{letterhead}
January 31, 1996
VIA EDGAR TRANMISSION VIA FEDERAL EXPRESS
Securities and OFICS Filer Support
Exchange Commission SEC Operations Center
450 Fifth Street, N.W. 6432 General Green Way
Washington, D.C. 20540 Alexandria, VA 22312-2413
Re: Nicholas II, Inc. (the "Fund")
SEC File No. 2-85030
Post-Effective Amendment No. 12
Registration Statement on Form N-1A
Gentlemen:
In connection with the amendment by the Fund of its registration statement
on Form N-1A under Section 8 of the Investment Company Act of 1940, as amended,
and pursuant to the provisions of Rule 472 and Rule 485 under the Securities Act
of 1933, as amended, and pursuant to Regulation S-T relating to electronic
filings, we enclose for filing a copy of Post-Effective Amendment No. 12 to the
Registration Statement, including exhibits relating thereto, marked to show
changes effected by the Amendment. In addition, as prescribed by Rule 902(g) of
Regulation S-T, paper copies of Amendment No. 12 to the Registration Statement,
including exhibits thereto, also are being filed by copy of this letter.
This Amendment shall be effective on the date of filing, in accordance with
Rule 485(b). As legal counsel to the Fund, we have prepared the Amendment, and
we hereby represent pursuant to Rule 485(b)(4) that the Amendment does not
contain disclosures which would render it ineligible to become effective
pursuant to Rule 485(b).
Very truly yours,
MICHAEL BEST & FRIEDRICH
Kate M. Fleming
KMF/ljg
Enclosure
<PAGE>
As filed with the Securities and Exchange Commission on January 31, 1996
File No. 2-85030
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 12
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 12
NICHOLAS II, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
700 North Water Street, Milwaukee, Wisconsin 53202
- --------------------------------------------- -------
(Address of Principal Executive Offices) (Zip Code)
(414) 272-6133
----------------------------------------------------
(Registrant's Telephone Number, including Area Code)
ALBERT O. NICHOLAS, PRESIDENT
NICHOLAS II, INC.
700 NORTH WATER STREET
MILWAUKEE, WISCONSIN 53202
---------------------------------------
(Name and Address of Agent for Service)
Copy to:
KATE M. FLEMING
MICHAEL BEST & FRIEDRICH
100 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
x on January 31, 1996 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
___ on ________ pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph(a)(2)
on _______________ pursuant to paragraph (a)(2) of Rule 485
Pursuant to Rule 24f-2, the Registrant hereby registers an
indefinite amount of securities. On November 24, 1995,
Registrant filed the necessary Rule 24f-2 Notice and filing fee
with the Commission for its fiscal year ended September 30, 1995.
<PAGE>
NICHOLAS II, INC.
CROSS-REFERENCE SHEET
(As required by Rule 481(a))
Part A. Information Required in Prospectus Heading
- ------- ---------------------------------- ------
Item 1.0 Cover Page Cover Page
Item 2.0 Synopsis Performance Data
Item 3.0 Condensed Financial
Information Consolidated Disclosure
of Fund Fees and
Expenses; Financial
Highlights
Item 4.0 General Description of
Registrant Introduction; Investment
Objectives and Policies;
Investment Restrictions
Item 5.0 Management of the Fund Investment Adviser;
Management-Directors,
Executive Officers and
Portfolio Managers of the
Fund
Item 5A. Management's Discussion of Management's Discussion
Fund Performance of Fund Performance
Item 6.0 Capital Stock and Other
Securities Transfer of Capital
Stock; Dividends and
Federal Tax Status;
Capital Structure; Annual
Meeting; Shareholder
Reports
Item 7.0 Purchase of Securities Being
Offered Purchase of Capital
Stock; Redemption of
Capital Stock; Exchange
Between Funds; Transfer
of Capital Stock;
Determination of Net
Asset Value; Individual
Retirement Account;
Master Retirement Plan
Item 8.0 Redemption or Repurchase Purchase of Capital
Stock; Redemption of
Capital Stock
Item 9.0 Pending Legal Proceedings N/A
Part B. Information Required in a Statement of Additional Information
- ------- -------------------------------------------------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and
History Introduction
Item 13. Investment Objectives and
Policies Investment Objectives and
Policies; Investment
Restrictions
Item 14. Management of the Fund Investment Adviser;
Management - Directors,
Executive Officers and
Portfolio Managers of the
Fund
Item 15. Control Persons and Principal
Holders of Securities Principal Shareholders
Item 16. Investment Advisory
and Other Services Investment Adviser;
Custodian and Transfer
Agent; Independent
Accountants and Legal
Counsel
Item 17. Brokerage Allocation and
Other Practices Brokerage
<PAGE>
CROSS-REFERENCE SHEET
(Continued)
Item 18. Capital Stock and Other
Securities Transfer of Capital
Stock; Dividends and
Federal Tax Status;
Capital Structure; Stock
Certificates; Shareholder
Reports; Annual Meeting
Item 19. Purchase, Redemption and
Pricing
of Securities Being Offered Purchase of Capital
Stock; Redemption of
Capital Stock; Exchange
Between Funds; Transfer
of Capital Stock;
Determination of Net
Asset Value; Dividend
Reinvestment Plan;
Individual Retirement
Account; Master
Retirement Plan
Item 20. Tax Status Dividends and Federal Tax
Status
Item 21. Underwriters N/A
Item 22. Calculation of Performance
Data Performance Data
Item 23. Financial Statements Financial Information
Part C Other information
- ------ -----------------
Item 24. Financial Statements and
Exhibits Part C
Item 25. Persons Controlled By or
Under Common Control
with Registrant Part C
Item 26. Number of Holders of
Securities Part C
Item 27. Indemnification Part C
Item 28. Business and Other
Connections of Investment
Adviser Part C
Item 29. Principal Underwriters Part C
Item 30. Location of Accounts and
Records Part C
Item 31. Management Services Part C
Item 32. Undertakings Part C
<PAGE>
Nicholas II, Inc.
Form N-1A
PART A: PROSPECTUS
Nicholas II, Inc.
<PAGE>
NICHOLAS II, INC.
PROSPECTUS
700 North Water Street, Suite 1010
Milwaukee, Wisconsin 53202
414-272-6133
Nicholas II, Inc. (the "Fund") is an open-end management
investment company having as its investment objective long-term
growth in which income is a secondary consideration. To achieve
its objective, the Fund will invest in a diversified list of
common stocks that have growth potential.
NO-LOAD FUND - NO SALES CHARGE
Investment Adviser
NICHOLAS COMPANY, INC.
Minimum Initial Investment - $1,000
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS
THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus sets forth concisely the information about
the Fund that a prospective investor should know before
investing. Additional information about the Fund has been filed
with the Securities and Exchange Commission in the form of a
Statement of Additional Information dated January 31, 1996. Upon
request to the Fund at the address and telephone number set forth
above, the Fund will provide copies of the Statement of
Additional Information without charge to each person to whom a
Prospectus is delivered.
January 31, 1996
INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE
<PAGE>
TABLE OF CONTENTS
Page
Introduction 1
Consolidated Disclosure of Fund Fees and Expenses 1
Financial Highlights 2
Management's Discussion of Fund Performance 2
Performance Data 6
Investment Objectives and Policies 6
Investment Restrictions 8
Investment Adviser 9
Management - Directors,
Executive Officers and Portfolio Managers of the Fund 11
Purchase of Capital Stock 13
Redemption of Capital Stock 14
Exchange Between Funds 16
Transfer of Capital Stock 17
Determination of Net Asset Value 18
Dividends and Federal Tax Status 18
Dividend Reinvestment Plan 19
Individual Retirement Account 19
Master Retirement Plan 19
Capital Structure 19
Annual Meeting 20
Shareholder Reports 20
Custodian and Transfer Agent 20
Independent Accountants and Legal Counsel 20
No person has been authorized to give any information or to
make any representations other than those contained in this
Prospectus and the Statement of Additional Information dated
January 31, 1996 and, if given or made, such information or
representations may not be relied upon as having been authorized
by Nicholas II, Inc.
This Prospectus does not constitute an offer to sell
securities in any state or jurisdiction in which such offering
may not lawfully be made. The delivery of this Prospectus at any
time shall not imply that there has been no change in the affairs
of Nicholas II, Inc. since the date hereof.
<PAGE>
INTRODUCTION
Nicholas II, Inc. (the "Fund") was incorporated under the
laws of Maryland on June 28, 1983. The Fund is an open-end,
diversified management investment company registered under the
Investment Company Act of 1940, as amended. As an open-end
investment company, it obtains its assets by continuously selling
shares of its Common Stock, $0.01 par value per share, to the
public. Proceeds from such sales are invested by the Fund in
securities of other companies. 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").
CONSOLIDATED DISCLOSURE OF FUND FEES AND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as applicable) None
Redemption Fees (as a percentage of redemption
proceeds, if applicable)(1) None
Exchange Fee(2) None
ANNUAL FUND OPERATING EXPENSES(3) (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.52%
12b-1 Fees None
Other Expenses 0.14%
Total Fund Operating Expenses 0.66%
__________
(1) There is a $7.50 fee for federal fund wire redemptions.
(2) There is a $5.00 fee for telephone exchanges only.
(3) Annual Fund Operating Expenses are based on expenses incurred
for the fiscal year ended September 30, 1995.
EXAMPLE
1 Year 3 Years 5 Years 10 Years
------- ------- -------- --------
A shareholder would pay the
following expenses on a $1,000
investment, assuming: (1) 5%
annual return and (2) redemption
at the end of each period: $7 $21 $37 $82
This example should not be considered a representation of past
or future expenses. Actual expenses may be
greater or lesser than those shown.
The purpose of the table is to assist the prospective
investor in understanding the various costs and expenses that an
investor in the Fund will bear directly and indirectly. For a
description of "Management Fees" and "Other Expenses," see
"Investment Adviser."
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
The following Financial Highlights of the Fund for the ten
years ended September 30, 1995, have 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 September 30, 1995. The table should be read in
conjunction with the financial statements and related notes
included in the Fund's Annual Report which are incorporated
herein by reference.
<TABLE>
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 .24 .21 .21 .23 .26 .36 .29 .36 .24 .40
OPERATIONS:
Net investment income 5.22 1.23 3.24 1.07 6.70 (3.75) 3.31 (1.15) 4.80 2.33
Net gains or (losses) on
securities (realized
and unrealized) 5.46 1.44 3.45 1.30 6.96 (3.39) 3.60 (.79) 5.04 2.73
Total from investment
operations (.21) (.20) (.24) (.24) (.34) (.31) (.34) (.34) (.42) (.16)
LESS DISTRIBUTIONS:
Dividends (from net
investment income)
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 $43.3 $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% 0.79% 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>
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 Fund's primary objective is
long-term capital appreciation. In an effort to achieve this
objective, the Adviser purchases stocks for the Fund in small and
medium size companies that represent good value in relation to
their growth prospects.
<PAGE>
The Fund closed its fiscal year ended September 30, 1995 at
$30.07 per share, producing a total return of 22.39%, assuming
the reinvestment of dividends. In comparison, the total return
for the same period of the NASDAQ OTC Composite was 36.54%, the
S&P 500 was 29.71% and the Russell 2000 was 23.36%.
During the Fund's fiscal year ended September 30, 1995, the
technology sector continued its strong performance, as evidenced
by the overall strong performance of the NASDAQ market, which is
heavily weighted in technology issues versus other indices. The
Fund's overweighting in financials (12.3%), business services
(12.1%), retail trade (12.2%), industrial products and services
(12.5%) and health care related stocks (24.1%) accounted for much
of the Fund's performance over the past twelve months. The
Adviser believes the one year performance of the fund is
satisfying given the investment style and Fund objectives. When
compared to other indices, the Fund's performance lags somewhat.
However, this tends to happen when the markets are in a period of
strong upward movement. The Adviser will continue to invest
conservatively with an eye toward preservation of capital, which
usually will not lead to outperformance during a speculative bull
market. The Adviser's philosophy and the Fund objectives are
designed to outperform market indices during weak market periods
due to the conservatism and intolerance to risk and volatility.
The longer-term record of the Fund, with an average annual
total return of 17.01% and 13.04% for the five years and ten
years ended September 30, 1995, respectively, is in line with the
Fund's investment objectives and basically mirrors the market
averages. Considering the risk level, as measured by beta or
volatility which tends to be lower than that of the overall
market averages, the Adviser believes 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 for the period 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 the Adviser's view should
not be considered sustainable. The strong market has pushed
valuation measures such as dividend yields and price/earnings
ratios to all time highs. The Adviser believes 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. The Adviser
will continue to practice its investment philosophy developed
over many years of good and bad markets and believes the Fund's
performance should be measured over a complete market cycle.
Set forth below is a comparison of the initial account value
and subsequent account values at the end of each of the most
recently completed ten fiscal years of the Fund, and at the end
of the three months ended December 31, 1995, assuming a $10,000
investment in the Fund at the beginning of the first fiscal year,
to the same investment over the same periods in the Standard &
Poor's 500r Composite Stock Price Index, the Russell 2000 Index
and the NASDAQ OTC Composite Index.
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
NICHOLAS II, INC. AND S&P 500 INDEX, RUSSELL 2000 INDEX
AND NASDAQ OTC COMPOSITE INDEX
(The performance graph plot points are as follows:)
<TABLE>
<CAPTION>
Nicholas % total Russell % total S&P 500 % total Nasdaq % total
II return 2000 return Value return return
<S> <C> <C> <C> <C> <C> <C> <C> <C>
9/30/85 10,000 10,000 10,000 10,000
9/30/86 11,926 19.26% 12,203 22.03% 13,144 31.44% 12,510 25.10%
9/30/87 15,676 31.44% 15,790 29.40% 18,838 43.32% 15,849 26.70%
9/30/88 15,443 -1.48% 14,083 -10.81% 16,476 -12.54% 13,831 -12.73%
9/30/89 18,514 19.88% 17,109 21.49% 21,868 32.73% 16,872 21.99%
9/30/90 15,526 -16.14% 12,463 -27.16% 19,817 -9.38% 12,289 -27.16%
9/30/91 21,877 40.91% 18,083 45.09% 26,017 31.29% 18,796 52.94%
9/30/92 23,100 5.59% 19,701 8.95% 28,884 11.02% 20,809 10.71%
9/30/93 26,378 14.19% 26,229 33.14% 32,638 13.00% 27,213 30.78%
9/30/94 27,826 5.49% 26,931 2.68% 33,831 3.66% 27,268 0.20%
9/30/95 34,057 22.39% 33,223 23.36% 43,896 29.75% 37,224 36.51%
</TABLE>
<PAGE>
The Fund's average annual total returns for the one, five and
ten year periods ended on the last day of the most recent fiscal
year are as follows:
ONE YEAR ENDED FIVE YEARS ENDED TEN YEARS ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1995 SEPTEMBER 30, 1995
------------------ ------------------ ------------------
Average Annual
Total Return 22.39% 17.01% 13.0%
Past performance is not predictive of future performance.
PERFORMANCE DATA
The Fund may from time to time include its "total return" or
"average annual total return" 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 the total return discounted
for the number of represented time periods and is expressed as a
percentage. The rate represents the annual rate achieved on the
initial investment to arrive at the ending redeemable value. The
ending value assumes reinvestment of dividends and capital gains
and the reduction of account charges, if any. 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 the "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. For additional information regarding the
calculation of this performance data, see the Statement of
Additional Information.
In sales materials, reports and other communications to
shareholders, the Fund may compare its performance to certain
indices, including, the Standard & Poor's 500r Composite Stock
Price Index, the National Association of Securities Dealers
Automated Quotation System, 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, Lipper Analytical Services Mutual
Fund Performance Analysis and Morningstar Mutual Funds.
INVESTMENT OBJECTIVES AND POLICIES
The Fund has adopted primary investment objectives, which
are fundamental policies. The Fund also has adopted secondary
investment objectives and certain other policies which are not
fundamental and may be changed by the Board of Directors without
shareholder approval. However, any changes will be made only
upon advance notice to shareholders. Such changes may result in
the Fund having secondary investment and other policy objectives
different from the objectives which a shareholder considered
appropriate at the time of investment in the Fund.
The primary investment objective of the Fund is long-term
growth, and securities are selected for its portfolio on that
basis. Current income will be a secondary factor in considering
the selection of investments. There are market risks inherent in
any investment and there can be no assurance the objective of the
Fund will be realized, nor can there be any assurance against
possible loss in the value of the Fund's portfolio.
<PAGE>
It is the policy of the Fund to invest in securities which
are believed by both the Adviser and the Board of Directors of
the Fund to offer possibilities for increase in value, which for
the most part are common stocks of companies the Adviser
considers to have favorable long-term prospects. Since the major
portion of the Fund's portfolio consists of common stocks, its
net asset value may be subject to greater fluctuation than a
portfolio containing a substantial amount of fixed income
securities.
The Fund's investment philosophy is basically a long-term
growth philosophy, inherent in which is the assumption that if a
company achieves superior growth in sales and earnings,
eventually the company's stock will achieve superior performance.
While small and medium size companies often have a limited market
for their securities and limited financial resources, and are
usually more affected by changes in the economy in general, they
also may have the potential for more rapid, and greater,
long-term growth because of newer and more innovative products.
In seeking capital appreciation, the Fund will often purchase
common stock of small and medium size companies which often
fluctuates in price more than common stocks of larger companies,
such as many of those included in the Dow Jones Industrial
Average. The Adviser believes a company's annual sales volume
and the market capitalization of a company are the factors most
illustrative of a company's size and are factors commonly used by
investors in determining size. The following standards are used
by the Adviser in distinguishing company size and are considered
reasonable:
ANNUAL SALES VOLUME MARKET CAPITALIZATION
------------------- ---------------------
Small 0 to $500 Million 0 to $500 Million
Medium 500 Million to $1.0 Billion $500 Million to $2.0 Billion
Large Over $1.0 Billion Over $2.0 Billion
Securities of unseasoned companies, where the risks are
considerably greater than with securities of more established
companies, also may be acquired from time to time by the Fund
when the Adviser believes such investments offer possibilities of
capital appreciation. However, the Fund is limited to 5% in the
percentage of total Fund assets which may be invested in the
securities of unseasoned companies (i.e., companies which have a
record of less than three years continuous operation).
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, may
be acquired from time to time when the Adviser believes such
investments offer the possibility of appreciation in value. The
Adviser intends generally to limit the Fund's purchase of debt
securities and preferred stock to those which are rated in one of
the top four rating categories by any of the nationally
recognized statistical rating organizations ("NRSROs") as defined
in Section 270.2a-7 of the Code of Federal Regulations, or will
be unrated instruments but deemed by the Adviser to be comparable
in quality to instruments so rated on the date of purchase.
However, this policy will not preclude the Fund from retaining a
security if its credit quality is downgraded to a non-investment
grade level after purchase.
It is anticipated the major portion of the portfolio will be
invested in common stocks at all times. However, there is no
minimum or maximum percentage of the Fund's assets which is
required to be invested in any type of security. Cash and cash
equivalent securities will be retained by the Fund in an amount
sufficient to provide moderate liquid reserves so that the Fund
always has sufficient cash to meet shareholder redemption
requests and other operating expenses. The Fund reserves freedom
to temporarily invest its assets in investment grade fixed income
securities as a defensive measure when conditions are deemed to
warrant such action. "Investment grade fixed income securities"
refers to fixed income securities ranked in the top four debt
security rating categories by any of the NRSROs, or unrated but
deemed by the Adviser to be comparable in quality to instruments
so rated on the date of purchase. However, this policy will not
preclude the Fund from retaining a security if its credit quality
is downgraded to a non-investment grade level after purchase.
The fixed income securities described in the fourth category of
these rating services possess speculative characteristics. Non-
<PAGE>
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 capacity to pay
interest and repay principal than higher rated securities.
Because the market for lower rated securities may be thinner and
less active than for higher rated securities, there may be market
price volatility for these securities and limited liquidity in
the resale market. Factors adversely impacting the market value
of high yielding, high risk securities will adversely impact the
Fund's net asset value.
Securities are not purchased with a view to rapid turnover
or to obtain short-term trading profits. Short-term trading
profits are defined as profits on assets held less than twelve
months. The term "portfolio turnover rate" refers to the
percentage determined by dividing the lesser of the cost of
purchases or the proceeds from sales of portfolio securities
during the year by the average of the value of the portfolio
securities owned by the Fund during the year. "Portfolio
turnover rate" excludes investments in securities with less than
one year to maturity at the time of purchase.
The Fund has reserved the right to invest in repurchase
agreements as a defensive measure. Repurchase agreements may be
entered into only with a member bank of the Federal Reserve
System or a primary dealer in U.S. Government securities. While
the obligation is a U.S. Government security, the obligation of
the seller to repurchase the security is not guaranteed by the
U.S. Government, thereby creating the risk that the seller may
fail to repurchase the security. Furthermore, in the event of
default by the seller under a repurchase agreement construed to
be a collateralized loan, the underlying securities are not owned
by the Fund but only constitute collateral for the seller's
obligation to pay the repurchase price. Therefore, the Fund may
suffer time delays and incur costs or losses in connection with
the disposition of the collateral.
The Fund also may invest in securities which are issued in
private placements pursuant to Section 4(2) of the Securities Act
of 1933, as amended (the "Act"). Such securities are not
registered for purchase and sale by the public under the Act. The
determination of the liquidity of these securities is a question
of fact for the Board of Directors to determine, based upon the
trading markets for the specific security, the availability of
reliable price information and other relevant information. There
may be a risk of little or no market for resale associated with
such private placement securities if the Fund does not hold them
to maturity. In addition, to the extent that qualified
institutional buyers do not purchase restricted securities
pursuant to Rule 144A, the Fund's investing in such securities
may have the effect of increasing the level of illiquidity in the
Fund's portfolio. However, the Fund is limited in its
investments in Section 4(2) and Rule 144A debt securities by the
investment restriction set forth in 1(c) under "Investment
Restrictions" below. The Fund may invest generally up to 10% of
its total assets in securities of other investment companies.
Investments in the securities of other investment companies will
involve duplication of advisory fees and certain other expenses.
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 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) investment in repurchase agreements 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 days will not constitute more than
5% of the value of total net assets, taken at
market; and
<PAGE>
(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 5% of the
value of total net assets, taken at market, of the
Fund;
provided, however, that the total investment of
the Fund in repurchase agreements maturing in more than
seven days, when combined with the type of investment
set forth in 1(c) above, will not exceed 5% of the
value 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 net assets).
4. The Fund will not pledge any of its assets.
5. 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.
6. 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 (not including United
States Government securities).
7. Not more than 25% of the value of the Fund's total
net assets will be concentrated in companies of any one
industry or group of related industries.
8. 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 is an
officer, director, shareholder or other interested
person of the Adviser.
All percentage limitations apply on the date of investment
by the Fund.
In addition to the foregoing restrictions, the Fund has
adopted other restrictions to comply with the securities laws of
various states. These restrictions may be changed by the Board
of Directors of the Fund without shareholder approval. However,
so long as the securities of the Fund are registered for sale in
those states which require these restrictions, the restrictions
will not be changed.
INVESTMENT ADVISER
Under an investment advisory agreement dated June 30, 1983,
Nicholas Company, Inc., 700 North Water Street, Suite 1010,
Milwaukee, Wisconsin, 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. Nicholas Company, Inc. is the investment
adviser to five other mutual funds and to approximately 35
institutions and individuals with substantial investment
portfolios. The other funds for which Nicholas Company, Inc.
acts as investment adviser are Nicholas Fund, Inc., Nicholas
Income Fund, Inc., Nicholas Limited Edition, Inc., Nicholas Money
Market Fund, Inc. and Nicholas Equity Income Fund, Inc.
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 three-fourths of one percent (0.75 of
1%) of the average net asset value of the Fund, up to and
including $50,000,000, six-tenths of one percent (0.6 of 1%) of
the average net asset value over $50,000,000 to and including
$100,000,000 and one-half of one percent (0.5 of 1%) of the
average net asset value in excess of $100,000,000. The annual
fee of 0.75 of 1% is higher than that paid by most other
investment companies.
<PAGE>
Under the Investment Advisory Agreement, the Adviser, at its
own expense and without reimbursement from the Fund, furnishes
the Fund with office space, office facilities, executive officers
and executive expenses (such as health insurance premiums for
executive officers). The Adviser also bears 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. Included as
"operating expenses" are fees of 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, accounting and tax consulting
services, legal fees and expenses, printing, fees and expenses of
any custodian or trustee 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 any other costs related to the
aforementioned items.
The Adviser has undertaken to reimburse the Fund to the
extent that the aggregate annual operating expenses, including
the investment advisory fee, but excluding interest, taxes,
brokerage commissions, litigation and extraordinary expenses,
exceed the lowest, i.e., most restrictive, percentage of the
Fund's average net assets established by the laws of the states
in which the Fund's shares are registered for sale, as determined
by valuations made as of the close of each business day of the
year. The Adviser shall reimburse the Fund at the end of any
fiscal year in which the aggregate annual operating expenses
exceed such restrictive percentage.
Albert O. Nicholas is President and a Director of both the
Fund and 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.
Lynn S. Nicholas and David O. Nicholas, Senior Vice Presidents of
the Fund, are also Senior Vice Presidents of the Adviser. Lynn
Nicholas is the daughter of Albert O. Nicholas, and David
Nicholas is the son of Albert O. Nicholas. Kathleen A. Evans,
Assistant Vice President of the Fund, is also a Vice President of
the Adviser. Cheryl L. King, Vice President and Treasurer of the
Fund, and Candace L. Lesak, Vice President of the Fund, are also
employees of the Adviser. Jeffrey T. May, Vice President of the
Fund, also is Senior Vice President and Treasurer of the Adviser.
David E. Leichtfuss, 100 E. Wisconsin Avenue, Milwaukee,
Wisconsin is a Director and the Secretary of the Adviser. Mr.
Leichtfuss is a partner with the law firm of Michael Best &
Friedrich, Milwaukee, Wisconsin, legal counsel to the Fund and
the Adviser. Daniel J. Nicholas, 2618 Harlem Boulevard,
Rockford, Illinois, is the only other Director of the Adviser.
Mr. Nicholas, a brother of Albert O. Nicholas, is a private
investor.
91% of the outstanding voting securities of the Adviser are
owned by Albert O. Nicholas.
<PAGE>
MANAGEMENT - DIRECTORS, 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 following table sets forth the pertinent
information about the Fund's officers and directors as of
December 31, 1995:
NAME, AGE AND POSITIONS PRINCIPAL OCCUPATIONS
ADDRESS HELD WITH DURING PAST FIVE YEARS
FUND
------------- --------- ----------------------
* Albert O. Nicholas, 64 President and President and
700 N. Water Street Director Director, Nicholas
Milwaukee, WI 53202 Company, Inc., since
1967. He has been
Portfolio Manager
for, and primarily
responsible for the
day-to-day management
of, the portfolios of
Nicholas Fund, Inc.,
Nicholas Income Fund,
Inc., Nicholas Money
Market Fund, Inc. and
Nicholas Equity
Income Fund, Inc.
since the Nicholas
Company, Inc. has
served as investment
adviser for such
funds. He also was
Portfolio Manager for
the Fund 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, 62 Director Director and
10625 W. North Ave. Management
Wauwatosa, WI 53226 Consultant,
Professional
Management of
Milwaukee, Inc. He
offers financial
advice to members of
the medical and
dental professions
and is a Certified
Professional Business
Consultant.
Richard Seaman, 70 Director Management
5270 N. Maple Lane Consultant, on an
Nashotah, WI 53058 independent basis,
primarily in the
areas of mergers,
acquisitions and
strategic planning.
Robert H. Bock, 63 Director Professor of Business
3132 Waucheeta Trail Strategy, Ethics and
Madison, WI 53711 Venture Capital,
University of
Wisconsin School of
Business, since 1965.
From 1972 to 1984, he
was Dean of the
School of Business.
David L. Johnson, 53 Executive Vice Executive Vice
700 N. Water Street President President, Nicholas
Milwaukee, WI 53202 Company, Inc., the
Adviser to the Fund,
and employed by the
Adviser since 1980.
He is a Chartered
Financial Analyst.
<PAGE>
Thomas J. Saeger, 51 Executive Vice Executive Vice
700 N. Water Street President and President and
Milwaukee, WI 53202 Secretary Assistant Secretary,
Nicholas Company,
Inc., the Adviser to
the Fund, and
employed by the
Adviser since 1969.
He is a Certified
Public Accountant.
Lynn S. Nicholas, 39 Senior Vice Senior Vice
700 N. Water Street President President, Nicholas
Milwaukee, WI 53202 Company, Inc., the
Adviser to the Fund,
and employed by the
Adviser since
September 1983. She
is a Chartered
Financial Analyst.
David O. Nicholas, 34 Senior Vice Senior Vice
700 N. Water Street President and President, Nicholas
Milwaukee, WI 53202 Portfolio Company, Inc., the
Manager Adviser to the Fund,
and employed by the
Adviser since
December 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. He also
is a Chartered
Financial Analyst.
Candace L. Lesak, 38 Vice President Employee, Nicholas
700 N. Water Street Company, Inc., the
Milwaukee, WI 53202 Adviser to the Fund,
since February 1983.
She is a Certified
Financial Planner.
Jeffrey T. May, 39 Vice President Senior Vice President
700 N. Water Street and Treasurer,
Milwaukee, WI 53202 Nicholas Company,
Inc., the Adviser to
the Fund, and
employed by the
Adviser since July
1987. He is a
Certified Public
Accountant.
Cheryl L. King, 34 Vice President Employee, Nicholas
700 N. Water Street and Treasurer Company, Inc., the
Milwaukee, WI 53202 Adviser to the Fund,
since 1983. She is a
Certified Public
Accountant.
Kathleen A. Evans, 47 Assistant Vice Vice President,
700 N. Water Street President Nicholas Company,
Milwaukee, WI 53202 Inc., the Adviser to
the Fund, and
employed by the
Adviser since March
1985.
____________________
* Mr. 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.
Mr. David O. Nicholas is the Portfolio Manager of the Fund
and is primarily responsible for the day-to-day management of the
Fund's portfolio.
<PAGE>
PURCHASE OF CAPITAL STOCK
Applications for the purchase of shares are made to
Nicholas II, Inc., c/o Firstar Trust Company, P.0. Box 2944,
Milwaukee, Wisconsin 53201-2944. The Fund has available an
Automatic Investment Plan for shareholders. Anyone interested
should contact the Fund for additional information.
The price per share will be the net asset value next
computed after the time the application is received in proper
order and accepted by the Fund. The determination of the net
asset value for a particular day is applicable to all
applications for the purchase of shares received at or before the
close of trading on the New York Stock Exchange ("Exchange") on
that day (usually 4:00 p.m., New York time). Accordingly,
purchase orders received on a day the Exchange is open for
trading, prior to the close of trading on that day, will be
valued as of the close of trading on that day. Applications for
purchase of shares received after the close of trading on the
Exchange will be based on the net asset value as determined as of
the close of trading on the next day the Exchange is open.
The Fund does not consider the U.S. Postal Service or other
independent delivery services to be its agents. Therefore,
deposit in the mail or with such services, or receipt at Firstar
Trust Company's Post Office Box, of purchase applications or
redemption requests does not constitute receipt by Firstar Trust
Company or the Fund. Correspondence intended for overnight
courier should not be sent to the Post Office Box address.
OVERNIGHT COURIER DELIVERY SHOULD BE SENT TO FIRSTAR TRUST
COMPANY, THIRD FLOOR, 615 EAST MICHIGAN STREET, MILWAUKEE,
WISCONSIN 53202.
All applications to purchase capital stock are subject to
acceptance or rejection by authorized officers of the Fund and
are not binding until accepted. Applications will not be
accepted unless they are accompanied by payment in U.S. funds.
Payment should be made by check 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 custodian will charge a
$15 fee against a shareholder's account, in addition to any loss
sustained by the Fund, for any payment check returned to the
custodian for insufficient funds. It is the policy of the Fund
not to accept applications under circumstances or in amounts
considered disadvantageous for shareholders; for example, if an
individual previously tried to pay for shares with a bad check,
the Fund reserves the right not to accept future applications
from that individual. Any account (including custodial accounts)
opened without a proper social security number or taxpayer
identification number may be liquidated and distributed to the
owner(s) of record on the first business day following the 60th
day of investment, net of the back-up withholding tax amount.
The Board of Directors has established $1,000 as the minimum
initial purchase and $100 as the minimum for any subsequent
purchase, except in the case of reinvestment of distributions.
The Automatic Investment Plan has a minimum monthly investment of
$50. Due to the fixed expenses incurred by the Fund in
maintaining individual accounts, the Fund reserves the right to
redeem accounts that fall below the $1,000 minimum required
investment 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.
Purchase of shares will be made in full and fractional
shares computed to three decimal places. To purchase additional
shares of the Fund by federal wire transfer, please send to:
FIRSTAR BANK MILWAUKEE, N.A.
ABA #0750-00022
TRUST FUNDS, ACCOUNT #112-952-137
777 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202
FOR FURTHER CREDIT TO NICHOLAS II, INC.
[YOUR ACCOUNT NUMBER AND THE TITLE OF THE ACCOUNT]
<PAGE>
If a wire purchase is to be an initial purchase, please call
Firstar Trust Company (414-276-0535) with the appropriate account
information prior to sending the wire.
Shares of Common Stock of the Fund may be purchased or sold
through certain broker-dealers, financial institutions or other
service providers ("Processing Intermediaries"). When shares of
Common Stock of the Fund are purchased this way, the Processing
Intermediary, rather than its customer, 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. A processing
intermediary may be required to register as a broker or dealer
under certain laws.
An investor intending to invest in the Fund through a
Processing Intermediary should read the program materials
provided by the Processing Intermediary in conjunction with this
Prospectus. Processing Intermediaries may charge fees or other
charges for the services they provide to their customers.
Investors who do not wish to receive the services of a Processing
Intermediary, or pay the fees that may be charged for such
services, may want to consider investing directly with the Fund.
Direct purchase or sale of shares of Common Stock of the Fund may
be made without a sales or redemption charge.
Certificates representing Fund shares purchased will not be
issued unless the shareholder specifically requests certificates
by signed written request to the Fund. Certificates are mailed
to requesting shareholders approximately two weeks after receipt
of the request by the Fund. In no instance will certificates be
issued for fractional shares. Where certificates are not
requested, the Fund's transfer agent, Firstar Trust Company,
Milwaukee, Wisconsin, will credit the shareholder's account with
the number of shares purchased. Written confirmations are issued
for all purchases of Fund shares.
REDEMPTION OF CAPITAL STOCK
A shareholder may require the Fund to redeem shares in whole
or in part at any time during normal business hours. Redemption
requests must be signed by each shareholder in the exact manner
as the Fund account is registered and must state the amount of
redemption and identify the shareholder account number. When
shares are represented by certificates, redemption is
accomplished by delivering to the Fund, c/o Firstar Trust
Company, P.O. Box 2944, Milwaukee, Wisconsin 53201-2944, the
certificate(s) for the full shares to be redeemed. The
certificate(s) must be properly endorsed or accompanied by
instrument of transfer, in either case with signatures guaranteed
by an "eligible guarantor institution" as defined in Section
240.17Ad-15 of the Code of Federal Regulations. An "eligible
guarantor institution" includes a bank, a 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 certificates have not been issued, redemption is
accomplished by delivering an original signed written request for
redemption addressed to Nicholas II, Inc., c/o Firstar Trust
Company. Facsimile transmission of redemption requests is not
acceptable. 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. Written confirmations are
issued for all redemptions of Fund shares.
The Fund may require additional supporting documents for
redemptions made by corporations, executors, administrators,
trustees and guardians. Specifically, 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 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 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.
<PAGE>
If there is doubt as to what documents or instructions are
necessary in order to redeem shares, please write or call Firstar
Trust Company (414-276-0535), prior to submitting the redemption
request. A redemption request will not become effective until
all documents have been received in proper form by Firstar Trust
Company.
For federal income tax purposes, a redemption generally is
treated as a sale of the shares being redeemed, with the
shareholder recognizing capital gain or loss equal to the
difference between the redemption price and the shareholder's
cost for the shares being redeemed.
Shareholders who have an individual retirement account
("IRA"), a master retirement plan or other retirement plan must
indicate on their 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.
All redemptions will be processed immediately upon receipt.
Share redemption orders are effected at the net asset value next
determined after receipt of the order in proper form by the Fund.
Accordingly, shares tendered for redemption on a day the Exchange
is open for trading, prior to the close of trading on that day,
will be valued as of the close of trading on that day. Requests
for redemption of shares received after the close of trading on
the Exchange will be based on the net asset value as determined
as of the closing of trading on the next day the Exchange is
open. The redemption price will depend on the market value of
the investments in the Fund's portfolio at the time of redemption
and may be more or less than the cost of shares redeemed. The
Fund will return redemption requests that contain restrictions as
to the time or date redemptions are to be effected. The Fund
ordinarily will make payment 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.
The Fund reserves the right to hold payment up to 15 days or
until satisfied that investments made by check have been
collected. During the period prior to the time the shares are
redeemed, dividends on such shares will accrue and be payable.
The Fund does not consider the U.S. Postal Service or other
independent delivery services to be its agents. Therefore,
deposit in the mail or with such services or receipt at Firstar
Trust Company's Post Office Box of redemption requests does not
constitute receipt by Firstar Trust Company or the Fund. DO NOT
mail letters by overnight courier to the Post Office Box address.
CORRESPONDENCE MAILED BY OVERNIGHT COURIER SHOULD BE SENT TO THE
FIRSTAR TRUST COMPANY, THIRD FLOOR, 615 EAST MICHIGAN STREET,
MILWAUKEE, WISCONSIN 53202.
Telephone redemption is automatically extended to all
accounts in the Fund unless this privilege is declined in
writing. This option does not apply to IRA accounts and master
retirement plans for which Firstar Trust Company acts as
custodian. Telephone redemptions can only be made by calling
Firstar Trust Company at 800-544-6547 or (414) 276-0535. In
addition to the account registration, you will be required to
provide either the account number or social security number.
Telephone calls will be recorded. Telephone redemption
requests must be received prior to the closing of the New York
Stock Exchange (usually 4:00 p.m., New York time) to receive that
day's net asset value. There will be no exceptions due to market
activity. The maximum telephone redemption is $25,000 per
account/per business day. The maximum telephone redemption for
related accounts is $100,000 per business day. The minimum
telephone redemption is $1,000 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 Trust Company. Neither the Fund nor
Firstar Trust Company will be responsible for the authenticity of
redemption instructions received by telephone. As a result, the
shareholder will bear the risk of loss in the event of a
fraudulent telephone redemption. The staff of the Securities and
Exchange Commission is currently considering the propriety of
this policy.
<PAGE>
The shareholder may instruct Firstar Trust Company to mail
the proceeds to the address of record or to directly mail the
proceeds to a pre-authorized bank account. The proceeds also may
be wired to a pre-authorized account at a commercial bank in the
United States. Firstar Trust Company charges a fee for each
wire redemption, up to $10.00. Please contact the Fund for the
appropriate form if you are interested in setting your account
up with wiring instructions.
SIGNATURE GUARANTEES. A signature guarantee of each owner is
required to redeem shares in the following situations, for all
size transactions: (i) if you change the ownership on your
account; (ii) upon redemption of shares when certificates have
been issued for your account; (iii) when you want the redemption
proceeds sent to a different address than is registered on the
account; (iv) for both certificated and uncertificated shares, if
the proceeds are to be made payable to someone other than the
account owner(s); (v) any redemption transmitted by federal wire
transfer to your bank; and (vi) if a change of address request
has been received by the Fund or Firstar Trust Company within 15
days of a redemption request. In addition, signature guarantees
will be required for all redemptions of $100,000 or more from any
shareholder account in the Nicholas Family of Funds. A
redemption will not be processed until the signature guarantee,
if required, is received in proper form.
EXCHANGE BETWEEN FUNDS
If a shareholder chooses to exercise the exchange privilege,
the shares will be exchanged at their next determined net asset
value. When an exchange into the Nicholas Money Market Fund,
Inc. would involve investment of the exchanged amount on a day
when the New York Stock Exchange is open for trading but the
Federal Reserve Banks are closed, shares of the Fund will be
redeemed on the day upon which the exchange request is received;
however, issuance of Nicholas Money Market Fund, Inc. shares may
be delayed an additional day in order to avoid the dilutive
effect on return (i.e. reduction in net investment income per
share) which would result from issuance of such shares on a day
when the exchanged amount cannot be invested. In such a case,
the exchanged amount would be uninvested for this one day period.
Shareholders interested in exercising the exchange privilege must
obtain an authorization form and the appropriate prospectus from
Nicholas Company, Inc. An exchange constitutes a sale for
federal tax purposes and a capital gain or loss generally will be
recognized upon the exchange, depending upon whether the net
asset value at the time is more or less than the shareholder's
cost. An exchange between the funds involving master retirement
(Keogh) plan and IRA accounts generally will not constitute a
taxable transaction for federal tax purposes. This 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; however, procedures for exchanging Fund shares by
telephone may be modified or terminated at any time by the Fund
or Firstar Trust Company.
Shares of the Fund which have been outstanding at least 15
days may be exchanged for shares of other investment companies
for which Nicholas Company, Inc. serves as the investment adviser
and which permit such exchanges. Nicholas Company, Inc. is also
the investment adviser to Nicholas Fund, Inc., Nicholas Income
Fund, Inc., Nicholas Limited Edition, Inc., Nicholas Money Market
Fund, Inc. and Nicholas Equity Income Fund, Inc. Nicholas Fund,
Inc. has an investment objective of capital appreciation in which
income is a secondary consideration. Nicholas Income Fund,
Inc.'s investment objective is to seek high current income
consistent with the preservation and conservation of capital
value. Nicholas Limited Edition, Inc. has as its investment
objective long-term growth in which income is a secondary
consideration. Shareholders are reminded, however, that Nicholas
Limited Edition, Inc. is restricted in size to ten million
shares, and that the exchange privilege into that fund may be
terminated or modified at a time when that maximum is reached.
Nicholas Money Market Fund, Inc. has an investment objective of
achieving as high a level of current income as is consistent with
<PAGE>
preserving capital and providing liquidity. Nicholas Equity
Income Fund, Inc. has an investment objective of reasonable
income, with moderate long-term growth as a secondary
consideration. Exchanges by mail are available for all of these
funds. Exchanges by telephone are available only between the
Fund and Nicholas Money Market Fund, Inc. and between Nicholas
Fund, Inc. and Nicholas Money Market Fund, Inc. Exchange of
shares can be accomplished in the following ways:
Exchange by Mail. An exchange of shares of the Fund for
shares of other available Nicholas mutual funds will be made
without cost to the investor through written request.
Shareholders interested in exercising the exchange by mail
privilege may obtain the appropriate prospectus from Nicholas
Company, Inc.
Signatures required are the same as previously explained
under "Redemption of Capital Stock."
Exchange by Telephone. Shareholders may exchange by
telephone among all funds for which the Nicholas Company, Inc.
serves as investment adviser.
Only exchanges of $l,000 or more may be executed using the
telephone exchange privilege. Firstar Trust Company 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. Exchanges between the Fund and Nicholas Equity
Income Fund, Inc. are limited to $25,000 per day and $100,000 per
day for related accounts. Four telephone exchanges per account
during any twelve month period will be allowed.
Fund shares in IRA and master retirement plan accounts may be
exchanged by telephone to any of the Funds managed by the
Nicholas Company, Inc. Procedures for exchanging Fund shares
by telephone may be modified or terminated at any time by the
Fund or Firstar Trust Company. Neither the Fund nor Firstar
Trust Company will be responsible for the authenticity of
exchange instructions received by telephone.
Telephone exchanges can only be made by calling Firstar Trust
Company at (4l4) 276-0535. You will be required to provide
pertinent information regarding your account (social security
number or account number). Calls will be recorded.
TRANSFER OF CAPITAL STOCK
Shares of the Fund may be transferred 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. Documents and instructions necessary
to transfer capital stock can be obtained by writing or calling
Firstar Trust Company (414-276-0535) or Nicholas Company, Inc.
(414-272-6133) prior to submitting any transfer requests.
<PAGE>
DETERMINATION OF NET ASSET VALUE
The net asset value of a share of the Fund is determined by
dividing the total value of the net assets of the Fund 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 total assets. The net asset value is determined as of the
close of trading on the New York Stock Exchange on each day the
Exchange is open for unrestricted trading.
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. Other securities will be valued at the current bid
price. Any securities for which there are no readily available
market quotations will be valued at fair value, as determined in
good faith by the Board of Directors. Odd lot differentials and
brokerage commissions will be excluded in calculating values.
All assets other than securities will be valued at their then
current fair value as determined in good faith by the Board of
Directors.
DIVIDENDS AND FEDERAL TAX STATUS
The Fund intends to continue to qualify annually as a
"regulated investment company" under the Internal Revenue Code of
1986 and intends to take all other action required to ensure that
little or no federal income or excise taxes will be payable by
the Fund. As a result, the Fund generally will distribute
annually to its shareholders substantially all of its net
investment income and net capital gains (after utilization of any
available capital loss carryovers).
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. Long-
term capital gain distributed by the Fund will retain the
character that it had at the Fund level. Income distributed from
the Fund's net investment income and net realized short-term
capital gains are taxable to shareholders as ordinary income.
Distributions generally will be made annually in December. The
Fund will provide information to shareholders concerning the
character and federal tax treatment of any distribution.
Since at the time of purchase of shares the Fund may have
undistributed income or capital gains included in the computation
of the net asset value per share, 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, an investor must certify under penalties of perjury that
the taxpayer identification number supplied to the Fund is
correct and that he or she is 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. Shareholders should consult with a tax
adviser concerning the application of federal, state and local
taxes to an investment in the Fund.
<PAGE>
DIVIDEND REINVESTMENT PLAN
Unless a shareholder elects to accept cash in lieu of shares,
all dividend and capital gain distributions are automatically
reinvested in additional shares of the Fund through the Dividend
Reinvestment Plan. An election to accept cash may be made in an
application to purchase shares or by separate written
notification. All reinvestments are at the net asset value per
share in effect on the dividend or distribution record date and
are credited to the shareholder's account. Shareholders will be
advised of the number of shares purchased and the price following
each reinvestment.
Shareholders may withdraw from or thereafter elect to
participate in the Dividend Reinvestment Plan at any time by
giving written notice to the Transfer Agent. An election must be
received by the Transfer Agent 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 Dividend 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 Dividend Reinvestment Plan at any time on
30 days written notice to participants.
INDIVIDUAL RETIREMENT ACCOUNT
Individuals may be able to establish their own tax-sheltered
IRA. The Fund offers a prototype IRA plan for adoption by
individuals who qualify for spousal, deductible and
non-deductible IRA accounts.
As long as the aggregate IRA contributions meet the Fund's
minimum investment requirement of $1,000, 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 taxpayers to consult with their
personal tax adviser to determine the deductibility of their IRA
contributions.
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 you obtain up-to-date
information from the Fund before opening an IRA.
Because a retirement program involves commitments covering
future years, it is important that the investment objectives of
the Fund are consistent with your own retirement objectives.
Premature withdrawals from an IRA may result in adverse tax
consequences. Consultation with a tax adviser regarding tax
consequences is recommended.
MASTER RETIREMENT PLAN
The Fund has available a master retirement plan (formerly
called a "Keogh" Plan) for self-employed individuals. Any person
seeking additional information or wishing to participate in the
plan may contact the Fund. Consultation with a tax adviser
regarding the tax consequences of the plan is recommended.
CAPITAL STRUCTURE
The Fund is authorized to issue 200,000,000 shares of Common
Stock, par value $0.01 per share. Each full share has one vote
and all shares participate equally in dividends and other
distributions 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. Holders have no preemptive
rights and may not cumulate their votes in the election of
directors. Shares are redeemable and are transferable.
Fractional shares entitle the holder to the same rights as whole
shares.
<PAGE>
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 Investment Company Act
of 1940, as amended. The Fund has adopted the appropriate
provisions in its By-Laws and will not hold annual meetings of
shareholders for the following purposes unless otherwise required
to do so: (i) election of directors; (ii) approval of the
investment advisory agreement; (iii) ratification of the
selection of independent auditors; and (iv) approval of any
distribution agreement.
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 to do so by the record holders
of not less than l0% 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
Investment Company Act of 1940, as amended.
SHAREHOLDER REPORTS
Shareholders will be provided with a report or a current
prospectus showing the Fund's portfolio and other information at
least semiannually. After the close of the Fund's fiscal year,
which ends September 30, 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. Inquiries concerning the Fund may be made by
telephone at (414) 272-6133, or by writing to Nicholas II, Inc.,
700 North Water Street, Suite 1010, Milwaukee, Wisconsin 53202,
Attention: Corporate Secretary.
CUSTODIAN AND TRANSFER AGENT
Firstar Trust Company, 615 East Michigan Street, Milwaukee,
Wisconsin 53202, acts as Custodian and Transfer Agent of the
Fund.
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL
Arthur Andersen LLP, 100 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, has been selected as the independent accountants
for the Fund. Michael Best & Friedrich, 100 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202, has passed on the legality of
the shares of Common Stock of the Fund being offered.
<PAGE>
PROSPECTUS
NICHOLAS II, INC.
INVESTMENT ADVISER
NICHOLAS COMPANY, INC.
MILWAUKEE
CUSTODIAN AND TRANSFER AGENT
FIRSTAR TRUST COMPANY
MILWAUKEE 414/276-0535
INDEPENDENT PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN LLP
MILWAUKEE
COUNSEL
MICHAEL BEST & FRIEDRICH
MILWAUKEE
NICHOLAS II, INC.
700 NORTH WATER STREET
MILWAUKEE, WISCONSIN 53202
January 31, 1996
<PAGE>
Nicholas II, Inc
Form N-1A
Part B: Statement of Additional Information
<PAGE>
NICHOLAS II, INC.
STATEMENT OF ADDITIONAL INFORMATION
700 North Water Street, Suite 1010
Milwaukee, Wisconsin 53202
414-272-6133
This Statement of Additional Information, which is not a
prospectus, supplements and should be read in conjunction with
the current Prospectus of Nicholas II, Inc. (the "Fund"), dated
January 31, 1996, and the Fund's Annual Report for the fiscal
year ended September 30, 1995, which is incorporated herein by
reference, as they may be revised from time to time. To obtain a
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 CHARGE
Investment Adviser
NICHOLAS COMPANY, INC.
January 31, 1996
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION 1
INVESTMENT OBJECTIVES AND POLICIES 1
INVESTMENT RESTRICTIONS 3
INVESTMENT ADVISER 5
MANAGEMENT - DIRECTORS EXECUTIVE OFFICERS
OF THE FUND 7
PRINCIPAL SHAREHOLDERS 9
PURCHASE OF CAPITAL STOCK 10
REDEMPTION OF CAPITAL STOCK 11
EXCHANGE BETWEEN FUNDS 13
TRANSFER OF CAPITAL STOCK 14
DETERMINATION OF NET ASSET VALUE 14
DIVIDENDS AND FEDERAL TAX STATUS 15
DIVIDEND REINVESTMENT PLAN 15
INDIVIDUAL RETIREMENT ACCOUNT 16
MASTER RETIREMENT PLAN 16
BROKERAGE 16
PERFORMANCE DATA 17
CAPITAL STRUCTURE 19
STOCK CERTIFICATES 19
ANNUAL MEETING 19
SHAREHOLDER REPORTS 19
CUSTODIAN AND TRANSFER AGENT 19
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL 20
FINANCIAL INFORMATION 20
<PAGE>
INTRODUCTION
Nicholas II, Inc. ("Fund") was incorporated under the laws
of Maryland on June 28, 1983. The Fund is an open-end,
diversified management investment company registered under the
Investment Company Act of 1940, as amended. As an open-end
investment company, it obtains its assets by continuously selling
shares of its Common Stock, $01 par value per share, to the
public. Proceeds from such sales are invested by the Fund in
securities of other companies. 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. ("Adviser").
INVESTMENT OBJECTIVES AND POLICIES
The Fund has adopted primary investment objectives, which
are fundamental policies. The Fund also has adopted secondary
investment objectives and certain other policies which are not
fundamental and may be changed by the Board of Directors without
shareholder approval. However, any changes will be made only
upon advance notice to shareholders. Such changes may result in
the Fund having secondary investment and other policy objectives
different from the objectives which a shareholder considered
appropriate at the time of investment in the Fund.
The primary investment objective of the Fund is long-term
growth, and securities are selected for its portfolio on that
basis. Current income will be a secondary factor in considering
the selection of investments. There are market risks inherent in
any investment and there can be no assurance the objective of the
Fund will be realized, nor can there be any assurance against
possible loss in the value of the Fund's portfolio.
It is the policy of the Fund to invest in securities which
are believed by both the Adviser and the Board of Directors of
the Fund to offer possibilities for increase in value, which for
the most part are common stocks of companies the Adviser
considers to have favorable long-term prospects. Since the major
portion of the Fund's portfolio consists of common stocks, its
net asset value may be subject to greater fluctuation than a
portfolio containing a substantial amount of fixed income
securities.
The Fund's investment philosophy is basically a long-term
growth philosophy, inherent in which is the assumption that if a
company achieves superior growth in sales and earnings,
eventually the company's stock will achieve superior performance.
While small and medium size companies often have a limited market
for their securities and limited financial resources, and are
usually more affected by changes in the economy in general, they
also may have the potential for more rapid, and greater,
long-term growth because of newer and more innovative products.
The Adviser believes a company's annual sales volume and the
market capitalization of a company are the factors most
illustrative of a company's size and are factors commonly used by
investors in determining size. The following standards are used
by the Adviser in distinguishing company size and are considered
reasonable:
ANNUAL SALES VOLUME MARKET CAPITALIZATION
Small 0 to $500 Million 0 to $500 Million
Medium $500 Million to $1.0 Billion $500 Million to $2.0 Billion
Large Over $1.0 Billion Over $2.0 Billion
In seeking capital appreciation, the Fund will often
purchase common stock of small and medium size companies which
often fluctuates 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 more volatile, in both "up"
and "down" markets than most of the popular stock averages.
<PAGE>
Securities of unseasoned companies, where the risks are
considerably greater than with securities of more established
companies, also may be acquired from time to time by the Fund
when the Adviser believes such investments offer possibilities of
capital appreciation. However, the Fund is limited in the
percentage of total fund assets which may be invested in the
securities of unseasoned companies (i.e., companies which have a
record of less than three years continuous operation.)
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, may
be acquired from time to time when the Adviser believes such
investments offer the possibility of appreciation in value. The
Adviser intends generally to limit the Fund's purchase of debt
securities and preferred stock to those which are rated in one of
the top four rating categories by any of the nationally
recognized statistical rating organizations ("NRSROs") as defined
in Section 270.2a-7 of the Code of Federal Regulations, or will
be unrated instruments but deemed by the Adviser to be comparable
in quality to instruments so rated on the date of purchase.
However, this policy will not preclude the Fund from retaining a
security if its credit quality is downgraded to a non-investment
grade level after purchase.
It is anticipated the major portion of the portfolio will be
invested in common stocks at all times. However, there is no
minimum or maximum percentage of the Fund's assets which is
required to be invested in any type of security. Cash and cash
equivalent securities will be retained by the Fund in an amount
sufficient to provide moderate liquid reserves so that the Fund
always has sufficient cash to meet shareholder redemption
requests and other operating expenses. The Fund reserves freedom
to temporarily invest its assets in investment grade fixed income
securities as a defensive measure when conditions are deemed to
warrant such action. "Investment grade fixed income securities"
refers to fixed income securities ranked in the top four debt
security rating categories of any of the NRSROs, or unrated but
deemed by the Adviser to be comparable in quality to instruments
so rated on the date of purchase. However, this policy will not
preclude the Fund from retaining a security if its credit quality
is downgraded to a non-investment grade level after purchase.
The fixed income securities described in the fourth category of
these rating services possess speculative characteristics. 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 capacity to pay
interest and repay principal than higher rated securities.
Because the market for lower rated securities may be thinner and
less active than for higher rated securities, there may be market
price volatility for these securities and limited liquidity in
the resale market. Factors adversely impacting the market value
of high yielding, high risk securities will adversely impact the
Fund's net asset value.
Securities are not purchased with a view to rapid turnover
or to obtain short-term trading profits. Short-term trading
profits are defined as profits on assets held less than twelve
months. The term "portfolio turnover rate" refers to the
percentage determined by dividing the lesser of the cost of
purchases or the proceeds from sales of portfolio securities
during the year by the average of the value of the portfolio
securities owned by the Fund during the year. "Portfolio
turnover rate" excludes investments in securities with less than
one year to maturity at the time of purchase.
The Fund has reserved the right to invest in repurchase
agreements as a defensive measure. Repurchase agreements may be
entered into only with a member bank of the Federal Reserve
System or a primary dealer in U.S. Government securities. Under
such agreements, the bank or primary dealer agrees, upon entering
into the contract, to repurchase the security from the Fund at a
mutually agreed upon time and price. The prices at which the
trades are conducted do not reflect accrued interest on the
underlying obligation. While the obligation is a U.S. Government
security, the obligation of the seller to repurchase the security
is not guaranteed by the U.S. Government, thereby creating the
risk that the seller may fail to repurchase the security.
Repurchase agreements may be construed to be collateralized
loans by the purchaser to the seller secured by the securities
transferred to the purchaser. The Fund will require the seller
to provide additional collateral if the market value of the
securities falls below the repurchase price at any time during
the term of the repurchase agreement. In the event of default by
the seller under a repurchase agreement construed to be a
collateralized loan, the underlying securities are not owned by
the Fund but only constitute collateral for the seller's
obligation to pay the repurchase price. Therefore, the Fund may
suffer time delays and incur costs or losses in connection with
the disposition of the collateral. The Fund would also retain
<PAGE>
ownership of the securities in the event of a default under a
repurchase agreement that is construed not to be a collateralized
loan. In such event, the Fund would also have rights against the
seller for breach of contract with respect to any losses arising
from market fluctuations following the failure of the seller to
perform.
The Fund also may invest in securities which are issued in
private placements pursuant to Section 4(2) of the Securities Act
of 1933, as amended (the "Act"). Such securities are not
registered for purchase and sale by the public under the Act.
The determination of the liquidity of these securities is a
question of fact for the Board of Directors to determine, based
upon the trading markets for the specific security, the
availability of reliable price information and other relevant
information. There may be a risk of little or no market for
resale associated with such private placement securities if the
Fund does not hold them to maturity. In addition, to the extent
that qualified institutional buyers do not purchase restricted
securities pursuant to Rule 144A, the Fund's investing in such
securities may have the effect of increasing the level of
illiquidity in the Fund's portfolio. However, the Fund is
limited in its investments in Section 4(2) and Rule 144A debt
securities by the investment restriction set forth in 1(c) under
"Investment Restrictions" below. The Fund may invest generally
up to 10% of its total assets in securities of other investment
companies. Investments in the securities of other investment
companies will involve duplication of advisory fees and certain
other expenses.
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 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) investment in repurchase agreements 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 days will not constitute more than
5% of the value of 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 5% of the
value of total net assets, taken at market, of the
Fund;
provided, however, that the total investment of
the Fund in repurchase agreements maturing in more than
seven days, when combined with the type of investment
set forth in 1(c) above, will not exceed 5% of the
value 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 net assets).
4. The Fund will not pledge any of its assets.
<PAGE>
5. 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.
6. 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 (not including United
States Government securities).
7. Not more than 25% of the value of the Fund's total
net assets will be concentrated in companies of any one
industry or group of related industries.
8. 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 is an
officer, director, shareholder or other interested
person of the Adviser.
In addition to the foregoing restrictions, the Fund has
adopted the following restrictions which may be changed by the
Board of Directors of the Fund without shareholder approval.
However, so long as the securities of the Fund are registered for
sale in those states which require these restrictions, the
restrictions will not be changed. Any such change would be made
only upon advance notice to shareholders in the form of an
amended Statement of Additional Information filed with the
Securities and Exchange Commission.
1. The Fund will not acquire or retain any security
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 (.5 of 1%) of such company's stock or
other securities, and all of the foregoing persons
owning more than one-half of one percent (.5 of 1%)
together own more than 5% of such stock or security.
2. The Fund will not invest more than 5% of its total
net assets in equity securities which are not readily
marketable and in securities of unseasoned companies
(i.e., companies which have a record of less than three
years' continuous operation, including the operation of
any predecessor business of a company which came into
existence as a result of a merger, consolidation,
reorganization or purchase of substantially all of the
assets of such predecessor business).
3. The Fund will not invest in interests in oil, gas
or other mineral exploration programs, but this shall
not prohibit the Fund from investing in securities of
companies engaged in oil, gas or mineral activities.
4. The Fund will not invest in puts, calls,
straddles, spreads or any combination thereof.
5. The Fund will not purchase any securities which
would cause more than 2% of its total net assets at the
time of such purchase to be invested in warrants which
are not listed on the New York Stock Exchange or the
American Stock Exchange, or would cause more than 5% of
its total net assets to be invested in warrants whether
or not so listed, such warrants in each case to be
valued at the lesser of cost or market, but assigning
no value to warrants acquired by the Fund in units with
or attached to debt securities.
6. The Fund will not invest more than 10% of its
total net assets in restricted securities (i.e.,
securities acquired directly or indirectly from an
issuer, or from a person in a control relationship with
such an issuer (an affiliate) in a transaction or chain
of transactions not involving any public offering.)
7. Securities of other open-end investment companies
will not be purchased.
<PAGE>
8. The Fund will not invest in bonds, debentures or
other debt securities of types commonly distributed in
private placements to financial institutions,
repurchase agreements maturing in more than seven days,
other securities that are not readily marketable, and
all other illiquid securities which, taken in the
aggregate, would exceed 10% of the value of the Fund's
total net assets.
9. The Fund may not issue senior securities in
violation of the Investment Company Act of 1940, as
amended. 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 the Fund's total net assets.
All percentage limitations apply on the date of investment
by the Fund. As a result, if a percentage restriction is adhered
to at the time of investment, a later increase in percentage
resulting from a change in market value of the investment or the
total assets of the Fund will not constitute a violation of that
restriction.
INVESTMENT ADVISER
Under an investment advisory agreement dated June 30, 1983,
Nicholas Company, Inc., 700 North Water Street, Suite 1010,
Milwaukee, Wisconsin, 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
approximately 35 institutions and individuals with substantial
investment portfolios, and to five other mutual funds, which are
sold without sales charge. The other funds for which the Adviser
serves as investment adviser are Nicholas Fund, Inc., Nicholas
Income Fund, Inc., Nicholas Limited Edition, Inc., Nicholas Money
Market Fund, Inc. and Nicholas Equity Income Fund, Inc.
Nicholas Fund, Inc. has a primary objective of capital
appreciation. It had net assets of $3,281,652,640 as of
September 30, 1995. Nicholas Income Fund, Inc. had net assets of
$156,833,331 as of September 30, 1995. Its investment objective
is high current income consistent with the preservation and
conservation of capital values. Nicholas Limited Edition, Inc.
had net assets of $164,363,716 as of September 30, 1995 Its
investment objective is long-term growth in which income is a
secondary consideration. Nicholas Money Market Fund, Inc. had
net assets of $110,125,921 as of September 30, 1995. Its
investment objective is achieving as high a level of current
income as is consistent with preserving capital and providing
liquidity. Nicholas Equity Income Fund, Inc. has a primary
investment objective to produce reasonable income for the
investor, and had net assets of $13,926,751 as of September 30,
1995.
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 three-fourths of one percent (0.75 of
1%) of the average net asset value of the Fund, up to and
including $50,000,000, six-tenths of one percent (.6 of 1%) of
the average net asset value over $50,000,000 to and including
$100,000,000, and one-half of one percent (.5 of 1%) of the
average net asset value in excess of $100,000,000. The annual
fee of 0.75 of 1% is higher than that paid by most other
investment companies. As of September 30, 1995, total net assets
of the Fund were $682,233,977. The fee paid to the Adviser for
the fiscal year of the Fund ended September 30, 1995 was
$3,321,192.
Under the Investment Advisory Agreement, the Adviser, at its
own expense and without reimbursement from the Fund, furnishes
the Fund with office space, office facilities, executive officers
and executive expenses (such as health insurance premiums for
executive officers). The Adviser also bears all sales and
promotional expenses of the Fund other than expenses incurred in
complying with laws regulating the issue or sale of securities,
and fees paid for attendance at Board meetings to directors who
are not interested persons of the Adviser or officers or
employees of the Fund. The Fund pays all of its operating
expenses, including, but not limited to, the costs of preparing
and printing post-effective amendments to its registration
statements required under the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, and any
amendments thereto and of preparing and printing registration
statements in the various states, the printing and distribution
cost of prospectuses mailed to existing shareholders, the cost of
stock certificates, reports to shareholders, interest charges,
taxes and legal expenses. Also included as "operating expenses"
<PAGE>
which are paid by the Fund are fees of 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, accounting and tax
consulting services, 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 any other costs related to the
aforementioned items.
The Adviser has undertaken to reimburse the Fund to the
extent the aggregate annual operating expenses, including the
investment advisory fee, but excluding interest, taxes, brokerage
commissions, litigation and extraordinary expenses exceed the
lowest, i.e., most restrictive, percentage of the Fund's average
net assets established by the laws of the states in which the
Fund's shares are registered for sale, as determined by
valuations made as of the close of each business day of the year.
The Adviser shall, on a monthly basis, reimburse the Fund by
offsetting against its monthly fee all expenses in excess of
these amounts as pro rated on an annual basis. During the fiscal
years ended September 30, 1995, September 30, 1994, and
September 30, 1993, the Fund paid the Adviser an aggregate of
$3,321,192, $3,491,703 and $3,788,131, respectively, in fees.
During none of the foregoing fiscal years did the expenses borne
by the Fund exceed the expense limitation then in effect and the
Adviser was not required to reimburse the Fund for any additional
expenses.
The Investment Advisory Agreement with the Adviser is not
assignable and may be terminated by either party, without
penalty, on 60 days notice. Otherwise, the Investment Advisory
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 Investment Advisory Agreement or "interested persons" of
the Adviser or of the Fund, as defined in the Investment Company
Act of 1940, as amended, cast in person at a meeting called for
the purpose of voting for such approval.
The Investment Advisory Agreement with the Adviser provides
for payment by the Fund of fees for attendance at meetings of the
Fund's Board of Directors to directors who are not interested
persons of the Fund. The amount of such fees is subject to
increase or decrease at any time, but is subject to the overall
limitation of the Fund's annual expenses. During the fiscal year
ended September 30, 1995, a total of $12,000 was paid in fees to
the Fund's non-interested directors, including reimbursed out-of-
pocket travel expenses.
Albert O. Nicholas is President and a Director of both the
Fund and 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.
Lynn S. Nicholas and David O. Nicholas, Senior Vice Presidents of
the Fund, are also Senior Vice Presidents of the Adviser. Lynn
S. Nicholas is the daughter of Albert O. Nicholas, and David
Nicholas is the son of Albert O. Nicholas. Kathleen A. Evans,
Assistant Vice President of the Fund, is also a Vice President of
the Adviser. Cheryl L. King, Vice President and Treasurer of the
Fund, and Candace L. Lesak, Vice President of the Fund, are also
employees of the Adviser. Jeffrey T. May, Vice President of the
Fund, also is Senior Vice President and Treasurer of the Adviser.
David E. Leichtfuss, 100 E. Wisconsin Avenue, Milwaukee,
Wisconsin is a Director and the Secretary of the Adviser. Mr.
Leichtfuss is a partner with the law firm of Michael Best &
Friedrich, Milwaukee, Wisconsin, legal counsel to the Fund and
the Adviser. Daniel J. Nicholas, 2618 Harlem Boulevard,
Rockford, Illinois, is the only other Director of the Adviser.
Mr. Nicholas, a brother of Albert O. Nicholas, is a private
investor.
91% of the outstanding voting securities of the Adviser are
owned by Albert O. Nicholas.
<PAGE>
MANAGEMENT - DIRECTORS, EXECUTIVE OFFICERS
AND PORTFOLIO MANAGERS 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 following table sets forth the pertinent
information about the Fund's officers and directors as of
December 31, 1995:
NAME, AGE AND POSITIONS HELD PRINCIPAL OCCUPATIONS
ADDRESS WITH FUND DURING PAST FIVE YEARS
Albert O. Nicholas, 64 President and President and
700 N. Water Street Director Director, Nicholas
Milwaukee, WI 53202 Company, Inc., since
1967. He has been
Portfolio Manager
for, and primarily
Responsible for the
day-to-day management
of, the portfolios of
Nicholas Fund, Inc.,
Nicholas Income Fund,
Inc., Nicholas Money
Market Fund, Inc. and
Nicholas Equity
Income Fund, Inc.
since the Nicholas
Company, Inc. has
served as investment
adviser for such
funds. He also was
Portfolio Manager for
the Fund 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, 62 Director Director and
10625 W. North Ave. Management
Wauwatosa, WI 53226 Consultant,
Professional
Management of
Milwaukee, Inc. He
offers financial
advice to members of
the medical and
dental professions
and is a Certified
Professional Business
Consultant.
Richard Seaman, 70 Director Management
5270 N. Maple Lane Consultant, on an
Nashotah, WI 53058 independent basis,
primarily in the
areas of mergers,
acquisitions and
strategic planning.
Robert H. Bock, 63 Director Professor of Business
3132 Waucheeta Trail Strategy, Ethics and
Madison, WI 53711 Venture Capital,
University of
Wisconsin School of
Business, since 1965.
From 1972 to 1984, he
was Dean of the
School of Business.
David L. Johnson, 53 Executive Vice Executive Vice
700 N. Water Street President President, Nicholas
Milwaukee, WI 53202 Company, Inc., the
Adviser to the Fund,
and employed by the
Adviser since 1980.
He is a Chartered
Financial Analyst.
Thomas J. Saeger, 51 Executive Vice Executive Vice
700 N. Water Street President and President and
Milwaukee, WI 53202 Secretary Assistant Secretary,
Nicholas Company,
Inc., the Adviser to
the Fund, and
employed by the
Adviser since 1969.
He is a Certified
Public Accountant.
Lynn S. Nicholas, 39 Senior Vice Senior Vice
700 N. Water Street President President, Nicholas
Milwaukee, WI 53202 Company, Inc., the
Adviser to the Fund,
and employed by the
Adviser since
September 1983. She
is a Chartered
Financial Analyst.
David O. Nicholas, 34 Senior Vice Senior Vice
700 N. Water Street President and President, Nicholas
Milwaukee, WI 53202 Portfolio Company, Inc., the
Manager Adviser to the Fund,
and employed by the
Adviser since
December 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. He also
is a Chartered
Financial Analyst.
Candace L. Lesak, 38 Vice President Employee, Nicholas
700 N. Water Street Company, Inc., the
Milwaukee, WI 53202 Adviser to the Fund,
since February 1983.
She is a Certified
Financial Planner.
Jeffrey T. May, 39 Vice President Senior Vice President
700 N. Water Street and Treasurer,
Milwaukee, WI 53202 Nicholas Company,
Inc., the Adviser to
the Fund, and
employed by the
Adviser since July
1987. He is a
Certified Public
Accountant.
Cheryl L. King, 34 Vice President Employee, Nicholas
700 N. Water Street and Treasurer Company, Inc., the
Milwaukee, WI 53202 Adviser to the Fund,
since 1983. She is a
Certified Public
Accountant.
Kathleen A. Evans, 47 Assistant Vice Vice President,
700 N. Water Street President Nicholas Company,
Milwaukee, WI 53202 Inc., the Adviser to
the Fund, and
employed by the
Adviser since March
1985.
* Mr. 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.
Reference is made to the Section "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.
<PAGE>
Mr. Nicholas is a member of the Board of Directors of
Nicholas Fund, Inc., Nicholas Income Fund, Inc., Nicholas Limited
Edition, Inc., Nicholas Money Market Fund, Inc. and Nicholas
Equity Income Fund, Inc. Messrs. Bock and Seaman serve as
directors of Nicholas Fund, Inc. and Nicholas Equity Income Fund,
Inc. Mr. Schultz is a member of the Board of Directors of
Nicholas Fund, Inc., Nicholas Limited Edition, Inc., Nicholas
Equity Income Fund, Inc., Nicholas Income Fund, Inc. and Nicholas
Money Market Fund, Inc.
The Investment Advisory Agreement between the Fund and
Nicholas Company, Inc. states that the Fund shall pay the
directors' fees of directors who are not interested persons of
Nicholas II, Inc. The amount of such fees is subject to increase
or decrease at any time, but is subject to the overall limitation
on the Fund's annual expenses.
The table below sets forth the aggregate compensation
received from the Fund by all directors of the Fund during the
fiscal year ended September 30, 1995. 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>
AGGREGATE PENSION OR RETIREMENT ESTIMATED TOTAL COMPENSATION
COMPENSATION BENRFITS ACCRUED AS ANNUAL BENEFITS FROM FUND AND FUND
NAME AND POSITION FROM THE FUND PART OF FUND EXPENSES UPON RETIREMENT COMPLEX PAID TO DIRECTORS(1)
<S> <C> <C> <C> <C>
Albert O. Nicholas(2) $0 $0 $0 $0
Melvin L. Schultz(2) $4,000 $0 $0 $13,400
Richard Seaman(2) $4,000 $0 $0 $10,200
Robert H. Bock(2) $4,000 $0 $0 $10,374
</TABLE>
(1) During the fiscal year ended September 30, 1995, the Fund and
other funds in its Fund Complex (i.e., those funds which also
have Nicholas Company, Inc. as its investment adviser, namely
Nicholas Fund, Inc., Nicholas Equity Income Fund, 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
September 30, 1995, the Fund compensated the disinterested
directors at a rate of $500 per director per meeting attended
and an annual retainer of $2,000 per year. The disinterested
directors did not receive any other form or amount of
compensation from the Fund Complex during the fiscal year
ended September 30, 1995. All other directors and officers
of the Fund were compensated by the Adviser in accordance
with its investment advisory agreement.
(2) Mr. Nicholas also is a member of the Board of Directors of
Nicholas Fund, Inc., Nicholas II, Inc., Nicholas Limited
Edition, Inc., Nicholas Income Fund, Inc. and Nicholas Money
Market Fund, Inc. Mr. Schultz also is a member of the Board
of Directors of Nicholas Fund, Inc., Nicholas Limited Edition,
Inc., Nicholas Income Fund, Inc., Nicholas Equity Income Fund,
Inc. and Nicholas Money Market Fund, Inc. Mr. Seaman also is
a member of the Board of Directors of Nicholas Fund, Inc. and
Nicholas II, Inc. Mr. Bock also is a member of the Board of
Directors of Nicholas Fund, Inc. and Nicholas II, Inc.
PRINCIPAL SHAREHOLDERS
No persons are known to the Fund to own beneficially or of
record 5% or more of the full shares of Common Stock of the Fund
<PAGE>
as of September 30, 1995. All directors and executive officers
of the Fund as a group (12 in number) own approximately 0.67% of
the full shares of Common Stock of the Fund as of September 30,
1995.
<PAGE>
PURCHASE OF CAPITAL STOCK
Applications for the purchase of shares are made to
Nicholas II, Inc., c/o Firstar Trust Company, P.0. Box 2944,
Milwaukee, Wisconsin 53201-2944. [The Fund has available an
Automatic Investment Plan for shareholders. Anyone interested
should contact the Fund for additional information.]
The price per share will be the net asset value next
computed after the time the application is received in proper
order and accepted by the Fund. The determination of the net
asset value for a particular day is applicable to all
applications for the purchase of shares received at or before the
close of trading on the New York Stock Exchange ("Exchange") on
that day (usually 4:00 p.m., New York time). Accordingly,
purchase orders received on a day the Exchange is open for
trading, prior to the close of trading on that day, will be
valued as of the close of trading on that day. Applications for
purchase of shares received after the close of trading on the
Exchange will be based on the net asset value as determined as of
the close of trading on the next day the Exchange is open.
The Fund does not consider the U.S. Postal Service or other
independent delivery services to be its agents. Therefore,
deposit in the mail or with such services, or receipt at Firstar
Trust Company's Post Office Box, of purchase applications or
redemption requests does not constitute receipt by Firstar Trust
Company or the Fund. Correspondence intended for overnight
courier should not be sent to the Post Office Box address.
OVERNIGHT COURIER DELIVERY SHOULD BE SENT TO FIRSTAR TRUST
COMPANY, THIRD FLOOR, 615 EAST MICHIGAN STREET, MILWAUKEE,
WISCONSIN 53202.
All applications to purchase capital stock are subject to
acceptance or rejection by authorized officers of the Fund and
are not binding until accepted. Applications will not be
accepted unless they are accompanied by payment in U.S. funds.
Payment should be made by check drawn on a U.S. bank, savings &
loan or credit union. Checks are accepted subject to collection
at full face value in U.S. funds. The custodian will charge a
$15 fee against a shareholder's account, in addition to any loss
sustained by the Fund, for any payment check returned to the
custodian for insufficient funds. It is the policy of the Fund
not to accept applications under circumstances or in amounts
considered disadvantageous for shareholders; for example, if an
individual previously tried to pay for shares with a bad check,
the Fund reserves the right not to accept future applications
from that individual. Any account (including custodial accounts)
opened without a proper social security number or taxpayer
identification number may be liquidated and distributed to the
owner(s) of record on the first business day following the 60th
day of investment, net of the back-up withholding tax amount.
The Board of Directors has established $1,000 as the minimum
initial purchase and $100 as the minimum for any subsequent
purchase, except in the case of reinvestment of distributions.
The Automatic Investment Plan has a minimum monthly investment of
$50. Due to the fixed expenses incurred by the Fund in
maintaining individual accounts, the Fund reserves the right to
redeem accounts that fall below the $1,000 minimum required
investment 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.
Purchase of shares will be made in full and fractional
shares computed to three decimal places. To purchase additional
shares of the Fund by federal wire transfer, please send to:
FIRSTAR BANK MILWAUKEE, N.A.
ABA #0750-00022
TRUST FUNDS, ACCOUNT #112-952-137
777 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202
FOR FURTHER CREDIT TO NICHOLAS II, INC.
[YOUR ACCOUNT NUMBER AND THE TITLE OF THE ACCOUNT]
If a wire purchase is to be an initial purchase, please call
Firstar Trust Company (414-765-4124) with the appropriate account
information prior to sending the wire.
<PAGE>
Shares of Common Stock of the Fund may be purchased or sold
through certain broker-dealers, financial institutions or other
service providers ("Processing Intermediaries"). When shares of
Common Stock of the Fund are purchased this way, the Processing
Intermediary, rather than its customer, 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. A processing
intermediary may be required to register as a broker or dealer
under certain State laws.
An investor intending to invest in the Fund through a
Processing Intermediary should read the program materials
provided by the Processing Intermediary in conjunction with this
Prospectus. Processing Intermediaries may charge fees or other
charges for the services they provide to their customers.
Investors who do not wish to receive the services of a Processing
Intermediary, or pay the fees that may be charged for such
services, may want to consider investing directly with the Fund.
Direct purchase or sale of shares of Common Stock of the Fund may
be made without a sales or redemption charge.
Certificates representing Fund shares purchased will not be
issued unless the shareholder specifically requests certificates
by signed written request to the Fund. Certificates are mailed
to requesting shareholders approximately two weeks after receipt
of the request by the Fund. In no instance will certificates be
issued for fractional shares. Where certificates are not
requested, the Fund's transfer agent, Firstar Trust Company,
Milwaukee, Wisconsin, will credit the shareholder's account with
the number of shares purchased. Written confirmations are issued
for all purchases of Fund shares.
REDEMPTION OF CAPITAL STOCK
A shareholder may require the Fund to redeem his or her
shares in whole or in part at any time during normal business
hours. Redemption requests must be signed by each shareholder in
the exact manner as the Fund account is registered and must state
the amount of redemption and identify the shareholder account
number. When shares are represented by certificates, redemption
is accomplished by delivering to the Fund, c/o Firstar Trust
Company, P.O. Box 2944, Milwaukee, Wisconsin 53201-2944, the
certificate(s) for the full shares to be redeemed. The
certificate(s) must be properly endorsed or accompanied by
instrument of transfer, in either case with signatures guaranteed
by an "eligible guarantor institution" as defined in Section
240.17Ad-5 of the Code of Federal Regulation. An "eligible
guarantor institution" includes a bank, a 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 certificates have not been issued, redemption is
accomplished by delivering an original signed written request for
redemption addressed to Nicholas II, Inc., c/o Firstar Trust
Company. Facsimile transmission of redemption requests is not
acceptable. 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. Written confirmations are
issued for all redemptions of Fund shares.
The Fund may require additional supporting documents for
redemptions made by corporations, executors, administrators,
trustees and guardians. Specifically, 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 have a copy
of the title and signature pages of the trust agreement on file
or 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 there is doubt as to what documents or instructions are
necessary in order to redeem shares, please write or call Firstar
Trust Company (414-276-0535), prior to submitting the redemption
request. A redemption request will not become effective until
all documents have been received in proper form by Firstar Trust
Company.
<PAGE>
For federal income tax purposes, a redemption generally is
treated as a sale of the shares being redeemed, with the
shareholder recognizing capital gain or loss equal to the
difference between the redemption price and the shareholder's
cost for the shares being redeemed.
Shareholders who have an individual retirement account
("IRA"), master retirement plan or other retirement plan must
indicate on their 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.
All redemptions will be processed immediately upon receipt.
Share redemption orders are effected at the net asset value next
determined after receipt of the order in proper form by the Fund.
Accordingly, shares tendered for redemption on a day the Exchange
is open for trading, prior to the close of trading on that day,
will be valued as of the close of trading on that day. Requests
for redemption of shares received after the close of trading on
the Exchange will be based on the net asset value as determined
as of the closing of trading on the next day the Exchange is
open. The redemption price will depend on the market value of
the investments in the Fund's portfolio at the time of redemption
and may be more or less than the cost of shares redeemed. The
Fund will return redemption requests that contain restrictions as
to the time or date redemptions are to be effected. The Fund
ordinarily will make payment 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.
The Fund reserves the right to hold payment up to 15 days or
until satisfied that investments made by check have been
collected. During the period prior to the time the shares are
redeemed, dividends on such shares will accrue and be payable.
The Fund does not consider the U.S. Postal Service or other
independent delivery services to be its agents. Therefore,
deposit in the mail or with such services or receipt at Firstar
Trust Company's Post Office Box of redemption requests does not
constitute receipt by Firstar Trust Company or the Fund. DO NOT
mail letters by overnight courier to the Post Office Box address.
Correspondence mailed by overnight courier should be sent to the
Firstar Trust Company, Third Floor, 615 East Michigan Street,
Milwaukee, Wisconsin 53202.
Telephone redemption is automatically extended to all
accounts in the Fund unless this privilege is declined in
writing. This option does not apply to IRA accounts and master
retirement plans for which Firstar Trust Company acts as
custodian. Telephone redemptions can only be made by calling
Firstar Trust Company at 800-544-6547 or (414) 276-0535. In
addition to the account registration, you will be required to
provide either the account number or social security number.
Telephone calls will be recorded. Telephone redemption requests
must be received prior to the closing of the New York Stock
Exchange (usually 4:00 p.m., New York time) to receive that day's
net asset value. There will be no exceptions due to market
activity. The maximum telephone redemption is $25,000 per
account/per business day. The maximum telephone redemption for
related accounts is $100,000 per business day. The minimum
telephone redemption is $1,000 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 Trust Company. Neither the Fund nor
Firstar Trust Company will be responsible for the authenticity of
redemption instructions received by telephone. As a result, the
shareholder will bear the risk of loss in the event of a
fraudulent telephone redemption. The staff of the Securities and
Exchange Commission is currently considering the propriety of
this policy.
The shareholder may instruct Firstar Trust Company 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 Trust Company charges a fee for each
wire redemption of up to $10.00. Please contact the Fund for
the appropriate form if you are interested in setting your
account up with wiring instructions.
<PAGE>
Although not anticipated, it is possible that conditions may
arise in the future which would, in the opinion of the Fund's
Adviser or Board of Directors, make it undesirable for the Fund
to pay for all redemptions in cash. In such cases, the Board may
authorize payment to be made in portfolio securities or other
property of the Fund. However, the Fund has obligated itself
under the 1940 Act to redeem for cash all shares presented for
redemption by any one shareholder up to $250,000 (or 1% of the
Fund's net assets if that is less) in any 90-day period.
Securities delivered in payment of redemptions would be valued at
the same value assigned to them in computing the net asset value
per share. Shareholders receiving such securities would incur
brokerage costs when these securities are sold.
SIGNATURE GUARANTEES. A signature guarantee of each owner
is required to redeem shares in the following situations, for all
size transactions: (i) if you change the ownership on your
account; (ii) upon redemption of shares when certificates have
been issued for your account; (iii) when you want the redemption
proceeds sent to a different address than is registered on the
account; (iv) for both certificated and uncertificated shares, if
the proceeds are to be made payable to someone other than the
account owner(s); (v) any redemption transmitted by federal wire
transfer to your bank; and (vi) if a change of address request
has been received by the Fund or Firstar Trust Company within 15
days of a redemption request. In addition, signature guarantees
will be required for all redemptions of $100,000 or more from any
shareholder account in the Nicholas Family of Funds. A
redemption will not be processed until the signature guarantee,
if required, is received in proper form.
EXCHANGE BETWEEN FUNDS
If a shareholder chooses to exercise the exchange privilege,
the shares will be exchanged at their next determined net asset
value. When an exchange into the Nicholas Money Market Fund,
Inc. would involve investment of the exchanged amount on a day
when the New York Stock Exchange is open for trading but the
Federal Reserve Banks are closed, shares of the Fund will be
redeemed on the day upon which the exchange request is received;
however, issuance of Nicholas Money Market Fund, Inc. shares may
be delayed an additional day in order to avoid the dilutive
effect on return (i.e., reduction in net investment income per
share) which would result from issuance of such shares on a day
when the exchanged amount cannot be invested. In such a case,
the exchanged amount would be uninvested for this one day period.
Shareholders interested in exercising the exchange privilege must
obtain an authorization form and the appropriate prospectus from
Nicholas Company, Inc. An exchange constitutes a sale for
federal tax purposes and a capital gain or loss generally will be
recognized upon the exchange, depending upon whether the net
asset value at the time is more or less than the shareholder's
cost. An exchange between the funds involving master retirement
(Keogh) plan and IRA accounts generally will not constitute a
taxable transaction for federal tax purposes. This 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; however, procedures for exchanging Fund shares by
telephone may be modified or terminated at any time by the Fund
or Firstar Trust Company.
Shares of the Fund which have been outstanding at least 15
days may be exchanged for shares of other investment companies
for which Nicholas Company, Inc. serves as the investment adviser
and which permit such exchanges. Nicholas Company, Inc. is also
the investment adviser to Nicholas Fund, Inc., Nicholas Income
Fund, Inc., Nicholas Limited Edition, Inc., Nicholas Money Market
Fund, Inc. and Nicholas Equity Income Fund, Inc. Nicholas Fund,
Inc. has an investment objective of capital appreciation in which
income is a secondary consideration. Nicholas Income Fund,
Inc.'s investment objective is to seek high current income
consistent with the preservation and conservation of capital
value. Nicholas Limited Edition, Inc. has as its investment
objective long-term growth in which income is a secondary
consideration. Shareholders are reminded, however, that Nicholas
Limited Edition, Inc. is restricted in size to ten million
shares, and the exchange privilege into that fund may be
terminated or modified at a time when that maximum is reached.
Nicholas Money Market Fund, Inc. has an investment objective of
achieving as high a level of current income as is consistent with
preserving capital and providing liquidity. Nicholas Equity
Income Fund, Inc. has an investment objective of reasonable
<PAGE>
income, with moderate long-term growth as a secondary
consideration. Exchanges by mail are available for all of these
funds. Exchanges by telephone are available only between the
Fund and Nicholas Money Market Fund, Inc. and between Nicholas
Fund, Inc. and Nicholas Money Market Fund, Inc. Exchange of
shares can be accomplished in the following ways:
Exchange by Mail. An exchange of shares of the Fund for
shares of other available Nicholas mutual funds will be made
without cost to the investor through written request.
Shareholders interested in exercising the exchange by mail
privilege may obtain the appropriate prospectus from
Nicholas Company, Inc.
Signatures required are the same as previously explained
under "Redemption of Capital Stock."
Exchange by Telephone. Shareholders may exchange by
telephone among all funds for which the Nicholas Company,
Inc. serves as investment adviser.
Only exchanges of $l,000 or more may be executed using the
telephone exchange privilege. Firstar Trust Company 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. Four telephone exchanges per account during
any twelve month period will be allowed. Exchanges between the
Fund and Nicholas Equity Income Fund, Inc. are limited to $25,000
per day and $100,000 per day for related accounts.
Fund shares in IRA and master retirement plan accounts may
be exchanged by telephone into Nicholas Money Market Fund, Inc.
Procedures for exchanging Fund shares by telephone may be
modified or terminated at any time by the Fund or Firstar Trust
Company. Neither the Fund nor Firstar Trust Company will be
responsible for the authenticity of exchange instructions
received by telephone.
Telephone exchanges can only be made by calling Firstar
Trust Company at (4l4) 276-0535. You will be required to provide
pertinent information regarding your account (social security
number or account number). Calls will be recorded.
TRANSFER OF CAPITAL STOCK
Shares of the Fund may be transferred 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. Documents and instructions necessary
to transfer capital stock can be obtained by writing or calling
Firstar Trust Company (414-276-0535) or Nicholas Company, Inc.
(414-272-6133) prior to submitting any transfer requests.
DETERMINATION OF NET ASSET VALUE
The net asset value of a share is determined by dividing the
total value of the net assets of the Fund 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 total
assets. The net asset value is determined as of the close of
trading on the New York Stock Exchange on each day the Exchange
is open for trading.
<PAGE>
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. Other securities will be valued at the current bid
price. Any securities for which there are no readily available
market quotations will be valued at fair value, as determined in
good faith by the Board of Directors. Odd lot differentials and
brokerage commissions will be excluded in calculating values.
All assets other than securities will be valued at their then
current fair value as determined in good faith by the Board of
Directors.
DIVIDENDS AND FEDERAL TAX STATUS
The Fund intends to continue to qualify annually as a
"regulated investment company" under the Internal Revenue Code of
1986 and intends to take all other action required to ensure that
little or no federal income or excise taxes will be payable by
the Fund. As a result, the Fund generally will distribute
annually to its shareholders substantially all of its net
investment income and net realized capital gain (after
utilization of any available capital loss carryovers).
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. Long-
term capital gain distributed by the Fund will retain the
character that it had at the Fund level. Income distributed from
the Fund's net investment income and net realized short-term
capital gains are taxable to shareholders as ordinary income.
Distributions generally will be made annually in December. The
Fund will provide information to shareholders concerning the
character and federal tax treatment of any distribution.
Since at the time of purchase of shares the Fund may have
undistributed income or capital gains included in the computation
of the net asset value per share, 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, an investor must certify under penalties of perjury that
the taxpayer identification number supplied to the Fund is
correct and that he is 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. Shareholders should consult with a tax
advisor concerning the application of federal, state and local
taxes to an investment in the Fund.
DIVIDEND REINVESTMENT PLAN
Unless a shareholder elects to accept cash in lieu of
shares, all dividend and capital gain distributions are
automatically reinvested in additional shares of the Fund through
the Dividend Reinvestment Plan. An election to accept cash may
be made in an application to purchase shares or by separate
written notification. All reinvestments are at the net asset
value per share in effect on the dividend or distribution record
date and are credited to the shareholder's account. If the
application of such distributions to the purchase of additional
shares of the Fund would result in the issuance of fractional
shares, the Fund may, at its option, either issue fractional
shares (computed to three decimal places) or pay to the
shareholder cash equal to the value of the fractional share on
the dividend or distribution payment date. Shareholders will be
advised of the number of shares purchased and the price following
each reinvestment. 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.
<PAGE>
Shareholders may withdraw from or thereafter elect to
participate in the Dividend Reinvestment Plan at any time by
giving written notice to the Transfer Agent. An election must be
received by Firstar Trust Company 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 Dividend 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 Dividend Reinvestment Plan at any time on
30 days written notice to participants.
INDIVIDUAL RETIREMENT ACCOUNT
Individuals may be able to establish their own tax-sheltered
IRA. The Fund offers a prototype IRA plan for adoption by
individuals who qualify for spousal, deductible and
non-deductible IRA accounts.
As long as the aggregate IRA contributions meet the Fund's
minimum investment requirement of $1,000, the Fund will accept
any allocation of such contributions 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 taxpayers to consult with their
personal tax adviser to determine the deductibility of their IRA
contributions.
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 Internal
Revenue Service requires to be furnished to individuals who are
considering adopting an IRA. It is important you obtain
up-to-date information from the Fund before opening an IRA.
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 a retirement plan may
result in adverse tax consequences. Consultation with a tax
adviser regarding the tax consequences of the Plan is
recommended.
MASTER RETIREMENT PLAN
The Fund has available a master retirement plan (formerly
called a "Keogh" Plan) for self-employed individuals. Any person
seeking additional information or wishing to participate in the
Plan may contact the Fund. Consultation with a tax adviser
regarding the tax consequences of the Plan is recommended.
BROKERAGE
The Adviser, who decides to buy and sell securities, selects
a broker or dealer for the execution of 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 issuers of securities and events and
current conditions in specific industries, and the rendering of
advice regarding general economic conditions affecting the stock
market and the U.S. economy.
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 are also considered
in view of the value of the research, statistical and price
quotation services, if any, rendered by the broker or dealer
through whom a transaction is placed.
<PAGE>
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
supplemental research and statistical and price quotation
services. The Adviser understands that since the brokers and
dealers rendering such services are compensated therefor by
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.
In instances where it is determined by the Adviser 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
Advisor's other client accounts, which are also utilized by the
Adviser in managing the Fund's portfolio. The aggregate amount
of brokerage commissions paid by the Fund for its fiscal year
ended September 30, 1995 was $326,990. Brokerage commissions
paid by the Fund during the fiscal years end September 30, 1994
and September 30, 1993 totalled $438,049 and $439,516,
respectively. The Fund's portfolio turnover rates were 19.63%,
17.38% and 27.32%, respectively, for the fiscal years ended
September 30, 1995, September 30, 1994, and September 30, 1993.
The Adviser, which is the investment adviser to the Nicholas
Fund, Inc., Nicholas Income Fund, Inc., Nicholas Limited Edition,
Inc., Nicholas Money Market Fund, Inc. and Nicholas Equity Income
Fund, Inc., as well as to the Fund, may occasionally make
investment decisions which would involve the purchase or sale of
securities for the portfolios of more than one of the six funds
at the same time. As a result, the demand for securities being
purchased or the supply of securities being sold may increase,
and this could have an adverse effect on the price of those
securities. It is the Adviser's policy not to favor one fund
over another in making recommendations or in placing orders. If
two or more of the Adviser's clients are purchasing a given
security on the same day from the same broker or dealer, the
Adviser may average the price of the transactions and allocate
the average among the clients participating in the transactions.
It is the Advisor's policy to allocate the commission charged by
such broker or dealer to each fund in direct proportion to the
number of shares bought or sold by the particular fund involved.
The Adviser may effect portfolio transactions with brokers
or dealers who recommend the purchase of the Fund's shares. The
Adviser 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.
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. The rate represents the annual rate achieved on the
initial investment to arrive at the ending redeemable value. The
ending value assumes reinvestment of dividends and capital gains
and the reduction of account charges, if any. This computation
does not reflect any sales load or other nonrecurring charges,
since the Fund is not subject to such charges. These values are
computed according to the following formulas:
<PAGE>
Total Return: ERV - 1
---
P
n
Average Annual Total Return = nth root of ERV
--- -1
P
where:
P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = at the end of the 1, 5 or 10 year periods, the
ending redeemable value of a hypothetical
$1000 payment made at the beginning of the 1,
5 and 10 year periods.
<TABLE>
ONE YEAR ENDED FIVE YEARS ENDED TEN YEARS ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1995 SEPTEMBER 30, 1995
<S> <C> <C> <C>
Total Return 22.39% 119.35% 240.56%
Average Annual Total
Return 22.39% 17.01% 13.04%
</TABLE>
For purposes of these calculations, the following
assumptions are made: (1) all dividends and distributions by
the Fund are reinvested at the net asset value calculated on the
reinvestment dates during the period; (2) a complete redemption
at the end of the periods is made; and (3) all recurring fees
that are charged to all shareholder accounts are included.
These figures are computed by adding the total number of
shares purchased by a hypothetical $1000 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 $1000 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 materials, reports and other communications to
shareholders, the Fund may compare its performance to certain
indices, including the S&P 500 Index, the National Association of
Securities Dealers Automated Quotation System, 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, Lipper
Analytical Services Mutual Fund Performance Analysis and
Morningstar Mutual Funds.
<PAGE>
CAPITAL STRUCTURE
The Fund is authorized to issue 200,000,000 shares of Common
Stock, par value $0.01 per share. Each share has one vote and
all shares participate equally in dividends and other
distributions 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. Shares are redeemable and are
transferable. Fractional shares entitle the holder to the same
rights as whole shares except fractional shares have no voting
rights.
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 Trust Company,
and direct that his account be credited with the shares. A
shareholder may in writing direct Firstar Trust Company at any
time to issue a certificate for his shares without charge.
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 Investment Company Act
of 1940, as amended. The Fund has adopted the appropriate
provisions in its By-Laws and will not hold annual meetings of
shareholders for the following purposes unless otherwise required
to do so: (i) election of directors; (ii) approval of the
investment advisory agreement; (iii) ratification of the
selection of independent auditors; and (iv) approval of any
distribution agreement.
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 to
do so by the record holders of not less than l0% 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 Investment Company Act of
1940, as amended.
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 September 30, 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 Trust Company, 615 East Michigan Street, Milwaukee,
Wisconsin 53202, acts as Custodian of the Fund. As such, Firstar
Trust Company holds all securities and cash of 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 officers of the Fund.
Firstar Trust Company does not exercise any supervisory function
over the management of the Fund, the purchase and sale of
securities or the payment of distributions to shareholders.
Firstar Trust Company also acts as the Fund's Transfer Agent and
Dividend Disbursing Agent.
<PAGE>
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL
Arthur Andersen LLP, 100 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, has been selected as the independent accountants
for the Fund. Michael Best & Friedrich, 100 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202, has passed on the legality of
the shares of Common Stock of the Fund being offered.
FINANCIAL INFORMATION
The schedule of investments, the 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 September 30, 1995, are incorporated herein by reference.
<PAGE>
Nicholas II, Inc.
Form N-1A
PART C: OTHER INFORMATION
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements: Per share income and capital
changes information with respect to the Registrant's common stock
appears in Part A; the Registrant's statement of assets and
liabilities, including the schedule of investments, as of
September 30, 1995, and the related statement of operations for
the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the per share
income and capital changes for each of the years in the period
then ended are incorporated in Parts A&B by reference to the
Annual Report to Shareholders of the Registrant for its fiscal
year ended September 30, 1995.
(b) Exhibits: All exhibits required to be filed with this
Form N-lA pursuant to Item 24(b) thereof 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 Securities and Exchange
Commission.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
The Registrant is not under common control with any
other person. The Registrant, Nicholas Fund, Inc., Nicholas
Income Fund, Inc., Nicholas Limited Edition, Inc., Nicholas Money
Market Fund, Inc. and Nicholas Equity Income Fund, Inc., which
are all Maryland corporations, 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 management services provided by the
adviser. The Registrant does not control any other person.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of September 30, 1995, the number of record holders was:
Title of Class Number of Record Holders
-------------- ------------------------
Common Stock, $0.01
par value per share 39,446
ITEM 27. INDEMNIFICATION
Article VII, Section 7 of the By-Laws of the Registrant
provides for the indemnification of its officers and director
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.
The investment adviser to the Registrant, Nicholas
Company, Inc., has, by resolution of its Board of Directors,
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 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
None.
ITEM 29. PRINCIPAL UNDERWRITERS
None.
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, 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 Registrant, 700 North Water Street, Milwaukee,
Wisconsin, and at the offices of Registrant's custodian and
transfer agent, Firstar Trust Company, 615 East Michigan Street,
Milwaukee, Wisconsin.
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
The Registrant's By-Laws provide that it will indemnify
the Officers and Directors of 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
Securities Act of 1933, as amended ("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, 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.
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 and Exchange Act
of 1934; 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 quarterly
report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
<PAGE>
EXHIBIT INDEX
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
(b)(1) Articles of Incorporation of Registrant. *
(b)(2) By-Laws of Registrant. *
(b)(4) Specimen certificate evidencing common
stock, $.01 par value, of Registrant. *
(b)(5) Investment Advisory Agreement between
Registrant and Nicholas Company, Inc. *
(b)(8) Custodian Agreement between Registrant
and Firstar Trust Company. *
(b)(10) Opinion of Michael Best & Friedrich,
counsel to the Registrant, concerning
the legality of Registrant's common
stock, including consent to the use
thereof. _____
(b)(11) Consent of Arthur Andersen LLP,
independent public accountants. _____
(b)(12) Statements of Assets and Liabilities
of Registrant, including the Schedule
ofInvestments, as of September 30, 1995,
and the related Statement of Operations
for the year then ended, the Statement
of Changes in Net Assets for each of the
two years in the period ended
September 30, 1995, and the Financial
Highlights and Ratios for each of the
ten years in the period ended
September 30, 1995 [included in the
Annual Report to Shareholders of
Registrant for the fiscal year ended
September 30, 1995]. _____
(b)(14.1) Registrant's Prototype IRA Plan. *
(b)(14.2) Registrant's Master Retirement Plan
for Self-Employed Individuals. *
(b)(16) Schedule for computation of
performance quotation
provided in response to
Item 22 of Form N-lA.
(b)(17) Financial Data Schedule _____
(b)(99) Power of Attorney. *
* Incorporated by reference to previous filings with the
Securities and Exchange Commission.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
the Registrant, Nicholas II, Inc., a corporation organized and
existing under the laws of the State of Maryland, hereby
certifies that it meets all of the requirements for effectiveness
of this Amendment to its Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933, and has duly caused this
Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, on the 26th
day of January, 1996.
NICHOLAS II, INC.
By: /s/ Thomas J. Saeger
-------------------------
Thomas J. Saeger, Executive
Vice President, Secretary and
Principal Financial
and Accounting Officer
Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
this Amendment to the Registration Statement has been signed
below by the following persons in the capacity indicated on the
26th day of January, 1996.
Albert O. Nicholas*
- --------------------- President (Chief Executive
Albert O. Nicholas Officer), and Director
Thomas J. Saeger*
- -------------------- Executive Vice President,
Thomas J. Saeger Secretary, Chief Financial
Officer, and Chief Accounting
Officer
Robert H. Bock*
- --------------- Director
Robert H. Bock
Melvin L. Schultz*
- ------------------ Director
Melvin L. Schultz
Richard Seaman*
- --------------- Director
Richard Seaman
* By: /s/ Thomas J. Saeger
----------------------------------
Thomas J. Saeger, as
Attorney-in-Fact for the above officers
and directors, under authority of
Powers of Attorney previously filed
<PAGE>
LIST OF CONSENTS
1. Consent of Michael, Best & Friedrich
(included in Exhibit (b)(10))
2. Consent of Arthur Anderson LLP
(included as Exhibit (b)(11))
<PAGE>
EXHIBIT NO. (B)(10)
OPINION OF MICHAEL BEST AND FRIEDRICH
COUNCEL TO THE REGISTRANT, CONCERNING
THE LEGALITY OF THE REGISTRANTS COMMON
STOCK, INCLUDING THE CONSENT TO THE USE
THEREOF.
<PAGE>
EXHIBIT NO. (b)(11)
CONSENT OF ARTHUR ANDERSEN LLP,
INDEPENDENT PUBLIC ACCOUNTANTS.
<PAGE>
EXHIBIT NO. (b)(12)
ANNUAL REPORT TO SHAREHOLDERS
OF REGISTRANT FOR THE
FISCAL YEAR ENDED
SEPTEMBER 30, 1995
<PAGE>
EXHIBIT NO. (b)(16)
SCHEDULE FOR COMPUTATION OF PERFORMANCE
QUOTATION PROVIDED IN RESPONSE TO
ITEM 22 OF FORM N-1A
<PAGE>
EXHIBIT NO. (b)(17)
Financial Data Schedule
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report,
and to all references to our Firm, included in or made a part of this Form N-1A
registration statement for Nicholas II, Inc.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
January 26, 1996.
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
<letterhead>
January 31, 1996
Nicholas II, Inc.
700 North Water Street
Suite 1010
Milwaukee, WI 53202
Gentlemen:
We have acted as counsel to Nicholas II, Inc. (the
"Fund"), a corporation organized under the laws of the State
of Maryland, in connection with the preparation and filing
of a registration statement on Form N-1A and amendments
thereto ("Registration Statement"), relating to the
registration of the shares of common stock of the Fund
("Common Stock") under the Securities Act of 1933, as
amended.
We have reviewed the Articles of Incorporation and By-
Laws of the Fund and the Registration Statement; we also
have examined such other corporate records, certified
documents and other documents as we deem necessary for the
purposes of this opinion and we have considered such
questions of law as we believe to be involved. We have
assumed without independent verification the genuineness of
signatures and the conformity with originals of all
documents submitted to us as copies. Based upon the
foregoing, we are of the opinion that:
1. The Fund is validly incorporated under the laws of
the State of Maryland, and has the corporate power to carry
on its present business.
2. The Fund is authorized to issue up to two hundred
million (200,000,000) shares of Common Stock, par value $.01
per share, including those shares currently issued and
outstanding.
<PAGE>
<letterhead>
Nicholas II, Inc.
January 31, 1996
Page Two
3. The shares of Common Stock of the Fund to be
offered for sale pursuant to the Registration Statement have
been duly authorized and, upon the effectiveness of Post-
Effective Amendment No. 12 to the Registration Statement and
compliance with applicable federal and state securities laws
and regulations, when sold, issued (within the limits
authorized under the Articles of Incorporation of the Fund)
and paid for as contemplated in the Registration Statement,
such shares will have been validly and legally issued, fully
paid and non-assessable.
We consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to us in
the prospectus comprising Part A and elsewhere in the
Registration Statement.
Very truly yours,
MICHAEL BEST & FRIEDRICH
David E. Leichtfuss
DEL/ljg
<TABLE>
<CAPTION>
Compound and Total Return Calculation NICHOLAS II 09/30/94 THRU 09/30/95
Starting date: 09/30/94 future value 1,223.89
Ending date: 09/30/95 present valu 1,000.00
Total Return 22.3894% # years 1
Average annual return 22.3894% # days 365.00
Investment Redemption
Lump sum Lump sum
Annuity Annuity
PRICE INV INC CAP GAIN # of SHARES REINVESTED REINVESTED CUM TOTAL
DATE /SHARE /SHARE /SHARE INVEST PURCHASED INV INC CAP GAIN SHARES MARKET VALUE
----------- ------------- ----------- ----------- ------------- ---------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/94 Q 26.71 1000 37.439 37.439 $1,000.00
12/27/94 D 24.10 0.3100 1.7900 0.000 0.482 2.781 40.701 $980.91
12/31/94 A 24.46 0.000 0.000 0.000 40.701 $995.56
03/31/95 Q 26.61 0.000 0.000 0.000 40.701 $1,083.07
06/30/95 S 27.46 0.000 0.000 0.000 40.701 $1,117.66
09/30/95 Q 30.07 0.000 0.000 0.000 40.701 $1,223.89
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Starting date: 09/30/90 future value 2,193.52
Ending date: 09/30/95 present valu 1,000.00
Total Return 119.3520% # years 5
Average annual return 17.0114% # days 1826.00
Investment Redemption
Lump sum Lump sum
Annuity Annuity
PRICE INV INC CAP GAIN # of SHARES REINVESTED REINVESTED CUM TOTAL
DATE /SHARE /SHARE /SHARE INVEST PURCHASED INV INC CAP GAIN SHARES MARKET VALUE
----------- ------------- ----------- ----------- ------------- ---------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
09/30/90 Q 17.39 1000 57.504 57.504 $1,000.00
12/21/90 D 18.30 0.3559 0.1297 0.000 1.118 0.408 59.030 $1,080.25
12/31/90 A 18.42 0.000 0.000 0.000 59.030 $1,087.34
03/31/91 Q 22.25 0.000 0.000 0.000 59.030 $1,313.42
06/30/91 S 23.20 0.000 0.000 0.000 59.030 $1,369.50
09/30/91 Q 23.87 0.000 0.000 0.000 59.030 $1,409.05
12/23/91 D 23.62 0.2447 0.4042 0.000 0.612 1.010 60.652 $1,432.60
12/31/91 A 25.02 0.000 0.000 0.000 60.652 $1,517.51
03/31/92 Q 25.08 0.000 0.000 0.000 60.652 $1,521.15
06/30/92 S 24.03 0.000 0.000 0.000 60.652 $1,457.47
09/30/92 Q 24.53 0.000 0.000 0.000 60.652 $1,487.79
12/29/92 D 26.03 0.2350 0.8000 0.000 0.548 1.864 63.064 $1,641.54
12/31/92 A 26.32 0.000 0.000 0.000 63.064 $1,659.83
03/31/93 Q 26.24 0.000 0.000 0.000 63.064 $1,654.79
06/30/93 S 26.30 0.000 0.000 0.000 63.064 $1,658.57
09/30/93 Q 26.94 0.000 0.000 0.000 63.064 $1,698.93
12/28/93 D 26.09 0.2700 1.4000 0.000 0.653 3.384 67.100 $1,750.64
12/31/93 A 26.32 0.000 0.000 0.000 67.100 $1,766.08
03/31/94 Q 25.55 0.000 0.000 0.000 67.100 $1,714.41
06/30/94 S 25.46 0.000 0.000 0.000 67.100 $1,708.37
09/30/94 Q 26.71 0.000 0.000 0.000 67.100 $1,792.25
12/27/94 D 24.10 0.3100 1.7900 0.000 0.863 4.984 72.947 $1,758.03
12/31/94 A 24.46 0.000 0.000 0.000 72.947 $1,784.29
03/31/95 Q 26.61 0.000 0.000 0.000 72.947 $1,941.12
06/30/95 S 27.46 0.000 0.000 0.000 72.947 $2,003.13
09/30/95 Q 30.07 0.000 0.000 0.000 72.947 $2,193.52
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Starting date: 09/30/85 future value 3,405.65
Ending date: 09/30/95 present valu 1,000.00
Total Return 240.5647% # years 10
Average annual return 13.0368% # days 3652.00
Investment Redemption
Lump sum Lump sum
Annuity Annuity
PRICE INV INC CAP GAIN # of SHARES REINVESTED REINVESTED CUM TOTAL
DATE /SHARE /SHARE /SHARE INVEST PURCHASED INV INC CAP GAIN SHARES MARKET VALUE
----------- ------------- ----------- ----------- ------------- ---------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
09/30/85 Q 14.39 1000 69.493 69.493 $1,000.00
10/18/85 D 14.48 0.1910 0.0330 0.000 0.917 0.158 70.568 $1,021.82
12/31/85 A 15.54 0.000 0.000 0.000 70.568 $1,096.62
03/31/86 Q 17.23 0.000 0.000 0.000 70.568 $1,215.88
06/30/86 S 18.48 0.000 0.000 0.000 70.568 $1,304.09
09/30/86 Q 16.90 0.000 0.000 0.000 70.568 $1,192.59
10/23/86 D 16.29 0.4200 0.5130 0.000 1.819 2.222 74.609 $1,215.39
12/31/86 A 16.22 0.000 0.000 0.000 74.609 $1,210.17
03/31/87 Q 19.88 0.000 0.000 0.000 74.609 $1,483.24
06/30/87 S 20.45 0.000 0.000 0.000 74.609 $1,525.76
09/30/87 Q 21.01 0.000 0.000 0.000 74.609 $1,567.54
10/27/87 D 14.48 0.2450 1.2600 0.000 1.262 6.492 82.364 $1,192.63
12/15/87 D 14.87 0.0930 0.0430 0.000 0.515 0.238 83.117 $1,235.96
12/31/87 A 15.69 0.000 0.000 0.000 83.117 $1,304.11
03/31/88 Q 17.59 0.000 0.000 0.000 83.117 $1,462.03
06/30/88 S 18.47 0.000 0.000 0.000 83.117 $1,535.18
09/30/88 Q 18.58 0.000 0.000 0.000 83.117 $1,544.32
12/15/88 D 17.59 0.3350 0.0800 0.000 1.583 0.378 85.078 $1,496.53
12/31/88 A 17.98 0.000 0.000 0.000 85.078 $1,529.71
03/31/89 Q 19.04 0.000 0.000 0.000 85.078 $1,619.89
06/30/89 S 20.36 0.000 0.000 0.000 85.078 $1,732.20
09/30/89 Q 21.76 0.000 0.000 0.000 85.078 $1,851.31
12/15/89 D 19.86 0.3170 0.6640 0.000 1.358 2.845 89.281 $1,773.12
12/31/89 A 20.16 0.000 0.000 0.000 89.281 $1,799.90
03/31/90 Q 19.53 0.000 0.000 0.000 89.281 $1,743.66
06/30/90 S 21.01 0.000 0.000 0.000 89.281 $1,875.79
09/30/90 Q 17.39 0.000 0.000 0.000 89.281 $1,552.59
12/21/90 D 18.30 0.3559 0.1297 0.000 1.736 0.633 91.650 $1,677.20
12/31/90 A 18.42 0.000 0.000 0.000 91.650 $1,688.19
03/31/91 Q 22.25 0.000 0.000 0.000 91.650 $2,039.21
06/30/91 S 23.20 0.000 0.000 0.000 91.650 $2,126.28
09/30/91 Q 23.87 0.000 0.000 0.000 91.650 $2,187.69
12/23/91 D 23.62 0.2447 0.4042 0.000 0.949 1.568 94.168 $2,224.24
12/31/91 A 25.02 0.000 0.000 0.000 94.168 $2,356.08
03/31/92 Q 25.08 0.000 0.000 0.000 94.168 $2,361.73
06/30/92 S 24.03 0.000 0.000 0.000 94.168 $2,262.85
09/30/92 Q 24.53 0.000 0.000 0.000 94.168 $2,309.94
12/29/92 D 26.03 0.2350 0.8000 0.000 0.850 2.894 97.912 $2,548.65
12/31/92 A 26.32 0.000 0.000 0.000 97.912 $2,577.05
03/31/93 Q 26.24 0.000 0.000 0.000 97.912 $2,569.21
06/30/93 S 26.30 0.000 0.000 0.000 97.912 $2,575.09
09/30/93 Q 26.94 0.000 0.000 0.000 97.912 $2,637.75
12/28/93 D 26.09 0.2700 1.4000 0.000 1.013 5.254 104.179 $2,718.04
12/31/93 A 26.32 0.000 0.000 0.000 104.179 $2,742.00
03/31/94 Q 25.55 0.000 0.000 0.000 104.179 $2,661.78
06/30/94 S 25.46 0.000 0.000 0.000 104.179 $2,652.41
09/30/94 Q 26.71 0.000 0.000 0.000 104.179 $2,782.63
12/27/94 D 24.10 0.3100 1.7900 0.000 1.340 7.738 113.257 $2,729.50
12/31/94 A 24.46 0.000 0.000 0.000 113.257 $2,770.27
03/31/95 Q 26.61 0.000 0.000 0.000 113.257 $3,013.78
06/30/95 S 27.46 0.000 0.000 0.000 113.257 $3,110.05
09/30/95 Q 30.07 0.000 0.000 0.000 113.257 $3,405.65
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 405,317,746
<INVESTMENTS-AT-VALUE> 681,351,190
<RECEIVABLES> 5,079,512
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 686,430,702
<PAYABLE-FOR-SECURITIES> 3,555,249
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 641,476
<TOTAL-LIABILITIES> 4,196,725
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 355,893,052
<SHARES-COMMON-STOCK> 22,688,733
<SHARES-COMMON-PRIOR> 23,391,568
<ACCUMULATED-NII-CURRENT> 3,206,733
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 47,155,635
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 275,978,557
<NET-ASSETS> 682,233,977
<DIVIDEND-INCOME> 6,455,732
<INTEREST-INCOME> 1,964,669
<OTHER-INCOME> 39,228
<EXPENSES-NET> 4,179,767
<NET-INVESTMENT-INCOME> 4,279,862
<REALIZED-GAINS-CURRENT> 53,181,461
<APPREC-INCREASE-CURRENT> 71,740,215
<NET-CHANGE-FROM-OPS> 129,201,538
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,696,388
<DISTRIBUTIONS-OF-GAINS> 43,254,533
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,264,903
<NUMBER-OF-SHARES-REDEEMED> 3,835,468
<SHARES-REINVESTED> 1,867,730
<NET-CHANGE-IN-ASSETS> 57,561,407
<ACCUMULATED-NII-PRIOR> 3,623,259
<ACCUMULATED-GAINS-PRIOR> 37,228,708
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,321,192
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,179,767
<AVERAGE-NET-ASSETS> 631,064,679
<PER-SHARE-NAV-BEGIN> 26.71
<PER-SHARE-NII> 0.24
<PER-SHARE-GAIN-APPREC> 5.22
<PER-SHARE-DIVIDEND> 0.21
<PER-SHARE-DISTRIBUTIONS> 1.89
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 30.07
<EXPENSE-RATIO> 0.66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
