NICHOLAS II, INC.
May 28, 1996
Dear Fellow Shareholders:
Our Fund performed exceptionally well during the calendar 1996 first
quarter and the Fund's fiscal first half ended March 31, 1996. Returns for
various periods ended March 31, 1996 are shown below:
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN*
________________________________
3 MONTHS 6 MONTHS 1 YEAR 5 YEARS 10 YEARS
________ ________ ________ _________ ________
<S> <C> <C> <C> <C> <C>
Nicholas II
(Distributions Reinvested) +12.01% +17.12% +32.35% +14.36% +12.61%
NASDAQ OTC Composite
(Excludes Income) +4.68% +5.54% +34.77% +17.96% +11.38%
Russell 2000
(Includes Income) +5.13% +7.41% +29.08% +16.01% +10.40%
Standard & Poor's 500
(Income Reinvested) +5.37% +11.72% +32.11% +14.65% +13.97%
Consumer Price Index +1.0% +1.6% +2.8% +2.8% +3.6%
Ending value of $10,000 invested in
Nicholas II (Distributions Reivested) $11,201 $11,712 $13,235 $19,561 $32,806
</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.
The Fund seems to have found "the groove" as an athlete on a hot streak
would say. Performance has come from nearly all sectors, old securities and
new. Management, however, does not expect this type of performance to continue
forever. The market at the moment seems to crave the types of stocks held in
Nicholas II.
Though our stocks have performed well and are fully valued, our
philosophy does not tempt us to sell the high-quality, market leading, niche
growth companies we hold. If we are correct in our judgements, these companies
should be great investments for a long time to come.
Management and all of our staff, which I am extremely proud of for their
hard work and dedication, appreciate your support.
Sincerely,
/s/ David O. Nicholas
David O. Nicholas
Portfolio Manager
<PAGE>
SCHEDULE OF INVESTMENTS
MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Shares or Quoted
Principal Market
Amount Value
_________ ____________
(Note 1 (a))
<S> <C> <C>
COMMON STOCKS - 97.1%
BANKS AND FINANCE - 10.2%
306,023 Associated Banc-Corp $ 11,552,368
223,125 Fifth Third Bancorp 12,941,250
98,600 Firstar Corporation 4,412,350
583,600 First Financial Corporation 12,474,450
7,676 First National Bank of Anchorage (The) 11,936,180
330,750 Litchfield Financial Corporation + 4,713,187
557,900 Marshall & Ilsley Corporation 14,575,138
195,000 MBNA Corporation 5,776,875
___________
78,381,798
___________
BROADCASTING AND COMMUNICATIONS - 2.5%
139,200 Andrew Corporation * 5,324,400
105,000 British Sky Broadcasting Group plc 4,213,125
160,000 PanAmSat Corporation * 4,880,000
150,000 U.S Satellite Broadcasting Company, Inc. * 4,912,500
___________
19,330,025
___________
BUSINESS SERVICES - 13.6%
350,000 Alco Standard Corporation 18,243,750
195,000 Checkfree Corporation * 3,412,500
165,000 Danka Business Systems PLC 6,971,250
5,000 First USA Paymentech, Inc. * 176,250
642,500 Fiserv, Inc. * 17,990,000
419,062 G&K Services, Inc. - Class A 11,209,909
1,018,675 Keane, Inc. * + 30,432,915
100,000 Medaphis Corporation * 4,850,000
173,900 Programming and Systems, Inc. *
(Note 1 (a)) 0
381,300 SPS Transaction Services, Inc. * 11,772,638
___________
105,059,212
___________
CONSUMER PRODUCTS AND SERVICES - 4.4%
87,600 Amway Asia Pacific Ltd. 2,923,650
363,300 Central Parking Corporation 9,582,037
440,850 Newell Co. 11,792,738
40,000 ThermoTrex Corporation * 1,710,000
175,600 Valspar Corporation (The) 7,967,850
___________
33,976,275
___________
FOOD AND BEVERAGE - 3.1%
185,000 Outback Steakhouse, Inc. * 6,983,750
459,000 Tootsie Roll Industries, Inc. 16,753,500
___________
23,737,250
___________
HEALTH CARE FACILITIES MANAGEMENT - 16.6%
426,000 Emeritus Corporation * + 8,679,750
Shares or Quoted
Principal Market
Amount Value
_________ ____________
(Note 1 (a))
HEALTH CARE FACILITIES MANAGEMENT - 16.6%
(CONTINUED)
262,500 Health Care and Retirement
Corporation * $ 9,909,375
1,406,962 Health Management
Associates, Inc. - Class A * 49,243,670
250,000 Magellan Health Services Inc. * 5,625,000
497,500 Quorum Health Group, Inc. * 11,753,438
425,646 Vencor, Inc. * 14,684,787
963,955 VIVRA Incorporated * 27,713,705
___________
127,609,725
___________
HEALTH CARE PRODUCTS - 9.4%
108,000 Amgen Inc. * 6,277,500
322,029 Block Drug Company, Inc. - Class A 13,323,950
315,900 DENTSPLY International Inc. 12,754,462
295,600 Elan Corporation, plc * 18,992,300
296,000 Forest Laboratories, Inc. * 14,430,000
207,500 Sofamor/Danek Group, Inc. * 7,029,063
___________
72,807,275
___________
HEALTH CARE SERVICES - 10.2%
211,890 American HomePatient, Inc. * 8,316,683
349,853 Cardinal Health, Inc. 22,478,055
314,600 Healthsource, Inc. * 12,190,750
65,000 Oxford Health Plans, Inc. * 5,703,750
148,500 PacifiCare Health Systems, Inc. * 12,659,625
391,600 Patterson Dental Company * 12,041,700
122,500 PhyCor, Inc. * 5,390,000
___________
78,780,563
___________
INDUSTRIAL PRODUCTS AND SERVICES - 5.3%
325,000 General Motors Corporation - Class H 20,556,250
186,300 Sigma-Aldrich Corporation 10,619,100
495,000 Watts Industries, Inc. - Class A 9,838,125
___________
41,013,475
___________
INSURANCE - 6.4%
110,000 Foremost Corporation of America 6,050,000
162,500 MGIC Investment Corporation 8,856,250
464,400 Mutual Risk Management Ltd. 19,214,550
445,000 Protective Life Corporation 15,018,750
___________
49,139,550
___________
RETAIL TRADE - 12.4%
628,500 Arbor Drugs, Inc. 13,198,500
290,000 AutoZone, Inc. * 9,823,750
<PAGE>
Shares or Quoted
Principal Market
Amount Value
_________ ____________
(Note 1 (a))
COMMON STOCKS - 97.1% (Continued)
RETAIL TRADE - 12.4% (CONTINUED)
335,000 Circuit City Stores, Inc. $ 10,008,125
562,500 Consolidated Stores Corporation * 18,843,750
521,500 Heilig-Meyers Company 10,755,938
248,200 Kohl's Corporation * 15,729,675
254,000 OfficeMax, Inc. * 6,159,500
310,000 O'Reilly Automotive, Inc. * 10,772,500
___________
95,291,738
___________
TRANSPORTATION - 3.0%
494,000 Expeditors International of
Washington, Inc. 12,967,500
392,595 Heartland Express, Inc. * 9,962,098
___________
22,929,598
___________
TOTAL COMMON STOCKS
(cost $390,438,747) 748,056,484
___________
CONVERTIBLE BOND - 0.1%
$1,000,000 Emeritus Corporation,
6.25%, due January 1, 2006
(cost $1,000,000) 1,081,250
___________
SHORT-TERM INVESTMENTS - 3.1%
COMMERCIAL PAPER - 2.3%
2,000,000 Fiserv, Inc.,
5.40%, due April 2, 1996 1,999,700
3,000,000 Harnischfeger Industries, Inc.,
5.45%, due April 4, 1996 2,998,638
2,000,000 A.O. Smith Corporation,
5.45%, due April 8, 1996 1,997,881
Shares or Quoted
Principal Market
Amount Value
_________ ____________
(Note 1 (a))
SHORT-TERM INVESTMENTS - 3.1% (Continued)
COMMERCIAL PAPER - 2.3% (Continued)
3,000,000 Payco American Corporation,
5.55%, due April 11, 1996 $ 2,995,375
4,000,000 Firstar Corporation,
5.50%, due April 15, 1996 3,991,444
2,000,000 Firstar Corporation,
5.55%, due April 18, 1996 1,994,758
2,000,000 Fiserv, Inc.,
5.55%, due April 22, 1996 1,993,525
___________
17,971,321
___________
VARIABLE DEMAND NOTES - 0.8%
6,096,900 Sara Lee Corporation,
5.09%, due April 1, 1996 6,096,900
90,400 Warner Lambert Company,
5.08%, due April 1, 1996 90,400
___________
6,187,300
___________
TOTAL SHORT-TERM
INVESTMENTS
(cost $24,104,336) 24,158,621
___________
TOTAL INVESTMENTS 773,296,355
___________
LIABILITIES, NET OF CASH
AND RECEIVABLES - (0.3%) (2,520,332)
___________
TOTAL NET ASSETS (Basis of
percentages disclosed above) $770,776,023
___________
___________
</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)
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1996 (UNADUTIED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value (Note 1(a)) -
Nonaffiliated issuers (cost $397,110,050) - see accompanying schedule of investments $729,470,502
Affiliated issuers (cost $18,433,033) - see accompanying schedule of investments (Note 5) 43,825,853
___________
Total investments 773,296,355
___________
Receivables -
Dividends and interest 488,027
Investment securities sold 2,311,093
___________
Total receivables 2,799,120
___________
Total assets 776,095,475
___________
LIABILITIES:
Payables -
Investment securities purchased 4,676,605
Management fee (Note 2) 332,417
Other payables and accrued expenses 310,430
___________
Total liabilities 5,319,452
___________
Total net assets $770,776,023
___________
___________
NET ASSETS CONSIST OF:
Fund shares issued and outstanding $390,856,296
Net unrealized appreciation on investments (Note 3) 357,698,987
Accumulated undistributed net realized gains on investments 21,628,915
Accumulated undistributed net investment income 591,825
___________
$770,776,023
___________
___________
NET ASSET VALUE PER SHARE ($.01 par value, 200,000,000 shares authorized)
offering price and redemption price ($770,776,023 ./. 23,949,760 shares outstanding) $32.18
_____
_____
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
INCOME:
Dividends _
Nonaffiliated issuers $ 2,843,142
Affiliated issuers (Note 5) 13,230
Interest 617,608
Other 25,287
___________
3,499,267
___________
EXPENSES:
Management fee (Note 2) 1,826,742
Transfer agent fees 236,841
Postage 59,669
Custodian fees 31,158
Printing 20,684
Registration fees 20,476
Legal fees 13,960
Telephone 8,096
Directors' fees 6,000
Insurance 4,956
Other operating expenses 4,580
___________
2,233,162
___________
Net investment income 1,266,105
___________
NET REALIZED GAINS ON INVESTMENTS (Note 1(b)):
Nonaffiliated issuers 29,877,035
Affiliated issuers (Note 5) _
___________
29,877,035
___________
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 81,720,430
___________
Net gains on investments 111,597,465
___________
Net increase in net assets resulting from operations $112,863,570
___________
___________
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED) AND THE YEAR ENDED
SEPTEMBER 30, 1995
<TABLE>
<S> <C> <C>
1996 1995
___________ ___________
OPERATIONS:
Net investment income $ 1,266,105 $ 4,279,862
Net realized gains on investments (Note 1(b)) 29,877,035 53,181,461
Net increase in unrealized appreciation on investments 81,720,430 71,740,215
___________ ___________
Net increase in net assets resulting from operations 112,863,570 129,201,538
___________ ___________
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.1750 and $0.2056 per share, respectively) (3,881,013) (4,696,388)
Distributions from net realized gains on investment transactions
($2.4979 and $1.8944 per share, respectively) (55,403,755) (43,254,533)
___________ ___________
Total distributions (59,284,768) (47,950,921)
___________ ___________
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued (811,818 and 1,264,903
shares, respectively) 24,896,099 33,523,121
Net asset value of shares issued in distributions from
net investment income and net realized gains
(1,967,328 and 1,867,730 shares, respectively) 55,675,398 45,012,292
Cost of shares redeemed (1,518,119 and 3,835,468
shares, respectively) (45,608,253) (102,224,623)
___________ ___________
Increase (decrease) in net assets derived from
capital share transactions 34,963,244 (23,689,210)
___________ ___________
Total increase in net assets 88,542,046 57,561,407
___________ ___________
NET ASSETS, at the beginning of the period (including undistributed net
investment income of $3,206,733 and $3,623,259, respectively) 682,233,977 624,672,570
___________ ___________
NET ASSETS, at the end of the period (including undistributed net
investment income of $591,825 and $3,206,733, respectively) $770,776,023 $682,233,977
___________ ___________
___________ ___________
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Six Months
Ended
March 31, Year Ended September 30,
1996 _______________________________________________
(unaudited) 1995 1994 1993 1992 1991
___________ _______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $30.07 $26.71 $26.94 $24.53 $23.87 $17.39
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .06 .24 .21 .21 .23 .26
Net gains or (losses) on securities
(realized and unrealized) 4.73 5.22 1.23 3.24 1.07 6.70
_____ _____ _____ _____ _____ _____
Total from investment operations 4.79 5.46 1.44 3.45 1.30 6.96
_____ _____ _____ _____ _____ _____
LESS DISTRIBUTIONS:
Dividends (from net investment income) (.18) (.21) (.20) (.24) (.24) (.34)
Distributions (from capital gains) (2.50) (1.89) (1.47) (.80) (.40) (.14)
_____ _____ _____ _____ _____ _____
Total distributions (2.68) (2.10) (1.67) (1.04) (.64) (.48)
_____ _____ _____ _____ _____ _____
NET ASSET VALUE, END OF PERIOD $32.18 $30.07 $26.71 $26.94 $24.53 $23.87
_____ _____ _____ _____ _____ _____
_____ _____ _____ _____ _____ _____
TOTAL RETURN 16.58%** 22.39% 5.49% 14.19% 5.59% 40.91%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $770.8 $682.2 $624.7 $715.8 $646.5 $490.9
Ratio of expenses to average net assets .64%* .66% .67% .67% .66% .70%
Ratio of net investment income
to average net assets .36%* .68% .72% .79% 1.01% 1.24%
Portfolio turnover rate 25.68%* 19.63% 17.38% 27.32% 11.47% 12.46%
Average commission rate paid by the Fund on
portfolio investment transactions $0.048 $0.048 _ _ _ _
</TABLE>
* Annualized
** Not annualized
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE>
HISTORICAL RECORD (UNAUDITED)
<TABLE>
<CAPTION>
Net Investment Dollar Growth of
Net Income 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, 1986 16.90 .163 .061 15.0 times 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 1.4700 18.5 41,020
September 30 1995 30.07 .2056 (a) 1.8944 (a) 20.8 50,205
December 31, 1995 28.73 .1750 (b) 2.4979 (b) 22.6 52,498
March 31, 1996 32.18 _ _ 26.7 58,802
* Date of Initial Public Offering (a) Paid December 31, 1994 to shareholders of record December 27, 1994.
** Based on latest 12 months accomplished earnings
*** Assuming reinvestment of all distributions (b) Paid December 31, 1995 to shareholders of record December 26, 1995.
</TABLE>
Range in quarter end price/earnings ratios
High Low
____________ ____________
3/31/96 26.7 9/30/85 11.7
TOP TEN EQUITY HOLDINGS (UNAUDITED)
<TABLE>
<S> <C>
March 31, 1996*
______________
Health Management Associates, Inc. - Class A 6.4%
Keane, Inc. 4.0%
VIVRA Incorporated 3.6%
Cardinal Health, Inc. 2.9%
General Motors Corporation - Class H 2.7%
Mutual Risk Management Ltd. 2.5%
Elan Corporation, plc 2.5%
Consolidated Stores Corporation 2.4%
Alco Standard Corporation 2.4%
Fiserv, Inc. 2.3%
</TABLE>
* Percentage of total net assets.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996 (UNAUDITED)
(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. Commercial paper is stated at market value with the resultant
difference between market value and original purchase price being
recorded as interest income. Investment transactions are recorded no
later than the first business day after the trade date. Cost
amounts, as reported on the schedule of investments and the statement
of assets and liabilities, are the same for Federal income tax
purposes. 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.
(e) The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from the estimates.
(2) Investment Adviser and Management Agreement -
The Fund has an agreement with Nicholas Company, Inc. (with whom certain
officers and directors of the Fund are affiliated) to serve as investment
adviser and manager. Under the terms of the agreement, a monthly fee is
paid to the investment adviser based on 1/16th of 1% (.75 of 1% on an
annual basis) of the average net asset value up to and including $50
million, 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 March 31,
1996, based on investment cost for Federal tax purposes is as follows:
Aggregate gross unrealized appreciation on investments $360,772,152
Aggregate gross unrealized depreciation on investments (3,073,165)
___________
Net unrealized appreciation $357,698,987
___________
___________
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996 (UNAUDITED)
(4) Investment Transactions -
For the period ended March 31, 1996, the cost of purchases and the
proceeds from sales of investment securities, other than short-term
obligations, aggregated $88,765,773 and $107,139,242, respectively.
(5) Transactions with Affiliates -
Following is an analysis of 1996 transactions with "affiliated companies"
as defined by the Investment Company Act of 1940:
<TABLE>
<CAPTION>
Amount of
Share Activity Dividends
_______________________________________ Credited
to Income
Balance Balance in Fiscal
Security Name 9/30/95 Purchases Sales 3/31/96 1996
_____________ _______ _________ _____ _______ _________
<S> <C> <C> <C> <C> <C>
Emeritus Corporation _ 426,000 _ 426,000 $ _
Keane, Inc. 963,675 55,000 _ 1,018,675 _
Litchfield Financial Corporation 330,750 _ _ 330,750 13,230
_______
$13,230
_______
_______
</TABLE>
AUTOMATIC INVESTMENT PLAN - AN UPDATE (UNAUDITED)
The Nicholas Family of Funds' Automatic Investment Plan provides a simple
method to dollar cost average into the fund(s) of your choice.
Dollar cost averaging involves making equal systematic investments over an
extended time period. A fixed dollar investment will purchase more shares
when the market is low and fewer shares when the market is high. The
automatic investment plan is an excellent way for you to become a
disciplined investor.
The following table illustrates what dollar cost averaging can achieve. Please
note that past performance is no guarantee of future results. Nicholas Company
recommends dollar cost averaging as a practical investment method. It should
be consistently applied for long periods (5-10 years or more) so that
investments are made through several market cycles. The table will be updated
and appear in future financial reports issued by the Nicholas Family of Funds.
<TABLE>
<CAPTION>
Nicholas II
___________
<S> <C>
$1,000 initial investment on 10-17-83
$100 invested on the last day of each month following
the date of the initial investment (in years) 12.5
Total cash invested $16,000
Total capital gains reinvested $ 9,005
Total dividends reinvested $ 2,496
Total full shares owned 3/31/96 1,393
Total market value on 3/31/96 $44,831
</TABLE>
The results above assume purchase on the last day of the month. The Nicholas
Automatic Investment Plan actually invests on the 20th of each month (or on the
alternate date specified by the investor). Total market value includes
reinvestment of all distributions.
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>
<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.
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SEMIANNUAL REPORT
NICHOLAS II, INC.
700 North
Water Street
Milwaukee,
Wisconsin 53202
March 31, 1996
