<PAGE>
{LETTERHEAD}
July 28, 1995
VIA EDGAR TRANSMISSION
---------------------------------------
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Nicholas Equity Income Find, Inc.
Post-Effective Amendment No. 2 to Form N-1/A
File No. 33-69804
Gentlemen:
On behalf Nicholas Equity Income Fund, Inc. (The
"Registrant"), in connection with the amendment by the
Registrant of its Registration Statement on Form N-1/A
under Section 8 of the Investment Company Act of 1940,
as amended, and pursuant to Rule 472 and the rules and
regulations promulgated under the Securities Act of
1933, as amended, including Rule 101 (I), 101 (iv) and
902 (b) of Regulation S-T relating to electronic
filings, enclosed for filing is a marked copy of Post-
Effective Amendment No. 2 to the Form N-1/A of the
Registrant, including all exhibits thereto.
In accordance with Rule 485 (b), Amendment No. 2
to the Registration Statement on Form N-1/A shall be
effective on the date of filing. As legal council to
the Fund, we have reviewed the Amendment, and we
hereby represent, pursuant to Rule 485 (b) (4), that
the Amendment does not contain disclosure that would
render it ineligible to become effective under Rule
485 (b).
Should you have any questions or comments, please
do not hesitate to contact the undersigned at (414)
271-6560.
Very truly yours,
/s/ Michael Best &
Fredrich
----------------------------------
MICHAEL BEST & FREDRICH
Kate M. Fleming
KMF/ljg
Enclosure
<PAGE>
As filed with The Securities and Exchange Commission on July 28, 1995
Registration No. 33-69804
811-8062
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 2
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Post-Effective Amendment No. 2
NICHOLAS EQUITY INCOME FUND, INC.
(Exact Name of Registrant as Specified in Charter)
700 North Water Street, Milwaukee, Wisconsin 53202
(Address of Principal Executive Offices)
(414) 272-6133
(Registrant's Telephone Number, including Area Code)
Albert O. Nicholas, President
Nicholas Equity Income Fund, Inc.
700 North Water Street
Milwaukee, Wisconsin 53202
(Name and Address of Agent for Service)
Copy to:
Kate M. Fleming
Michael Best & Friedrich
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
It is proposed that the filing will become effective:
_____ immediately upon filing pursuant to paragraph (b)
X on July 28, 1995 pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(1)
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on ________ pursuant to paragraph (a)(2) of Rule 485
on ___________ pursuant to paragraph (a)(1)
Declaration Pursuant To Rule 24f-2
Pursuant to Rule 24f-2 under the Investment Company Act of
1940, the Registrant hereby elects to register an indefinite
number of shares of its Common Stock. On May 29, 1995, the
Registrant filed the necessary Rule 24f-2 Notice and filing fee
with the Commission for its fiscal year ended March 31, 1995.
<PAGE>
NICHOLAS EQUITY INCOME FUND, INC.
CROSS-REFERENCE SHEET
(As required by Rule 481(a))
PART A Information Required Heading
in Prospectus
------ -------------------- -------
Item 1. Cover Page.............. Cover Page
Item 2. Synopsis................ Performance Data
Item 3. Condensed Financial
Information............. Consolidated Disclosure
of Fund Fees and
Expenses; Financial
Highlights; Management's
Discussion of Fund
Performance
Item 4. General Description of
Registrant.............. Introduction; Investment
Objectives and Policies;
Investment Restrictions
Item 5. Management of the Fund.. Investment Adviser;
Management - Directors,
Executive Officers and
Portfolio Managers of the
Fund
Item 6. Capital Stock and Other
Securities.............. Transfer of Capital
Stock; Dividends and
Federal Tax Status;
Capital Structure; Annual
Meeting; Shareholder
Reports
Item 7. Purchase of Securities
Being Offered........... Purchase and Redemption
of Capital Stock;
Exchange Between Funds;
Transfer of Capital
Stock; Determination of
Net Asset Value; Dividend
Reinvestment Plan;
Individual Retirement
Account; Systematic
Withdrawal Plan; Self-
Employed Master
Retirement Plan
Item 8. Redemption or Repurchase Purchase of Capital
Stock; Redemption of
Capital Stock
Item 9. Pending Legal Proceedings Introduction
Part B. Information Required in Statement of Additional Information
------- -----------------------------------------------------------
Item 10. Cover Page............... Cover Page
Item 11. Table of Contents........ Table of Contents
Item 12. General Information and..
History.................. Introduction
Item 13. Investment Objectives and
Policies................. Investment Objectives and
Policies; Investment
Restrictions
Item 14. Management of the
Registrant............... Investment Adviser;
Management - Directors,
Executive Officers and
Portfolio Managers of the
Fund
Item 15. Control Persons and
Principal Holders of
Securities.............. Principal Shareholders
Item 16. Investment Advisory and
Other Services.......... Investment Adviser;
Custodian and Transfer
Agent; Independent
Accountants and Legal
Counsel
<PAGE>
CROSS-REFERENCE SHEET
(Continued)
Item 17. Brokerage Allocation.... Brokerage
Item 18. Capital Stock and Other
Securities.............. Transfer of Capital
Stock; Dividends and
Federal Tax Status;
Capital Structure;
Shareholder Reports;
Annual Meeting
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered............ Purchase of Capital
Stock; Redemption of
Capital Stock; Exchange
Between Funds; Transfer
of Capital Stock;
Determination of Net
Asset Value; Dividend
Reinvestment Plan;
Individual Retirement
Account; Self-Employed
Master Retirement Plan
Item 20. Tax Status............... Dividends and Federal Tax
Status
Item 21. Underwriters............. N/A
Item 22. Calculations of
Performance Data......... Performance Data
Item 23. Financial Statements..... Financial Information
Part C. Other Information
------- ------------------
Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C of the
Registration Statement.
<PAGE>
Nicholas Equity Income Fund, Inc.
Form N-1A
PART A: PROSPECTUS
<PAGE>
NICHOLAS EQUITY INCOME FUND, INC.
PROSPECTUS
700 North Water Street, Suite 1010
Milwaukee, Wisconsin 53202
414-272-6133
Nicholas Equity Income Fund, Inc. (the "Fund") is an
open-end management investment company whose primary investment
objective is to produce reasonable income for the investor.
Moderate long-term growth is a secondary consideration. To
achieve its primary investment objective, the Fund generally will
have at least 65% of its total assets invested in income-
producing equity securities. See "Investment Objectives and
Policies" for a further description of the Fund's primary and
secondary investment objectives.
NO-LOAD FUND - NO SALES CHARGE
Investment Adviser
NICHOLAS COMPANY, INC.
Minimum Initial Investment - $2,000
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS
THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus sets forth concisely the information about
the Fund that a prospective investor should know before
investing. Additional information about the Fund has been filed
with the Securities and Exchange Commission in the form of a
Statement of Additional Information, dated July 28, 1995. Upon
request to the Fund at the address and telephone number set forth
above, the Fund will provide copies of the Statement of
Additional Information without charge to each person to whom a
Prospectus is delivered.
July 28, 1995
INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION 1
CONSOLIDATED DISCLOSURE OF FUND FEES AND EXPENSES 1
FINANCIAL HIGHLIGHTS 2
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE 3
PERFORMANCE DATA 4
INVESTMENT OBJECTIVES AND POLICIES 4
INVESTMENT RESTRICTIONS 7
INVESTMENT ADVISER 9
MANAGEMENT - DIRECTORS, EXECUTIVE OFFICERS AND
PORTFOLIO MANAGERS OF THE FUND 10
PURCHASE OF CAPITAL STOCK 11
REDEMPTION OF CAPITAL STOCK 13
EXCHANGE BETWEEN FUNDS 14
TRANSFER OF CAPITAL STOCK 15
DETERMINATION OF NET ASSET VALUE 15
DIVIDENDS AND FEDERAL TAX STATUS 15
DIVIDEND REINVESTMENT PLAN 16
SYSTEMATIC WITHDRAWAL PLAN 16
INDIVIDUAL RETIREMENT ACCOUNT 16
SELF-EMPLOYED MASTER RETIREMENT PLAN 17
CAPITAL STRUCTURE 17
ANNUAL MEETING 17
SHAREHOLDER REPORTS 18
CUSTODIAN AND TRANSFER AGENT 18
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL 18
No person has been authorized to give any information or to
make any representations other than those contained in this
Prospectus and the Statement of Additional Information dated July
28, 1995, and, if given or made, such information or
representations may not be relied upon as having been authorized
by Nicholas Equity Income Fund, Inc.
This Prospectus does not constitute an offer to sell
securities in any state or jurisdiction in which such offering
may not lawfully be made. The delivery of this Prospectus at any
time shall not imply that there has been no change in the affairs
of Nicholas Equity Income Fund, Inc. since the date hereof.
<PAGE>
INTRODUCTION
Nicholas Equity Income Fund, Inc. (the "Fund") was
incorporated under the laws of Maryland on September 1, 1993.
The Fund is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as
amended. As an open-end investment company, it obtains its
assets by continuously selling shares of its common stock, $.0001
par value per share, to the public. Proceeds from such sales are
invested by the Fund in securities of other companies. The
resources of many investors are combined and each individual
investor has an interest in every one of the securities owned by
the Fund. The Fund provides each individual investor with
diversification by investing in the securities of many different
companies in a variety of industries. The Fund also furnishes
experienced management to select and watch over its investments.
As an open-end investment company, the Fund will redeem any of
its outstanding shares on demand of the owner at the net asset
value next determined following receipt of the redemption
request. The investment adviser to the Fund is Nicholas Company,
Inc. (the "Adviser").
The Fund's primary objective is to produce reasonable income
for the investor. Moderate long-term growth is a secondary goal.
The Fund seeks an income yield that exceeds the composite
dividend yield on the securities included in the Standard and
Poor's 500r Composite Stock Price Index ("S&P 500 Index").
The Fund generally will have at least 65% of its total
assets invested in income-producing equity securities to achieve
these objectives. The equity securities in which the Fund may
invest include, but are not limited to, common stocks, preferred
stocks and convertible securities. The Fund generally will focus
on dividend-paying stocks. The Fund is designed for investors
who seek higher current income and less volatility than the
typical growth or capital appreciation equity fund.
CONSOLIDATED DISCLOSURE OF FUND FEES AND EXPENSES
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds,
as applicable) None
Redemption Fees (as a percentage of redemption
proceeds, if applicable)(1) None
Exchange Fee None
Annual Fund Operating Expenses(2) (as a percentage of average net
assets)
Management Fees 0.70%
12b-1 Fees None
Other Expenses 1.03%
Total Fund Operating Expenses 1.73%
____________________
(1) There is a $7.50 fee for federal fund wire redemptions.
(2) Annual Fund Operating Expense percentages are based on
expenses incurred for the fiscal year ended March 31, 1995.
<PAGE>
EXAMPLE
One Year Three Years Five Years Ten Years
A shareholder would pay the
following expenses on a $1,000
investment, assuming: (1) 5%
annual return and (2) redemption
at the end of each period........ $18 $54 $94 $204
This Example should not be considered a representation of past
or future expenses. Actual expenses may be
greater or lesser than those shown.
The purpose of the table is to assist the prospective
investor in understanding the various costs and expenses that an
investor in the Fund will bear directly and indirectly. For a
description of "Management Fees" and "Other Expenses," see
"Investment Adviser."
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
The following Financial Highlights of the Fund for the
fiscal year ended March 31, 1995 and for the period from
November 23, 1993 (date of initial public offering) through March
31, 1994, have been examined by Arthur Andersen LLP, independent
public accountants, whose report thereon is included in the
Fund's Annual Report for the fiscal year ended March 31, 1995.
The Financial Highlights should be read in conjunction with the
financial statements and related notes included in the Fund's
Annual Report which is incorporated herein by reference.
Period from
Fiscal Year Ended November 23, 1993
March 31, 1995 to March 31, 1994
NET ASSET VALUE, BEGINNING OF PERIOD $10.04 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .30 .06
Net losses on securities (unrealized) .50 (.01)
Total from investment operations .80 .05
LESS DISTRIBUTIONS:
Dividends (from net investment income) .28 .01
Total distributions .28 .01
NET ASSET VALUE, END OF PERIOD $10.56 $10.04
TOTAL RETURN 8.13% 0.53% *
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period $11.8 million $ 5.8 million
Ratio of expenses to average net assets 1.73% 1.70%**
Ratio of net investment income to
average net assets 3.32% 2.53%**
Portfolio turnover rate 10.98% 0%
_________________________
* Non-annualized.
** Annualized.
<PAGE>
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The Fund's primary investment objective is to produce
reasonable income for the investor, and the Fund seeks an income
yield that exceeds the composite dividend yield on the securities
included in the Standard and Poor's 500r Composite Stock Price
Index ("S&P 500 Index"). The term "reasonable income" refers to
the Adviser's judgment that reasonable income would be an income
yield greater than the composite dividend yield on the securities
included in the S&P 500 Index. The Fund was first offered for
sale November 23, 1993. Management has invested in dividend
paying common stocks as opportunities arose. During the recent
decline in interest rates in 1995 to date, management has
increased its purchase of equity securities.
As of March 31, 1995, the Fund was invested approximately
56% in common stocks, 6% in convertible bonds, 26% in non-
convertible bonds and the remainder in cash equivalents. The
equity investments made by the Fund tend to have higher cash
dividend returns than the equity investments made by the other
growth mutual funds for which the Adviser serves as investment
adviser. Management believes this strategy should reduce the
overall volatility of the Fund and more adequately protect the
Fund's capital as compared to the other growth mutual funds for
which the Adviser serves as investment adviser.
Set forth below is a comparison of the initial account value
and subsequent account value at the end of the completed fiscal
year of the Fund, assuming a $10,000 investment in the Fund at
the beginning of the period, to the same investment over the same
period in the S&P 500 Index and the Lehman Brothers Intermediate
Corporate Bond Index.
(The performance graph plot points are as follows:)
<TABLE>
<CAPTION>
Lehman
Nicholas Intermediate
Equity Income % S&P 500 % Corporate %
Value returns Value returns Value returns
<S> <C> <C> <C> <C> <C> <C>
11/30/93 10,000.00 10,000.00 10,000.00
12/31/93 9,993.00 -0.07% 10,120.75 1.21% 10,062.00 0.62%
03/31/94 10,052.96 0.60% 9,736.90 -3.79% 9,787.31 -2.73%
06/30/94 10,108.25 0.55% 9,777.89 0.42% 9,710.97 -0.78%
09/30/94 10,540.88 4.28% 10,255.95 4.89% 9,810.99 1.03%
12/31/94 10,407.01 -1.27% 10,254.34 -0.02% 9,794.31 -0.17%
03/31/95 10,870.13 4.45% 11,252.75 9.74% 10,316.35 5.33%
</TABLE>>
The Fund's average annual total returns for the one year and
life periods ended on the last day of the most recent fiscal year
are as follows:
Time Period From Inception
One Year Ended (November 23, 1993)
March 31, 1995 to March 31, 1995
Average Annual Total Return 8.13% 6.38%
Total returns are historical and include change in share
price and reinvestment of dividend and capital gain
distributions. Past performance is not predictive of future
performance. Principal value and return will fluctuate so an
investment, when redeemed, may be worth more or less than
original cost.
<PAGE>
PERFORMANCE DATA
The Fund may from time to time include its "total return,"
"average annual total return," "yield" and "distribution rate" in
advertisements or in information furnished to present or
prospective shareholders. The "total return" of the Fund is
expressed as a ratio of the increase (or decrease) in value of a
hypothetical investment in the Fund at the end of a measuring
period to the amount initially invested. The "average annual
total return" is the total return discounted for the number of
represented time periods and is expressed as a percentage. The
rate represents the annual rate achieved on the initial
investment to arrive at the ending redeemable value. The ending
value assumes reinvestment of dividends and capital gains and the
reduction of account charges, if any. This computation does not
reflect any sales load or other nonrecurring charges, since the
Fund is not subject to such charges.
The " 30-day yield" of the Fund is calculated by dividing
the Fund's net investment income per share, as defined by the
Securities and Exchange Commission, for the 30-day period by the
net asset value per share on the last day of the stated period.
Net investment income represents dividends and interest generated
by the Fund's portfolio securities reduced by all expenses and
any other charges that have been applied to all shareholder
accounts. The calculation assumes the 30-day net investment
income is compounded monthly for six months and then annualized.
The Fund's distribution rate is calculated by annualizing the
most recent per share income distribution and dividing by the net
asset value per share on the last day of the period. Generally,
the distribution rate reflects the amounts actually paid to
shareholders at a point in time and is based on book income,
whereas the yield reflects the earning power, net of expenses, of
the Fund's portfolio securities at a point in time.
The Fund's yield may be more or less than the amount
actually distributed to shareholders ("distribution rate").
Methods used to calculate advertised yields and total returns are
standardized for all bond and stock mutual funds by the
Securities and Exchange Commission.
All performance measurements will vary from time to time
depending upon market conditions, the composition of the Fund's
portfolio, operating expenses, and the distribution policy as
determined by the Board of Directors. These factors should be
considered when evaluating the Fund's performance. For
additional information regarding the calculation of these
performance data, see the Statement of Additional Information.
In sales materials, reports and other communications to
shareholders, the Fund may compare its performance to certain
indices, including, but not limited to, the Standard & Poor's
500r Composite Stock Price Index, the National Association of
Securities Dealers Automated Quotation System, the Russell 2000
Index and the United States Department of Labor Consumer Price
Index. The Fund also may include evaluations of the Fund
published by nationally recognized financial publications and
ranking services, such as Forbes, Money, Financial World, Lipper
Analytical Services Mutual Fund Performance Analysis and
Morningstar Mutual Funds.
INVESTMENT OBJECTIVES AND POLICIES
The Fund has adopted primary investment objectives, which
are fundamental policies and may not be changed without
shareholder approval. The Fund also has adopted secondary
investment objectives and certain other policies which are not
fundamental and may be changed by the Board of Directors without
shareholder approval. However, any such change will be made only
upon advance notice to shareholders. Such changes may result in
the Fund having secondary investment and other policy objectives
different from the objectives which a shareholder considered
appropriate at the time of investment in the Fund.
The Fund's primary investment objective is to produce
reasonable income for the investor, and the Fund seeks an income
yield that exceeds the composite dividend yield on the securities
included in the Standard and Poor's 500r Composite Stock Price
Index ("S&P 500 Index"). The term "reasonable income" refers to
the Adviser's judgment that reasonable income would be an income
yield greater than the composite dividend yield on the securities
included in the S&P 500 Index. The Fund's secondary investment
objective is moderate long-term growth. The term "moderate long-
term growth" refers to the Adviser's judgment that moderate long-
term growth would be approximately three-fourths of the average
total return achieved over a five-year period on the S&P 500
Index. The Fund will not be managed as a balanced portfolio and
is not required to maintain a portion of its investments in each
<PAGE>
of the Fund's permitted investments at all times. The asset
allocation mix for the Fund will be determined by the Adviser at
any given time in light of its assessment of current economic
conditions and investment opportunities. There is no assurance
the Fund will achieve its investment objectives, nor is there any
assurance the Fund will achieve reasonable income or moderate
long-term growth, as such terms are defined by the Adviser.
During normal market conditions, the Fund generally will
have at least 65% of its total assets invested in income-
producing equity securities with expected dividend yields that
are higher than the yield of the S&P 500 Index. The equity
securities in which the Fund may invest include common stocks,
preferred stocks and convertible securities. Most of the equity
securities purchased by the Fund will have a dividend-paying
history or will pay a current dividend, while the remainder of
the equity securities will be securities of companies which offer
possibilities for increase in value and/or have favorable long-
term prospects. To the extent the Fund invests in small and
medium-sized companies, such companies often have a limited
market for their securities, limited financial resources and
usually are more affected by changes in the economy in general,
and the market price of their securities often fluctuates more
than securities of larger companies. However, such small and
medium-sized companies also may have the potential for more
rapid, and greater, long-term growth because of newer and more
innovative products. If the Fund holds a stock that pays
dividends at a rate which is below the yield of the S&P 500 Index
at the time of purchase, the Adviser will attempt to offset this
lower rate through other holdings that pay dividends or interest
at rates deemed to be sufficient so that the Fund's current net
income exceeds the yield of the S&P 500 Index. The Fund also may
invest in preferred stock and convertible securities, but only to
the extent that such securities also provide a current interest
or dividend payment stream. The Fund may invest in preferred
stock and convertible securities which are not rated in one of
the top four rating categories by any of the nationally
recognized statistical rating organizations ("NRSROs") as defined
in Section 270.2a-7 of the Code of Federal Regulations, or are
unrated instruments but deemed by the Adviser to be comparable in
quality to instruments so rated on the date of purchase;
provided, however, that the Fund shall not invest more than 35%
of its total assets (at the time of purchase) in preferred
stocks, convertible securities or debt securities which are not
rated in one of the top four rating categories by any of the
NRSROs, or are unrated securities but deemed by the Adviser to be
comparable in quality to securities so rated on the date of
purchase, and provided further that the Fund may invest only in
securities rated at least B (or its equivalent) by any NRSRO (or
unrated but comparable in quality) at the time of purchase. (See
the Statement of Additional Information for a description of the
ratings used by Standard & Poor's Corporation and Moody's
Investor Services, Inc.) A convertible security typically is a
fixed income security, such as a bond or preferred stock, which
may be converted at a stated price within a specified period of
time into a specified number of shares of common stock of the
same or different issuer. While providing a fixed income stream
(generally higher in yield than the income derivable from a
common stock but lower than that afforded by a non-convertible
debt security), a convertible security also affords an investor
the opportunity, through its conversion feature, to participate
in the capital appreciation of the common stock into which it is
convertible. In general, the market value of a convertible
security is the higher of its investment value (i.e., its value
as a fixed income security) or its conversion value (i.e., the
value of the underlying shares of common stock if the security is
converted). Convertible securities frequently have speculative
characteristics.
The remainder of the Fund's assets generally will be
invested in corporate and governmental fixed income securities.
The Fund may invest in debt securities, including notes, bonds
and debentures, which are not investment grade quality on the
date of purchase (as rated by any of the NRSROs) or are unrated
obligations but deemed by the Adviser to be comparable in quality
to instruments so rated on the date of purchase; provided,
however, that the Fund shall not invest more than 35% of its
total assets (at the time of purchase) in preferred stocks,
convertible securities or debt securities which are not rated in
one of the top four rating categories by any of the NRSROs, or
are unrated securities but deemed by the Adviser to be comparable
in quality to securities so rated on the date of purchase, and
provided further that the Fund may invest only in securities
rated at B (or its equivalent) by any NRSRO (or unrated but
comparable in quality) at the time of purchase. "Investment
grade" refers to fixed income securities ranked in the top four
categories of rating services of Standard & Poor's Corporation,
Moody's Investor Services, Inc., or any other NRSRO. Obligations
rated in the lowest of the top four rating categories are
considered to have speculative characteristics. (See the
Statement of Additional Information for a description of the
ratings used by Standard & Poor's Corporation and Moody's
Investor Services, Inc.) Governmental fixed income securities
include obligations supported by the full faith and credit of the
<PAGE>
United States, such as U.S. Treasury obligations and the
obligations of certain instrumentalities and agencies, and
mortgage-backed and related securities issued or guaranteed by
the United States Government, its agencies or instrumentalities,
such as GNMA or FNMA certificates, or issued or guaranteed by
private issuers and guarantors equivalent to the quality
standards of corporate fixed income securities. The average
maturity of the Fund's fixed income securities will vary with
economic conditions. The net asset value of the fixed income
securities held by the Fund will be affected primarily by changes
in interest rates, average maturities and the investment and
credit quality of the fixed income securities.
Non-investment grade securities tend to reflect individual
corporate developments to a greater extent, tend to be more
sensitive to economic conditions and tend to have a weaker
capacity to pay interest and repay principal than higher rated
securities. Because the market for lower rated securities may be
thinner and less active than for higher rated securities, there
may be market price volatility for these securities and limited
liquidity in the resale market. Factors adversely impacting the
market value of high yielding, high risk securities will
adversely impact the Fund's net asset value. The Fund also may
incur additional expenses to the extent it is required to seek
recovery upon a default in the payment of principal or interest
on its portfolio holding. In addition to relying, in part, on
the ratings assigned to the debt securities, the Fund also will
rely on the Adviser's judgment, analysis and experience in
evaluating the creditworthiness of the issuer. In this
evaluation, the Adviser will consider, among other things, the
issuer's financial resources, its sensitivity to economic
conditions and trends, its operating history, the quality of the
issuer's management and regulatory matters. The achievement of
the Fund's investment objectives may be more dependent on the
Adviser's own credit analysis than is the case for higher quality
securities.
Since some issuers do not seek ratings for their securities,
unrated securities will be considered for investment by the Fund,
but only when the Adviser believes the financial condition of the
issuers of such securities and/or protection afforded by the
terms of the securities limit the risk to the Fund to a degree
comparable to that of rated securities in which the Fund may
invest. Although unrated securities are not necessarily of lower
quality than rated securities, the market for them may not be as
broad and thus they may carry greater market risk and higher
yield than rated securities. These factors may have the effect
of limiting the availability of securities for purchase by the
Fund and also may limit the ability of the Fund to sell such
securities at their fair market value either to meet redemption
requests or in response to changes in the economy or in the
financial markets.
An investment in the Fund may be considered more speculative
than an investment in shares of a fund which invests primarily in
higher rated securities. All investments will be made in
conformance with the Fund's primary investment objective which is
to seek to obtain moderate income and moderate long-term growth.
While the risk of investing in lower rated securities with
speculative characteristics is greater than the risk of investing
in higher rated securities, the Fund will attempt to minimize
this risk through diversification of its investments and by
analysis of each issuer and its ability to make timely payments
of income and principal. The Fund may invest only in securities
rated at least B (or its equivalent) by any NRSRO (or unrated but
comparable in quality) at the time of purchase; however,
subsequent to purchase, the ratings of the securities so
purchased may fall below B (or its equivalent) and the Fund will
not be precluded from retaining such a security whose credit
quality is so downgraded. As of March 31, 1995, less than 5% of
the Fund's total net assets were invested in preferred stock,
convertible securities and debt securities which were not rated
in one of the top four categories by any of the NRSROs (or
unrated but deemed by the Adviser to be comparable in quality to
securities so rated on the date of purchase).
The Fund reserves the flexibility to temporarily invest its
assets in short-term, investment grade fixed income securities as
a defensive measure when conditions, such as a decline in the
stock market, are deemed to warrant such action or for investment
of idle cash balances. These short-term instruments include
United States ("U.S.") Government obligations (including Treasury
Bills, Treasury Notes and Treasury Bonds), certificates of
deposit, bankers' acceptances, commercial paper (rated A-1 or A-2
by Standard & Poor's or Prime-1 or Prime-2 by Moody's, or the
equivalent by any other NRSRO, or unrated but deemed by the
Adviser to be comparable in quality to instruments so rated on
the date of purchase), short-term corporate debt issues and
repurchase agreements. The Fund also may invest in securities
which are issued in private placements pursuant to Section 4(2)
of the Securities Act of 1933, as amended (the "Act"). Such
securities are not registered for purchase and sale by the public
under the Act.
<PAGE>
The determination of the liquidity of these
securities is a question of fact for the Board of Directors to
determine, based upon the trading markets for the specific
security, the availability of reliable price information and
other relevant information. There may be a risk of little or no
market for resale associated with such private placement
securities if the Fund does not hold them to maturity. In
addition, to the extent that qualified institutional buyers do
not purchase restricted securities pursuant to Rule 144A, the
Fund's investing in such securities may have the effect of
increasing the level of illiquidity in the Fund's portfolio.
The Fund has reserved the right to invest in repurchase
agreements as a temporary defensive measure, but only up to 20%
of its total net assets at the time of purchase. Repurchase
agreements may be entered into only with a member bank of the
Federal Reserve System or a primary dealer in U.S. Government
securities. Under such agreements, the selling bank or primary
dealer agrees to repurchase such securities from the Fund at a
specified time and place. While the obligation is a U.S.
Government security, the obligation of the seller to repurchase
the security is not guaranteed by the U.S. Government, thereby
creating the risk that the seller may fail to repurchase the
security. In the event of a bankruptcy or default of certain
sellers of repurchase agreements, the Fund could experience costs
and delays in liquidating the underlying security, which is held
as collateral, and the Fund might incur a loss if the value of
the collateral held declines during this period.
The Fund also may invest in the securities of real estate
investment trusts and other real estate-based securities
(including securities of companies whose assets consist
substantially of real property and interests therein) listed on a
national securities exchange or authorized for quotation on the
National Association of Securities Dealers Automated Quotations
System. Although the Fund will not invest directly in real
estate, it may invest in real estate-based securities, and
therefore, an investment in the Fund may be subject to certain
risks associated with the direct ownership of real estate. Risks
associated with investment in the real estate industry include
declines in the value of real estate, risks related to general
and local economic conditions, increases in property taxes and
operating expenses, costs associated with environmental problems,
changes in zoning laws, variations in rental income and changes
in interest rates. The value of securities of companies which
service the real estate industry also may be affected by such
risks. Investing in real estate investment trusts involves
certain other risks in addition to those risks associated with
investing in the real estate investment industry in general.
Real estate investment trusts may be affected by changes in the
value of the underlying property owned and the quality of any
credit extended, and are subject to cash flow dependency, default
by borrowers and tax exemption disqualification.
The Fund's objective stresses reasonable income. Although
the Adviser will consider the possibility of some capital
appreciation in selecting investments for the Fund, an investor
should not expect the Fund to reach the growth potential of funds
which have growth or capital appreciation as their primary
objective.
Since the Fund generally will invest a significant portion
of its assets in equity securities, its per share price will
fluctuate more than funds which primarily invest in fixed income
securities. Furthermore, there are market risks inherent in any
investment and there can be no assurance the objectives of the
Fund will be realized, nor can there be any assurance against
possible loss in the value of the Fund's portfolio.
Generally, the Fund does not intend to purchase securities
for short-term trading; however, when circumstances warrant,
securities may be sold without regard to the length of time held.
Furthermore, the Fund does not intend to engage in investment
techniques such as leveraging, short-selling, options and futures
transactions or lending portfolio securities. The Fund may
invest generally up to 10% of its total assets in securities of
other investment companies. Investments in the securities of
other investment companies will involve duplication of advisory
fees and certain other expenses.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions, which are
matters of fundamental policy and cannot be changed without the
approval of the holders of a majority of its outstanding shares,
or, if less, 67% of the shares represented at a meeting of
shareholders at which 50% or more of the holders are represented
in person or by proxy. Limitations set forth below apply on the
date of investment by the Fund.
<PAGE>
1. The Fund will not purchase securities on margin,
participate in a joint trading account, sell securities
short, or act as an underwriter or distributor of
securities other than its own capital stock. The Fund
will not lend money, except for:
(a) the purchase of a portion of an issue of
publicly distributed debt securities;
(b) the purchase of bank certificates of
deposit or commercial paper;
(c) investment in repurchase agreements in
an amount not to exceed 20% of the total net
assets of the Fund; provided, however, that
repurchase agreements maturing in more than seven
days will not constitute more than 10% of the
value of the total net assets; and
(d) the purchase of a portion of bonds,
debentures or other debt securities of types
commonly distributed in private placements to
financial institutions, such illiquid amount of
which shall not exceed 10% of the value of the
total net assets of the Fund.
2. The Fund may not issue senior securities in
violation of the Investment Company Act of 1940, as
amended (the "1940 Act"). The Fund may make borrowings
but only for temporary or emergency purposes and then
only in amounts not in excess of 5% of the lower of
cost or market value of the Fund's total net assets,
and the Fund may make borrowings from banks, provided
that immediately after any such borrowing all
borrowings of the Fund do not exceed one-third of the
Fund's net assets.
3. The Fund will not mortgage, pledge or hypothecate
any of its assets except to secure permitted borrowings
and then only in an amount up to 15% of the value of
the Fund's total net assets taken at cost at the time
of such borrowings.
4. Investments will not be made for the purpose of
exercising control or management of any company. In
addition, the Fund will not purchase securities of any
issuer if, as a result of such purchase, the Fund would
hold more than 10% of the voting securities of such
issuer.
5. The Fund may not purchase the securities of any
one issuer, except securities issued or guaranteed by
the United States or its instrumentalities or agencies,
if immediately after and as a result of such purchase
the value of the holdings of the Fund in the securities
of such issuer exceeds 5% of the value of the Fund's
total assets.
6. Not more than 25% of the value of the Fund's total
net assets will be concentrated in companies of any one
industry or group of related industries. This
restriction does not apply to U.S. Government
securities, which are obligations issued or guaranteed
by the U.S. Government, its agencies or
instrumentalities.
7. The Fund may not purchase or sell real estate or
interests in real estate, commodities or commodity
futures. The Fund may invest in the securities of real
estate investment trusts and other real estate-based
securities (including securities of companies whose
assets consist substantially of real property and
interests therein) listed on a national securities
exchange or authorized for quotation on the National
Association of Securities Dealers Automated Quotation
System, but not more than 10% in value of the Fund's
total assets will be invested in real estate investment
trusts nor will more than 25% in value of the Fund's
total assets be invested in the real estate industry in
the aggregate.
In addition to the foregoing restrictions, the Fund has
adopted other restrictions to comply with the securities laws of
various states, including prohibiting the making of short sales
of securities. These restrictions may be changed by the Board of
Directors of the Fund without shareholder approval. However, so
long as the securities of the Fund are registered for sale in
those states which require these restrictions, the restrictions
will not be changed.
<PAGE>
INVESTMENT ADVISER
Under an investment advisory agreement dated November 23,
1993, Nicholas Company, Inc. (the "Adviser"), 700 North Water
Street, Suite 1010, Milwaukee, Wisconsin furnishes the Fund with
continuous investment service and is responsible for overall
management of the Fund's business affairs subject to supervision
by the Fund's Board of Directors. Nicholas Company, Inc. is the
investment adviser to five other mutual funds, which like the
Fund are sold without a sales charge, and to approximately 35
institutions and individuals with substantial investment
portfolios. The other funds for which Nicholas Company, Inc.
acts as investment adviser are Nicholas Fund, Inc., Nicholas
Income Fund, Inc., Nicholas II, Inc., Nicholas Limited Edition,
Inc. and Nicholas Money Market Fund, Inc.
The annual fee paid to the Adviser is paid monthly and is
based on the average net asset value of the Fund, as determined
by valuations made at the close of each business day of the
month. The annual fee is seven-tenths of one percent (.70 of 1%)
of the average net asset value of the Fund, up to and including
$50,000,000, and six-tenths of one percent (.60 of 1%) of the
average net asset value in excess of $50,000,000.
Under the Investment Advisory Agreement, the Adviser
furnishes the Fund with office space, office facilities,
executive officers and executive expenses (such as health
insurance premiums for executive officers), any or all of which
are subject to reimbursement by the Fund at the Adviser's
request. The Adviser bears all sales and promotional expenses of
the Fund other than expenses incurred in complying with laws
regulating the issuance or sale of securities. The Fund pays all
of its operating expenses. Included as "operating expenses" are
fees of directors who are not interested persons of the Adviser
or officers or employees of the Fund, salaries of administrative
and clerical personnel, association membership dues, auditing and
accounting services, legal fees and expenses, printing, fees and
expenses of any custodian or trustee having custody of Fund
assets, postage, charges and expenses of dividend disbursing
agents, registrars and stock transfer agents, including the cost
of keeping all necessary shareholder records and accounts and
handling any problems related thereto, and any other costs
relating to the aforementioned items.
The Adviser has undertaken to reimburse the Fund to the
extent that the aggregate annual operating expenses, including
the investment advisory fee but excluding interest, taxes,
brokerage commissions, litigation and extraordinary expenses,
exceed the lowest (i.e., most restrictive) percentage of the
Fund's average net assets established by the laws of the states
in which the Fund's shares are registered for sale, as determined
by valuations made as of the close of each business day of the
year. The Adviser shall reimburse the Fund at the end of any
fiscal year in which the aggregate annual operating expenses
exceed such restrictive percentage. The total expenses of the
Fund as a percentage of net assets for the fiscal years ended
March 31, 1994 (annualized) and 1995 were 1.70% and 1.73%,
respectively.
Albert O. Nicholas, President and a Director of the Fund, is
also President and a Director of the Adviser. Mr. Nicholas owns
91% of the outstanding voting securities of the Adviser. Thomas
J. Saeger, Executive Vice President and Secretary of the Fund, is
Executive Vice President and Assistant Secretary of the Adviser.
David L. Johnson is Executive Vice President of the Fund and
Executive Vice President of the Adviser. He is a brother-in-law
of Albert O. Nicholas. Lynn S. Nicholas, Senior Vice President
of the Fund, is Senior Vice President of the Adviser. She is the
daughter of Albert O. Nicholas. David O. Nicholas, Senior Vice
President of the Fund, is Senior Vice President of the Adviser.
He is the son of Albert O. Nicholas. Candace L. Lesak, Vice
President of the Fund, is an employee of the Adviser. Jeffrey T.
May, Vice President of the Fund, is Senior Vice President and
Treasurer of the Adviser. Cheryl L. King, Treasurer of the Fund,
is an employee of the Adviser. David E. Leichtfuss, a Director
of the Adviser, is a partner in the law firm of Michael Best &
Friedrich, Milwaukee, Wisconsin, legal counsel to both the Fund
and the Adviser. Daniel J. Nicholas, 612 North Main Street,
Rockford, Illinois, is a Director of the Adviser. Mr. Nicholas,
a brother of Albert O. Nicholas, is a private investor.
<PAGE>
MANAGEMENT - DIRECTORS, EXECUTIVE OFFICERS AND PORTFOLIO MANAGERS OF THE FUND
The overall operations of the Fund are conducted by the
officers of the Fund under the control and direction of its Board
of Directors. The following table sets forth the pertinent
information about the Fund's officers and directors at June 30,
1995:
NAME AGE AND POSITIONS PRINCIPAL OCCUPATIONS
ADDRESS HELD WITH DURING PAST FIVE YEARS
FUND
--------------------- ----------- ----------------------
* Albert O. Nicholas, 64 President, President and Director, Nicholas
700 N. Water Street Portfolio Company, Inc., since 1967. He
Milwaukee, WI 53202 Manager and has been Portfolio Manager for,
Director and primarily responsible for the
day-to-day management of, the
portfolios of Nicholas Fund, Inc.
and Nicholas Income Fund, Inc.
since the Nicholas Company, Inc.
has served as investment adviser
for such funds. He also was
Portfolio Manager for Nicholas
II, Inc. and Nicholas Limited
Edition, Inc. from the date of
each such fund's inception until
March 1993. He is a Chartered
Financial Analyst.
Melvin L. Schultz, 62 Director Director and Management
3636 N. 124th Street Consultant, Professional
Wauwatosa, WI 53222 Management of Milwaukee, Inc. He
offers financial advice to
members of the medical and dental
professions and is a Certified
Professional Business Consultant.
Richard Seaman, 69 Director Management Consultant, on an
5270 N. Maple Lane independent basis, primarily in
Nashotah, WI 53058 the areas of mergers,
acquisitions and strategic
planning.
Robert H. Bock, 63 Director Professor of Business Strategy,
3132 Waucheeta Trail Ethics and Venture Capital,
Madison, WI 53711 University of Wisconsin School of
Business, since 1965. From 1972
to 1984, he was Dean of the
School of Business.
David L. Johnson, 53 Executive Executive Vice President,
700 N. Water Street Vice Nicholas Company, Inc., the
Milwaukee, WI 53202 President Adviser to the Fund, and employed
by the Adviser since 1980. He is
a Chartered Financial Analyst.
Thomas J. Saeger, 51 Executive Executive Vice President and
700 N. Water Street Vice Assistant Secretary, Nicholas
Milwaukee, WI 53202 President Company, Inc., the Adviser to the
and Fund, and employed by the Adviser
Secretary since 1969. He is a Certified
Public Accountant.
Lynn S. Nicholas, 39 Senior Vice Senior Vice President, Nicholas
700 N. Water Street President Company, Inc., the Adviser to the
Milwaukee, WI 53202 Fund, and employed by the Adviser
since September 1983. She is a
Chartered Financial Analyst.
<PAGE>
David O. Nicholas, 34 Senior Vice Senior Vice President, Nicholas
700 N. Water Street President Company, Inc., the Adviser to the
Milwaukee, WI 53202 Fund, and employed by the Adviser
since December 1985. He has been
Portfolio Manager for, and
primarily responsible for the day-
to-day management of, the
portfolios of Nicholas II, Inc.
and Nicholas Limited Edition,
Inc. since March 1993. He also
is a Chartered Financial Analyst.
Candace L. Lesak, 37 Vice Employee, Nicholas Company, Inc.,
700 N. Water Street Presiden the Adviser to the Fund, since
Milwaukee, WI 53202 February 1983. She is a
Certified Financial Planner.
Jeffrey T. May, 39 Vice Senior Vice President and
700 N. Water Street President Treasurer, Nicholas Company,
Milwaukee, WI 53202 Inc., the Adviser to the Fund and
employed by the Adviser since
July 1987. He is a Certified
Public Accountant.
Cheryl L. King, 33 Treasurer Employee, Nicholas Company, Inc.,
700 N. Water Street the Adviser to the Fund, since
Milwaukee, WI 53202 1983. She is a Certified Public
Accountant.
____________________
* Mr. Nicholas is the only director of the Fund who is an
"interested person" in the Adviser, as that term is defined
in the 1940 Act.
Mr. Albert O. Nicholas serves as Portfolio Manager of the
Fund and is primarily responsible for the day-to-day management
of the Fund's portfolio. Mr. David O. Nicholas assists in such
management.
PURCHASE OF CAPITAL STOCK
Applications for the purchase of shares are made to
Nicholas Equity Income Fund, Inc., c/o Firstar Trust Company,
P.0. Box 2944, Milwaukee, Wisconsin 53201-2944. The Fund has
available an Automatic Investment Plan for shareholders. Anyone
interested should contact the Fund for additional information.
The price per share will be the net asset value next
computed after the time the application is received in proper
order and accepted by the Fund. The determination of the net
asset value for a particular day is applicable to all
applications for the purchase of shares received at or before the
close of trading on the New York Stock Exchange (the "Exchange")
on that day (usually 4:00 p.m., New York time). Accordingly,
purchase orders received on a day the Exchange is open for
trading, prior to the close of trading on that day, will be
valued as of the close of trading on that day. Applications for
purchase of shares received after the close of trading on the
Exchange will be based on the net asset value as determined as of
the close of trading on the next day the Exchange is open.
The Fund does not consider the U.S. Postal Service or other
independent delivery services to be its agents; therefore,
deposit in the mail or with such services, or receipt at Firstar
Trust Company's Post Office Box, does not constitute receipt by
Firstar Trust Company or the Fund. Correspondence intended for
overnight courier should not be sent to the Post Office Box
address. OVERNIGHT COURIER DELIVERY SHOULD BE SENT TO FIRSTAR
TRUST COMPANY, THIRD FLOOR, 615 EAST MICHIGAN STREET, MILWAUKEE,
WISCONSIN 53202.
All applications to purchase capital stock are subject to
acceptance or rejection by authorized officers of the Fund and
are not binding until accepted. Applications will not be
accepted unless they are accompanied by payment. Payment should
be made by check or money order drawn on a U.S. bank, savings and
loan or credit union. The custodian will charge a $15 fee
against a shareholder's account, in addition to any loss
sustained by the Fund, for any payment check returned to the
custodian for insufficient funds. It is the policy of the Fund
not to accept applications under circumstances or in amounts
considered disadvantageous to shareholders. For example, if an
individual previously tried to pay for shares with a bad check,
the Fund reserves the right not to accept future applications
from that individual. Any account (including custodial accounts)
opened without a proper social security number or taxpayer
identification number may be liquidated and distributed to the
owner(s) of record on the first business day following the 60th
day of investment (net of the back-up withholding tax amount).
The Board of Directors has established $2,000 as the minimum
initial purchase. The minimum for any subsequent purchases is
$100 except in the case of dividend reinvestment. The Automatic
Investment Plan has a minimum monthly investment of $50. Due to
the fixed expenses incurred by the Fund in maintaining individual
accounts, the Fund reserves the right to redeem accounts that
fall below $1,000 due to shareholder redemption (but not solely
due to a decrease in net asset value of the Fund). In order to
exercise this right, the Fund will give 45 days' advance written
notice to the accounts below such minimum.
Purchase of shares will be made in full and fractional
shares computed to three decimal places. To purchase additional
shares of the Fund by federal wire transfer please send to:
Firstar National Bank
ABA #0750-00022
Trust Funds, Account #112-952-137
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
for further credit to Nicholas Equity Income Fund, Inc.
[your account number and the title of the account]
Please call Firstar Trust Company (414-276-0535) with the
appropriate account information prior to sending the wire if a
wire purchase is to be an initial purchase.
Shares of Common Stock of the Fund may be purchased or sold
through certain broker-dealers, financial institutions or other
service providers ("Processing Intermediaries"). When shares of
Common Stock of the Fund are purchased this way, the Processing
Intermediary, rather than its customer, may be the shareholder of
record. Processing Intermediaries may use procedures and impose
restrictions in addition to or different from those applicable to
shareholders who invest in the Fund directly.
An investor intending to invest in the Fund through a
Processing Intermediary should read the program materials
provided by the Processing Intermediary in conjunction with this
Prospectus. Processing Intermediaries may charge fees or other
changes for the services they provide to their customers.
Investors who do not wish to receive the services of a Processing
Intermediary, or pay the fees that may be charged for such
services, may want to consider investing directly with the Fund.
Direct purchase or sale of shares of Common Stock of the Fund may
be made without a sales or redemption charge.
Certificates representing Fund shares purchased will not be
issued unless the shareholder specifically requests certificates
by signed written request to the Fund. Certificates are mailed
to requesting shareholders approximately two weeks after receipt
of the request by the Fund. In no instance will certificates be
issued for fractional shares. When certificates are not
requested, the Fund's transfer agent, Firstar Trust Company, will
credit the shareholder's account with the number of shares
purchased. Written confirmations are issued for all purchases
and redemptions of Fund shares.
<PAGE>
REDEMPTION OF CAPITAL STOCK
A shareholder may require the Fund at any time during normal
business hours to redeem his/her shares in whole or in part.
Redemption requests must be signed by each shareholder in the
exact manner as the Fund account is registered and must state the
amount of redemption. The shareholder account number and tax
identification number or social security number also are
necessary. When shares are represented by certificates,
redemption is accomplished by delivering to the Fund, c/o Firstar
Trust Company, P.O. Box 2944, Milwaukee, Wisconsin 53201-2944,
the certificate(s) for the full shares to be redeemed. The
certificate(s) must be properly endorsed or accompanied by
instrument of transfer, in either case, with signatures
guaranteed by an "eligible guarantor institution" as defined in
Section 240.17Ad-15 of the Code of Federal Regulations. An
"eligible guarantor institution" includes a bank, a savings and
loan association, a credit union or a member firm of a national
securities exchange. A notary public is not an acceptable
guarantor.
If certificates have not been issued, redemption is
accomplished by delivering an original signed written request for
redemption addressed to Nicholas Equity Income Fund, Inc., c/o
Firstar Trust Company. Facsimile transmission of redemption
requests is not acceptable. If the account registration is
individual, joint tenants, sole proprietorship, custodial
(Uniform Transfer to Minors Act) or general partners, the written
request must be signed exactly as the account is registered.
Both owners must sign if the account is owned jointly. Written
confirmations are issued for all redemptions of Fund shares.
The Fund may require additional supporting documents for
redemptions made by corporations, executors, administrators,
trustees and guardians. Specifically, if the account is
registered in the name of a corporation or association, the
written request must be accompanied by a corporate resolution
signed by the authorized person(s). A redemption request for
accounts registered in the name of a legal trust must have a copy
of the title and signature page of the trust agreement on file or
be accompanied by the trust agreement and signed by the
trustee(s). A copy of the trust document certified within the
last 60 days is required if the trustee's name is not registered
on the account.
Please write or call Firstar Trust Company (414-276-0535),
prior to submitting the redemption request if there is doubt as
to what documents or instruments are necessary in order to redeem
shares. A redemption request will not become effective until all
documents have been received in proper form by Firstar Trust
Company.
A redemption cannot be accomplished by telephoning or
telegraphing the Fund or Firstar Trust Company. The redemption
price is the net asset value next computed after the time of
receipt by Firstar Trust Company of the certificate(s) or written
request in the proper form set forth above. A redemption
generally is treated as a sale of the shares being redeemed for
federal income tax purposes. This means the shareholder
recognizes a capital gain or loss equal to the difference between
the redemption price and the shareholder's cost for the shares
being redeemed.
Shareholders who have an individual retirement account
("IRA"), a master retirement plan or other retirement plan must
indicate on their redemption requests whether or not to withhold
federal income tax. Redemption requests not indicating an
election not to have federal income tax withheld will be subject
to withholding. Please consult your current Disclosure Statement
for any applicable fees.
All redemptions will be processed immediately upon receipt.
Share redemption orders are effected at the net asset value next
determined after receipt of the order in proper form by the Fund.
The Fund will return redemption requests that contain
restrictions as to the time or date redemptions are to be
effected. The Fund ordinarily will make payment for redeemed
shares within seven days after receipt of a request in proper
form, except as provided by the rules of the Securities and
Exchange Commission. Redemption proceeds to be wired normally
will be wired on the next business day after a net asset value is
determined. There is a $7.50 charge to wire the redemption
proceeds. The Fund reserves the right to hold payment up to 15
days or until satisfied that investments made by check have been
collected. During the period prior to the time the shares are
redeemed, dividends on such shares will accrue and be payable,
and an investor will be entitled to exercise all other rights of
beneficial ownership.
<PAGE>
The Fund does not consider the U.S. Postal Service or other
independent delivery services to be its agents. Therefore,
deposit in the mail or with such services or receipt at Firstar
Trust Company's Post Office Box of redemption requests does not
constitute receipt by Firstar Trust Company or the Fund. DO NOT
MAIL LETTERS BY OVERNIGHT COURIER TO THE POST OFFICE BOX ADDRESS.
Due to the fixed expenses incurred by the Fund in
maintaining individual accounts, the Fund reserves the right to
redeem accounts that fall below $1,000 due to shareholder
redemption (but not solely due to a decrease in net asset value
of the Fund). In order to exercise this right, the Fund will
give 45 days' advance written notice to the accounts below such
minimum.
Signature Guarantees. A signature guarantee of each owner
is required to redeem shares in the following situations, for all
size transactions: (i) if you change the ownership on your
account; (ii) upon redemption of shares when certificates have
been issued for your account; (iii) when you want the redemption
proceeds sent to a different address than is registered on the
account; (iv) for both certificated and uncertificated shares if
the proceeds are to be made payable to someone other than the
account owner(s); (v) any redemption transmitted by federal wire
transfer to your bank; and (vi) if a change of address request
has been received by the Fund or Firstar Trust Company within 15
days of a redemption request. In addition, signature guarantees
are required for all redemptions of $100,000 or more from any
shareholder account in the Nicholas Family of Funds. A
redemption will not be processed until the signature guarantee,
if required, is received in proper form.
EXCHANGE BETWEEN FUNDS
If a shareholder chooses to exercise the exchange privilege,
the shares will be exchanged at their next determined net asset
value. When an exchange into the Nicholas Money Market Fund,
Inc. would involve investment of the exchanged amount on a day
when the New York Stock Exchange is open for trading but the
Federal Reserve Banks are closed, shares of the Fund will be
redeemed on the day upon which the exchange request is received;
however, issuance of Nicholas Money Market Fund, Inc. shares may
be delayed an additional day in order to avoid the dilutive
effect on return (i.e. reduction in net investment income per
share) which would result from issuance of such shares on a day
when the exchanged amount cannot be invested. In such a case,
the exchanged amount would be uninvested for this one day period.
Shareholders interested in exercising the exchange privilege must
obtain an authorization form and the appropriate prospectus from
Nicholas Company, Inc. Such an exchange constitutes a sale for
federal tax purposes and a capital gain or loss generally will be
recognized upon the exchange. This depends upon whether the net
asset value at the time is more or less than the shareholder's
cost. An exchange between the funds involving master retirement
(Keogh) or IRA accounts generally will not constitute a taxable
transaction for federal tax purposes.
This exchange privilege is available only in states where
shares of the Fund being acquired may legally be sold. The
privilege may be terminated or modified only upon 60 days'
advance notice to shareholders. Shareholders are reminded,
however, that Nicholas Limited Edition, Inc. is restricted in
size, and that the exchange privilege into that fund may be
terminated or modified at a time when that maximum is reached.
Shares of the Fund which have been outstanding at least 15
days may be exchanged for shares of other investment companies
for which Nicholas Company, Inc. serves as the investment adviser
and such exchanges are permitted. Nicholas Company, Inc. is also
the investment adviser to Nicholas Fund, Inc., Nicholas II, Inc.,
Nicholas Income Fund, Inc., Nicholas Limited Edition, Inc. and
Nicholas Money Market Fund, Inc. Nicholas Fund, Inc. has an
investment objective of capital appreciation. Nicholas II, Inc.
and Nicholas Limited Edition, Inc. have long-term growth as their
investment objective. Nicholas Income Fund, Inc.'s investment
objective is to seek high current income consistent with the
preservation and conservation of capital value. Nicholas Money
Market Fund, Inc. has an investment objective of achieving as
high a level of current income as is consistent with preserving
capital and providing liquidity.
An exchange of shares of the Fund for shares of other
available Nicholas mutual funds will be made without cost to the
investor through written request. Signatures required are the
same as previously explained under "Redemption of Capital Stock."
<PAGE>
TRANSFER OF CAPITAL STOCK
Shares of the Fund may be transferred in instances such as
the death of a shareholder, change of account registration,
change of account ownership and in cases where shares of the Fund
are transferred as a gift. Documents and instructions to
transfer capital stock can be obtained by writing or calling
Firstar Trust Company (414-276-0535) or Nicholas Company, Inc.
(414-272-6133) prior to submitting any transfer requests.
DETERMINATION OF NET ASSET VALUE
The net asset value per share will be computed by the
Adviser as of the close of trading on the New York Stock Exchange
on each day the Exchange is open for unrestricted trading. The
net asset value per share is determined by dividing the total
current market value of the assets of the Fund, less its
liabilities, by the total number of shares outstanding at the
time of determination. A portfolio security which is traded on a
national securities exchange is valued at the price of the last
sale on such exchange. If no sale has occurred on the date as of
which assets are valued, or if the security is traded only in the
over-the-counter market, it normally will be valued at the latest
bid price, unless the Board of Directors, in good faith,
determines that some other price reflects more closely the true
market value.
Bid prices for debt securities are obtained from the Fund's
pricing service which consults one or more market makers of each
debt security being priced. Debt securities listed on a national
exchange may be priced at the last sales price if the Fund's
pricing service believes that such price represents market value
of the security for institutional trades. The pricing of all
debt securities takes into account the fact that the Fund trades
in institutional size trading units. Securities for which
current quotations are not readily available and other assets of
the Fund are valued at fair value as determined in good faith by
the Fund's Board of Directors.
DIVIDENDS AND FEDERAL TAX STATUS
Dividends of the Fund, if any, are paid to shareholders in
April, July, October and December. In those years in which sales
of portfolio securities result in net realized capital gains
(after utilization of any available capital loss carryforwards),
such gains are distributed to shareholders in December or
January. It is the practice of the Fund to distribute capital
gains in shares of the Fund at net asset value or, at each
shareholder's election, in cash.
The Fund intends to continue to qualify annually as a
"regulated investment company" under the Internal Revenue Code of
1986 and intends to take all other action required to insure that
little or no federal income or excise taxes will be payable by
the Fund.
Distributions by the Fund, whether received in cash or
invested in additional shares of the Fund, will be taxable to the
Fund's shareholders, except those shareholders that are not
subject to tax on their income. Long-term capital gain
distributed by the Fund will retain the character that it had at
the Fund level. Income distributed from the Fund's net
investment income and net realized short-term capital gains are
taxable to shareholders as ordinary income. The Fund will
provide information to shareholders concerning the character and
federal tax treatment of any distribution.
At the time of purchase of shares, the Fund may have
undistributed income or capital gains included in the computation
of the net asset value per share. Therefore, a dividend or
capital gain distribution received shortly after such purchase by
a shareholder may be taxable to the shareholder, although it is,
in whole or in part, a return of capital and may have the effect
of reducing the net asset value per share.
Under federal law, some shareholders may be subject to a 31%
back-up withholding on reportable dividends, capital gain
distributions (if any) and redemption payments. Generally under
federal law, shareholders subject to backup withholding will be
those (i) for whom a taxpayer identification number is not on
file with the Fund or who, to the Fund's knowledge, have
furnished an incorrect number, or (ii) who have failed to declare
or underreported certain income on their federal returns. An
investor must certify under penalties of perjury that the
taxpayer identification number supplied to the Fund is correct
and that he or she is not subject to backup withholding when
establishing an account.
<PAGE>
The foregoing tax discussion relates solely to federal
income taxes only and is not intended to be a complete discussion
of all federal tax consequences. Shareholders should consult
with a tax adviser concerning the federal, state and local tax
aspects of an investment in the Fund.
DIVIDEND REINVESTMENT PLAN
Unless a shareholder elects to accept cash in lieu of
shares, all dividends and capital gains distributions are
automatically reinvested in additional shares of the Fund through
the Dividend Reinvestment Plan. An election to accept cash may
be made on an application to purchase shares or by separate
written notification. All reinvestments are at the net asset
value per share in effect on the dividend or distribution record
date and are credited to the shareholder's account. Shareholders
will be advised of the number of shares purchased and the price
following each reinvestment.
Shareholders may withdraw from or thereafter elect to
participate in the Dividend Reinvestment Plan at any time by
giving written notice to the Transfer Agent. An election must be
received by the Transfer Agent prior to the dividend record date
of any particular distribution for the election to be effective
for that distribution. If an election to withdraw from or
participate in the Dividend Reinvestment Plan is received between
a dividend record date and payment date, it shall become
effective on the day following the payment date. The Fund may
modify or terminate the Dividend Reinvestment Plan at any time on
30 days' written notice to participants.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders who have purchased or currently own Fund shares
worth $10,000 or more at the current market value may open a
Systematic Withdrawal Plan and receive monthly or quarterly
checks for any designated amount. Firstar Trust Company
reinvests all income and capital gain dividends in shares of the
Fund. Shareholders may add shares to, withdraw shares from, or
terminate the Plan, at any time. Each withdrawal may be a
taxable event to the shareholder. Liquidation of shares in
excess of distributions may deplete or possibly use up the
initial investment, particularly in the event of a market
decline, and withdrawals cannot be considered a yield or income
on the investment. In addition to termination of the Plan by the
Fund or shareholders, the Plan may be terminated by Firstar Trust
Company upon written notice mailed to the shareholders. Please
contact the Nicholas Company for copies of the Plan documents.
INDIVIDUAL RETIREMENT ACCOUNT
Individuals may be able to establish their own tax sheltered
individual retirement plans or accounts ("IRA"). The Fund offers
a prototype IRA Plan for adoption by individuals who qualify for
spousal, deductible and non-deductible IRA accounts.
As long as the aggregate IRA contributions meet the Fund's
minimum investment requirement of $2,000, the Fund will accept
any allocation of such contribution between spousal, deductible
and non-deductible accounts. The acceptability of this
calculation is the sole responsibility of the shareholder. For
this reason, it is advisable for taxpayers to consult with their
personal tax adviser to determine the deductibility of their IRA
contributions.
The applicable forms and a description of the applicable
service fees are available upon request from the Fund. The IRA
documents also contain a Disclosure Statement which the IRS
requires to be furnished to individuals who are considering
adopting an IRA. It is important you obtain up-to-date
information from the Fund before opening an IRA because changes
occur from time to time in existing IRA regulations.
Because a retirement program involves commitments covering
future years, it is important that the investment objectives of
the Fund are consistent with your own retirement objectives.
Premature withdrawals from an IRA may result in adverse tax
consequences. See "Redemption of Capital Stock." Consultation
with a tax adviser regarding tax consequences is recommended.
<PAGE>
SELF-EMPLOYED MASTER RETIREMENT PLAN
The Fund has available a master retirement plan (formerly
called a "Keogh" Plan) for self-employed individuals. Any person
seeking additional information or wishing to participate in the
plan may contact the Fund. Consultation with a tax adviser
regarding the tax consequences of the plan is recommended.
CAPITAL STRUCTURE
The Fund is authorized to issue five hundred million
(500,000,000) shares of common stock, $.0001 par value per share.
Each full share has one vote and all shares participate equally
in dividends and other distributions by the Fund and in the
residual assets of the Fund in the event of liquidation. The
shares are fully paid and non-assessable when issued. There are
no conversion or sinking fund provisions applicable to shares,
and shareholders have no preemptive rights and may not cumulate
their votes in the election of directors. Shares are redeemable
and are transferable. Fractional shares entitle the shareholder
to the same rights as whole shares.
ANNUAL MEETING
Under the laws of the State of Maryland, registered
investment companies, such as the Fund, may operate without an
annual meeting of shareholders under specified circumstances if
an annual meeting is not required by the 1940 Act. The Fund has
adopted the appropriate provisions in its Articles of
Incorporation and will not hold annual meetings of shareholders
for the following purposes unless otherwise required to do so:
(1) election of directors; (2) renewal of an investment advisory
agreement; (3) ratification of the selection of independent
auditors; and (4) approval of a distribution agreement.
In the event the Fund is not required to hold annual meetings
of shareholders to elect Directors, the Board of Directors of the
Fund will promptly call a meeting of shareholders of the Fund for
the purpose of voting upon the question of removal of any
Director when requested in writing to do so by the record holders
of not less than l0% of the outstanding shares of Common Stock of
the Fund. The affirmative vote of two-thirds of the outstanding
shares, cast in person or by proxy at a meeting called for such
purpose, is required to remove a Director of the Fund. The Fund
will assist shareholders in communicating with each other for
this purpose pursuant to the requirements of Section 16(c) of the
1940 Act.
SHAREHOLDER REPORTS
Shareholders will be provided with a report or a current
prospectus showing the Fund's portfolio and other information at
least semiannually. After the close of the Fund's fiscal year,
which ends March 31, an annual report or current prospectus
containing financial statements audited by the Fund's independent
public accountants will be sent to shareholders. Inquiries
concerning the Fund may be made by telephone at (414) 272-6133,
or by writing to Nicholas Equity Income Fund, Inc., 700 North
Water Street, Suite 1010, Milwaukee, Wisconsin 53202.
CUSTODIAN AND TRANSFER AGENT
Firstar Trust Company, 615 East Michigan Avenue, Milwaukee,
Wisconsin acts as Custodian, Transfer Agent and Dividend
Disbursing Agent for the Fund.
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL
Arthur Andersen LLP, 777 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, has been selected as the independent accountants
for the Fund.
Michael Best & Friedrich, 100 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202, has passed on the legality of the
shares of Common Stock of the Fund being offered.
<PAGE>
PROSPECTUS
NICHOLAS EQUITY INCOME FUND, INC.
Investment Adviser
NICHOLAS COMPANY, INC.
Milwaukee
Custodian, Transfer Agent and Disbursing Agent
FIRSTAR TRUST COMPANY
Milwaukee 414/276-0535
Independent Public Accountants
ARTHUR ANDERSEN LLP
Milwaukee
Counsel
MICHAEL BEST & FRIEDRICH
Milwaukee
NICHOLAS EQUITY INCOME FUND, INC.
700 North Water Street
Milwaukee, Wisconsin 53202
July 28, 1995
<PAGE>
Nicholas Equity Income Fund, Inc.
Form N-1A
PART B: STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
NICHOLAS EQUITY INCOME FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
700 North Water Street, Suite 1010
Milwaukee, Wisconsin 53202
414-272-6133
This Statement of Additional Information, which is not a
prospectus, supplements and should be read in conjunction with
the current Prospectus of Nicholas Equity Income Fund, Inc. (the
"Fund"), dated July 28, 1995. To obtain a copy of the Fund's
Prospectus and Annual Report, please write or call the Fund at
the address and telephone number set forth above.
NO LOAD FUND - NO SALES CHARGE
Investment Adviser
NICHOLAS COMPANY, INC.
July 28, 1995
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION 1
INVESTMENT OBJECTIVES AND POLICIES 1
INVESTMENT RESTRICTIONS 5
DESCRIPTION OF RATINGS 7
INVESTMENT ADVISER 11
MANAGEMENT - DIRECTORS, EXECUTIVE OFFICERS AND
PORTFOLIO MANAGERS OF THE FUND 12
PRINCIPAL SHAREHOLDERS 15
PURCHASE OF CAPITAL STOCK 15
REDEMPTION OF CAPITAL STOCK 17
EXCHANGE BETWEEN FUNDS 18
TRANSFER OF CAPITAL STOCK 19
DETERMINATION OF NET ASSET VALUE 19
DIVIDENDS AND FEDERAL TAX STATUS 19
DIVIDEND REINVESTMENT PLAN 20
SYSTEMATIC WITHDRAWAL PLAN 20
INDIVIDUAL RETIREMENT ACCOUNT 20
SELF-EMPLOYED MASTER RETIREMENT PLAN 21
BROKERAGE 21
PERFORMANCE DATA 22
CAPITAL STRUCTURE 23
STOCK CERTIFICATES 24
ANNUAL MEETING 24
SHAREHOLDER REPORTS 24
CUSTODIAN AND TRANSFER AGENT 24
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL 24
FINANCIAL INFORMATION 24
<PAGE>
INTRODUCTION
Nicholas Equity Income Fund, Inc. (the "Fund") was
incorporated under the laws of Maryland on September 1, 1993.
The Fund is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as
amended. As an open-end investment company, it obtains its
assets by continuously selling shares of its common stock, $.0001
par value per share, to the public. Proceeds from such sales are
invested in securities of other companies by the Fund. The
resources of many investors are combined and each individual
investor has an interest in every one of the securities owned by
the Fund. The Fund provides each individual investor with
diversification by investing in the securities of many different
companies in a variety of industries. The Fund also furnishes
experienced management to select and watch over its investments.
As an open-end investment company, the Fund will redeem any of
its outstanding shares on demand of the owner at the net asset
value next determined following receipt of the redemption
request. The investment adviser to the Fund is Nicholas Company,
Inc. (the "Adviser").
The Fund's primary objective is to produce reasonable income
for the investor. Moderate long-term growth is a secondary goal.
The Fund seeks an income yield that exceeds the composite
dividend yield on the securities included in the Standard and
Poor's 500r Composite Stock Price Index ("S&P 500").
The Fund generally will have at least 65% of its total
assets invested in income-producing equity securities to achieve
these objectives. The equity securities in which the Fund may
invest include, but are not limited to, common stocks, preferred
stocks, or convertible securities. The Fund generally will focus
on dividend-paying stocks. The Fund is designed for investors
who seek higher current income and less volatility than the
typical growth or capital appreciation equity fund.
INVESTMENT OBJECTIVES AND POLICIES
The Fund has adopted primary investment objectives, which
are fundamental policies and may not be changed without
shareholder approval. The Fund also has adopted secondary
investment objectives and certain other policies which are not
fundamental and may be changed by the Board of Directors without
shareholder approval. However, any such change will be made only
upon advance notice to shareholders. Such changes may result in
the Fund having secondary investment and other policy objectives
different from the objectives which a shareholder considered
appropriate at the time of investment in the Fund.
The Fund's primary investment objective is to produce
reasonable income for the investor, and the Fund seeks an income
yield that exceeds the composite dividend yield on the securities
included in the Standard and Poor's 500r Composite Stock Price
Index ("S&P 500 Index"). The term "reasonable income" refers to
the Adviser's judgment that reasonable income would be an income
yield greater than the composite dividend yield on the securities
included in the S&P 500 Index. The Fund's secondary investment
objective is moderate long-term growth. The term "moderate long-
term growth" refers to the Adviser's judgment that moderate long-
term growth would be approximately three-fourths of the average
total return achieved over a five-year period on the S&P 500
Index. The Fund will not be managed as a balanced portfolio and
is not required to maintain a portion of its investments in each
of the Fund's permitted investments at all times. The asset
allocation mix for the Fund will be determined by the Adviser at
any given time in light of its assessment of current economic
conditions and investment opportunities. There is no assurance
the Fund will achieve its investment objectives, nor is there any
assurance the Fund will achieve reasonable income or moderate
long-term growth, as such terms are defined by the Adviser.
During normal market conditions, the Fund generally will
have at least 65% of its total assets invested in income-
producing equity securities with expected dividend yields that
are higher than the yield of the S&P 500 Index. The equity
securities in which the Fund may invest include common stocks,
preferred stocks and convertible securities. Most of the equity
securities purchased by the Fund will have a dividend-paying
history or will pay a current dividend, while the remainder of
the equity securities will be securities of companies which offer
possibilities for increase in value and/or have favorable long-
term prospects. To the extent the Fund invests in small and
medium-sized companies, such companies often have a limited
market for their securities, limited financial resources and
usually are more affected by changes in the economy in general,
and the market price of their securities often fluctuates more
than securities of larger companies. However, such small and
medium-sized companies also may have the potential for more
rapid, and greater, long-term growth because of newer and more
innovative products. If the Fund holds a stock that pays
dividends at a rate which is below the yield of the S&P 500 Index
at the time of purchase, the Adviser will attempt to offset this
lower rate through other holdings that pay dividends or interest
at rates deemed to be sufficient so that the Fund's current net
income exceeds the yield of the S&P 500 Index. The Fund also may
invest in preferred stock and convertible securities, but only to
the extent that such securities also provide a current interest
or dividend payment stream. The Fund may invest in preferred
stock and convertible securities which are not rated in one of
the top four rating categories by any of the nationally
recognized statistical rating organizations ("NRSROs") as defined
in Section 270.2a-7 of the Code of Federal Regulations, or are
unrated instruments but deemed by the Adviser to be comparable in
quality to instruments so rated on the date of purchase;
provided, however, that the Fund shall not invest more than 35%
of its total assets (at the time of purchase) in preferred
stocks, convertible securities or debt securities which are not
rated in one of the top four rating categories by any of the
NRSROs, or are unrated securities but deemed by the Adviser to be
comparable in quality to securities so rated on the date of
purchase, and provided further that the Fund may invest only in
securities rated at least B (or its equivalent) by any NRSRO (or
unrated but comparable in quality) at the time of purchase.. A
convertible security typically is a fixed income security, such
as a bond or preferred stock, which may be converted at a stated
price within a specified period of time into a specified number
of shares of common stock of the same or different issuer. While
providing a fixed income stream (generally higher in yield than
the income derivable from a common stock but lower than that
afforded by a non-convertible debt security), a convertible
security also affords an investor the opportunity, through its
conversion feature, to participate in the capital appreciation of
the common stock into which it is convertible. In general, the
market value of a convertible security is the higher of its
investment value (i.e., its value as a fixed income security) or
its conversion value (i.e., the value of the underlying shares of
common stock if the security is converted). Convertible
securities frequently have speculative characteristics.
The remainder of the Fund's assets generally will be
invested in corporate and governmental fixed income securities.
The Fund may invest in debt securities, including notes, bonds
and debentures, which are not investment grade quality on the
date of purchase (as rated by any of the NRSROs) or are unrated
obligations but deemed by the Adviser to be comparable in quality
to instruments so rated on the date of purchase; provided,
however, that the Fund shall not invest more than 35% of its
total assets (at the time of purchase) in preferred stocks,
convertible securities or debt securities which are not rated in
one of the top four rating categories by any of the NRSROs, or
are unrated securities but deemed by the Adviser to be comparable
in quality to securities so rated on the date of purchase, and
provided further that the Fund may invest only in securities
rated at least B (or its equivalent) by any NRSRO (or unrated but
comparable in quality) at the time of purchase. "Investment
grade" refers to fixed income securities ranked in the top four
categories of rating services of Standard & Poor's Corporation,
Moody's Investor Services, Inc., or any other NRSRO. Obligations
rated in the lowest of the top four rating categories are
considered to have speculative characteristics. Governmental
fixed income securities include obligations supported by the full
faith and credit of the United States, such as U.S. Treasury
obligations and the obligations of certain instrumentalities and
agencies, and mortgage-backed and related securities issued or
guaranteed by the United States Government, its agencies or
instrumentalities, such as GNMA or FNMA certificates, or issued
or guaranteed by private issuers and guarantors equivalent to the
quality standards of corporate fixed income securities. The
average maturity of the Fund's fixed income securities will vary
with economic conditions. The net asset value of the fixed
income securities held by the Fund will be affected primarily by
changes in interest rates, average maturities and the investment
and credit quality of the fixed income securities.
Non-investment grade securities tend to reflect individual
corporate developments to a greater extent, tend to be more
sensitive to economic conditions and tend to have a weaker
capacity to pay interest and repay principal than higher rated
securities. Because the market for lower rated securities may be
thinner and less active than for higher rated securities, there
may be market price volatility for these securities and limited
liquidity in the resale market. Factors adversely impacting the
market value of high yielding, high risk securities will
adversely impact the Fund's net asset value. The Fund also may
incur additional expenses to the extent it is required to seek
recovery upon a default in the payment of principal or interest
on its portfolio holding. In addition to relying, in part, on
the ratings assigned to the debt securities, the Fund also will
rely on the Adviser's judgment, analysis and experience in
evaluating the creditworthiness of the issuer. In this
evaluation, the Adviser will consider, among other things, the
issuer's financial resources, its sensitivity to economic
conditions and trends, its operating history, the quality of the
issuer's management and regulatory matters. The achievement of
the Fund's investment objectives may be more dependent on the
Adviser's own credit analysis than is the case for higher quality
securities.
<PAGE>
Since some issuers do not seek ratings for their securities,
unrated securities will be considered for investment by the Fund,
but only when the Adviser believes the financial condition of the
issuers of such securities and/or protection afforded by the
terms of the securities limit the risk to the Fund to a degree
comparable to that of rated securities in which the Fund may
invest. Although unrated securities are not necessarily of lower
quality than rated securities, the market for them may not be as
broad and thus they may carry greater market risk and higher
yield than rated securities. These factors may have the effect
of limiting the availability of securities for purchase by the
Fund and also may limit the ability of the Fund to sell such
securities at their fair market value either to meet redemption
requests or in response to changes in the economy or in the
financial markets.
An investment in the Fund may be considered more speculative
than an investment in shares of a fund which invests primarily in
higher rated securities. All investments will be made in
conformance with the Fund's primary investment objective which is
to seek to obtain moderate income and moderate long-term growth.
While the risk of investing in lower rated securities with
speculative characteristics is greater than the risk of investing
in higher rated securities, the Fund will attempt to minimize
this risk through diversification of its investments and by
analysis of each issuer and its ability to make timely payments
of income and principal. The Fund may invest only in securities
rated B or above (or its equivalent) by any NRSRO (or unrated but
comparable in quality) at the time of purchase; however,
subsequent to purchase, the ratings of the securities so
purchased may fall below B and the Fund will not be precluded
from retaining such a security whose credit quality is so
downgraded. As of March 31, 1995, less than 5% of the Fund's
total net assets were invested in preferred stock, convertible
securities and debt securities which were not rated in one of the
top four categories by any of the NRSROs (or unrated but deemed
by the Adviser to be comparable in quality to securities so rated
on the date of purchase).
The market value of securities rated below investment grade
tend to reflect individual corporate developments to a greater
extent than do higher rated securities, which react primarily to
fluctuations in the general level of interest rates. Such lower
rated securities also tend to be more sensitive to economic
conditions and tend to have a weaker capacity to pay interest and
repay principal than higher rated securities. Because the market
for lower rated securities may be thinner and less active than
for higher rated securities, there may be market price volatility
for these securities and limited liquidity in the resale market.
Factors adversely impacting the market value of high yielding,
high risk securities will adversely impact the Fund's net asset
value. In addition, the Fund may incur additional expenses to
the extent it is required to seek recovery upon a default in the
payment of principal or interest on its portfolio holdings. In
addition to relying, in part, on the ratings assigned to the debt
securities, the Fund also will rely on the Adviser's judgment,
analysis and experience in evaluating the creditworthiness of the
issuer. In this evaluation, the Adviser will consider, among
other things, the issuer's financial resources, its sensitivity
to economic conditions and trends, its operating history, the
quality of the issuer's management and regulatory matters. The
achievement of the Fund's investment objectives may be more
dependent on the Adviser's own credit analysis than is the case
for higher quality debt securities.
Since some issuers do not seek ratings for their securities,
unrated securities will be considered for investment by the Fund,
but only when the Adviser believes the financial condition of the
issuers of such securities and/or protection afforded by the
terms of the securities limit the risk to the Fund to a degree
comparable to that of rated securities in which the Fund may
invest. Although unrated securities are not necessarily of lower
quality than rated securities, the market for them may not be as
broad and thus they may carry greater market risk and higher
yield than rated securities. These factors may have the effect
of limiting the availability of securities for purchase by the
Fund and may also limit the ability of the Fund to sell such
securities at their fair market value either to meet redemption
requests or in response to changes in the economy or in the
financial markets.
From time to time, proposals have been discussed regarding
new legislation designed to limit the use of certain high
yielding, high risk securities by issuers in connection with
leveraged buy-outs, mergers and acquisitions, or to limit the
deductibility of interest payouts on such securities. Such
proposals, if enacted into law, could negatively affect the
financial condition of issuers of high yield, high risk
<PAGE>
securities by removing or reducing a source of future financing,
and could negatively affect the value of specific high yield,
high risk issues and the high yield, high risk market in general.
However, the likelihood of any such legislation or the effect
thereof is uncertain.
The Fund reserves the flexibility to temporarily invest its
assets in short-term, investment grade fixed income securities as
a defensive measure when conditions, such as a decline in the
stock market, are deemed to warrant such action or for investment
of idle cash balances. These short-term instruments include
United States ("U.S.") Government obligations (including Treasury
Bills, Treasury Notes and Treasury Bonds), certificates of
deposit, bankers' acceptances, commercial paper (rated A-1 or A-2
by Standard & Poor's or Prime-1 or Prime-2 by Moody's, or the
equivalent by any other NRSRO, or unrated but deemed by the
Adviser to be of comparable quality to instruments so rated on
the date of purchase), short-term corporate debt issues and
repurchase agreements. The Fund also may invest in securities
which are issued in private placements pursuant to Section 4(2)
of the Securities Act of 1933, as amended (the "Act"). Such
securities are not registered for purchase and sale by the public
under the Act. The determination of the liquidity of these
securities is a question of fact for the Board of Directors to
determine, based upon the trading markets for the specific
security, the availability of reliable price information and
other relevant information. There may be a risk of little or no
market for resale associated with such private placement
securities if the Fund does not hold them to maturity. In
addition, to the extent that qualified institutional buyers do
not purchase restricted securities pursuant to Rule 144A, the
Fund's investing in such securities may have the effect of
increasing the level of illiquidity in the Fund's portfolio.
The Fund has reserved the right to invest in repurchase
agreements as a temporary defensive measure, but only up to 20%
of its total net assets at the time of purchase. Repurchase
agreements may be entered into only with a member bank of the
Federal Reserve System or a primary dealer in U.S. Government
securities. Under such agreements, the selling bank or primary
dealer agrees to repurchase such securities from the Fund at a
specified time and place. While the obligation is a U.S.
Government security, the obligation of the seller to repurchase
the security is not guaranteed by the U.S. Government, thereby
creating the risk that the seller may fail to repurchase the
security. In the event of a bankruptcy or default of certain
sellers of repurchase agreements, the Fund could experience costs
and delays in liquidating the underlying security, which is held
as collateral, and the Fund might incur a loss if the value of
the collateral held declines during this period.
The Fund also may invest in the securities of real estate
investment trusts and other real estate-based securities
(including securities of companies whose assets consist
substantially of real property and interests therein) listed on a
national securities exchange or authorized for quotation on the
National Association of Securities Dealers Automated Quotations
System. Although the Fund will not invest directly in real
estate, it may invest in real estate-based securities, and
therefore, an investment in the Fund may be subject to certain
risks accounted with the direct ownership of real estate. Risks
associated with investment in the real estate industry include
declines in the value of real estate, risks related to general
and local economic conditions, increases in property taxes and
operating expenses, costs associated with environmental problems,
changes in zoning laws, variations in rental income and changes
in interest rates. The value of securities of companies which
service the real estate industry also may be affected by such
risks. Investing in real estate investment trusts involves
certain other risks in addition to those risks associated with
investing in the real estate investment industry in general.
Real estate investment trusts may be affected by changes in the
value of the underlying property owned and the quality of any
credit extended, and are subject to cash flow dependency, default
by borrowers and tax exemption disqualification.
The Fund's objective stresses reasonable income. Although
the Adviser will consider the possibility of some capital
appreciation in selecting investments for the Fund, an investor
should not expect the Fund to reach the growth potential of funds
which have growth or capital appreciation as their primary
objective.
Since the Fund generally will invest a significant portion
of its assets in equity securities, its per share price will
fluctuate more than funds which primarily invest in fixed income
securities. Furthermore, there are market risks inherent in any
investment and there can be no assurance the objectives of the
Fund will be realized, nor can there be any assurance against
possible loss in the value of the Fund's portfolio.
<PAGE>
Generally, the Fund does not intend to purchase securities
for short-term trading; however, when circumstances warrant,
securities may be sold without regard to the length of time held.
Furthermore, the Fund does not intend to engage in investment
techniques such as leveraging, short-selling, options and futures
transactions or lending portfolio securities. The Fund may
invest generally up to 10% of its total assets in securities of
other investment companies. Investments in the securities of
other investment companies will involve duplication of advisory
fees and certain other expenses.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions, which are
matters of fundamental policy and cannot be changed without the
approval of the holders of a majority of its outstanding shares,
or, if less, 67% of the shares represented at a meeting of
shareholders at which 50% or more of the holders are represented
in person or by proxy (all percentage limitations apply on the
date of investment by the Fund):
1. The Fund will not purchase securities on margin,
participate in a joint trading account, sell securities
short, or act as an underwriter or distributor of
securities other than its own capital stock. The Fund
will not lend money, except for:
(a) the purchase of a portion of an issue of
publicly distributed debt securities;
(b) the purchase of bank certificates of
deposit or commercial paper;
(c) investment in repurchase agreements in
an amount not to exceed 20% of the total net
assets of the Fund; provided, however, that
repurchase agreements maturing in more than seven
days will not constitute more than 10% of the
value of the total net assets; and
(d) the purchase of a portion of bonds,
debentures or other debt securities of types
commonly distributed in private placements to
financial institutions, such illiquid amount of
which shall not exceed 10% of the value of the
total net assets of the Fund.
2. The Fund may not issue senior securities in
violation of the Investment Company Act of 1940, as
amended (the "1940 Act"). The Fund may make borrowings
but only for temporary or emergency purposes and then
only in amounts not in excess of 5% of the lower of
cost or market value of the Fund's total net assets,
and the Fund may make borrowings from banks, provided
that immediately after any such borrowing all
borrowings of the Fund do not exceed one-third of the
Fund's net assets. The exceptions to this restriction
are not for investment leverage purposes but are solely
for extraordinary or emergency purposes and to
facilitate management of the Fund's portfolio by
enabling the Fund to meet redemption requests when the
liquidation of portfolio instruments is deemed to be
disadvantageous or not possible. While the Fund has
borrowings in excess of 5% of the value of the Fund's
total assets outstanding, it will not make any
purchases of portfolio instruments. If due to market
fluctuations or other reasons, the net assets of the
Fund fall below 300% of its borrowings, the Fund will
promptly reduce its borrowings in accordance with the
1940 Act. To do this, the Fund may have to sell a
portion of its investments at a time when it may be
disadvantageous to do so.
3. The Fund will not mortgage, pledge or hypothecate
any of its assets except to secure permitted borrowings
and then only in an amount up to 15% of the value of
the Fund's total net assets taken at cost at the time
of such borrowings.
4. Investments will not be made for the purpose of
exercising control or management of any company. In
addition, the Fund will not purchase securities of any
issuer if, as a result of such purchase, the Fund would
hold more than 10% of the voting securities of such
issuer.
<PAGE>
5. The Fund may not purchase the securities of any
one issuer, except securities issued or guaranteed by
the United States or its instrumentalities or agencies,
if immediately after and as a result of such purchase
the value of the holdings of the Fund in the securities
of such issuer exceeds 5% of the value of the Fund's
total assets.
6. Not more than 25% of the value of the Fund's total
net assets will be concentrated in companies of any one
industry or group of related industries. This
restriction does not apply to U.S. government
securities, which are obligations issued or guaranteed
by the U.S. Government, its agencies or
instrumentalities.
7. The Fund may not purchase or sell real estate or
interests in real estate, commodities or commodity
futures. The Fund may invest in the securities of real
estate investment trusts and other real estate-based
securities (including securities of companies whose
assets consist substantially of real property and
interests therein) listed on a national securities
exchange or authorized for quotation on the National
Association of Securities Dealers Automated Quotations
System, but not more than 10% in value of the Fund's
total assets will be invested in real estate investment
trusts nor will more than 25% in value of the Fund's
total assets be invested in the real estate industry in
the aggregate.
In addition to the foregoing restrictions, the Fund has
adopted the following restrictions which may be changed by the
Board of Directors of the Fund without shareholder approval, in
order to comply with the securities laws of various states.
However, so long as the securities of the Fund are registered for
sale in those states which require these restrictions, the
restrictions will not be changed. Any such change would be made
only upon advance notice to shareholders in the form of an
amended Statement of Additional Information filed with the
Securities and Exchange Commission. All percentage limitations
apply on the date of investment by the Fund.
1. The Fund will not acquire or retain any security
issued by a company if one or more directors,
shareholders or other affiliated persons of its
investment adviser beneficially own more than one half
of one percent (.5 of 1%) of such company's stock or
other securities, and all of the foregoing persons
owning more than one-half of one percent (.5 of 1%)
together own more than 5% of such stock or security.
2. The Fund will not invest more than 5% of its total
net assets in equity securities which are not readily
marketable and in securities of unseasoned companies
(i.e., companies which have a record of less than three
years' continuous operation, including the operation of
any predecessor business of a company which came into
existence as a result of a merger, consolidation,
reorganization or purchase of substantially all of the
assets of such predecessor business).
3. The Fund will not invest in interests in oil, gas
or other mineral leases, but this shall not prohibit
the Fund from investing in securities of companies
engaged in oil, gas or mineral activities.
4. The Fund will not invest in puts, calls,
straddles, spreads or any combination thereof, and will
not invest in options, financial futures or stock index
futures, other than hedging positions or positions
covered by cash or securities, if as result thereof,
more than 5% of its assets would be so invested.
5. The Fund will not purchase any securities which
would cause more than 2% of its total net assets at the
time of such purchase to be invested in warrants which
are not listed on the New York Stock Exchange or the
American Stock Exchange, or would cause more than 5% of
its total net assets to be invested in warrants whether
or not so listed, such warrants in each case to be
valued at the lesser of cost or market, but assigning
no value to warrants acquired by the Fund in units with
or attached to debt securities.
<PAGE>
6. The Fund will not invest more than 10% of its
total net assets in restricted securities (i.e.,
securities acquired directly or indirectly from an
issuer, or from a person in a control relationship with
such an issuer (an affiliate) in a transaction or chain
of transactions not involving any public offering.)
7. Securities of other open-end investment companies
will not be purchased.
8. The Fund will not purchase illiquid securities if,
in the aggregate, more than 15% of the value of the
Fund's net assets would be so invested. "Illiquid
securities" are (a) securities which at the time of
such investment are not readily marketable; (b)
securities restricted as to resale (excluding
securities determined by the Board of Directors of the
Fund or the person designated by the Board of Directors
of the Fund to make such determinations to be readily
marketable); and (c) repurchase agreements maturing in
more than seven days.
9. The Fund will not engage in short sales of
securities.
10. The Fund will not purchase or sell real property
(including limited partnership interests, but excluding
readily marketable interests in real estate investment
trusts or readily marketable services of companies
which invest in real estate).
11. The Fund will not purchase securities of other
investment companies, except to the extent permitted by
the 1940 Act. Subject to certain exemptions, as of the
date of this Statement of Additional Information, the
1940 Act prohibits the Fund from investing more than 5%
of its total assets in securities of another investment
company, investing more than 10% of its total assets in
securities of such investment company and all other
investment companies, or purchasing more than 3% of the
total outstanding voting stock of another investment
company. Investments in the securities of other
investment companies may involve duplication of
advisory fees and certain other expenses.
All percentage limitations apply on the date of investment
by the Fund. As a result, if a percentage restriction is adhered
to at the time of investment, a later increase in percentage
resulting from a change in market value of the investment or the
total assets of the Fund will not constitute a violation of that
restriction.
DESCRIPTION OF RATINGS
As set forth in the Prospectus, the Fund may invest in
various debt securities, convertible securities and preferred
stock that are assigned specific ratings by NRSROs, including
Standard & Poor's Corporation and Moody's Investor Services, Inc.
A brief description of various of the ratings and their meanings
follows.
DEBIT SECURITIES
STANDARD AND POOR'S CORPORATION. An S&P corporate debt
rating is a current assessment of the creditworthiness of an
obligor with respect to a specific obligation. This assessment
may take into consideration obligors such as guarantors, insurers
or lessees. The ratings are based in varying degrees on the
following considerations: (i) likelihood of default-capacity and
willingness of the obligor as to the timely payment of interest
and repayment of principal in accordance with the terms of the
obligation; (ii) nature of and provisions of the obligation; and
(iii) protection afforded by, and the relative position of the
obligation in the event of bankruptcy, reorganization or other
arrangement under the laws of bankruptcy and other laws affecting
creditors' rights.
<PAGE>
S&P's rating categories are as follows:
AAA rated bonds are highest grade obligations. They
possess the ultimate degree of protection as to
principal and interest. Marketwise, they move with
interest rates, and hence, provide the maximum safety
on all counts.
AA rated bonds also qualify as high-grade
obligations, and in the majority of instances differ
from AAA issues only in a small degree. Here, too,
prices move with the long-term money market.
A rated bonds are regarded as upper medium-grade.
They have considerable investment strength but are not
entirely free from adverse effects of changes in
economic and trade conditions. Interest and principal
are regarded as safe. They predominantly reflect money
rates in their market behavior, but to some extent,
also economic conditions.
BBB rated bonds, or medium-grade category bonds, are
borderline between definitely sound obligations and
those where the speculative element begins to
predominate. These bonds have adequate asset coverage
and normally are protected by satisfactory earnings.
Their susceptibility to changing conditions,
particularly to depressions, necessitates constant
watching. Marketwise, the bonds are more responsive to
business and trade conditions than to interest rates.
This group is the lowest which qualifies for commercial
bank investment.
BB-B rated bonds are regarded, on balance, as
predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in
accordance with the terms of the obligation. While
such bonds will likely have some quality and protective
characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse
conditions.
CCC rated bonds have a currently identifiable
vulnerability to default, and are dependent upon
favorable business, financial and economic conditions
to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial
or economic conditions, they are not likely to have the
capacity to pay interest and repay principal.
CC-C rated bonds are usually bonds which are
subordinated to senior debt that is assigned an actual
or implied "CCC" or "CCC-" rating. A "C" rated bond
may also involve a situation where a bankruptcy
petition has been filed, but debt service payments are
continued.
D rated bonds are in payment default. They involve
a situation where interest payments or principal
payments are not made on the date due even if the
applicable grace period has not expired, unless
Standard & Poor's believes such payments will be made
during such grace period. A "D" rated bond may also
involve the filing of a bankruptcy petition if debt
service payments are jeopardized.
MOODY'S INVESTORS SERVICES, INC. Moody's bond rating
categories are as follows:
Aaa rated bonds are judged to be of the best quality.
They carry the smallest degree of investment risk and
are generally referred to as "gilt edged." Interest
payments are protected by a large or by an
exceptionally stable margin and principal is secure.
While the various protective elements are likely to
change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of
such issues.
Aa rated bonds are judged to be of high quality by
all standards. Together with the Aaa group they
comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa
securities, or fluctuation of protective elements may
be of greater amplitude, or there may be other elements
present which make the long-term risk appear somewhat
larger than in Aaa securities.
A rated bonds possess many favorable investment
attributes and are to be considered as upper medium-
grade obligations. Factors giving security to
principal and interest are considered adequate, but
elements may be present which suggest a susceptibility
to impairment sometime in the future.
Baa rated bonds are considered as medium-grade
obligations, i.e., they are neither highly protected
nor poorly secured. Interest payments and principal
security appear adequate for the present, but certain
protective elements may be lacking or may be
characteristically unreliable over any great length of
time. Such bonds lack outstanding investment
characteristics and, in fact, have speculative
characteristics as well.
Ba rated bonds are judged to have speculative
elements; their future cannot be considered as well
assured. Often the protection of interest and
principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes
bonds in this class.
B rated bonds generally lack characteristics of the
desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa rated bonds are of poor standing. They may be in
default or there may be present elements of danger with
respect to principal or interest.
Ca rated bonds represent obligations which are
speculative in a high degree. They are often in
default or have other marked shortcomings.
C rated bonds are the lowest rated class of bonds.
Bonds so rated can be regarded as having extremely poor
prospects of ever attaining any real investment
standing.
The ratings of S&P and Moody's represent their opinions as
to the quality of the instruments rated by them. Such ratings,
which are subject to revision or withdrawal, are general and are
not absolute standards of quality.
PREFERRED STOCK
STANDARD & POOR'S CORPORATION. An S&P preferred stock
rating is an assessment of the capacity and willingness of an
issuer to pay preferred stock dividends and any applicable
sinking fund obligations. A preferred stock rating differs from
a bond rating inasmuch as it is assigned to an equity issue,
which issue is intrinsically different from, and subordinated to,
a debt issue. Therefore, to reflect this difference, the
preferred stock rating symbol will normally not be higher than
the bond rating symbol assigned to, or that would be assigned to,
the senior debt of the same issuer.
The preferred stock ratings are based on the following
considerations:
I. Likelihood of payment - capacity and willingness
of the issuer to meet the timely payment of preferred
stock dividends and any applicable sinking fund
requirements in accordance with the terms of the
obligation.
II. Nature of, and provisions of, the issue.
III. Relative position of the issue in the event of
bankruptcy, reorganization, or other arrangements
affecting creditors' rights.
<PAGE>
S&P's rating categories for preferred stock are as follows:
AAA This is the highest rating that may be assigned by S&P to a
preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
AA A preferred stock issue rated "AA" also qualifies as a high-
quality fixed income security. The capacity to pay
preferred stock obligations is very strong, although not as
overwhelming as for issues rated "AAA."
A An issue rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more
susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB An issue rated "BBB" is regarded as backed by an adequate
capacity to pay the preferred stock obligations. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to make payments for a
preferred stock in this category than for issues in the "A"
category.
BB
B
CCC Preferred stock rated "BB," "B," and "CCC" are regarded, on
balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. "BB"
indicates the lowest degree of speculation and "CCC" the
highest degree of speculation. While such issues will
likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
CC The rating "CC" is reserved for a preferred stock issue in
arrears on dividends or sinking fund payments but that is
currently paying.
CA Preferred stock rated "C" is a non-paying issue.
DA Preferred stock rated "D" is a non-paying issue with the
issuer in default on debt instruments.
MOOD'S INVESTORS SERVICES, INC. Because of the fundamental
differences between preferred stocks and bonds, Moody's uses a
variation of its bond rating symbols in the quality ranking of
preferred stock. The symbols, presented below, are designed by
Moody's to avoid comparison with bond quality in absolute terms.
It should always be borne in mind that preferred stock occupies a
junior position to bonds within a particular capital structure
and these securities are rated by Moody's within the universe of
preferred stocks.
Moody's preferred stock ratings are as follows:
aaa An issue which is rated "aaa" is considered to be a top-
quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within
the universe of preferred stocks.
aa An issue which is rated "aa" is considered a high-grade
preferred stock. This rating indicates that there is a
reasonable assurance that earnings and asset protection will
remain relatively well maintained in the foreseeable future.
a An issue which is rated "a" is considered to be an upper-
medium grade preferred stock. While the risks are judged to
be somewhat greater than in the "aaa" and "aa"
classification, earnings and asset protection are,
nevertheless, expected to be maintained at adequate levels.
baa An issue which is rated "baa" is considered to be a medium
grade preferred stock, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at
present but may be questionable over any great length of
time.
<PAGE>
ba An issue which is rated "ba" is considered to have
speculative elements and its future cannot be considered
well assured. Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in
this class.
b An issue which is rated "b" generally lacks the
characteristics of a desirable investment. Assurance of
dividend payments and maintenance of other terms of the
issue over any long period of time may be small.
caa An issue which is rated "caa" is likely to be in arrears on
dividend payments. This rating designation does not purport
to indicate the future status of payments.
ca An issue which is rated "ca" is speculative in a high degree
and is likely to be in arrears on dividends with little
likelihood of eventual payments.
c This is the lowest rated class of preferred or preference
stock. Issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment
standing.
GENERAL
The S&P "AA" and "A" ratings may be modified by the addition
of a plus or minus sign to show relative standing within the
major rating categories.
Moody's security rating symbols may contain numerical
modifiers of a generic rating classification. The modifier 1
indicates that the security ranks in the higher end of its
generic rating category, the modifier 2 indicates a mid-range
ranking, and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
The ratings of S&P and Moody's represent their opinions as
to the quality of the instruments rated by them. It should be
emphasized that such ratings, which are subject to revision or
withdrawal, are general and are not absolute standards of
quality.
INVESTMENT ADVISER
Under an investment advisory agreement dated November 23,
1993, Nicholas Company, Inc. (the "Adviser"), 700 North Water
Street, Suite 1010, Milwaukee, Wisconsin furnishes the Fund with
continuous investment service and is responsible for overall
management of the Fund's business affairs subject to supervision
by the Fund's Board of Directors. Nicholas Company, Inc. is the
investment adviser to five other mutual funds, which like the
Fund are sold without a sales charge, and to approximately 35
institutions and individuals with substantial investment
portfolios. The other funds for which Nicholas Company, Inc.
acts as investment adviser are Nicholas Fund, Inc., Nicholas
Income Fund, Inc., Nicholas II, Inc., Nicholas Limited Edition,
Inc. and Nicholas Money Market Fund, Inc., with primary
investment objectives and net assets as set forth below.
<TABLE>
<CAPTION>
FUND PRIMARY INVESTMENT OBJECTIVE NET ASSETS AT
MARCH 31, 1995
---- ---------------------------- --------------
<S> <C> <C>
Nicholas Fund, Inc. Capital Appreciation $3,004,402,915
Nicholas II, Inc. Long-Term Growth 638,384,353
Nicholas Limited Edition, Inc. Long-Term Growth 154,939,513
Nicholas Income Fund, Inc. High Current Income 144,826,355
Nicholas Money Market Fund, Inc. Current Income 105,682,160
</TABLE>
The annual fee paid to the Adviser is paid monthly and is
based on the average net asset value of the Fund, as determined
by valuations made at the close of each business day of the
month. The annual fee is seven-tenths of one percent (.70 of 1%)
of the average net asset value of the Fund, up to and including
$50,000,000, and six-tenths of one percent (.60 of 1%) of the
average net asset value in excess of $50,000,000.
<PAGE>
Under the Investment Advisory Agreement, the Adviser
furnishes the Fund with office space, office facilities,
executive officers and executive expenses (such as health
insurance premiums for executive officers), any of which are
subject to reimbursement by the Fund at the Adviser's request.
The Adviser bears all sales and promotional expenses of the Fund
other than expenses incurred in complying with laws regulating
the issue or sale of securities. The Fund pays all of its
operating expenses. Included as "operating expenses" are fees of
directors who are not interested persons of the Adviser or
officers or employees of the Fund, salaries of administrative and
clerical personnel, association membership dues, auditing and
accounting services, legal fees and expenses, printing, fees and
expenses of any custodian or trustee having custody of Fund
assets, postage, charges and expenses of dividend disbursing
agents, registrars and stock transfer agents, including the cost
of keeping all necessary shareholder records and accounts and
handling any problems related thereto, and any other costs
related to the aforementioned items.
The Adviser has undertaken to reimburse the Fund to the
extent that the aggregate annual operating expenses, including
the investment advisory fee but excluding interest, taxes,
brokerage commissions, litigation and extraordinary expenses,
exceed the lowest (i.e., most restrictive) percentage of the
Fund's average net assets established by the laws of the states
in which the Fund's shares are registered for sale, as determined
by valuations made as of the close of each business day of the
year. The Adviser shall reimburse the Fund at the end of any
fiscal year in which the aggregate annual operating expenses
exceed such restrictive percentage. The total expenses of the
Fund as a percentage of net assets for the fiscal years ended
March 31, 1994 (annualized) and 1995 were 1.70% and 1.73%,
respectively. The Adviser was not required to reimburse the
Fund for excess expenses for the fiscal years ended March 31,
1994 or 1995. During the fiscal years ended March 31, 1994 and
1995, the Fund paid the Adviser an aggregate of $8,809 and
$67,554, respectively, in fees.
Albert O. Nicholas, President, Portfolio Manager and a
Director of the Fund, is also President and a Director of the
Adviser. Mr. Nicholas owns 91% of the outstanding voting
securities of the Adviser. Thomas J. Saeger, Executive Vice
President and Secretary of the Fund, is Executive Vice President
and Assistant Secretary of the Adviser. David L. Johnson is
Executive Vice President of the Fund and Executive Vice President
of the Adviser. He is a brother-in-law of Albert O. Nicholas.
Lynn S. Nicholas, Senior Vice President of the Fund, is Senior
Vice President of the Adviser. She is the daughter of Albert O.
Nicholas. David O. Nicholas, Senior Vice President of the Fund,
is Senior Vice President of the Adviser. He is the son of Albert
O. Nicholas. Candace L. Lesak, Vice President of the Fund, is an
employee of the Adviser. Jeffrey T. May, Vice President of the
Fund, is a Senior Vice President and Treasurer of the Adviser.
Cheryl L. King, Treasurer of the Fund, is an employee of the
Adviser. David E. Leichtfuss, a Director of the Adviser, is a
partner in the law firm of Michael Best & Friedrich, Milwaukee,
Wisconsin, legal counsel to both the Fund and the Adviser.
Daniel J. Nicholas, 612 North Main Street, Rockford, Illinois, is
a Director of the Adviser. Mr. Nicholas, a brother of Albert O.
Nicholas, is a private investor.
MANAGEMENT - DIRECTORS, EXECUTIVE OFFICERS AND PORTFOLIO MANAGERS OF THE FUND
The overall operations of the Fund are conducted by the
officers of the Fund under the control and direction of its Board
of Directors. The state of Maryland permits registered
investment companies, such as the Fund, to operate without an
annual meeting of shareholders under specified circumstances if
an annual meeting is not required by the Investment Company Act
of 1940, as amended. The Fund has adopted appropriate provisions
in its Articles of Incorporation and will not hold annual
meetings of shareholders to elect directors unless otherwise
required to do so. The Fund will hold an initial shareholders'
meeting to elect the initial Board of Directors and at such time
as may be required to fill existing vacancies on the Board in the
event less than a majority of the directors then in office have
been elected by shareholders. The following table sets forth the
pertinent information about the Fund's officers and directors at
June 30, 1995:
<PAGE>
NAME AGE AND POSITIONS PRINCIPAL OCCUPATIONS
ADDRESS HELD WITH DURING PAST FIVE YEARS
FUND
------------------------ ----------- --------------------------------
* Albert O. Nicholas, 64 President, President and Director, Nicholas
700 N. Water Street Portfolio Company, Inc., since 1967. He
Milwaukee, WI 53202 Manager and has been Portfolio Manager for,
Director and primarily responsible for the
day-to-day management of, the
portfolios of Nicholas Fund, Inc.
and Nicholas Income Fund, Inc.
since the Nicholas Company, Inc.
has served as investment adviser
for such funds. He also was
Portfolio Manager for Nicholas
II, Inc. and Nicholas Limited
Edition, Inc. from the date of
each such fund's inception until
March 1993. He is a Chartered
Financial Analyst.
Melvin L. Schultz, 62 Director Director and Management
3636 N. 124th Street Consultant, Professional
Wauwatosa, WI 53222 Management of Milwaukee, Inc. He
offers financial advice to
members of the medical and dental
professions and is a Certified
Professional Business Consultant.
Richard Seaman, 69 Director Management Consultant, on an
5270 N. Maple Lane independent basis, primarily in
Nashotah, WI 53058 the areas of mergers,
acquisitions and strategic
planning.
Robert H. Bock, 63 Director Professor of Business Strategy,
3132 Waucheeta Trail Ethics and Venture Capital,
Madison, WI 53711 University of Wisconsin School of
Business, since 1965. From 1972
to 1984, he was Dean of the
School of Business.
David L. Johnson, 53 Executive Executive Vice President,
700 N. Water Street Vice Nicholas Company, Inc., the
Milwaukee, WI 53202 President Adviser to the Fund, and employed
by the Adviser since 1980. He is
a Chartered Financial Analyst.
Thomas J. Saeger, 51 Executive Executive Vice President and
700 N. Water Street Vice Assistant Secretary, Nicholas
Milwaukee, WI 53202 President Company, Inc., the Adviser to the
and Fund, and employed by the Adviser
Secretary since 1969. He is a Certified
Public Accountant.
Lynn S. Nicholas, 39 Senior Vice Senior Vice President, Nicholas
700 N. Water Street President Company, Inc., the Adviser to the
Milwaukee, WI 53202 Fund, and employed by the Adviser
since September 1983. She is a
Chartered Financial Analyst.
David O. Nicholas, 34 Senior Vice Senior Vice President, Nicholas
700 N. Water Street President Company, Inc., the Adviser to the
Milwaukee, WI 53202 Fund, and employed by the Adviser
since December 1985. He has been
Portfolio Manager for, and
primarily responsible for the day-
to-day management of, the
portfolios of Nicholas II, Inc.
and Nicholas Limited Edition,
Inc. since March 1993. He also
is a Chartered Financial Analyst.
Candace L. Lesak, 37 Vice Employee, Nicholas Company, Inc.,
700 N. Water Street President the Adviser to the Fund, since
Milwaukee, WI 53202 February 1983. She is a
Certified Financial Planner.
Jeffrey T. May, 39 Vice Senior Vice President and
700 N. Water Street President Treasurer, Nicholas Company,
Milwaukee, WI 53202 Inc., the Adviser to the Fund and
employed by the Adviser since
July 1987. He is a Certified
Public Accountant.
Cheryl L. King, 33 Treasurer Employee, Nicholas Company, Inc.,
700 N. Water Street the Adviser to the Fund, since
Milwaukee, WI 53202 1983. She is a Certified Public
Accountant.
____________________
Mr. Nicholas is the only director of the Fund who is an
"interested person" in the Adviser, as that term is defined
in the 1940 Act.
Mr. Albert O. Nicholas serves as Portfolio Manager of the
Fund and is primarily responsible for the day-to-day management
of the Fund's portfolio. Mr. David O. Nicholas assists in such
management.
Reference is made to the Section "Investment Adviser" for a
description of the relationships of the officers of the Fund to
the Adviser and the family relationships between directors of the
Adviser and officers and directors of the Fund. All directors
and executive officers of the Fund as a group (eleven in number)
beneficially owned approximately 22.2% of the shares of Common
Stock of the Fund at June 30, 1995.
Mr. Nicholas is a member of the Board of Directors of
Nicholas Fund, Inc., Nicholas Income Fund, Inc., Nicholas Limited
Edition, Inc., Nicholas II, Inc., and Nicholas Money Market Fund,
Inc. Messrs. Bock and Seaman serve as directors of Nicholas
Fund, Inc. and Nicholas II, Inc. Mr. Schultz is a member of the
Board of Directors of Nicholas Fund, Inc., Nicholas II, Inc.,
Nicholas Limited Edition, Inc., Nicholas Income Fund, Inc. and
Nicholas Money Market Fund, Inc.
The Investment Advisory Agreement between the Fund and
Nicholas Company, Inc. states that the Fund shall pay the
directors' fees of directors who are not interested persons of
Nicholas Equity Income Fund, Inc. The amount of such fees is
subject to increase or decrease at any time, but is subject to
the overall limitation on the Fund's annual expenses.
The table below sets forth the aggregate compensation
received from the Fund by all directors of the Fund during the
fiscal year ended March 31, 1995. No officers of the Fund
receive any compensation from the Fund, but rather, are
compensated by the Adviser in accordance with its investment
advisory agreement with the Fund.
<TABLE>
<CAPTION>
AGGRREGATE PENSION OR RETIREMENT ESTIMATED TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED AS ANNUAL BENEFITS FROM FUND TO FUND
FROM THE FUND PART OF FUND EXPENSES UPON RETIREMENT COMPLEX PAID TO DIRECTORS (1)
<S> <C> <C> <C> <C>
Albert O. Nicholas (2) $0 $0 $0 $0
Melvin L. Schultz (2) $1,200 $0 $0 $11,400
Richard Seaman (2) $1,200 $0 $0 $10,200
Robert H. Bock (2) $1,200 $0 $0 $10,200
</TABLE>
------------
(1) During the fiscal year ended March 31, 1995, the
Fund and other funds in its Fund Complex (i.e., those funds
which also have Nicholas Company, Inc. as its investment
adviser, namely Nicholas Fund, Inc., Nicholas II, Inc.,
Nicholas Limited Edition, Inc., Nicholas Income Fund, Inc.
and Nicholas Money Market Fund, Inc.) compensated those
directors who are not "interested persons" of the Adviser in
the form of an annual retainer per director per fund and
meeting attendance fees. During the fiscal year ended March
31, 1995, the Fund compensated the disinterested directors
at a rate of $300 per director per meeting attended. The
disinterested directors did not receive any other form or
amount of compensation from the Fund Complex during the
fiscal year ended March 31, 1995. All other directors and
officers of the Fund were compensated by the Adviser in
accordance with its investment advisory agreement.
(2) Mr. Nicholas also is a member of the Board of Directors
of Nicholas Fund, Inc., Nicholas II, Inc., Nicholas Limited
Edition, Inc., Nicholas Income Fund, Inc. and Nicholas Money
Market Fund, Inc. Mr. Schultz also is a member of the Board of
Directors of Nicholas Fund, Inc., Nicholas II, Inc., Nicholas
Limited Edition, Inc., Nicholas Income Fund, Inc. and Nicholas
Money Market Fund, Inc. Mr. Seaman also is a member of the
Board of Directors of Nicholas Fund, Inc. and Nicholas II,
Inc. Mr. Bock also is a member of the Board of Directors of
Nicholas Fund, Inc. and Nicholas II, Inc.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth the beneficial ownership of
shares of Common Stock of the Fund at June 30, 1995 by each
person known to the Fund to own more than 5% of the issued and
outstanding shares of Common Stock of the Fund.
Number of Shares Percent of
Name and Address of Common Stock Total
of Beneficial Owner Beneficially Owned Outstanding Shares
Albert O. Nicholas
700 North Water Street
Milwaukee, WI 53202 248,571(1) 20.1%
Bessie Siegel, Trustee
For David Siegel Marital 88,684 7.2%
Partnership Trust
c/o Sattell, Johnson, Appel & Co.
700 N. Water Street
Milwaukee, WI 53202
_____________________
(1) Nicholas Company, Inc., the investment adviser to the Fund,
owns no Shares. Albert O. Nicholas, President, Treasurer
and a Director of the Fund, President and a Director of the
Adviser, and owner of 91% of the outstanding voting
securities of the Adviser, owns no Shares. Nancy Nicholas,
the spouse of Mr. Nicholas, owns 213,550 Shares. Mr.
Nicholas, along with David E. Leichtfuss, are the trustees
of the Nicholas Company, Inc. Profit-Sharing Trust, which
owns 35,021 Shares. Both have the right, in conjunction
with one another, to vote these Shares.
PURCHASE OF CAPITAL STOCK
Applications for the purchase of shares are made to
Nicholas Equity Income Fund, Inc., c/o Firstar Trust Company,
P.0. Box 2944, Milwaukee, Wisconsin 53201-2944. The Fund has
available an Automatic Investment Plan for shareholders. Anyone
interested should contact the Fund for additional information.
The price per share will be the net asset value next
computed after the time the application is received in proper
order and accepted by the Fund. The determination of the net
asset value for a particular day is applicable to all
applications for the purchase of shares received at or before the
close of trading on the New York Stock Exchange (the "Exchange")
on that day (usually 4:00 p.m., New York time). Accordingly,
purchase orders received on a day the Exchange is open for
trading, prior to the close of trading on that day, will be
valued as of the close of trading on that day. Applications for
purchase of shares received after the close of trading on the
Exchange will be based on the net asset value as determined as of
the close of trading on the next day the Exchange is open.
The Fund does not consider the U.S. Postal Service or other
independent delivery services to be its agents; therefore,
deposit in the mail or with such services, or receipt at Firstar
Trust Company's Post Office Box does not constitute receipt by
Firstar Trust Company or the Fund. Correspondence intended for
overnight courier should not be sent to the Post Office Box
address. OVERNIGHT COURIER DELIVERY SHOULD BE SENT TO FIRSTAR
TRUST COMPANY, THIRD FLOOR, 615 EAST MICHIGAN STREET, MILWAUKEE,
WISCONSIN 53202.
<PAGE>
All applications to purchase capital stock are subject to
acceptance or rejection by authorized officers of the Fund and
are not binding until accepted. Applications will not be
accepted unless they are accompanied by payment. Payment should
be made by check or money order drawn on a U.S. bank, savings and
loan or credit union. The custodian will charge a $15 fee
against a shareholder's account, in addition to any loss
sustained by the Fund, for any payment check returned to the
custodian for insufficient funds. It is the policy of the Fund
not to accept applications under circumstances or in amounts
considered disadvantageous for shareholders. For example, if an
individual previously tried to pay for shares with a bad check,
the Fund reserves the right not to accept future applications
from that individual. Any account (including custodial accounts)
opened without a proper social security number or taxpayer
identification number may be liquidated and distributed to the
owner(s) of record on the first business day following the 60th
day of investment (net of the back-up withholding tax amount).
The Board of Directors has established $2,000 as the minimum
initial purchase. The minimum for any subsequent purchases is
$100 except in the case of dividend reinvestment. The Automatic
Investment Plan has a minimum monthly investment of $50. Due to
the fixed expenses incurred by the Fund in maintaining individual
accounts, the Fund reserves the right to redeem accounts that
fall below the $2,000 minimum required investment due to
shareholder redemption (but not solely due to a decrease in net
asset value of the Fund). In order to exercise this right, the
Fund will give 30 days' advance written notice to the accounts
below such minimum.
Purchase of shares will be made in full and fractional
shares computed to three decimal places. To purchase additional
shares of the Fund by federal wire transfer please send to:
Firstar National Bank
ABA #0750-00022
Trust Funds, Account #112-952-137
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
for further credit to Nicholas Equity Income Fund, Inc.
[your account number and the title of the account]
Please call Firstar Trust Company (414-276-0535) with the
appropriate account information prior to sending the wire if a
wire purchase is to be an initial purchase.
Shares of Common Stock of the Fund may be purchased or sold
through certain broker-dealers, financial institutions or other
service providers ("Processing Intermediaries"). When shares of
Common Stock of the Fund are purchased this way, the Processing
Intermediary, rather than its customer, may be the shareholder of
record. Processing Intermediaries may use procedures and impose
restrictions in addition to or different from those applicable to
shareholders who invest in the Fund directly.
An investor intending to invest in the Fund through a
Processing Intermediary should read the program materials
provided by the Processing Intermediary in conjunction with this
Prospectus. Processing Intermediaries may charge fees or other
changes for the services they provide to their customers.
Investors who do not wish to receive the services of a Processing
Intermediary, or pay the fees that may be charged for such
services, may want to consider investing directly with the Fund.
Direct purchase or sale of shares of Common Stock of the Fund may
be made without a sales or redemption charge.
Certificates representing Fund shares purchased will not be
issued unless the shareholder specifically requests certificates
by signed written request to the Fund. Certificates are mailed
to requesting shareholders approximately two weeks after receipt
of the request by the Fund. In no instance will certificates be
issued for fractional shares. When certificates are not
requested, the Fund's transfer agent, Firstar Trust Company, will
credit the shareholder's account with the number of shares
purchased. Written confirmations are issued for all purchases
and redemptions of Fund shares.
<PAGE>
REDEMPTION OF CAPITAL STOCK
A shareholder may require the Fund at any time during normal
business hours to redeem his/her shares in whole or in part.
Redemption requests must be signed by each shareholder in the
exact manner as the Fund account is registered and must state the
amount of redemption. The shareholder account number and tax
identification number or social security number also are
necessary. When shares are represented by certificates,
redemption is accomplished by delivering to the Fund, c/o Firstar
Trust Company, P.O. Box 2944, Milwaukee, Wisconsin 53201-2944,
the certificate(s) for the full shares to be redeemed. The
certificate(s) must be properly endorsed or accompanied by
instrument of transfer, in either case, with signatures
guaranteed by an "eligible guarantor institution" as defined in
Section 240.17Ad-15 of the Code of Federal Regulations. This
includes a bank, a savings and loan association, a credit union
or a member firm of a national securities exchange. A notary
public is not an acceptable guarantor.
If certificates have not been issued, redemption is
accomplished by delivering an original signed written request for
redemption addressed to Nicholas Equity Income Fund, Inc., c/o
Firstar Trust Company. Facsimile transmission of redemption
requests is not acceptable. If the account registration is
individual, joint tenants, sole proprietorship, custodial
(Uniform Gift to Minors Act) or general partners, the written
request must be signed exactly as the account is registered.
Both owners must sign if the account is owned jointly.
The Fund may require additional supporting documents for
redemptions made by corporations, executors, administrators,
trustees and guardians. Specifically, if the account is
registered in the name of a corporation or association, the
written request must be accompanied by a corporate resolution
signed by the authorized person(s). A redemption request for
accounts registered in the name of a legal trust must have a copy
of the title and signature page of the trust agreement on file or
be accompanied by the trust agreement and signed by the
trustee(s). A copy of the trust document certified within the
last 60 days is required if the trustee's name is not registered
on the account.
Please write or call Firstar Trust Company (414-276-0535),
prior to submitting the redemption request if there is doubt as
to what documents or instruments are necessary in order to redeem
shares. A redemption request will not become effective until all
documents have been received in proper form by Firstar Trust
Company.
Redemption cannot be accomplished by telephoning or
telegraphing the Fund or Firstar Trust Company. The redemption
price is the net asset value next computed after the time of
receipt by Firstar Trust Company of the certificate(s) or written
request in the proper form set forth above. A redemption
generally is treated as a sale of the shares being redeemed for
federal income tax purposes. This means the shareholder
recognizes a capital gain or loss equal to the difference between
the redemption price and the shareholder's cost for the shares
being redeemed.
Shareholders who have an individual retirement account
("IRA"), master retirement plan or other retirement plan must
indicate on their redemption requests whether or not to withhold
federal income tax. Redemption requests not indicating an
election not to have federal income tax withheld will be subject
to withholding. Please consult your current Disclosure Statement
for any applicable fees.
All redemptions will be processed immediately upon receipt.
Share redemption orders are effected at the net asset value next
determined after receipt of the order in proper form by the Fund.
The Fund will return redemption requests that contain
restrictions as to the time or date redemptions are to be
effected. The Fund ordinarily will make payment for redeemed
shares within seven days after receipt of a request in proper
form, except as provided by the rules of the Securities and
Exchange Commission. Redemption proceeds which are to be wired
normally will be wired on the next business day after a net asset
value is determined. There is a $7.50 charge to wire the
redemption proceeds. The Fund reserves the right to hold payment
up to 15 days or until satisfied that investments made by check
have been collected. During the period prior to the time the
shares are redeemed, dividends on such shares will accrue and be
payable, and an investor will be entitled to exercise all other
rights of beneficial ownership.
<PAGE>
The Fund does not consider the U.S. Postal Service or other
independent delivery services to be its agents. Therefore,
deposit in the mail or with such services or receipt at Firstar
Trust Company's Post Office Box of redemption requests does not
constitute receipt by Firstar Trust Company or the Fund. Do not
mail letters by overnight courier to the Post Office Box address.
Due to the fixed expenses incurred by the Fund in
maintaining individual accounts, the Fund reserves the right to
redeem accounts that fall below $1,000 due to shareholder
redemption (but not solely due to a decrease in net asset value
of the Fund). In order to exercise this right, the Fund will
give 45 days' advance written notice to the accounts below such
minimums.
Although not anticipated, it is possible that conditions may
arise in the future which would, in the opinion of the Fund's
Adviser or Board of Directors, make it undesirable for the Fund
to pay for all redemptions in cash. In such cases, the Board may
authorize payment to be made in portfolio securities or other
property of the Fund. However, the Fund has obligated itself
under the 1940 Act to redeem for cash all shares presented for
redemption by any one shareholder up to $250,000 (or 1% of the
Fund's net assets if that is less) in any 90-day period.
Securities delivered in payment of redemptions would be valued at
the same value assigned to them in computing the net asset value
per share. Shareholders receiving such securities would incur
brokerage costs when these securities are sold.
Signature Guarantees. A signature guarantee of each owner
is required to redeem shares in the following situations, for all
size transactions: (i) if you change the ownership on your
account; (ii) upon redemption of shares when certificates have
been issued for your account; (iii) when you want the redemption
proceeds sent to a different address than is registered on the
account; (iv) for both certificated and uncertificated shares if
the proceeds are to be made payable to someone other than the
account owner(s); (v) any redemption transmitted by federal wire
transfer to your bank; and (vi) if a change of address request
has been received by the Fund or Firstar Trust Company within 15
days of a redemption request. In addition, signature guarantees
are required for all redemptions of $100,000 or more from any
shareholder account in the Nicholas Family of Funds. A
redemption will not be processed until the signature guarantee,
if required, is received in proper form.
EXCHANGE BETWEEN FUNDS
If a shareholder chooses to exercise the exchange privilege,
the shares will be exchanged at their next determined net asset
value. When an exchange into the Nicholas Money Market Fund,
Inc. would involve investment of the exchanged amount on a day
when the New York Stock Exchange is open for trading but the
Federal Reserve Banks are closed, shares of the Fund will be
redeemed on the day upon which the exchange request is received;
however, issuance of Nicholas Money Market Fund, Inc. shares may
be delayed an additional day in order to avoid the dilutive
effect on return (i.e. reduction in net investment income per
share) which would result from issuance of such shares on a day
when the exchanged amount cannot be invested. In such a case,
the exchanged amount would be uninvested for this one day period.
Shareholders interested in exercising the exchange privilege must
obtain an authorization form and the appropriate prospectus from
Nicholas Company, Inc. Such an exchange constitutes a sale for
federal tax purposes and a capital gain or loss generally will be
recognized upon the exchange. This depends upon whether the net
asset value at the time is more or less than the shareholder's
cost. An exchange between the funds involving master retirement
(Keogh) or IRA accounts generally will not constitute a taxable
transaction for federal tax purposes.
This exchange privilege is available only in states where
shares of the Fund being acquired may legally be sold. The
privilege may be terminated or modified only upon 60 days'
advance notice to shareholders. Shareholders are reminded,
however, that Nicholas Limited Edition, Inc. is restricted in
size, and that the exchange privilege into that fund may be
terminated or modified at a time when that maximum is reached.
Shares of the Fund which have been outstanding at least 15
days may be exchanged for shares of other investment companies
for which Nicholas Company, Inc. serves as the investment adviser
and such exchanges are permitted. Nicholas Company, Inc. is also
the investment adviser to Nicholas Fund, Inc., Nicholas II, Inc.,
Nicholas Income Fund, Inc., Nicholas Limited Edition, Inc. and
Nicholas Money Market Fund, Inc. Nicholas Fund, Inc. has an
investment objective of capital appreciation. Nicholas II, Inc.
and Nicholas Limited Edition, Inc. have long-term growth as their
investment objective. Nicholas Income Fund, Inc.'s investment
<PAGE>
objective is to seek high current income consistent with the
preservation and conservation of capital value. Nicholas Money
Market Fund, Inc. has an investment objective of achieving as
high a level of current income as is consistent with preserving
capital and providing liquidity.
An exchange of shares of the Fund for shares of other
available Nicholas mutual funds will be made without cost to the
investor through written request. Signatures required are the
same as previously explained under "Redemption Of Capital Stock."
Exchanges by telephone are available only between Nicholas II,
Inc. and Nicholas Money Market Fund, Inc., and Nicholas Fund,
Inc. and Nicholas Money Market Fund, Inc.
TRANSFER OF CAPITAL STOCK
Shares of the Fund may be transferred in instances such as
the death of a shareholder, change of account registration,
change of account ownership and in cases where shares of the Fund
are transferred as a gift. Documents and instructions to
transfer capital stock can be obtained by writing or calling
Firstar Trust Company (414-276-0535) or Nicholas Company, Inc.
(414-272-6133) prior to submitting any transfer requests.
DETERMINATION OF NET ASSET VALUE
The net asset value per share will be computed by the
Adviser as of the close of trading on the New York Stock Exchange
on each day the Exchange is open for unrestricted trading. The
net asset value per share is determined by dividing the total
current market value of the assets of the Fund, less its
liabilities, by the total number of shares outstanding at the
time of determination. A portfolio security which is traded on a
national securities exchange is valued at the price of the last
sale on such exchange. If no sale has occurred on the date as of
which assets are valued, or if the security is traded only in the
over-the-counter market, it normally will be valued at the latest
bid price, unless the Board of Directors, in good faith,
determines that some other price reflects more closely the true
market value.
Bid prices for debt securities are obtained from the Fund's
pricing service which consults one or more market makers of each
debt security being priced. Debt securities listed on a national
exchange may be priced at the last sales price if the Fund's
pricing service believes that such price represents market value
of the security for institutional trades. The pricing of all
debt securities takes into account the fact that the Fund trades
in institutional size trading units. Securities for which
current quotations are not readily available and other assets of
the Fund are valued at fair value as determined in good faith by
the Fund's Board of Directors.
DIVIDENDS AND FEDERAL TAX STATUS
Dividends of the Fund, if any, are paid to shareholders in
April, July, October and December. In those years in which sales
of portfolio securities result in net realized capital gains
(after utilization of any available capital loss carryforwards),
such gains are distributed to shareholders in December or
January. It is the practice of the Fund to distribute capital
gains in shares of the Fund at net asset value or, at each
shareholder's election, in cash.
The Fund intends to continue to qualify annually as a
"regulated investment company" under the Internal Revenue Code of
1986 and intends to take all other action required to insure that
little or no federal income or excise taxes will be payable by
the Fund.
Distributions by the Fund, whether received in cash or
invested in additional shares of the Fund, will be taxable to the
Fund's shareholders, except those shareholders that are not
subject to tax on their income. Long-term capital gain
distributed by the Fund will retain the character that it had at
the Fund level. Income distributed from the Fund's net
investment income and net realized short-term capital gains are
taxable to shareholders as ordinary income. The Fund will
provide information to shareholders concerning the character and
federal tax treatment of any distribution.
At the time of purchase of shares, the Fund may have
undistributed income or capital gains included in the computation
of the net asset value per share. Therefore, a dividend or
<PAGE>
capital gain distribution received shortly after such purchase by
a shareholder may be taxable to the shareholder, although it is,
in whole or in part, a return of capital and may have the effect
of reducing the net asset value per share.
Under federal law, some shareholders may be subject to a 31%
back-up withholding on reportable dividends, capital gain
distributions (if any) and redemption payments. Generally under
federal law, shareholders subject to backup withholding will be
those (i) for whom a taxpayer identification number is not on
file with the Fund or who, to the Fund's knowledge, have
furnished an incorrect number, or (ii) who have failed to declare
or underreported certain income on their federal returns. An
investor must certify under penalties of perjury that the
taxpayer identification number supplied to the Fund is correct
and that he or she is not subject to backup withholding when
establishing an account.
The foregoing tax discussion relates solely to federal
income taxes only and is not intended to be a complete discussion
of all federal tax consequences. Shareholders should consult
with a tax adviser concerning the federal, state and local tax
aspects of an investment in the Fund.
DIVIDEND REINVESTMENT PLAN
Unless a shareholder elects to accept cash in lieu of
shares, all dividends and capital gains distributions are
automatically reinvested in additional shares of the Fund through
the Dividend Reinvestment Plan. An election to accept cash may
be made on an application to purchase shares or by separate
written notification. All reinvestments are at the net asset
value per share in effect on the dividend or distribution record
date and are credited to the shareholder's account. Shareholders
will be advised of the number of shares purchased and the price
following each reinvestment.
Shareholders may withdraw from or thereafter elect to
participate in the Dividend Reinvestment Plan at any time by
giving written notice to the Transfer Agent. An election must be
received by the Transfer Agent prior to the dividend record date
of any particular distribution for the election to be effective
for that distribution. If an election to withdraw from or
participate in the Dividend Reinvestment Plan is received between
a dividend record date and payment date, it shall become
effective on the day following the payment date. The Fund may
modify or terminate the Dividend Reinvestment Plan at any time on
30 days written notice to participants.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders who have purchased or currently own Fund shares
worth $10,000 or more at the current market value may open a
Systematic Withdrawal Plan and receive monthly or quarterly
checks for any designated amount. Firstar Trust Company
reinvests all income and capital gain dividends in shares of the
Fund. Shareholders may add shares to, withdraw shares from, or
terminate the Plan, at any time. Each withdrawal may be a
taxable event to the shareholder. Liquidation of shares in
excess of distributions may deplete or possibly use up the
initial investment, particularly in the event of a market
decline, and withdrawals cannot be considered a yield or income
on the investment. In addition to termination of the Plan by the
Fund or shareholders, the Plan may be terminated by Firstar Trust
Company upon written notice mailed to the shareholders. Please
contact the Nicholas Company for copies of the Plan documents.
INDIVIDUAL RETIREMENT ACCOUNT
Individuals may be able to establish their own tax sheltered
individual retirement plans or accounts ("IRA"). The Fund offers
a prototype IRA Plan for adoption by individuals who qualify for
spousal, deductible and non-deductible IRA accounts.
As long as the aggregate IRA contributions meet the Fund's
minimum investment requirement of $2,000, the Fund will accept
any allocation of such contribution between spousal, deductible
and non-deductible accounts. The acceptability of this
calculation is the sole responsibility of the shareholder. For
this reason, it is advisable for taxpayers to consult with their
personal tax adviser to determine the deductibility of their IRA
contributions.
<PAGE>
The applicable forms and a description of the applicable
service fees are available upon request from the Fund. The IRA
documents also contain a Disclosure Statement which the IRS
requires to be furnished to individuals who are considering
adopting an IRA. It is important you obtain up-to-date
information from the Fund before opening an IRA because changes
occur from time to time in existing IRA regulations.
Because a retirement program involves commitments covering
future years, it is important that the investment objectives of
the Fund are consistent with your own retirement objectives.
Premature withdrawals from an IRA may result in adverse tax
consequences. See "Redemption Of Capital Stock." Consultation
with a tax adviser regarding tax consequences is recommended.
SELF-EMPLOYED MASTER RETIREMENT PLAN
The Fund has available a master retirement plan (formerly
called a "Keogh" Plan) for self-employed individuals. Any person
seeking additional information or wishing to participate in the
plan may contact the Fund. Consultation with a tax adviser
regarding the tax consequences of the plan is recommended.
BROKERAGE
The Adviser, who decides to buy and sell securities, selects
a broker or dealer for the execution of a portfolio transaction
on the basis that such broker or dealer will execute the order as
promptly and efficiently as possible subject to the overriding
policy of the Fund. This policy is to obtain the best market
price and reasonable execution for all its transactions, giving
due consideration to such factors as reliability of execution and
the value of research, statistical and price quotation services
provided by such broker or dealer. The research services
provided by brokers consist of recommendations to purchase or
sell specific securities, the rendering of advice regarding
events involving specific issuers of securities and events and
current conditions in specific industries, and the rendering of
advice regarding general economic conditions affecting the stock
market and the U.S. economy.
The Adviser does not specifically negotiate commissions and
charges with a broker or dealer in advance of each transaction.
The approximate brokerage discount and charges are, however,
generally known to the Adviser prior to effecting the
transaction. In determining the overall reasonableness of the
commissions paid, the Adviser compares the commission rates to
those it pays on transactions for its other client accounts and
to the rates generally charged in the industry to institutional
investors such as the Fund. The commissions also are considered
in view of the value of the research, statistical and price
quotation services, if any, rendered by the broker or dealer
through whom a transaction is placed.
Purchases and sales of portfolio securities are frequently
placed, without any agreement or undertaking to do so, with
brokers and dealers who provide the Adviser with such
supplemental research and statistical and price quotation
services. The Adviser understands that since the brokers and
dealers rendering such services are compensated therefor by
commissions, such services would be unilaterally reduced or
eliminated by the brokers and dealers if none of the Fund's
transactions were placed through them. While these services have
value which cannot be measured in dollars, the Adviser believes
such services do not significantly increase the Fund's or the
Adviser's expenses.
In instances where it is determined by the Adviser that the
supplemental research and statistical services are of significant
value, it is the practice of the Adviser to place the Fund's
transactions with brokers or dealers who are paid a higher
commission than other brokers or dealers. The Adviser utilizes
research and other information obtained from brokers and dealers
in managing its other client accounts. On the other hand, the
Adviser obtains research and information from brokers and dealers
who transact trades for the Adviser's other client accounts,
which also are utilized by the Adviser in managing the Fund's
portfolio.
The Adviser, which is the investment adviser to the Nicholas
Fund, Inc., Nicholas Income Fund, Inc., Nicholas Limited Edition,
Inc., Nicholas II, Inc. and Nicholas Money Market Fund, Inc., as
well as to the Fund, may occasionally make investment decisions
which would involve the purchase or sale of securities for the
portfolios of more than one of the six funds at the same time.
As a result, the demand for securities being purchased or the
supply of securities being sold may increase, and this could have
<PAGE>
an adverse effect on the price of those securities. It is the
Adviser's policy not to favor one fund over another in making
recommendations or in placing orders. If two or more of the
Adviser's clients are purchasing a given security on the same day
from the same broker or dealer, the Adviser may average the price
of the transactions and allocate the average among the clients
participating in the transactions. It is the Advisor's policy to
allocate the commission charged by such broker or dealer to each
fund in direct proportion to the number of shares bought or sold
by the particular fund involved.
The Adviser may effect portfolio transactions with brokers or
dealers who recommend the purchase of the Fund's shares. The
Adviser may not allocate brokerage on the basis of
recommendations to purchase shares of the Fund.
Over-the-counter market purchases and sales generally are
transacted directly with principal market makers who retain the
difference between their cost in a security and its selling
price. In some circumstances where, in the opinion of the
Adviser, better prices and executions are available elsewhere,
the transactions are placed through brokers who are paid
commissions directly. The Fund paid aggregate brokerage
commissions of approximately $3,090 and $5,257 for the fiscal
years ended March 31, 1994 and 1995, respectively. The Fund's
portfolio turnover rate was 0% and 10.98% for the fiscal years
ended March 31, 1994 and 1995, respectively.
PERFORMANCE DATA
The Fund may from time to time include its "total return",
"average annual total return," "yield" and "distribution rate" in
advertisements or in information furnished to present and
prospective shareholders. All performance figures are based on
historical earnings and are not intended to indicate future
results. The "total return" of the Fund is expressed as a ratio
of the increase (or decrease) in value of a hypothetical
investment in the Fund at the end of a measuring period to the
amount initially invested. The "average annual total return" is
the total return discounted for the number of represented time
periods and is expressed as a percentage. The rate represents
the annual rate achieved on the initial investment to arrive at
the ending redeemable value. The ending value assumes
reinvestment of dividends and capital gains and the reduction of
account charges, if any. This computation does not reflect any
sales load or other nonrecurring charges, since the Fund is not
subject to such charges.
The "average annual total return" and "total return" are
computed according to the following formulas:
n
P(1+T) = ERV
or
Total Return = ERV - 1
---
P
Average Annual Total Return = nth root of ERV
------ -1
P
where:
P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1000 payment
made at the beginning of the 1, 5 and 10 year periods at the end
of the 1, 5 or 10 year periods.
For the One Year Time Period From Inception
Period Ended (November 23, 1993)
March 31, 1995 to March 31, 1995
Total Return 8.13% 8.71%
Average Annual Total Return 8.13% 6.38%
<PAGE>
For purposes of the above calculations, the following
assumptions are made: (1) all dividends and distributions by
the Fund are reinvested at the net asset value calculated on the
reinvestment dates during the period; (2) a complete redemption
at the end of the periods is made; and (3) all recurring fees
that are charged to all shareholder accounts are included.
These figures are computed by adding the total number of
shares purchased by a hypothetical $1,000 investment in the Fund
to all additional shares purchased within a one year period with
reinvested dividends and distributions, reducing the number of
shares by those redeemed to pay account charges, taking the value
of those shares owned at the end of the year and reducing it by
any deferred charges, and then dividing that amount by the
initial $1,000 investment. This computation does not reflect any
sales load or other nonrecurring charges, since the Fund is not
subject to such charges.
The "30-day yield" of the Fund is calculated by dividing the
Fund's net investment income per share, as defined by the
Securities and Exchange Commission, for the 30-day period by the
net asset value per share on the last day of the stated period.
Net investment income represents dividends and interest generated
by the Fund's portfolio securities reduced by all expenses and
any other charges that have been applied to all shareholder
accounts. The calculation assumes the 30-day net investment
income is compounded monthly for six months and then annualized.
The Fund's distribution rate is calculated by annualizing the
most recent per share income distribution and dividing by the net
asset value per share on the last day of the period. Generally,
the distribution rate reflects the amounts actually paid to
shareholders at a point in time and is based on book income,
whereas the yield reflects the earning power, net of expenses, of
the Fund's portfolio securities at a point in time. The Fund's
yield may be more or less than the amount actually distributed to
shareholders ("distribution rate"). Methods used to calculate
advertised yields and total returns are standardized for all bond
and stock mutual funds by the Securities and Exchange Commission.
The yield is computed as follows:
Yield = 2[((A-B/CD)+1)6-1]
where:
A = Dividend and interest income
B = Expenses accrued for the period (net ofexpense reimbursement)
C = Average daily number of shares outstanding during the
period that were entitled to receive dividends
D = Maximum offering price per share on the
last day of the period
In sales materials, reports and other communications to
shareholders, the Fund may compare its performance to certain
indices, including, but not limited to, the S&P 500 Index,
National Association of Securities Dealers Automated Quotation
System, the Russell 2000 Index and United States Department of
Labor Consumer Price Index. The Fund also may include
evaluations of the Fund published by nationally recognized
financial publications and ranking services, such as Forbes,
Money, Financial World, Lipper Analytical Services Mutual Fund
Performance Analysis and Morningstar Mutual Funds.
CAPITAL STRUCTURE
The Fund is authorized to issue five hundred million
(500,000,000) shares of Common Stock, $.0001 par value per share.
Each full share has one vote and all shares participate equally
in dividends and other distributions by the Fund and in the
residual assets of the Fund in the event of liquidation. The
shares are fully paid and non-assessable when issued. There are
no conversion or sinking fund provisions applicable to shares,
and shareholders have no preemptive rights and may not cumulate
their votes in the election of directors. Shares are redeemable
and are transferable. Fractional shares entitle the shareholder
to the same rights as whole shares.
<PAGE>
STOCK CERTIFICATES
The Fund will not issue certificates evidencing shares
purchased unless so requested in writing. Where certificates are
not issued, the shareholder's account will be credited with the
number of shares purchased, relieving shareholders of
responsibility for safekeeping of certificates and the need to
deliver them upon redemption. Written confirmations are issued
for all purchases of shares. Any shareholder may deliver
certificates to the Fund's transfer agent, Firstar Trust Company,
and direct that his account be credited with the shares. A
shareholder may in writing direct Firstar Trust Company at any
time to issue a certificate for his shares without charge.
ANNUAL MEETING
Under the laws of the State of Maryland, registered
investment companies, such as the Fund, may operate without an
annual meeting of shareholders under specified circumstances if
an annual meeting is not required by the Investment Company Act
of 1940, as amended. The Fund has adopted the appropriate
provisions in its By-Laws and will not hold annual meetings of
shareholders for the following purposes unless otherwise required
to do so: (i) election of directors; (ii) approval of the
investment advisory agreement; (iii) ratification of the
selection of independent auditors; and (iv) approval of any
distribution agreement.
In the event the Fund is not required to hold annual
meetings of shareholders to elect Directors, the Board of
Directors of the Fund will promptly call a meeting of
shareholders of the Fund for the purpose of voting upon the
question of removal of any Director when requested in writing to
do so by the record holders of not less than l0% of the
outstanding shares of Common Stock of the Fund. The affirmative
vote of two-thirds of the outstanding shares, cast in person or
by proxy at a meeting called for such purpose, is required to
remove a Director of the Fund. The Fund will assist shareholders
in communicating with each other for this purpose pursuant to the
requirements of Section 16(c) of the Investment Company Act of
1940, as amended.
SHAREHOLDER REPORTS
Shareholders will be provided at least semiannually with a
report or a current prospectus showing the Fund's portfolio and
other information. After the close of the Fund's fiscal year,
which ends March 31, 1994, an annual report or current prospectus
containing financial statements audited by the Fund's independent
public accountants, Arthur Andersen & Co., will be sent to
shareholders.
CUSTODIAN AND TRANSFER AGENT
Firstar Trust Company, 615 East Michigan Avenue, Milwaukee,
Wisconsin, acts as Custodian of the Fund. As such, Firstar Trust
Company holds all securities and cash of the Fund, delivers and
receives payment for securities sold, receives and pays for
securities purchased, collects income from investments and
performs other duties, all as directed by officers of the Fund.
Firstar Trust Company does not exercise any supervisory function
over the management of the Fund, the purchase and sale of
securities or the payment of distributions to shareholders.
Firstar Trust Company also acts as the Fund's Transfer Agent and
Dividend Disbursing Agent.
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL
Arthur Andersen LLP, 777 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, has been selected as the independent accountants
for the Fund. Michael Best & Friedrich, 100 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202, has passed on the legality of
the shares of Common Stock of the Fund being offered.
FINANCIAL INFORMATION
The financial statements and other financial information
relating to the Fund contained in the Annual Report of the Fund
for the fiscal year ended March 31, 1995 are incorporated herein
by reference.
<PAGE>
Nicholas Equity Income Fund, Inc.
Form N-1A
PART C: OTHER INFORMATION
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS: Per share income and capital
changes information with respect to the Registrant's Common Stock
appears in Part A; the Registrant's statement of assets and
liabilities, including the schedule of investments, as of March
31, 1995, and the related statement of operations for the year
then ended, and the per share income and capital changes for the
year then ended are incorporated in Parts A and B by reference to
the Annual Report to Shareholders of the Registrant for its
fiscal year ended March 31, 1995.
(b) EXHIBITS: All exhibits required to be filed with this
Form N-lA pursuant to Item 24(b) thereof are listed in the
Exhibit Index appearing elsewhere in this Registration Statement
and (i) appear in their entirety herein or (ii) were previously
filed.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The Registrant is not under common control with any
other person. The Registrant, Nicholas Fund, Inc., Nicholas
Income Fund, Inc., Nicholas Limited Edition, Inc., Nicholas II,
Inc. and Nicholas Money Market Fund, Inc., which are all Maryland
corporations and are diversified management-type investment
companies registered under the Investment Company Act of 1940, as
amended, share a common investment adviser, Nicholas Company,
Inc.; however, each such fund has an independent Board of
Directors responsible for supervising the investment and business
management services provided by the Adviser. The Registrant does
not control any other person.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of June 30, 1995, the number of record holders was:
Title of Class Number of Record Holders
-------------- ------------------------
Common Stock, $.0001
par value per share 572
ITEM 27. INDEMNIFICATION
(a) Article Fourteenth of the Articles of Incorporation of
Registrant provides that the Registrant shall indemnify and
advance expenses to its current acting and its former officers
and directors to the fullest extent that indemnification of
officers and directors is permitted by the Maryland General
Corporation Law.
(b) Article VII, Section 7 of the By-laws of Registrant
provides for the indemnification of officers and directors of
Registrant for claims arising from his or her service to
Registrant, excepting claims in which such officer or director
has been adjudicated guilty of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in
the conduct of his or her office. In the absence of any
adjudication, indemnification will be determined by resolution of
two-thirds of the members of the Board of Directors who are not
"interested persons" and not involved in such action or claim.
(c) Registrant will maintain insurance coverage for the
benefit of officers and directors with respect to many types of
claims that may be made against them, some of which may be in
addition to those described in Article VII, Section 7 of the By-
laws of Registrant, subject to the limitations of federal law
(see Item 27(e), below).
(d) The Annotated Code of Maryland, Corporations and
Associations, Section 2-418 generally provides that, under
certain circumstances, corporations may indemnify any person who
was or is a party to any action by virtue of having been an
officer, director, employee or agent of the corporation,
including indemnification for judgments, fines, settlement
amounts and reasonable expenses actually incurred if the person
acted in good faith. This statute also provides a corporation
may maintain insurance on behalf of directors, officers,
<PAGE>
employees or agents for liabilities arising out of such persons'
actions in such position. Such state law is subject to the
limitations of applicable federal law (see Item 27(e), below).
(e) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 or the Investment Company Act of
1940 may be permitted to officers, directors, controlling
persons, employees and agents of Registrant pursuant to the
Articles of Incorporation, Article VII, Section 7 of the By-laws
of Registrant, Maryland law or otherwise, Registrant has been
advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in said Acts and is, therefore, unenforceable. In the
event a claim for indemnification for such liabilities (other
than payment by Registrant of expenses incurred or paid by an
officer, director, controlling person, employee or agent in
connection with the successful defense of any action, suit or
proceeding) is asserted by such officer, director, controlling
person, employee or agent in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
said Acts and will be governed by the final adjudication of such
issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
None.
ITEM 29. PRINCIPAL UNDERWRITERS
None.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books or other documents required to be
maintained pursuant to Section 31(a) of the Investment Company
Act of 1940, as amended, and the rules of the Securities and
Exchange Commission promulgated thereunder, are located at the
offices of Registrant, 700 North Water Street, Milwaukee,
Wisconsin, and at the offices of Registrant's custodian and
transfer agent, Firstar Trust Company, 615 East Michigan Avenue,
Milwaukee, Wisconsin.
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
The undersigned Registrant hereby undertakes to deliver or
cause to be delivered with the prospectus, to each person to whom
the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the
prospectus and furnished pursuant to and meeting the requirements
of Rule 14a-3 or Rule 14c-3 under the Securities and Exchange Act
of 1934; and, where interim financial information required to be
presented by Article 3 of Regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to each person
to whom the prospectus is sent or given, the latest quarterly
report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit No. Description Page No.
(b)(1) Articles of Incorporation of Registrant (1)
(b)(2) By-Laws of Registrant (1)
(b)(3) None.
(b)(4) Specimen certificate evidencing common stock,
$.0001 par value per share, of Registrant (2)
(b)(5) Investment Advisory Agreement between
Registrant and Nicholas Company, Inc. (1)
(b)(6) None.
(b)(7) None.
(b)(8) Custodian Agreement between Registrant
and Firstar Trust Company (1)
(b)(9) Transfer Agent Agreement between Registrant
and Firstar Trust Company (1)
(b)(10) Opinion of Michael Best & Friedrich, counsel to the
Registrant, concerning the legality of Registrant's
common stock, including consent to the use thereof..........----
(b)(11) Consent of Arthur Andersen & Co., independent
public accountants..........................................____
(b)(12) Statements of Assets and Liabilities of Registrant,
including the Schedule of Investments as of
March 31, 1995, and the related Statement of Change
in Net Assets and the Financial Highlights for the
period ended March 31, 1995 (included in the Annual
Report to Shareholders of Registrant for the fiscal
year ended March 31, 1995.)................................____
(b)(13) Subscription Agreement between the Registrant and
the Nicholas Company, Inc. Profit Sharing Trust
as initial shareholder representing
that the initial purchase was without any present
intention of redeeming or reselling (as amended) (2)
(b)(14.1) Registrant's Prototype IRA Plan (1)
(b)(14.2) Registrant's Master Retirement
Plan for Self-Employed Individuals (1)
(b)(15) None.
(b)(16) Schedule for computation of performance quotation
provided in response to Item 22 of Form N-lA...............----
(b)(17) Financial Data Schedule....................................____
(b)(99) Powers of Attorney (1)
_________________________
(1) Previously filed on October 1, 1993, with the Registrant's
initial Registration Statement on Form N-1A.
(2) Previously filed on November 8, 1993, with the Registrant's
Pre-Effective Amendment No. 1 to its Registration Statement
on Form N-1A.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
Nicholas Equity Income Fund, Inc., a corporation organized and
existing under the laws of the State of Maryland, hereby
certifies that it meets all of the requirements for effectiveness
of this Amendment to its Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933, and has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 30th day of June,
1995.
NICHOLAS EQUITY INCOME
FUND, INC.
By: /s/ Thomas J. Saeger
------------------------
Thomas J. Saeger,
Executive Vice
President and Secretary
Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
this Registration Statement has been signed below by the
following persons in the capacities indicated on the 30th day of
June, 1995.
Signature Title
/s/ Albert O. Nicholas* President, Chief Executive
------------------- Officer and Director
Albert O. Nicholas
/s/ Thomas J. Saeger Executive Vice President,
----------------- Secretary, Chief Financial
Thomas J. Saeger Officer, and Chief
Accounting Officer
/s/Robert H. Bock* Director
----------------
Robert H. Bock
/s/Richard Seaman* Director
----------------
Richard Seaman
/s/Melvin L. Schultz* Director
------------------
Melvin L. Schultz
* By: /s/Thomas J. Saeger
--------------------
Thomas J. Saeger, as
Attorney-in-Fact for the above officers
and directors, under authority of
Powers of Attorney previously filed
<PAGE>
EXHIBIT NO. (b)(10)
OPINION OF MICHAEL BEST & FRIEDRICH
<PAGE>
EXHIBIT NO. (b)(11)
CONSENT OF ARTHUR ANDERSEN LLP,
INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
EXHIBIT NO. (b)(12)
ANNUAL REPORT TO SHAREHOLDERS
FOR THE FISCAL YEAR ENDED
MARCH 31, 1995
<PAGE>
EXHIBIT NO. (b)(16)
SCHEDULE FOR COMPUTATION OF
PERFORMANCE QUOTATIONS
<PAGE>
EXHIBIT NO. (b)(17)
FINANCIAL DATA SCHEDULE
<PAGE>
LIST OF CONSENTS
1. Consent of Michael Best & Friedrich
(included in Exhibit (b)(10))
2. Consent of Arthur Andersen LLP
(included in Exhibit (b)(11))
CONSENT OF INDEPENDANT PUBLIC ACCOUNTANTS
As independant public accountants, we hereby consent to the use
of our report, and to all references to our, included in or made
a part of this form N-1A registration statement for the Nicholas
Equity Income Fund, Inc.
/s/ ARTHUR ANDERSON & CO.
Milwaukee, Wisconsin
July 21, 1995
NICHOLAS EQUITY INCOME FUND, INC.
May 23, 1995
Report to Shareholders:
Nicholas Equity Income Fund completed its fiscal year ended March 31,
1995 with total net assets of $11.8 million. Net asset value per share was
$10.56, and the Fund's cash position was 12%. The table below compares the
performance of Nicholas Equity Income Fund to the S&P 500 stock index and the
Lehman Brothers Intermediate Corporate Bond Index.
<TABLE>
<CAPTION>
One Year Total Return
Through March 31, 1995
______________________
<S> <C>
Nicholas Equity Income Fund
(distributions reinvested) +8.13%
Standard & Poor's 500
(income reinvested) +15.54%
Lehman Brothers Intermediate
Corporate Bond Index
(includes income) +5.41%
</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.
The Fund's average annual total return for the life of the Fund (1.35 years)
is +6.38%.
As of March 31, the Fund was invested approximately 62% in stock and
convertible bonds, 26% in non-convertible bonds and the remainder in cash
equivalents. It is management's goal to produce a distribution rate of 3% to
4% through investment in a diversified list of bonds and stocks. The equities
used in the portfolio tend to have higher cash dividend returns than the stocks
used in Nicholas Company growth mutual funds. This should reduce volatility
and protect capital versus the use of low dividend, high P/E growth stocks.
However, we still favor above-average growth companies.
The strongly rising stock market concerns management, but has not
altered our stock picking style. What's more, we continue to find interesting
situations to invest in. Thank you for your interest in our new, more
conservative equity fund.
Sincerely,
/s/ Albert O. Nicholas
Albert O. Nicholas
President
Schedule of Investments
March 31, 1995
<TABLE>
<CAPTION>
Shares or Quoted
Principal Market
Amount Value
_________ ____________
(Note 1 (a))
<S> <C>
COMMON STOCKS - 55.5%
Banks and Finance - 12.7%
30,000 Bando McGlocklin Capital Corporation $ 382,500
30,000 Cole Taylor Financial Group, Inc. 562,500
4,800 First Bank System, Inc. 193,800
11,800 Firstar Corporation 348,100
__________
1,486,900
__________
Consumer Products and Services - 10.7%
8,000 Eastman Kodak Company 425,000
7,000 Kiddie Products, Inc. 122,500
11,000 Marcus Corporation (The) 298,375
13,000 Sturm, Ruger & Company, Inc. 414,375
__________
1,260,250
__________
Energy - 2.8%
5,000 Exxon Corporation 333,750
__________
Health Care - 6.8%
4,000 American Home Products Corporation 285,000
3,200 Bristol-Myers Squibb Company 201,600
4,000 Warner-Lambert Company 313,000
__________
799,600
__________
Industrial Products - 2.0%
12,000 RPM, Inc. 238,500
__________
Insurance - 6.9%
1,000 Hartford Steam Boiler Inspection
and Insurance Company 43,000
11,000 Torchmark Corporation 456,500
8,000 United Wisconsin Services, Inc. 315,000
__________
814,500
__________
Real Estate - 5.3%
20,000 Equity Inns, Inc. 212,500
16,000 National Health Investors, Inc. 404,000
__________
616,500
__________
Utilities - 3.6%
10,200 Ameritech Corporation 420,750
__________
Miscellaneous - 4.7%
30,000 Landauer, Inc. 547,500
__________
TOTAL COMMON STOCKS
(cost $6,068,376) 6,518,250
__________
Shares or Quoted
Principal Market
Amount Value
_________ ____________
(Note 1 (a))
NON-CONVERTIBLE BONDS - 26.3%
Finance and Insurance - 8.4%
$300,000 Ford Motor Credit Company,
5.625%, 12/15/98 $ 281,518
300,000 NationsBank Corporation,
5.125%, 9/15/98 278,251
200,000 Norwest Corporation,
6.00%, 3/15/00 187,576
250,000 Smith Barney Holdings, Inc.,
5.625%, 11/15/98 233,789
__________
981,134
__________
Food and Beverage - 1.6%
200,000 PepsiCo, Inc.,
6.25%, 9/1/99 191,381
__________
Retail Trade - 1.6%
200,000 Penney (J.C.) Company, Inc.,
5.375%, 11/15/98 187,996
__________
United States Securities - 10.1%
400,000 U. S. Treasury Note,
6.00%, 6/30/96 396,874
400,000 U. S. Treasury Note,
7.25%, 11/30/96 403,000
400,000 U. S. Treasury Note,
5.75%, 10/31/97 389,500
__________
1,189,374
__________
Utilities - 4.6%
300,000 Commonwealth Edison Company,
7.00%, 2/1/97 297,382
250,000 United Illuminating Company (The),
7.00%, 1/15/97 246,535
__________
543,917
__________
TOTAL NON-CONVERTIBLE BONDS
(cost $3,176,855) 3,093,802
__________
CONVERTIBLE BONDS - 6.2%
Health Care - 6.2%
400,000 Pacific Physician Services, Inc.,
5.50%, 12/15/03 311,000
300,000 Vencor, Inc.,
6.00%, 10/1/02 420,750
__________
TOTAL CONVERTIBLE BONDS
(cost $623,000) 731,750
__________
Shares or Quoted
Principal Market
Amount Value
_________ ____________
(Note 1 (a))
SHORT-TERM INVESTMENTS - 11.3%
Commercial Paper - 10.4%
$200,000 FIserv, Inc.,
6.15%, due April 3, 1995 $ 200,000
200,000 Johnson Worldwide Associates, Inc.,
6.15%, due April 10, 1995 199,761
250,000 Badger Meter, Inc.,
6.15%, due April 26, 1995 249,018
250,000 Manpower International, Inc.,
6.25%, due May 5, 1995 248,611
325,000 Mosinee Paper Corporation,
6.25%, due May 22, 1995 322,235
__________
1,219,625
__________
Shares or Quoted
Principal Market
Amount Value
_________ ____________
(Note 1 (a))
Variable Demand Notes - 0.9%
$103,500 Pitney Bowes Credit Corporation,
5.73%, due April 3, 1995 $ 103,500
__________
TOTAL SHORT-TERM INVESTMENTS
(cost $1,318,123) 1,323,125
__________
TOTAL INVESTMENTS 11,666,927
__________
CASH AND RECEIVABLES,
NET OF LIABILITIES - 0.7% 83,291
__________
TOTAL NET ASSETS
(Basis of percentages
disclosed above) $ 11,750,218
__________
__________
</TABLE>
<TABLE>
<S> <C>
Statement of Assets and Liabilities
March 31, 1995
ASSETS:
Investments in securities at market value (cost $11,186,354) (Note 1 (a)) $11,666,927
Cash 23,145
Receivables -
Dividends and interest 96,357
__________
Total assets 11,786,429
__________
LIABILITIES:
Payables -
Investment securities purchased 19,000
Management fee (Note 2) 7,375
Other payables and accrued expenses 9,836
__________
Total liabilities 36,211
__________
Total net assets $11,750,218
__________
__________
NET ASSETS CONSIST OF:
Fund shares issued and outstanding $11,232,814
Net unrealized appreciation on investments (Note 3) 475,571
Accumulated net realized losses on investments (40,819)
Accumulated undistributed net investment income 82,652
__________
$11,750,218
__________
__________
NET ASSET VALUE PER SHARE ($.0001 par value, 500,000,000 shares authorized),
offering price and redemption price ($11,750,218 ./. 1,112,994 shares
outstanding) $10.56
______
______
</TABLE>
<TABLE>
<S> <C>
Statement of Operations
For the year ended March 31, 1995
INCOME:
Interest $250,683
Dividends 237,158
________
487,841
________
EXPENSES:
Management fee (Note 2) 67,554
Legal fees 33,413
Registration fees 31,831
Audit and tax consulting fees 9,800
Transfer agent fees 9,240
Custodian fees 4,070
Directors' fees 3,600
Printing 2,538
Postage 2,500
Pricing service fees 1,123
Other operating expenses 1,230
________
166,899
________
Net investment income 320,942
________
NET REALIZED LOSSES ON INVESTMENTS (Note 1 (b)) (40,819)
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 512,364
________
Net gains on investments 471,545
________
Net increase in net assets resulting from operations $792,487
________
________
</TABLE>
<TABLE>
<S> <C> <C>
Statements of Changes in Net Assets
For the periods ended March 31, 1995 and 1994
1995 1994*
__________ __________
OPERATIONS:
Net investment income $ 320,942 $ 31,770
Net realized losses on investments (Note 1 (b)) (40,819) _
Net increase (decrease) in unrealized appreciation on investments
512,364 (36,793)
__________ _________
Net increase (decrease) in net assets resulting from operations
792,487 (5,023)
__________ _________
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income ($0.2810 and $0.0133
per share, respectively) (267,262) (2,798)
__________ _________
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued (672,575 and 582,326 shares, respectively)
6,267,369 5,853,143
Net asset value of shares issued in distributions from net investment
income (25,222 and 276 shares, respectively) 255,411 2,752
Cost of shares redeemed (159,402 and 8,003 shares, respectively)
(1,068,273) (77,588)
__________ _________
Increase in net assets derived from capital share transactions
5,454,507 5,778,307
__________ _________
Total increase in net assets 5,979,732 5,770,486
__________ _________
NET ASSETS, at the beginning of the year (including undistributed net investment
income of $28,972 and $0, respectively) 5,770,486 _
__________ _________
NET ASSETS, at the end of the year (including undistributed net investment
income of $82,652 and $28,972, respectively) $11,750,218 $5,770,486
__________ _________
__________ _________
</TABLE>
*For the period from November 23, 1993 (date of initial public offering)
through March 31, 1994.
The accompanying notes to financial statements are an integral part of these
statements.
<TABLE>
<CAPTION>
Financial Highlights
(For a share outstanding throughout the period)
Period Ended March 31,
_____________________
1995 1994***
_______ ________
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $10.04 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .30 .06
Net gains or (losses) on securities (realized and unrealized) .50 (.01)
______ ______
Total from investment operations .80 .05
______ ______
LESS DISTRIBUTIONS:
Dividends (from net investment income) (.28) (.01)
______ ______
NET ASSET VALUE, END OF YEAR $10.56 $10.04
______ ______
______ ______
TOTAL RETURN 8.13% .53%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions) $11.8 $5.8
Ratio of expenses to average net assets 1.73% 1.70%*
Ratio of net investment income to average net assets 3.32% 2.53%*
Portfolio turnover rate 10.98% 0%
* Annualized
** Not annualized
*** For the period from November 23, 1993 (date of initial public offering)
through March 31, 1994.
</TABLE>
Notes to Financial Statements
March 31, 1995
(1) Summary of Significant Accounting Policies -
The following is a summary of the significant accounting policies of
Nicholas Equity Income Fund, Inc. (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 latest bid price. Market values of
most debt securities are based on valuations provided by a pricing
service, which determines valuations for normal, institutional-size
trading units of securities using market information, transactions
for comparable securities and various other relationships between
securities which are generally recognized by institutional traders.
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. As of March 31, 1995, the Fund has a capital
loss carry forward of approximately $41,000 expiring in 2003.
(d) Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Non-cash dividends, if any, are recorded at
fair market value on date of distribution.
(2) Investment Adviser and Management Agreement -
The Fund has an agreement with Nicholas Company, Inc. (with whom
certain officers and directors of the Fund are affiliated) to serve as
investment adviser and manager. Under the terms of the agreement, a
monthly fee is paid to the investment adviser based on approximately
1/17th of 1% (.70 of 1% on an annual basis) of the average net asset
value up to and including $50 million, and 1/20th of 1% (.60 of 1% on
an annual basis) of the average net asset value in excess of $50
million. Also, the investment adviser may be reimbursed for clerical
and administrative services rendered by its personnel. The advisory
agreement is subject to an annual review by the Directors of the Fund.
(3) Net Unrealized Appreciation -
Aggregate gross unrealized appreciation (depreciation) as of March 31,
1995, based on investment cost for Federal tax purposes is as follows:
Aggregate gross unrealized appreciation on investments $686,910
Aggregate gross unrealized depreciation on investments (211,339)
________
Net unrealized appreciation $475,571
________
________
(4) Investment Transactions -
For the year ended March 31, 1995, the cost of purchases and the
proceeds from sales of investments, other than short-term obligations,
aggregated $6,391,070 and $878,076, respectively.
Report of Independent Public Accountants
To the Shareholders and Board of Directors
of Nicholas Equity Income Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of
NICHOLAS EQUITY INCOME FUND, INC. (a Maryland corporation), including the
schedule of investments, as of March 31, 1995, and the related statement of
operations for the year then ended, the statements of changes in net assets
for the year ended March 31, 1995 and the period from November 23, 1993
(date of initial public offering) through March 31, 1994, and the
financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audit 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 March 31, 1995, by correspondence with the custodian
and brokers. As to securities purchased but not yet received as of year end,
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 Equity Income Fund, Inc. as of March 31, 1995, and the results of
its operations for the year then ended, the changes in its net assets for the
year ended March 31, 1995, and for the period from November 23, 1993 (date of
initial public offering) through March 31, 1994, and the financial highlights
for the periods presented in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
April 28, 1995.
<TABLE>
<CAPTION>
Historical Record (unaudited)
Dollar Growth of
Net Dividend Capital Gain Weighted An Initial
Asset Value Distributions Distributions Price/Earnings $10,000
Per Share Per Share Per Share Ratio** Investment***
___________ ____________ _____________ ______________ _____________
<S> <C> <C> <C> <C> <C>
November 23, 1993* $10.00 $ - $ - _ $10,000
December 31, 1993 9.98 .0133 - 16.0 times 9,993
March 31, 1994 10.04 - - 14.4 10,053
June 30, 1994 10.05 .0450 - 14.7 10,108
September 30, 1994 10.40 .0780 (a) - 14.3 10,541
December 31, 1994 10.11 .1580 (b) - 13.9 10,407
March 31, 1995 10.56 - - 14.6 10,871
</TABLE>
<TABLE>
<S> <C>
* Date of Initial Public Offering (a) Paid August 2, 1994 to shareholders of
record July 29, 1994.
** Based on latest 12 months accomplished earnings
(b) Paid $0.065 October 25, 1994 to
*** Assuming reinvestment of all distributions shareholders of record October 21, 1994.
Range in price/earnings ratios Paid $0.093 December 31, 1994 to
shareholders of record December 29, 1994.
High 19.5 Low 13.3
January 3, 1994 December 8, 1994
</TABLE>
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
LYNN S. NICHOLAS
Senior Vice President
DAVID O. NICHOLAS
Senior Vice President
CANDACE L. LESAK
Vice President
JEFFREY T. MAY
Vice President
CHERYL L. KING
Treasurer
Custodian and Transfer Agent
FIRSTAR TRUST COMPANY
Milwaukee
(414) 276-0535
Counsel
MICHAEL, BEST & FRIEDRICH
Milwaukee
Auditors
ARTHUR ANDERSEN LLP
Milwaukee
This report is submitted for the information of shareholders of the Fund. It
is not authorized for distribution to prospective investors unless preceded
or accompanied by an effective prospectus.
ANNUAL REPORT
NICHOLAS
EQUITY INCOME
FUND, INC.
700 North
Water Street
Milwaukee,
Wisconsin 53202
March 31, 1995
July 21, 1995
Nicholas Equity Income Fund, Inc.
700 North Water Street
Suite 1010
Milwaukee, Wisconsin 53202
Gentlemen:
We have acted as counsel to Nicholas Equity Income Fund, Inc.
(The "Fund"), a corporation organized under the laws of the State
of Maryland, in connection with the preparation and filing of
a registration statement on Form N-1A and amendments thereto
("Registration Statement"), relating to the registration of these
shares of common stock of the Fund ("Common Stock") under the
securities Act of 1933, as amended.
We have reviewed the Articles of Incorporation and By-Laws of the
Fund and the Registration Statement; we also have examined such
other corporate records, certified documents and other documents
as we deem necessary for the purposes of this opinion and we have
considered such questions of law as we believe to be involved. We
have assumed without independant verification of the genuiness of
signatures and to the conformity with originals of all documents
submitted to us as copies. Based upon the foregoing, we are of the
opinion that:
1. The Fund is validly organized under the laws of the State
of Maryland, and has the corporate power to carry on its present
business and is duly authorized to own its properties and conduct
its business in those states where such authorization is presently
required.
2. The Fund is authorized to issue up to five hundred million
(500,000,000) shares of Common Stock, par value $.0001 per share,
including those shares currently issued and outstanding.
3. The shares of Common Stock of the Fund to be offered for
sale pursuant to the Registration Statement have been duly authorized
and, upon the effectiveness of Post Effective Amendment No. 2 to
the Registration Statement and compliance with applicable federal
and state securities laws and regulations, when sold, issued
(within the limits authorized under the Articles of Incorporation of
the Fund) and paid for as contemplated in the Registration Statement,
such shares will have benn validly and legally issued, fully paid and
non-assessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the prospectus
comprising Part A and elsewhere in the Registration Statement.
Very truly yours,
/s/ David E Leichtfuss
----------------------------------
David E Leichtfuss
MICHAEL BEST & FRIEDRICH
DEL/ljg
<TABLE>
<CAPTION>
Compound and Total Return Calculation NICHOLAS EQUITY INCOME FUND 03/31/94 THRU 03/31/95
Starting date: 03/31/94 future value 1,081.29
Ending date: 03/31/95 present valu 1,000.00
Total Return 8.1287% # years 1
Average annual return 8.1287% # days 365.00
Investment Redemption
Lump sum Lump sum
Annuity Annuity
PRICE INV INC CAP GAIN # of SHARES REINVESTED REINVESTED CUM TOTAL
DATE /SHARE /SHARE /SHARE INVEST PURCHASED INV INC CAP GAIN SHARES MARKET VALUE
----------- ------------- ----------- ----------- ------------- ---------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
03/31/94 Q 10.04 1000 99.602 99.602 $1,000.00
04/30/94 D 10.07 0.0450 0.445 100.047 $1,007.47
05/31/94 M 10.14 100.047 $1,014.47
06/30/94 S 10.05 100.047 $1,005.47
07/31/94 D 10.09 0.0780 0.773 100.820 $1,017.27
08/31/94 M 10.27 100.820 $1,035.42
09/30/94 Q 10.40 100.820 $1,048.53
10/21/94 D 10.28 0.0650 0.637 101.458 $1,042.98
10/31/94 M 10.25 101.458 $1,039.94
11/30/94 M 10.05 101.458 $1,019.65
12/29/94 D 10.07 0.0930 0.937 102.395 $1,031.11
12/31/94 A 10.11 102.395 $1,035.21
01/31/95 M 10.19 102.395 $1,043.40
02/28/95 M 10.37 102.395 $1,061.83
03/31/95 Q 10.56 102.395 $1,081.29
</TABLE>
<PAGE>
<TABLE>
<CAPTION> Compound and Total Return Calculation NICHOLAS EQUITY INCOME FUND 11/23/93 THRU 03/31/95
Starting date: 11/23/93 future value 1,087.06
Ending date: 03/31/95 present valu 1,000.00
Total Return 8.7060% # years 1.3506849315
Average annual return 6.3753% # days 493.00
Investment Redemption
Lump sum Lump sum
Annuity Annuity
PRICE INV INC CAP GAIN # of SHARES REINVESTED REINVESTED CUM TOTAL
DATE /SHARE /SHARE /SHARE INVEST PURCHASED INV INC CAP GAIN SHARES MARKET VALUE
----------- ------------- ----------- ----------- ------------- ---------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
11/23/93 D 10.00 1000 100.000 100.000 $1,000.00
11/30/93 M 9.98 100.000 $998.00
12/30/93 D 9.97 0.0133 0.133 100.133 $998.33
12/31/93 A 9.98 100.133 $999.33
01/31/94 M 10.14 100.133 $1,015.35
02/28/94 M 10.18 100.133 $1,019.36
05/31/94 M 10.14 100.581 $1,019.89
06/30/94 S 10.05 100.581 $1,010.84
07/31/94 D 10.09 0.0780 0.778 101.358 $1,022.71
08/31/94 M 10.27 101.358 $1,040.95
09/30/94 Q 10.40 101.358 $1,054.13
10/21/94 D 10.28 0.0650 0.641 101.999 $1,048.55
10/31/94 M 10.25 101.999 $1,045.49
11/30/94 M 10.05 101.999 $1,025.09
12/29/94 D 10.07 0.0930 0.942 102.941 $1,036.62
12/31/94 A 10.11 102.941 $1,040.74
01/31/95 M 10.19 102.941 $1,048.97
02/28/95 M 10.37 102.941 $1,067.50
03/31/95 Q 10.56 102.941 $1,087.06
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1994
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 11,186,354
<INVESTMENTS-AT-VALUE> 11,666,927
<RECEIVABLES> 96,357
<ASSETS-OTHER> 23,145
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,786,429
<PAYABLE-FOR-SECURITIES> 19,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,211
<TOTAL-LIABILITIES> 36,211
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,232,814
<SHARES-COMMON-STOCK> 1,112,994
<SHARES-COMMON-PRIOR> 574,599
<ACCUMULATED-NII-CURRENT> 82,652
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (40,819)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 475,571
<NET-ASSETS> 11,750,218
<DIVIDEND-INCOME> 237,158
<INTEREST-INCOME> 250,683
<OTHER-INCOME> 0
<EXPENSES-NET> 166,899
<NET-INVESTMENT-INCOME> 320,942
<REALIZED-GAINS-CURRENT> (40,819)
<APPREC-INCREASE-CURRENT> 512,364
<NET-CHANGE-FROM-OPS> 792,487
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 267,262
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 672,575
<NUMBER-OF-SHARES-REDEEMED> 159,402
<SHARES-REINVESTED> 25,222
<NET-CHANGE-IN-ASSETS> 5,979,732
<ACCUMULATED-NII-PRIOR> 28,972
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 67,554
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 166,899
<AVERAGE-NET-ASSETS> 9,670,204
<PER-SHARE-NAV-BEGIN> 10.04
<PER-SHARE-NII> 0.30
<PER-SHARE-GAIN-APPREC> 0.50
<PER-SHARE-DIVIDEND> 0.28
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.56
<EXPENSE-RATIO> 1.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
