February 18, 1999
Report to Fellow Shareholders:
1998 was a difficult year for small company investing, not
only on an absolute basis but even more meaningful on a relative
basis. Large-cap technology stocks such as Microsoft, Intel and
Cisco Systems with returns of 114.60%, 68.77% and 149.72%,
respectively, drove the NASDAQ Composite Index to a record high
after gaining 39.63% in 1998. In contrast the Russell 2000 Index
of small companies declined 2.55% during the same time period.
1998 was also a very volatile year as stocks declined
declivitously during the months of June through October and then
recovered sharply through the end of the year.
Nicholas Limited Edition managed to gain 1.67% during 1998.
This compares favorably to the Russell 2000 Index and other small-
cap funds. Nicholas Limited Edition's long-term record is also
favorable when compared to other small-cap funds and indices as
can be seen in the chart below.
<TABLE>
<CAPTION>
Average Annual Total Return*
---------------------------------------------
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Nicholas Limited Edition, Inc.
(Distributions Reinvested)...... 1.67% 18.10% 15.77% 15.90%
Lipper Small Cap Fund Index**
(Distributions Reinvested) ... (0.85)% 9.26% 11.30% 13.16%
Russell 2000 Index
(Dividends Reinvested) ....... (2.55)% 11.58% 11.86% 12.92%
Ending Value of $10,000 invested
in Nicholas Limited Edition, Inc.
(Distributions Reinvested) ... $10,167 $16,474 $20,793 $43,732
</TABLE>
The Fund's performance during 1998 was driven by selected
healthcare stocks along with selected business services
companies. Performance was adversely affected by companies with
exposure to international markets as well as the industrial
sector of the economy. Finally, the Fund's lack of technology
stocks, including Internet related stocks, and conservative
investment approach held back performance relative to more
aggressive funds. Our philosophy is to invest for a full market
cycle and limit downside risk. This philosophy can impede
performance when the market focuses on speculative issues such as
initial public offerings and the Internet mania.
During 1998 corporate earnings growth on average slowed
significantly from 1997 mainly due to weak international
economies. This slowdown caused investors to concentrate their
portfolios in only the most rapidly growing and largest
companies. This concentration contributed to the wide divergence
of performance between large- and small-company stocks. Though
the S&P 500 Index gained 28.58%, on an unweighted basis the
average stock in the index gained only 10.8% for the year. A
recent study done by a regional brokerage firm which categorized
their universe of stocks in quintiles based on price relative to
earnings (P/E), noted that only the top quintile, which sold for
an average P/E of 35.7 at the end of 1997, showed a positive
return for 1998. This group had a positive return of 27.8%
whereas all other groups, where P/E's were lower, had negative
returns.*** As you know, our philosophy generally favors low P/E
stocks because they usually are less risky.
Recent stock market returns have been significantly higher
than historical levels, especially in the larger companies.
Historical returns for the S&P 500 for example have been in the
10% range, however, over the last 5 years the average return has
been 24.05%. Investors, I believe, have set their expectations
of future returns too high. This has forced many mutual fund
managers to pursue higher risk investments to achieve higher
expected returns. We will continue to stick to our time honored
approach to balance risk and return.
Sincerely,
/S/ David O. Nicholas
---------------------
David O. Nicholas
*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.
**Lipper Small Cap Fund Index is an unmanaged equally weighted
index of the 30 largest mutual funds included in the Lipper Small
Cap Fund category.
***Highest P/E stocks Post Best Gains in '98, Robinson-Humphrey,
December 7, 1998. Calculations based on Robinson-Humphrey's
research universe over the period from January 1 to November 27,
1998. Robinson-Humphrey is a member of the New York Stock
Exchange and is not affiliated with the Nicholas Company, Inc.
<TABLE>
<CAPTION>
Financial Highlights
(For a share outstanding throughout each period)
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.... $25.07 $20.74 $19.22 $17.09 $18.68 $18.77 $16.86 $12.03 $12.49 $11.29
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................. .01 .00* .01 .08 .10 .09 .08 .12 .12 .15
Net gains (losses) on securities
(realized and unrealized).......... .38 6.82 4.14 5.07 (.68) 1.59 2.74 5.07 (.34) 1.82
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations... 0.39 6.82 4.15 5.15 (.58) 1.68 2.82 5.19 (.22) 1.97
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends (from net investment income) (.01) (.00)* (.01) (.08) (.10) (.09) (.08) (.12) (.12) (.15)
Distributions (from capital gains).... (1.25) (2.49) (2.62) (2.94) (.91) (1.57) (.83) (.24) (.12) (.62)
Distributions (in excess of book
realized gains) (Note 1 (d))....... (.00)** -- -- -- -- (.11) -- -- -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions................. (1.26) (2.49) (2.63) (3.02) (1.01) (1.77) (.91) (.36) (.24) (.77)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD........... $24.20 $25.07 $20.74 $19.22 $17.09 $18.68 $18.77 $16.86 $12.03 $12.49
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL RETURN............................. 1.67% 33.02% 21.81% 30.18% (3.04%) 9.03% 16.78% 43.22% (1.73%) 17.36%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions)..... $367.2 $328.0 $232.8 $169.6 $142.6 $180.8 $190.2 $175.3 $70.9 $57.3
Ratio of expenses to average net assets.. .85% .86% .86% .90% .90% .88% .92% .94% 1.07% 1.12%
Ratio of net investment income
to average net assets.................. .06% .01% .06% .38% .52% .42% .45% 1.05% 1.10% 1.37%
Portfolio turnover rate.................. 30.06% 37.05% 32.31% 35.77% 16.29% 24.35% 24.44% 12.62% 15.15% 30.65%
</TABLE>
* The amount rounds to $0.00, actual amount $0.0029.
** The amount rounds to $(0.00), actual amount $(0.0020).
The accompanying notes to financial statements
are an integral part of these statements.
TOP TEN PORTFOLIO HOLDINGS
December 31, 1998 (unaudited)
- -------------------------------------------------------------------------------
Percentage of
Name Net Assets
- ---- -----------
International Speedway Corporation - Class B... 5.95%
Knight Transportation, Inc. ................... 3.35%
Patterson Dental Company ...................... 2.65%
PSS World Medical, Inc. ....................... 2.59%
DBT Online, Inc. .............................. 2.56%
Heartland Express, Inc. ....................... 2.53%
Concord EFS, Inc. ............................. 2.51%
Sofamor/Danek Group, Inc. ..................... 2.49%
Poe & Brown, Inc. ............................. 2.47%
Res-Care, Inc. ................................ 2.46%
------
Total of top ten holdings 29.56%
------
------
SCHEDULE OF INVESTMENTS
December 31, 1998
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares or Quoted
Principal Market
Amount Value
- ------------ -----------
(Note 1(a))
COMMON STOCKS - 98.07%
<S> <C> <C>
BANKS AND FINANCE - 8.24%
101,757 CNB Bancshares, Inc. ........................... $ 4,744,420
201,500 Community First Bankshares, Inc. ............... 4,244,094
150,000 FirstMerit Corporation ......................... 4,031,250
97,500 Marshall & Ilsley Corporation .................. 5,697,656
250,000 Medallion Financial Corp. ...................... 3,578,125
221,580 National City Bancorporation * ................. 5,816,475
143,397 State Financial Services Corporation - Class A.. 2,150,955
------------
30,262,975
------------
BUSINESS PRODUCTS AND SERVICES - 17.40%
349,000 ABR Information Services, Inc. * ............... 6,849,125
293,750 Analysts International Corporation ............. 5,654,688
290,000 Checkfree Holdings Corporation * ............... 6,778,750
217,500 Concord EFS, Inc. * ............................ 9,216,562
376,250 DBT Online, Inc. * ............................. 9,382,734
100,000 Envoy Corporation * ............................ 5,825,000
107,150 G&K Services, Inc. - Class A ................... 5,705,738
242,222 Interim Services, Inc. * ....................... 5,661,939
40,000 Plantronics, Inc. * ............................ 3,440,000
237,000 TESSCO Technologies Incorporated * + ........... 5,391,750
------------
63,906,286
------------
CONSUMER PRODUCTS AND SERVICES - 4.22%
235,000 Extended Stay America, Inc. * .................. 2,467,500
313,200 Thermedics Inc. * .............................. 3,386,475
508,700 ThermoQuest Corporation * ...................... 6,581,306
359,600 ThermoTrex Corporation * ....................... 3,079,075
------------
15,514,356
------------
HEALTH CARE PRODUCTS - 10.44%
311,200 Ballard Medical Products ....................... 7,566,050
76,000 Elan Corporation PLC * ......................... 5,286,750
68,400 Forest Laboratories, Inc. * .................... 3,638,025
83,500 Osteotech, Inc. * .............................. 3,882,750
441,000 Respironics, Inc. * ............................ 8,833,803
75,000 Sofamor/Danek Group, Inc. * .................... 9,131,250
------------
38,338,628
------------
HEALTH CARE SERVICES - 19.19%
619,000 Assisted Living Concepts Incorporated * ........ 8,124,375
150,000 Boron, LePore & Associates, Inc. * ............. 5,175,000
470,000 Concentra Managed Care, Inc. * ................. 5,023,125
158,800 Emeritus Corporation * ......................... 1,677,325
158,488 National HealthCare Corporation * .............. 2,456,564
377,500 NCS Health Care, Inc. - Class A * .............. 8,965,625
223,750 Patterson Dental Company * ..................... 9,733,125
413,125 PSS World Medical, Inc. * ...................... 9,501,875
240,000 Quorum Health Group, Inc. * .................... 3,105,000
266,250 Renal Care Group, Inc. * ....................... 7,671,328
365,250 Res-Care, Inc. * ............................... 9,017,109
------------
70,450,451
------------
INDUSTRIAL PRODUCTS AND SERVICES - 9.29%
485,192 Anicom, Inc. * ................................. 4,457,702
180,000 Fastenal Company ............................... 7,920,000
272,200 General Cable Corporation ...................... 5,580,100
225,000 Superior Services, Inc. * ...................... 4,514,063
542,100 Thermo Bioanalysis Corporation * ............... 7,182,825
367,000 Thermo Optek Corporation * ..................... 3,188,312
408,580 Thermo Vision Corporation * + .................. 1,276,812
------------
34,119,814
------------
INSURANCE - 3.99%
259,800 Poe & Brown, Inc. .............................. 9,076,763
140,000 Protective Life Corporation .................... 5,573,750
------------
14,650,513
------------
MEDIA, COMMUNICATIONS AND
ENTERTAINMENT - 11.83%
475,000 Artesyn Technologies, Inc. * ................... 6,650,000
365,800 Asia Satellite Telecommunications
Holdings Limited .............................. 6,401,500
425,880 Dover Downs Entertainment, Inc. ................ 5,137,177
539,310 International Speedway
Corporation - Class B ......................... 21,842,055
127,500 Penske Motorsports, Inc. * ..................... 3,394,688
------------
43,425,420
------------
REAL ESTATE - 2.47%
192,000 CCA Prison Realty Trust ........................ 3,936,000
125,000 Corrections Corporation of America * ........... 2,203,125
119,000 National Health Investors, Inc. ................ 2,937,813
------------
9,076,938
------------
RETAIL TRADE - 3.28%
72,900 Kohl's Corporation * ........................... 4,478,794
160,000 O'Reilly Automotive, Inc. * .................... 7,560,000
------------
12,038,794
------------
TRANSPORTATION - 7.72%
260,000 C.H. Robinson Worldwide, Inc. .................. 6,743,750
530,188 Heartland Express, Inc. * ...................... 9,278,290
461,250 Knight Transportation, Inc. * .................. 12,309,609
------------
28,331,649
------------
TOTAL COMMON STOCKS
(cost $251,766,368) ........................ 360,115,824
------------
CONVERTIBLE BOND - 0.38%
CONSUMER PRODUCTS AND SERVICES - 0.38%
2,000,000 ThermoTrex Corporation
3.25%, due November 1, 2007
(cost $1,991,563) .......................... 1,390,000
------------
SHORT-TERM INVESTMENTS - 2.03%
Commercial Paper - 0.68%
1,500,000 Newell Co.
5.85%, due January 4, 1999 .................... 1,500,000
1,000,000 Fiserv, Inc.
5.70%, due January 11, 1999 ................... 998,892
------------
2,498,892
------------
Variable Rate Demand Notes - 1.35%
2,143,747 General Mills, Inc.
5.23%, due January 4, 1999 .................... 2,143,747
1,150,996 Pitney Bowes Credit Corporation
5.23%, due January 4, 1999 .................... 1,150,996
1,130,812 Sara Lee Corporation
5.23%, due January 4, 1999 .................... 1,130,812
535,727 Warner-Lambert Company
5.18%, due January 4, 1999 .................... 535,727
------------
4,961,282
------------
TOTAL SHORT TERM INVESTMENTS
(cost $7,458,005) .......................... 7,460,174
------------
TOTAL INVESTMENTS
(cost $261,215,936) ........................ 368,965,998
------------
LIABILITIES, NET OF CASH
AND RECEIVABLES - (0.48)% .................. (1,774,609)
------------
TOTAL NET ASSETS
(Basis of percentages
disclosed above)............................ $367,191,389
------------
------------
</TABLE>
* 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
December 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value (Note 1 (a)) - <C>
Nonaffiliated issuers (cost $253,818,561) - see accompanying schedule of investments..... $362,297,436
Affiliated issuers (cost $7,397,375) - see accompanying schedule of investments (Note 5). 6,668,562
Receivables --
Investment securities sold........................................................... 48,032
Dividends and interest............................................................... 499,662
------------
Total receivables.............................................................. 547,694
------------
Total assets................................................................... 369,513,692
------------
LIABILITIES:
Payables --
Investment securities purchased...................................................... 635,000
Management fee (Note 2).............................................................. 243,334
Dividends payable.................................................................... 1,354,591
Other payables and accrued expenses.................................................. 89,378
------------
Total liabilities.............................................................. 2,322,303
------------
Total net assets............................................................... $367,191,389
------------
------------
NET ASSETS CONSIST OF:
Fund shares issued and outstanding......................................................... $259,472,694
Net unrealized appreciation on investments (Note 3)............................................... 107,747,893
Distributions in excess of book realized gains (Note 1 (d))................................ (29,198)
------------
$367,191,389
------------
------------
NET ASSET VALUE PER SHARE ($.01 par value, 20,000,000 shares authorized),
offering price and redemption price ($367,191,389/15,171,189 shares
outstanding)............. $24.20
------
------
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
STATEMENT OF OPERATIONS
For the year ended December 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INCOME:
Dividends.................................................. $ 1,644,761
Interest................................................... 1,547,603
-----------
3,192,364
-----------
EXPENSES:
Management fee (Note 2).................................... 2,659,090
Transfer agent fees........................................ 161,595
Registration fees.......................................... 58,658
Legal fees................................................. 26,454
Audit and tax consulting fees.............................. 19,975
Custodian fees............................................. 17,407
Postage and mailing fees................................... 15,172
Printing fees.............................................. 11,181
Insurance fees............................................. 6,134
Telephone fees............................................. 5,570
Directors' fees............................................ 2,000
Other operating expenses................................... 2,878
-----------
2,986,114
-----------
Net investment income................................ 206,250
-----------
NET REALIZED GAINS ON INVESTMENTS
Nonaffiliated issuers...................................... 12,782,876
Affiliated issuers (Note 5)................................ 5,258,239
-----------
18,041,115
-----------
NET DECREASE IN UNREALIZED APPRECIATION ON INVESTMENTS............ (14,015,362)
-----------
Net gain on investments.............................. 4,025,753
-----------
Net increase in net assets resulting from operations. $ 4,232,003
-----------
-----------
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1998 and 1997
- ------------------------------------------------------------------------------
<TABLE>
1998 1997
------ ------
<S> <C> <C> <C>
OPERATIONS:
Net investment income...................................................... $ 206,250 $ 34,492
Net realized gains on investments.......................................... 18,041,115 29,741,180
Net increase (decrease) in unrealized appreciation on investments.......... (14,015,362) 47,262,890
----------- ------------
Net increase in net assets resulting from operations....................... 4,232,003 77,038,562
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income ($0.0142 and $0.0029 per share,
respectively)............................................................ (206,250) (34,492)
Distributions from net realized gains on investments ($1.2470 and $2.4886
per share, respectively)................................................. (18,041,115) (29,741,180)
Distributions in excess of book realized gains
($0.0020 per share) (Note 1 (d))......................................... (29,198) ---
------------ ------------
Total distributions................................................... (18,276,563) (29,775,672)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued (5,541,251 and 2,829,418 shares, respectively). 136,879,599 70,335,372
Net asset value of shares issued in distributions to shareholders
(713,706 and 1,126,020 shares, respectively)........................... 16,921,966 27,925,295
Cost of shares redeemed (4,167,180 and 2,094,015 shares, respectively)..... (100,587,882) (50,255,447)
------------ ------------
Increase in net assets derived from capital
share transactions.................................................. 53,213,683 48,005,220
------------ ------------
Total increase in net assets........................................... 39,169,123 95,268,110
------------ ------------
NET ASSETS, at the beginning of the year........................................ 328,022,266 232,754,156
------------ ------------
NET ASSETS, at the end of the year.............................................. $367,191,389 $328,022,266
------------ ------------
------------ ------------
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
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>
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
December 31, 1992.......................... 18.77 .0815 .8275 18.8 22,690
December 31, 1993.......................... 18.68 .0867 1.6782 20.4 24,738
December 31, 1994.......................... 17.09 .1031 .9065 18.3 23,985
December 31, 1995.......................... 19.22 .0761 2.9353 25.2 31,223
December 31, 1996.......................... 20.74 .0124 2.6151 30.7 38,031
December 31, 1997.......................... 25.07 .0029 2.4886 33.0 50,590
December 31, 1998.......................... 24.20 .0142 (a) 1.2490 (a) 30.3 51,436
</TABLE>
*Date of Initial Public Offering.
**Based on latest 12 months accomplished earnings.
***Assuming reinvestment of all distributions.
(a) Paid December 31, 1998 to shareholders
of record December 29, 1998.
Range in quarter end price/earnings ratios
High 35.5 Low 13.3
September 30, 1997 June 30, 1988
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
- -------------------------------------------------------------------------------
(1) Summary of Significant Accounting Policies --
Nicholas Limited Edition, 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 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 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 generally 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 generally represents losses on the
sale of portfolio securities in the months of November and December. These
losses are 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 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 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. 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 December 31,
1998, based on investment cost for Federal tax purposes is as follows:
Aggregate gross unrealized
appreciation on investments .............. $133,765,243
Aggregate gross unrealized
depreciation on investments .............. (26,017,350)
-----------
Net unrealized appreciation .......... $107,747,893
-----------
-----------
(4) Investment Transactions --
For the year ended December 31, 1998, the cost of purchases and the
proceeds from sales of investments, other than short-term obligations,
aggregated $152,267,726 and $100,303,194, respectively.
(5) Transactions with Affiliates --
Following is an analysis of transactions with "affiliated companies"
for the year ended December 31, 1998, as defined by the Investment
Company Act of 1940:
<TABLE>
<CAPTION>
Amount of
Capital
Gain(loss)
Realized
Share Activity on Sale
------------------------------------------ of Shares
Balance Balance in Fiscal
Security Name 12/31/97 Purchases Sales 12/31/98 1998
------------- -------- --------- ----- -------- ----------
<S> <C> <C> <C> <C> <C>
Grand Prix Association of Long
Beach, Inc. (a) (b)................. 251,000 87,000 338,000 --- $ ---
Harborside Healthcare Corporation (a). 452,200 --- 452,200 --- 5,945,897
Surety Capital Corporation (a) ....... 432,800 --- 432,800 --- (687,658)
TESSCO Technologies Incorporated ..... 177,000 60,000 --- 237,000 ---
Thermo Vision Corporation ............ 343,580 65,000 --- 408,580 ---
----------
$5,258,239
----------
----------
</TABLE>
(a) As of December 31, 1998, the Fund is no longer affiliated with
this company.
(b) Grand Prix Association of Long Beach, Inc. was merged with Dover
Downs Entertainment, Inc. The Fund received shares of Dover
Downs Entertainment, Inc. in consideration for the shares of
Grand Prix Association of Long Beach, Inc.
There were no dividends from affiliated companies for the year
ended 12/31/98.
REPORT OF INDEPENDANT PUBLIC ACCOUNTANTS
- -------------------------------------------------------------------------------
To the Shareholders and Board of Directors
of Nicholas Limited Edition, Inc.:
We have audited the accompanying statement of assets and liabilities of
NICHOLAS LIMITED EDITION, INC. (a Maryland corporation), including the schedule
of investments, as of December 31, 1998, 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 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 December 31, 1998, 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 Limited Edition, Inc. as of December 31, 1998, 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 the
periods presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
January 20, 1999.
NICHOLAS FAMILY OF FUNDS
Services Offered
- ---------------------------------------------------------------------
* IRAs
*Traditional *Simple *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
THOMAS J. SAEGER
Executive Vice President, Secretary and Director
MELVIN L. SCHULTZ
Director
DAVID L. JOHNSON
Executive Vice President
DAVID O. NICHOLAS
Senior Vice President
LYNN S. NICHOLAS
Senior Vice President
JEFFREY T. MAY
Senior Vice President
MARK J. GIESE
Vice President
CANDACE L. LESAK
Vice President
TRACY C. EBERLEIN
Assistant Vice President
MARY C. GOSEWEHR
Treasurer
Investment Adviser
NICHOLAS COMPANY, INC.
Milwaukee, Wisconsin
414-272-6133 or 800-227-5987
Transfer Agent
FIRSTAR MUTUAL FUND SERVICES, LLC
Milwaukee, Wisconsin
414-276-0535 or 800-544-6547
Custodian
FIRSTAR BANK MILWAUKEE, N.A.
Milwaukee, Wisconsin
Auditors
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
Counsel
MICHAEL, BEST & FRIEDRICH LLP
Milwaukee, Wisconsin
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.
NICHOLAS LIMITED EDITION
700 N. Water Street
Milwaukee, Wisconsin 53202
www.nicholasfunds.com
December 31, 1998
