February 28, 1997
Report to Fellow Shareholders:
Reflecting the conservative nature and style of
Nicholas Equity Income Fund, total return for 1996 was
15.90%, with distributions reinvested. Net assets at
December 31, 1996, were $20.6 million, and the net asset
value per share was $12.27. The table below compares the
Nicholas Equity Income Fund with the Standard and Poor's 500
stock index and the Lehman Brothers Intermediate Corporate
Bond Index for the time period ended December 31, 1996.
One Year Total Return
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Nicholas Equity Income Fund
(Distributions Reinvested) +15.90%
Standard & Poor's 500 Index
(Income Reinvested) +22.95%
Lehman Brothers Intermediate
Corporate Bond Index
(Includes Income) +3.97%
*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,
share price, yield and return will fluctuate so an
investment, when redeemed, may be worth more or
less than original cost. Since inception on
November 23, 1993, the average annual total return
of the Fund is 11.80%. For the nine months ended
December 31, 1996, the adviser absorbed expenses
of approximately 0.28%. Otherwise, the yield
would have been 3.52% and returns would have been
lower.
To repeat our goals for Nicholas Equity Income Fund,
management plans to produce a dividend yield in excess of
what the S&P 500 returns (currently 1.9%) through investment
in a diversified list of bonds and stocks. As of December
31, the 30-day annualized yield was 3.80%*. At the same
time, with a majority of portfolio assets in equities, we
hope to accrue a reasonable amount of capital appreciation.
At year-end, approximately 9% of assets were in cash, 10% in
bonds and 81% in stocks and convertible securities. With
this portfolio alignment we expect less volatility in share
price than with our growth funds.
Effective February 12, 1996, Nicholas Company, Inc.,
the adviser to the Fund, decided to absorb expenses in
excess of 0.90% of average net assets. This decision should
place the Fund's expense ratio more in line with our other
funds and significantly below the average of all the funds
in the equity income fund category
Thank you for your interest in Nicholas Equity Income
Fund.
Sincerely,
/s/ Albert O. Nicholas
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Albert O. Nicholas
President
