May 30, 1997
Report to Shareholders:
The type of companies in which Nicholas II, Inc. invests have been
in a bear market. Don't feel bad if you haven't noticed, it hasn't been
ostensive in the market averages. Although the NASDAQ Composite Stock
Index returned 16.12% for the fifteen months ended March 31, 1997, a
recent study by Merrill Lynch & Company, Inc. indicated that 76.8% of
NASDAQ stocks were down at least 20% from their highs and over 60% of
NASDAQ stocks were down over 30% from their highs reached between the
start of 1996 and the end of the first quarter of 1997. It has been
rough for small andmid-capitalization stocks and investors during the
past fifteen months.
Nicholas II, Inc. however, has performed well during this period
relative to the indexes and other mutual funds in its category (Lipper Mid
Cap), as illustrated in the table below.
<TABLE>
First Average Annual
Calendar Six Total Return*
Quarter Month 1 Year 3 Years 5 Years 10 Years
------- ----- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Nicholas II, Inc.
(Distributions Reinvested) + 0.90% + 3.80% + 7.54% +17.24% +12.68% +11.20%
Mid Cap Funds**
(Income Reinvested) - 5.84% - 3.64% + 4.95% +14.03% +12.87% +11.77%
Russell 2000 Index
(Includes Income) - 5.17% - 0.24% + 5.11% +12.69% +12.78% + 9.40%
Consumer Price Index + 0.44% + 1.27% + 2.76% + 2.82% + 2.81% + 3.60%
Ending value of $10,000
invested in Nicholas II
(Distributions Reinvested) $10,090 $10,380 $10,754 $16,116 $18,163 $28,921
</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.
**Based on Lipper Investment Objective performance summary for
all mid cap funds followed by Lipper Analytical Services, Inc.
Nicholas II's performance through this tough market is gratifying to
us and is a reflection of the investment style we implement in managing
risk for shareholders. The focus on quality companies selling at fair
valuations pays off during these difficult market cycles.
Nicholas II's portfolio continues to be concentrated in healthcare
products and services, business services, retailing and financial
services. These areas should continue to do well as aging baby boomers
spend more on healthcare and financial services; and businesses continue
to lower their cost structures through information technology and
outsourcing.
At Nicholas Company, our employees are here to serve you, the
shareholder. Our goals are to provide good consistent after tax returns
and high quality customer service. If you have any questions, please do
not hesitate to call.
Sincerely,
/s/ David O. Nicholas
-----------------
David O. Nicholas
Portfolio Manager
SCHEDULE OF INVESTMENTS
- ---------------------------------------------------------------------
March 31, 1997 (unaudited)
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Shares or Quoted
Principal Market
Amount Value
----------- ------------
(Note 1 (a))
COMMON STOCKS - 95.26%
BANKS AND FINANCE - 9.54%
409,227 Associated Banc-Corp 15,039,092
223,125 Fifth Third Bancorp 17,292,188
8,803 First National Bank of Anchorage (The) 16,021,460
413,287 Litchfield Financial Corporation ** 6,405,948
527,900 Marshall & Ilsley Corporation 19,268,350
------------
74,027,038
------------
BUSINESS SERVICES - 15.16%
515,000 Checkfree Corporation * 6,244,375
220,000 Danka Business Systems PLC 6,916,360
190,000 Envoy Corporation * 4,441,250
642,500 Fiserv, Inc. * 23,933,125
419,062 G&K Services, Inc. 12,571,860
310,000 IKON Office Solutions, Inc. 10,385,000
1,231,750 Keane, Inc. * 40,493,781
433,900 Thermo Instrument Systems Inc. * 12,583,100
------------
117,568,851
------------
CONSUMER PRODUCTS AND SERVICES - 4.62%
144,400 Central Parking Corporation 3,537,800
313,850 Newell Co. 10,513,975
36,560 Thermedics Detection, Inc. 388,450
380,600 Thermedics Inc. * 5,946,875
257,700 ThermoTrex Corporation * 5,379,488
351,200 Valspar Corporation (The) 10,097,000
------------
35,863,588
------------
FOOD AND BEVERAGE - 3.12%
150,000 Outback Steakhouse, Inc. * 3,000,000
472,770 Tootsie Roll Industries, Inc. 21,215,554
------------
24,215,554
------------
HEALTH CARE PRODUCTS - 12.23%
133,000 Amgen Inc. * 7,431,375
175,000 Biogen, Inc. 6,540,625
331,689 Block Drug Company, Inc. 14,594,316
315,900 DENTSPLY International Inc. 15,795,000
591,200 Elan Corporation, plc * 20,174,700
376,000 Forest Laboratories, Inc. * 14,147,000
277,500 Sofamor Danek Group, Inc. * 10,024,688
182,050 Thermo Cardiosystems Inc. * 3,504,462
229,150 Trex Medical Corporation * 2,663,869
------------
94,876,035
------------
HEALTH CARE SERVICES - 21.51%
257,585 American HomePatient, Inc. * 5,731,266
149,779 Cardinal Health, Inc. 8,144,233
621,000 Emeritus Corporation * ** 7,529,625
488,750 Health Care and Retirement Corporation * 14,051,562
1,459,993 Health Management Associates, Inc. * 34,674,834
115,000 Oxford Health Plans, Inc. * 6,741,875
173,500 PacifiCare Operations, Inc. * 14,964,375
466,600 Patterson Dental Company * 15,864,400
173,750 PhyCor, Inc. * 4,734,687
602,500 Quorum Health Group, Inc. * 18,602,188
436,346 Vencor, Inc. * 16,526,605
713,955 VIVRA Incorporated * 19,276,785
------------
166,842,435
------------
INSURANCE - 6.13%
110,000 Foremost Corporation of America 6,380,000
619,200 Mutual Risk Management Ltd. 22,446,000
445,000 Protective Life Corporation 18,690,000
------------
47,516,000
------------
MEDIA, COMMUNICATIONS AND ENTERTAINMENT - 5.99%
460,000 American Mobile Satellite Corporation * 5,175,000
375,000 General Motors Corporation - Class H 20,343,750
310,000 PanAmSat Corporation * 8,912,500
210,000 Penske Motorsports, Inc. * 5,880,000
575,000 United States Satellite
Broadcasting Company * 6,181,250
------------
46,492,500
------------
RETAIL TRADE - 12.28%
942,750 Arbor Drugs, Inc. 16,498,125
505,000 AutoZone, Inc. * 11,362,500
120,000 Circuit City Stores, Inc.-CarMax Group * 1,800,000
335,000 Circuit City Stores, Inc.-Circuit City Group 11,180,625
371,875 Consolidated Stores Corporation * 13,108,594
471,400 Kohl's Corporation * 19,975,575
706,000 OfficeMax, Inc. * 9,178,000
330,000 O'Reilly Automotive, Inc. * 12,127,500
------------
95,230,919
------------
TRANSPORTATION - 4.68%
988,000 Expeditors International of Washington, Inc. 23,712,000
663,892 Heartland Express, Inc. * 12,613,948
------------
36,325,948
------------
TOTAL COMMON STOCKS
(cost $405,463,522) 738,958,868
------------
CONVERTIBLE BOND - 0.73%
$7,000,000 Emeritus Corporation, **
6.25%, due January 1, 2006
(cost $5,980,500) 5,661,250
--------------
SHORT-TERM INVESTMENTS - 3.93%
Commercial Paper - 3.38%
$1,000,000 A.O. Smith Corporation,
5.50%, due April 1, 1997 1,000,000
1,000,000 Houston Industries Incorporated,
5.62%, due April 2, 1997 999,844
1,000,000 Schreiber Foods, Inc.,
5.50%, due April 3, 1997 999,694
1,000,000 Manpower, Inc.,
5.50%, due April 4, 1997 999,542
2,500,000 Mosinee Paper Corporation,
5.50%, due April 7, 1997 2,497,708
3,000,000 Houston Industries Incorporated,
5.50%, due April 8, 1997 2,996,792
3,500,000 Fiserv, Inc.,
5.50%, due April 9, 1997 3,495,722
1,000,000 Schreiber Foods, Inc.,
5.50%, due April 10, 1997 998,625
2,000,000 ConAgra, Inc.,
5.48%, due April 11, 1997 1,996,956
2,000,000 Manpower, Inc.,
5.50%,, due April 14, 1997 1,996,028
1,500,000 Mosinee Paper Corporation,
5.60%, due April 16, 1997 1,496,500
1,245,000 Lockheed Martin Corporation,
5.85%, due April 17, 1997 1,241,763
2,500,000 American Bankers Insurance Group, Inc.,
5.70%, due April 22, 1997 2,491,687
1,000,000 Mosinee Paper Corporation,
5.70%, due April 23, 1997 996,517
2,000,000 Manpower, Inc.,
5.75%, due April 25, 1997 1,992,333
------------
26,199,711
------------
Variable Rate Demand Notes - 0.55%
3,992,143 Johnson Controls, Inc.,
5.31%, due April 1, 1997 3,992,143
310,312 Sara Lee Corporation,
5.27%, due April 1, 1997 310,312
------------
4,302,455
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $30,434,441) 30,502,166
------------
TOTAL INVESTMENTS 775,122,284
------------
CASH AND RECEIVABLES, NET OF
LIABILITIES - 0.08% 627,655
------------
TOTAL NET ASSETS (Basis of
percentages disclosed above) $775,749,939
------------
------------
* Nondividend paying security
** This company is affiliated with the Fund as defined in Section 2(a)(3)
of the Investment Company Act of 1940, in that the Fund holds 5% or
more of its outstanding voting securities. (Note 5)
The accompanying notes to financial statements are an integral
part of this schedule.
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1997 (unaudited)
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value (Note 1 (a))--
Nonaffiliated issuers (cost $428,908,216)-see accompanying schedule of investments..... $761,186,711
Affiliated issuers (cost $12,970,247)-see accompanying schedule of investments (Note 5) 13,935,573
------------
Total investments................................................................ 775,122,284
------------
Cash....................................................................................... 513,987
------------
Receivables --
Investment securities sold............................................................ 2,894,281
Dividends and interest................................................................ 483,122
------------
Total receivables ............................................................... 3,377,403
------------
Total assets..................................................................... 779,013,674
------------
LIABILITIES:
Payables --
Investment securities purchased....................................................... 2,819,505
Management fee (Note 2)............................................................... 335,963
Other payables and accrued expenses................................................... 108,267
------------
Total liabilities................................................................ 3,263,735
------------
Total net assets ................................................................ $775,749,939
------------
------------
NET ASSETS CONSIST OF:
Fund shares issued and outstanding......................................................... $415,365,157
Net unrealized appreciation on investments (Note 3)........................................ 333,176,096
Accumulated undistributed net realized gains on investments................................ 26,750,158
Accumulated undistributed net investment income............................................ 458,528
------------
$775,749,939
------------
------------
NET ASSET VALUE PER SHARE ($.01 par value, 200,000,000 shares authorized)
offering price and redemption price ($775,749,939 / 24,805,792 shares
outstanding)............................................................................... $31.27
------
------
</TABLE>
The accompanying notes to financial statements are an integral
part of this statement.
STATEMENT OF OPERATIONS
For the six months ended March 31, 1997 (unaudited)
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
<TABLE>
<S> <C>
INCOME:
Dividends (Note 1 (d)) -
Nonaffiliated issuers ............................................................ $2,114,517
Affiliated issuers (Note 5)....................................................... 20,664
Interest............................................................................. 1,112,806
-------------
3,247,987
-------------
EXPENSES:
Management fee (Note 2).............................................................. 2,050,873
Transfer and disbursing agent fees................................................... 231,940
Postage and mailing fees............................................................. 38,386
Registration fees.................................................................... 35,237
Printing ............................................................................ 19,026
Custodian fees....................................................................... 18,676
Legal fees........................................................................... 18,447
Insurance............................................................................ 7,820
Telephone............................................................................ 6,668
Directors' fees...................................................................... 6,000
-------------
2,433,073
-------------
Net investment income.......................................................... 814,914
-------------
NET REALIZED GAINS ON INVESTMENTS (Note 1 (b)):
Nonaffiliated issuers ............................................................... 16,274,554
Affiliated issuers (Note 5).......................................................... 17,596,133
-------------
33,870,687
-------------
NET DECREASE IN UNREALIZED APPRECIATION ON INVESTMENTS .................................. (5,233,959)
-------------
Net gains on investments............................................................. 28,636,728
-------------
Net increase in net assets resulting from operations................................. $29,451,642
-------------
-------------
</TABLE>
The accompanying notes to financial statements are an integral
part of this statement.
STATEMENTS OF CHANGES IN NET ASSETS
For the six months ended March 31, 1997 (unaudited)
and the year ended September 30, 1996
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
<TABLE>
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income................................................$ 814,914 $ 2,112,316
Net realized gains on investments (Note 1 (b))....................... 33,870,687 73,968,832
Net (decrease) increase in unrealized appreciation on investments.... (5,233,959) 64,431,510
------------ ------------
Net increase in net assets
resulting from operations................................. 29,451,642 138,512,658
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (Note 1 (d)):
Distributions from net investment income
($0.0779 and $0.1750 per share, respectively)..................... (1,794,422) (3,881,013)
Distributions from net realized gains on investment transactions
($3.1621 and $2.4979 per share, respectively)...................... (72,841,241) (55,403,755)
----------- -----------
Total distributions......................................... (74,635,663) (59,284,768)
----------- ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued (572,857 and 1,894,643
shares, respectively).............................................. 18,627,840 60,059,790
Net asset value of shares issued in distributions from net
investment income and net realized gains (2,289,423 and 1,967,328
shares, respectively) ............................................. 69,507,135 55,675,398
Cost of shares redeemed (1,291,784 and 3,315,408 shares,
respectively)...................................................... (41,956,250) (102,441,820)
------------ ------------
Increase in net assets derived from capital
share transactions........................................ 46,178,725 13,293,368
------------ ------------
Total increase in net assets................................ 994,704 92,521,258
------------ ------------
NET ASSETS, at the beginning of the period (including undistributed net
investment income of $1,438,036 and $3,206,733, respectively).......... 774,755,235 682,233,977
------------ ------------
NET ASSETS, at the end of the period (including undistributed net
investment income of $458,528 and $1,438,036, respectively)............$775,749,939 $774,755,235
------------ ------------
------------ ------------
</TABLE>
The accompanying notes to financial statements are an integral
part of these statements.
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
<TABLE>
Six Months
Ended
March 31,
1997 Year ended September 30,
----------------------------------------------
(unaudited) 1996 1995 1994 1993 1992
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $33.34 $30.07 $26.71 $26.94 $24.53 $23.87
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .03 .10 .24 .21 .21 .23
Net gains or (losses) on securities
(realized and unrealized) 1.14 5.84 5.22 1.23 3.24 1.07
------ ------ ------ ------ ------ -----
Total from investment operations 1.17 5.94 5.46 1.44 3.45 1.30
------ ------ ------ ------ ------ -----
LESS DISTRIBUTIONS:
Dividends (from net
investment income) (.08) (.18) (.21) (.20) (.24) (.24)
Distributions (from capital gains) (3.16) (2.49) (1.89) (1.47) (.80) (.40)
------ ------ ------ ------ ------ -----
Total distributions (3.24) (2.67) (2.10) (1.67) (1.04) (.64)
------ ------ ------ ------ ------ -----
NET ASSET VALUE, END OF PERIOD $31.27 $33.34 $30.07 $26.71 $26.94 $24.53
------ ------ ------ ------ ------ -----
------ ------ ------ ------ ------ -----
TOTAL RETURN 3.80%** 21.35% 22.39% 5.49% 14.19% 5.59%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $775.7 $774.8 $682.2 $624.7 $715.8 $646.5
Ratio of expenses to average net assets .62%* .62% .66% .67% .67% .66%
Ratio of net investment income
to average net assets .21%* .29% .68% .72% .79% 1.01%
Portfolio turnover rate 22.41%* 24.47% 19.63% 17.38% 27.32% 11.47%
Average commission rate paid by
the Fund on portfolio investment
transactions***........................ $0.049 $0.046 $0.048 -- -- --
*Annualized
**Not annualized
***Disclosure of this rate is required by the Securities and Exchange
Commission on a prospective basis beginning with the Fund's 1996
fiscal year end. The Fund has chosen to disclose this rate
beginning in fiscal 1995.
</TABLE>
The accompanying notes to financial statements are an integral
part of these statements.
- -------------------------------------------------------------------
Top Ten Equity Holdings
March 31, 1997 (Unaudited)
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Percentage of
Total Net Assets
----------------
Keane, Inc................................................ 5.22%
Health Management Associates, Inc. - Class A.............. 4.47%
Fiserv, Inc............................................... 3.09%
Expeditors International of Washington, Inc............... 3.06%
Mutual Risk Management Ltd................................ 2.89%
Tootsie Roll Industries, Inc.............................. 2.73%
General Motors Corporation - Class H...................... 2.62%
Elan Corporation, plc..................................... 2.60%
Kohl's Corporation........................................ 2.58%
VIVRA Incorporated........................................ 2.48%
HISTORICAL RECORD (Unaudited)
- ---------------------------------------------------------------------
<TABLE>
Net Investment Dollar Growth of
Net Income Capital Gain Weighted An Initial
Asset Value Distributions Distributions Price/Earnings $10,000
Per Share Per Share Per Share Ratio** Investment***
----------- --------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
October 17, 1983*........... $10.00 $ -- $ -- -- $10,000
September 30, 1984........... 11.66 -- -- 12.6 times 11,660
September 30, 1985........... 14.39 .0930 .1860 11.7 14,742
September 30, 1986........... 16.90 .1630 .0610 15.0 17,581
September 30, 1987........... 21.01 .4200 .5130 20.9 23,108
September 30, 1988........... 18.58 .3380 1.3030 15.0 22,766
September 30, 1989........... 21.76 .3350 .0800 17.1 27,291
September 30, 1990........... 17.39 .3124 .6686 14.8 22,888
September 30, 1991........... 23.87 .3422 .1434 17.8 32,250
September 30, 1992........... 24.53 .2447 .4042 17.3 34,052
September 30, 1993........... 26.94 .2350 .8000 18.1 38,885
September 30, 1994........... 26.71 .2000 1.4700 18.5 41,020
September 30, 1995........... 30.07 .2056 1.8944 20.8 50,205
September 30, 1996........... 33.34 .1750 2.4979 28.9 60,922
March 31, 1997............... 31.27 .0779 (a) 3.1621 (a) 27.5 63,237
*Date of Initial Public Offering. (a) Paid December 31, 1996 to
**Based on latest 12 months accomplished earnings shareholders of record
of equity securities. December 24, 1996.
***Assuming reinvestment of all distributions.
</TABLE>
Range in quarter end price/earnings ratios
High Low
- --------------- ------------
12/31/96 29.0 9/30/85 11.7
NOTES TO FINANCIAL STATEMENTS
March 31, 1997 (unaudited)
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
(1) Summary of Significant Accounting Policies --
Nicholas II, Inc. (the "Fund") is an open-end, diversified management
investment company registered under the Investment Company Act of
1940, as amended. The primary objective of the Fund is capital
appreciation in which income is a secondary consideration. To achieve
its objective, the Fund invests in a diversified list of common stocks
saving growth potential. The following is a summary of the significant
accounting policies of 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 rate demand notes are valued at cost which
approximates market value. U.S. Treasury Bills and commercial
paper are stated at market value with the resultant difference
between market value and original purchase price being recorded
as interest income. Investment transactions are 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.
The Fund currently holds 173,900 shares of Programming and
Systems, Inc. ("the Company"), common stock which was delisted
by NASDAQ after the Securities and Exchange Commission suspended
trading. After the company was delisted an attempt to reorganize
and resolve issues facing the Company included a spin-off of a
new entity to existing shareholders called FRM Nexus, Inc., of
which the Fund received 57,966 common shares. The Board of
Directors of the Fund have continued to deem the shares of both
companies worthless until additional information including
audited financial statements and exchange listing information
is released by the companies.
(b) Net realized gains and losses on common stocks and bonds were
computed on the basis of specific certificates.
(c) Provision has not been made for Federal income taxes or excise
taxes since the Fund has elected to be taxed as a "regulated
investment company" and intends to distribute substantially all
taxable income to its shareholders and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies.
(d) Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Non-cash dividends, if any, are recorded at
fair market value on date of distribution.
(e) The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from the estimates.
(2) Investment Adviser and Management Agreement --
The Fund has an agreement with Nicholas Company, Inc. (with whom
certain officers and directors of the Fund are affiliated) to serve as
investment adviser and manager. Under the terms of the agreement, a
monthly fee is paid to the investment adviser based on 1/16th of 1%
(.75 of 1% on an annual basis) of the average net asset value up to
and including $50 million, 1/20th of 1% (.6 of 1% on an annual basis)
of the average net asset value over $50 million up to and including
$100 million and 1/24th of 1% (.5 of 1% on an annual basis) of the
average net asset value in excess of $100 million. Also, the
investment adviser may be reimbursed for clerical and administrative
services rendered by its personnel. The advisory agreement is subject
to an annual review by the Directors of the Fund.
NOTES TO FINANCIAL STATEMENTS (Continued)
- ---------------------------------------------------------------------
March 31, 1997 (unaudited)
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
(3) Net Unrealized Appreciation --
<TABLE>
Aggregate gross unrealized appreciation (depreciation) as of March 31,
1997, based on investment cost for Federal tax purposes is as follows:
<S> <C>
Aggregate gross unrealized appreciation on investments ...................$361,515,782
Aggregate gross unrealized depreciation on investments ................... (28,339,686)
------------
Net unrealized appreciation ............................................$333,176,096
------------
------------
</TABLE>
(4) Investment Transactions --
For the period ended March 31, 1997, the cost of purchases and the
proceeds from sales of investment securities, other than short-term
obligations, aggregated $84,299,310 and $110,520,927 respectively.
(5) Transactions with Affiliates --
Following is an analysis of transactions with "affiliated companies"
for the six months ended March 31, 1997, as defined by the Investment
Company Act of 1940:
<TABLE>
<CAPTION>
Amount of
Amount of Capital Gain
Dividends Realized
Share Activity Credited on Sale
-------------------------------------------- to Income of Shares
Balance Balance in Fiscal in Fiscal
Security Name 9/30/96 Purchases Sales 3/31/97 1997 1997
------------- -------- --------- ----- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Emeritus Corporation 581,000 40,000 -- 621,000 -- --
Keane, Inc. (a)(b) 2,037,350 -- 805,600 1,231,750 -- $17,596,133
Litchfield Financial Corporation 413,287 -- -- 413,287 $20,664 --
------- -----------
$20,664 $17,596,133
------- -----------
------- -----------
</TABLE>
(a) The share activity has been adjusted to reflect a stock split/dividend.
(b) As of March 31, 1997, the Fund is no longer affiliated with this company.
AUTOMATIC INVESTMENT PLAN - AN UPDATE (UNAUDITED)
The Nicholas Family of Funds' AUTOMATIC INVESTMENT PLAN provides a
simple method to dollar cost average into the fund(s) of your choice.
Dollar cost averaging involves making equal systematic investments
over an extended time period. A fixed dollar investment will purchase
more shares when the market is low and fewer shares when the market
is high. The automatic investment plan is an excellent way for you to
become a disciplined investor.
The following table illustrates what dollar cost averaging can
achieve. Please note that past performance is no guarantee of future
results. Nicholas Company recommends dollar cost averaging as a
practical investment method. It should be consistently applied for
long periods (5-10 years or more) so that investments are made
through several market cycles. The table will be updated and
appear in future financial reports issued by the Nicholas Family of
Funds.
Nicholas II
_____________
$1,000 initial investment on 10-17-83
$100 invested on the last day of each month
following the date of the initial
investment (in years) 13.5
Total cash invested $ 17,200
Total dividends and capital gains
distributions reinvested $ 16,094
Total full shares owned 3/31/97 1,582
Total market value on 3/31/97 $ 49,455
The results above assume purchase on the last day of the month for the
respective periods. The Nicholas Automatic Investment Plan actually
invests on the 20th of each month (or on the alternate date specified
by the investor). Total market value includes reinvestment of all
distributions.
CAN YOU AFFORD NOT TO INVEST IN AN IRA?
The maximum yearly IRA contribution is the lesser of $2,000 or 100%
of your compensation. Every year that you contribute this amount you may
also deduct it from your Federal income taxes, unless you (or your spouse)
are an eligible participant in an employer-sponsored retirement plan and
your adjusted gross income exceeds certain limits as defined by the
Internal Revenue Code. This deduction can lead to substantial savings,
especially when you look at the relationship between higher tax brackets
and the net cost of investing. The table below illustrates a schedule of
tax brackets, resulting tax savings, and the net cost of investing $2,000
in an IRA, assuming full deductibility of your contributions.
TABLE 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
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 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
OFFICERS AND DIRECTORS
ALBERT O. NICHOLAS
President and Director
ROBERT H. BOCK
Director
MELVIN L. SCHULTZ
Director
RICHARD SEAMAN
Director
DAVID L. JOHNSON
Executive Vice President
THOMAS J. SAEGER
Executive Vice President and Secretary
DAVID O. NICHOLAS
Senior Vice President
LYNN S. NICHOLAS
Senior Vice President
JEFFREY T. MAY
Senior Vice President & Treasurer
CANDACE L. LESAK
Vice President
JOHN J. O'HARE II
Vice President
KATHLEEN A. EVANS
Assistant Vice President
TRACY C. EBERLEIN
Assistant Vice President
Investment Advisor
NICHOLAS COMPANY, INC.
Milwaukee
414-272-6133 or 800-227-5987
Custodian and Transfer Agent
FIRSTAR TRUST COMPANY
Milwaukee
414-276-0535 or 800-544-6547
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.
SEMI ANNUAL REPORT
NICHOLAS II
