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)
411 East Wisconsin Avenue, Suite 2100, Milwaukee, Wisconsin 53202
(Address of Principal Executive Offices) (Zip Code)
Jennifer R. Kloehn, Senior Vice President and Treasurer
411 East Wisconsin Avenue, Suite 2100
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: 09/30/2024
Date of reporting period: 03/31/2024
Item 1. Report to Stockholders.
SEMIANNUAL REPORT
March 31, 2024
NICHOLAS II, INC.

WWW.NICHOLASFUNDS.COM
NICHOLAS II, INC.
May 2024
Dear Fellow Shareholders,
For the six-month period ended March 31, 2024, Nicholas II (the “Fund”) – Class I returned 22.37% compared to the Russell Midcap Growth Index of 25.42% (the “Index”).
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, 2024.
| | | | | | | | | | | | | | | |
| | | | | Average Annual Total Returns | |
| | 6 Month | | | 1 | Year | | 3 | Year | | 5 | Year | | 10 | Year |
Nicholas II, Inc. – Class I | | 22.37 | % | | 22.87 | % | | 7.21 | % | | 11.59 | % | | 10.88 | % |
Nicholas II, Inc. – Class N | | 22.18 | % | | 22.49 | % | | 6.88 | % | | 11.26 | % | | 10.52 | % |
Morningstar Mid-Cap | | | | | | | | | | | | | | | |
Growth Category | | 22.90 | % | | 23.04 | % | | 1.14 | % | | 10.63 | % | | 10.12 | % |
Russell Midcap Growth Index | | 25.42 | % | | 26.28 | % | | 4.62 | % | | 11.82 | % | | 11.35 | % |
Russell Midcap Index | | 22.52 | % | | 22.35 | % | | 6.07 | % | | 11.10 | % | | 9.95 | % |
Standard & Poor’s 500 Index | | 23.48 | % | | 29.88 | % | | 11.49 | % | | 15.05 | % | | 12.96 | % |
Ending value of $10,000 invested in | | | | | | | | | | | | | | | |
Nicholas II, Inc. – Class I | $ | 12,237 | | $ | 12,287 | | $ | 12,323 | | $ | 17,307 | | $ | 28,090 | |
Ending value of $10,000 invested in | | | | | | | | | | | | | | | |
Nicholas II, Inc. – Class N | $ | 12,218 | | $ | 12,249 | | $ | 12,209 | | $ | 17,047 | | $ | 27,189 | |
Fund’s Class I Expense Ratio (from 01/28/24 Prospectus): 0.60% | | | | | | | | | | |
Fund’s Class N Expense Ratio (from 04/30/24 Prospectus): 0.91% | | | | | | | |
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.
Unusually favorable market conditions and high returns may not be sustainable or repeated in the future.
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. 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 shares of the Fund commenced operations on February 28, 2005. The annual returns shown for the Class I shares of this Fund would be substantially similar to the Class N shares 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. Please see the respective prospectus for details.
The $64,000 question over the past year was whether the US economy would experience a hard or soft landing. Historically reliable indicators suggested a recession was likely. Aggressive Federal Reserve tightening, an inverted yield curve, tight bank lending standards, the Manufacturing PMI in contractionary territory, the Conference Board Leading Economic Index at low negative levels, consumer sentiment surveys near the lowest levels in the last 50 years, CEO confidence levels at recessionary levels, and the NFIB Small Business Optimism Index at the lowest levels in over a decade were all tangible signals that a recession was near.
However, a recession did not emerge, at least not yet. There are several hypotheses as to why this has been the case.
US consumers had a large surplus of excess savings that accumulated during the COVID-19 timeframe which they used to maintain their spending levels in the subsequent years.
While the Federal Reserve has been running restrictive monetary policy, the US Government has been running an extremely expansionary policy with the 2023 Federal budget deficit equal to 6.3% of Gross Domestic Product (GDP), a level historically experienced only during recessions when GDP is cyclically depressed.
The job market has remained strong as many companies were reticent to lay off workers due to the difficulty they experienced finding workers in recent years. Also, high inflation contributed to high nominal revenues and increased operating margins, which negated the need to cut employees to protect profitability.
While historically a Fed rate hiking campaign is restrictive, there is a counterview that the wealth effect of higher rates on the US consumer, who has almost three times the short-term interest-bearing assets as consumer debt (excluding mortgages), is actually expansionary.
While we may never know the exact answer, the reality is that the US economy has remained healthy which, along with slowing inflation, helped drive robust equity market gains over the past 16 months. As might be expected in a “risk on” market environment, stocks with low Return on Equity (ROE), high leverage, high valuations, and high betas outperformed within the Index over the past six months. This is not an ideal backdrop for the Fund’s relative performance as we prefer stocks with the exact opposite attributes: high/improving ROEs, low leverage, reasonable valuations, and low betas. Thus, it is not a surprise the Fund underperformed the Index over this time period.
For the six-month period ended March 31, 2024, all sectors held be the Fund contributed to its return. The Fund’s relative underperformance versus the Index was driven primarily by unfavorable stock selection in Industrials, Health Care, and Financials offset by favorable stock selection in Communication Services. Relative to the Index, the Fund’s overweighting of Consumer Staples, which underperformed, and an underweighting of Communication Services, which outperformed the Index, also contributed to the Fund’s relative underperformance.
The Fund’s best-performing stocks in the period were CrowdStrike Holdings (+91.53%), Burlington Stores (+71.61%), CyberArk Software (+62.20%), Chipotle Mexican Grill (+58.68%), and DexCom (+48.66%). The worst-performing stocks were Dynatrace (-0.62%), Revvity (-5.02%), Wendy’s Company (-5.17%), Paylocity Holdings (-5.42%), and Power Integrations (-5.73%). The Trade Desk, Inc. (TTD) was the lone new stock added to the Fund during the period. TTD is a demand-side platform provider of digital/programmatic buying, media planning/attribution, and data management solutions for advertisers and agencies. We believe it is well-positioned to benefit from the secular transition toward digital advertising and connected TV. We purchased TTD after it fell 17% on its 3Q23 earnings release that outlined lower guidance. This weakness appeared transitory and offered a rare opportunity to purchase the stock at a reasonable valuation, in our view.
As of March 31, 2024, the Fund owned 62 stocks and approximately 4% cash. The period-end sector weightings were Industrials 26%, Information Technology 22%, Health Care 19%, Consumer Discretionary 12%, Financials 7%, Consumer Staples 5%, Materials 3%, Real Estate 1% and Communication Services 1%. The Fund’s largest sector overweights compared to the Index were Industrials and Consumer Staples while the largest sector underweights were Financials, Energy, and Communication Services.
We believe it is extremely difficult to predict a recession, so instead of trying to predict the macroeconomic outlook, we remain focused on owning high-quality companies with sustainable competitive advantages, consistent revenue and earnings growth, strong balance sheets and
management teams, and that trade at reasonable valuations, as we believe these stocks should outperform the market over the course of time. Given the current historically high valuation of the overall market, we continue to patiently wait to purchase the stocks that meet our investment parameters.
Thank you for your continued support.
Sincerely,

| |
David O. Nicholas | Brian J. Janowski |
Lead Portfolio Manager | Co-Portfolio Manager |
Mutual fund investing involves risk. Principal loss is possible. 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 loss in a declining market.
Earnings growth is not representative of the Fund’s future performance.
Opinions expressed are subject to change at any time, are not guaranteed, and should not be considered investment advice.
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. Current and future holdings are subject to risk.
The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 27% of the total market capitalization of the Russell 1000 Index. 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 Standard & Poor’s (“S&P”) 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.
The Conference Board Leading Economic Index (LEI) provides an early indication of significant turning points in the business cycle and where the economy is heading in the near term. The LEI is a predictive variable that anticipates (or “leads”) turning points in the business cycle by around 7 months. The ten components of The Conference Board Leading Economic Index® for the U.S. include: Average weekly hours in manufacturing; Average weekly initial claims for unemployment insurance; Manufacturers’ new orders for consumer goods and materials; ISM® Index of New Orders; Manufacturers’ new orders for nondefense capital goods excluding aircraft orders; Building permits for new private housing units; S&P 500® Index of Stock Prices; Leading Credit Index™; Interest rate spread (10-year Treasury bonds less federal funds rate); Average consumer expectations for business conditions.
NFIB (National Federation of Independent Business) Small Business Optimism Index is a is a composite of ten SBET (Small Business Economic Trends) indicators that provides a monthly, summary data point for the state of the small business economy. It is a coincident indicator of the national economy, though it also offers direction for the small business sector’s immediate prospects. The ten indicators include: good time to expansion, general economic outlook, expected sales, current earnings, planned capital outlays, current job openings, hiring plans, inventory status, expected inventory change, and expected credit conditions.
Beta: A stock’s (or portfolio’s) beta measures its volatility versus an index. A stock (or portfolio) with a beta higher than 1 has tended to exhibit more volatility than the index, while a stock (or portfolio) with a beta between 0 and 1 has tended to exhibit less volatility than the index.
Earnings growth: The annual rate of growth of earnings from investments.
Gross Domestic Product (GDP): The monetary value of all the finished goods and services produced within a country’s borders in a specific time period.
Price-to-Earning (P/E): P/E is a valuation ratio of a company’s current share price compared to its per-share earnings.
Purchasing Managers Index (PMI): A measure of the prevailing direction of economic trends in manufacturing.
Return on Equity (ROE): Net income divided by common equity.
Must be preceded or accompanied by a prospectus.
The Nicholas Funds are distributed by Quasar Distributors, LLC.
– 4–
Financial Highlights Class I (NCTWX)
For a share outstanding throughout each period
| | | | | | | | | | | | | | | | | | |
| | Six Months | | | | | | | | | | | | | | | | |
| | Ended | | | | | | | | | | | | | | | | |
| | 03/31/2024 | | | | | | Years Ended September 30, | | | | |
| | (unaudited) | | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
NET ASSET VALUE, | | | | | | | | | | | | | | | | | | |
BEGINNING OF PERIOD | $ | 29.22 | | $ | 26.69 | | $ | 35.98 | | $ | 28.68 | | $ | 29.61 | | $ | 30.37 | |
INCOME (LOSS) FROM | | | | | | | | | | | | | | | | | | |
INVESTMENT OPERATIONS | | | | | | | | | | | | | | | | | | |
Net investment income(1) | | .05 | | | .11 | | | .05 | | | .05 | | | .07 | | | .10 | |
Net gain (loss) on securities | | | | | | | | | | | | | | | | | | |
(realized and unrealized) | | 6.46 | | | 3.50 | | | (5.90 | ) | | 8.45 | | | 2.21 | | | 2.08 | |
Total from | | | | | | | | | | | | | | | | | | |
investment operations | | 6.51 | | | 3.61 | | | (5.85 | ) | | 8.50 | | | 2.28 | | | 2.18 | |
LESS DISTRIBUTIONS | | | | | | | | | | | | | | | | | | |
From net investment income | | (.11 | ) | | (.06 | ) | | (.05 | ) | | (.05 | ) | | (.11 | ) | | (.18 | ) |
From net capital gain | | (.12 | ) | | (1.02 | ) | | (3.39 | ) | | (1.15 | ) | | (3.10 | ) | | (2.76 | ) |
Total distributions | | (.23 | ) | | (1.08 | ) | | (3.44 | ) | | (1.20 | ) | | (3.21 | ) | | (2.94 | ) |
NET ASSET VALUE, | | | | | | | | | | | | | | | | | | |
END OF PERIOD | $ | 35.50 | | $ | 29.22 | | $ | 26.69 | | $ | 35.98 | | $ | 28.68 | | $ | 29.61 | |
|
TOTAL RETURN | | 22.37 | %(2) | | 13.83 | % | | (18.51 | )% | | 30.26 | % | | 7.85 | % | | 9.97 | % |
|
SUPPLEMENTAL DATA: | | | | | | | | | | | | | | | | | | |
Net assets, end of period (millions) | $ | 1,068.6 | | $ | 882.4 | | $ | 798.8 | | $ | 1,031.3 | | $ | 847.7 | | $ | 828.6 | |
Ratio of expenses | | | | | | | | | | | | | | | | | | |
to average net assets. | | .59 | %(3) | | .60 | % | | .59 | % | | .59 | % | | .60 | % | | .60 | % |
Ratio of net investment income | | | | | | | | | | | | | | | | | | |
to average net assets. | | .32 | %(3) | | .39 | % | | .15 | % | | .15 | % | | .25 | % | | .34 | % |
Portfolio turnover rate | | 6.94 | %(3) | | 6.26 | % | | 15.76 | % | | 19.57 | % | | 22.89 | % | | 19.75 | % |
(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.
– 5–
Financial Highlights Class N (NNTWX)
For a share outstanding throughout each period
| | | | | | | | | | | | | | | | | | |
| | Six Months | | | | | | | | | | | | | | | | |
| | Ended | | | | | | | | | | | | | | | | |
| | 03/31/2024 | | | | | | Years Ended September 30, | | | | |
| | (unaudited) | | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
NET ASSET VALUE, | | | | | | | | | | | | | | | | | | |
BEGINNING OF PERIOD | $ | 28.16 | | $ | 25.82 | | $ | 34.97 | | $ | 27.94 | | $ | 28.91 | | $ | 29.72 | |
INCOME (LOSS) FROM | | | | | | | | | | | | | | | | | | |
INVESTMENT OPERATIONS | | | | | | | | | | | | | | | | | | |
Net investment income (loss)(1) | | (.00 | )(2) | | .03 | | | (.05 | ) | | (.05 | ) | | (.01 | ) | | (.00 | )(2) |
Net gain (loss) on securities | | | | | | | | | | | | | | | | | | |
(realized and unrealized) | | 6.23 | | | 3.38 | | | (5.71 | ) | | 8.23 | | | 2.16 | | | 2.03 | |
Total from | | | | | | | | | | | | | | | | | | |
investment operations | | 6.23 | | | 3.41 | | | (5.76 | ) | | 8.18 | | | 2.15 | | | 2.03 | |
LESS DISTRIBUTIONS | | | | | | | | | | | | | | | | | | |
From net investment income | | (.10 | ) | | (.05 | ) | | — | | | — | | | (.02 | ) | | (.08 | ) |
From net capital gain | | (.12 | ) | | (1.02 | ) | | (3.39 | ) | | (1.15 | ) | | (3.10 | ) | | (2.76 | ) |
Total distributions | | (.22 | ) | | (1.07 | ) | | (3.39 | ) | | (1.15 | ) | | (3.12 | ) | | (2.84 | ) |
NET ASSET VALUE, | | | | | | | | | | | | | | | | | | |
END OF PERIOD | $ | 34.17 | | $ | 28.16 | | $ | 25.82 | | $ | 34.97 | | $ | 27.94 | | $ | 28.91 | |
|
TOTAL RETURN | | 22.18 | %(3) | | 13.49 | % | | (18.75 | )% | | 29.85 | % | | 7.54 | % | | 9.55 | % |
|
SUPPLEMENTAL DATA: | | | | | | | | | | | | | | | | | | |
Net assets, end of period (millions) | $ | 86.5 | | $ | 72.5 | | $ | 70.1 | | $ | 95.6 | | $ | 85.0 | | $ | 96.7 | |
Ratio of expenses | | | | | | | | | | | | | | | | | | |
to average net assets. | | .91 | %(4) | | .91 | % | | .89 | % | | .89 | % | | .90 | % | | .95 | % |
Ratio of net investment income | | | | | | | | | | | | | | | | | | |
(loss) to average net assets. | | (.00 | )%(4) | | .08 | % | | (.16 | )% | | (.15 | )% | | (.05 | )% | | (.01 | )% |
Portfolio turnover rate | | 6.94 | %(4) | | 6.26 | % | | 15.76 | % | | 19.57 | % | | 22.89 | % | | 19.75 | % |
(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.
– 6–
Top Ten Equity Portfolio Holdings
March 31, 2024 (unaudited)
| | |
| Percentage | |
Name | of Net Assets | |
O’Reilly Automotive, Inc. | 2.89 | % |
CyberArk Software Ltd. | 2.44 | % |
Vulcan Materials Company | 2.28 | % |
CDW Corporation | 2.17 | % |
Westinghouse Air Brake Technologies Corporation | 2.13 | % |
PTC Inc. | 2.05 | % |
AMETEK, Inc. | 2.02 | % |
Gartner, Inc. | 2.02 | % |
Lamb Weston Holdings, Inc. | 1.94 | % |
Ulta Beauty Inc. | 1.93 | % |
Total of top ten | 21.87 | % |
Sector Diversification (as a percentage of portfolio)
March 31, 2024 (unaudited)

– 7–
Fund Expenses
For the six month period ended March 31, 2024 (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 Paid |
| | Account Value | | Account Value | | During Period* |
| | 09/30/23 | | 03/31/24 | | 10/01/23 - 03/31/24 |
Actual | $ | 1,000.00 | $ | 1,223.70 | $ | 3.28 |
Hypothetical | | 1,000.00 | | 1,022.05 | | 2.98 |
(5% return before expenses) | | | | | | |
* Expenses are equal to the Class I six-month annualized expense ratio of 0.59%, multiplied by the |
average account value over the period, multiplied by 183 then divided by 366 to reflect the |
one-half year period. |
– 8–
Fund Expenses (continued)
For the six month period ended March 31, 2024 (unaudited)
| | | | | | |
Class N | | | | | | |
| | Beginning | | Ending | | Expenses Paid |
| | Account Value | | Account Value | | During Period** |
| | 09/30/23 | | 03/31/24 | | 10/01/23 - 03/31/24 |
Actual | $ | 1,000.00 | $ | 1,221.80 | $ | 5.05 |
Hypothetical | | 1,000.00 | | 1,020.45 | | 4.60 |
(5% return before expenses) | | | | | | |
** Expenses are equal to the Class N six-month annualized expense ratio of 0.91%, multiplied by |
the average account value over the period, multiplied by 183 then divided by 366 to reflect the |
one-half year period. |
– 9–
Schedule of Investments
March 31, 2024 (unaudited)
| | | |
Shares or | | | |
Principal | | | |
Amount | | | Value |
COMMON STOCKS — 96.58% | | |
| Communication Services – Media & Entertainment — 1.08% | | |
142,905 | Trade Desk, Inc. Class A* | $ | 12,492,755 |
| Consumer Discretionary – Consumer | | |
| Discretionary Distribution & Retail — 6.56% | | |
46,070 | Burlington Stores, Inc.* | | 10,696,993 |
108,565 | CarMax, Inc.* | | 9,457,097 |
29,530 | O’Reilly Automotive, Inc.* | | 33,335,827 |
42,640 | Ulta Beauty Inc.* | | 22,295,603 |
| | | 75,785,520 |
| Consumer Discretionary – Consumer Services — 5.03% | | |
6,385 | Chipotle Mexican Grill, Inc.* | | 18,559,726 |
32,870 | Domino’s Pizza, Inc. | | 16,332,446 |
251,430 | Service Corporation International | | 18,658,620 |
244,745 | Wendy’s Company | | 4,610,996 |
| | | 58,161,788 |
| Consumer Staples – Consumer Staples | | |
| Distribution & Retail — 1.91% | | |
291,486 | BJ’s Wholesale Club Holdings, Inc.* | | 22,050,916 |
| Consumer Staples – Food, Beverage & Tobacco — 3.58% | | |
69,500 | Constellation Brands, Inc. Class A | | 18,887,320 |
210,731 | Lamb Weston Holdings, Inc. | | 22,449,173 |
| | | 41,336,493 |
| Financials – Banks — 1.08% | | |
246,480 | Webster Financial Corporation | | 12,513,790 |
| Financials – Financial Services — 5.74% | | |
70,110 | Corpay, Inc.* | | 21,631,739 |
87,281 | Jack Henry & Associates, Inc. | | 15,163,328 |
125,570 | Northern Trust Corporation | | 11,165,685 |
143,155 | Raymond James Financial, Inc. | | 18,383,965 |
| | | 66,344,717 |
| Health Care – Health Care Equipment & Services — 9.86% | | |
168,900 | Cooper Companies, Inc. | | 17,136,594 |
149,691 | DexCom, Inc.* | | 20,762,142 |
227,260 | Globus Medical Inc Class A* | | 12,190,227 |
150,250 | Hologic, Inc.* | | 11,713,490 |
77,440 | ResMed Inc. | | 15,335,443 |
83,254 | STERIS plc | | 18,717,164 |
78,000 | Veeva Systems Inc Class A* | | 18,071,820 |
| | | 113,926,880 |
The accompanying notes to financial statements are an integral part of this schedule.
– 10 –
Schedule of Investments (continued)
March 31, 2024 (unaudited)
| | | |
Shares or | | | |
Principal | | | |
Amount | | | Value |
COMMON STOCKS — 96.58% (continued) | | |
| Health Care – Pharmaceuticals, | | |
| Biotechnology & Life Sciences — 9.22% | | |
255,609 | Bio-Techne Corporation | $ | 17,992,318 |
68,606 | Charles River Laboratories International, Inc.* | | 18,588,796 |
83,070 | IQVIA Holdings Inc* | | 21,007,572 |
14,964 | Mettler-Toledo International Inc.* | | 19,921,424 |
118,455 | Revvity, Inc. | | 12,437,775 |
515,270 | Stevanato Group SpA | | 16,540,167 |
| | | 106,488,052 |
| Industrials – Capital Goods — 14.99% | | |
197,850 | A. O. Smith Corporation | | 17,699,661 |
127,500 | AMETEK, Inc. | | 23,319,750 |
211,025 | Fastenal Company | | 16,278,468 |
238,700 | Fortive Corp. | | 20,532,974 |
75,195 | IDEX Corporation | | 18,349,084 |
61,005 | L3Harris Technologies Inc | | 13,000,166 |
36,815 | Lennox International Inc. | | 17,993,699 |
77,500 | Nordson Corporation | | 21,276,850 |
169,262 | Westinghouse Air Brake Technologies Corporation | | 24,658,088 |
| | | 173,108,740 |
| Industrials – Commercial & Professional Services — 9.21% | | |
89,700 | Broadridge Financial Solutions, Inc. | | 18,375,942 |
90,685 | Paylocity Holding Corp.* | | 15,585,124 |
126,048 | RB Global, Inc. | | 9,601,076 |
106,070 | Republic Services, Inc. | | 20,306,041 |
269,765 | TransUnion | | 21,527,247 |
88,843 | Verisk Analytics Inc | | 20,942,960 |
| | | 106,338,390 |
| Industrials – Transportation — 1.69% | | |
88,920 | Old Dominion Freight Line, Inc. | | 19,501,045 |
| Information Technology – Semiconductors & | | |
| Semiconductor Equipment — 4.10% | | |
213,950 | Microchip Technology Incorporated | | 19,193,454 |
178,545 | Power Integrations, Inc. | | 12,774,895 |
141,740 | Skyworks Solutions, Inc. | | 15,353,277 |
| | | 47,321,626 |
| Information Technology – Software & Services — 14.43% | | |
61,815 | CrowdStrike Holdings, Inc. Class A* | | 19,817,271 |
106,330 | CyberArk Software Ltd.* | | 28,244,438 |
438,343 | Dynatrace, Inc.* | | 20,356,649 |
The accompanying notes to financial statements are an integral part of this schedule.
– 11 –
Schedule of Investments (continued)
March 31, 2024 (unaudited)
| | | | | |
| Shares or | | | | |
| Principal | | | | |
| Amount | | | Value | |
| COMMON STOCKS — 96.58% (continued) | | | |
| | Information Technology – | | | |
| | Software & Services — 14.43% (continued) | | | |
| 161,402 | Elastic NV* | $ | 16,178,936 | |
| 48,940 | Gartner, Inc.* | | 23,328,230 | |
| 185,257 | Okta, Inc. Class A* | | 19,381,587 | |
| 55,482 | Palo Alto Networks, Inc.* | | 15,764,101 | |
| 125,045 | PTC Inc.* | | 23,626,002 | |
| | | | 166,697,214 | |
| | Information Technology – Technology | | | |
| | Hardware & Equipment — 3.51% | | | |
| 98,195 | CDW Corporation | | 25,116,317 | |
| 36,020 | Teledyne Technologies Incorporated* | | 15,464,107 | |
| | | | 40,580,424 | |
| | Materials – Materials — 3.26% | | | |
| 78,580 | AptarGroup, Inc. | | 11,306,876 | |
| 96,460 | Vulcan Materials Company | | 26,325,863 | |
| | | | 37,632,739 | |
| | Real Estate – Real Estate Management & Development — 1.33% | | | |
| 158,175 | CBRE Group, Inc. Class A* | | 15,380,937 | |
| | TOTAL COMMON STOCKS | | | |
| | (cost $515,037,665) | | 1,115,662,026 | |
|
| SHORT-TERM INVESTMENTS — 3.44% | | | |
| | Money Market Deposit Account — 0.85% | | | |
$ | 9,749,064 | U.S. Bank Money Market, 5.24% | | 9,749,064 | |
| | Money Market Fund — 1.30% | | | |
| 15,000,000 | Morgan Stanley Institutional Liquidity Funds Government Portfolio | | | |
| | (Institutional Class), 7-day net yield, 5.222% | | 15,000,000 | |
| | U.S. Government Securities — 1.29% | | | |
| 15,000,000 | U.S. Treasury Bill 05/02/2024, 4.903% | | 14,931,807 | |
| | TOTAL SHORT-TERM INVESTMENTS | | | |
| | (cost $39,681,898) | | 39,680,871 | |
| | TOTAL INVESTMENTS | | | |
| | (cost $554,719,563) – 100.02% | | 1,155,342,897 | |
| | LIABILITIES, NET OF OTHER ASSETS – (0.02)% | | (189,381 | ) |
| | TOTAL NET ASSETS | | | |
| | (basis of percentages disclosed above) – 100% | $ | 1,155,153,516 | |
|
| * Non-income producing security. | | | |
The accompanying notes to financial statements are an integral part of this schedule.
– 12 –
Statement of Assets and Liabilities
March 31, 2024 (unaudited)
| | |
ASSETS | | |
Investments in securities at value (cost $554,719,563) | $ | 1,155,342,897 |
Receivables — | | |
Dividend and interest | | 438,845 |
Capital stock subscription | | 175,426 |
Total receivables | | 1,155,957,168 |
Other | | 58,273 |
Total assets | | 1,156,015,441 |
|
LIABILITIES | | |
Payables — | | |
Due to adviser — | | |
Management fee | | 497,783 |
Accounting and administrative fee | | 15,938 |
Total due to adviser | | 513,721 |
Capital stock redemption | | 254,385 |
12b-1 and servicing fee | | 32,189 |
Other payables and accrued expense | | 61,630 |
Total liabilities | | 861,925 |
Total net assets | $ | 1,155,153,516 |
|
NET ASSETS CONSIST OF | | |
Paid in capital | $ | 537,599,112 |
Accumulated distributable earnings | | 617,554,404 |
Total net assets | $ | 1,155,153,516 |
|
Class I | | |
Net assets | $ | 1,068,646,903 |
Shares outstanding | | 30,102,106 |
NET ASSET VALUE PER SHARE ($.01 par value, | | |
125,000,000 shares authorized), offering price and redemption price | $ | 35.50 |
|
Class N | | |
Net assets | $ | 86,506,613 |
Shares outstanding | | 2,531,893 |
NET ASSET VALUE PER SHARE ($.01 par value, | | |
75,000,000 shares authorized), offering price and redemption price | $ | 34.17 |
The accompanying notes to financial statements are an integral part of this statement.
– 13 –
Statement of Operations
For the six months ended March 31, 2024 (unaudited)
| | |
INCOME | | |
Dividend (net of foreign taxes of $17,016) | $ | 3,571,682 |
Interest | | 1,162,414 |
Total income | | 4,734,096 |
|
EXPENSES | | |
Management fee | | 2,682,752 |
Transfer agent fees | | 95,758 |
12b-1 fees – Class N | | 93,875 |
Administration services | | 85,643 |
Accounting & pricing services | | 49,496 |
Servicing fees – Class N | | 31,292 |
Registration fees | | 30,096 |
Custodian fees | | 25,553 |
Audit and tax fees | | 22,034 |
Insurance | | 19,037 |
Directors’ fees | | 12,848 |
Postage and mailing | | 12,660 |
Printing | | 10,232 |
Legal fees | | 6,154 |
Other operating expenses | | 9,739 |
Total expenses | | 3,187,169 |
Net investment income | | 1,546,927 |
|
NET REALIZED GAIN ON INVESTMENTS | | 19,230,902 |
|
CHANGE IN NET UNREALIZED | | |
APPRECIATION/DEPRECIATION ON INVESTMENTS | | 191,047,803 |
Net realized and unrealized gain on investments | | 210,278,705 |
Net increase in net assets resulting from operations | $ | 211,825,632 |
The accompanying notes to financial statements are an integral part of this statement.
– 14 –
Statements of Changes in Net Assets
For the six months ended March 31, 2024 (unaudited)
and the year ended September 30, 2023
| | | | | | |
| | Six Months Ended | | | | |
| | 03/31/2024 | | | Year Ended | |
| | (unaudited) | | | 09/30/2023 | |
INCREASE (DECREASE) IN NET ASSETS | | | | | | |
FROM OPERATIONS | | | | | | |
Net investment income | $ | 1,546,927 | | $ | 3,526,562 | |
Net realized gain on investments | | 19,230,902 | | | 7,185,745 | |
Change in net unrealized | | | | | | |
appreciation/depreciation on investments | | 191,047,803 | | | 107,541,048 | |
Net increase in net assets | | | | | | |
resulting from operations | | 211,825,632 | | | 118,253,355 | |
|
DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | |
Investment operations – Class I | | (3,954,893 | ) | | (32,017,621 | ) |
Investment operations – Class N | | (3,679,902 | ) | | (2,841,109 | ) |
Total distributions | | (7,634,795 | ) | | (34,858,730 | ) |
|
CAPITAL SHARE TRANSACTIONS | | | | | | |
Proceeds from shares issued – Class I | | | | | | |
(591,836 and 707,152 shares, respectively) | | 19,265,024 | | | 21,351,042 | |
Reinvestment of distributions – Class I | | | | | | |
(194,620 and 1,072,426 shares, respectively) | | 6,399,104 | | | 29,148,550 | |
Cost of shares redeemed – Class I | | | | | | |
(887,550 and 1,502,619 shares, respectively) | | (28,394,558 | ) | | (43,700,915 | ) |
Proceeds from shares issued – Class N | | | | | | |
(61,189 and 50,775 shares, respectively) | | 1,936,543 | | | 1,433,137 | |
Reinvestment of distributions – Class N | | | | | | |
(17,368 and 107,402 shares, respectively) | | 550,042 | | | 2,819,297 | |
Cost of shares redeemed – Class N | | | | | | |
(123,118 and 297,378 shares, respectively) | | (3,774,348 | ) | | (8,345,249 | ) |
Change in net assets derived | | | | | | |
from capital share transactions | | (4,018,193 | ) | | 2,705,862 | |
Total increase (decrease) in net assets | | 200,172,644 | | | 86,100,487 | |
|
NET ASSETS | | | | | | |
Beginning of period | | 954,980,872 | | | 868,880,385 | |
End of period | $ | 1,155,153,516 | | $ | 954,980,872 | |
The accompanying notes to financial statements are an integral part of these statements.
– 15 –
Notes to Financial Statements
March 31, 2024 (unaudited)
These financial statements have been prepared pursuant to reporting rules for interim
financial statements. Accordingly, these financial statements do not include all of the
information and footnotes required by U.S. generally accepted accounting principles
(“U.S. GAAP”) for annual financial statements. These financial statements should be read in
conjunction with the financial statements and financial highlights and notes in the Fund’s
Annual Report on Form N-CSR for the year ended September 30, 2023.
These financial statements have not been audited. Management believes that these financial
statements include all adjustments (which, unless otherwise noted, include only normal
recurring adjustments) necessary for a fair presentation of the financial results for each
period shown.
(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. Investments in shares of open-end mutual funds, including money
market funds, are valued at their daily closing net asset value. 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. Short-term investments are valued
using evaluated bid prices. 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. The Board of Directors has
delegated fair value responsibilities to Nicholas Company, Inc., the Fund’s adviser.
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
Measurement” (“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
– 16 –
Notes to Financial Statements (continued)
March 31, 2024 (unaudited)
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, 2024 in valuing the
Fund’s investments carried at value:
| | |
| | Investments |
Valuation Inputs | | in Securities |
Level 1 – | | |
Common Stocks(1) | $ | 1,115,662,026 |
Money Market Fund | | 15,000,000 |
Money Market Deposit Account | | 9,749,064 |
Level 2 – | | |
U.S. Government Securities | | 14,931,807 |
Level 3 – | | |
None | | — |
Total | $ | 1,115,342,897 |
(1) See Schedule of Investments for further detail by industry. | | |
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.
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 12b-1 fees
– 17 –
Notes to Financial Statements (continued)
March 31, 2024 (unaudited)
and shareholder servicing 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. During the period, the 12b-1 fee was 0.24% and the
service fee was 0.08%. 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.
(d) Provision has not been made for federal income taxes or excise taxes since the
Fund has elected to be taxed as a “regulated investment company” and intends to
distribute substantially all net investment income and net realized capital gains on
sales of investments to its shareholders and otherwise comply with the provisions
of Subchapter M of the Internal Revenue Code applicable to regulated investment
companies.
(e) Dividends and distributions paid to shareholders are recorded on the ex-dividend
date. Distributions from net investment income are generally declared and paid at
least 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. GAAP for financial reporting purposes. Financial reporting records
are adjusted for permanent book-to-tax differences to reflect tax character.
The tax character of distributions paid during the six months ended March 31, 2024
and the year ended September 30, 2023 was as follows:
| | | | |
| | 03/31/2024 | | 09/30/2023 |
Distributions paid from: | | | | |
Ordinary income | $ | 3,679,902 | $ | 2,013,644 |
Long-term capital gain | | 3,954,893 | | 32,845,086 |
Total distributions paid | $ | 7,634,795 | $ | 34,858,730 |
The following information for the Fund is presented on an income tax basis as of
September 30, 2023.
| | | |
Investment cost for federal tax purposes | $ | 544,447,888 | |
Unrealized appreciation | $ | 415,894,845 | |
Unrealized depreciation | | (6,319,314 | ) |
Net unrealized appreciation | $ | 409,575,531 | |
There were no differences between financial statement and tax-basis cost.
The Fund had no material uncertain tax positions and has not recorded a liability for
unrecognized tax benefits as of March 31, 2024. Also, the Fund recognized no
interest and penalties related to uncertain tax benefits during the period ended
March 31, 2024. At March 31, 2024, the fiscal years 2020 through 2023 remain
open to examination in the Fund’s major tax jurisdictions.
– 18 –
Notes to Financial Statements (continued)
March 31, 2024 (unaudited)
(f) The Fund is considered an investment company under U.S. GAAP and follows the
accounting and reporting guidance applicable to investment companies in the
Financial Accounting Standards Board (“FASB”) ASC 946, “Financial Services –
Investment Companies.” U.S. GAAP guidance requires management to make
estimates and assumptions that effect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from estimates.
(g) In the normal course of business the Fund enters into contracts that contain
general indemnification clauses. The Fund’s maximum exposure under these
arrangements is unknown, as this would involve future claims against the Fund that
have not yet occurred. Based on experience, the Fund expects the risk of loss to be
remote.
(h) 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, 2024. There have been no material subsequent events since
March 31, 2024 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 0.75% of the average net asset
value up to and including $50 million, 0.60% of the average net asset value over
$50 million up to and including $100 million and 0.50% of the average net asset
value in excess of $100 million.
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 $3,399 for the period ended March 31, 2024
for legal services rendered by this law firm.
(3) Investment Transactions —
For the period ended March 31, 2024, the cost of purchases and the proceeds from
sales of investment securities, other than short-term obligations, aggregated
$42,742,427 and $34,487,013, respectively.
– 19 –
Historical Record Class I
(unaudited)
| | | | | | | | | | | |
| | | | Net | | | | | | | |
| | | | Investment | | | | | Dollar | | Growth of |
| | Net | | Income | | | Capital Gain | | Weighted | | an Initial |
| | Asset Value | | Distributions | | | Distributions | | Price/Earnings | | $10,000 |
Class I | | Per Share | | Per Share(2) | | | Per Share(2) | | Ratio(3) | | Investment(4) |
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 |
September 30, 2011 | | 18.72 | | 0.0867 | | | 0.3831 | | 17.2 | | 126,423 |
September 30, 2012 | | 22.91 | | 0.0992 | | | 0.4903 | | 20.2 | | 159,188 |
September 30, 2013 | | 26.37 | | 0.1428 | | | 1.8746 | | 22.9 | | 200,723 |
September 30, 2014 | | 27.41 | | 0.0889 | | | 2.0445 | | 22.3 | | 225,609 |
September 30, 2015 | | 25.39 | | 0.0997 | | | 3.4844 | | 21.3 | | 237,669 |
September 30, 2016 | | 25.41 | | 0.0931 | | | 1.4736 | | 22.7 | | 252,980 |
September 30, 2017 | | 28.79 | | 0.0752 | | | 1.1754 | | 24.9 | | 301,091 |
September 30, 2018 | | 30.37 | | 0.0277 | | | 3.0205 | | 25.9 | | 352,592 |
September 30, 2019 | | 29.61 | | 0.1821 | | | 2.7546 | | 24.8 | | 387,738 |
September 30, 2020 | | 28.68 | | 0.1133 | | | 3.1017 | | 29.1 | | 418,165 |
September 30, 2021 | | 35.98 | | 0.0487 | | | 1.1473 | | 25.5 | | 544,703 |
September 30, 2022 | | 26.69 | | 0.0495 | | | 3.3930 | | 22.6 | | 443,863 |
September 30, 2023 | | 29.22 | | 0.0634 | | | 1.0161 | | 27.4 | | 505,239 |
March 31, 2024 | | 35.50 | | 0.1148 | (a) | | 0.1219 | (a) | 31.7 | | 618,245 |
(1) | Date of Initial Public Offering. |
(2) | Rounded. |
(3) | Based on latest 12 months accomplished earnings. |
(4) | Assuming reinvestment of all distributions. |
| |
(a) | Paid on December 27, 2023 to shareholders of record on December 26, 2023. |
– 20 –
Historical Record Class N
(unaudited)
| | | | | | | | | | | |
| | | | Net | | | | | | | |
| | | | Investment | | | | | Dollar | | Growth of |
| | Net | | Income | | | Capital Gain | | Weighted | | an Initial |
| | Asset Value | | Distributions | | | Distributions | | Price/Earnings | | $10,000 |
Class N | | Per Share | | Per Share(2) | | | Per Share(2) | | Ratio(3) | | Investment(4) |
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 |
September 30, 2011 | | 18.49 | | 0.0479 | | | 0.3831 | | 17.2 | | 11,741 |
September 30, 2012 | | 22.63 | | 0.0191 | | | 0.4903 | | 20.2 | | 14,732 |
September 30, 2013 | | 26.04 | | 0.0560 | | | 1.8746 | | 22.9 | | 18,516 |
September 30, 2014 | | 27.03 | | — | | | 2.0445 | | 22.3 | | 20,734 |
September 30, 2015 | | 25.00 | | 0.0002 | | | 3.4844 | | 21.3 | | 21,770 |
September 30, 2016 | | 25.00 | | — | | | 1.4736 | | 22.7 | | 23,091 |
September 30, 2017 | | 28.29 | | — | | | 1.1754 | | 24.9 | | 27,387 |
September 30, 2018 | | 29.72 | | — | | | 3.0205 | | 25.9 | | 31,972 |
September 30, 2019 | | 28.91 | | 0.0818 | | | 2.7546 | | 24.8 | | 35,025 |
September 30, 2020 | | 27.94 | | 0.0182 | | | 3.1017 | | 29.1 | | 37,666 |
September 30, 2021 | | 34.97 | | — | | | 1.1473 | | 25.5 | | 48,909 |
September 30, 2022 | | 25.82 | | — | | | 3.3930 | | 22.6 | | 39,738 |
September 30, 2023 | | 28.16 | | 0.0495 | | | 1.0161 | | 27.4 | | 45,099 |
March 31, 2024 | | 34.17 | | 0.0973 | (a) | | 0.1219 | (a) | 31.7 | | 55,103 |
(1) | Date of Initial Public Offering. |
(2) | Rounded. |
(3) | Based on latest 12 months accomplished earnings. |
(4) | Assuming reinvestment of all distributions. |
| |
(a) | Paid on December 27, 2023 to shareholders of record on December 26, 2023. |
– 21 –
Approval of Investment Advisory Contract
(unaudited)
In November 2023, 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 2024. 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, 2023, the management fee was 0.52% and the Fund’s Class I and Class N total expense ratios (including the management fee) were 0.60% and 0.91%, 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 15th, 2nd, 8th and 10th out of 23 funds for the one-, three-, five- and ten-year periods ending September 30, 2023. The Fund’s Class I had the second 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 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.
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 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 performance, strategies to improve 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.
– 22 –
Liquidity Risk Management Program
(unaudited)
The Fund has adopted and implemented a liquidity risk management program (the “Program”) in accordance with Rule 22e-4 under the 1940 Act. The Program seeks to assess and manage the Fund’s liquidity risk, i.e., the risk that the Fund is unable to satisfy redemption requests without significantly diluting remaining investors’ interests in the Fund. The Board of Directors of the Fund has designated Nicholas Company, Inc., the Fund’s investment adviser, to administer the Program. Certain aspects of the Program rely on third parties to perform certain functions, including the provision of market data and application of models.
The Program is comprised of various components designed to support the assessment and/or management of liquidity risk, including: (1) the periodic assessment (no less frequently than annually) of certain factors that influence the Fund’s liquidity risk; (2) the periodic classification (no less frequently than monthly) of the Fund’s investments into one of four liquidity categories that reflect an estimate of their liquidity under current market conditions; (3) a 15% limit on the acquisition of “illiquid investments” (as defined under Rule 22e-4); (4) for a Fund that does not invest primarily in “highly liquid investments” (as defined under Rule 22e-4), the determination of a minimum percentage of the Fund’s assets that will generally be invested in highly liquid investments (a “Highly Liquid Investment Minimum”); and (5) periodic reporting to the Board of Directors.
At a meeting of the Board of Directors on February 12, 2024, Nicholas Company, Inc. provided a written report to the Board addressing the operation, and the adequacy and effectiveness of the implementation, of the Program, including, as applicable, the operation of any Highly Liquid Investment Minimum and any material changes to the Program, for the period from January 1, 2023 through December 31, 2023 (the “Reporting Period”). Among other things, the annual report discussed: (1) the results of stress tests designed to assess liquidity under a hypothetical stressed scenario involving elevated redemptions; and (2) an assessment of the methodologies used to classify investments into one of four liquidity categories. The report concluded that the Program was reasonably designed to assess and manage liquidity risk and was adequately and effectively implemented during the Reporting Period.
There can be no assurance that the Program will achieve its objectives under all circumstances in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other risks to which it may be subject.
– 23 –
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 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 as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports 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.
– 24 –
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.
– 25 –
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 | | 10/17/1983 | * | | 03/31/2014 |
Number of years investing $100 each month | | | | | |
following the date of initial investment | | 40.5 | | | 10 |
Total cash invested | $ | 49,600 | | $ | 13,000 |
Total dividend and capital gain distributions reinvested | $ | 394,367 | | $ | 6,583 |
Total full shares owned at 03/31/2024 | | 17,602 | | | 689 |
Total market value at 03/31/2024 | $ | 624,898 | | $ | 24,479 |
The results above assume purchase on the last day of the month. The Nicholas Automatic Investment Plan actually invests on the date specified by the investor. Total market value includes reinvestment of all distributions.
* | Date of Initial Public Offering. |
– 26 –
Nicholas Funds Services Offered
(unaudited)
| | |
• | IRAs | |
| • Traditional | • SIMPLE |
| • Roth | • SEP |
• | Coverdell Education Accounts |
• | Automatic Investment Plan |
• | Direct Deposit of Dividend and Capital Gain Distributions |
• | Systematic Withdrawal Plan |
• | Monthly Automatic Exchange between Funds |
• | Telephone Purchase and 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).
– 27 –
Directors and Officers
DAVID O. NICHOLAS, President and Director
JOHN A. HAUSER, Director
DAVID P. PELISEK, Director
JULIE M. VAN CLEAVE, Director
BRIAN J. JANOWSKI, Senior Vice President
JENNIFER R. KLOEHN, Senior Vice President,
Treasurer and Chief Compliance Officer
LAWRENCE J. PAVELEC, Senior Vice President and Secretary
Investment Adviser
NICHOLAS COMPANY, INC.
Milwaukee, Wisconsin
www.nicholasfunds.com
414-276-0535 or 800-544-6547
Accountant
Dividend Disbursing Agent
Transfer Agent
U.S. BANCORP FUND SERVICES, LLC
Milwaukee, Wisconsin
414-276-0535 or 800-544-6547
Distributor
QUASAR DISTRIBUTORS, LLC
Portland, Maine
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 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 of this Form N-CSR.
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.
(a) The Fund’s principal executive officer and principal financial officer, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) are effective, based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended.
(b) There were no changes in the registrant’s internal controls over financial reporting (as defined in
Rule 30a-3(d) under the 1940 Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Applicable only to closed-end funds.
Item 13. Exhibits.
(a)(1) Sarbanes-Oxley Code of Ethics for Principal Executive and Senior Financial Officers (that is the subject of the disclosure required by Item 2).
Applicable only to annual reports.
(a)(2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2(a) under the Investment Company Act of 1940, attached hereto as 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.
(a)(4) Change in the registrant’s independent public accountant.
Not applicable to this filing.
(b) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2(b) under the Investment Company Act of 1940, attached hereto as EX-99.906 CERT.
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 30, 2024
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 30, 2024
By: /s/ Jennifer R. Kloehn
Name: Jennifer R. Kloehn
Title: Principal Financial Officer
Date: May 30, 2024