SEMIANNUAL REPORT
NICHOLAS
LIMITED EDITION, INC.
700 North
Water Street
Milwaukee,
Wisconsin 53202
August 28, 1996
Dear Fellow Shareholders:
Our Fund performed quite well during the six month period ended
June 30, 1996, returning 18.42% versus 10.09% for the S&P 500, 12.63% for
the NASDAQ Composite Index and 10.36% for the Russell 2000 small company
index. As of June 30, 1996, the Fund had total net assets of $229
million. The table below shows results for the various time periods
ended June 30, 1996.
Average Annual Total Return*
6 Month 1 Year 3 Years 5 Years
------- ------ ------- -------
Nicholas Limited Edition
(Distributions Reinvested)..... +18.42% +36.43% +17.43% +16.93%
Standard & Poor's 500
(Income Reinvested)............ +10.09% +25.98% +17.20% +15.71%
NASDAQ OTC Composite
(Excludes Income).............. +12.63% +26.95% +18.96% +20.02%
Russell 2000 (Income Reinvested) +10.36% +23.89% +15.80% +17.51%
*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 values and return will
fluctuate so an investment, when redeemed, may be worth more or less than
original cost.
The Fund's performance during the first six months of 1996 was
driven by nearly all sectors and securities except, perhaps, the
specialty finance companies. Worries about consumer credit problems hurt
that sector's performance. Long-time holdings such as Keane, Inc. and
others along with newer holdings such as National Surgery Centers, Inc.
combined for the performance produced over the last six months.
Long-term performance of Nicholas Limited Edition continues to meet
our expectations. The Fund's life time return is 15.42%, which
encompasses 9.12 years and both bull and bear markets. Management's goal
of 15% over the long-term is a good target, one we cannot promise, but
that fits our investment philosophy. Anything more and we would be
tempted to take too much risk, anything less and we would not take enough
risk. If we can compound at this rate for 20 years, an investment of
$10,000 would be worth $163,665. The key to even better performance is to
add incrementally (monthly) to the pool of assets.
Since June 30, 1996, the markets have become extremely volatile.
From peak to trough, the S&P 500 dropped 7.64%, the NASDAQ declined
16.55% and the Russell 2000 lost 15.59% of its value. During these
volatile times we look for opportunities to buy more of the high quality
companies we already own and start new positions in companies we love
yet in the past found too expensive for our tastes. The underlying
businesses intrinsic values rarely decline the way the stock market would
indicate. These volatile periods provide us the opportunity to buy some
very unique companies at favorable prices which should help our future
performance.
As always, we appreciate the long-term shareholders who have stuck
with us through good times and not so good.
Sincerely,
/s/ David O. Nicholas
---------------------
David O. Nicholas
Portfolio Manager
Schedule of Investments
June 30, 1996 (unaudited)
Shares or Quoted
Principal Market
Amount Value
(Note 1 (a))
- -------------- ------------
COMMON STOCKS - 91.0%
BANKS AND FINANCE - 8.0%
210,000 First Merchants Acceptance Corporation * $ 4,147,500
147,525 Litchfield Financial Corporation........ 2,065,350
97,500 Marshall & Ilsley Corporation........... 2,705,625
260,265 Mercury Finance Company................. 3,318,379
18,125 Patlex Corporation *.................... 706,875
40,000 Security Capital Corporation............ 2,380,000
66,040 State Financial Services Corporation - Class A 1,122,680
407,800 Surety Capital Corporation * +.......... 1,860,791
------------
18,307,200
------------
BUSINESS SERVICES - 13.6%
81,250 Analysts International Corporation...... 3,412,500
100,000 Checkfree Corporation *................. 1,987,500
62,000 Danka Business Systems PLC.............. 1,813,500
85,000 Envoy Corporation *..................... 2,486,250
71,111 Interim Services, Inc. *................ 3,057,773
305,125 Keane, Inc. *........................... 11,251,484
35,000 SITEL Corporation *..................... 1,448,125
83,700 TESSCO Technologies Incorporated *...... 3,055,050
80,000 Viking Office Products, Inc. *.......... 2,510,000
------------
31,022,182
------------
BROADCASTING - 2.8%
60,000 Asia Satellite Telecommunications
Holdings Limited........................ 1,785,000
121,000 United States Satellite
Broadcasting Company, Inc - Class A *... 4,567,750
------------
6,352,750
------------
CONSUMER PRODUCTS AND SERVICES - 6.0%
79,250 Central Parking Corporation............. 2,347,782
20,000 Extended Stay America, Inc. *........... 630,000
120,000 Marcus Corporation (The)................ 3,015,000
173,283 Monro Muffler Brake, Inc. *............. 3,184,075
155,500 Republic Automotive Parts, Inc. *....... 2,293,625
170,000 ThermoQuest Corporation *............... 2,358,750
------------
13,829,232
------------
HEALTH CARE PRODUCTS - 11.1%
203,400 Ballard Medical Products................ 3,890,025
60,000 DENTSPLY International Inc. ............ 2,550,000
48,000 Elan Corporation, plc *................. 2,742,000
70,000 Forest Laboratories, Inc. *............. 2,703,750
155,000 Haemonetics Corporation *............... 2,828,750
85,000 Ostex International, Inc. *............. 892,500
183,000 Respironics, Inc. *..................... 3,385,500
70,000 Sofamor/Danek Group, Inc. *............. 1,942,500
152,500 Tecnol Medical Products, Inc. *......... 2,935,625
35,500 Thermo Cardiosystems Inc. *............. 1,588,625
------------
25,459,275
------------
HEALTH CARE SERVICES - 18.7%
25,000 American HomePatient, Inc. *............ 1,106,250
80,000 American Oncology Resources, Inc. *..... 1,740,000
47,500 Cardinal Health, Inc. .................. 3,425,938
25,000 CompDent Corporation *.................. 1,162,500
124,000 Emeritus Corporation *.................. 2,185,500
30,000 First Commonwealth, Inc. *.............. 836,250
335,000 Harborside HealthCare Corporation +..... 3,433,750
138,600 Healthsource, Inc. *.................... 2,425,500
55,000 Medaphis Corporation *.................. 2,186,250
120,000 MedPartners/Mullikin, Inc. *............ 2,505,000
171,000 National Surgery Centers, Inc. *........ 4,531,500
40,000 OccuSystems, Inc. *..................... 1,495,000
80,000 Renal Care Group, Inc. ................. 2,580,000
39,800 United Dental Care, Inc. *.............. 1,681,550
68,850 United HealthCare Corporation........... 3,476,925
243,750 VIVRA Incorporated *.................... 8,013,281
------------
42,785,194
------------
INDUSTRIAL PRODUCTS AND SERVICES - 4.4%
55,800 Gelman Sciences Inc. *.................. 1,262,475
50,000 Republic Industries, Inc. *............. 1,456,250
121,600 Thermo Optek Corporation *.............. 1,580,800
107,200 ThermoSpectra Corporation *............. 1,688,400
92,600 Trimble Navigation Limited.............. 1,782,550
135,000 U.S. Can Corporation *.................. 2,193,750
------------
9,964,225
------------
INSURANCE - 5.1%
122,430 Capitol Transamerica Corporation........ 2,356,777
75,000 PMI Group, Inc. (The)................... 3,187,500
148,200 Poe & Brown, Inc. ...................... 3,667,950
70,000 Protective Life Corporation............. 2,458,750
------------
11,670,977
------------
PRINTING AND PUBLISHING - 1.8%
152,825 American List Corporation............... 4,049,863
------------
REAL ESTATE - 1.7%
119,000 National Health Investors, Inc. ........ 3,897,250
------------
RETAIL TRADE - 4.6%
124,125 Heilig-Meyers Company................... 2,979,000
103,000 Kohl's Corporation *.................... 3,772,375
105,000 O'Reilly Automotive, Inc. *............. 3,806,250
------------
10,557,625
------------
TRANSPORTATION - 7.2%
346,792 Heartland Express, Inc. *.............. 9,276,686
150,000 Knight Transportation, Inc. *.......... 3,075,000
170,000 Landair Services, Inc. *............... 2,677,500
42,000 Midwest Express Holdings, Inc. *....... 1,349,250
------------
16,378,436
------------
MISCELLANEOUS - 6.0%
70,000 Grand Prix Association of
Long Beach Inc. *...................... 665,000
36,010 International Speedway Corporation..... 10,622,950
95,000 Penske Motorsports, Inc. *............. 2,517,500
------------
13,805,450
------------
TOTAL COMMON STOCKS
(cost $130,472,573)............... 208,079,659
------------
CONVERTIBLE BOND - 4.1%
2,250,000 Baby Superstore, Inc.,
4.875%, 10/1/00....................... 1,763,438
1,560,000 National Healthcare L. P.,
6.00%, 7/1/00......................... 3,825,900
3,550,000 Richey Electronics, Inc.,
7.00%, 3/1/06......................... 3,723,062
------------
TOTAL CONVERTIBLE BONDS 9,312,400
(cost $8,643,575) ------------
SHORT-TERM INVESTMENTS - 5.0%
COMMERCIAL PAPER - 4.6%
2,000,000 Fiserv, Inc.,
5.55%, due July 1, 1996............... $ 2,000,000
2,000,000 Sta-Rite Industries, Inc.
5.55%, due July 3, 1996............... 1,999,383
3,000,000 Schreiber Foods, Inc.,
5.55%, due July 8, 1996............... 2,996,762
1,250,000 Harnischfeger Industries, Inc.,
5.60%, due July 11, 1996.............. 1,248,056
2,250,000 Fiserv, Inc.,
5.60%, due July 15, 1996.............. 2,245,100
------------
10,489,301
------------
VARIABLE DEMAND NOTES - 0.4%
904,400 Southwestern Bell Telephone Company,
5.12%, due July 1, 1996............... 904,400
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $11,355,451) 11,93,701
------------
TOTAL INVESTMENTS 228,785,760
------------
LIABILITIES, NET OF CASH
AND RECEIVABLES - (0.1%) (14,853)
------------
TOTAL NET ASSETS
(Basis of percentages
disclosed above) $228,770,907
------------
------------
* Nondividend paying security
+ This company is affiliated with the Fund as defined in
Section 2(a)(2)-(3) of the Investment Company Act of
1940, in that the Fund holds 5% or more of its
outstanding voting securities. (Note 5)
The accompanying notes to financial statements are an
integral part of this schedule.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value (Note 1 (a)) --
Nonaffiliated issuers (cost $145,014,879) - see accompanying schedule of investments.. $223,491,219
Affiliated issuers (cost $5,456,720) - see accompanying schedule of investments(Note 5) 5,294,541
------------
Total investments............................................................... 228,785,760
Cash....................................................................................... 1,076,291
------------
Receivables --
Investment securities sold........................................................... 1,542,098
Dividends and interest............................................................... 279,287
------------
Total receivables.............................................................. 1,821,385
------------
Total assets................................................................... 231,683,436
------------
LIABILITIES:
Payables --
Investment securities purchased...................................................... 2,723,298
Management fee (Note 2).............................................................. 133,251
Other payables and accrued expenses.................................................. 55,980
------------
Total liabilities.............................................................. 2,912,529
------------
Total net assets............................................................... $228,770,907
NET ASSETS CONSIST OF:
Fund shares issued and outstanding......................................................... $134,526,452
Net unrealized appreciation on investments (Note 3)........................................ 78,275,911
Accumulated undistributed net realized gains on investments................................ 15,937,730
Accumulated undistributed net investment income............................................ 30,814
------------
$228,770,907
------------
NET ASSET VALUE PER SHARE ($.01 par value, 14,000,000 shares authorized), ------------
offering price and redemption price ($228,770,907 divided by 10,050,091
shares outstanding)............................................................................. $22.76
------
------
</TABLE>
The accompanying notes to financial statements are
an integral part of this statement.
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the six months ended June 30, 1996 (unaudited)
<TABLE>
<S> <C>
INCOME:
Dividends --
Nonaffiliated issuers................................................................ $ 561,762
Interest................................................................................... 331,270
-------
893,032
-------
EXPENSES:
Management fee (Note 2).................................................................... 746,378
Transfer agent fees........................................................................ 47,859
Registration fees.......................................................................... 28,293
Legal fees................................................................................. 17,380
Custodian fees............................................................................. 8,873
Postage ................................................................................... 4,357
Printing................................................................................... 3,000
Audit and tax consulting fees.............................................................. 2,485
Telephone.................................................................................. 1,807
Directors' fees............................................................................ 600
Other operating expenses................................................................... 1,186
-----------
862,218
-----------
Net investment income................................................................ 30,814
-----------
NET REALIZED GAINS ON INVESTMENTS (Note 1 (b)):
Nonaffiliated issuers...................................................................... 15,937,730
-----------
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS ........................................... 15,333,590
-----------
Net gain on investments.............................................................. 31,271,320
-----------
Net increase in net assets resulting from operations................................. $31,302,134
-----------
-----------
</TABLE>
The accompanying notes to financial statements are an integral
part of this statement.
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
<TABLE> <C> <C>
<S> 1996 1995
OPERATIONS: ------------ -----------
Net investment income...................................................... $ 30,814 $ 585,213
Net realized gains on investments (Note 1 (b))............................. 15,937,730 22,569,855
Net increase in unrealized appreciation on investments..................... 15,333,590 17,738,854
------------ -----------
Net increase in net assets resulting from operations.................. 31,302,134 40,893,922
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income ($0.0761 per share in 1995)....... -- (585,213)
Distributions from net realized gains on investments
($2.9353 per share in 1995)................................................ -- (22,569,855)
------------ -----------
Total distributions................................................... -- (23,155,068)
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued (1,883,530 and
912,733 shares, respectively). (Note 1(f)................................ 42,229,376 17,514,151
Net asset value of shares issued in distributions to shareholders
(1,127,739 shares in 1995)............................................... -- 21,562,367
Cost of shares redeemed (655,078 and 1,561,078 shares, respectively)....... (14,329,283) (29,849,025)
Increase in net assets derived from capital share ------------ -----------
transactions........................................................ 27,900,093 9,227,493
Total increase in net assets.......................................... 59,202,227 26,966,347
------------ -----------
NET ASSETS, at the beginning of the period..................................... 169,568,680 142,602,333
------------ -----------
NET ASSETS, at the end of the period (including undistributed net investment
income of $30,814 in 1996)................................................... $228,770,907 $169,568,680
------------ -----------
------------ -----------
</TABLE>
The accompanying notes to financial statements are
an integral part of these statements.
HISTORICAL RECORD (unaudited)
<TABLE>
Capital Gain Dollar Growth of
Net Dividend and Other 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>
May 18, 1987 *............................. $10.00 $ -- $ -- -- $10,000
December 31, 1987 ......................... 9.15 .0900 -- 13.9 times 9,242
December 31, 1988.......................... 11.29 .0969 .2527 14.1 11,762
December 31, 1989.......................... 12.49 .1453 .6151 16.3 13,804
December 31, 1990.......................... 12.03 .1207 .1213 14.2 13,566
December 31, 1991.......................... 16.86 .1228 .2407 21.9 19,429
June 30, 1992.............................. 16.27 -- -- 17.3 18,749
December 31, 1992.......................... 18.77 .0815 .8275 18.8 22,690
June 30, 1993.............................. 18.89 -- -- 18.1 22,835
December 31, 1993.......................... 18.68 .0867 1.6782 20.4 24,738
June 30, 1994.............................. 17.64 -- -- 18.1 23,360
December 31, 1994.......................... 17.09 .1031 (a) .9065 (a) 18.3 23,985
June 30, 1995.............................. 19.31 -- -- 20.0 27,101
December 31, 1995.......................... 19.22 .0761 (b) 2.9353 (b) 25.2 31,223
June 30, 1996.............................. 22.76 -- -- 32.0 36,973
*Date of Initial Public Offering (a) Paid December 31, 1994 to shareholders
**Based on latest 12 months accomplished earnings of record December 29, 1994.
***Assuming reinvestment of all distributions (b) Paid December 31, 1995 to shareholders
of record December 28, 1995.
</TABLE>
Range in quarter end price/earnings ratios
High Low
------------- -------------
6/30/96 32.0 6/30/96 13.3
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
Six Months Year ended December 31,
Ended 6/30/96 -------------------------------------------
(unaudited) 1995 1994 1993 1992 1991
------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $19.22 $17.09 $18.68 $18.77 $16.86 $12.03
INCOME FROM INVESTMENT OPERATIONS:
Net investment income -- .08 .10 .09 .08 .12
Net gains or (losses) on securities
(realized and unrealized) 3.54 5.07 (.68) 1.59 2.74 5.07
------ ------ ------ ------ ------ ------
Total from investment operations 3.54 5.15 (.58) 1.68 2.82 5.19
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends (from net
investment income) -- (.08) (.10) (0.09) (.08) (.12)
Distributions (from capital gains) -- (2.94) (.91) (1.57) (.83) (.24)
Distributions (in excess of book
realized gains) (Note 1 (d)) -- -- -- (0.11) -- --
------ ------ ------ ------ ------ ------
Total distributions -- (3.02) (1.01) (1.77) (.91) (.36)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $22.76 $19.22 $17.09 $18.68 $18.77 $16.86
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL RETURN 18.42% 30.18% (3.04%) 9.03% 16.78% 43.22%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $228.8 $169.6 $142.6 $180.8 $190.2 $175.3
Ratio of expenses to average net assets .86%* .90% .90% .88% .92% .94%
Ratio of net investment income
to average net assets 0.04%* .38% .52% .42% .45% 1.05%
Portfolio turnover rate 30.68%* 35.77% 16.29% 24.35% 24.44% 12.62%
Average commission rate paid by the
Fund on portfolio investment
transactions *** $0.047 $0.045 -- -- -- --
</TABLE>
* 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 chose to disclose this rate beginning in
fiscal 1995.
The accompanying notes to financial statements are
an integral part of these statements.
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
The following is an open-end, diversified management investment
company registered under the Investment Company Act of 1040, as
ammended. The primary objective of the Fund is long-term growth.
Current income is a small factor in considering the selection of
investments. The following is a summary of the significant
accounting policies of Nicholas Limited Edition, 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 schedule of investments
and the statement of assets and liabilities, are the same for
Federal income tax purposes.
(b) Net realized gains and losses on common stocks 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) Excess distributions of book realized gains is the result of
different accounting treatment for book and tax purposes and
should not be treated as a return of capital for income tax
reporting. The Fund is required to distribute at least
98 percent of realized gains through October 31 to avoid paying
a federal excise tax. The excess distribution in 1993 generally
represents losses on the sale of portfolio securities in the
months of November and December. The losses were used to offset
future gains.
(e) 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.
(f) The Fund reopened on January 3, 1995 and will remain open until
there are approximately 10 million shares outstanding excluding
reinvested dividends.
(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.
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 June
30, 1996, based on investment cost for Federal tax purposes is as
follows:
Aggregate gross unrealized appreciation on investments $81,618,870
Aggregate gross unrealized depreciation on investments (3,342,959)
-----------
Net unrealized appreciation.................... $78,275,911
-----------
(4) INVESTMENT TRANSACTIONS --
For the six months ended June 30, 1996, the cost of purchases and
the proceeds from sales of investments, other than short-term
obligations, aggregated $49,977,786 and $29,546,821, respectively.
(5) TRANSACTIONS WITH AFFILIATES --
Following is an analysis of 1996 transactions with "affiliated
companies" as defined by the Investment Company Act of 1940:
<TABLE>
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 12/31/95 Purchases Sales 6/30/96 1996 1996
------------- -------- --------- ----- ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Harborside Healthcare Corporation -- 335,000 -- 335,000 $ -- $ --
Surety Capital Corporation -- 407,800 -- 407,800 -- --
------- -------
$ 0 $ 0
------- -------
------- -------
</TABLE>
OFFICERS AND DIRECTORS
ALBERT O. NICHOLAS
President and Director
THOMAS J. SAEGER
Executive Vice President, Secretary and Director
MELVIN L. SCHULTZ
Director
DAVID L. JOHNSON
Executive Vice President
LYNN S. NICHOLAS
Senior Vice President
DAVID O. NICHOLAS
Senior Vice President
CANDACE l. LESAK
Vice President
JEFFREY T. MAY
Vice President
JOHN J. O'HARE II
Assistant Vice President
MARY C. GOSEWEHR
Treasurer
INVESTMENT ADVISOR
NICHOLAS COMPANY, INC.
Milwaukee
CUSTODIAN AND TRANSFER AGENT
FIRSTAR TRUST COMPANY
Milwaukee 414/276-0535
INDEPENDANT PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN LLP
Milwaukee
COUNSEL
MICHAEL, BEST & FRIEDRICH
Milwaukee
Member of
100% No-Load (TM)
Mutual Fund Council
of the 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.
