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)
Jeffrey T. May, Senior Vice President, Secretary and Treasurer
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: 03/31/2009
Date of reporting period: 03/31/2009
Item 1. Report to Stockholders.
ANNUAL REPORT
March 31, 2009
NICHOLAS FUND, INC.
700 North Water Street
Milwaukee, Wisconsin 53202
www.nicholasfunds.com
May 2009
Report to Fellow Shareholders:
For the first three months of calendar year 2009, Nicholas Fund returned -9.00% versus - -11.01% for the Standard and Poor's 500 Index. For the fiscal year ended March 31, 2009, the Fund produced a -31.70% total return compared to -38.09% for the S and P 500. Relative performance has improved in recent months.
At March 31, 2009, Nicholas Fund was fully invested with 8.08% cash. The diversified portfolio consisted of 59 equities. Management is tending to favor smaller companies rather than larger ones in our stock selection. The top ten holdings and sector diversification are included within this report. For the fiscal year ended March 31, 2009, only a few stocks had positive returns such as O'Reilly Automotive. On the negative side, financials, including Affiliated Managers Group, Berkshire Hathaway and Marshall and Ilsley, were major detractors to performance.
Returns for Nicholas Fund, Inc. and selected indices are provided in the chart below for the period ended March 31, 2009.
| | Average Annual Total Return |
| | 1 Year | 3 Year | 5 Year | 10 Year | 15 Year | Life* |
| Nicholas Fund, Inc. | -31.70% | -13.15% | -4.54% | -2.99% | 4.29% | 9.56% |
| Standard and Poor's 500 Index | -38.09% | -13.06% | -4.76% | -3.00% | 5.91% | 8.85% |
| Consumer Price Index | -0.45% | 2.11% | 2.60% | 2.59% | 2.49% | 4.53% |
| Ending value of $10,000 invested in Nicholas Fund, Inc. | $6,830 | $6,550 | $7,928 | $7,382 | $18,788 | $376,093 |
| Fund's Expense Ratio (from 07/31/08 Prospectus): 0.75% |
* The life of the Fund is 39.7 years from the date of its initial public offering, July 14, 1969. Starting time period for the Standard and Poor's 500 Index and the Consumer Price Index was June 30, 1969.
The Fund's expense ratio for the period ended March 31, 2009 can be found in the financial highlights included within this report.
Performance data quoted represents past performance and is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.nicholasfunds.com/returns.html.
The Fund's returns are reduced by expenses, while the market indices are not. The ending values above illustrate the performance of a hypothetical $10,000 investment made in the Fund over the timeframes listed. Assumes reinvestment of dividends and capital gains, but does not reflect the effect of any applicable sales charge or redemption fees. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. These figures do not imply any future performance.
The U.S. economy shrank sharply in the first quarter of 2009, capping its worst six-month performance in 51 years as noted in the April 30, 2009 Wall Street Journal. This recession marks the first time since 1975 that the economy has contracted for three quarters in a row. Unemployment has reached 8.9%. The Government and the Federal Reserve Board have responded with huge stimulus actions, including cutting short-term interest rates to near zero. Green shoots are appearing that indicate the economy could revive by the fourth quarter. These green shoots include a decline in business inventories (the need to rebuild) and an up-tick in consumer spending. Also, many economic measures are either declining at a slower rate or stabilizing. The worst of our economic and business nightmare appears to be over.
The stock market has been no fun over the last year and a half. It anticipated the worldwide economic and financial tsunami we are experiencing. As measured by the S and P 500, the market declined 57% from the high in October 2007, to the recent low on March 9, 2009. This represents the worst bear market since the Great Depression. From the low on March 9th, stocks have rallied 37% as of May 8th, but still remain 41% below the October 2007 high. We have positioned the Fund portfolio, which is fully invested, as we seek to regain lost capital. Stocks generally anticipate economic recovery six-to-nine months before it actually happens.
As I close in on 40 years of managing the Nicholas Fund, I am as enthused and optimistic as ever regarding long-term capital gain possibilities. After the miserable performance of stocks over the last ten years, the next ten appear to offer better prospects.
Thank you for your continued interest in the Fund.
Sincerely,
Albert O. Nicholas
Portfolio Manager
The Fund may invest in smaller companies, which involve additional risks such as limited liquidity and greater volatility.
Please refer to the Schedule of Investments in the report for complete Fund holdings information. Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security.
The S and P 500 Index is a broad based unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general. The Consumer Price Index represents changes in prices of all goods and services purchased for consumption by urban households. One cannot invest directly in an index.
Must be preceded or accompanied by a prospectus.
The Nicholas Funds are distributed by Quasar Distributors, LLC. (05/09)
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
NICHOLAS FUND, INC. AND S and P 500 INDEX
The line graph which follows compares the initial account value and subsequent account value at the end of each of the most recently completed ten fiscal years of the Fund, to the same investment over the same periods in the S and P 500 Index. The graph assumes a $10,000 investment in the Fund and the index at the beginning of the period.
| Nicholas Fund, Inc. | % Total Return | S and P 500 Index | % Total Return |
| 03/31/99 | $10,000.00 | | $10,000.00 | |
| 03/31/00 | 10,675.00 | 6.75% | 11,794.12 | 17.94% |
| 03/31/01 | 8,888.01 | -16.74% | 9,237.57 | -21.68% |
| 03/31/02 | 8,865.78 | -0.25% | 9,259.74 | 0.24% |
| 03/31/03 | 6,684.80 | -24.60% | 6,967.03 | -24.76% |
| 03/31/04 | 9,312.60 | 39.31% | 9,412.73 | 35.10% |
| 03/31/05 | 10,040.26 | 7.81% | 10,042.82 | 6.69% |
| 03/31/06 | 11,270.68 | 12.25% | 11,219.85 | 11.72% |
| 03/31/07 | 11,557.84 | 2.55% | 12,547.61 | 11.83% |
| 03/31/08 | 10,809.56 | -6.47% | 11,910.49 | -5.08% |
| 03/31/09 | 7,382.41 | -31.70% | 7,373.79 | -38.09% |
The Fund's average annual total returns for the one-, five- and ten-year periods ended on the last day of the most recent fiscal year are as follows:
| One Year Ended March 31, 2009 | Five Years Ended March 31, 2009 | Ten Years Ended March 31, 2009 |
| Average Annual Total Return | -31.70% | -4.54% | -2.99% |
Past performance is not predictive of future performance, and the above graph and table do not reflect deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Financial Highlights (NICSX)
For a share outstanding throughout each period
- -------------------------------------------------------------------------
Year Ended March 31,
------------------------------------------
2009 2008 2007 2006 2005
------ ------ ------ ------ ------
NET ASSET VALUE,
BEGINNING OF PERIOD ....... $45.03 $57.85 $61.49 $60.05 $56.14
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
Net investment income ... .18 .21 .80 .26 .10
Net gain (loss) on
securities (realized
and unrealized) ....... (12.72) (2.85) .71 6.75 4.29
------ ------ ------ ------ ------
Total from investment
operations .......... (12.54) (2.64) 1.51 7.01 4.39
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment
income ................. (.17) (.23) (.82) (.25) (.07)
From net capital gain ... (4.61) (9.95) (4.33) (5.32) (.41)
------ ------ ------ ------ ------
Total distributions .. (4.78) (10.18) (5.15) (5.57) (.48)
------ ------ ------ ------ ------
NET ASSET VALUE, END
OF PERIOD ................. $27.71 $45.03 $57.85 $61.49 $60.05
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN ............... (31.70)% (6.47)% 2.55% 12.25% 7.81%
SUPPLEMENTAL DATA:
Net assets, end of
period (millions) ......... $1,033.2 $1,690.7 $2,213.5 $2,504.9 $2,434.5
Ratio of expenses to
average net assets ........ .77% .75% .75% .77% .75%
Ratio of net investment
income to average
net assets ................ .50% .37% 1.30% .41% .17%
Portfolio turnover rate .... 31.79% 31.18% 29.96% 32.48% 20.94%
The accompanying notes to financial statements are an integral part of these
highlights.
-------------------------------------------------------------------------------
Top Ten Equity Portfolio Holdings
March 31, 2009 (unaudited)
- -------------------------------------------------------------------------------
Percentage
Name of Net Assets
---- -------------
Berkshire Hathaway Inc. - Class A ...................... 5.37%
Kinder Morgan Management, LLC .......................... 4.33%
O'Reilly Automotive, Inc. .............................. 4.04%
Affiliated Managers Group, Inc. ........................ 4.04%
Yum! Brands, Inc. ...................................... 3.72%
Walgreen Co. ........................................... 3.64%
DaVita, Inc. ........................................... 3.62%
Thermo Fisher Scientific Inc. .......................... 3.13%
W.W. Grainger, Inc. .................................... 2.89%
Fiserv, Inc. ........................................... 2.77%
------
Total of top ten ....................................... 37.55%
------
------
-------------------------------------------------------------------------------
Sector Diversification (As a Percentage of Portfolio)
March 31, 2009 (unaudited)
- -------------------------------------------------------------------------------
BAR CHART PLOT POINTS
Health Care ............................................... 17.68%
Consumer Discretionary .................................... 15.78%
Financials ................................................ 13.63%
Energy .................................................... 12.01%
Industrials ............................................... 10.21%
Consumer Staples .......................................... 8.62%
Short-Term Investments .................................... 8.26%
Materials ................................................. 6.48%
Information Technology .................................... 6.43%
Utilities ................................................. 0.90%
-------------------------------------------------------------------------------
Fund Expenses
For the six month period ended March 31, 2009 (unaudited)
- -------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs and (2) ongoing costs, including management fees and other operating
expenses. The following table is intended to help you understand your ongoing
costs (in dollars) of investing in the Fund and to compare these costs with
those of other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period.
The first line of the table below provides information about the actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is
not the Fund's actual return. The hypothetical account values and expenses may
not be used to estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the ongoing costs of
investing in the Fund with other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as wire
fees. Therefore, the second line of the table is useful in comparing ongoing
costs only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transactional costs were included, your
costs would have been higher.
Beginning Ending Expenses
Account Account Paid During
Value Value Period*
09/30/08 03/31/09 10/01/08 - 03/31/09
------------------------------------------------------------------
Actual $1,000.00 $ 717.60 $3.43
Hypothetical 1,000.00 1,021.01 4.03
(5% return before expenses) * Expenses are equal to the Fund's six-month annualized expense ratio
of 0.80%, multiplied by the average account value over the period,
multiplied by 182 then divided by 365 to reflect the one-half year
period.
Schedule of Investments
March 31, 2009
- -------------------------------------------------------------------------------
Shares or
Principal
Amount Value
- ----------- ---------------
COMMON STOCKS - 91.92%
Consumer Discretionary - Auto &
Components - 0.67%
575,100 Johnson Controls, Inc. $ 6,901,200
--------------
Consumer Discretionary - Durables &
Apparel - 1.43%
600,000 Fortune Brands, Inc. 14,730,000
--------------
Consumer Discretionary - Hotels, Restaurants &
Leisure - 3.72%
1,400,000 Yum! Brands, Inc. 38,472,000
--------------
Consumer Discretionary - Retail - 9.04%
410,000 Jos. A. Bank Clothiers, Inc. * 11,402,100
650,000 Kohl's Corporation * 27,508,000
1,192,476 O'Reilly Automotive, Inc. * 41,748,585
676,160 Penske Automotive Group, Inc. 6,308,573
1,130,886 Sally Beauty Company, Inc. * 6,423,432
--------------
93,390,690
--------------
Consumer Discretionary - Services - 0.96%
832,868 DineEquity, Inc. 9,877,814
--------------
Consumer Staples - Food & Staples Retail - 3.64%
1,450,000 Walgreen Co. 37,642,000
--------------
Consumer Staples - Food, Beverage &
Tobacco - 3.69%
300,000 Altria Group, Inc. 4,806,000
1,604,800 Constellation Brands, Inc. - Class A * 19,097,120
400,000 Philip Morris International Inc. 14,232,000
--------------
38,135,120
--------------
Consumer Staples - Household &
Personal Products - 1.30%
700,000 Avon Products, Inc. 13,461,000
--------------
Energy - 12.03%
400,000 Apache Corporation 25,636,000
363,300 Bristow Group Inc. * 7,785,519
881,300 Inergy, L.P. 19,318,096
230,000 Kayne Anderson Energy Development Company 2,148,200
700,000 Kayne Anderson Energy Total Return Fund, Inc. 10,094,000
700,000 Kayne Anderson MLP Investment Company 13,916,000
1,096,592 Kinder Morgan Management, LLC * 44,697,095
150,000 McMoRan Exploration Co. * 705,000
--------------
124,299,910
--------------
Financials - Banks - 0.98%
1,644,126 Marshall & Ilsley Corporation 9,256,429
642,975 MGIC Investment Corporation 913,025
--------------
10,169,454
--------------
Financials - Diversified - 5.54%
1,000,000 Affiliated Managers Group, Inc. * 41,710,000
1,044,785 Leucadia National Corporation 15,556,849
--------------
57,266,849
--------------
Financials - Insurance - 7.08%
640 Berkshire Hathaway Inc. - Class A * 55,488,000
800,000 Loews Corporation 17,680,000
--------------
73,168,000
--------------
Financials - Real Estate - 0.05%
253,550 Cohen & Steers Quality Income Realty Fund, Inc. 509,635
--------------
Health Care - Equipment - 5.77%
280,000 Alcon, Inc. 25,454,800
507,500 Covidien Ltd. 16,869,300
475,000 St. Jude Medical, Inc. * 17,256,750
--------------
59,580,850
--------------
Health Care - Pharmaceuticals &
Biotechnology - 6.33%
278,000 Charles River Laboratories International, Inc. 7,564,380
550,000 Gilead Sciences, Inc. * 25,476,000
905,688 Thermo Fisher Scientific Inc. * 32,305,891
--------------
65,346,271
--------------
Health Care - Services - 5.62%
850,000 DaVita, Inc. * 37,357,500
920,000 VCA Antech, Inc. * 20,746,000
--------------
58,103,500
--------------
Industrials - Capital Goods - 7.88%
305,173 Brady Corporation 5,380,200
300,000 Briggs & Stratton Corporation 4,950,000
750,000 Chicago Bridge & Iron Company N.V. 4,702,500
136,100 Curtiss-Wright Corporation 3,817,605
150,000 EMCOR Group, Inc. * 2,575,500
250,000 Lincoln Electric Holdings, Inc. 7,922,500
2,083,300 Oshkosh Corporation 14,041,442
425,000 W.W. Grainger, Inc. 29,826,500
733,695 Woodward Governor Company 8,202,710
--------------
81,418,957
--------------
Industrials - Commercial Services &
Supplies - 2.35%
756,500 Copart, Inc. * 22,437,790
57,630 Interface, Inc. - Class A 172,314
100,000 Republic Services, Inc. 1,715,000
--------------
24,325,104
--------------
Information Technology - Hardware &
Equipment - 1.62%
325,400 Mettler-Toledo International Inc. * 16,702,782
--------------
Information Technology - Software &
Services - 4.83%
785,000 Fiserv, Inc. * 28,621,100
500,000 Hewitt Associates, Inc. * 14,880,000
258,800 Solera Holdings, Inc. * 6,413,064
--------------
49,914,164
--------------
Materials - 6.49%
400,000 Airgas, Inc. 13,524,000
350,000 AptarGroup, Inc. 10,899,000
1,000,000 Bemis Company, Inc. 20,970,000
300,000 RPM International, Inc. 3,819,000
653,400 Stepan Company + 17,837,820
--------------
67,049,820
--------------
Utilities - 0.90%
400,000 Allegheny Energy, Inc. 9,268,000
--------------
TOTAL COMMON STOCKS
(cost $1,043,251,144) ........................ 949,733,120
--------------
SHORT-TERM INVESTMENTS - 8.28%
Commercial Paper - 8.27%
$2,070,000 Avery Dennison Corporation 04/01/09, 0.80% 2,070,000
5,455,000 ITT Corporation 04/01/09, 1.60% 5,455,000
3,500,000 Integrys Energy Group, Inc. 04/02/09, 2.25% 3,499,781
2,200,000 Integrys Energy Group, Inc. 04/03/09, 1.65% 2,199,798
551,000 Nordstrom, Inc. 04/03/09, 1.00% 550,969
1,605,000 H.J. Heinz Finance Company 04/06/09, 1.00% 1,604,777
5,115,000 ITT Corporation 04/06/09, 1.70% 5,113,792
2,600,000 PPG Industries, Inc. 04/06/09, 1.40% 2,599,494
3,000,000 ITT Corporation 04/08/09, 1.50% 2,999,125
1,655,000 Volkswagen of America, Inc. 04/09/09, 2.80% 1,653,970
4,400,000 Ingersoll-Rand Global Holding Company Limited
04/13/09, 2.85% 4,395,820
600,000 Ingersoll-Rand Global Holding Company Limited
04/14/09, 2.65% 599,426
3,025,000 Wisconsin Energy Corporation 04/15/09, 0.65% 3,024,235
950,000 H.J. Heinz Finance Company 04/16/09, 2.00% 949,208
4,120,000 Wisconsin Energy Corporation 04/17/09, 0.90% 4,118,352
4,915,000 Verizon Communications Inc. 04/20/09, 1.10% 4,912,147
3,730,000 Altria Group, Inc. 04/21/09, 1.65% 3,726,581
5,225,000 Wisconsin Energy Corporation 04/24/09, 0.90% 5,221,996
5,000,000 H.J. Heinz Finance Company 04/27/09, 0.90% 4,996,750
1,085,000 H.J. Heinz Finance Company 04/28/09, 1.20% 1,084,024
1,225,000 ITT Corporation 04/29/09, 1.60% 1,223,475
3,000,000 CVS Corporation 04/30/09, 1.25% 2,996,979
2,750,000 Verizon Communications Inc. 05/05/09, 1.15% 2,747,013
3,110,000 Verizon Communications Inc. 05/07/09, 1.15% 3,106,424
1,675,000 Kellogg Company 05/11/09, 1.15% 1,672,860
3,000,000 Kellogg Company 05/12/09, 1.15% 2,996,071
3,480,000 ITT Corporation 05/27/09, 1.50% 3,471,880
3,500,000 Kellogg Company 06/15/09, 1.10% 3,491,979
3,000,000 Verizon Communications Inc. 06/16/09, 0.70% 2,995,567
--------------
85,477,493
--------------
Variable Rate Security - 0.01%
49,549 American Family Financial Services, Inc. (1)
04/01/09, 0.10% ................................. 49,549
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $85,527,042) ......................... 85,527,042
--------------
TOTAL INVESTMENTS
(cost $1,128,778,186) -- 100.20% ........... 1,035,260,162
--------------
LIABILITIES, NET OF
OTHER ASSETS -- (0.20)% ......................... (2,077,072)
--------------
TOTAL NET ASSETS
(basis of percentages
disclosed above) -- 100% ................... $1,033,183,090
--------------
--------------+ 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.
(1) Subject to a demand feature as defined by the Securities and Exchange
Commission.
The accompanying notes to financial statements are an integral part of this
schedule.
Statement of Assets and Liabilities
March 31, 2009
- -------------------------------------------------------------------------------
ASSETS
Investments in securities at value -
Nonaffiliated issuers (cost $1,109,102,388) -
see accompanying schedule of investments ............ $1,017,422,342
Affiliated issuers (cost $19,675,798) -
see accompanying schedule of investments (Note 4) ... 17,837,820
--------------
Total investments ............................... 1,035,260,162
-------------- Receivables -
Dividend and interest ................................ 566,772
Capital stock subscription ........................... 20,500
--------------
Total receivables ............................... 587,272
--------------
Other ..................................................... 9,673
--------------
Total assets .................................... 1,035,857,107
--------------LIABILITIES
Payables -
Investment securities purchased ...................... 1,990,300
Due to adviser -
Management fee .................................. 531,684
Accounting and administrative fee ............... 20,291
Other payables and accrued expense ................... 131,742
--------------
Total liabilities ............................... 2,674,017
--------------
Total net assets ................................ $1,033,183,090
--------------
--------------NET ASSETS CONSIST OF
Paid in capital ........................................... $1,149,069,787
Net unrealized depreciation on investments ................ (93,518,024)
Accumulated net realized loss on investments .............. (23,740,255)
Accumulated undistributed net investment income ........... 1,371,582
------------
Total net assets ................................ $1,033,183,090
--------------
--------------
NET ASSET VALUE PER SHARE ($.50 par value, 200,000,000
shares authorized), offering price and redemption price
(37,279,040 shares outstanding) .............................. $27.71
------
------
The accompanying notes to financial statements are an integral part of this
statement.
Statement of Operations
For the year ended March 31, 2009
- -------------------------------------------------------------------------------
INCOME
Dividend (net of foreign taxes of $8,400) -
Nonaffiliated issuers ................................ $ 13,122,134
Affiliated issuers (Note 4) .......................... 597,141
Interest .................................................. 3,918,099
-------------
Total income ......................................... 17,637,374
-------------EXPENSES
Management fee ............................................ 9,030,267
Transfer agent fees ....................................... 835,274
Accounting and administrative fees ........................ 345,395
Postage and mailing ....................................... 139,101
Insurance ................................................. 85,385
Printing .................................................. 70,567
Custodian fees ............................................ 68,379
Registration fees ......................................... 32,692
Audit and tax fees ........................................ 28,200
Telephone ................................................ 21,794
Directors' fees ........................................... 17,500
Accounting system and pricing service fees ................ 10,680
Legal fees ................................................ 8,691
Other operating expenses .................................. 5,197
-------------
Total expenses ....................................... 10,699,122
-------------
Net investment income ................................ 6,938,252
-------------NET REALIZED LOSS ON INVESTMENTS
Nonaffiliated issuers ..................................... (24,208,965)
Affiliated issuers (Note 4) ............................... 4,214,295
-------------
(19,994,670)
-------------CHANGE IN NET UNREALIZED APPRECIATION/DEPRECIATION
ON INVESTMENTS ............................................... (482,968,517)
-------------
Net realized and unrealized loss on investments ........... (502,963,187)
-------------
Net decrease in net assets resulting from operations ...... $(496,024,935)
-------------
-------------
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, 2009 and 2008
- -------------------------------------------------------------------------------
2009 2008
------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income .................. $ 6,938,252 $ 7,556,590
Net realized gain (loss)
on investments ........................ (19,994,670) 390,895,188
Change in net unrealized
appreciation/depreciation
on investments ........................ (482,968,517) (503,554,850)
-------------- --------------
Net decrease in net assets
resulting from operations ........ (496,024,935) (105,103,072)
-------------- --------------DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ............. (6,411,252) (8,143,242)
From net realized gain on investments .. (169,107,528) (354,730,242)
-------------- --------------
Total distributions ............... (175,518,780) (362,873,484)
-------------- --------------CAPITAL SHARE TRANSACTIONS
Proceeds from shares issued
(831,405 and 261,295
shares, respectively) ................. 26,930,813 14,171,633
Reinvestment of distributions
(3,725,864 and 6,346,478
shares, respectively) ................. 162,611,111 334,717,745
Cost of shares redeemed
(4,820,212 and 7,327,761
shares, respectively) ................. (175,491,555) (403,767,276)
-------------- --------------
Decrease in net assets derived
from capital share transactions .. 14,050,369 (54,877,898)
-------------- --------------
Total decrease in net assets ...... (657,493,346) (522,854,454)
-------------- --------------NET ASSETS
Beginning of period .................... 1,690,676,436 2,213,530,890
-------------- --------------
End of period (including accumulated
undistributed net investment income
of $1,371,582 and $844,582,
respectively) ......................... $1,033,183,090 $1,690,676,436
-------------- --------------
-------------- --------------
The accompanying notes to financial statements are an integral part of these
statements.
Notes to Financial Statements
March 31, 2009
- ------------------------------------------------------------------------------
(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, 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) Equity securities traded on a stock exchange will ordinarily be valued
on the basis of the last sale price on the date of valuation on the
securities principal exchange, or if in the absence of any sale on
that day, the closing bid price. For securities principally traded on
the NASDAQ market, the Fund uses the NASDAQ Official Closing 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. 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 for financial statement purposes are recorded
on trade date. The Fund adopted Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 157, Fair Value Measurements ("FAS
157"), effective April 1, 2008. In accordance with FAS 157, fair
value is defined as the price that the Fund would receive upon selling
an investment in a timely transaction to an independent buyer in the
principal or most advantageous market of the investment. FAS 157
established a three-tier hierarchy to maximize the use of observable
market data and minimize the use of unobservable inputs and to
establish classification of fair value measurements for disclosure
purposes. Inputs refer broadly to the assumptions that market
participants would use in pricing the asset or liability, including
assumptions about risk, for example, the risk inherent in a particular
valuation technique used to measure fair value including such a
pricing model and/or the risk inherent in the inputs to the valuation
technique. Inputs may be observable or unobservable. Observable
inputs are inputs that reflect the assumptions market participants
would use in pricing the asset or liability developed based on market
data obtained from sources independent of the reporting entity.
Unobservable inputs are inputs that reflect the reporting entity's own
assumptions about the assumptions market participants would use in
pricing the asset or liability developed based on the best information
available in the circumstances. The three-tier hierarchy of inputs is
summarized in the three broad levels listed below. Level 1 - quoted prices in active markets for identical
investments Level 2 - other significant observable inputs (including quoted
prices for similar investments, interest rates, prepayment
speeds, credit risk, etc.) Level 3 - significant unobservable inputs (including the Fund's
own assumptions in determining the fair value of investments) The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing in
those securities. The following is a summary of the inputs used as of March 31, 2009 in
valuing the Fund's investments carried at value: Investments
in
Valuation Inputs Securities
---------------- -------------
Level 1 - Quoted Prices .............. $ 949,733,120
Level 2 - Other Significant
Observable Inputs ......... 85,527,042
Level 3 - Significant Unobservable
Inputs .................... --
--------------
Total ....... $1,035,260,162
--------------
-------------- (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. Generally, discounts
and premiums on long-term debt security purchases, if any, are
amortized over the expected lives of the respective securities using
the effective yield method. (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. (e) Dividends and distributions paid to shareholders are recorded on the
ex-dividend date. 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 U.S. generally accepted
accounting principles. Distributions are determined in accordance
with income tax regulations, which may differ from net investment
income and realized gains for financial reporting purposes. Financial
reporting records are adjusted for permanent book to tax differences
to reflect tax character. At March, 31, 2009, reclassifications were
recorded to decrease accumulated net realized loss on investments and
decrease paid in capital by $10,575. The tax character of distributions paid during the years ended March
31 was as follows: 03/31/2009 03/31/2008
------------ ------------
Distributions paid from:
Ordinary income ............ $ 23,682,169 $ 8,143,242
Long-term capital gain ..... 151,836,611 354,730,242
------------ ------------
Total distributions paid ... $175,518,780 $362,873,484
------------ ------------
------------ ------------ As of March 31, 2009, investment cost for federal tax purposes was
$1,138,921,681 and the tax basis components of net assets were as
follows: Unrealized appreciation ....................... $ 203,862,408
Unrealized depreciation ....................... (307,523,927)
--------------
Net unrealized depreciation ................... (103,661,519)
--------------
Undistributed ordinary income ................. 1,371,582
accumulated net realized capital loss.......... (11,096,776)
Paid in capital ............................... 1,149,069,787
Other temporary differences ................... (2,499,984)
--------------
Net assets .................................... $1,033,183,090
--------------
-------------- The differences between book-basis and tax-basis unrealized
appreciation (depreciation) and accumulated realized capital loss are
attributable primarily to the tax deferral of losses from wash sales
and holdings in partnership interests. As of March 31, 2009, the Fund realized no post-October losses for tax
purposes. As of March 31, 2009, the Fund had a tax deferral of wash loss sales
of approximately $12,643,000. As of March 31, 2009, the Fund has a capital loss carryforward of
approximately $11,097,000, which expires in 2017. To the extent the
Fund has future net realized capital gains, distributions of capital
gains to shareholders will be offset by any unused capital loss
carryforward. In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes"
("FIN 48"). FIN 48 addresses the accounting for uncertainty in income
taxes and establishes for all entities, such as the Fund, a minimum
threshold for financial statement recognition of the benefit of
positions taken in filing tax returns (including whether an entity is
taxable in a particular jurisdiction). The Fund recognizes tax
benefits only if it is more likely than not that a tax position
(including the Fund's assertion that its income is exempt from tax)
will be sustained upon examination. If applicable, the Fund
recognizes interest accrued related to unrecognized tax benefits in
"interest" and penalties in "other" expenses on the Statement of
Operations. The Fund adopted FIN 48 on September 30, 2007. The Fund
had no material uncertain tax positions and has not recorded a
liability for unrecognized tax benefits as of March 31, 2009. Also,
the Fund had recognized no interest and penalties related to uncertain
tax benefits in fiscal 2009. At March 31, 2009, the tax years March
31, 2006 through March 31, 2009 remain open to examination in the
Fund's major tax jurisdictions. (f) The preparation of financial statements in conformity with U.S.
generally accepted accounting principles 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) Related Parties--
(a) 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 paid for accounting
and administrative services rendered by its personnel, subject to the
following guidelines: (i) up to five basis points, on an annual basis,
of the average net asset value of the Fund up to and including $2
billion and up to three basis points, on an annual basis, of the
average net asset value of the Fund greater than $2 billion, based on
the average net asset value of the Fund as determined by valuations
made at the close of each business day of each month, and (ii) where
the preceding calculation results in an annual payment of less than
$50,000, the Adviser, in its discretion, may charge the Fund up to
$50,000 for such services. (b) Legal Counsel --
A director of the Adviser is affiliated with a law firm that provides
services to the Fund. The Fund incurred expenses of $4,191 for the
year ended March 31, 2009 for legal services rendered by this law firm.(3) Investment Transactions --
For the year ended March 31, 2009, the cost of purchases and the proceeds
from sales of investment securities, other than short-term obligations,
aggregated $405,962,453 and $529,662,655, respectively.(4) Transactions with Affiliates -
Following is a summary of fiscal 2009 transactions with "affiliated
companies" as defined by the Investment Company Act of 1940: Amount of
Capital
Amount of Gain
Dividends Realized
Share Activity Credited on Sale
-------------------------------------------- to Income of Shares
Balance Balance in Fiscal in Fiscal
Security Name 03/31/08 Purchases Sales 03/31/09 2009 2009
------------- ---------- --------- --------- ---------- --------- -----------
Stepan Company 800,200 -- 146,800 653,400 $597,141 $4,214,295
--------- -----------
(5) Change of Independent Registered Public Accounting Firm --
On October 8, 2008, management of the Fund, informed Ernst & Young LLP of
its dismissal as the independent registered public accounting firm for the
Fund. The Board of Directors of the Fund approved the dismissal of Ernst &
Young LLP and the appointment of Deloitte & Touche LLP as the Fund's
independent registered public accounting firm on August 1, 2008. The reports of Ernst & Young LLP on the Fund's financial statements for
each of the last two fiscal years contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. During the Fund's two most recent
fiscal years, and through October 8, 2008, there were no disagreements with
Ernst & Young LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Ernst & Young LLP,
would have caused it to make reference to the subject matter of the
disagreements in connection with its reports on the Fund's financial
statements. Additionally, during the last two fiscal years, and during the interim
period through October 8, 2008, the Fund did not consult with Deloitte &
Touche LLP on items which concerned the application of accounting
principles to a specified transaction, either completed or proposed, or the
type of audit opinion that might be rendered on the Fund's financial
statements or concerned the subject of a disagreement (as defined in
paragraph (a) (1) (iv) of Item 304 of Regulation S-K) or reportable events
(as described in paragraph (a) (1) (v) of Item 304 of Regulation S-K).(6) New Accounting Pronouncement --
In April 2009, FASB Staff Position 157-4, Determining Fair Value when the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions that are not Orderly, was issued
and is effective for periods ending after June 25, 2009. FASB Staff
Position 157-4 is intended to provide additional guidance for estimating
fair value in accordance with FASB Statement No. 157, Fair Value
Measurements, when the volume and level of activity for the asset or
liability have significantly decreased. This FASB Staff Position also
provides guidance on identifying circumstances that indicate a transaction
is not orderly. At this point, management is evaluating the implications
of FASB Staff Position 157-4 and the impact, if any, on the Fund's
financial statements.
Report of Independent Registered Public Accounting Firm
- -------------------------------------------------------------------------------
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, 2009, and the related statements of operations and changes in net
assets and financial highlights for the year then ended. 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 audit. The statement of
changes in net assets for the year ended March 31, 2008 and the financial
highlights for the periods ended prior to March 31, 2009 were audited by other
auditors, whose report, dated May 28, 2008, expressed an unqualified opinion on
the statement of changes in net assets and financial highlights.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (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. The Fund is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Fund's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. Our
procedures included confirmation of securities owned as of March 31, 2009, by
correspondence with the custodian and brokers. We believe that our audit
provides 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 the
Nicholas Fund, Inc. as of March 31, 2009, the results of its operations, the
changes in its net assets and financial highlights for the year then ended, in
conformity with accounting principles generally accepted in the United States
of America.
Deloitte & Touche LLP
Milwaukee, Wisconsin
May 22, 2009
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 (2) Investment (3)
----------- -------------- ------------- -------------- --------------
July, 14 1969 (1) ...... $ 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 -- 19.4 474,406
March 31, 2005 ......... 60.05 0.0678 0.4100 19.4 511,476
March 31, 2006 ......... 61.49 0.2512 5.3194 18.4 574,151
March 31, 2007 ......... 57.85 0.8173 4.3310 16.6 588,783
March 31, 2008 ......... 45.03 0.2283 9.9501 17.4 550,664
March 31, 2009 ......... 27.71 0.1714(a) 4.6096(b) 12.1 376,093(1) Date of Initial Public Offering.
(2) Based on latest 12 months accomplished earnings.
(3) Assuming reinvestment of all distributions.
(a) Paid $0.0714 on June 5, 2008 to shareholders of record on June 4, 2008.
Paid $0.1000 on December 29, 2008 to shareholders of record on December 26, 2008.(b) Paid $4.6096 on June 5, 2008 to shareholders of record on June 4, 2008.
Range in quarter end price/earnings ratios since December 31, 1974
High Low
-------------------- -------------------
March 31, 2000 37.3 March 31, 1982 8.3
Approval of Investment Advisory Contract
(unaudited)
- -------------------------------------------------------------------------------
A discussion of the Approval by the Board of Directors of the Fund's Investment
Advisory Contract can be found in the Fund's Semiannual Report dated September
30, 2009.
Tax Information
March 31, 2009 (unaudited)
- ------------------------------------------------------------------------------
The Fund designates 32.74% of its June 2008 and 100% of its December 2008
ordinary income distributions as qualified dividend income under the Jobs and
Growth Tax Relief Reconciliation Act of 2003.
Also the same percentages qualify for the dividends received deduction
available to corporate shareholders.
The Fund hereby designates approximately $151,836,611 as a capital gain
dividend for the year ended March 31, 2009.
Information on Proxy Voting
(unaudited)
- -------------------------------------------------------------------------------
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 800-544-6547 (toll-free) or 414-276-0535. It
also appears in the Fund's Statement of Additional Information, which can be
found on the SEC's website, www.sec.gov. A record of how the Fund voted its
proxies for the most recent twelve-month period ended June 30, also is
available on the Fund's website, www.nicholasfunds.com, and the SEC's website,
www.sec.gov.
Quarterly Portfolio Schedule
(unaudited)
- ------------------------------------------------------------------------------
The Fund files its complete schedule of investments with the SEC for the first
and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Q's are
available on the SEC's website at www.sec.gov and may be reviewed and copied at
the SEC's Public Reference Room in Washington, D.C. Information on the
operation of the Public Reference Room may be obtained by calling 800-SEC-0330.
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,
2009. 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 and Age With Fund Time Served During Past 5 Years by Director by Director
- -----------------------------------------------------------------------------------------------------------------------INTERESTED DIRECTOR
Albert O. Nicholas, 78 (1), (3) President, (2), 40 years Chief Executive Officer, 3 None
Portfolio President, Chairman of the
Manager and Board, Nicholas Company, Inc.,
Director the Adviser to the Fund.
He is Portfolio Manager of
Nicholas Equity Income Fund, Inc.
and the Fund and Nicholas
Liberty Fund (effective
January 29, 2009).DISINTERESTED DIRECTORS
Robert H. Bock, 77 Director (2), 31 years Private Investor, Consultant, 6 None
Dean Emeritus of Business
Strategy and Ethics, University of
Wisconsin School of Business,
1997 to present.Jay H. Robertson, 57 Director (2), 6 years Private Investor, April 2000 7 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, 67 (3) Executive Annual, Executive Vice President,
Vice President 29 years Nicholas Company, Inc., the
Adviser to the Fund.Jeffrey T. May, 52 Senior Vice Annual, Executive Vice President, Chief
President, 16 years Financial Officer and Chief
Treasurer, Compliance Officer, Nicholas
Secretary and Company, Inc., the Adviser to
Chief Compliance the Fund. He is Portfolio
Officer Manager of Nicholas Money Market
Fund, Inc.David O. Nicholas, 47 (3) Senior Vice Annual, Chief Investment Officer and
President 20 years Director, Nicholas Company, Inc.,
the Adviser to the Fund.
He is Portfolio Manager
of Nicholas II, Inc. and
Nicholas Limited Edition, Inc.
He formerly was Co-Portfolio Manager
of Nicholas High Income Fund, Inc.,
Nicholas Equity Income Fund, Inc.
and the Fund.Lynn S. Nicholas, 52 (3) Senior Vice Annual, Senior Vice President, Nicholas
President 23 years Company, Inc. the Adviser to the
Fund. Lawrence J. Pavelec, 50 Senior Vice Annual, Senior Vice President, Nicholas
President 4 years Company, Inc., the Adviser to the
Fund. He has been Portfolio
Manager of Nicholas High Income Fund,
Inc. since April 2008. He served as
Co-Portfolio Manager from April 2003
until April 2008. He was a
portfolio manager for Brandes
Investment Partners from 1999 to
April 2003.Candace L. Lesak, 51 Vice President Annual, Employee, Nicholas Company, Inc.,
23 years the Adviser to the Fund.
____________________(1) Albert O. Nicholas is the only director of the Fund who is an "interested person" of the Fund,
as that term is defined in the 1940 Act. Mr. Nicholas is Chief Executive Officer, President and a Director of
the Adviser and owns 97% 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 a 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 800-544-6547 (toll-free)
or 414-276-0535.
Privacy Policy
(unaudited)
- -------------------------------------------------------------------------------
Nicholas Fund, Inc. respects each shareholder's 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 Fund.
Nicholas Fund
-------------------
$1,000 initial investment on ....................... 07/14/69* 03/31/99
Number of years investing $100 each month following
the date of initial investment .................... 39.7 10
Total cash invested ................................ $48,700 $13,000
Total dividend and capital gain distributions
reinvested ........................................ $981,185 $ 6,717
Total full shares owned at 03/31/09 ................ 20,629 326
Total market value at 03/31/09 ..................... $571,635 $10,040The 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.
Nicholas Funds Services Offered
(unaudited)
- -------------------------------------------------------------------------------
* IRAs
* Traditional * SIMPLE
* Roth * SEP* Coverdell Education Accounts
* Profit Sharing Plan
* Automatic Investment Plan
* Direct Deposit of Dividend and Capital Gain Distributions
* Systematic Withdrawal Plan with Direct Deposit
* Monthly Automatic Exchange between Funds
* Telephone Redemption
* Telephone Exchange
* 24-hour Automated Account Information (800-544-6547)
* 24-hour Internet Account Access (www.nicholasfunds.com)
Please call a shareholder representative for further information on the above
services or with any other questions you may have regarding the Nicholas Funds
(800-544-6547).
Directors and Officers
ALBERT O. NICHOLAS, President and Director
ROBERT H. BOCK, Director
JAY H. ROBERTSON, Director
DAVID L. JOHNSON, Executive Vice President
DAVID O. NICHOLAS, Senior Vice President
LYNN S. NICHOLAS, Senior Vice President
JEFFREY T. MAY, Senior Vice President, Secretary,
Treasurer and Chief Compliance Officer
LAWRENCE J. PAVELEC, Senior Vice President
CANDACE L. LESAK, Vice President
Investment Adviser
NICHOLAS COMPANY, INC.
Milwaukee, Wisconsin
www.nicholasfunds.com
414-276-0535 or 800-544-6547
Transfer Agent
U.S. BANCORP FUND SERVICES, LLC
Milwaukee, Wisconsin
414-276-0535 or 800-544-6547
Distributor
QUASAR DISTRIBUTORS, LLC
Milwaukee, Wisconsin
Custodian
U.S. BANK N.A.
Milwaukee, Wisconsin
Independent Registered Public Accounting Firm
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
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.
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
Affirmed: November 17, 2008
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. | David O. Nicholas | Jeffrey T. May |
Nicholas Limited Edition, Inc. | David O. Nicholas | Jeffrey T. May |
Nicholas Income Fund, Inc. | David 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 no member of the Board of Directors is an audit committee financial expert as that term is defined for purposes of this item. The Fund's Board of Directors routinely holds its meetings with the other six funds in the Nicholas complex, there is substantial overlap in the boards of each of those funds, auditors for funds in the Nicholas complex make presentations jointly to the boards of the funds which they audit and three of those funds have the same auditor as the Fund. The boards of directors of five of those other funds have determined that one of their members meets the definition of an audit committee financial expert; however, that person is not a director of the Fund. The Fund believes that the joint meetings and presentations with the other funds in the Nicholas complex and the availability and presence of the board member of other funds in the Nicholas complex who is an audit committee financial expert gives the Fund some of the benefit of having a board member who meets the definition of an audit committee financial expert. The Fund can call upon this person from time to time should circumstances warrant. The independent members of the Fund's Board of Directors are considering the possibility of adding that person as an independent director of the Fund and adding other independent directors; however, under present SEC rules, such additions may require that the Fund hold a meeting of the shareholders. Current SEC proposals, if adopted, may change the required percentage of independent directors for mutual funds. The Board of Directors of the Fund believes that it is not in the best interest of the Fund to hold a shareholder meeting until after such SEC proposals are finalized, at which time the Board can more easily evaluate the resulting requirements, the methods which will then be available to satisfy those requirements and the benefit to the Fund of holding a shareholder meeting.
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 $ in 2009 and $24,150 in 2008.
(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 $XX,XXX in 2009 and $5,250 in 2008. 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.
(d) All Other Fees. The aggregate fees billed for professional services rendered by the Auditor to the Fund's investment adviser were approximately $17,500 in 2008. These services were for the audit of the investment adviser for the adviser's fiscal year ended 10/31/2008. Aggregate fees billed by the registrant's prior principal accountant during 2008 in connection with the transition of the engagement to the registrant's current principal accountant were $2,000, and fees billed in 2007 were $15,750 and related to the audit of the investment advisor's fiscal year ended 10/31/2007.
(e) (1) 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 authorize the Auditor's engagements for audit and non-audit services to the Fund and its Adviser prior to each engagement.
(e) (2) The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows:
(b) N/A
(c) N/A
(d) N/A
(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.
Not applicable to this filing.
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. Portfolio Managers of Closed-End Management Investment Companies.
Applicable only to annual reports filed by closed-end funds.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers.
Applicable only to closed-end funds.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable to this filing.
Item 11. 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 12. 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: 05/29/2009
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: 05/29/2009
By: /s/ Jeffrey T. May
Name: Jeffrey T. May
Title: Principal Financial Officer
Date: 05/29/2009
