UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-01728
Nicholas Fund, Inc.
(Exact name of registrant as specified in charter)
700 North Water Street, Milwaukee, Wisconsin 53202
(Address of principal executive offices) (Zip code)
Albert O. Nicholas
700 North Water Street
Milwaukee, Wisconsin 53202
(Name and address of agent for service)
Registrant's telephone number, including area code: 414-272-4650
Date of fiscal year end: 03/31/2004
Date of reporting period: 03/31/2004
Item 1. Report to Stockholders.
May 2004
Report to Fellow Shareholders:
For the fiscal year ended March 31, 2004, Nicholas Fund returned 39.31%. In the first quarter of calendar 2004, the Fund was up 3.07%. In both periods the performance exceeded the Fund's benchmark, the S&P 500 Index, which increased 35.10% and 1.69%, respectively.
Returns for Nicholas Fund, Inc. and selected indices are provided in the chart below for the periods ended March 31, 2004.
Average Annual Total Return | |||||||
3 Month | 1 Year | 3 Year | 5 Year | 10 Year | 15 Year | Life * | |
Nicholas Fund, Inc. | 3.07% | 39.31% | 1.57% | (1.42)% | 9.01% | 10.03% | 11.76% |
Standard & Poor's 500 Index | 1.69% | 35.10% | 0.63% | (1.20)% | 11.68% | 11.82% | 10.97% |
Consumer Price Index | 1.24% | 1.74% | 2.08% | 2.58% | 2.44% | 2.88% | 4.81% |
Ending value of $10,000 invested in Nicholas Fund, Inc. (Distributions Reinvested) | $10,307 | $13,931 | $10,478 | $9,312 | $23,699 | $41,925 | $474,407 |
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. Investment returns and principal value will fluctuate, so that investors' shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month-end, which may be higher or lower than that cited, is available at www.nicholasfunds.com/returns.htm.
As of March 31, 2004, the Fund was fully invested in common stocks with cash representing 4.82% of assets. One of our long-held investment principles is that we tend to remain fully invested (about 5% or less cash) unless we believe the entire market is substantially overvalued or we are unable to find stocks at reasonable prices. The diversified portfolio consisted of 53 equities with concentrations in financial, healthcare and consumer discretionary companies.
The economy continues to improve, interest rates are extremely low by historic standards and core inflation seems under control. Corporate profits are running strong. We do anticipate a gradual rise in interest rates in the months ahead. This is to be expected and should not cause undue harm to stock market psychology. In general, however, our view is that stocks are somewhat high in relation to earnings.
In our opinion, the easy gains in stocks are over. From this point forward, the market outlook is less sanguine. Intelligent security analysis and adroit portfolio management will be required to achieve good results for the remaining months of 2004. Shareholders' expectations for investment returns should be reduced and not based on what was achieved in the just-completed fiscal year.
Please visit our expanded website, www.nicholasfunds.com, for account access and fund information. Thank you for your continued support.
Sincerely,
Albert O. Nicholas David O. Nicholas
Co-Portfolio Manager Co-Portfolio Manager* The life of the Fund is 34.7 years from the date of its initial public offering, July 14, 1969. Starting time period for the Standard & Poor’s 500 Index and the Consumer Price Index was June 30, 1969.
Financial Highlights (For a share outstanding throughout each period) - -----------------------------------------------------------------------------------------------------------------------
Year Ended March 31, ---------------------------------------------------------------------------------------- 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ NET ASSET VALUE, BEGINNING OF PERIOD ........ $40.37 $53.74 $54.11 $ 84.56 $85.20 $93.98 $67.11 $63.81 $52.22 $51.10 INCOME (LOSS) FROM INVESTMENT OPERATIONS Net investment income .... .09 .18 .12 .20 .39 .51 .36 .40 .57 .69 Net gain (loss) on securities (realized and unrealized) ............. 15.77 (13.39) (.26) (11.21) 5.22 (.43) 32.67 8.64 15.68 4.46 ------ ------ ------ ------- ------ ------ ------ ------ ------ ------ Total from investment operations ........... 15.86 (13.21) (.14) (11.01) 5.61 .08 33.03 9.04 16.25 5.15 ------ ------ ------ ------- ------ ------ ------ ------ ------ ------ LESS DISTRIBUTIONS From net investment income .................. (.09) (.16) (.23) (.19) (.31) (.59) (.36) (.42) (.57) (.71) From net capital gain .... -- -- -- (19.25) (5.94) (8.27) (5.80) (5.32) (4.09) (3.32) ------ ------ ------ ------- ------ ------ ------ ------ ------ ------ Total distributions ... (.09) (.16) (.23) (19.44) (6.25) (8.86) (6.16) (5.74) (4.66) (4.03) ------ ------ ------ ------- ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD .................. $56.14 $40.37 $53.74 $ 54.11 $84.56 $85.20 $93.98 $67.11 $63.81 $52.22 ------ ------ ------ ------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------- ------ ------ ------ ------ ------ ------
TOTAL RETURN ................ 39.31% (24.60)% (.25)% (16.74)% 6.75% .13% 50.98% 14.68% 32.88% 10.88%
SUPPLEMENTAL DATA: Net assets, end of period (millions)........$2,470.8 $1,985.2 $2,995.3 $3,475.0 $4,900.9 $5,619.4 $5,907.2 $3,989.5 $3,655.3 $3,004.4 Ratio of expenses to average net assets ......... .73% .75% .73% .72% .73% .71% .71% .72% .74% .77% Ratio of net investment income to average net assets ................. .17% .38% .22% .30% .46% .58% .44% .61% .87% 1.34% Portfolio turnover rate ..... 18.18% 33.36% 39.48% 40.64% 39.72% 25.04% 17.01% 15.18% 25.70% 29.82%
The accompanying notes to financial statements are an integral part of these highlights - ----------------------------------------------------------------------------------------------------------------------- Top Ten Portfolio Holdings March 31, 2004 (unaudited) - -----------------------------------------------------------------------------------------------------------------------
Percentage Name of Net Assets ---- ------------- Berkshire Hathaway Inc. - Class A ......................... 5.92% Affiliated Managers Group, Inc. ........................... 3.39% Marshall & Ilsley Corporation ............................. 3.14% Apogent Technologies Inc. ................................. 2.80% Renal Care Group, Inc. .................................... 2.69% Liberty Media Corporation - Class A ....................... 2.58% Cardinal Health, Inc. ..................................... 2.57% Kinder Morgan Management, LLC ............................. 2.56% W.R. Berkley Corporation .................................. 2.53% Washington Mutual, Inc. ................................... 2.51% ------ Total of top ten .......................................... 30.69% ------ ------
Schedule of Investments March 31, 2004 - -------------------------------------------------------------------------------
Shares or Principal Amount Value - ----------- -------------- COMMON STOCKS - 94.75% Consumer Discretionary-Hotels, Restaurants & Leisure - 3.13% 650,000 Outback Steakhouse, Inc. $ 31,655,000 540,000 Panera Bread Company * 21,016,800 650,000 Yum! Brands, Inc. * 24,693,500 -------------- 77,365,300 -------------- Consumer Discretionary-Media - 6.24% 1,037,600 Clear Channel Communications, Inc. 43,942,360 3,025,484 DIRECTV Group, Inc. (The) * 46,531,944 5,826,824 Liberty Media Corporation-Class A * 63,803,723 -------------- 154,278,027 -------------- Consumer Discretionary-Retail - 9.86% 500,000 Autozone, Inc. * 42,985,000 1,250,000 Home Depot, Inc. (The) 46,700,000 1,251,000 InterActiveCorp * 39,519,090 272,000 Kohl's Corporation * 13,145,760 1,150,000 O'Reilly Automotive, Inc. * 46,046,000 2,250,000 TJX Companies, Inc. (The) 55,260,000 -------------- 243,655,850 -------------- Consumer Staples-Food, Beverage & Tobacco - 1.75% 1,350,000 Constellation Brands, Inc.-Class A * 43,335,000 -------------- Consumer Staples- Food & Staple Retail - 3.21% 1,265,000 CVS Corporation 44,654,500 1,050,000 Walgreen Co. 34,597,500 -------------- 79,252,000 -------------- Consumer Staples-Household & Personal Products - 2.45% 1,380,900 Alberto-Culver Company 60,580,083 -------------- Financials-Banks - 7.84% 350,000 Bank Mutual Corporation 3,916,500 903,218 Fifth Third Bancorp 50,011,181 2,054,126 Marshall & Ilsley Corporation 77,666,504 1,452,000 Washington Mutual, Inc. 62,014,920 -------------- 193,609,105 -------------- Financials-Diversified - 5.70% 1,536,000 Affiliated Managers Group, Inc. + * 83,834,880 1,100,000 American Express Company 57,035,000 -------------- 140,869,880 -------------- Financials-Insurance - 14.35% 1,569 Berkshire Hathaway Inc.-Class A * 146,387,700 1,077,700 Mercury General Corporation 53,809,561 1,449,900 Protective Life Corporation 54,298,755 1,565,250 W.R. Berkley Corporation 62,422,170 330,000 WellPoint Health Networks Inc. * 37,527,600 -------------- 354,445,786 -------------- Health Care-Equipment - 7.54% 2,257,400 Apogent Technologies Inc. * 69,257,032 550,000 DENTSPLY International Inc. 24,381,500 834,000 Guidant Corporation 52,850,580 836,196 Medtronic, Inc. 39,928,359 -------------- 186,417,471 -------------- Health Care-Pharmaceuticals & Biotechnology - 7.02% 547,200 Abbott Laboratories 22,489,920 800,000 Bristol-Myers Squibb Company 19,384,000 425,000 Eli Lilly and Company 28,432,500 1,220,000 Pfizer Inc. 42,761,000 1,850,000 Schering-Plough Corporation 30,007,000 806,000 Wyeth 30,265,300 -------------- 173,339,720 -------------- Health Care-Services - 13.20% 1,321,700 Baxter International Inc. 40,827,313 921,087 Cardinal Health, Inc. 63,462,894 1,040,000 DaVita, Inc. * 49,660,000 2,472,037 Health Management Associates, Inc. 57,375,979 1,450,000 Renal Care Group, Inc. * 66,352,000 1,050,000 Universal Health Services, Inc.-Class B 48,373,500 -------------- 326,051,686 -------------- Industrials-Capital Goods - 2.96% 422,500 General Dynamics Corporation 37,741,925 600,000 Pentair, Inc. 35,400,000 -------------- 73,141,925 -------------- Industrials-Commercial Services & Supplies - 5.68% 1,300,000 Cendant Corporation 31,707,000 300,000 ChoicePoint Inc. * 11,409,000 352,350 Cintas Corporation 15,323,701 800,000 H&R Block, Inc. 40,824,000 885,000 Manpower Inc. 41,152,500 -------------- 140,416,201 -------------- Information Technology- Software & Services - 1.26% 600,000 Affiliated Computer Services, Inc. * 31,140,000 -------------- Utilities - 2.56% 1,492,672 Kinder Morgan Management, LLC 63,140,019 -------------- TOTAL COMMON STOCKS (cost $1,385,905,148) 2,341,038,053 --------------
PREFERRED STOCK - 0.43% Consumer Discretionary - Media 338,391 News Corporation Limited (The) Preferred ADR (cost $9,816,723) 10,730,378 --------------
SHORT-TERM INVESTMENTS - 4.65% Commercial Paper - 4.48% $3,250,000 Fiserv, Inc. 04/01/04, 1.40% $ 3,250,000 3,000,000 General Motors Acceptance Corporation 04/02/04, 1.22% 2,999,898 1,500,000 General Electric Capital Corporation 04/05/04, 1.03% 1,499,829 3,750,000 Fiserv, Inc. 04/06/04, 1.40% 3,749,271 3,000,000 General Electric Capital Services, Inc. 04/07/04, 1.04% 2,999,480 3,000,000 General Mills Inc. 04/07/04, 1.07% 2,999,465 2,000,000 Fiserv, Inc. 04/08/04, 1.40% 1,999,456 3,250,000 John Deere Capital Corporation 04/08/04, 1.06% 3,249,330 3,000,000 Fiserv, Inc. 04/12/04, 1.40% 2,998,717 4,500,000 Fiserv, Inc. 04/13/04, 1.40% 4,497,900 2,500,000 General Electric Capital Services, Inc. 04/14/04, 1.04% 2,499,061 4,500,000 Fiserv, Inc. 04/15/04, 1.40% 4,497,550 3,300,000 Fiserv, Inc. 04/16/04, 1.40% 3,298,075 2,500,000 Kraft Foods, Inc. 04/19/04, 1.10% 2,498,625 2,000,000 Prudential Financial, Inc. 04/19/04, 1.05% 1,998,950 3,500,000 Sears Roebuck Acceptance Corporation 04/20/04, 1.06% 3,498,042 4,000,000 General Mills Inc. 04/21/04, 1.07% 3,997,622 3,000,000 General Electric Capital Corporation 04/22/04, 1.04% 2,998,180 3,000,000 Sears Roebuck Acceptance Corporation 04/23/04, 1.07% 2,998,038 3,000,000 Prudential Financial, Inc. 04/26/04, 1.06% 2,997,792 1,000,000 Sears Roebuck Acceptance Corporation 04/27/04, 1.05% 999,242 1,500,000 Sears Roebuck Acceptance Corporation 04/27/04, 1.04% 1,498,873 4,000,000 Prudential Financial, Inc. 04/28/04, 1.04% 3,996,880 3,000,000 General Electric Capital Corporation 04/29/04, 1.03% 2,997,597 1,000,000 Fiserv, Inc. 04/30/04, 1.40% 998,872 1,000,000 Fiserv, Inc. 04/30/04, 1.40% 998,872 3,000,000 Schering-Plough Corporation 05/03/04, 1.09% 2,997,093 3,000,000 Schering-Plough Corporation 05/05/04, 1.09% 2,996,912 3,000,000 Schering-Plough Corporation 05/07/04, 1.08% 2,996,760 3,000,000 Prudential Financial, Inc. 05/11/04, 1.06% 2,996,467 1,500,000 Fiserv, Inc. 05/12/04, 1.40% 1,497,608 3,000,000 Prudential Financial, Inc. 05/13/04, 1.06% 2,996,290 2,500,000 General Mills Inc. 05/14/04, 1.06% 2,496,835 1,500,000 Marcus Corporation 05/14/04, 1.40% 1,497,492 2,000,000 General Electric Capital Corporation 05/18/04, 1.03% 1,997,310 4,500,000 Mortgage Interest Networking Trust 05/20/04, 1.04% 4,493,630 3,000,000 Kraft Foods, Inc. 05/21/04, 1.10% 2,995,417 3,750,000 Mortgage Interest Networking Trust 05/24/04, 1.03% 3,744,313 4,000,000 General Electric Capital Corporation 05/28/04, 1.02% 3,993,540 -------------- 110,715,284 -------------- Variable Rate Demand Note - 0.17% 4,164,740 U.S. Bank N.A. 04/01/04, 0.84% 4,164,740 -------------- TOTAL SHORT-TERM INVESTMENTS (cost $114,880,024) 114,880,024 -------------- TOTAL INVESTMENTS (cost $1,510,601,895) - 99.83% 2,466,648,455 -------------- OTHER ASSETS, NET OF LIABILITIES - 0.17% 4,130,833 -------------- TOTAL NET ASSETS (Basis of percentages disclosed above) - 100% $2,470,779,288 -------------- -------------- + This company is affiliated with the Fund as defined in Section 2(a)(3) of the Investment Company Act of 1940, in that the Fund holds 5% or more of its outstanding voting securities. (Note 4) * Non-income producing security.
The accompanying notes to financial statements are an integral part of this schedule.
Statement of Assets and Liabilities March 31, 2004 - -------------------------------------------------------------------------------
ASSETS Investments in securities at value - Nonaffiliated issuers (cost $1,456,855,319) - see accompanying schedule of investments ............ $2,382,813,575 Affiliated issuers (cost $53,746,576) - see accompnaying schedule of investments (Note 4) ... 83,834,880 -------------- Total investments ............................... 2,466,648,455 -------------- Receivables - Investment securities sold ........................... 4,749,313 Dividends and interest ............................... 1,149,982 Other ................................................ 25,937 -------------- Total receivables ............................... 5,925,232 -------------- Total assets .................................... 2,472,573,687 --------------
LIABILITIES Payables - Management fee ....................................... 1,365,650 Other payables and accrued expenses .................. 428,749 -------------- Total liabilities ............................... 1,794,399 -------------- Total net assets ................................ $2,470,779,288 -------------- --------------
NET ASSETS CONSIST OF Paid in capital ........................................... $1,533,184,706 Net unrealized appreciation on investments ................ 956,046,560 Accumulated net realized loss on investments .............. (19,026,035) Accumulated undistributed net investment income ........... 574,057 -------------- Total net assets ................................ $2,470,779,288 -------------- --------------
NET ASSET VALUE PER SHARE ($.50 par value, 200,000,000 shares authorized), offering price and redemption price ($2,470,779,288 / 44,014,309 shares outstanding) ............. $56.14 ------ ------
The accompanying notes to financial statements are an integral part of this statement. Statement of Operations For the year ended March 31, 2004 - -------------------------------------------------------------------------------
INCOME Dividend .................................................. $ 19,736,832 Interest .................................................. 1,232,362 ------------ Total income ......................................... 20,969,194 ------------
EXPENSES Management fee ............................................ 15,198,627 Transfer agent fees ....................................... 1,268,542 Postage and mailing ....................................... 271,849 Custodian fees ............................................ 117,985 Printing .................................................. 76,939 Registration fees ......................................... 35,876 Insurance ................................................. 27,028 Audit and tax fees ........................................ 23,000 Legal fees ................................................ 12,553 Directors' fees ........................................... 10,000 Accounting system and pricing service fees ................ 9,724 Other operating expenses .................................. 17,443 ------------ Total expenses ....................................... 17,069,566 ------------ Net investment income ................................ 3,899,628 ------------
NET REALIZED GAIN ON INVESTMENTS .............................. 84,786,641 ------------
CHANGE IN NET UNREALIZED APPRECIATION ON INVESTMENTS .......... 657,684,626 ------------ Net realized and unrealized gain on investments ........... 742,471,267 ------------ Net increase in net assets resulting from operations ...... $746,370,895 ------------ ------------
The accompanying notes to financial statements are an integral part of this statement. Statements of Changes in Net Assets For the years ended March 31, 2004 and 2003 - ------------------------------------------------------------------------------- 2004 2003 -------------- --------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income ................ $ 3,899,628 $ 8,827,463 Net realized gain (loss) on investments ...................... 84,786,641 (47,165,843) Change in net unrealized appreciation on investments ......... 657,684,626 (664,886,891) --------------- --------------- Net increase (decrease) in net assets resulting from operations ..................... 746,370,895 (703,225,271) -------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS From net investment income ........... (4,170,476) (7,982,558) -------------- ---------------
CAPITAL SHARE TRANSACTIONS Proceeds from shares issued (1,105,325 and 2,550,887 shares, respectively) ............... 54,832,132 112,416,182 Reinvestment of distributions (73,406 and 172,788 shares, respectively) ............... 3,784,110 7,257,105 Cost of shares redeemed (6,340,844 and 9,281,742 shares, respectively) ............... (315,244,116) (418,599,353) -------------- --------------- Decrease in net assets derived from capital share transactions ................... (256,627,874) (298,926,066) -------------- --------------- Total increase (decrease) in net assets ..................... 485,572,545 (1,010,133,895) -------------- ---------------
NET ASSETS Beginning of period .................. 1,985,206,743 2,995,340,638 -------------- --------------- End of period (including undistributed net investment income of $574,057 and $844,905, respectively) ....................... $2,470,779,288 $ 1,985,206,743 -------------- --------------- -------------- ---------------
The accompanying notes to financial statements are an integral part of these statements. Notes to Financial Statements March 31, 2004 - ------------------------------------------------------------------------------ (1) Summary of Significant Accounting Policies -- Nicholas Fund, Inc. (the "Fund") is organized as a Maryland corporation and is registered as an open-end, diversified management investment company under the Investment Company Act of 1940 (the "1940 Act"), as amended. The primary objective of the Fund is long-term growth. The following is a summary of the significant accounting policies of the Fund:
(a) Each equity security is valued at the last sale price reported by the principal security exchange on which the issue is traded, or if no sale is reported, the last bid price. Debt securities, excluding short-term investments, are valued at their current evaluated bid price as determined by an independent pricing service, which generates evaluations on the basis of dealer quotes for normal, institutional-sized trading units, issuer analysis, bond market activity and various other factors. Restricted securities for which market quotations may not be readily available are valued at their fair value as determined in good faith by procedures adopted by the Board of Directors. Variable rate demand notes are valued at cost, which approximates market value. U.S. Treasury Bills and commercial paper are stated at amortized cost, which approximates market value. Investment transactions are recorded no later than the first business day after the trade date.
(b) Net realized gain (loss) on portfolio securities was computed on the basis of specific identification.
(c) Dividend income is recorded on the ex-dividend date, and interest income is recognized on an accrual basis. Non-cash dividends, if any, are recorded at value on date of distribution. Dividends and distributions paid to shareholders are recorded on the ex-dividend date.
(d) 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 net investment income and net realized capital gains on sales of investments to its shareholders and otherwise comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies.
As of March 31, 2004, the Fund has a capital loss carryforward of approximately $18,044,000 which expires in 2011.
For the year ended March 31, 2004, the Fund had a tax deferral of wash loss sales of approximately $982,000.
(e) Distributions from net investment income are generally declared and paid semiannually. Distributions of net realized capital gain, if any, are declared and paid at least annually.
The amount of distributions from net investment income and net realized capital gain are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States. To the extent these book and tax differences are permanent in nature, such amounts are reclassified among paid in capital, accumulated undistributed net realized gain (loss) on investments and accumulated undistributed net investment income. Accordingly, at March 31, 2004, no reclassifications were recorded. The tax character of distributions paid during the years ended March 31 were as follows:
03/31/2004 03/31/2003 ---------- ---------- Distributions paid from: Ordinary income ............ $4,170,476 $7,982,558 ---------- ---------- ---------- ----------
For the fiscal year ended March 31, 2004, certain dividends paid by the Fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Fund intends to designate up to a maximum amount of $4,170,476 as taxed at a maximum rate of 15%. Complete information will be computed and reported in conjunction with your Form 1099-DIV.
For the year ended March 31, 2004, 100% of the dividends paid from net ordinary income qualify for the dividends received deduction available to corporate shareholders.
As of March 31, 2004, investment cost for federal tax purposes was $1,511,584,235 and the tax basis components of net assets were as follows:
Unrealized appreciation ..................... $ 991,803,248 Unrealized depreciation ..................... (36,739,028) -------------- Net unrealized appreciation ................. 955,064,220 -------------- Undistributed ordinary income ............... 574,057 Accumulated net realized capital loss ....... (18,043,695) Paid in capital ............................. 1,533,184,706 -------------- Net assets .................................. $2,470,779,288 -------------- --------------
The differences, if any, between book-basis and tax-basis unrealized appreciation (depreciation), undistributed ordinary income and accumulated net realized capital loss are attributable primarily to the tax deferral of losses from wash sales.
(f) The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from estimates.
(2) Investment Adviser and Management Agreement -- The Fund has an agreement with Nicholas Company, Inc. (with whom certain officers and directors of the Fund are affiliated) (the "Adviser") to serve as investment adviser and manager. Under the terms of the agreement, a monthly fee is paid to the Adviser based on an annualized fee of .75% of the average net asset value up to and including $50 million and .65% of the average net asset value in excess of $50 million. Also, the Adviser may be reimbursed for clerical and administrative services rendered by its personnel. No amounts were paid by the Fund for clerical and administrative services during the year ended March 31, 2004.
(3) Investment Transactions -- For the year ended March 31, 2004, the cost of purchases and the proceeds from sales of investment securities, other than short-term obligations, aggregated $403,854,788 and $720,231,856, respectively.
(4) Transactions with Affiliates - As of March 31, 2004, Affiliated Managers Group, Inc. was the only "affiliated company" as defined by the Investment Company Act of 1940. There were no purchases or sales of the security during the period. The security was non-dividend producing.
Report of Independent Auditors - -------------------------------------------------------------------------------
To the Shareholders and Board of Directors of Nicholas Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Nicholas Fund, Inc. (the "Fund"), including the schedule of investments, as of March, 31, 2004, and the related statement of operations for the year then ended and the statements of changes in net assets and financial highlights for each of two years then ended. These financial statements and financial highlights are the responsiblity of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the eight years in the period ended March 31, 2002 were audited by other auditors who have ceased operations whose report dated April 19, 2002, expressed an unqualified opinion on those statements.
We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 and financial highlights. Our procedures included confirmation of securities owned as of March, 31, 2004, by correspondence with the custodian. 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 Fund, Inc. as of March 31, 2004, and the results of its operations for the year then ended and the changes in its net assets and financial highlights for each of the two years in the period then ended in conformity with accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
Chicago, Illinois, May 10, 2004
Historical Record (unaudited) - -------------------------------------------------------------------------------------------------- Net Investment Dollar Growth of Net Income Capital Gain Weighted an Initial Asset Value Distributions Distributions Price/Earnings $10,000 Per Share Per Share Per Share Ratio ** Investment *** ----------- -------------- ------------- -------------- -------------- July, 14 1969 * ........ $ 6.59 $ -- $ -- -- $ 10,000 March 31, 1985 ......... 29.24 0.6420 1.5760 13.2 times 69,858 March 31, 1986 ......... 35.26 0.5750 0.6100 15.8 87,699 March 31, 1987 ......... 39.94 0.8820 0.1870 16.3 102,387 March 31, 1988 ......... 32.15 1.8400 4.0340 14.1 98,557 March 31, 1989 ......... 35.27 1.0250 0.4510 13.2 113,155 March 31, 1990 ......... 37.72 0.9240 1.0540 14.9 127,360 March 31, 1991 ......... 42.99 0.7900 0.2250 16.9 149,180 March 31, 1992 ......... 49.68 0.6790 0.8240 19.4 178,011 March 31, 1993 ......... 52.91 0.6790 2.0420 18.5 200,098 March 31, 1994 ......... 51.10 0.8175 1.0470 16.7 200,182 March 31, 1995 ......... 52.22 0.7070 3.3170 17.2 221,970 March 31, 1996 ......... 63.81 0.5650 4.0945 21.0 293,836 March 31, 1997 ......... 67.11 0.4179 5.3166 21.7 336,973 March 31, 1998 ......... 93.98 0.3616 5.8002 30.0 508,762 March 31, 1999 ......... 85.20 0.5880 8.2716 31.7 509,446 March 31, 2000 ......... 84.56 0.3114 5.9433 37.3 543,813 March 31, 2001 ......... 54.11 0.1900 19.2500 26.6 452,780 March 31, 2002 ......... 53.74 0.2360 -- 23.8 451,627 March 31, 2003 ......... 40.37 0.1585 -- 16.4 340,547 March 31, 2004 ......... 56.14 0.0905 (a) -- 19.4 474,406
* Date of Initial Public Offering. ** Based on latest 12 months accomplished earnings. *** Assuming reinvestment of all distributions.
(a) Paid $0.0310 on June 10, 2003 to shareholders of record on June 9, 2003. Paid $0.0595 on December 29, 2003 to shareholders of record on December 26, 2003.
Range in quarter end price/earnings ratios since December 31, 1974 High Low -------------------- ------------------- March 31, 2000 37.3 March 31, 1982 8.3
INFORMATION ON PROXY VOTING - ------------------------------------------------------------------------------- A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request by calling 800-227-5987 (toll-free) or 414-272-6133. It also appears in the Fund's Statement of Additional Information, which can be found on the SEC's website, www.sec.gov.
DIRECTORS AND OFFICERS OF THE FUND (unaudited) - -----------------------------------------------------------------------------------------------------------------------
The following table sets forth the pertinent information about the Fund's directors and officers as of March 31, 2004. Unless otherwise listed, the business address of each director and officer is 700 North Water Street, Milwaukee, WI 53202.
Number of Term of Portfolios in Other Office and Fund Complex Directorships Positions Held Length of Principal Occupations Overseen Held Name, Age and Address With Fund Time Served During Past 5 Years by Director by Director - -----------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTOR Albert O. Nicholas, 73 (1), (3) President, (2), 35 years Chief Executive Officer and 6 None Co-Portfolio Chairman of the Board, Nicholas Manager and Company, Inc., the Adviser to Director to the Fund. He has been Co-Portfolio Manager of Nicholas Fund, Inc.; and also Nicholas Income Fund, Inc. and Nicholas Equity Income Fund, Inc. since April 2001 and July 2001, respectively. He formerly was the sole Portfolio Manager of these funds, since the time the Adviser managed them.
DISINTERESTED DIRECTORS Robert H. Bock, 72 Director (2), 26 years Private Investor, Consultant, 5 None Dean Emeritus of Business Strategy and Ethics, University of Wisconsin School of Business, 1997 to present.
Jay H. Robertson, 52 Director (2), 1 year Private Investor, April 2000 5 None to present. Chairman of the Board of Robertson-Ryan and Associates, Inc., an insurance brokerage firm from 1993 to March 2000.
OFFICERS David L. Johnson, 62 (3) Executive Annual, Executive Vice President, Vice President 24 years Nicholas Company, Inc., the Adviser to the Fund.
Thomas J. Saeger, 59 Executive Annual, Executive Vice President and Vice President 32 years Assistant Secretary, Nicholas and Secretary Company, Inc., the Adviser to the Fund.
Jeffrey T. May, 47 Senior Vice Annual, Senior Vice President, Treasurer President 11 years and Compliance Officer, Nicholas and Treasurer Company, Inc., the Adviser to the Fund. He has been Portfolio Manager of Nicholas Money Market Fund, Inc.
David O. Nicholas, 42 (3) Senior Vice Annual, President, Chief Investment President and 15 years Officer and Director, Nicholas Co-Portfolio Company, Inc., the Adviser to the Manager Fund. He has been Portfolio Manager for Nicholas II, Inc. and has been Co-Portfolio Manager of Nicholas Fund, Inc.; and also Nicholas Income Fund, Inc. and Nicholas Equity Income Fund, Inc. since April 2001 and July 2001, respectively.
Lynn S. Nicholas, 47 (3) Senior Vice Annual, Senior Vice President, Nicholas President 18 years Company, Inc. the Adviser to the Fund.
Mark J. Giese, 33 Vice President Annual, Vice President, Nicholas Company, 7 years Inc., the Adviser to the Fund. He has been the Portfolio Manager of Nicholas Liberty Fund since December 2001.
Candace L. Lesak, 46 Vice President Annual, Employee, Nicholas Company, Inc., 18 years the Adviser to the Fund. ____________________
(1) Albert O. Nicholas is the only director of the Fund who is an "interested person" of the Adviser, as that term is defined in the 1940 Act. Mr. Nicholas is Chief Executive Officer and a Director of the Adviser and owns 51% of the outstanding voting securities of the Adviser. (2) Until duly elected or re-elected at a subsequent annual meeting of the Fund. (3) David O. Nicholas and Lynn S. Nicholas are the son and daughter, respectively, of Albert O. Nicholas. David L. Johnson is the brother-in-law of Albert O. Nicholas.
The Fund's Statement of Additional Information includes additional information about Fund directors and is available, without charge, upon request, by calling 800-227-5987 (toll-free) or 414-272-6133.
Nicholas Fund, Inc. Privacy Policy - ------------------------------------------------------------------------------- Nicholas Fund, Inc. respects each shareholders' right to privacy. We are committed to safeguarding the information that you provide us to maintain and execute transactions on your behalf.
We collect the following non-public personal information about you:
* Information we receive from you on applications or other forms, whether we receive the form in writing or electronically. This includes, but is not limited to, your name, address, phone number, tax identification number, date of birth, beneficiary information and investment selection.
* Information about your transactions with us and account history with us. This includes, but is not limited to, your account number, balances and cost basis information. This also includes transaction requests made through our transfer agent.
* Other general information that we may obtain about you such as demographic information.
WE DO NOT SELL ANY NON-PUBLIC PERSONAL INFORMATION ABOUT CURRENT OR FORMER SHAREHOLDERS.
INFORMATION SHARED WITH OUR TRANSFER AGENT, A THIRD PARTY COMPANY, ALSO IS NOT SOLD.
We may share, only as permitted by law, non-public personal information about you with third party companies. Listed below are some examples of third parties to whom we may disclose non-public personal information. While these examples do not cover every circumstance permitted by law, we hope they help you understand how your information may be shared.
We may share non-public personal information about you:
* With companies who work for us to service your accounts or to process transactions that you may request. This would include, but is not limited to, our transfer agent to process your transactions, mailing houses to send you required reports and correspondence regarding the Fund and its Adviser, the Nicholas Company, Inc., and our dividend disbursing agent to process fund dividend checks.
* With a party representing you, with your consent, such as your broker or lawyer.
* When required by law, such as in response to a subpoena or other legal process.
The Fund and its Adviser maintain policies and procedures to safeguard your non-public personal information. Access is restricted to employees who the Adviser determines need the information in order to perform their job duties. To guard your non-public personal information we maintain physical, electronic, and procedural safeguards that comply with federal standards.
In the event that you hold shares of the Fund with a financial intermediary, including, but not limited to, a broker-dealer, bank, or trust company, the privacy policy of your financial intermediary would govern how your non-public personal information would be shared with non-affiliated third parties.
AUTOMATIC INVESTMENT PLAN - AN UPDATE (unaudited) - ------------------------------------------------------------------------------- The Nicholas Family of Funds' Automatic Investment Plan provides a simple method to dollar cost average into the fund(s) of your choice.
Dollar cost averaging involves making equal systematic investments over an extended time period. A fixed dollar investment will purchase more shares when the market is low and fewer shares when the market is high. The automatic investment plan is an excellent way for you to become a disciplined investor.
The following table illustrates what dollar cost averaging can achieve. Please note that past performance is no guarantee of future results. Nicholas Company recommends dollar cost averaging as a practical investment method. It should be consistently applied for long periods so that investments are made through several market cycles. The table will be updated and appear in future financial reports issued by the Nicholas Family of Funds.
Nicholas Fund ------------------- $1,000 initial investment on ....................... 07/14/69* 03/31/94 Number of years investing $100 each month following the date of initial investment .................... 34.7 10 Total cash invested ................................ $42,700 $13,000 Total dividends and capital gains distributions reinvested ........................................ $370,729 $ 7,313 Total full shares owned at 03/31/04 ................ 12,747 320 Total market value at 03/31/04 ..................... $715,664 $17,976
The results above assume purchase on the last day of the month. The Nicholas Automatic Investment Plan actually invests on the 20th of each month (or on the alternate date specified by the investor). Total market value includes reinvestment of all distributions.
*Date of Initial Public Offering.
Directors and Officers
ALBERT O. NICHOLAS, President and Director
ROBERT H. BOCK, Director
JAY H. ROBERTSON, Director
DAVID L. JOHNSON, Executive Vice President
THOMAS J. SAEGER, Executive Vice President and Secretary
DAVID O. NICHOLAS, Senior Vice President
LYNN S. NICHOLAS, Senior Vice President
JEFFREY T. MAY, Senior Vice President and Treasurer
MARK J. GIESE, Vice President
CANDACE L. LESAK, Vice President
Investment Adviser NICHOLAS COMPANY, INC. Milwaukee, Wisconsin 414-272-6133 or 800-227-5987
Transfer Agent U.S. BANCORP FUND SERVICES, LLC Milwaukee, Wisconsin 414-276-0535 or 800-544-6547
Custodian U.S. BANK N.A. Cincinnati, Ohio
Auditors ERNST & YOUNG LLP Chicago, Illinois
Counsel MICHAEL BEST & FRIEDRICH LLP Milwaukee, Wisconsin
This report is submitted for the information of shareholders of the Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.
ANNUAL REPORT
NICHOLAS FUND, INC.
700 North Water Street Milwaukee, Wisconsin 53202 www.nicholasfunds. com
March 31, 2004
Item 2. Code of Ethics.
CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND
SENIOR FINANCIAL OFFICERS
I. Covered Officers/Purpose of the Code
The Nicholas Family of Funds code of ethics (this "Code") for the investment companies within the complex (collectively, "Funds" and each, "Company") applies to the Company's Principal Executive Officer and Principal Financial Officer (the "Covered Officers" each of whom are set forth in Exhibit A) for the purpose of promoting:
* honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
* full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Company;
* compliance with applicable laws and governmental rules and regulations;
* the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and
* accountability for adherence to the Code.
Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest.
II. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest
Overview. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his service to, the Company. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Company.
Certain conflicts of interest arise out of the relationships between Covered Officers and the Company and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Company because of their status as "affiliated persons" of the Company. The Company's and the investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code.
Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Company and the investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Company or for the adviser, or for both), be involved in establishing policies and implementing decisions that will have different effects on the adviser and the Company. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Company and the adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Company. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds' Boards of Directors ("Boards") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes.
Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Company.
* * *
Each Covered Officer must:
* not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Company whereby the Covered Officer would benefit personally to the detriment of the Company;
* not cause the Company to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Company;
* not use material non-public knowledge of portfolio transactions made or contemplated for the Company to trade personally or cause others to trade personally in contemplation of the market effect of such transactions;
* report, at least annually:
* officer and director positions in corporations, public or private, for profit or not for profit, or in which the Covered Officer or any of his immediate family members holds 5% or more of its outstanding stock;
* Positions as a trustee, executor or other fiduciary;
* Ownership interest in any broker-dealer or bank;
* Transactions between the Covered Officer and any of the Nicholas Family of Funds, the Nicholas Company or any company in which any director of any of the Nicholas Family of Funds is an officer or director.
* Situations in which any immediate family member of the Covered Employee is an officer, director or employee of any company in which any officer or director of the Nicholas Company or any of the Nicholas Family of Funds is a director or executive officer.
There are some conflict of interest situations that should always be discussed with the appropriate officer if material. If the matter involves Jeffrey T. May, he should discuss the matter with David O. Nicholas. If the matter involves any other person, that person should discuss the matter with Jeffrey T. May. In each case, the officer with whom such matter is discussed is encouraged to review the matter with counsel to the Company. Examples of these include:
* service as a director on the board of any public company;
* the receipt of any non-nominal gifts;
* the receipt of any entertainment from any company with which the Company has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety;
* any ownership interest in, or any consulting or employment relationship with, any of the Company's service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof;
* a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Company for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership.
III. Disclosure and Compliance
* Each Covered Officer should familiarize himself with the disclosure requirements generally applicable to the Company;
* each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company's directors and auditors, and to governmental regulators and self-regulatory organizations;
* each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds files with, or submits to, the SEC and in other public communications made by the Funds; and
* it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations.
IV. Reporting and Accountability
Each Covered Officer must:
* upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he has received, read, and understands the Code;
* annually thereafter affirm to the Board that he has complied with the requirements of the Code;
* not retaliate against any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; and
* notify the appropriate person promptly if he knows of any violation of this Code. Failure to do so is itself a violation of this Code. Each Covered Officer should notify Jeffrey T. May unless the person violating the Code is Jeffrey T. May, in which case such person should notify David O. Nicholas. In each case, each Covered Officer is encouraged to also contact counsel to the Fund.
Jeffrey T. May is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation; provided that if the situation involves Jeffrey T. May directly, then Mr. David O. Nicholas is responsible for applying the Code to him and he has authority to interpret the Code with respect to such application. Both Jeffrey T. May and David O. Nicholas are encouraged to discuss the matter with counsel to the Fund. However, any approvals or waivers sought by the Principal Executive Officer will be considered by the Independent Directors (the "Committee").
The Company will follow these procedures in investigating and enforcing this Code:
* Jeffrey T. May or David O. Nicholas, with the advice of counsel will take all appropriate action to investigate any potential violations reported to him;
* if, after such investigation, the officer making such investigation believes that no violation has occurred, he is not required to take any further action;
* any matter that the officer making the investigation believes is a violation will be reported to the independent directors;
* if the independent directors concur that a violation has occurred, they will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer;
* the independent directors will be responsible for granting waivers, as appropriate; and
* any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules.
V. Other Policies and Procedures
This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds' adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds' and their investment adviser's codes of ethics under Rule 17j-1 under the Investment Company Act and the adviser's more detailed policies and procedures are separate requirements applying to the Covered Officers and others, and are not part of this Code.
VI. Amendments
Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Board, including a majority of independent directors.
VII. Confidentiality
All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board and its counsel, the appropriate Company and the Nicholas Company.
VIII. Internal Use
The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Company, as to any fact, circumstance, or legal conclusion.
Date: November 20, 2003
Exhibit A
Persons Covered by this Code of Ethics
The Nicholas Company | Albert O. Nicholas | Jeffrey T. May |
Nicholas Fund, Inc. | Albert O. Nicholas | Jeffrey T. May |
Nicholas II, Inc. | Albert O. Nicholas | Jeffrey T. May |
Nicholas Limited Edition, Inc. | Albert O. Nicholas | Jeffrey T. May |
Nicholas Income Fund, Inc. | Albert O. Nicholas | Jeffrey T. May |
Nicholas Equity Income Fund, Inc. | Albert O. Nicholas | Jeffrey T. May |
Nicholas Liberty Fund | David O. Nicholas | Jeffrey T. May |
Nicholas Money Market Fund, Inc. | Albert O. Nicholas | Jeffrey T. May |
Item 3. Audit Committee Financial Expert.
The Fund's Board of Directors has determined that Mr. Timothy P. Reiland, an independent director, qualifies as an audit committee financial expert as that term is defined for purposes of this item.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees. The aggregate fees billed for each of the last two fiscal years (the "Reporting Periods") for professional services rendered by the Fund's principal accountant (the "Auditor") for the audit of the Fund's annual financial statements, or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $19,000 in 2004 and $18,000 in 2003.
(b) Audit-Related Fees. There were no fees billed in each of the last two fiscal years for assurance and related services rendered by the Auditor to the Fund that are reasonably related to the performance of the audit of the Fund's financial statements and are not reported under paragraph (a) of this Item 4.
(c) Tax Fees. The aggregate fees billed in the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax advice and tax planning ("Tax Services") were $4,000 in 2004 and $4,000 in 2003. These services consisted of (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local tax planning, advice and assistance regarding statutory, regulatory or administrative developments, (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired or held.
There were no fees billed in each of the last two fiscal years for Tax Services by the Auditor to the Fund's investment adviser which required pre-approval by the Board of Directors as described in paragraph (e)(1) of this Item 4.
(d) All Other Fees. There were no fees billed in each of the last two fiscal years for products and services provided by the Auditor, other than the services reported in paragraphs (a) through (c) of this Item 4.
There were no fees billed in each of the last two fiscal years for Non-Audit Services by the Auditor to the Fund's investment adviser which required pre-approval by the Board of Directors as described in paragraph (e)(1) of this Item 4.
(e) Audit Committee Pre-Approval Policies and Procedures. The Fund's Board of Director's has not adopted any pre-approval policies and procedures as described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. The Fund's Board of Directors meets with the Auditors and management to review and pre-approve the Auditor's engagements for audit and non-audit services to the Fund and its Adviser prior to each engagement.
(f) No disclosures are required by this Item 4(f).
(g) There were no non-audit fees billed in each of the last two fiscal years by the Auditor for services rendered to the Fund or the Fund's investment adviser that provides ongoing services.
(h) No disclosures are required by this Item 4(h).
Item 5. Audit Committee of Listed Registrants.
Applicable only for annual reports covering periods ending on or after the earlier of (i) the first annual shareholder meeting after January 15, 2004 or (ii) October 31, 2004.
Item 6. Schedule of Investments.
The schedule of investments in securities of unaffiliated issuers is included as part of the report to shareholders filed under Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Applicable only to annual reports filed by closed-end funds.
Item 8. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers.
Applicable only to closed-end funds.
Item 9. Submission of Matters to a Vote of Security Holders.
Not applicable to this filing..
Item 10. Controls and Procedures.
The Fund's principal executive officer and principal financial officer have concluded that the Fund's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. There were no significant changes or corrective actions with regard to significant deficiencies or material weaknesses in the Fund's internal controls or in other factors that could significantly affect the Fund's internal controls subsequent to the date of their evaluation.
Item 11. Exhibits.
(a)(1) Code of Ethics -- Any code of ethics, or amendments thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit.
Not applicable to this filing.
(a)(2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbannes-Oxley Act of 2002, attached hereto as part of EX-99.CERT.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more person.
Applicable only to closed-end funds.
(b) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbannes-Oxley Act of 2002, attached hereto as part of EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nicholas Fund, Inc.
By: /s/ Albert O. Nicholas
Name: Albert O. Nicholas
Title: Principal Executive Officer
Date: 05/27/2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Albert O. Nicholas
Name: Albert O. Nicholas
Title: Principal Executive Officer
Date: 05/27/2004
By: /s/ Jeffrey T. May
Name: Jeffrey T. May
Title: Principal Financial Officer
Date: 05/27/2004