November 28, 1995
Report to Fellow Shareholders:
Nicholas Equity Income Fund completed its fiscal year ended September 30, 1995
with total net assets of $13.9 million. Net asset value per share was $11.27,
and the Fund's cash position was 4%. 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>
Six Month One Year Total
Total Return* Return*
Through 9/30/95 Through 9/30/95
______________ ______________
<S> <C> <C>
Nicholas Equity Income Fund
(distributions reinvested) + 8.31% +11.70%
Standard and Poor's 500
(income reinvested) +18.23% +29.71%
Lehman Brothers Intermediate
Corp Bond Index
(includes income) + 8.54% +14.04%
Inflation (CPI) + 1.26% + 2.54%
</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 (1.85 years)
is +9.22%
As of September 30, the Fund was invested approximately 73% in
stock and convertible bonds, 23% in regular bonds and the remainder in
cash equivalents. It is management's goal to produce a cash distribution rate
of approximately 3% 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. However, we still favor
above-average growth companies.
The strongly rising stock market concerns management, but has not
altered our "stock picking" style. We continue to find interesting situations
to invest in. Thank you for your interest in our more conservative equity
income fund.
Sincerely,
Albert O. Nicholas
President
<PAGE>
Schedule of Investments
September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
Shares or Quoted
Principal Market
Amount Value
________ ___________
(Note 1 (a))
<S> <C>
COMMON STOCKS - 57.7%
Banks and Finance - 18.4%
50,000 Bando McGlocklin Capital Corporation $ 612,500
10,000 First Bank System, Inc. 481,250
20,000 First Merchants Acceptance Corporation 525,000
11,800 Firstar Corporation 438,075
12,000 MBNA Corporation 499,500
_________
2,556,325
_________
Consumer Products and Services - 8.1%
8,000 Eastman Kodak Company 474,000
21,000 Sturm, Ruger & Company, Inc. 656,250
_________
1,130,250
_________
Health Care - 9.6%
4,000 American Home Products Corporation 339,500
30,000 Charter Medical Corporation 615,000
4,000 Warner-Lambert Company 381,000
_________
1,335,500
_________
Industrial Products and Services - 5.8%
14,000 General Motors Corporation - Class H 574,000
12,000 RPM, Inc. 238,500
_________
812,500
_________
Insurance - 3.3%
11,000 Torchmark Corporation 463,375
_________
Real Estate - 3.5%
16,000 National Health Investors, Inc. 484,000
_________
Retail Trade - 1.1%
12,000 Shopko Stores, Inc. 148,500
_________
Utilities - 3.8%
10,200 Ameritech Corporation 531,675
_________
Miscellaneous - 4.1%
30,000 Landauer, Inc. 570,000
_________
TOTAL COMMON STOCKS
(cost $6,882,302) 8,032,125
_________
</TABLE>
<TABLE>
<CAPTION>
Shares or Quoted
Principal Market
Amount Value
_________ ___________
(Note 1 (a))
<S> <C>
PREFERRED CONVERTIBLE STOCK - 3.0%
Consumer Products and Services - 3.0%
5,000 Alco Standard Corporation - Class B $ 421,250
_________
TOTAL CONVERTIBLE PREFERRED STOCK
(cost $386,875) 421,250
_________
NON-CONVERTIBLE BONDS - 22.8%
Finance and Insurance - 7.3%
$300,000 Ford Motor Credit Company,
5.625%, 12/15/98 293,943
300,000 NationsBank Corporation,
5.125%, 9/15/98 290,454
200,000 Norwest Corporation,
6.00%, 3/15/00 196,489
250,000 Smith Barney Holdings, Inc.,
5.625%, 11/15/98 244,338
_________
1,025,224
_________
Food and Beverage - 1.4%
200,000 PepsiCo, Inc.,
6.25%, 9/1/99 199,551
_________
Retail Trade - 1.4%
200,000 Penney (J.C.) Company, Inc.,
5.375%, 11/15/98 194,931
_________
United States Securities - 8.7%
400,000 U. S. Treasury Note,
6.00%, 6/30/96 400,875
400,000 U. S. Treasury Note,
7.25%, 11/30/96 406,500
400,000 U. S. Treasury Note,
5.75%, 10/31/97 399,500
_________
1,206,875
_________
Utilities - 4.0%
300,000 Commonwealth Edison Company,
7.00%, 2/1/97 301,764
250,000 United Illuminating Company (The),
7.00%, 1/15/97 250,502
_________
552,266
_________
TOTAL NON-CONVERTIBLE BONDS
(cost $3,176,855) 3,178,847
_________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Shares or Quoted
Principal Market
Amount Value
_________ ___________
(Note 1 (a))
<S> <C>
CONVERTIBLE BONDS - 12.4%
Health Care - 8.4%
$700,000 Pacific Physician Services, Inc.,
5.50%, 12/15/03 $ 608,125
450,000 Vencor, Inc.,
6.00%, 10/1/02 571,500
__________
1,179,625
__________
Miscellaneous - 4.0%
500,000 Leucadia National Corp.
5.25%, 2/1/03 552,500
__________
TOTAL CONVERTIBLE BONDS
(cost $1,597,900) 1,732,125
__________
SHORT-TERM INVESTMENTS - 3.5%
Commercial Paper - 2.5%
100,000 Quad/Graphics, Inc.
5.95%, due October 3, 1995 99,984
250,000 Mosinee Paper Corporation
5.90%, due October 11, 1995 249,631
__________
349,615
__________
</TABLE>
<TABLE>
<CAPTION>
Shares or Quoted
Principal Market
Amount Value
_________ ___________
(Note 1 (a))
<S> <C>
Variable Demand Notes - 1.0%
$136,250 Sara Lee Corporation
5.45%, due October 2, 1995 $ 136,250
2,800 Wisconsin Electric Power Company
5.51%, due October 2, 1995 2,800
__________
139,050
__________
TOTAL SHORT-TERM INVESTMENTS
(cost $488,180) 488,665
__________
TOTAL INVESTMENTS 13,853,012
__________
CASH AND RECEIVABLES,
NET OF LIABILITIES - 0.6% 73,739
__________
TOTAL NET ASSETS
(Basis of percentages
disclosed above) $13,926,751
__________
__________
The accompanying notes to financial statements are an integral part of this
schedule.
Historical Record (unaudited)
</TABLE>
<TABLE>
<CAPTION>
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
March 31, 1994 10.04 .0133 -- 14.4 times 10,053
March 31, 1995 10.56 .2810 -- 14.6 10,871
June 30, 1995 10.58 .0750 (a) -- 14.2 10,970
September 30, 1995 11.27 .0810 (b) -- 15.7 11,774
* Date of Initial Public Offering (a) Paid May 3, 1995 to shareholders
** Based on latest 12 months accomplished earnings of record April 28, 1995.
*** Assuming reinvestment of all distributions (b) Paid July 26, 1995 to shareholders
of record July 21, 1995.
</TABLE>
<PAGE>
Statement of Assets and Liabilities
September 30, 1995 (unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value (cost $12,532,112) (Note 1 (a)) $13,853,012
Cash 3,521
Receivables -
Dividends and interest 111,177
__________
Total assets 13,967,710
__________
LIABILITIES:
Payables -
Investment securities purchased 2,800
Management fee (Note 2) 8,287
Other payables and accrued expenses 29,872
__________
Total liabilities 40,959
__________
Total net assets $13,926,751
__________
__________
NET ASSETS CONSIST OF:
Fund shares issued and outstanding $12,508,523
Net unrealized appreciation on investments (Note 3) 1,320,415
Accumulated net realized losses on investments (11,867)
Accumulated undistributed net investment income 109,680
__________
$13,926,751
__________
__________
NET ASSET VALUE PER SHARE ($.0001 par value, 500,000,000 shares authorized),
offering price and redemption price ($13,926,751 ./. 1,235,540 shares outstanding) $11.27
______
______
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
<PAGE>
Statement of Operations
For the six months ended September 30, 1995 (unaudited)
<TABLE>
<S> <C>
INCOME:
Interest $ 165,511
Dividends 154,400 154,400
_________
319,911
_________
EXPENSES:
Management fee (Note 2) 46,003
Legal fees 19,657
Registration fees 18,806
Audit and tax consulting fees 5,610
Transfer agent fees 3,515
Postage 3,445
Printing 2,947
Custodian fees 2,807
Directors' fees 1,800
Pricing service fees 1,269
Other operating expenses 204
_________
106,063
_________
Net investment income 213,848
_________
NET REALIZED GAINS ON INVESTMENTS (Note 1 (b)) 28,951
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 844,844
_________
Net gains on investments 873,795
_________
Net increase in net assets resulting from operations $1,087,643
_________
_________
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
<PAGE>
Statements of Changes in Net Assets
For the six months ended September 30, 1995 (unaudited) and the year ended
March 31, 1995
<TABLE>
<CAPTION>
<S>
Six Months
Ended 9/30/95
(unaudited) 1995
_____________ _________
<S> <C>
OPERATIONS:
Net investment income $ 213,848 $ 320,942
Net realized gains (losses) investments (Note 1 (b)) 28,951 (40,819)
Net increase in unrealized appreciation on investments 844,844 512,364
__________ __________
Net increase in net assets resulting from operations 1,087,643 792,487
__________ __________
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income ($0.156 and $0.2810 per share, respectively) (186,820) (267,262)
__________ __________
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued (189,365 and 672,575 shares, respectively) 1,994,573 6,267,369
Net asset value of shares issued in distributions
from net investment income (17,048 and 25,222 shares, respectively) 179,331 255,411
Cost of shares redeemed (83,867 and 159,402 shares, respectively) (898,194) (1,068,273)
__________ __________
Increase in net assets derived from capital share transactions 1,275,710 5,454,507
__________ __________
Total increase in net assets 2,176,533 5,979,732
__________ __________
NET ASSETS, at the beginning of the period (including undistributed net
investment income of $82,652 and $28,972, respectively) 11,750,218 5,770,486
__________ __________
NET ASSETS, at the end of the period (including undistributed net investment
income of $109,680 and $82,652, respectively) $13,926,751 $11,750,218
__________ __________
__________ __________
</TABLE>
Financial Highlights
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Six Months Year Ended March 31,
Ended 9/30/95 _____________________
(unaudited) 1995 1994***
_____________ _________ _________
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.56 $10.04 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .17 .30 .06
Net gains or (losses) on securities
(realized and unrealized) .70 .50 (.01)
______ ______ ______
Total from investment operations .87 .80 .05
______ ______ ______
LESS DISTRIBUTIONS:
Dividends (from net investment income) (.16) (.28) (.01)
NET ASSET VALUE, END OF PERIOD $11.27 $10.56 $10.04
______ ______ ______
______ ______ ______
TOTAL RETURN 8.31%** 8.13% .53%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $13.9 $11.8 $5.8
Ratio of expenses to average net assets 1.60%* 1.73% 1.70%*
Ratio of net investment income to average net assets 3.24%* 3.32% 2.53%*
Portfolio turnover rate 47.79%* 10.98% 0%
</TABLE>
* Annualized
** Notannualized
*** 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.
<PAGE>
Notes to Financial Statements
September 30, 1995 (unaudited)
(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 and bonds were
computed on the basis of specific certificates.
(c) Provision has not been made for Federal income taxes or excise taxes
since the Fund has elected to be taxed as a "regulated investment
company" and intends to distribute substantially all taxable income
to its shareholders and otherwise comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies.
As of September 30, 1995, the Fund has a capital loss carryforward 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 September 30,
1995, based on investment cost for Federal tax purposes is as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized appreciation on investments $1,424,362
Aggregate gross unrealized depreciation on investments (103,947)
_________
Net unrealized appreciation $1,320,415
_________
_________
</TABLE>
(4) Investment Transactions -
For the period ended September 30, 1995, the cost of purchases and the
proceeds from sales of investments, other than short-term obligations,
aggregated $5,004,423 and $2,857,674, respectively.
<PAGE>
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.
SEMIANNUAL REPORT
NICHOLAS
EQUITY INCOME
FUND, INC.
700 North
Water Street
Milwaukee,
Wisconsin 53202
September 30, 1995
