ended
September 30, 1995, do not incorporate what is normally considered a bear
market. The last bear market or correction occurred during 1990 and ended
early in the fourth quarter of 1990. During that correction the S&P 500 and
the NASDAQ dropped 19.24% and 30.07% from their respective peaks. The
subsequent bull market has lasted five years and is the longest running bull
market in recent history without a 10% correction. This bull market phenomenon
has produced some spectacular five year records, which in our view should not
be considered sustainable in our view. The strong market has pushed valuation
measures such as dividend yields and price/earnings ratios to all time highs.
We still believe bear markets exist and that stock returns will eventually
revert back to the long-term mean which is about 10% for the S&P 500 over the
last 70 years.
We are not, however, forecasting a correction or bear market because we do not
believe the market can be predicted on a consistent basis. We continue to
practice our investment philosophy developed over many years of good and bad
markets and believe our performance should be measured over a complete market
cycle.
No matter what the market, we continue to maintain a portfolio of high quality
companies that can produce consistent earnings growth, high returns and good
cash flows. If our analysis of these characteristics is correct, our returns
should be more than satisfactory going forward.
David O. Nicholas
Portfolio Manager
<PAGE>
Schedule of Investments
September 30, 1995
<TABLE>
<CAPTION>
Shares or Quoted
Principal Market
Amount Value
__________ __________
(Note 1 (a))
<S> <C>
COMMON STOCKS - 96.1%
Banks and Finance - 12.3%
306,023 Associated Banc-Corp $ 11,246,345
148,750 Fifth Third Bancorp 8,534,531
498,600 Firstar Corporation 18,510,525
693,600 First Financial Corporation 14,739,000
7,403 First National Bank of Anchorage (The) 11,252,560
330,750 Litchfield Financial Corporation + 5,043,938
592,900 Marshall & Ilsley Corporation 14,896,612
___________
84,223,511
___________
Broadcasting - 0.5%
105,000 British Sky Broadcasting Group plc 3,793,125
___________
Business Services - 12.1%
140,000 Alco Standard Corporation 11,865,000
165,000 Danka Business Systems PLC 5,940,000
632,500 FIserv, Inc. * 18,263,437
419,062 G&K Services, Inc. - Class A 9,743,192
963,675 Keane, Inc. * + 27,826,116
173,900 Programming and Systems, Inc. *
(Note 1(a)) 0
301,300 SPS Transaction Services, Inc. * 8,737,700
___________
82,375,445
___________
Consumer Products and Services - 4.0%
32,600 Amway Asia Pacific Ltd. 1,218,425
203,800 Loewen Group Inc. (The) 8,406,750
440,850 Newell Co. 10,911,037
175,600 Valspar Corporation (The) 6,716,700
___________
27,252,912
___________
Environmental Services - 0.5%
285,000 Waste Management International plc * 3,135,000
___________
Food and Beverage - 3.3%
170,000 Outback Steakhouse, Inc. * 5,227,500
445,632 Tootsie Roll Industries, Inc. 17,658,168
___________
22,885,668
___________
Food Retailer - 1.4%
350,900 Hannaford Bros. Co. 9,430,437
___________
Health Care - 24.1%
34,390 American HomePatient, Inc. * 876,945
98,000 Amgen Inc. * 4,887,750
312,650 Block Drug Company, Inc. - Class A 12,115,187
237,550 Cardinal Health, Inc. 13,154,331
315,900 DENTSPLY International Inc. 10,898,550
295,600 Elan Corporation, plc * 12,267,400
296,000 Forest Laboratories, Inc. * 13,172,000
</TABLE>
<TABLE>
<CAPTION>
Shares or Quoted
Principal Market
Amount Value
__________ __________
(Note 1 (a))
<S> <C>
Health Care - 24.1% (Continued)
215,500 Health Care and Retirement
Corporation * $ 6,922,937
937,975 Health Management Associates, Inc. -
Class A * 30,132,447
251,700 Hooper Holmes, Inc. 2,517,000
316,600 Patterson Dental Company * 8,389,900
82,500 PhyCor, Inc. * 2,825,625
377,500 Quorum Health Group, Inc. * 8,540,938
192,200 Sofamor/Danek Group, Inc. * 5,333,550
370,646 Vencor, Inc. * 11,860,688
642,637 Vivra Incorporated * 20,403,725
___________
164,298,973
___________
Industrial Products and Services - 12.5%
330,300 Crompton & Knowles Corporation 4,913,213
295,000 General Motors Corporation -
Class H 12,095,000
173,500 IDEX Corporation 6,202,625
91,600 McWhorter Technologies, Inc. * 1,408,350
285,250 Schulman (A.), Inc. 7,131,250
276,300 Sigma-Aldrich Corporation 13,400,550
346,950 Teleflex Incorporated 14,051,475
571,000 Unifi, Inc. 13,989,500
495,000 Watts Industries, Inc. - Class A 12,313,125
___________
85,505,088
___________
Insurance - 9.6%
110,000 Foremost Corporation of America 4,867,500
207,300 Healthsource, Inc. * 9,976,313
162,500 MGIC Investment Corporation 9,303,125
464,400 Mutual Risk Management Ltd. 18,343,800
148,500 PacifiCare Health Systems, Inc. * 10,098,000
445,000 Protective Life Corporation 13,016,250
___________
65,604,988
___________
Investment Management - 0.5%
90,000 United Asset Management Corporation 3,611,250
___________
Retail Trade - 12.2%
628,500 Arbor Drugs, Inc. 11,784,375
125,000 AutoZone, Inc. * 3,187,500
435,000 Circuit City Stores, Inc. 13,756,875
542,500 Consolidated Stores Corporation * 12,545,313
466,500 Heilig-Meyers Company 10,846,125
217,200 Kohl's Corporation * 11,267,250
315,000 Medicine Shoppe International, Inc. 13,938,750
234,000 OfficeMax, Inc. * 5,674,500
___________
83,000,688
___________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Shares or Quoted
Principal Market
Amount Value
__________ __________
(Note 1 (a))
<S> <C>
COMMON STOCKS - 96.1% (Continued)
Transportation - 3.1%
494,000 Expeditors International of
Washington, Inc. $ 13,338,000
255,000 Heartland Express, Inc. * 7,458,750
___________
20,796,750
___________
TOTAL COMMON STOCKS
(cost $379,935,278) 655,913,835
___________
SHORT-TERM INVESTMENTS - 3.7%
Commercial Paper - 2.8%
$5,500,000 Mosinee Paper Corporation
5.93%, due October 6, 1995 5,496,376
2,000,000 Quad/Graphics, Inc.
5.95%, due October 13, 1995 1,996,364
2,300,000 LaCrosse Footwear, Inc.
5.95%, due October 17, 1995 2,294,298
6,500,000 Illinois Power Company
5.85%, due October 18, 1995 6,483,100
3,000,000 Schreiber Foods, Inc.
5.95%, due October 30, 1995 2,986,117
___________
19,256,255
___________
</TABLE>
<TABLE>
<CAPTION>
Shares or Quoted
Principal Market
Amount Value
__________ __________
(Note 1 (a))
<S> <C>
Variable Demand Notes - 0.9%
$4,207,100 Sara Lee Corporation
5.45%, due October 2, 1995 $ 4,207,100
1,974,000 Southwestern Bell Company
5.45%, due October 2, 1995 1,974,000
___________
6,181,100
___________
TOTAL SHORT-TERM
INVESTMENTS
(cost $25,382,468) 25,437,355
___________
TOTAL INVESTMENTS 681,351,190
___________
CASH AND RECEIVABLES, NET
OF LIABILITIES - 0.2% 882,787
___________
TOTAL NET ASSETS (Basis of
percentages disclosed above) $682,233,977
___________
___________
</TABLE>
* Nondividend paying security
+ This company is affiliated with the Fund as defined in Section 2(a)(2)-(3)
of the Investment Company Act of 1940, in that the Fund holds 5% or more
of its outstanding voting securities. (Note 5)
<PAGE>
Statement of Assets and Liabilities
September 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value (Note 1(a)) -
Nonaffiliated issuers (cost $394,153,132) -
see accompanying schedule of investments $648,481,137
Affiliated issuers (cost $11,164,614) -
see accompanying schedule of investments (Note 5) 32,870,053
___________
Total investments 681,351,190
___________
Receivables -
Dividends and interest 412,918
Investment securities sold 4,666,594
___________
Total receivables 5,079,512
___________
Total assets 686,430,702
___________
LIABILITIES:
Payables -
Investment securities purchased 3,555,249
Management fee (Note 2) 304,644
Other payables and accrued expenses 336,832
___________
Total liabilities 4,196,725
___________
Total net assets $682,233,977
___________
___________
NET ASSETS CONSIST OF:
Fund shares issued and outstanding $355,893,052
Net unrealized appreciation on investments (Note 3) 275,978,557
Accumulated undistributed net realized gains on investments 47,155,635
Accumulated undistributed net investment income 3,206,733
___________
$682,233,977
___________
___________
NET ASSET VALUE PER SHARE ($.01 par value, 200,000,000 shares
authorized) offering price and redemption price
($682,233,977 ./. 22,688,733 shares outstanding) $30.07
______
______
</TABLE>
<PAGE>
Statement of Operations
For the Year Ended September 30, 1995
<TABLE>
<S> <C>
INCOME:
Dividends -
Nonaffiliated issuers $ 6,446,282
Affiliated issuers (Note 5) 9,450
Interest 1,964,669
Other 39,228
___________
8,459,629
___________
EXPENSES:
Management fee (Note 2) 3,321,192
Transfer agent fees 535,389
Custodian fees 71,782
Postage 63,635
Registration fees 55,531
Printing 48,863
Legal fees 29,665
Audit and tax consulting fees 19,925
Telephone 14,598
Directors' fees 12,000
Insurance 4,957
Other operating expenses 2,230
___________
4,179,767
___________
Net investment income 4,279,862
___________
NET REALIZED GAINS ON INVESTMENTS (Note 1 (b)):
Nonaffiliated issuers 56,226,347
Affiliated issuers (Note 5) (3,044,886)
___________
53,181,461
___________
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 71,740,215
___________
Net gains on investments 124,921,676
___________
Net increase in net assets resulting from operations $129,201,538
___________
___________
</TABLE>
<PAGE>
Statements of Changes in Net Assets
For the Years Ended September 30, 1995 and 1994
<TABLE>
<S> <C> <C>
1995 1994
_____________ _____________
OPERATIONS:
Net investment income $ 4,279,862 $ 4,759,460
Net realized gains on investments (Note 1 (b)) 53,181,461 39,661,906
Net increase (decrease) in unrealized
appreciation on investments 71,740,215 (8,089,870)
_____________ _____________
Net increase in net assets resulting
from operations 129,201,538 36,331,496
_____________ _____________
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.2056 and $0.2000 per share, respectively) (4,696,388) (5,077,717)
Distributions from net realized gains on
investment transactions ($1.8944 and $1.4700
per share, respectively) (43,254,533) (37,294,772)
_____________ _____________
Total distributions (47,950,921) (42,372,489)
_____________ _____________
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued (1,264,903 and
1,790,597 shares, respectively) 33,523,121 47,450,393
Net asset value of shares issued in
distributions from net investment income and
net realized gains (1,867,730 and 1,509,156
shares, respectively) 45,012,292 39,373,882
Cost of shares redeemed (3,835,468 and 6,478,915
shares, respectively) (102,224,623) (171,891,349)
_____________ ____________
Decrease in net assets derived from
capital share transactions (23,689,210) (85,067,074)
_____________ ____________
Total increase (decrease) in net assets 57,561,407 (91,108,067)
_____________ ____________
NET ASSETS, at the beginning of the year (including
undistributed net investment income of $3,623,259
and $3,941,516, respectively) 624,672,570 715,780,637
_____________ ____________
NET ASSETS, at the end of the year (including
undistributed net investment income of $3,206,733
and $3,623,259, respectively) $682,233,977 $624,672,570
_____________ ____________
_____________ ____________
</TABLE>
<PAGE>
Financial Highlights
(For a share outstanding throughout the year)
Year Ended September 30,
<TABLE>
<CAPTION>
Year Ended September 30,
________________________________________________________________________________________
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
____ ____ ____ ____ ____ ____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR $26.71 $26.94 $24.53 $23.87 $17.39 $21.76 $18.58 $21.01 $16.90 $14.39
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .24 .21 .21 .23 .26 .36 .29 .36 .24 .40
Net gains or (losses) on
securities (realized and
unrealized) 5.22 1.23 3.24 1.07 6.70 (3.75) 3.31 (1.15) 4.80 2.33
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Total from investment
operations 5.46 1.44 3.45 1.30 6.96 (3.39) 3.60 (.79) 5.04 2.73
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
LESS DISTRIBUTIONS:
Dividends (from net
investment income) (.21) (.20) (.24) (.24) (.34) (.31) (.34) (.34) (.42) (.16)
Distributions (from capital
gains) (1.89) (1.47) (.80) (.40) (.14) (.67) (.08) (1.30) (.51) (.06)
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Total distributions (2.10) (1.67) (1.04) (.64) (.48) (.98) (.42) (1.64) (.93) (.22)
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
NET ASSET VALUE, END
OF YEAR $30.07 $26.71 $26.94 $24.53 $23.87 $17.39 $21.76 $18.58 $21.01 $16.90
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
TOTAL RETURN 22.39% 5.49% 14.19% 5.59% 40.91% (16.14%) 19.88% (1.48%) 31.44% 19.26%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year (millions) $682.2 $624.7 $715.8 $646.5 $490.9 $336.5 $422.2 $380.2 $432.3 $299.2
Ratio of expenses to average
net assets .66% .67% .67% .66% .70% .71% .74% .77% .74% .79%
Ratio of net investment income
to average net assets .68% .72% .79% 1.01% 1.24% 1.78% 1.43% 1.97% 1.37% 2.70%
Portfolio turnover rate 19.63% 17.38% 27.32% 11.47% 12.46% 18.78% 8.22% 18.42% 25.66% 14.64%
Average commission rate paid on
portfolio investment transactions $0.048 _ _ _ _ _ _ _ _ _
</TABLE>
<PAGE>
Notes to Financial Statements
September 30, 1995
(1) Summary of Significant Accounting Policies -
The following is a summary of the significant accounting policies of
Nicholas II, Inc. (the "Fund"):
(a) Each security, excluding short-term investments, is valued at the
last sale price reported by the principal security exchange on which
the issue is traded, or if no sale is reported, the latest bid price.
Variable demand notes are valued at cost which approximates market
value. U.S. Treasury Bills and commercial paper are stated at market
value with the resultant difference between market value and original
purchase price being recorded as interest income. Investment
transactions are recorded no later than the first business day after
the trade date. Cost amounts, as reported on the statement of assets
and liabilities, are the same for Federal income tax purposes.
On June 18, 1992, the Securities and Exchange Commission suspended
trading of the common stock of Programming and Systems, Inc., (the
"Company") because of information received questioning the accuracy
of the Company's financial statements. Following the release of this
information, the Company's common stock was delisted by NASDAQ and,
as such, is nontradable. To date, this matter has not been resolved.
The Board of Directors of the Fund have deemed the shares worthless
until additional information, including audited financial statements,
is released by the Company.
(b) Net realized gains and losses on common stocks and bonds were
computed on the basis of specific certificates.
(c) Provision has not been made for Federal income taxes or excise taxes
since the Fund has elected to be taxed as a "regulated investment
company" and intends to distribute substantially all taxable income
to its shareholders and otherwise comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies.
(d) Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Non-cash dividends, if any, are recorded at fair
market value on date of distribution.
(2) Investment Adviser and Management Agreement -
The Fund has an agreement with Nicholas Company, Inc. (with whom certain
officers and directors of the Fund are affiliated) to serve as investment
adviser and manager. Under the terms of the agreement, a monthly fee is
paid to the investment adviser based on 1/16th of 1% (.75 of 1% on an
annual basis) of the average net asset value up to and including
$50 million, 1/20th of 1% (.6 of 1% on an annual basis) of the average
net asset value over $50 million up to and including $100 million and
1/24th of 1% (.5 of 1% on an annual basis) of the average net asset value
in excess of $100 million. Also, the investment adviser may be
reimbursed for clerical and administrative services rendered by its
personnel. The advisory agreement is subject to an annual review by the
Directors of the Fund.
(3) Net Unrealized Appreciation -
Aggregate gross unrealized appreciation (depreciation) as of September 30,
1995, based on investment cost for Federal tax purposes is as follows:
Aggregate gross unrealized appreciation on investments $281,754,611
Aggregate gross unrealized depreciation on investments (5,776,054)
___________
Net unrealized appreciation $275,978,557
___________
___________
(4) Investment Transactions -
For the year ended September 30, 1995, the cost of purchases and the
proceeds from sales of investment securities, other than short-term
obligations, aggregated $118,010,114 and $174,257,615, respectively.
<PAGE>
(5) Transactions with Affiliates -
Following is an analysis of fiscal 1995 transactions with "affiliated
companies" as defined by the Investment Company Act of 1940:
<TABLE>
<CAPTION>
Amount of
Amount of Capital Loss
Dividends Realized
Share Activity Credited on Sale
________________________________________________ to Income of Shares
Balance Balance in Fiscal in Fiscal
Security Name 9/30/94 Purchases Sales 9/30/95 1995 1995
_____________ _______ _________ _____ _______ _________ __________
<S> <C> <C> <C> <C> <C> <C>
Keane, Inc. 963,675 _ _ 963,675 $ _ $ _
Litchfield Financial Corporation (b) 330,750 _ _ 330,750 9,450 _
Sullivan Dental Products, Inc. (a) 472,500 _ 472,500 _ _ (3,044,886)
_______ _________
$9,450 $(3,044,886)
_______ __________
_______ __________
</TABLE>
(a) As of September 30, 1995, the Fund is no longer affiliated with this
company.
(b) The share activity has been adjusted to reflect a stock dividend.
Historical Record (unaudited)
<TABLE>
<CAPTION>
Dollar Growth of
Net Dividend Capital Gain Weighted An Initial
Asset Value Distributions Distributions Price/Earnings $10,000
Per Share Per Share Per Share Ratio** Investment***
_________ _________ ___________ ____________ _________
<S> <C> <C> <C> <C> <C>
October 17, 1983* $10.00 $ - $ - - $10,000
September 30, 1985 14.39 .093 .186 11.7 times 14,742
September 30, 1986 16.90 .163 .061 15.0 17,581
September 30, 1987 21.01 .420 .513 20.9 23,108
September 30, 1988 18.58 .338 1.303 15.0 22,766
September 30, 1989 21.76 .335 .080 17.1 27,291
September 30, 1990 17.39 .3124 .6686 14.8 22,888
September 30, 1991 23.87 .3422 .1434 17.8 32,251
September 30, 1992 24.53 .2447 .4042 17.3 34,054
September 30, 1993 26.94 .2350 .8000 18.1 38,885
September 30, 1994 26.71 .2000 (a) 1.4700 (a) 18.5 41,020
December 31, 1994 24.46 .2056 (b) 1.8944 (b) 18.4 40,838
March 31, 1995 26.61 _ _ 20.0 44,428
June 30, 1995 27.46 _ _ 19.7 45,847
September 30, 1995 30.07 _ _ 20.8 50,205
</TABLE>
<TABLE>
<S> <C>
* Date of Initial Public Offering (a) Paid December 31, 1993 to
** Based on latest 12 months accomplished earnings shareholders of record December 28, 1993
*** Assuming reinvestment of all distributions (b) Paid December 31, 1994 to
shareholders of record December 27, 1994.
</TABLE>
Range in price/earnings ratios
High 25.4 Low 11.6
August 6, 1987 October 8, 1985
<PAGE>
Report of Independent Public Accountants
To the Shareholders and Board of Directors
of Nicholas II, Inc.:
We have audited the accompanying statement of assets and liabilities of
NICHOLAS II, INC. (a Maryland corporation), including the schedule of
investments as of September 30, 1995, the related statement of operations for
the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of
the periods presented. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1995, by correspondence with the custodian and brokers. As to
securities purchased but not received, we requested confirmation from brokers
and, when replies were not received, we carried out other alternative auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Nicholas II, Inc. as of September 30, 1995, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
October 19, 1995.
<PAGE>
CAN YOU AFFORD NOT TO INVEST IN AN IRA?
The maximum yearly IRA contribution is the lesser of $2,000 or 100% of your
compensation. Every year that you contribute this amount you may also deduct it
from your Federal income taxes, unless you (or your spouse) are an eligible
participant in an employer-sponsored retirement plan and your adjusted gross
income exceeds certain limits as defined by the Internal Revenue Code. This
deduction can lead to substantial savings, especially when you look at the
relationship between higher tax brackets and the net cost of investing. The
table below illustrates a schedule of tax brackets, resulting tax savings, and
the net cost of investing $2,000 in an IRA, assuming full deductibility of your
contributions.
<TABLE>
<CAPTION>
TABLE I
Federal Tax Federal Tax Net Cost of Investing
Brackets Savings $2,000 in an IRA
___________ ___________ ___________________
<C> <C> <C>
15% $300 $1,700
28% 560 1,440
31% 620 1,380
36% 720 1,280
39.6% 792 1,208
</TABLE>
Even if you are an eligible participant in an employer-sponsored retirement
plan, you may still make a non-deductible IRA contribution (subject to the
$2,000/100% of compensation limit). Another tax advantage to investing in an
IRA is that any amounts received from dividends, interest, etc., accumulate tax
deferred, whether or not your contribution is fully deductible. Taxes will have
to be paid when you receive distributions.
Finally, Table II shows the various amounts accumulated in an IRA under
different annual rates of return, based on a $2,000 annual year end
contribution. These figures are purely hypothetical since investment returns
are rarely constant year to year. Yet, one can get a good idea that investing
in an IRA plan provides a good nest egg for retirement.
<TABLE>
<CAPTION>
TABLE II
Amounts accumulated in an IRA
Annual Rates of Return
________________________________________
After 8% 10% 12% 15%
_____ ______ ______ ______ ______
<C> <C> <C> <C> <C>
10 Years $ 28,973 $ 31,874 $ 35,096 $ 40,606
20 Years 91,524 114,550 144,104 204,880
30 Years 226,566 328,980 482,660 869,480
40 Years 518,113 885,180 1,534,180 3,558,000
</TABLE>
The Nicholas Family of Funds has set the following tentative dates for
distributions in December 1995.
<TABLE>
Record and Payment
Reinvestment Date Date
_________________ _________________
<C> <C> <C>
Nicholas Fund Dec. 22, 1995 Dec. 31, 1995
Nicholas II Dec. 26, 1995 Dec. 31, 1995
Nicholas Limited Edition Dec. 28, 1995 Dec. 31, 1995
Nicholas Income Fund Dec. 28, 1995 Dec. 31, 1995
Nicholas Equity Income Fund Dec. 28, 1995 Dec. 31, 1995
Nicholas Money Market Dec. 31, 1995 Dec. 31, 1995
</TABLE>
<PAGE>
Officers and Directors
ALBERT O. NICHOLAS
President and Director
ROBERT H. BOCK
Director
MELVIN L. SCHULTZ
Director
RICHARD SEAMAN
Director
DAVID L. JOHNSON
Executive Vice President
THOMAS J. SAEGER
Executive Vice President and Secretary
DAVID O. NICHOLAS
Senior Vice President
LYNN S. NICHOLAS
Senior Vice President
CHERYL L. KING
Treasurer and Vice President
CANDACE L. LESAK
Vice President
JEFFREY T. MAY
Vice President
JOHN J. O'HARE II
Vice President
KATHLEEN A. EVANS
Assistant Vice President
Custodian and Transfer Agent
FIRSTAR TRUST COMPANY
Milwaukee
(414) 276-0535
This report is submitted for the information of shareholders of the Fund. It is
not authorized for distribution to prospective investors unless preceded or
accompanied by an effective prospectus.
ANNUAL REPORT
NICHOLAS II, INC.
700 North
Water Street
Milwaukee,
Wisconsin 53202
September 30, 1995
