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: 09/30/2011
Date of reporting period: 03/31/2011
Item 1. Report to Stockholders.
SEMIANNUAL REPORT
March 31, 2011
NICHOLAS II, INC.
700 North Water Street
Milwaukee, Wisconsin 53202
www.nicholasfunds.comMay 2011
Dear Fellow Shareholders:
Equity markets have rebounded strongly off the lows reached during the financial crisis of 2008-2009. Although national unemployment remains high and the pace of economic expansion is more sluggish than what is typical following a deep recession, most companies are doing quite well. Corporate profits have tended to rebound strongly, balance sheets of most public companies performed well, and margins are near all-time highs. The Federal Reserve also is maintaining a very accommodating position of low interest rates and monetary stimulus. For the six-month period ending March 31, 2011, Nicholas II Class I returned 19.37% compared to the S and P 500 Index of 17.32%.
Returns for Nicholas II, Inc. Class I and Class N and selected indices are provided in the chart below for the periods ended March 31, 2011.
| | | Average Annual Total Returns |
| | 6 Month | 1 Year | 3 Year | 5 Year | 10 Year |
| Nicholas II, Inc. - Class I | 19.37% | 22.16% | 7.69% | 4.70% | 6.58% |
| Nicholas II, Inc. - Class N (linked to Class I) | 19.20% | 21.75% | 7.36% | 4.35% | 6.36% |
| Russell Midcap Growth Index | 22.96% | 26.60% | 7.63% | 4.93% | 6.94% |
| Russell 2000 Index | 25.48% | 25.79% | 8.57% | 3.35% | 7.87% |
| Morningstar Mid-Cap Growth Category | 22.68% | 25.86% | 6.68% | 4.32% | 5.91% |
| Standard and Poor's 500 Index | 17.32% | 15.65% | 2.36% | 2.62% | 3.29% |
| Ending value of $10,000 invested in Nicholas II, Inc. - Class I | $11,937 | $12,216 | $12,489 | $12,580 | $18,908 |
| Ending value of $10,000 invested in Nicholas II, Inc. - Class N (linked to Class I) | $11,920 | $12,175 | $12,376 | $12,374 | $18,530 |
| Fund's Class I Expense Ratio (from 01/31/11 Prospectus): 0.68% |
| Fund's Class N Expense Ratio (from 04/30/11 Prospectus): 1.00% |
The Fund's expense ratios for the period ended March 31, 2011 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.
During the first six months of the Fund's fiscal year, small- and mid-capitalization stocks outperformed large-caps, which is typical coming out of recessions. Also, low quality stocks that were hit hard during the recession tend to rebound more. Finally, commodity oriented securities perform well when commodity prices rise as they have through the report period end. Our investment philosophy focuses on high quality, less cyclical companies which tend to do better in the later part of an economic cycle. That being said, we were pleased with the performance of the Fund during this period of recovery.
The Fund's performance for the semiannual period was driven by stock selection in the information technology and consumer discretionary sectors where fundamentals were strong. Performance was also strong in the industrial and energy sectors as the economic recovery drove strong demand. The healthcare sector was a detractor from performance due to concerns about the new healthcare law, high unemployment, and insurance companies conscious efforts to hold down costs of medical procedures. The Fund's underperformance for the one-year period ended March 31, 2011 as compared to the mid-cap indices, stems from underweighting in the energy and material sectors which were good performers due to the aforementioned increase in commodity prices.
Currently, the portfolio is well diversified with approximately 23% in technology, 21% consumer related, 17% industrials, 14% healthcare, 11% financials, and about 4 % in both the energy and materials sectors.
Looking forward, stocks, in particular small- and mid-size company stocks, have had big recoveries off the lows of 2008 leaving valuations at more normal levels. The economy has started to recover, albeit at a tepid pace due to slow hiring and slow-to-recover housing markets. We think this type of economy will be in place for quite a while. As always, we remain focused on owning companies that have solid balance sheets and good outlooks for growth. We believe that fundamental research and stock selection will be critical to investment success in this current environment.
Thank you for your continued support.
/s/ David O. Nicholas
David O. Nicholas
Portfolio Manager
The Fund may invest in smaller companies, which involve additional risks such as limited liquidity and greater volatility.
Diversification does not assure a profit or protect against a loss in a declining market.
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. (05/11)
Financial Highlights Class I (NCTWX)
For a share outstanding throughout each period
---------------------------------------------------------------------------------------------------
Six Months Years Ended September 30,
Ended 03/31/2011 --------------------------------------------------
(unaudited) 2010 2009 2008 2007 2006
---------------- ------ ------ ------ ------ ------
NET ASSET VALUE,
BEGINNING OF PERIOD ......... $19.31 $17.02 $19.15 $25.18 $23.11 $23.50
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
Net investment income(1) .. .05 .08 .11 .10 .08 .04
Net gain (loss) on
securities (realized and
unrealized) .............. 3.66 2.31 (1.01) (3.46) 3.10 1.73
------ ------ ------ ------ ------ ------
Total from investment
operations ............ 3.71 2.39 (.90) (3.36) 3.18 1.77
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment income (.09) (.10) (.11) (.10) (.06) (.01)
From net capital gain ..... (.38) -- (1.12) (2.57) (1.05) (2.15)
------ ------ ------ ------ ------ ------
Total distributions .... (.47) (.10) (1.23) (2.67) (1.11) (2.16)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END
OF PERIOD ................... $22.55 $19.31 $17.02 $19.15 $25.18 $23.11
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL RETURN ................. 19.37%(2) 14.06% (2.86)% (14.65)% 14.19% 7.85%
SUPPLEMENTAL DATA:
Net assets, end of
period (millions) ........... $490.5 $418.0 $384.7 $421.8 $539.9 $536.8
Ratio of expenses to
average net assets .......... .65%(3) .68% .72% .67% .66% .67%
Ratio of net investment
income to average net assets .48%(3) .44% .78% .44% .34% .19%
Portfolio turnover rate ...... 13.37%(3) 28.67% 32.86% 27.48% 19.56% 16.90%
(1) Computed based on average shares outstanding.
(2) Not annualized.
(3) Annualized.
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
---------------------------------------------------------------------------------------------------
Six Months Years Ended September 30,
Ended 03/31/2011 --------------------------------------------------
(unaudited) 2010 2009 2008 2007 2006
---------------- ------ ------ ------ ------ ------
NET ASSET VALUE,
BEGINNING OF PERIOD ......... $19.11 $16.87 $19.04 $25.03 $23.00 $23.45
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
Net investment income
(loss)(1) ................ .01 .02 .07 .03 .00(2) (.03)
Net gain (loss) on
securities (realized and
unrealized) .............. 3.62 2.29 (1.02) (3.44) 3.08 1.71
------ ------ ------ ------ ------ ------
Total from investment
operations ............ 3.63 2.31 (.95) (3.41) 3.08 1.68
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
From net investment income (.05) (.07) (.10) (.01) -- --
From net capital gain ..... (.38) -- (1.12) (2.57) (1.05) (2.13)
------ ------ ------ ------ ------ ------
Total distributions .... (.43) (.07) (1.22) (2.58) (1.05) (2.13)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END
OF PERIOD ................... $22.31 $19.11 $16.87 $19.04 $25.03 $23.00
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL RETURN ................. 19.20%(3) 13.70% (3.17)% (14.92)% 13.77% 7.49%
SUPPLEMENTAL DATA:
Net assets, end of
period (millions) ........... $132.0 $44.1 $31.9 $1.8 $0.8 $0.8
Ratio of expenses to
average net assets .......... 1.00%(4) 1.00% .98% 1.02% 1.01% 1.02%
Ratio of net investment
income to average net assets .13%(4) .12% .48% .09% (.01)% (.16)%
Portfolio turnover rate ...... 13.37%(4) 28.67% 32.86% 27.48% 19.56% 16.90%
(1) Computed based on average shares outstanding.
(2) The amount rounds to $0.00.
(3) Not annualized.
(4) Annualized.
The accompanying notes to financial statements are an integral part of these highlights.
-------------------------------------------------------------------------------
Top Ten Equity Portfolio Holdings
March 31, 2011 (unaudited)
-------------------------------------------------------------------------------
Percentage
Name of Net Assets
---- -------------
IDEX Corporation ....................................... 1.67%
IHS Inc. - Class A ..................................... 1.57%
Altera Corporation ..................................... 1.52%
AMETEK, Inc. ........................................... 1.48%
Raymond James Financial, Inc. .......................... 1.41%
Willis Group Holdings PLC .............................. 1.41%
Microchip Technology Incorporated ...................... 1.40%
Fiserv, Inc. ........................................... 1.37%
Teradata Corporation ................................... 1.34%
Fastenal Company ....................................... 1.33%
------
Total of top ten ....................................... 14.50%
------
------
-------------------------------------------------------------------------------
Sector Diversification (as a percentage of portfolio)
March 31, 2011 (unaudited)
-------------------------------------------------------------------------------
BAR CHART PLOT POINTS
Information Technology .................................... 23.37%
Consumer Discretionary .................................... 18.24%
Industrials ............................................... 16.96%
Health Care ............................................... 13.67%
Financials ................................................ 11.17%
Energy .................................................... 5.56%
Short-Term Investments .................................... 4.47%
Materials ................................................. 3.33%
Consumer Staples .......................................... 3.23%
-------------------------------------------------------------------------------
Fund Expenses
For the six month period ended March 31, 2011 (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*
09/30/10 03/31/11 10/01/10 - 03/31/11
------------------------------------------------------------------
Actual $1,000.00 $1,193.70 $3.55
Hypothetical 1,000.00 1,021.76 3.28
(5% return before expenses) * Expenses are equal to the Class I six-month annualized expense ratio
of 0.65%, multiplied by the average account value over the period,
multiplied by 182 then divided by 365 to reflect the one-half year
period.
Class N
Beginning Ending Expenses
Account Account Paid During
Value Value Period**
09/30/10 03/31/11 10/01/10 - 03/31/11
------------------------------------------------------------------
Actual $1,000.00 $1,192.00 $5.46
Hypothetical 1,000.00 1,020.01 5.04
(5% return before expenses) ** Expenses are equal to the Class N six-month annualized expense ratio
of 1.00%, 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, 2011 (unaudited)
----------------------------------------------------------------------------------------------------
Shares or
Principal
Amount Value
---------- ------------
COMMON STOCKS -- 95.77%
Consumer Discretionary - Automobiles & Components -- 1.14%
235,000 Gentex Corporation $ 7,108,750
------------
Consumer Discretionary - Durables & Apparel -- 3.33%
190,000 Jarden Corporation 6,758,300
325,000 Newell Rubbermaid, Inc. 6,217,250
130,000 Tupperware Brands Corporation 7,762,300
------------
20,737,850
------------
Consumer Discretionary - Media -- 0.75%
100,000 DIRECTV - Class A * 4,680,000
------------
Consumer Discretionary - Retailing -- 9.16%
300,000 Aaron's, Inc. 7,608,000
165,000 CarMax, Inc. * 5,296,500
125,000 Guess?, Inc. 4,918,750
112,100 Kohl's Corporation 5,945,784
330,000 LKQ Corporation * 7,953,000
95,000 Nordstrom, Inc. 4,263,600
115,000 O'Reilly Automotive, Inc. * 6,607,900
170,000 PetSmart, Inc. 6,961,500
150,000 TJX Companies, Inc. (The) 7,459,500
------------
57,014,534
------------
Consumer Discretionary - Services -- 3.90%
155,000 Darden Restaurants, Inc. 7,615,150
290,000 InterContinental Hotels Group PLC 6,011,700
60,000 Starwood Hotels & Resorts Worldwide, Inc. 3,487,200
140,000 Yum! Brands, Inc. 7,193,200
------------
24,307,250
------------
Consumer Staples - Food, Beverage & Tobacco -- 3.24%
230,000 Hormel Foods Corporation 6,403,200
130,000 McCormick & Company, Inc. 6,217,900
110,000 Ralcorp Holdings, Inc. * 7,527,300
------------
20,148,400
------------
Energy -- 5.57%
55,000 Cameron International Corporation * 3,140,500
35,000 Concho Resources Inc. * 3,755,500
100,000 Continental Resources, Inc. * 7,147,000
102,535 Kinder Morgan Management, LLC * 6,725,260
130,000 Petrohawk Energy Corporation * 3,190,200
50,000 Range Resources Corporation 2,923,000
215,000 Weatherford International Ltd. * 4,859,000
40,000 Whiting Petroleum Corporation * 2,938,000
------------
34,678,460
------------
Financials - Banks -- 1.82%
100,000 Comerica Incorporated 3,672,000
102,637 Commerce Bancshares, Inc. 4,150,640
60,000 Cullen/Frost Bankers, Inc. 3,541,200
------------
11,363,840
------------
Financials - Diversified -- 5.50%
67,500 Affiliated Managers Group, Inc. * 7,382,475
185,000 Eaton Vance Corp. 5,964,400
175,000 MSCI Inc. * 6,443,500
230,000 Raymond James Financial, Inc. 8,795,200
85,000 T. Rowe Price Group, Inc. 5,645,700
------------
34,231,275
------------
Financials - Insurance -- 3.32%
230,000 Brown & Brown, Inc. 5,934,000
200,000 Marsh & McLennan Companies, Inc. 5,962,000
217,000 Willis Group Holdings PLC 8,758,120
------------
20,654,120
------------
Financials - Real Estate -- 0.56%
60,000 Digital Realty Trust, Inc. 3,488,400
------------
Health Care - Equipment & Services -- 6.99%
372,000 Allscripts Healthcare Solutions, Inc. * 7,808,280
25,000 Cerner Corporation * 2,780,000
205,000 DENTSPLY International Inc. 7,582,950
80,000 IDEXX Laboratories, Inc. * 6,177,600
170,000 ResMed Inc. * 5,100,000
125,000 St. Jude Medical, Inc. 6,407,500
305,000 VCA Antech, Inc. * 7,679,900
------------
43,536,230
------------
Health Care - Pharmaceuticals, Biotechnology
& Life Sciences -- 6.71%
85,000 Allergan, Inc. 6,036,700
115,000 Covance Inc. * 6,292,800
190,000 Gilead Sciences, Inc. * 8,063,600
47,500 Mettler-Toledo International Inc. * 8,170,000
115,000 Teva Pharmaceutical Industries Ltd. 5,769,550
133,920 Thermo Fisher Scientific Inc. * 7,439,256
------------
41,771,906
------------
Industrials - Capital Goods -- 8.91%
250,000 AECOM Technology Corporation * 6,932,500
210,000 AMETEK, Inc. 9,212,700
128,000 Fastenal Company 8,298,240
237,500 IDEX Corporation 10,366,875
165,000 Pentair, Inc. 6,235,350
105,000 Snap-on Incorporated 6,306,300
120,000 Westinghouse Air Brake Technologies Corporation 8,139,600
------------
55,491,565
------------
Industrials - Commercial & Professional Services -- 3.86%
110,000 IHS Inc. - Class A * 9,762,500
115,000 Manpower Inc. 7,231,200
250,000 Ritchie Bros. Auctioneers Incorporated 7,037,500
------------
24,031,200
------------
Industrials - Transportation -- 4.23%
80,000 C.H. Robinson Worldwide, Inc. 5,930,400
143,000 Expeditors International of Washington, Inc. 7,170,020
150,000 Landstar System, Inc. 6,852,000
315,000 UTi Worldwide Inc. 6,375,600
------------
26,328,020
------------
Information Technology - Hardware & Equipment -- 6.23%
185,000 FLIR Systems, Inc. 6,402,850
125,000 Harris Corporation 6,200,000
170,000 Juniper Networks, Inc. * 7,153,600
340,000 Molex Incorporated - Class A 7,034,600
300,000 QLogic Corporation * 5,565,000
163,750 Zebra Technologies Corporation - Class A * 6,425,550
------------
38,781,600
------------
Information Technology - Semiconductors &
Semiconductor Equipment -- 6.12%
215,000 Altera Corporation 9,464,300
195,000 Avago Technologies Limited 6,064,500
150,000 Linear Technology Corporation 5,044,500
228,750 Microchip Technology Incorporated 8,694,788
140,000 Skyworks Solutions, Inc. * 4,538,800
130,000 Xilinx, Inc. 4,264,000
------------
38,070,888
------------
Information Technology - Software & Services -- 11.09%
135,000 Accenture plc - Class A 7,420,950
140,000 Akamai Technologies, Inc. * 5,320,000
110,000 ANSYS, Inc. * 5,960,900
135,000 BMC Software, Inc. * 6,714,900
290,000 Broadridge Financial Solutions, Inc. 6,580,100
209,499 Fidelity National Information Services, Inc. 6,848,522
135,937 Fiserv, Inc. * 8,525,969
26,000 MasterCard Incorporated - Class A 6,544,720
215,000 Paychex, Inc. 6,742,400
165,000 Teradata Corporation * 8,365,500
------------
69,023,961
------------
Materials -- 3.34%
35,000 Air Products and Chemicals, Inc. 3,156,300
50,000 Airgas, Inc. 3,321,000
241,400 Bemis Company, Inc. 7,920,334
125,000 Ecolab Inc. 6,377,500
------------
20,775,134
------------
TOTAL COMMON STOCKS
(cost $379,589,327) 596,223,383
------------
SHORT-TERM INVESTMENTS -- 4.48%
Commercial Paper -- 4.23%
$1,500,000 Sara Lee Corporation 04/01/11, 0.28% 1,500,000
975,000 General Mills, Inc. 04/04/11, 0.25% 974,980
800,000 Integrys Energy Group, Inc. 04/04/11, 0.28% 799,981
2,000,000 Prudential Financial, Inc. 04/04/11, 0.25% 1,999,958
1,525,000 BMW US Capital, LLC 04/05/11, 0.33% 1,524,944
1,000,000 UnitedHealth Group Incorporated 04/05/11, 0.35% 999,961
2,000,000 Hitachi Capital America Corp. 04/06/11, 0.32% 1,999,911
875,000 Sherwin-Williams Company (The) 04/06/11, 0.23% 874,972
1,470,000 Clorox Company (The) 04/07/11, 0.30% 1,469,926
1,000,000 Sara Lee Corporation 04/08/11, 0.28% 999,946
800,000 UnitedHealth Group Incorporated 04/08/11, 0.35% 799,946
1,125,000 Clorox Company (The) 04/11/11, 0.30% 1,124,906
400,000 Sara Lee Corporation 04/11/11, 0.30% 399,967
600,000 Clorox Company (The) 04/12/11, 0.31% 599,943
1,000,000 Prudential Financial, Inc. 04/13/11, 0.28% 999,907
1,225,000 Prudential Financial, Inc. 04/14/11, 0.28% 1,224,876
1,000,000 BMW US Capital, LLC 04/15/11, 0.33% 999,872
1,400,000 Sara Lee Corporation 04/15/11, 0.28% 1,399,847
1,000,000 Clorox Company (The) 04/20/11, 0.30% 999,842
875,000 Prudential Financial, Inc. 04/20/11, 0.28% 874,871
1,550,000 Bemis Company, Inc. 04/21/11, 0.31% 1,549,733
975,000 H.J. Heinz Finance Company 04/26/11, 0.28% 974,810
1,250,000 Kellogg Company 04/29/11, 0.25% 1,249,757
------------
26,342,856
------------
Variable Rate Security -- 0.25%
1,525,300 American Family Financial Services, Inc. 04/01/11, 0.10%(1) 1,525,300
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $27,868,156) 27,868,156
------------
TOTAL INVESTMENTS
(cost $407,457,483) -- 100.25% 624,091,539
------------
LIABILITIES, NET OF OTHER ASSETS -- (0.25)% (1,558,256)
------------
TOTAL NET ASSETS
(basis of percentages disclosed above) -- 100% $622,533,283
------------
------------
* 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, 2011 (unaudited)
-------------------------------------------------------------------------------
ASSETS
Investments in securities at value (cost $407,457,483) .... $624,091,539
------------
Receivables -
Dividend and interest ................................ 484,712
Capital stock subscription ........................... 261,741
------------
Total receivables ............................... 746,453
------------
Other ..................................................... 68,207
------------
Total assets .................................... 624,906,199
------------LIABILITIES
Payables -
Investment securities purchased ...................... 1,931,401
Due to adviser -
Management fee .................................. 272,358
Accounting and administrative fee ............... 12,875
------------
285,233
------------
12b-1 and servicing fee .............................. 55,966
Other payables and accrued expense ................... 100,316
------------
Total liabilities ............................... 2,372,916
------------
Total net assets ................................ $622,533,283
------------
------------NET ASSETS CONSIST OF
Paid in capital ........................................... $400,201,547
Net unrealized appreciation on investments ................ 216,634,056
Accumulated undistributed net realized gain on investments 5,248,225
Accumulated undistributed net investment income ........... 449,455
------------
Total net assets ................................ $622,533,283
------------
------------
Class I:
Net assets .................................................... $490,540,364
Shares outstanding ............................................ 21,751,705
NET ASSET VALUE PER SHARE ($.01 par value,
125,000,000 shares authorized),
offering price and redemption price .......................... $22.55
------
------
Class N:
Net assets .................................................... $131,992,919
Shares outstanding ............................................ 5,915,056
NET ASSET VALUE PER SHARE ($.01 par value,
75,000,000 shares authorized),
offering price and redemption price .......................... $22.31
------
------
The accompanying notes to financial statements are an integral part of this
statement.
Statement of Operations
For the six months ended March 31, 2011 (unaudited)
-------------------------------------------------------------------------------
INCOME
Dividend (net of foreign taxes of $9,672) ................. $ 3,054,201
Interest .................................................. 42,606
-----------
Total income ......................................... 3,096,807
-----------EXPENSES
Management fee ............................................ 1,453,641
Transfer agent fees ....................................... 112,491
12b-1 fees - Class N ...................................... 110,632
Accounting and administrative fees ........................ 68,319
Servicing fees - Class N .................................. 44,253
Registration fees ......................................... 28,352
Postage and mailing ....................................... 28,319
Printing .................................................. 18,777
Audit and tax fees ........................................ 14,725
Custodian fees ............................................ 14,102
Insurance ................................................. 12,623
Directors' fees ........................................... 10,275
Accounting system and pricing service fees ................ 5,562
Legal fees ................................................ 3,990
Other operating expenses .................................. 3,360
-----------
Total expenses ....................................... 1,929,421
-----------
Net investment income ................................ 1,167,386
-----------NET REALIZED GAIN ON INVESTMENTS .............................. 5,500,177
-----------CHANGE IN NET UNREALIZED APPRECIATION/DEPRECIATION
ON INVESTMENTS ............................................... 87,925,209
-----------
Net realized and unrealized gain on investments ........... 93,425,386
-----------
Net increase in net assets resulting from operations ...... $94,592,772
-----------
-----------The accompanying notes to financial statements are an integral part of this
statement.
Statements of Changes in Net Assets
For the six months ended March 31, 2011 (unaudited) and the year ended
September 30, 2010
-------------------------------------------------------------------------------
Six Months
Ended Year Ended
03/31/2011 09/30/2010
------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income .................. $ 1,167,386 $ 1,800,419
Net realized gain on investments ....... 5,500,177 16,041,627
Change in net unrealized
appreciation/depreciation
on investments ........................ 87,925,209 39,997,236
------------ ------------
Net increase in net
assets resulting from operations . 94,592,772 57,839,282
------------ ------------DISTRIBUTIONS TO SHAREHOLDERS
From net investment income - Class I ... (1,855,287) (2,129,851)
From net realized gain
on investments - Class I .............. (8,197,926) --
From net investment income - Class N ... (189,759) (154,485)
From net realized gain
on investments - Class N .............. (1,517,676) --
------------ ------------
Total distributions ............... (11,760,648) (2,284,336)
------------ ------------CAPITAL SHARE TRANSACTIONS
Proceeds from shares issued - Class I
(523,570 and 637,825
shares, respectively) ................. 11,200,682 11,559,590
Reinvestment of distributions - Class I
(446,453 and 111,674
shares, respectively) ................. 9,446,959 1,992,262
Cost of shares redeemed - Class I
(869,363 and 1,700,297
shares, respectively) ................. (18,463,033) (30,779,416)
Proceeds from shares issued - Class N
(3,902,403 and 1,288,634
shares, respectively) ................. 81,637,427 22,917,431
Reinvestment of distributions - Class N
(81,365 and 8,723
shares, respectively) ................. 1,705,398 154,399
Cost of shares redeemed - Class N
(377,646 and 880,709
shares, respectively) ................. (7,992,795) (15,874,311)
------------ ------------
Change in net assets
derived from capital share
transactions ..................... 77,534,638 (10,030,045)
------------ ------------
Total increase in net assets ...... 160,366,762 45,524,901
------------ ------------NET ASSETS
Beginning of period .................... 462,166,521 416,641,620
------------ ------------
End of period (including accumulated
undistributed net investment income of
$449,455 and $1,327,115,
respectively) ......................... $622,533,283 $462,166,521
------------ ------------
------------ ------------
The accompanying notes to financial statements are an integral part of these
statements.
Notes to Financial Statements
March 31, 2011 (unaudited)
------------------------------------------------------------------------------
(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. U.S. Treasury Bills and commercial paper
are stated at amortized cost, which approximates market value. The
Fund did not maintain any positions in derivative instruments or
engage in hedging activities during the year. Investment transactions
for financial statement purposes are recorded on trade date. In accordance with Accounting Standards Codification ("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 such as 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 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 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, benchmark yields
bids, offers, transactions, spreads and other relationships
observed in the markets among market securities, underlying
equity of the issuer, proprietary pricing models, 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, 2011 in
valuing the Fund's investments carried at value: Investments
Valuation Inputs in Securities
-----------------------------------------------------------------
Level 1 -
Common Stocks(1) ............................... $596,223,383
Level 2 -
Commercial Paper ............................... 26,342,856
Variable Rate Security ......................... 1,525,300
Level 3 -
None ........................................... --
------------
Total ................... $624,091,539
------------
------------ (1) See Schedule of Investments for further detail by industry.
There were no significant transfers between levels during the period
ended March 31, 2011 and the Fund did not hold any Level 3 investments
during the period. (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. 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 March 31, 2011, no reclassifications
were recorded. The tax character of distributions paid during the six months ended
March 31, 2011 and the year ended September 30, 2010 was as follows: 03/31/2011 09/30/2010
---------- ----------
Distributions paid from:
Ordinary income ............ $ 2,045,046 $2,284,336
Long-term capital gain ..... 9,715,602 --
----------- ----------
Total distributions paid ... $11,760,648 $2,284,336
------------ ----------
------------ ---------- As of March 31, 2011, investment cost for federal tax purposes was
$407,708,317 and the tax basis components of net assets were as
follows: Unrealized appreciation ....................... $220,722,166
Unrealized depreciation ....................... (4,338,944)
------------
Net unrealized appreciation ................... $216,383,222
------------
------------ The difference between book-basis and tax-basis unrealized
appreciation is attributable primarily to the tax deferral of losses
from wash sales. As of the fiscal year ended September 30, 2010, the Fund realized no
post-October losses for tax purposes. As of March 31, 2011, the Fund had a tax deferral of wash loss sales
of approximately $251,000. As of fiscal year ended September 30, 2010, the Fund had no capital
loss carryforward. On December 22, 2010, the Regulated Investment Company Modernization
Act of 2010 (the "RIC Act") was enacted. The RIC Act modernizes
several of the federal income and excise tax provisions related to
regulated investment companies ("RICs"). Under the RIC Act, new
capital losses may be carried forward indefinitely, with the character
of the original loss retained. The RIC Act also contains simplification
provisions, which are aimed at preventing disqualification of a RIC
for inadvertent failures to comply with asset diversification and/or
qualifying income tests. The RIC Act exempts RICs from the
preferential dividend rule and repealed the 60-day designation
requirement for certain types of pay-through income and gains. In
addition, the RIC Act contains provisions aimed at preserving the
character of distributions made by a fiscal year RIC during the
portion of its taxable year ending after October 31 or December 31.
Except for the simplification provisions related to RIC qualification,
the RIC Act is effective for taxable years beginning after December
22, 2010. Management is currently evaluating the implications of the
RIC Act and the impact of the Funds' financial statements, if any, is
currently being assessed. The Fund had no material uncertain tax positions and has not recorded
a liability for unrecognized tax benefits as of March 31, 2011. Also,
the Fund recognized no interest and penalties related to uncertain tax
benefits in fiscal 2011. At March 31, 2011, the fiscal years 2007
through 2011 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. (g) In connection with the preparation of the Fund's financial statements,
management evaluated subsequent events after the date of the Statement
of Assets and Liabilities of March 31, 2011. There have been no
significant subsequent events since March 31, 2011 that would require
adjustment to or additional disclosure in these financial statements.(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 $1,740 for the
period ended March 31, 2011 for legal services rendered by this law
firm.(3) Investment Transactions --
For the period ended March 31, 2011, the cost of purchases and the proceeds
from sales of investment securities, other than short-term obligations,
aggregated $92,637,290 and $34,480,016, respectively.
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 1.1206 19.2 111,845
September 30, 2010 ..... 19.31 0.0957 -- 20.7 127,575
March 31, 2011 ......... 22.55 0.0867(a) 0.3831(a) 21.5 152,288Class 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 1.1206 19.2 10,457
September 30, 2010 ..... 19.11 0.0666 -- 20.7 11 890
March 31, 2011 ......... 22.31 0.0479(a) 0.3831(a) 21.5 14,173
(1) Date of Initial Public Offering.
(2) Based on latest 12 months accomplished earnings.
(3) Assuming reinvestment of all distributions.
(a) Paid on December 27, 2010 to shareholders of record on December 23, 2010.
Approval of Investment Advisory Contract
(unaudited)
-------------------------------------------------------------------------------
In October 2010, the Board of Directors of the Fund renewed the one-year term
of the Investment Advisory Agreement by and between the Fund and the Adviser
through October 2011. In connection with the renewal of the Investment
Advisory Agreement, no changes to the amount or manner of calculation of the
management fee or the terms of the agreement were proposed by the Adviser or
adopted by the Board. For the annual period ended September 30, 2010, the
management fee was 0.54% and the Fund's Class I and Class N total expense
ratios (including the management fee) were 0.68% and 1.00%, respectively. In
renewing the Investment Advisory Agreement, the Board carefully considered the
following factors on an absolute basis and relative to the Fund's peer group:
(i) the Fund's historical performance; (ii) the Fund's performance relative to
its benchmark; (iii) the expense ratios for peer group funds in the mid-cap
growth category and the Fund's risk/return profile as measured by the standard
deviation and the Sharpe Ratio; and (iv) the range and quality of the services
offered by the Adviser. The peer group fund data included mid-cap growth
focused funds with similar asset sizes, number of holdings and market
capitalizations. In terms of the peer group data used for performance
comparisons, the Fund's Class I was ranked 16th, 6th, 14th and 8th out of 19
funds for the one-, three-, five- and ten-year periods ending September 30,
2010. The Fund's Class I had the third lowest expense ratio among its peer
group.
The Board considered the range of services to be provided by the Adviser to the
Fund under the Advisory Agreement. The Board concluded that the nature, extent
and quality of the services to be provided were consistent with the terms of
the Advisory Agreement and the needs of the Fund, and that the services
provided were of a high quality.
The Board considered the investment performance of the Fund and the Adviser.
Among other things, the Board noted its consideration of the Fund's performance
relative to peer funds and its benchmarks. The Board reviewed the actual and
relative short-term and long-term performance of the Fund. The Board agreed
that the Fund demonstrated satisfactory performance with respect to its
benchmarks and peers. The Board also discussed the extent to which economies
of scale would be realized, and whether such economies were reflected in the
Fund's fee levels and concluded that the Adviser had been instrumental in
holding down Fund costs, citing consistently low fees in an environment where
fund fees have been flat or on an upward trend.
The Board considered the cost of services provided and the profits to be
realized by the Adviser from the relationship with the Fund. The Board
concluded that given the Board's focus on performance and maintaining a low fee
structure that the Adviser's profits were not relevant.
The Board compared fees and services provided by the Adviser and concluded that
the Adviser maintained a low fee structure and provided services of high
quality.
The Board determined that the Adviser had fully and adequately carried out the
terms and conditions of its contract with the Fund. The Board expressed
satisfaction with the Fund's absolute performance and management's strategies
to improve relative performance, management's control of expenses and the rate
of the management fee for the Fund and the overall level of services provided
by the Adviser.
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.
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* 03/31/01
Number of years investing $100 each month following
the date of initial investment .................... 27.5 10
Total cash invested ................................ $34,000 $13,000
Total dividend and capital gain distributions
reinvested ........................................ $105,700 $4,163
Total full shares owned at 03/31/11 ................ 6,443 877
Total market value at 03/31/11 ..................... $145,304 $19,788The results above assume purchase on the last day of the month. The Nicholas
Automatic Investment Plan actually invests on the 20th of each month (or on the
alternate date specified by the investor). Total market value includes
reinvestment of all distributions.
* Date of Initial Public Offering.
Directors and Officers
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.
Applicable only to annual reports.
Item 3. Audit Committee Financial Expert.
Applicable only to annual reports.
Item 4. Principal Accountant Fees and Services.
Applicable only to annual reports.
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: May 27, 2011
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: May 27, 2011
By: /s/ Jeffrey T. May
Name: Jeffrey T. May
Title: Principal Financial Officer
Date: May 27, 2011
