May 27, 1998
Dear Fellow Shareholders:
Nicholas II returned 18.96% during the past six months ended March 31,
1998. This compares to 6.37% for the Russell 2000 small company
index and 8.23% for mid-cap funds. Nicholas II is categorized in
most publications as a mid-cap fund, however, it contains a combination of
small and mid-cap securities.
As seen in the chart below, Nicholas II has generally been an
excellent performer compared to its benchmark indices.
<TABLE>
Average Annual
Six Total Return*
Month 1 Year 3 Years 5 Years 10 Years
----- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
Nicholas II, Inc.
(Distributions Reinvested) +18.96% +54.64% +30.08% +20.89% +16.33%
Mid Cap Funds**
(Dividends Reinvested) + 8.23% +43.06% +24.67% +17.80% +16.89%
Russell 2000 Index
(Dividends Reinvested) + 6.37% +42.01% +24.42% +17.67% +14.85%
Consumer Price Index + 0.43% + 1.31% + 2.30% + 2.45% + 3.34%
Ending value of $10,000
invested in Nicholas II
(Distributions Reinvested) $11,896 $15,464 $22,011 $25,820 $45,373
</TABLE>
Performance has been driven by good stock selection in areas such as
business services, telecommunications, healthcare, and financials. The Funds
underweighting in areas such as speculative technology and real estate
investment trusts also helped its relative performance.
Looking toward the future, valuation levels, especially among large
capitalization stocks continues to concern us. High valuation levels mean a
much larger downside risk when company fundamentals do not meet investor
expectations. Therefore, it is more important than ever to be invested in
quality companies that perform in line with expectations. We continue
to strive to limit risk in the portfolio by holding quality businesses with
reasonable to attractive valuations. We will not however try to time the
market by going to a large cash position. This is a futile exercise in our
opinion that only stands to limit your long-term potential.
The performance differential between large well known companies and the
small lesser known companies that Nicholas II invests with, has caused a
large valuation discrepancy when looking at price/earning ratios in relation
to growth rates. 1998 has proven to be tough fundamentally for the large
companies, especially technology, due to the Asian economic crisis. This
situation may help narrow the valuation gap between large and small companies
which would benefit Nicholas II on a relative basis.
Finally, I heard an analogy to this long historical bull market that seems
appropos. It is a "Titanic" market. The party goes on even as the large
ship approaches an iceberg. We all know what happens in the end. The lesson
learned from the disaster which should be applied to today's market is to be
cautious and prepare for all possible risks. Our staff at Nicholas
Company is working hard to be cautious, keeping in mind long-term potential.
Thank you for your interest and continued support in the Nicholas II fund.
Sincerely,
/s/ David O. Nicholas
------------------
David O. Nicholas
Portfolio Manager
*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.
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
<TABLE>
Six Months
Ended
March 31,
1998 Year ended September 30,
--------------------------------------------------------
(unaudited) 1997 1996 1995 1994 1993
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $40.65 $33.34 $30.07 $26.71 $26.94 $24.53
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................. .02 .08 .10 .24 .21 .21
Net gains on securities
(realized and unrealized)........... 6.71 10.47 5.84 5.22 1.23 3.24
------ ------ ------ ------ ------ ------
Total from investment operations...... 6.73 10.55 5.94 5.46 1.44 3.45
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends (from net
investment income).................. (.07) (.08) (.18) (.21) (.20) (.24)
Distributions (from capital gains)..... (5.24) (3.16) (2.49) (1.89) (1.47) (.80)
------ ----- ----- ----- ----- -----
Total distributions................. (5.31) (3.24) (2.67) (2.10) (1.67) (1.04)
------ ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD........... $42.07 $40.65 $33.34 $30.07 $26.71 $26.94
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL RETURN............................. 18.96%** 34.94% 21.35% 22.39% 5.49% 14.19%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions)..... $1,177.1 $994.4 $774.8 $682.2 $624.7 $715.8
Ratio of expenses to average net assets.. .60%* .61% .62% .66% .67% .67%
Ratio of net investment income
to average net assets.................. .11%* .23% .29% .68% .72% .79%
Portfolio turnover rate.................. 13.55%* 30.21% 24.47% 19.63% 17.38% 27.32%
Average commission rate paid by
the Fund on portfolio investment
transactions***........................ $0.0490 $0.0491 $0.0468 $0.0480 -- --
*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>
TOP TEN EQUITY HOLDINGS
March 31, 1998 (Unaudited)
- ----------------------------------------------------------------------
Percentage of
Total Net Assets
----------------
Health Management Associates, Inc. - Class A.............. 5.33%
Mutual Risk Management Ltd................................ 3.56%
Fiserv, Inc............................................... 3.46%
Elan Corporation, plc..................................... 2.97%
Tootsie Roll Industries, Inc.............................. 2.97%
Arbor Drugs, Inc.......................................... 2.83%
PanAmSat Corporation...................................... 2.77%
Protective Life Corporation............................... 2.76%
Expeditors International of Washington, Inc............... 2.62%
Quorum Health Group, Inc.................................. 2.61%
-------
Total of top ten holdings....................... 31.88%
-------
-------
The accompanying notes to financial statements
are an integral part of these statements.
SCHEDULE OF INVESTMENTS
March 31, 1998 (unaudited)
Shares or Quoted
Principal Market
Amount Value
----------- ------------
(Note 1 (a))
COMMON STOCKS - 96.81%
BANKS AND FINANCE - 9.47%
458,187 Associated Banc-Corp 24,713,461
244,687 Fifth Third Bancorp 20,920,739
8,853 First National Bank
of Anchorage (The) 26,116,350
413,287 Litchfield Financial Corporation + 9,092,314
527,900 Marshall & Ilsley Corporation 30,684,187
---------------
111,527,051
---------------
BUSINESS SERVICES - 12.19%
535,000 Checkfree Holdings Corporation * 11,836,875
345,000 ENVOY Corporation * 14,835,000
642,500 Fiserv, Inc. * 40,718,438
466,062 G&K Services, Inc. - Class A 20,448,470
665,000 Select Appointments (Holdings)
Public Limited Company 16,791,250
708,500 Thermo Instrument Systems Inc. * 23,469,062
662,000 Viking Office Products, Inc. * 15,391,500
---------------
143,490,595
---------------
CONSUMER PRODUCTS AND SERVICES - 4.13%
313,850 Newell Co. 15,202,109
618,500 Thermedics Inc. * 11,017,031
407,700 ThermoTrex Corporation * 8,612,663
351,200 Valspar Corporation (The) 13,784,600
---------------
48,616,403
---------------
FOOD AND BEVERAGE - 2.97%
486,953 Tootsie Roll Industries, Inc. 34,908,443
---------------
HEALTH CARE PRODUCTS - 14.13%
340,000 BioChem Pharma Inc. * 8,223,750
325,000 Biogen, Inc. * 15,660,938
341,639 Block Drug Company, Inc. - Class A 14,348,838
887,200 DENTSPLY International Inc. 27,669,550
541,200 Elan Corporation, plc * 34,975,050
752,000 Forest Laboratories, Inc. * 28,200,000
277,500 Sofamor Danek Group, Inc. * 23,656,875
242,050 Thermo Cardiosystems Inc. * 6,550,478
375,150 Trex Medical Corporation * 7,057,509
---------------
166,342,988
---------------
HEALTH CARE SERVICES - 17.54%
401,585 American HomePatient, Inc. * 7,805,809
184,779 Cardinal Health, Inc. 16,295,198
621,000 Emeritus Corporation * + 8,073,000
508,750 Health Care and
Retirement Corporation * 21,844,453
2,189,989 Health Managememt Associates,
Inc. - Class A * 62,688,435
884,400 Patterson Dental Company * 27,416,400
693,750 PhyCor, Inc. * 15,652,734
913,750 Quorum Health Group, Inc. * 30,724,844
531,346 Vencor, Inc. * 15,907,171
---------------
206,408,044
---------------
INDUSTRIAL PRODUCTS AND SERVICES - 3.81%
606,500 General Cable Corporation 27,519,938
555,000 Superior Services, Inc. * 17,309,062
---------------
44,829,000
---------------
INSURANCE - 7.82%
446,100 Liberty Financial Companies, Inc. 17,648,831
1,238,400 Mutual Risk Management Ltd. 41,950,800
445,000 Protective Life Corporation 32,485,000
---------------
92,084,631
---------------
MEDIA, COMMUNICATIONS
AND ENTERTAINMENT - 9.78%
460,000 American Mobile
Satellite Corporation * 6,555,000
753,400 Computer Products, Inc. * 17,563,638
575,000 General Motors
Corporation-Class H * 26,018,750
655,000 LCI International, Inc. * 25,217,500
535,000 PanAmSat Corporation * 32,568,125
222,000 Penske Motorsports, Inc. * 7,159,500
---------------
115,082,513
---------------
REAL ESTATE - 1.13%
431,120 Meditrust Corp, Paired ctf. 13,310,830
---------------
RETAIL TRADE - 9.59%
1,414,125 Arbor Drugs, Inc. 33,320,321
685,000 AutoZone, Inc. * 23,204,375
246,400 Kohl's Corporation * 20,143,200
1,006,000 OfficeMax, Inc. * 17,982,250
660,000 O'Reilly Automotive, Inc. * 18,191,250
---------------
112,841,396
---------------
TRANSPORTATION - 4.25%
718,000 Expeditors International of
Washington, Inc. 30,784,250
693,892 Heartland Express, Inc. * 19,255,503
---------------
50,039,753
---------------
TOTAL COMMON STOCKS 1,139,481,647
(cost $529,306,759) ---------------
CONVERTIBLE BONDS - 0.68%
$7,000,000 Emeritus Corporation +
6.25%, due January 1, 2006 5,565,000
2,500,000 ThermoTrex Corporation
3.25%, Due November 1, 2007 2,415,625
---------------
TOTAL CONVERTIBLE BONDS
(cost $8,480,500) 7,980,625
---------------
SHORT-TERM INVESTMENTS - 2.79%
Commercial Paper - 2.24%
$6,000,000 Quad/Graphics, Inc.,
5.75%, due April 2, 1998 5,999,042
1,900,000 Banta Corporation,
5.70%, due April 6, 1998 1,898,496
1,250,000 Harnischfeger Industries, Inc.,
5.75%, due April 6, 1998 1,249,002
1,250,000 Fiserv, Inc.,
5.75%, due April 8, 1998 1,248,602
3,500,000 Lockheed Martin Corporation,
5.70%, due April 8, 1998 3,496,121
2,250,000 Briggs & Stratton Corporation,
5.70%, due April 13, 1998 2,245,725
2,750,000 Cox Enterprises, Inc.
5.72%, due April 14, 1998 2,744,320
2,000,000 Fiserv, Inc.,
5.70%, due April 15, 1998 1,995,567
3,590,000 Briggs & Stratton Corporation,
5.75%, due April 17, 1998 3,580,825
2,000,000 Fiserv, Inc.,
5.70%, due April 20, 1998 1,993,983
---------------
26,451,683
---------------
Variable Rate Demand Notes - 0.55%
3,411,543 Johnson Controls, Inc.,
5.29%, due April 1, 1998 3,411,543
183,000 Pitney Bowes Credit Corporation
5.29%, due April 1, 1998 183,000
2,901,092 Warner-Lambert Company,
5.27%, due April 1, 1998 2,901,092
---------------
6,495,635
---------------
TOTAL SHORT-TERM INVESTMENTS
(cost $32,858,959) 32,947,318
----------------
TOTAL INVESTMENTS
(cost $570,646,218) 1,180,409,590
----------------
LIABILITIES, NET OF CASH
AND RECEIVABLES - (0.28%) (3,345,143)
----------------
TOTAL NET ASSETS (Basis of
percentages disclosed above) $1,177,064,447
----------------
----------------
* 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.
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, 1986........... 16.90 0.1630 0.0610 15.0 times 17,581
September 30, 1987........... 21.01 0.4200 0.5130 20.9 23,108
September 30, 1988........... 18.58 0.3380 1.3030 15.0 22,766
September 30, 1989........... 21.76 0.3350 0.0800 17.1 27,291
September 30, 1990........... 17.39 0.3124 0.6686 14.8 22,888
September 30, 1991........... 23.87 0.3422 0.1434 17.8 32,250
September 30, 1992........... 24.53 0.2447 0.4042 17.3 34,052
September 30, 1993........... 26.94 0.2350 0.8000 18.1 38,885
September 30, 1994........... 26.71 0.2000 1.4700 18.5 41,020
September 30, 1995........... 30.07 0.2056 1.8944 20.8 50,205
September 30, 1996........... 33.34 0.1750 2.4979 28.9 60,922
September 30, 1997........... 40.65 0.0779 3.1621 31.4 82,206
March 31, 1998............... 42.07 0.0679 (a) 5.2413 (a) 32.9 97,791
*Date of Initial Public Offering. (a) Paid December 31, 1997 to shareholders of
**Based on latest 12 months accomplished earnings. record December 24, 1997.
***Assuming reinvestment of all distributions.
</TABLE>
Range in quarter end price/earnings ratios
High Low
- ------------- -------------
3/31/98 32.9 9/30/85 11.7
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1998 (unaudited)
- ----------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value (Note 1 (a))--
Nonaffiliated issuers (cost $551,695,471)-see accompanying schedule of investments.....$1,157,679,276
Affiliated issuers (cost $18,950,747)-see accompanying schedule of investments (Note 5) 22,730,314
--------------
Total investments................................................................ 1,180,409,590
--------------
Cash....................................................................................... 120,537
Dividends and interest receivable.......................................................... 559,800
--------------
Total assets..................................................................... 1,181,089,927
--------------
LIABILITIES:
Payables --
Investment securities purchased....................................................... 3,253,175
Management fee (Note 2)............................................................... 482,845
Other payables and accrued expenses................................................... 289,460
--------------
Total liabilities................................................................ 4,025,480
--------------
Total net assets ................................................................ $1,177,064,447
--------------
--------------
NET ASSETS CONSIST OF:
Fund shares issued and outstanding......................................................... $530,131,707
Net unrealized appreciation on investments (Note 3)........................................ 609,675,013
Accumulated undistributed net realized gains on investments................................ 36,749,585
Accumulated undistributed net investment income............................................ 508,142
--------------
$1,177,064,447
--------------
--------------
NET ASSET VALUE PER SHARE ($.01 par value, 200,000,000 shares authorized)
offering price and redemption price ($1,177,064,447 / 27,979,903 shares
outstanding)............................................................................... $42.07
------
------
The accompanying notes to financial statements
are an integral part of this statement.
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended March 31, 1998 (unaudited)
- ----------------------------------------------------------------------
<TABLE>
<S> <C>
INCOME:
Dividends (Note 1 (d)) -
Nonaffiliated issuers ............................................................ $ 2,708,515
Affiliated issuers (Note 5)....................................................... 24,797
Interest............................................................................. 915,050
-------------
3,648,362
-------------
EXPENSES:
Management fee (Note 2).............................................................. 2,663,194
Transfer agent fees.................................................................. 232,189
Registration fees.................................................................... 79,570
Custodian fees....................................................................... 25,098
Legal fees........................................................................... 22,140
Postage and mailing fees............................................................. 21,320
Printing ............................................................................ 18,777
Audit and tax consulting fees........................................................ 10,375
Insurance............................................................................ 8,264
Telephone............................................................................ 7,462
Directors' fees...................................................................... 6,000
Other expenses....................................................................... 997
-------------
3,095,386
-------------
Net investment income.......................................................... 552,976
-------------
NET REALIZED GAINS ON INVESTMENTS (Note 1 (b)):
Nonaffiliated issuers ............................................................... 37,073,279
Affiliated issuers (Note 5).......................................................... ---
-------------
37,073,279
-------------
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS .................................. 148,281,262
-------------
Net gains on investments............................................................. 185,354,541
-------------
Net increase in net assets resulting from operations................................. $185,907,517
-------------
-------------
The accompanying notes to financial statements
are an integral part of this statement.
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the six months ended March 31, 1998 (unaudited) and the year
ended September 30, 1997
- ---------------------------------------------------------------------
<TABLE>
<S> <C> <C>
1998 1997
-------------- ------------
OPERATIONS:
Net investment income..............................................$ 552,976 $ 1,971,980
Net realized gains on investments (Note 1 (b))..................... 37,073,279 134,967,832
Net increase in unrealized appreciation on investments............. 148,281,262 122,983,697
-------------- ------------
Net increase in net assets
resulting from operations............................... 185,907,517 259,923,509
-------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.0679 and $0.0779 per share, respectively).................... (1,660,429) (1,794,421)
Distributions from net realized gains on investment transactions
($5.2413 and $3.1621 per share, respectively).................... (128,170,972) (72,841,242)
-------------- -----------
Total distributions........................................ (129,831,401) (74,635,663)
-------------- ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued (1,957,735 and 1,483,510
shares, respectively)............................................ 77,941,942 51,370,208
Net asset value of shares issued in distributions from net
investment income and net realized gains (3,389,898 and 2,289,431
shares, respectively) ........................................... 120,443,058 69,507,135
Cost of shares redeemed (1,830,711 and 2,545,256 shares,
respectively).................................................... (71,777,094) (86,539,799)
-------------- ------------
Increase in net assets derived from capital
share transactions...................................... 126,607,706 34,337,544
-------------- ------------
Total increase in net assets.............................. 182,683,822 219,625,390
-------------- ------------
NET ASSETS, at the beginning of the period (including undistributed net
investment income of $1,615,595 and $1,438,036, respectively)........ 994,380,625 774,755,235
-------------- ------------
NET ASSETS, at the end of the period (including undistributed net
investment income of $508,142 and $1,615,595, respectively)..........$1,177,064,447 $994,380,625
-------------- ------------
-------------- ------------
The accompanying notes to financial statements
are an integral part of these statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1998 (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 growth in which income
is a secondary consideration. To achieve its objective, the Fund invests
in a diversified list of common stocks having growth potential. The
following is a summary of the significant accounting policies of the Fund.
(a) Each equity security 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 last bid price. Most debt securities, excluding
short-term investments, are valued at current evaluated 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 schedule of
investments and 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. and 57,966 shares of FRM Nexus, Inc. The Board of Directors
and the management of the Fund have deemed the shares of both
companies worthless.
(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% (0.6 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% (0.5 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. This
advisory agreement is subject to an annual review by the Directors of the
Fund.
(3) Net Unrealized Appreciation --
Aggregate gross unrealized appreciation (depreciation) as of
March 31, 1998, based on investment cost for Federal
tax purposes is as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized appreciation on investments.................. $619,548,027
Aggregate gross unrealized depreciation on investments................... (9,873,014)
------------
Net unrealized appreciation ........................................... $609,675,013
------------
------------
</TABLE>
(4) Investment Transactions --
For the period ended March 31, 1998, the cost of purchases and the
proceeds from sales of investment securities, other than short-term
obligations, aggregated $69,041,366 and $77,026,342 respectively.
(5) Transactions with Affiliates --
Following is an analysis of transactions with "affiliated companies" for
the six months ended March 31, 1998, as defined by the Investment Company
Act of 1940:
<TABLE>
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 9/30/97 Purchases Sales 3/31/98 1998 1998
------------- -------- --------- ----- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Emeritus Corporation (a) 621,000 -- -- 621,000 -- --
Litchfield Financial Corporation 413,287 -- -- 413,287 $24,797 --
------- ----------
$24,797 --
------- ----------
------- ----------
</TABLE>
(a) In addition to the common stock, the Fund holds $7,000,000 principal
(par) value of an Emeritus Corporation convertible debenture at March 31,
1998. For the six months ended March 31, 1998, the Fund earned $218,174
in interest on this bond.
AUTOMATIC INVESTMENT PLAN - AN UPDATE (UNAUDITED)
The Nicholas Family of Funds' Automatic Investment Plan provides a simple
method to dollar cost average into the fund(s) of your choice.
Dollar cost averaging involves making equal systematic investments over an
extended time period. A fixed dollar investment will purchase more shares
when the market is low and fewer shares when the market is high. The
automatic investment plan is an excellent way for you to become a
disciplined investor.
The following table illustrates what dollar cost averaging can achieve.
Please note that past performance is no guarantee of future results.
Nicholas Company recommends dollar cost averaging as a practical
investment method. It should be consistently applied for long periods
(5-10 years or more) so that investments are made through several market
cycles. The table will be updated and appear in future financial reports
issued by the Nicholas Family of Funds.
<TABLE>
<CAPTION>
Nicholas II
___________
<S> <C>
$1,000 initial investment on 10-17-83*
Number of years of investing $100 on the last day of
each month following the date of initial investment 14.5
Total cash invested $18,400
Total dividends and capital gains distributions reinvested $24,604
Total full shares owned 3/31/98 1,853
Total market value on 3/31/98 $77,943
</TABLE>
The results above assume purchase on the last day of the month. The Nicholas
Automatic Investment Plan actually invests on the 20th of each month (or on
the alternate date specified by the investor). Total market value includes
reinvestment of all distributions.
* Date of initial public offering.
NICHOLAS FAMILY OF FUNDS
Services Offered
- ---------------------------------------------------------------------
* IRAs
*Traditional *Educational
*Roth *SEP
*Self-employed Master Retirement Plan
*Money Purchase *Profit Sharing
*Automatic Investment Plan
*Direct Deposite of Distributions
*Systematic Withdrawl Plan
*Monthly Automatic Exchange between Funds
*Telephone Redemption (Regular accounts only)
*Telephone Exchange
*24-hour Automated Account Information (800-544-6547)
Please call a shareholder representative for further information on
the above services or with any other questions you may have regarding
the Nicholas Family of Funds.
800-227-5987
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 and Treasurer
CANDACE L. LESAK
Vice President
MARK J. GIESE
Vice President
KATHLEEN A. EVANS
Assistant Vice President
TRACY C. EBERLEIN
Assistant Vice President
Counsel
MICHAEL, BEST & FRIEDRICH LLP
Milwaukee, Wisconsin
Auditors
ARTHUR ANDERSON LLP
Milwaukee, Wisconsin
Investment Adviser
NICHOLAS COMPANY, INC.
Milwaukee, Wisconsin
414-272-6133 or 800-227-5987
Custodian and Transfer Agent
FIRSTAR TRUST COMPANY
Milwaukee, Wisconsin
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.
