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
