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 811-03851
Nicholas II, 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: 09/30/2009
Date of reporting period: 09/30/2009
Item 1. Report to Stockholders.
ANNUAL REPORT
September 30, 2009
NICHOLAS II, INC.
700 North Water Street
Milwaukee, Wisconsin 53202
www.nicholasfunds.com
November 2009
Dear Fellow Shareholders:
During the 12-months ended September 30, 2009, equity markets varied wildly with the market dropping 41.17% from September 30, 2008 to the bottom of the market on March 9, 2009 as measured by the Standard and Poor's 500 Index. Then from March 9, 2009 to September 30, 2009, the market rallied 58.25%. Time will tell whether the current market rebound is the beginning of a new bull market or just a recovery from oversold levels. It was basically one year ago when the financial crisis hit and the credit crunch began. Since then, governments around the world have put in place large amounts of fiscal and monetary stimulus in an attempt to stave off financial ruin. Things seem to be improving as evidenced by the 3rd quarter 2009 Gross Domestic Product ("GDP") estimated growth of 3.5% after four quarters of negative GDP. Unemployment remains stubbornly high and credit is still difficult for small businesses to get. We are looking for a slow steady recovery as deleveraging occurs throughout the system.
For the fiscal year ended September 2009, Nicholas II Class I lost 2.86% compared to a loss of 6.91% for the S&P 500 Index. Returns for Nicholas II, Inc. Class I and Class N and selected indices are provided in the chart below for the periods ended September 30, 2009.
| | Average Annual Total Returns |
| | 1 Year | 3 Year | 5 Year | 10 Year | 15 Year |
| Nicholas II, Inc. - Class I | -2.86% | -1.81% | 2.67% | 3.04% | 6.92% |
| Nicholas II, Inc. - Class N (linked to Class I) | -3.17% | -2.14% | 2.35% | 2.88% | 6.80% |
| Russell Midcap Growth Index | -0.40% | -3.10% | 3.75% | 2.18% | 7.64% |
| Russell 2000 Index | -9.55% | -4.57% | 2.41% | 4.88% | 7.32% |
| Morningstar Mid-Cap Growth Category | -3.10% | -2.83% | 3.14% | 2.88% | 7.36% |
| Standard and Poor's 500 Index | -6.91% | -5.43% | 1.02% | -0.15% | 7.62% |
| Ending value of $10,000 invested in Nicholas II, Inc. - Class I | $9,714 | $9,467 | $11,408 | $13,498 | $27,266 |
| Ending value of $10,000 invested in Nicholas II, Inc. - Class N (linked to Class I) | $9,683 | $9,372 | $11,232 | $13,289 | $26,844 |
| Fund's Class I Expense Ratio (from 01/31/09 Prospectus): 0.67% |
| Fund's Class N Expense Ratio (from 04/30/09 Prospectus): 1.08% |
The Fund's expense ratios for the period ended September 30, 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.
Class N of the Fund commenced operations on February 28, 2005. The annual returns shown for the Class I shares for this Fund would be substantially similar to the Class N because both classes of shares are invested in the same portfolio of securities. Annual returns will generally differ only to the extent that the classes do not have the same expenses. Specifically, the performance shown for the Class I shares does not reflect the 0.25% 12b-1 fee or 0.10% servicing fee that is charged to Class N shares. Subsequent to June 4, 2009, the 12b-1 fee was 0.125% and the servicing fee was 0.05%.
Performance for the year in the markets has been a bit psychotic with investor panic hitting the energy, materials, technology, and low quality sectors hardest. Once investors anticipated a recovery, these sectors then outperformed. With our philosophy of focusing on quality companies the Fund did better in the down market, while underperforming in the up market. We anticipated a slower recovery in the market because the recession was very deep. Don't forget the cruel math of big losses. If an investment declines 20%, it takes a gain of 25% to get back to even, a fall of one-third requires a rebound of 50% and a 50% decline, needs a 100% return to get back to even. Thus, we tend to be conscience of downside risk and volatility.
As of September 30, 2009, as a percent of the portfolio, the Fund has approximately 22% in healthcare, 20% in information technology, 19% in industrials, 17% in consumer related stocks, 10% in financials, 4 % in energy and 3% in materials. We continue to believe there will be a slow recovery for the economy; however, it probably will not be in a straight line up. Unemployment will most likely remain high through 2010 putting a lid on consumer spending which represents about 70% of the U.S. economy. Therefore, we are somewhat cautious in the near-term, especially considering the rebound we have seen in many stocks, particularly in the lower quality companies. Long-term, we believe stocks can perform in line with historical levels, due to recovery, worldwide economic growth, and good relative valuations.
Thank you for your continued support.
David 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 Russell Midcap Growth Index measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index measures the performance of the 2000 smallest companies in the Russell 3000 Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index. The Standard and Poor's 500 Index is a broad based unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general. One cannot invest directly in an index. Each Morningstar Category average represents a universe of Funds with similar investment objectives.
Must be preceded or accompanied by a prospectus.
The Nicholas Funds are distributed by Quasar Distributors, LLC. (11/09)
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
NICHOLAS II, INC. - CLASS I, RUSSELL MIDCAP INDEX AND RUSSELL MIDCAP GROWTH INDEX
The line graph which follows compares the initial account value and subsequent account values at the end of each of the most recently completed ten fiscal years of the Fund's Class I, to the same investment over the same period in two peer group indices. The graph assumes a $10,000 investment in the Fund's Class I and the indices at the beginning of the first fiscal year. The peer group in the graph includes the Russell Midcap Index and the Russell Midcap Growth Index. The Adviser believes the Russell Midcap Index and the Russell Midcap Growth Index are representative of the performance of small- and medium-capitalization growth companies in which the Fund primarily invests.
| Nicholas II, Inc. Class I | % Total Return | Russell Midcap Index | % Total Return | Russell Midcap Growth Index | % Total Return |
| 09/30/99 | $10,000 | | $10,000 | | $10,000 | |
| 09/30/00 | 11,649 | 16.49% | 13,164 | 31.64% | 16,038 | 60.38% |
| 09/30/01 | 9,215 | -20.89% | 10,220 | -22.37% | 7,734 | -51.78% |
| 09/30/02 | 8,294 | -9.99% | 9,302 | -8.98% | 6,536 | -15.49% |
| 09/30/03 | 10,257 | 23.66% | 12,337 | 32.63% | 9,078 | 38.89% |
| 09/30/04 | 11,831 | 15.35% | 14,872 | 20.55% | 10,320 | 13.68% |
| 09/30/05 | 13,220 | 11.74% | 18,605 | 25.10% | 12,742 | 23.47% |
| 09/30/06 | 14,257 | 7.85% | 20,385 | 9.57% | 13,637 | 7.03% |
| 09/30/07 | 16,281 | 14.19% | 24,028 | 17.87% | 16,531 | 21.22% |
| 09/30/08 | 13,895 | -14.65% | 18,655 | -22.36% | 12,456 | -24.65% |
| 09/30/09 | 13,498 | -2.86% | 17,993 | -3.55% | 12,406 | -0.40% |
The Fund's Class I 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 September 30, 2009 | Five Years Ended September 30, 2009 | Ten Years Ended September 30, 2009 |
| Average Annual Total Return | -2.86% | 2.67% | 3.04% |
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 Class I (NCTWX)
For a share outstanding throughout each period
- -------------------------------------------------------------------------
Years Ended September 30,
------------------------------------------
2009 2008 2007 2006 2005
------ ------ ------ ------ ------
NET ASSET VALUE,
BEGINNING OF PERIOD ........ $19.15 $25.18 $23.11 $23.50 $21.88
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
Net investment income .... .11(1) .10(1) .08(1) .04(1) .01
Net gain (loss) on
securities (realized and
unrealized) ............. (1.01) (3.46) 3.10 1.73 2.52
------ ------ ------ ------ ------
Total from investment
operations ........... (0.90) (3.36) 3.18 1.77 2.53
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment
income .................. (.11) (.10) (.06) (.01) --
From net capital gain .... (1.12) (2.57) (1.05) (2.15) (.91)
------ ------ ------ ------ ------
Total distributions ... (1.23) (2.67) (1.11) (2.16) (.91)
------ ------ ------ ------ ------
NET ASSET VALUE, END
OF PERIOD .................. $17.02 $19.15 $25.18 $23.11 $23.50
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN ................ (2.86)% (14.65)% 14.19% 7.85% 11.74%
SUPPLEMENTAL DATA:
Net assets, end of
period (millions) .......... $384.7 $421.8 $539.9 $536.8 $546.0
Ratio of expenses to
average net assets ......... .72% .67% .66% .67% .70%
Ratio of net investment
income to average
net assets ................. .78% .44% .34% .19% .02%
Portfolio turnover rate ..... 32.86% 27.48% 19.56% 16.90% 20.80%
(1) Computed based on average shares outstanding.
The accompanying notes to financial statements are an integral part of these
highlights.
Financial Highlights Class N (NNTWX)
For a share outstanding throughout each period
- -----------------------------------------------------------------------------------
Years Ended September 30, Period from
--------------------------------------- 02/28/2005(1)
2009 2008 2007 2006 to 09/30/2005
------ ------ ------ ------ -------------
NET ASSET VALUE,
BEGINNING OF PERIOD ...... $19.04 $25.03 $23.00 $23.45 $22.59
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
Net investment income
(loss) ................ .07(2) .03(2) (.00)(2)(3)(.03)(2) (.02)
Net gain (loss) on
securities (realized and
unrealized) ........... (1.02) (3.44) 3.08 1.71 .88
------ ------ ------ ------ -----
Total from investment
operations ......... (.95) (3.41) 3.08 1.68 .86
------ ------ ------ ------ -----
LESS DISTRIBUTIONS
From net investment
income ................ (.10) (.01) -- -- --
From net capital gain .. (1.12) (2.57) (1.05) (2.13) --
------ ------ ------ ------ ------
Total distributions . (1.22) (2.58) (1.05) (2.13) --
------ ------ ------ ------ ------
NET ASSET VALUE, END
OF PERIOD ................ $16.87 $19.04 $25.03 $23.00 $23.45
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN .............. (3.17)% (14.92)% 13.77% 7.49% 3.81%(4)
SUPPLEMENTAL DATA:
Net assets, end of
period (millions) ........ $31.9 $1.8 $0.8 $0.8 $0.5
Ratio of expenses to
average net assets ....... .98% 1.02% 1.01% 1.02% 1.06%(5)
Ratio of net investment
income (loss) to average
net assets ............... .48% .09% (.01)% (.16)% (.24)%(5)
Portfolio turnover rate ... 32.86% 27.48% 19.56% 16.90% 20.80%(5)
(1) Commencement of operations.
(2) Computed based on average shares outstanding.
(3) The amount rounds to $0.00.
(4) Not annualized.
(5) Annualized.
The accompanying notes to financial statements are an integral part of these
highlights.
- -------------------------------------------------------------------------------
Top Ten Equity Portfolio Holdings
September 30, 2009 (unaudited)
- -------------------------------------------------------------------------------
Percentage
Name of Net Assets
---- -------------
Willis Group Holdings Limited .......................... 2.08%
Fiserv, Inc. ........................................... 1.92%
Microchip Technology Incorporated ...................... 1.84%
Ecolab Inc. ............................................ 1.78%
Cintas Corporation ..................................... 1.73%
Hormel Foods Corporation ............................... 1.71%
Harris Corporation ..................................... 1.67%
Teva Pharmaceutical Industries Ltd. .................... 1.64%
Gilead Sciences, Inc. .................................. 1.62%
DENTSPLY International Inc. ............................ 1.62%
------
Total of top ten ....................................... 17.61%
------
------
- -------------------------------------------------------------------------------
Sector Diversification (As a Percentage of Portfolio)
September 30, 2009 (unaudited)
- -------------------------------------------------------------------------------
BAR CHART PLOT POINTS
Health Care ............................................... 21.93%
Information Technology .................................... 19.59%
Industrials ............................................... 18.63%
Consumer Discrectionary ................................... 10.99%
Financials ................................................ 10.43%
Consumer Staples .......................................... 5.69%
Short-Term Investments .................................... 5.33%
Energy .................................................... 4.07%
Materials ................................................. 3.34%
- -------------------------------------------------------------------------------
Fund Expenses
For the six month period ended September 30, 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 for each share class of the Fund 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
ratios for each class of the Fund and an assumed rate of return of 5% per year
before expenses, which are not the Fund's actual returns. 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.
Class I
Beginning Ending Expenses
Account Account Paid During
Value Value Period*
03/31/09 09/30/09 04/01/09 - 09/30/09
------------------------------------------------------------------
Actual $1,000.00 $1,281.60 $4.00
Hypothetical 1,000.00 1,021.49 3.55
(5% return before expenses)
* Expenses are equal to the Class I six-month annualized expense ratio
of 0.70%, multiplied by the average account value over the period,
multiplied by 183 then divided by 365 to reflect the one-half year
period.
Class N
Beginning Ending Expenses
Account Account Paid During
Value Value Period**
03/31/09 09/30/09 04/01/09 - 09/30/09
------------------------------------------------------------------
Actual $1,000.00 $1,280.00 $5.32
Hypothetical 1,000.00 1,020.34 4.71
(5% return before expenses)
** Expenses are equal to the Class N six-month annualized expense ratio
of 0.93%, multiplied by the average account value over the period,
multiplied by 183 then divided by 365 to reflect the one-half year
period.
Schedule of Investments
September 30, 2009
- -------------------------------------------------------------------------------
Shares or
Principal
Amount Value
- ----------- ---------------
COMMON STOCKS - 94.40%
Consumer Discretionary - Hotels,
Restaurants & Leisure - 1.50%
90,000 Starbucks Corporation * $ 1,858,500
130,000 Yum! Brands, Inc. 4,388,800
------------
6,247,300
------------
Consumer Discretionary - Media - 1.32%
200,000 DIRECTV Group, Inc. (The) * 5,516,000
------------
Consumer Discretionary - Retail - 6.95%
112,100 Kohl's Corporation * 6,395,305
270,000 LKQ Corporation * 5,005,800
55,000 Nordstrom, Inc. 1,679,700
165,000 O'Reilly Automotive, Inc. * 5,963,100
250,000 PetSmart, Inc. 5,437,500
120,000 TJX Companies, Inc. (The) 4,458,000
------------
28,939,405
------------
Consumer Discretionary - Services - 1.19%
145,000 Darden Restaurants, Inc. 4,948,850
-------------
Consumer Staples - Food & Staple Retail - 1.19%
138,296 CVS Caremark Corporation 4,942,699
------------
Consumer Staples - Food, Beverage & Tobacco - 4.49%
300,000 ConAgra Foods, Inc. 6,504,000
200,000 Hormel Foods Corporation 7,104,000
150,000 McCormick & Company, Inc. 5,091,000
------------
18,699,000
------------
Energy - 4.05%
17,950 Apache Corporation 1,648,348
50,000 Cameron International Corporation * 1,891,000
55,000 Continental Resources, Inc. * 2,154,350
133,582 Kinder Morgan Management, LLC * 6,325,088
35,000 Smith International, Inc. 1,004,500
95,000 Weatherford International Ltd. * 1,969,350
45,832 XTO Energy, Inc. 1,893,778
------------
16,886,414
------------
Financials - Banks - 2.42%
65,000 BancorpSouth, Inc. 1,586,650
55,000 Commerce Bancshares, Inc. 2,048,200
35,000 Cullen/Frost Bankers, Inc. 1,807,400
30,000 M & T Bank Corporation 1,869,600
345,000 Marshall & Ilsley Corporation 2,784,150
------------
10,096,000
------------
Financials - Diversified - 4.84%
67,500 Affiliated Managers Group, Inc. * 4,388,175
185,000 Eaton Vance Corp. 5,178,150
230,000 Raymond James Financial, Inc. 5,354,400
115,000 T. Rowe Price Group, Inc. 5,255,500
------------
20,176,225
------------
Financials - Insurance - 3.14%
230,000 Brown & Brown, Inc. 4,406,800
307,000 Willis Group Holdings Limited 8,663,540
------------
13,070,340
------------
Health Care - Equipment - 7.74%
195,000 DENTSPLY International Inc. 6,735,300
300,000 Hologic, Inc. * 4,902,000
95,000 IDEXX Laboratories, Inc. * 4,750,000
130,000 ResMed Inc. * 5,876,000
105,000 Smith & Nephew plc 4,736,550
135,000 St. Jude Medical, Inc. * 5,266,350
------------
32,266,200
------------
Health Care - Pharmaceuticals & Biotechnology - 10.98%
85,000 Allergan, Inc. 4,824,600
115,000 Covance Inc. * 6,227,250
80,000 Genzyme Corporation * 4,538,400
145,000 Gilead Sciences, Inc. * 6,754,100
70,000 Mettler-Toledo International Inc. * 6,341,300
200,000 Pharmaceutical Product Development, Inc. 4,388,000
135,000 Teva Pharmaceutical Industries Ltd. 6,825,600
133,920 Thermo Fisher Scientific Inc. * 5,848,286
------------
45,747,536
------------
Health Care - Services - 3.15%
117,500 DaVita, Inc. * 6,655,200
240,000 VCA Antech, Inc. * 6,453,600
------------
13,108,800
------------
Industrials - Capital Goods - 10.29%
180,000 AECOM Technology Corporation * 4,885,200
140,000 AMETEK, Inc. 4,887,400
168,000 Fastenal Company 6,501,600
237,500 IDEX Corporation 6,638,125
95,000 ITT Corporation 4,954,250
55,000 Kaydon Corporation 1,783,100
165,000 Pentair, Inc. 4,870,800
90,000 Rockwell Automation, Inc. 3,834,000
120,000 Westinghouse Air Brake Technologies
Corporation (Wabtec Corporation) 4,503,600
------------
42,858,075
------------
Industrials - Commercial Services & Supplies - 5.65%
237,500 Cintas Corporation 7,198,625
105,000 FTI Consulting, Inc. * 4,474,050
85,000 IHS Inc. - Class A * 4,346,050
70,000 Manpower Inc. 3,969,700
145,000 Ritchie Bros. Auctioneers Incorporated 3,558,300
------------
23,546,725
------------
Industrials - Transportation - 2.63%
65,000 C.H. Robinson Worldwide, Inc. 3,753,750
123,000 Expeditors International of Washington, Inc. 4,323,450
200,000 UTi Worldwide Inc. 2,896,000
------------
10,973,200
------------
Information Technology - Hardware & Equipment - 7.36%
185,000 FLIR Systems, Inc. * 5,174,450
185,000 Harris Corporation 6,956,000
170,000 Juniper Networks, Inc. * 4,593,400
300,000 QLogic Corporation * 5,160,000
165,000 Teradata Corporation * 4,540,800
163,750 Zebra Technologies Corporation - Class A * 4,246,038
------------
30,670,688
------------
Information Technology - Semiconductors
& Semiconductor Equipment - 4.36%
195,000 Altera Corporation 3,999,450
227,000 Intersil Holding Corporation 3,475,370
288,750 Microchip Technology Incorporated 7,651,875
130,000 Xilinx, Inc. 3,044,600
------------
18,171,295
------------
Information Technology - Software & Services - 7.82%
135,000 Accenture plc - Class A 5,031,450
345,000 Activision Blizzard, Inc. * 4,274,550
140,000 Akamai Technologies, Inc. * 2,755,200
80,000 ANSYS, Inc. * 2,997,600
165,937 Fiserv, Inc. * 7,998,163
136,666 Metavante Technologies, Inc. * 4,712,244
165,000 Paychex, Inc. 4,793,250
------------
32,562,457
------------
Materials - 3.33%
5,000 Airgas, Inc. 241,850
241,400 Bemis Company, Inc. 6,254,674
160,000 Ecolab Inc. 7,396,800
------------
13,893,324
------------
TOTAL COMMON STOCKS
(cost $304,608,922) 393,320,533
------------
SHORT-TERM INVESTMENTS - 5.32%
Commercial Paper - 5.01%
$1,000,000 Time Warner Cable, Inc. 10/01/09, 0.35% 1,000,000
500,000 Wisconsin Energy Corporation 10/02/09, 0.25% 499,997
715,000 BMW US Capital, LLC 10/05/09, 0.30% 714,976
700,000 Time Warner Cable, Inc. 10/05/09, 0.40% 699,969
900,000 Clorox Company (The) 10/06/09, 0.30% 899,962
1,000,000 Hitachi Capital America Corp. 10/06/09, 0.35% 999,951
1,050,000 V.F. Corporation 10/06/09, 0.25% 1,049,964
550,000 Kraft Foods Inc. 10/07/09, 0.20% 549,982
750,000 Clorox Company (The) 10/08/09, 0.25% 749,964
600,000 Time Warner Cable, Inc. 10/08/09, 0.35% 599,959
1,000,000 Integrys Energy Group, Inc. 10/09/09, 0.30% 999,933
575,000 General Mills, Inc. 10/13/09, 0.24% 574,954
575,000 Hitachi Capital America Corp. 10/13/09, 0.40% 574,923
1,175,000 CVS Corporation 10/14/09, 0.33% 1,174,860
800,000 BMW US Capital, LLC 10/15/09, 0.30% 799,907
750,000 Hitachi Capital America Corp. 10/16/09, 0.40% 749,875
500,000 BMW US Capital, LLC 10/19/09, 0.30% 499,925
875,000 Clorox Company (The) 10/19/09, 0.25% 874,891
500,000 Kraft Foods Inc. 10/20/09, 0.38% 499,900
525,000 BMW US Capital, LLC 10/22/09, 0.30% 524,908
650,000 Wisconsin Energy Corporation 10/23/09, 0.20% 649,921
500,000 H.J. Heinz Finance Company 10/26/09, 0.25% 499,913
1,500,000 Kraft Foods Inc. 10/26/09, 0.35% 1,499,635
950,000 XTO Energy Inc. 10/26/09, 0.30% 949,802
675,000 H.J. Heinz Finance Company 10/28/09, 0.25% 674,873
675,000 Time Warner Cable, Inc. 10/28/09, 0.38% 674,808
875,000 Kraft Foods Inc. 10/29/09, 0.32% 874,782
------------
20,862,534
------------
Variable Rate Security - 0.31%
1,276,221 American Family Financial Services, Inc.
10/01/09, 0.10%(1) 1,276,221
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $22,138,755) 22,138,755
------------
TOTAL INVESTMENTS
(cost $326,747,677) -- 99.72% 415,459,288
------------
OTHER ASSETS, NET OF LIABILITIES -- 0.28% 1,182,332
------------
TOTAL NET ASSETS
(basis of percentages disclosed above) -- 100% $416,641,620
------------
------------
* 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
September 30, 2009
- -------------------------------------------------------------------------------
ASSETS
Investments in securities at value (cost $326,747,677) .... $415,459,288
------------
Receivables -
Investment securities sold ........................... 2,510,869
Dividend and interest ................................ 240,988
Capital stock subscription ........................... 91,774
------------
Total receivables ............................... 2,843,631
------------
Other ..................................................... 16,156
------------
Total assets .................................... 418,319,075
------------
LIABILITIES
Payables -
Investment securities purchased ...................... 1,368,217
Due to adviser -
Management fee .................................. 183,390
Accounting and administrative fee ............... 8,450
------------
191,840
------------
12b-1 and servicing fee .............................. 19,689
Other payables and accrued expense ................... 97,709
------------
Total liabilities ............................... 1,677,455
------------
Total net assets ................................ $416,641,620
------------
------------
NET ASSETS CONSIST OF
Paid in capital ........................................... $332,696,954
Net unrealized appreciation on investments ................ 88,711,611
Accumulated net realized loss on investments .............. (6,577,977)
Accumulated undistributed net investment income ........... 1,811,032
------------
Total net assets ................................ $416,641,620
------------
------------
Class I:
Net assets .................................................... $384,716,160
Shares outstanding ............................................ 22,601,843
NET ASSET VALUE PER SHARE ($.01 par value,
125,000,000 shares authorized),
offering price and redemption price .......................... $17.02
------
------
Class N:
Net assets .................................................... $31,925,460
Shares outstanding ............................................ 1,892,286
NET ASSET VALUE PER SHARE ($.01 par value,
75,000,000 shares authorized),
offering price and redemption price .......................... $16.87
------
------
The accompanying notes to financial statements are an integral part of this
statement.
Statement of Operations
For the year ended September 30, 2009
- -------------------------------------------------------------------------------
INCOME
Dividend (net of foreign taxes of $20,396) ................ $ 4,760,030
Interest .................................................. 481,985
------------
Total income ......................................... 5,242,015
------------
EXPENSES
Management fee ............................................ 1,935,993
Transfer agent fees ....................................... 242,230
Accounting and administrative fees ........................ 88,050
Registration fees ......................................... 44,926
Postage and mailing ....................................... 44,466
12b-1 fees - Class N ...................................... 36,554
Audit and tax fees ........................................ 28,300
Printing .................................................. 26,173
Insurance ................................................. 24,308
Directors' fees ........................................... 20,550
Custodian fees ............................................ 17,609
Servicing fees - Class N .................................. 14,622
Accounting system and pricing service fees ................ 11,732
Legal fees ................................................ 10,130
Other operating expenses .................................. 7,902
------------
Total expenses ....................................... 2,553,545
------------
Net investment income ................................ 2,688,470
------------
NET REALIZED LOSS ON INVESTMENTS .............................. (6,577,978)
------------
CHANGE IN NET UNREALIZED APPRECIATION/DEPRECIATION
ON INVESTMENTS ............................................... (7,563,942)
------------
Net realized and unrealized loss on investments ........... (14,141,920)
------------
Net decrease in net assets resulting from operations ...... $(11,453,450)
------------
------------
The accompanying notes to financial statements are an integral part of this
statement.
Statements of Changes in Net Assets
For the years ended September 30, 2009 and 2008
- -------------------------------------------------------------------------------
2009 2008
------------ -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income .................. $ 2,688,470 $ 2,111,977
Net realized gain (loss)
on investments ........................ (6,577,978) 30,635,040
Change in net unrealized
appreciation/depreciation
on investments ........................ (7,563,942) (108,129,996)
------------ -------------
Net decrease in net assets
resulting from operations ........ (11,453,450) (75,382,979)
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income - Class I ... (2,318,178) (2,046,390)
From net realized gain
on investments - Class I .............. (24,232,747) (53,730,946)
From net investment income - Class N ... (91,632) (221)
From net realized gain
on investments - Class N .............. (1,059,677) (84,591)
------------ -------------
Total distributions ............... (27,702,234) (55,862,148)
------------ -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares issued - Class I
(688,157 and 344,387
shares, respectively) ................. 9,924,599 7,366,868
Reinvestment of distributions - Class I
(1,888,058 and 2,408,369
shares, respectively) ................. 24,941,246 52,526,533
Cost of shares redeemed - Class I
(2,000,126 and 2,172,037
shares, respectively) ................. (28,918,535) (47,075,150)
Proceeds from shares issued - Class N
(3,137,740 and 66,186
shares, respectively) ................. 46,503,945 1,366,998
Reinvestment of distributions - Class N
(85,441 and 3,783
shares, respectively) ................. 1,120,991 82,237
Cost of shares redeemed - Class N
(1,423,831 and 10,785
shares, respectively) ................. (21,342,519) (223,717)
------------ -------------
Change in net assets
derived from capital share
transactions ..................... 32,229,727 14,043,769
------------ -------------
Total decrease in net assets ...... (6,925,957) (117,201,358)
------------ -------------
NET ASSETS
Beginning of period .................... 423,567,577 540,768,935
------------ -------------
End of period (including accumulated
undistributed net investment
income of
$1,811,032 and $1,533,445,
respectively) ......................... $416,641,620 $ 423,567,577
------------ -------------
------------ -------------
The accompanying notes to financial statements are an integral part of these
statements.
Notes to Financial Statements
September 30, 2009
- ------------------------------------------------------------------------------
(1) Summary of Significant Accounting Policies --
Nicholas II, 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. The Fund did not maintain any positions in
derivative instruments or engage in hedging activities during the
year. 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.
In accordance with Accounting Standards Codification ("ASC") ASC
820-10, "Fair Value Measurements and Disclosures" ("ASC 820-10"), 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. ASC 820-10
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.
In April 2009, Financial Accounting Standards Board ("FASB") issued
ASC 820-10-65-4, "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" ("ASC 820-10-65-4"),
effective for interim and annual periods ending after June 15, 2009.
ASC 820-10-65-4 expands existing fair value measurement disclosure to
include a breakout of the current ASC 820 chart to add category and/or
security types.
The following is a summary of the inputs used as of September 30, 2009
in valuing the Fund's investments carried at value:
Investments
Valuation Inputs in Securities
---------------- -------------
Level 1 -
Common Stocks(1) ................ $393,320,533
Level 2 -
Commerical Paper ................ 20,862,534
Short-Term Investments .......... 1,276,221
Level 3 -
None ............................ --
------------
Total ....... $415,459,288
------------
------------
(1) See Schedule of Investments for further detail by industry.
In May 2009, FASB issued ASC 855-10, "Subsequent Events" ("ASC
855-10"). The Fund adopted ASC 855-10 which requires an entity to
recognize in the financial statements the effects of all subsequent
events that provide additional evidence about conditions that existed
at the date of the balance sheet. For non-recognized subsequent
events that must be disclosed to keep the financial statements from
being misleading, an entity will be required to disclose the nature of
the event as well as an estimate of its financial effect, or a
statement that such an estimate cannot be made. In addition, ASC
855-10 requires an entity to disclose the date through which
subsequent events have been evaluated. The Fund has evaluated
subsequent events through November 24, 2009, the date that the
financial statements were available to be issued.
In June 2009, "Generally Accepted Accounting Principles" ("ASC
105-10") was issued and is effective for interim and fiscal periods
ending after September 15, 2009. ASC 105-10 is intended to establish
the FASB Codification as the source of authoritative accounting
principles recognized by the FASB to be applied to nongovernmental
entities in preparation of financial statements in conformity with
GAAP.
(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.
Investment income, net capital gains (losses) and all expenses
incurred by the Fund are allocated based on the relative net assets of
each class, except for service fees and certain other fees and
expenses related to one class of shares.
Class N shares are subject to a 0.25% 12b-1 fee and a 0.10% servicing
fee, as described in its prospectus. Subsequent to June 04, 2009, the
12b-1 fee and servicing fee were voluntarily reduced to 0.125% and
0.05%, respectively. Income, expenses (other than expenses
attributable to a specific class), and realized and unrealized gains
and losses are allocated daily to each class of shares based upon the
relative net asset value of outstanding shares.
(e) Dividends and distributions paid to shareholders are recorded on the
ex-dividend date. Distributions from net investment income are
generally declared and paid annually. 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 September 30, 2009, reclassifications
were recorded to decrease accumulated undistributed net income and
decrease accumulated net realized loss by $1,073. This adjustment is
attributable to a distribution reclass.
The tax character of distributions paid during the years ended
September 30, was as follows:
2009 2008
------------ ------------
Distributions paid from:
Ordinary income ............ $ 2,556,518 $ 8,524,733
Long-term capital gain ..... 25,145,716 47,337,415
----------- -----------
Total distributions paid ... $27,702,234 $55,862,148
----------- -----------
----------- -----------
As of September 30, 2009, investment cost for federal tax purposes was
$326,991,745 and the tax basis components of net assets were as
follows:
Unrealized appreciation ....................... $107,949,522
Unrealized depreciation ....................... (19,481,979)
------------
Net unrealized appreciation ................... 88,467,543
------------
Undistributed ordinary income ................. 1,811,032
Accumulated net realized capital loss ......... (6,333,909)
Paid in capital ............................... 332,696,954
------------
Net assets .................................... $416,641,620
------------
------------
The differences between book-basis and tax-basis unrealized
appreciation, and accumulated realized capital loss are attributable
primarily to the tax deferral of losses from wash sales.
As of the year ended September 30, 2009, the Fund realized
post-October losses of approximately $4,785,000, which for tax
purposes, will be deferred and recognized in the following year.
As of September 30, 2009, the Fund had a tax deferral of wash loss
sales of approximately $244,000.
As of September 30, 2009, the Fund has a capital loss carryforward of
approximately $1,549,000, which expires in 2017.
Effective March 31, 2008, the Fund adopted ASC 740-10, "Accounting for
Uncertainty in Income Taxes" which 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 operating expenses" on the
Statement of Operations. The Fund had no material uncertain tax
positions and has not recorded a liability for unrecognized tax
benefits as of September 30, 2009. Also, the Fund recognized no
interest and penalties related to uncertain tax benefits in 2009. At
September 30, 2009, the fiscal years 2006 through 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, .60% of the average net asset value over $50
million up to and including $100 million and .50% of the average net
asset value in excess of $100 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 $5,630 for the
year ended September 30, 2009 for legal services rendered by this law
firm.
(3) Investment Transactions --
For the year ended September 30, 2009, the cost of purchases and the
proceeds from sales of investment securities, other than short-term
obligations, aggregated $120,889,159 and $111,211,880, respectively.
Report of Independent Registered Public Accounting Firm
- -------------------------------------------------------------------------------
To the Shareholders and Board of Directors of Nicholas II, Inc.:
We have audited the accompanying statement of assets and liabilities of
Nicholas II, Inc. (the "Fund"), including the schedule of investments, as of
September 30, 2009, and the related statement of operations for the year then
ended and the statements of changes in net assets and the financial highlights
for each of the two years in the period 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 audits. The financial highlights for the
periods ended prior to September 30, 2008 were audited by other auditors, whose
report, dated November 20, 2007, expressed an unqualified opinion on those
financial highlights.
We conducted our audits 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 audits
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 September 30, 2009,
by correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. 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 the
Nicholas II, Inc. as of September 30, 2009, the results of its operations for
the year then ended, and the changes in its net assets and the financial
highlights for each of the two years in the period then ended, in conformity
with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Milwaukee, Wisconsin
November 24, 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)
----------- -------------- ------------- -------------- --------------
Class I
October 17, 1983 (1) ... $10.00 $ -- $ -- -- $10,000
September 30, 1984 ..... 11.66 -- -- 12.6 times 11,660
September 30, 1985 ..... 14.39 0.0930 0.1860 11.7 14,742
September 30, 1986 ..... 16.90 0.1630 0.0610 15.0 17,581
September 30, 1987 ..... 21.01 0.4200 0.5130 20.9 23,108
September 30, 1988 ..... 18.58 0.3380 1.3030 15.0 22,766
September 30, 1989 ..... 21.76 0.3350 0.0800 17.1 27,291
September 30, 1990 ..... 17.39 0.3124 0.6686 14.8 22,888
September 30, 1991 ..... 23.87 0.3422 0.1434 17.8 32,250
September 30, 1992 ..... 24.53 0.2447 0.4042 17.3 34,052
September 30, 1993 ..... 26.94 0.2350 0.8000 18.1 38,885
September 30, 1994 ..... 26.71 0.2000 1.4700 18.5 41,020
September 30, 1995 ..... 30.07 0.2056 1.8944 20.8 50,205
September 30, 1996 ..... 33.34 0.1750 2.4979 28.9 60,922
September 30, 1997 ..... 40.65 0.0779 3.1621 31.4 82,206
September 30, 1998 ..... 34.78 0.0810 5.2282 28.6 80,845
September 30, 1999 ..... 31.83 0.1337 4.0049 29.0 82,864
September 30, 2000 ..... 36.58 0.0100 0.4701 35.1 96,527
September 30, 2001 ..... 17.54 -- 13.1200 23.4 76,361
September 30, 2002 ..... 15.34 -- 0.5766 22.2 68,730
September 30, 2003 ..... 18.97 -- -- 22.9 84,994
September 30, 2004 ..... 21.88 -- 0.0015 22.9 98,040
September 30, 2005 ..... 23.50 -- 0.9146 23.3 109,547
September 30, 2006 ..... 23.11 0.0083 2.1472 22.4 118,142
September 30, 2007 ..... 25.18 0.0643 1.0460 23.4 134,908
September 30, 2008 ..... 19.15 0.0978 2.5678 17.5 115,141
September 30, 2009 ..... 17.02 0.1072(a) 1.1206(a) 19.2 111,845
Class N
February 28, 2005 (1) .. $22.59 $ -- $ -- 23.1 times $10,000
September 30, 2005 ..... 23.45 -- -- 23.3 10,381
September 30, 2006 ..... 23.00 -- 2.1340 22.4 11,158
September 30, 2007 ..... 25.03 -- 1.0460 23.4 12,694
September 30, 2008 ..... 19.04 0.0067 2.5678 17.5 10,800
September 30, 2009 ..... 16.87 0.0969(a) 1.1206(a) 19.2 10,457
(1) Date of Initial Public Offering.
(2) Based on latest 12 months accomplished earnings.
(3) Assuming reinvestment of all distributions.
(a) Paid December 26, 2008 to shareholders of record on December 24, 2008.
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 March 31,
2009.
Tax Information
September 30, 2009 (unaudited)
- ------------------------------------------------------------------------------
The Fund designates 100% of its ordinary income distribution for the year ended
September 30, 2009 as qualified dividend income under the Jobs and Growth Tax
Relief Reconciliation Act of 2003.
For the year ended September 30, 2009, 100% of the dividends paid from net
ordinary income qualify for the dividends received deduction available to
corporate shareholders. .
The Fund hereby designates $25,145,716 as a capital gain dividend for the year
ended September 30, 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 September
30, 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
David O. Nicholas, 48 (1), (3) President, (2), 5 years Chief Investment Officer 3 None
Director and and Director, Nicholas
Portfolio Company, Inc., the Adviser
Manager to the Fund. He is the
Portfolio Manager of Nicholas
Limited Edition, Inc.
and the Fund. He formerly
served as Co-Portfolio
Manager of Nicholas Fund, Inc.,
Nicholas High Income Fund, Inc.
and Nicholas Equity Income
Fund, Inc.
DISINTERESTED DIRECTORS
Robert H. Bock, 77 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.
Timothy P. Reiland, 53 Director (2), 7 years Private Investor, Consultant, 5 None
Chairman and Chief Financial
Officer, Musicnotes, Inc.,
October 2001 to present.
Investment Analyst from 1987
to October 2001, Tucker Anthony
Incorporated, a brokerage firm.
He is a Chartered Financial
Analyst.
Jay H. Robertson, 57 Director (2), 5 years Private Investor, April 2000 6 None
to present. Chairman of the
Board of Robertson-Ryan and
Associates, Inc., an insurance
brokerage firm from 1993 to
March 2000.
OFFICERS
Albert O. Nicholas, 78 (3) Executive Annual, Chief Executive Officer and
Vice President 26 years Chairman of the Board, Nicholas
Company, Inc., the Adviser to
the Fund. He is Portfolio
Manager of Nicholas Fund, Inc.
and Nicholas Equity Income
Fund, Inc. He was a Director
of the Fund until October 29, 2004.
David L. Johnson, 67 (3) Executive Annual, Executive Vice President,
Vice President 26 years Nicholas Company, Inc., the
Adviser to the Fund.
Jeffrey T. May, 53 Senior Vice Annual, Executive Vice President, Chief
President, 17 years Financial Officer and Chief Compliance
Secretary, Officer, Nicholas Company, Inc.,
Treasurer the Adviser to the Fund. He is
and Chief Portfolio Manager of Nicholas
Compliance Money Market Fund, Inc.
Officer
Lynn S. Nicholas, 53 (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 5 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.
Candace L. Lesak, 52 Vice President Annual, Employee, Nicholas Company, Inc.,
23 years the Adviser to the Fund.
____________________
(1) David 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 a Director of
the Adviser and owns 1% 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 II, 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.
Nicholas II - Class I
--------------------
$1,000 initial investment on ....................... 10/17/83* 09/30/99
Number of years investing $100 each month following
the date of initial investment .................... 26 10
Total cash invested ................................ $32,200 $13,000
Total dividend and capital gain distributions
reinvested ........................................ $102,155 $5,495
Total full shares owned at 09/30/09 ................ 6,175 885
Total market value at 09/30/09 ..................... $105,114 $15,075
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.
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
DAVID O. NICHOLAS, President and Director
ROBERT H. BOCK, Director
TIMOTHY P. REILAND, Director
JAY H. ROBERTSON, Director
ALBERT O. NICHOLAS, Executive Vice President
DAVID L. JOHNSON, Executive Vice President
JEFFREY T. MAY, Senior Vice President, Secretary,
Treasurer and Chief Compliance Officer
LYNN S. NICHOLAS, Senior Vice President
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 24, 2009
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 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 $24,700 in 2009 and $24,000 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 $3,600 in 2009 and $3,500 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 II, Inc.
By: /s/ David O. Nicholas
Name: David O. Nicholas
Title: Principal Executive Officer
Date: November 24, 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/ David O. Nicholas
Name: David O. Nicholas
Title: Principal Executive Officer
Date: November 24, 2009
By: /s/ Jeffrey T. May
Name: Jeffrey T. May
Title: Principal Financial Officer
Date: November 24, 2009
