PROSPECTUS
J ULY
29,
2023
Nicholas Equity Income Fund, Inc. – NSEIX
Nicholas Equity Income Fund, Inc. – NSEIX
![[image]](g528145nei485bpos072023x2x1.jpg)
Nicholas
Equity Income Fund, Inc.’s (the “Fund”)
primary investment objective is to produce reasonable income and
the Fund’s secondary goal is moderate long-term growth.
The Securities and Exchange Commission has not approved or disapproved of
the Fund’s shares or determined whether this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
WWW.NICHOLASFUNDS.COM
primary investment objective is to produce reasonable income and
the Fund’s secondary goal is moderate long-term growth.
The Securities and Exchange Commission has not approved or disapproved of
the Fund’s shares or determined whether this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
WWW.NICHOLASFUNDS.COM
The
table below describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. You may pay other fees, such as brokerage commissions and
other fees to financial intermediaries, which are not reflected in the tables
and examples below.
| Maximum Sales Charge (Load) Imposed on Purchases | |||
| Maximum Deferred Sales Charge (Load) | |||
| Maximum Sales Charge (Load) Imposed on Reinvested Dividends | |||
| Wire Redemption Fee | $ | ||
| Exchange Fee | |||
| Management Fees | % | ||
| Distribution (12b-1) Fees | |||
| Other Expenses | % | ||
| Total Annual Fund Operating Expenses | % |
| One | Three | Five | Ten | |||||
| Year | Years | Years | Years | |||||
| $ | $ | $ | $ |
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
18.75 % of the average
value of the portfolio.
To
achieve reasonable income, the Fund seeks an income yield that exceeds the
corporate dividend yield on the securities included in the Standard & Poor’s
500 Composite Stock Price Index (“S&P 500 Index”). The market capitalization
of the securities held by the Fund as of June 30, 2023 ranged from a low of $2.1
billion to a high of $2.5 trillion. To achieve moderate long-term growth, the
Fund seeks a five-year return which approximates three-fourths of the average
total return achieved over a five-year period on the S&P 500
Index.
1
To
pursue the Fund’s investment objectives, the Fund invests in a diversified
portfolio of income-producing equity securities (including common stocks,
preferred stocks and convertible securities) and corporate and government fixed
income investments (including notes, bonds and debentures). The Fund is not
managed as a balanced portfolio. The Fund invests, under normal market
conditions, at least 80% of its net assets in equity securities. The Fund’s
Board of Directors may change this policy without shareholder approval. However,
the Fund will not change this policy of investing at least 80% of its net assets
in equity securities without first changing the Fund’s name and providing at
least 60 days prior notice to shareholders. The Fund’s asset allocation is
determined by its Adviser, Nicholas Company, Inc. (the “Adviser”), at any given
time in light of its assessment of current economic conditions and investment
opportunities.
In
selecting investments, the Adviser performs its own credit analysis on the
credit quality of issuers. In this evaluation, the Adviser considers, among
other things, the issuer’s financial resources, its sensitivity to economic
conditions and trends, its operating history, the quality of the issuer’s
management and regulatory
matters.
The
Fund may invest in both investment grade and non-investment grade securities and
its investments may include both rated and unrated securities. The Fund is
subject to the following restriction: at time of investment, not more than 20%
of the Fund’s total assets may be invested in non-investment grade preferred
stocks, convertible securities and debt securities. The Fund invests in both
short-term and long-term debt securities and is not limited as to the maturities
of the securities in which it invests. The Fund may invest in Real Estate
Investment Trusts (“REITs”) and other real estate-based
securities.
As
with any mutual fund, the Fund cannot guarantee that it will meet its goals or
that its performance will be positive over any period of time. The Fund’s
investments change in value. Consequently, the value of your Fund shares may
change. If the value of the Fund shares or the
values of the Fund’s investments go down, you may lose
money.
The
principal risks of investing in the Fund are:
- Stock Market Risk – Stock market risk involves the possibility that the value of the Fund’s investments in equity securities will decrease because of declines in the stock market, regardless of the success or failure of the operations of the Fund’s portfolio companies. At other times, there are specific factors that may adversely affect the value of a particular investment of the Fund.
- Portfolio-Specific Risk – From time to time, the value of an individual company may decline due to a particular set of circumstances affecting that company, its industry or certain companies within the industry, while having little or no impact on other similar companies within the industry. Although the Fund will invest most of its assets in the securities of medium- and large- sized companies, the Fund may face additional risks due to its investments in small-sized companies. Securities of small- to medium-sized companies often fluctuate in price more than common stocks of larger companies.
- Credit Risk – Credit risk involves the possibility that the issuers of securities held in the Fund’s portfolio may fail to make timely interest and principal payments. The Fund’s investments may include non-investment grade securities (securities with lower credit qualities) which recognized rating agencies consider speculative with respect to the issuer’s continuing ability to pay interest or principal.
- Interest Rate Risk – Interest rate risk refers to the risk that the prices of the Fund’s investments, particularly fixed income investments, are likely to fall if interest rates rise. This is because the prices of debt securities typically move in the opposite direction of interest rates. Debt securities with longer maturities generally are affected to a greater degree than debt securities with shorter maturities. Because the Fund does not have a policy limiting the maturity of its investments, and the Fund may invest in debt securities with longer maturities, the Fund may be subject to greater interest rate risk than a fund that primarily invests in short-term debt securities.
2
In
addition, the income you receive from the Fund is based in part on interest
rates which can vary widely
over the short- and long-term. If interest rates decline, your income from the
Fund may decline
as well.
- Selection Risk – The Fund also faces selection risk, which is the risk that the investments the Fund purchases will underperform markets or other mutual funds with similar investment objectives and strategies.
- Risks Related to Preferred Stock and Convertible Investments – Preferred stocks may provide a higher dividend rate than the interest yield on debt securities of the same issuer, but are subject to greater risk of fluctuation in market value and greater risk of non-receipt of income. Preferred stocks are in many ways like perpetual debt securities, providing a stream of income but without a stated maturity date. Because they often lack a fixed maturity or redemption date, preferred stocks are likely to fluctuate substantially in price when interest rates change. The value of convertible preferred stock and debt securities convertible into common stock generally will be affected by its stated dividend rate or interest rate, as applicable, and the value of the underlying common stock.
As a result of the conversion feature, the dividend rate or interest rate on convertible preferred stock or convertible debt securities generally is less than would be the case if the security were not convertible. Therefore, the value of convertible preferred stock and convertible debt securities will be affected by the factors that affect both equity securities (such as stock market movements) and debt securities (such as interest rates). Some convertible securities might require the Fund to sell the securities back to the issuer or a third party at a time that is disadvantageous to the Fund. - Investments in Unrated Debt Securities – Although unrated securities are not necessarily of lower quality than rated securities, the market for them may not be as liquid and thus they may carry greater market risk and a higher yield than rated securities.
- High Yield Bond Market Risk – The entire high yield bond market can experience sudden and sharp price swings due to a variety of factors, including changes in economic forecasts, stock market activity, large sustained sales by major investors, a high-profile default or just a change in the market’s volatility.
- Call Risk – If interest rates fall, it is possible that issuers of bonds with high interest rates will prepay or “call” their bonds before their maturity dates. In such event, the proceeds could be reinvested by the Fund in bonds with the new, lower interest rates, resulting in a possible decline in the Fund’s income and distributions to shareholders.
- Risks Related to Investments in REITs and Other Real Estate-Based Securities – These securities are subject to risks related to the real estate industry. The performance of these securities is dependent on the types and locations of the properties owned by the entities issuing the securities and how well the properties are managed. In addition, these securities also are subject to market risk (the risk that stock prices overall will decline over short or even extended periods) and interest rate risk (the risk that the prices of these securities will decrease if interest rates rise).
- Public Health Threats Risk – Threats to public health can have a negative impact on the global economy and financial markets, which could adversely affect the securities held by the Fund.
Impacts of public health threats may last for an extended period of time and result in a substantial economic downturn. Health crises caused by outbreaks, such as the coronavirus (COVID-19) outbreak, may exacerbate other pre-existing political, social and economic risks and disrupt normal market conditions and operations. The impact of this outbreak, and other epidemics and pandemics that may arise in the future, could negatively affect the worldwide economy, as well as the economies of individual countries, individual companies and the market in general in significant and unforeseen ways. These developments as well as other events could result in further market volatility and negatively affect security prices, the liquidity of certain securities and the normal operations of securities exchanges and other markets. As a result, the risk environment remains elevated. The Adviser will monitor developments and seek to manage the Fund in a manner consistent with achieving the Fund’s investment objective, but there can be no assurance that it will be successful in doing so.
3
- Cybersecurity Risk – The Fund, its service providers, and third party fund distribution platforms, and your ability to transact with the Fund, may be negatively impacted due to operational risks arising from, among other issues, human errors, systems and technology disruptions or failures, or cybersecurity incidents. Cybersecurity incidents may allow an unauthorized party to gain access to fund assets, customer data, or proprietary information, or cause the Fund or its service providers, as well as the securities trading venues and their service providers, to suffer data corruption or lose operational functionality. The occurrence of any of these issues could result in a loss of information, regulatory scrutiny, reputational damage and other consequences, any of which could have a material adverse effect on the Fund or its shareholders. Cybersecurity incidents could also affect issuers of securities in which the Fund invests, leading to significant loss of value.
Since
there are risks inherent in all investments in securities, there is no assurance
that the Fund’s objectives will be achieved.
Please
note the Fund’s objective stresses reasonable income. Although the Adviser will
consider the possibility of some capital appreciation in selecting investments
for the Fund, you should not expect the Fund to reach the growth potential of
funds which have growth or capital appreciation as their primary
objective.
![[image]](g528145nei485bpos072023x7x1.jpg)
| (1) |
|
For
the ten calendar year periods shown in the above bar chart, the highest quarterly return
was 15.86 % (for the quarter ended June 30, 2020 ) and
the lowest quarterly return was
-21.55 % (for the quarter ended March 31,
2020 ).
This
next table shows how the Fund’s average annual total returns for the one, five
and ten year periods ending on December 31, 2022 (the Fund’s most recently
completed calendar year), compared to the returns of a broad measure of market
performance and the performance average of similar mutual funds. The table also
shows the Fund’s average annual total returns after taxes on distributions and
after taxes on distributions and the redemption of all of your Fund shares.
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. After-tax
returns shown are not relevant to investors who hold their Fund shares through
tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts.
4
| One | Five | Ten | ||||
| Year | Year | Year | ||||
| Nicholas Equity Income Fund, Inc. | ||||||
| Return Before Taxes | - |
% | % | % | ||
| Return After Taxes on Distributions | - |
% | % | % | ||
| Return After Taxes on Distributions | ||||||
| and Sale of Fund Shares | - |
% | % | % | ||
| Standard & Poor’s 500 Index | ||||||
| (reflects no deduction for fees, expenses or taxes) | - |
% | % | % | ||
| Lipper Equity Income Fund Objective | ||||||
| (reflects no deduction for taxes) | - |
% | % | % |
Nicholas Company, Inc. serves as the Fund’s investment adviser (the
“Adviser”).
Mr.
Michael L. Shelton is the Lead Portfolio Manager of the Fund and is primarily
responsible for the day-to-day management of the Fund’s portfolio. Mr. Shelton
is a Senior Vice President of the Fund and has been the Lead Portfolio Manager
of the Fund since August 2016. He served as the Co-Portfolio Manager of the Fund
from April 2011 to August 2016, and has been employed by the Adviser since 2006.
Mr. David O. Nicholas is the President and a Director of the Fund and has been
Co-Portfolio Manager of the Fund since August 2016. He formerly served as the
Co-Portfolio Manager of the Fund from July 2001 to April 2008.
The
minimum initial investment for the Fund is $500. The minimum subsequent
investment is $100 except for those shareholders participating in an automatic
investment plan established with the Fund, the minimum is $50.
The
Fund’s shares are redeemable. Generally, shareholders may redeem some or all of
their shares without charge by the Fund on any day when the New York Stock
Exchange is open by written request, by telephone request by calling
800-544-6547, by accessing your account online at www.nicholasfunds.com or by
wire transfer.
Shareholders
may receive distributions from the Fund of ordinary income dividends and capital
gains, which may be taxable to shareholders.
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank or financial adviser), the Fund and its related companies may
pay that intermediary for the sale of Fund shares and related services. Please
bear in mind that these payments may create a conflict of interest by
influencing the broker-dealer or other intermediary to recommend the Fund over
another investment. Ask your intermediary or visit your intermediary’s website
for more information.
5
This
section provides a more detailed description of the Fund’s investment objective,
its principal investment strategies and related risks. The following questions
and answers are designed to help you better understand the principal investment
strategies and principal risks of investing in the Fund.
What
is the Fund’s primary investment objective?
The
primary investment objective of Nicholas Equity Income Fund, Inc. is to produce
reasonable income for the investor. To achieve this objective, the Fund seeks an
income yield that exceeds the corporate dividend yield on the securities
included in the Standard & Poor’s 500 Composite Stock Price Index (“S&P
500 Index”). The Fund’s primary investment objective may not be changed without
shareholder approval.
The
Fund’s secondary objective is moderate long-term growth. To achieve this
objective, the Fund seeks a five-year return which approximates three-fourths of
the average total return achieved over a five-year period on the S&P 500
Index. The Fund’s secondary investment objective may be changed by the Fund’s
Board of Directors without shareholder approval with advance notice to
shareholders.
How
does the Fund pursue its investment objectives?
The
Fund strives to meet its investment objectives by investing primarily in
income-producing equity securities and fixed income investments. The Fund will
not be managed as a balanced portfolio. The Fund invests, under normal market
conditions, at least 80% of its net assets in equity securities. The Fund’s
Board of Directors may change this policy without shareholder approval. However,
the Fund will not change this policy of investing at least 80% of its net assets
in equity securities without first changing the Fund’s name and providing at
least 60 days prior notice to shareholders. The Fund’s asset allocation will be
determined by the Adviser at any given time in light of its assessment of
current economic conditions and investment opportunities. The Fund will not
limit its investments to any particular type or size of company or industry. The
Fund may invest in companies with small, medium and large market capitalizations
if the Adviser believes the companies have the potential to produce reasonable
income and, secondarily, moderate long-term growth.
In
addition to relying, in part, on the ratings assigned to fixed income
securities, the Fund also will rely on the Adviser’s judgment, analysis and
experience in evaluating the credit worthiness of the issuer. In this
evaluation, the Adviser will consider, among other things, the issuer’s
financial resources, its sensitivity to economic conditions and trends, its
operating history, the quality of issuers’ management and regulatory
matters.
Equity
Investments
The
Fund, under normal market conditions, will invest at least 80% of its total
assets in income-producing equity securities, which may include common stocks,
preferred stocks and securities convertible into common or preferred stocks. The
Adviser generally selects income-producing securities which have a higher
expected dividend yield than the current quoted dividend yield on the S&P
500 Index. If the Fund invests in an equity security that pays a dividend at a
rate below the yield of the S&P 500 Index at the time of purchase, the
Adviser will attempt to offset this lower rate through other holdings that pay
dividends or interest at rates deemed to be sufficient so that the Fund’s
current net income exceeds the yield of the S&P 500 Index. The Fund
generally will acquire equity securities with dividend paying histories or which
pay current dividends.
Fixed
Income Investments
The
portion of the Fund’s assets not invested in income-producing equity securities
generally will be invested in corporate and government fixed income securities,
which may include notes, bonds and debentures. As discussed further below, the
Fund’s corporate fixed income investments may include investment grade and
non-investment grade fixed income securities (junk bonds).
6
Governmental
fixed income securities include obligations supported by the full faith and
credit of the United States, such as U.S. Treasury obligations and obligations
of certain instrumentalities and agencies, and mortgage-backed and related
securities issued or guaranteed by the United States Government, its agencies or
instrumentalities, or issued or guaranteed by private issuers or guarantors
equivalent to the quality standards of corporate fixed income securities, and
other government securities.
The
Fund invests in both short-term and long-term debt securities. Debt securities
with longer maturities generally tend to produce higher yields but are subject
to greater interest rate risk than debt securities with shorter maturities. The
Fund is not limited as to the maturities of the securities in which it
invests.
Credit
Quality of Fund Investments
The
Fund may invest in both investment grade and non-investment grade securities and
its investments may include both rated and unrated securities. In selecting
rated investments, the Adviser will rely upon the ratings assigned to certain
income-producing equity securities and debt securities. The Fund may invest in
unrated securities when the Adviser believes the financial condition of the
issuers of such securities and/or protection offered by the terms of the
securities limit the risk to the Fund to a degree comparable to that of rated
securities in which the Fund may invest.
At
time of investment, not more that 20% of the Fund’s total assets may be invested
in non-investment grade preferred stocks, convertible securities and debt
securities.
Certain
circumstances also may arise in which the Fund takes a temporary defensive
position. In the case of a temporary defensive position, which could arise from
adverse market, economic, political or other conditions, the Fund may hold up to
100% of its portfolio in cash, cash equivalents or U.S. government securities.
During any period in which the Fund maintains such a temporary defensive
position, it may not achieve its investment objective.
Percentage
limitations generally apply on the date of investment by the Fund to the extent
permitted by the Investment Company Act of 1940, as amended. Thus, if an
investment satisfies a percentage restriction when it is made, no violation of
that restriction is created by changes afterwards in the market value of the
investment or total assets of the Fund.
What
are the principal risks of investing in Nicholas Equity Income
Fund?
Stock
Market Risk. The
value of the Fund’s investments, and therefore, the value of your Fund shares,
may go up or down. Value changes in the Fund’s investments and consequently,
your Fund shares, may occur because among other things, a particular stock
market fluctuates. Stock markets tend to move in cycles, with periods when stock
prices generally go up, known as “bull markets,” and periods when stock prices
generally go down, referred to as “bear markets.” Stock prices in general may
decline over short or extended periods. Thus, there is a possibility that the
value of the Fund’s investments will decrease because of declines in the stock
market, regardless of the success or failure of the operations of the Fund’s
portfolio companies. At other times, there are specific factors that may
adversely affect the value of a particular investment of the Fund, which in turn
may reduce the value of the Fund’s investments, and consequently, your Fund
shares.
Credit
Risk. Credit
risk refers to an issuer’s ability to make timely payments of interest or
principal. The Fund may invest in non-investment grade securities (securities
with lower credit qualities). Recognized rating agencies consider non-investment
grade securities to be speculative with respect to the issuer’s continuing
ability to pay interest or principal. Lower grade securities may have less
liquidity, a higher incidence of default and the Fund may incur higher
expenditures to protect the Fund’s interest in such securities than investments
in higher-grade securities. Issuers of lower grade securities generally are more
sensitive to negative corporate developments, such as a decline in profits, or
adverse economic conditions, such as a recession, than issuers of higher-grade
securities.
While
the risk of investing in lower rated securities with speculative characteristics
is greater than the risk of investing in higher rated securities, the Fund
attempts to minimize this risk through diversification of its investments and by
analysis of each issuer and its ability to make timely payments of interest and
principal.
7
Interest
Rate Risk. Interest
rate risk refers to the risk that the prices of the Fund’s investments,
particularly the debt securities in which the Fund may invest, are likely to
fall if interest rates rise. This is because the prices of debt securities
typically move in the opposite direction of interest rates. Debt securities with
longer maturities generally are affected by changes in interest rates to a
greater degree than debt securities with shorter maturities. Because the Fund
does not have a policy limiting the maturity of its investments, and the Fund
may invest in debt securities with longer maturities, the Fund may be subject to
greater interest rate risk than a fund that primarily invests in short-term debt
securities.
In
addition, the income you receive from the Fund is based primarily on interest
rates, which can vary widely over the short- and long-term. If interest rates
decline, your income from the Fund may decline as well.
Risks
Related to Preferred Stock and Convertible Investments. Preferred
stocks may provide a higher dividend rate than the interest yield on debt
securities of the same issuer, but are subject to greater risk of fluctuation in
market value and greater risk of non-receipt of income. Unlike interest on debt
securities, dividends on preferred stocks must be declared by the issuer’s board
of directors before becoming payable. Preferred stocks are in many ways like
perpetual debt securities, providing a stream of income but without a stated
maturity date. Because they often lack a fixed maturity or redemption date,
preferred stocks are likely to fluctuate substantially in price when interest
rates change. Preferred stocks have claims on assets and earnings of the issuer
which are subordinate to the claims of all creditors but senior to the claims of
common stock holders.
The
value of convertible preferred stock and debt securities convertible into common
stock generally will be affected by its stated dividend rate or interest rate,
as applicable, and the value of the underlying common stock. As a result of the
conversion feature, the dividend rate or interest rate on convertible preferred
stock or convertible debt securities generally is less than would be the case if
the security were not convertible. Therefore, the value of convertible preferred
stock and convertible debt securities will be affected by the factors that
affect both equity securities (such as stock market movements) and debt
securities (such as interest rates). Some convertible securities might require
the Fund to sell the securities back to the issuer or a third party at a time
that is disadvantageous to the Fund.
Investments
in Unrated Debt Securities. Unrated
securities will be considered for investment by the Fund, but only when the
Adviser believes the financial condition of the issuer of such securities and/or
protection afforded by the terms of the securities limit the risk to the Fund to
a degree comparable to that of rated securities in which the Fund may invest.
Although unrated securities are not necessarily of lower quality than rated
securities, the market for them may not be as liquid and thus they may carry
greater market risk and a higher yield than rated securities. These factors have
the effect of limiting the availability for purchase by the Fund and also may
limit the ability of the Fund to sell such securities at their fair market value
either to meet redemption requests or in response to changes in the economy or
the financial markets.
High
Yield Bond Market Risk. The
entire high yield bond market can experience sudden and sharp price swings due
to a variety of factors, including changes in economic forecasts, stock market
activity, large sustained sales by major investors, a high-profile default or
just a change in the market’s volatility.
Call
Risk. If
interest rates fall, it is possible that issuers of bonds with high interest
rates will prepay or “call” their bonds before their maturity dates. In such
event, the proceeds could be reinvested by the Fund in bonds with the new, lower
interest rates, resulting in a possible decline in the Fund’s income and
distributions to shareholders.
Selection
Risk. The
Fund also faces selection risk, which is the risk that the investments the Fund
purchases will underperform the markets or other mutual funds with similar
investment objectives and strategies.
Risks
Related to Investments in REITs and Other Real Estate-Based Securities.
The
Fund may invest in REITs and other real estate-based securities listed on a
national securities exchange or authorized for quotation on NASDAQ. These
securities are subject to risks related to the real estate industry. The
performance of these securities is dependent on the types and locations of the
properties
8
owned
by the entities issuing the securities and how well the properties are managed.
For instance, the income of the properties could decline due to vacancies,
increased competition or poor management, and the property values of the
properties could decrease due to a decline in neighborhood condition,
overbuilding, uninsured damages caused by natural disasters, property tax
increases or other factors. In addition, these securities also are subject to
market risk (the risk that stock prices overall will decline over short or even
extended periods) and interest rate risk (the risk that the prices of these
securities will decrease if interest rates rise).
Public
Health Threats Risk. Threats
to public health can have a negative impact on the global economy and financial
markets, which could adversely affect the securities held by the Fund. Impacts
of public health threats may last for an extended period of time and result in a
substantial economic downturn. Health crises caused by outbreaks, such as the
coronavirus (COVID-19) outbreak, may exacerbate other pre-existing political,
social and economic risks and disrupt normal market conditions and operations.
The impact of this outbreak, and other epidemics and pandemics that may arise in
the future, could negatively affect the worldwide economy, as well as the
economies of individual countries, individual companies and the market in
general in significant and unforeseen ways. These developments as well as other
events could result in further market volatility and negatively affect security
prices, the liquidity of certain securities and the normal operations of
securities exchanges and other markets. As a result, the risk environment
remains elevated. The Adviser will monitor developments and seek to manage the
Fund in a manner consistent with achieving the Fund’s investment objective, but
there can be no assurance that it will be successful in doing so.
Cybersecurity
Risk. The
Fund, its service providers, and third party fund distribution platforms, and
your ability to transact with the Fund, may be negatively impacted due to
operational risks arising from, among other issues, human errors, systems and
technology disruptions or failures, or cybersecurity incidents. Cybersecurity
incidents may allow an unauthorized party to gain access to fund assets,
customer data, or proprietary information, or cause the Fund or its service
providers, as well as the securities trading venues and their service providers,
to suffer data corruption or lose operational functionality. The occurrence of
any of these issues could result in a loss of information, regulatory scrutiny,
reputational damage and other consequences, any of which could have a material
adverse effect on the Fund or its shareholders. Cybersecurity incidents could
also affect issuers of securities in which the Fund invests, leading to
significant loss of value.
Risks
Related to Certain Other Portfolio Investments and Strategies.
The
Fund may use other investment strategies. These strategies and the associated
non-principal risks are described in further detail in the Fund’s Statement of
Additional Information (“SAI”), which is incorporated by reference
herein.
Disclosure
of Portfolio Holdings. A
description of the Fund’s policies and procedures with respect to the disclosure
of the Fund’s portfolio securities is available in the Fund’s SAI. There can be
no assurance that the Fund’s policies with respect to information about its
portfolio securities will be effective or protect the Fund from the potential
misuse of holdings by individuals or firms in possession of that information.
The Fund’s complete portfolio holdings are made available to the public on a
quarterly basis generally no later than 60 days after the end of each calendar
quarter end. A summary of the Fund’s portfolio composition is also posted to the
Fund’s website at www.nicholasfunds.com under the heading “Quarterly Factsheet”
generally 10 days or more following a calendar quarter end. This summary
composition may include the Fund’s top ten holdings and a breakdown by
sector.
The
Fund may use many different investment strategies in seeking its investment
objective, and it has certain investment restrictions. These strategies and
certain of the restrictions and policies governing the Fund’s investments are
explained in detail in the Fund’s SAI, which is incorporated by reference
herein. If you would like to learn more about how the Fund may invest and the
Fund’s policies and procedures with respect to the disclosure of the Fund’s
portfolio securities, you should request a copy of the SAI. To learn how to
obtain a copy, see the back cover page of this Prospectus.
As
with any mutual fund, there can be no guarantee that the Fund will meet its
goals or that you will not lose money on your investment. There is no guarantee
that the Fund’s performance will be positive over any period of time. In view of
the risks inherent in all investments in securities, there is no assurance that
the Fund’s objectives will be achieved.
9
The
financial highlights table is intended to help you understand the Fund’s
financial performance for the past five fiscal years ended March 31, 2023.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that an investor would have earned
(or lost) on an investment in the Fund (assuming reinvestment of all dividends
and distributions). The information has been derived from the Fund’s financial
statements which have been audited by Deloitte & Touche LLP, Independent
Registered Public Accounting Firm, whose report, along with the Fund’s financial
statements, financial highlights, and related notes, are incorporated by
reference in the SAI and included in the Fund’s Annual Report, which may be
obtained without charge by writing or calling the Fund.
| Years Ended March 31, | |||||||||||||||
| 2023 | 2022 | 2021 | 2020 | 2019 | |||||||||||
| NET ASSET VALUE, | |||||||||||||||
| BEGINNING OF PERIOD | $ | 21.57 | $ | 21.75 | $ | 15.14 | $ | 18.87 | $ | 20.50 | |||||
| INCOME (LOSS) FROM | |||||||||||||||
| INVESTMENT OPERATIONS | |||||||||||||||
| Net investment income(1) | .40 | .36 | .36 | .36 | .40 | ||||||||||
| Net gain (loss) on securities | |||||||||||||||
| (realized and unrealized) | (1.35 | ) | 2.02 | 7.23 | (1.57 | ) | .92 | ||||||||
| Total from investment operations | (.95 | ) | 2.38 | 7.59 | (1.21 | ) | 1.32 | ||||||||
| LESS DISTRIBUTIONS | |||||||||||||||
| From net investment income | (.38 | ) | (.36 | ) | (.29 | ) | (.28 | ) | (.56 | ) | |||||
| From net capital gain | (.40 | ) | (2.20 | ) | (.69 | ) | (2.24 | ) | (2.39 | ) | |||||
| Total distributions | (.78 | ) | (2.56 | ) | (.98 | ) | (2.52 | ) | (2.95 | ) | |||||
| NET ASSET VALUE, END OF PERIOD | $ | 19.84 | $ | 21.57 | $ | 21.75 | $ | 15.14 | $ | 18.87 | |||||
| TOTAL RETURN | (4.31 | )% | 11.23 | % | 51.18 | % | (8.80 | )% | 7.88 | % | |||||
| SUPPLEMENTAL DATA: | |||||||||||||||
| Net assets, end of period (millions) | $ | 442.0 | $ | 487.4 | $ | 459.6 | $ | 295.9 | $ | 386.8 | |||||
| Ratio of expenses to average net assets | .70 | % | .70 | % | .72 | % | .73 | % | .73 | % | |||||
| Ratio of net investment income | |||||||||||||||
| to average net assets | 2.00 | % | 1.65 | % | 1.92 | % | 1.88 | % | 2.02 | % | |||||
| Portfolio turnover rate | 18.75 | % | 18.11 | % | 33.58 | % | 32.04 | % | 36.76 | % | |||||
| (1) |
Computed
based on average shares outstanding. |
Please
consider the performance information above in light of the Fund’s investment
objectives and policies, and market conditions during the reported time periods.
Again, you must remember that historical performance does not necessarily
indicate what will happen in the future. The value of your Fund shares may go up
or down.
10
Nicholas
Company, Inc., located at 411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202,
is the Fund’s investment adviser. The Adviser furnishes the Fund with continuous
investment service and is responsible for overall management of the Fund’s
business affairs, subject to supervision by the Fund’s Board of
Directors.
The
Adviser is the investment adviser to three other mutual funds and to numerous
institutions and individuals with substantial investment portfolios. The
additional mutual funds it advises are: Nicholas Fund, Inc., Nicholas II, Inc.
and Nicholas Limited Edition, Inc. As of March 31, 2023, the Adviser had
approximately $5.2 billion in assets under management.
The
annual fee paid to the Adviser under the investment advisory agreement is paid
monthly and is based on the average net asset value of the Fund, as determined
by valuations made at the close of each business day of the month. The following
table illustrates the calculation of the Adviser’s annual fee:
| Annual Fee Calculation (Based on the | ||
| Net Asset Value of the Fund | Average Net Asset Value of the Fund) | |
| Up to and including $50,000,000 | 0.70 of 1% | |
| In excess of $50,000,000 | 0.60 of 1% |
For
the fiscal year ended March 31, 2023, the aggregate fee paid to the Adviser was
0.61% of the Fund’s average net assets. From time to time, the Adviser may
voluntarily waive all or a portion of its management fee and/or absorb certain
Fund expenses without further notification of the commencement or termination of
such waiver or absorption. As a result, the Fund’s total return, yield and
distribution rate will be higher than if the fees and expenses had been paid by
the Fund. A discussion regarding the basis for the Board of Directors approval
of the Fund’s Investment Advisory Agreement can be found in the Fund’s
Semiannual Report to Shareholders for the period ended September
30.
Commencing
February 12, 1996, the Adviser began to absorb all Fund operating expenses,
including the investment advisory fee, in excess of 0.90% of the average net
assets of the Fund on an annual basis, until further notice. From time to time
and in its sole discretion, the Adviser may: (i) further reduce or waive its fee
or reimburse the Fund for certain of the expenses in order to further reduce the
Fund’s expense ratio; or (ii) decrease the amount of absorption of the Fund’s
operating expenses in excess of 0.90% of the average net assets of the Fund on
an annual basis. During the fiscal years ended March 31, 2011 through 2023, the
Adviser did not voluntarily absorb Fund expenses, including the investment
advisory fee, because expenses were not in excess of 0.90% of the average net
assets of the Fund on an annual basis.
Under
an Investment Advisory Agreement with the Fund, the Adviser, at its own expense
and without reimbursement from the Fund, furnishes the Fund with office space,
office facilities, executive officers and executive expenses (such as health
insurance premiums for executive officers). The Adviser also pays all sales and
promotional expenses of the Fund, other than expenses incurred in complying with
laws regulating the issuance or sale of securities.
The
Fund pays all of its operating expenses. Operating expenses include, but are not
limited to, fees paid for attendance at Board meetings to directors who are not
interested persons of the Adviser or officers or employees of the Fund, salaries
of administrative and clerical personnel, association membership dues, auditing
and accounting services, legal fees and expenses, printing, fees and expenses of
any custodian or trustee having custody of Fund assets, postage, charges and
expenses of dividend disbursing agents, registrars and stock transfer agents,
including the cost of keeping all necessary shareholder records and accounts and
handling any problems related thereto, and certain other costs related to the
aforementioned items. The Fund also pays the Adviser for administrative services
provided to the Fund by the Adviser that the Fund is obligated to pay under the
Investment Advisory Agreement, subject to certain payment guidelines adopted by
unanimous resolution of the Board of Directors. A description of the payment
guidelines is included in the Fund’s SAI under “The Fund’s Investment
Adviser.”
11
Mr.
Michael L. Shelton is the Lead Portfolio Manager of the Fund and is primarily
responsible for the day-to-day management of the Fund’s portfolio. Mr. Shelton
served as Co-Portfolio Manager of the Fund from April 2011 to August 2016. Mr.
Shelton is a Senior Vice President of the Fund and a Senior Vice President of
the Adviser. Mr. Shelton also serves as the Co-Portfolio Manager to another fund
managed by the Adviser, has been employed by the Adviser since 2006, and is a
Chartered Financial Analyst and a Certified Public Accountant. Mr. David O.
Nicholas has been Co-Portfolio Manager of the Fund since August 2016. Mr.
Nicholas served as Co-Portfolio Manager of the Fund from July 2001 to April
2008. Mr. Nicholas is President and a Director of the Fund, a Director of the
Adviser and the President, Chief Executive Officer and Chief Investment Officer
of the Adviser. Mr. Nicholas also serves as a Lead Portfolio Manager or
Portfolio Manager to other funds managed by the Adviser, and is a Chartered
Financial Analyst.
The
Fund’s SAI provides additional information about the Portfolio Managers’
compensation, other accounts managed by the Portfolio Managers, and the
Portfolio Managers’ ownership of securities in the Fund.
David
O. Nicholas is a controlling person of the Adviser through his ownership of 60%
of the outstanding voting securities of the Adviser.
The
Fund’s price per share is the net asset value (“NAV”) of the Fund. The NAV of
the Fund is determined by dividing the total value in U.S. dollars of the Fund’s
total net assets by the total number of shares outstanding at that time. Net
assets of the Fund are determined by deducting the liabilities of the Fund from
the total assets of the Fund. Securities of the Fund are valued at market value,
or if a market quotation is not readily available, their fair value is
determined in good faith using procedures adopted by the Board of Directors. As
an example, a market quotation may not be readily available if the trading of a
security is halted by its primary exchange and does not resume before the
markets close or the primary exchange experiences technical difficulties. If a
security is valued using fair value pricing, the Fund’s value for that security
is likely to be different than the last quoted market value. The NAV is
determined as of the close of regular trading on the New York Stock Exchange
(“NYSE”) (usually 4:00 p.m., Eastern Time) on each day the NYSE is open.
Therefore, shares of the Fund are not priced on days when the NYSE is closed,
which generally is on weekends and national holidays in the U.S.A. For a list of
holidays observed by the NYSE, please contact the Fund or see the Fund’s
SAI.
Shareholder
purchase, redemption and exchange orders are processed using the NAV next
calculated after receipt of such request in proper order by the Fund (or an
Authorized Agent of the Fund). In order to receive a day’s price, your request
must be received in proper order by the close of regular trading on the NYSE. If
you request to purchase, redeem or exchange your shares after the NYSE has
closed or on a day the NYSE is closed, the NAV will be determined as of the
close of the next day the NYSE is open for trading.
12
| TO OPEN AN ACCOUNT | TO ADD TO AN ACCOUNT | |||
| MINIMUM INVESTMENT | $500 | $100 | ||
| $50 via the Automatic | ||||
| Investment Plan | ||||
| BY MAIL | Complete and sign the | Send your check along with | ||
| Regular Mail: | Account Application. | the Invest by Mail form | ||
| Nicholas Funds | detached from your | |||
| c/o U.S. Bancorp Global Fund Services | Make your check payable | confirmation statement. | ||
| P.O. Box 701 | to Nicholas Funds. | |||
| Milwaukee, Wisconsin 53201-0701 | Send your check payable to | |||
| Nicholas Funds with your | ||||
| Overnight Mail: | account number in the | |||
| Nicholas Funds | memo field. | |||
| c/o U.S. Bancorp Global Fund Services | ||||
| Third Floor | ||||
| 615 East Michigan Street | ||||
| Milwaukee, Wisconsin 53202 | ||||
| BY INTERNET – | Go to | Current shareholders can visit | ||
| www.nicholasfunds.com | www.nicholasfunds.com | www.nicholasfunds.com and | ||
| and click on “Online | click on “Online Account | |||
| Account Access” located | Access” and then “Login Using | |||
| on the home page. Next, | User ID” to make subsequent | |||
| click on “New Account | investments directly from your | |||
| Setup”. To open an account | pre-established bank account | |||
| you will need to provide | or to purchase or exchange | |||
| your social security number, | shares from another fund in the | |||
| your bank’s routing | Nicholas complex with the | |||
| information (also known as | same registration. | |||
| an ABA number), your | ||||
| bank account number, your | ||||
| mailing address, your | ||||
| residential address and | ||||
| your email address | ||||
|
| ||||
| BY TELEPHONE – 800-544-6547 | You may not make an | Call the Fund’s transfer agent, | ||
| 414-276-0535 | initial purchase of Fund | U.S. Bancorp Fund Services | ||
| The Fund must have bank | shares via the telephone. | LLC, during business hours | ||
| instructions on file to purchase | (8:00 A.M. to 7:00 P.M. | |||
| Fund shares this way. | Central Time). | |||
| Telephone calls will be recorded. | ||||
| BY WIRE | Complete and send in an | Call U.S. Bancorp to notify | ||
| U.S. Bank, N.A. | Account Application. The | 800-544-6547 or | ||
| ABA 075000022 | completed application must | 414-276-0535. | ||
| U.S. Bancorp Fund Services, LLC | be received in advance of | |||
| Account 112-952-137 | the wire. | |||
| Nicholas Equity Income Fund, Inc. | ||||
| (shareholder account number) | Call U.S. Bancorp to notify | |||
| (shareholder registration) | 800-544-6547 or | |||
| 414-276-0535. | ||||
| AUTOMATIC INVESTMENT | Not applicable. | Contact the Fund for | ||
| PLAN | additional information. | |||
| U.S. Bancorp | ||||
| 800-544-6547 or 414-276-0535 | ||||
13
Other
Information about Purchasing Fund Shares
Your
application to purchase Fund shares must be in proper order to be accepted may
only be accepted by the Fund or an Authorized Agent of the Fund and is not
binding until accepted. Once your purchase order has been accepted, you may not
cancel or revoke it. All purchase orders must be accompanied by payment in U.S.
funds. Purchase of shares will be made in full and fractional shares computed
with three decimal places.
Your
check should be drawn on a U.S. bank, savings and loan or credit union. Checks
are accepted subject to collection at full face value in U.S. funds. To prevent
check fraud, third-party checks, Treasury checks, credit card checks, traveler’s
checks, starter checks and money orders will not be accepted. The Fund is unable
to accept post-dated checks or any conditional order or payment. The transfer
agent will charge a $25 fee against your account, in addition to any loss
sustained by the Fund, if any payment check is returned to the transfer agent or
your Automated Clearing House (“ACH”) transfer does not clear. The Fund will not
accept purchase or exchange orders under circumstances or in amounts considered
disadvantageous for shareholders.
Under
the Automatic Investment Plan, you may purchase Fund shares automatically at
regular intervals by authorizing the Fund to withdraw $50 or more from your
personal bank account. If your bank rejects your payment, the Fund’s transfer
agent will charge a $25 fee to your account. To participate in this plan, you
must complete the “Automatic Investment Plan” section of the application and
attach a voided check or contact the Fund at 800-544-6547 for additional
information. Your financial institution must be a member of the Automated
Clearing House (ACH) network. Any request to change or terminate your Automatic
Investment Plan should be submitted to the transfer agent 5 days prior to the
effective date.
In
compliance with the USA Patriot Act, please note that the transfer agent, U.S.
Bancorp Fund Services, LLC (“U.S. Bancorp”), will verify certain information on
your Account Application as part of the Fund’s Anti-Money Laundering Program. As
requested on the Application, you must supply your full name, date of birth,
social security number and permanent street address. Mailing addresses
containing a P.O. Box alone will not be accepted as a permanent street address.
Please contact U.S. Bancorp (800-544-6547 or 414-276-0535) if you need
additional assistance when completing your application. If you are opening the
account in the name of a legal entity (e.g., partnership, limited liability
company, business trust, corporation, etc.), you must also supply the identity
of the beneficial owners. Shares of the Fund have not been registered for sale
outside of the United States. The Fund generally does not sell shares to
investors residing outside of the United States, even if they are U.S. Citizens
or lawful permanent residents, except to investors with U.S. military APO or FPO
addresses.
If
we do not have a reasonable belief of the identity of a customer, the account
will be rejected or the customer will not be allowed to perform a transaction on
the account until such information is received. In the rare event that the
Fund’s transfer agent is unable to verify your identity, the Fund reserves the
right to redeem your account at the current day’s net asset value.
You
should be aware that deposit of purchase and exchange requests in the mail or
with other independent delivery services does not constitute receipt by U.S.
Bancorp or the Fund.
Only
bank accounts held at domestic financial institutions that are ACH members may
be used for telephone or internet transactions. The ability to perform internet
and telephone transactions will become effective approximately 7 business days
after an application including bank instructions or a change of account options
request to add or change bank instructions is received.
During
periods of substantial economic or market changes or due to technical
difficulties, you may have difficulty making internet or telephone purchases and
exchanges. If you are unable to perform your transaction via the internet or by
telephone, you may purchase and exchange Fund shares by delivering the request
in person or by mail.
Wired
funds must be received prior to 4:00 p.m. Eastern Time to be eligible for same
day pricing. The Fund and its transfer agent are not responsible for the
consequences of delays resulting from the banking or Federal Reserve wire
system, or from incomplete wiring instructions. If you are making an initial
investment by wire, you must first complete and return to the appropriate
address an Account Application.
14
Due
to fixed expenses incurred by the Fund in maintaining individual accounts, the
Fund reserves the right to redeem accounts that fall below the minimum
investment required due to shareholder redemption (but not solely due to a
decrease in net asset value of the Fund). In order to exercise this right, the
Fund will give advance written notice of at least 30 days to the accounts below
such minimum. The Fund’s transfer agent may charge an activity fee for certain
requests, including but not limited to, requesting stop payment on a redemption
check and overnight delivery of redemption proceeds.
It
is important that the Fund maintain a correct address for each investor. An
incorrect address may cause an investor’s account statements and other mailings
to be returned to the Fund. Based upon statutory requirements for returned mail,
the Fund will attempt to locate the investor or rightful owner of the account.
If the Fund is unable to locate the investor, then it will determine whether the
investor’s account can legally be considered abandoned. The Fund is legally
obligated to escheat (or transfer) abandoned property to the appropriate state’s
unclaimed property administrator in accordance with statutory requirements. The
investor’s last known address of record determines which state has jurisdiction.
Please proactively contact the Fund at 1-800-544-6547 at least annually to
ensure your account remains in active status. Investors who are residents of the
state of Texas may designate a representative to receive legislatively required
unclaimed property due diligence notifications. Please contact the transfer
agent to complete a Texas Designation of Representative form.
Share
ownership is electronically recorded. The Fund’s transfer agent will credit the
shareholder’s account with the number of shares purchased. Written confirmations
are issued for all purchases of Fund shares.
| BY MAIL | Written redemption and exchange requests must include the | |
| Regular Mail: | name of the Fund, the account number(s), the amount of | |
| Nicholas Funds | money or number of shares being redeemed or exchanged, | |
| c/o U.S. Bancorp Global Fund Services | the name(s) on the account(s) and the signature(s) of each | |
| P.O. Box 701 | registered account holder. If an account registration is | |
| Milwaukee, Wisconsin 53201-0701 | individual, joint tenants, sole proprietorship, custodial | |
| (Uniform Transfer to Minors Act), or general partners, the | ||
| Overnight Mail: | written request must be signed exactly as the account is | |
| Nicholas Funds | registered. If the account is owned jointly, all owners | |
| c/o U.S. Bancorp Global Fund Services | must sign. | |
| Third Floor | ||
| 615 East Michigan Street | ||
| Milwaukee, Wisconsin 53202 | ||
| BY INTERNET – | Visit www.nicholasfunds.com and click on “Account | |
| www.nicholasfunds.com | Access” to redeem or exchange shares to another fund in | |
| The Fund must have bank | the Nicholas complex. | |
| instructions on file to redeem | ||
| Fund shares this way. | ||
| BY TELEPHONE – 800-544-6547 | Call the Fund’s transfer agent, U.S. Bancorp Fund Services | |
| 414-276-0535 | LLC, during business hours (8:00 A.M. to 7:00 P.M. | |
| Telephone calls will be recorded. | Central Time). | |
| BY WIRE – 800-544-6547 | Call U.S. Bancorp to request wire redemptions. | |
| 414-276-0535 | ||
| SYSTEMATIC WITHDRAWAL | Contact the Fund for additional information. | |
| PLAN | ||
| U.S. Bancorp | ||
| 800-544-6547 or 414-276-0535 |
15
Other
Information about Redeeming and Exchanging Fund Shares
All
redemptions and exchanges will be processed immediately upon receipt and written
confirmations will be issued for all redemptions and exchanges of Fund shares.
Once your redemption or exchange order has been accepted, you may not cancel or
revoke it.
The
Fund ordinarily pays for redeemed shares within seven days after receipt of a
request in proper order, except as provided by the rules of the Securities and
Exchange Commission. Redemption payments are normally funded by cash held by the
Fund, but in periods of unusually high redemptions, the Fund may be required to
sell securities. Although not anticipated, it is possible that conditions may
arise in the future which would, in the opinion of the Fund’s Adviser or Board
of Directors, make it undesirable for the Fund to pay for all redemptions in
cash. In such cases, the Board may authorize payment to be made in portfolio
securities or other property of the Fund. Redemption proceeds to be wired
normally will be wired on the next business day after a NAV is determined. The
Fund reserves the right to hold payment up to 15 days or until notified that
investments made by check or electronic funds transfer through the ACH network,
have been collected, at which time payment will be made. This delay will not
apply if you purchased your shares via wire payment.
You
may instruct U.S. Bancorp to mail the proceeds to the address of record or to
directly mail the proceeds to a pre-authorized bank account. Proceeds also may
be wired to a pre-authorized account at a commercial bank in the United States.
The transfer agent charges a $15 wire redemption fee. In addition, proceeds also
may be electronically transferred through the ACH to a pre-authorized account at
no cost. Please contact the Fund for the appropriate form if you are interested
in setting your account up with wiring instructions or authorizing electronic
transfers.
You
can redeem and exchange your shares by internet or telephone unless you decline
this option in writing.
During
periods of substantial economic or market changes or due to technical
difficulties, you may have difficulty making internet or telephone redemptions
and exchanges. If you are unable to perform your transactions via the internet
or by telephone, you may redeem or exchange your shares by delivering the
request in person or by mail.
Procedures
for redeeming and exchanging Fund shares by internet or telephone may be
modified or terminated at any time by the Fund or its transfer agent. The
exchange privilege may be terminated or modified only upon 60 days advance
notice to shareholders. Neither the Fund nor its transfer agent will be liable
for following instructions communicated by the internet or telephone which they
reasonably believe to be genuine. The Fund and its transfer agent will employ
reasonable procedures to confirm that instructions received by telephone are
genuine, and if they do not, they may be liable for losses due to unauthorized
or fraudulent instructions. If an account has more than one owner or authorized
person, the Fund will accept telephone instructions from any one owner or
authorized person. Once you place a telephone transaction request, it cannot be
canceled or modified after the regular close of trading on the NYSE (generally,
4:00 p.m., Eastern Time).
The
Fund will return and not process requests that contain restrictions as to the
time or date redemptions and exchanges are to be
effected.
The
Fund may require additional supporting documents for redemptions and exchanges
made by corporations, executors, administrators, trustees and guardians.
Specifically, if the account is registered in the name of a corporation or
association, the request must be accompanied by a corporate resolution signed by
the authorized person(s). A redemption or exchange request for accounts
registered in the name of a legal trust must have a copy of the title and
signature page of the trust agreement on file or must be accompanied by the
trust agreement and signed by the trustee(s).
For
federal income tax purposes, redemptions and exchanges generally are treated as
a sale of the shares being redeemed or exchanged. You may recognize a capital
gain or loss equal to the difference between the redemption or exchange price
and your cost basis for the shares being redeemed or exchanged. An exchange
between the funds involving master retirement plans and IRA accounts generally
is not a taxable transaction for federal tax purposes. See “Dividends,
Distributions and Federal Tax Status” for further information. If you have an
individual retirement account (“IRA”) or
16
other
retirement plan, you must indicate on your redemption requests whether or not to
withhold federal income tax. Unless a redemption request specifies not to have
federal income tax withheld, the transaction will be subject to withholding.
Shares held in an IRA or other retirement accounts may be redeemed by telephone.
Investors will be asked whether or not to withhold taxes from any distribution.
Please consult your current IRA Disclosure Statement for any applicable fees.
IRA redemptions may not be conducted using the internet.
Nicholas
Company, Inc. also is the Adviser to Nicholas II, Inc. and Nicholas Limited
Edition, Inc., which offer both Class I and Class N shares, as well as Nicholas
Fund, Inc., all of which have investment objectives as discussed in separate
prospectuses. You may exchange your shares of the Fund for shares of these other
available Nicholas funds or the Fidelity Investments Money Market Funds:
Government Portfolio. The Fidelity Investments Money Market Funds: Government
Portfolio is a money market mutual fund available for you to respond to changes
in your goals or market conditions and is not affiliated with the Fund or the
Adviser.
If
you choose to exercise the exchange privilege, your shares will be exchanged at
their next determined NAV. Exchanges can only occur between identically
registered accounts. Minimum investment requirements must be met, with the
exception that if you were a shareholder of any of the Nicholas Funds discussed
above as of March 1, 2005, you may qualify to exchange into the Class I shares
of Nicholas II, Inc. and Nicholas Limited Edition, Inc.
If
you are interested in exercising the exchange privilege, you must obtain the
appropriate prospectus from Nicholas Company, Inc.
Signature
guarantees will generally be accepted from domestic banks, brokers, dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations, as well as from
participants in the New York Stock Exchange Medallion Signature Program and the
Securities Transfer Agents Medallion Program (“STAMP”). A notary public is not
an acceptable signature guarantor.
A
signature guarantee, from either a Medallion program member or a non-Medallion
program member, is required to redeem shares in the following
situations:
-
If ownership is being changed on your account;
-
When redemption proceeds are payable or sent to any person, address or bank account not on record;
-
When a redemption request is received and a change of address has occurred within the last 15 calendar days;
-
For all redemptions in excess of $100,000 from any shareholder account.
The
Fund may waive any of the above requirements in certain instances. In addition
to the situations described above, the Fund(s) and /or the transfer agent
reserve the right to require a signature guarantee in other instances based on
the circumstances relative to the particular situation.
Non-financial
transactions, including establishing or modifying certain services on an
account, may require a signature guarantee, signature verification from a
Signature Validation Program member, or other acceptable form of authentication
from a financial institution source.
If
you are uncertain about what documents or instructions are necessary in order to
redeem and exchange shares, please write or call U.S. Bancorp (800-544-6547 or
414-276-0535) prior to submitting a request. A redemption or exchange request
will not become effective until all documents are received in proper
order.
You
can purchase and redeem shares of the Fund through certain broker-dealers,
financial institutions and other service providers (“Processing
Intermediaries”). Certain Processing Intermediaries are, in turn, authorized to
designate other intermediaries to accept purchase and redemption orders on the
Fund’s behalf. If you invest in the Fund through a Processing Intermediary, the
Processing Intermediary rather than you may be the shareholder of record.
Processing Intermediaries may use procedures and
17
impose
restrictions in addition to or different from those applicable to shareholders
who invest in the Fund directly. You should read the program materials provided
by the Processing Intermediary in conjunction with this Prospectus before you
invest in the Fund this way.
Processing
Intermediaries may charge fees or other charges for the services they provide to
their customers. Such charges vary among Processing Intermediaries, but in all
cases will be retained by the Processing Intermediary and not remitted to the
Fund or the Adviser.
The
Fund also may enter into an arrangement with some Processing Intermediaries
which authorizes them to process purchase and redemption orders on behalf of the
Fund on an expedited basis (an “Authorized Agent”). Receipt of a purchase or
redemption order by an Authorized Agent will be deemed to be received by the
Fund for purposes of determining the NAV of Fund shares to be purchased or
redeemed. If you place a purchase order through an Authorized Agent, you will
pay the Fund’s NAV next computed after the receipt by the Authorized Agent of
such purchase order, plus any applicable transaction charges imposed by the
Authorized Agent. For redemption orders placed through an Authorized Agent, you
will receive redemption proceeds which reflect the NAV next computed after the
receipt by the Authorized Agent of the redemption order, less any redemption
fees imposed by the Authorized Agent.
Of
course, you do not have to use the services of a Processing Intermediary, or pay
the fees that may be charged for such services. You can invest directly with the
Fund without a sales charge. If you hold Fund shares through a Processing
Intermediary, you must redeem your shares through such Processing Intermediary.
In such event, you should contact the Processing Intermediary for instructions
on how to redeem. Otherwise, if you originally invested directly with the Fund,
you can redeem directly through the Fund without a redemption
charge.
Frequent
purchases and sales of fund shares may affect shareholders in various ways.
Depending on various factors, including but not limited to, the size of the
fund, the amount of assets the portfolio manager typically maintains in cash or
cash equivalents, and the dollar amount, number and frequency of trades,
short-term or excessive trading may disrupt the efficient management of the
fund’s portfolio, may impact fund performance and may increase brokerage,
administrative and other expenses. The Fund reserves the right to reject any
purchase request, including exchange requests from other Nicholas Funds, if the
Fund regards the request as disruptive or if the Fund deems the request to have
the potential to be disruptive. However, the Fund cannot ensure that its efforts
will eliminate all risks of market timing.
The
Fund discourages disruptive trading in Fund shares for abusive purposes in
accordance with the policies and procedures adopted by the Fund’s Board of
Directors, which are reasonably designed to detect and discourage disruptive
trading. These policies and procedures apply to any account, whether an
individual account or an account referred to as an “omnibus account” where a
financial intermediary holds Fund shares for a number of its customers in one
account. Because there is currently no generally applied standard in the
marketplace as to what level of trading activity is abusive, the Board of
Directors elected not to adopt rigid rules specifying what activity is abusive
or how suspected abusive activity will be addressed. In adopting the Fund’s
policies and procedures, the Board of Directors determined that it would be in
the best interests of shareholders to provide flexibility in dealing with such
activities.
Under
the Fund’s policies and procedures, the Fund currently uses various methods to
deter disruptive activity in both individual and omnibus accounts, including but
not limited to, selective monitoring of trading activity and undertaking
preventive action designed to discourage and preclude disruptive traders from
entering the Fund. We may consider trading in the Fund’s shares to be disruptive
if we detect one or more of the following in an account:
-
Shares traded out of the Fund within a short period of time after the shares were purchased;
-
Two or more purchases and redemptions are made within a short period of time;
-
A series of transactions within the Fund that is indicative of a timing pattern or strategy; or
-
One or more large trades relative to the Fund’s overall size.
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The
Fund reserves the right to take responsive action to trading activity deemed
disruptive by the Fund’s compliance committee, even though such trades may not
fall into one or more of these categories.
In
connection with our review of suspected disruptive trading, we may, at our
option, contact the individual or entity or the financial intermediary believed
to be engaged in or to have facilitated such trading. If we reasonably believe
that the trading was disruptive, we will ask that investor or financial
intermediary to refrain from such activity in the future. In addition, the
investor or financial intermediary may be restricted from future purchases into
the Fund and may also be restricted from future purchases of shares offered by
any of the funds in the Nicholas fund complex.
In
determining what action to take with respect to suspected disruptive trading
activity, the Fund will act in a manner that is consistent with the best
interests of the Fund’s shareholders by making independent assessments of
instances or patterns of potentially improper conduct in a manner consistent
with the policies and procedures approved by the Board of
Directors.
While
the Fund does not accommodate market timing activities engaged in for abusive
purposes, the methods used by the Fund to deter and detect market timing
activities involve judgments that are inherently subjective and our response to
potentially disruptive trading activity may not be uniform. This means that the
Fund may not take remedial action against investors detected engaging in a
disruptive trade for reasons believed by the Fund to be legitimate and
non-abusive. Examples of legitimate trading activities include, but may not be
limited to, asset allocation, dollar cost averaging, emergency liquidations,
estate planning measures or similar activities that may nonetheless arguably
result in disruptive trading of Fund shares.
There
is a risk that the Fund’s policies and procedures will prove ineffective in
whole or in part to detect or prevent abusive market timing activities. For
example, it may be difficult for the Fund to identify such activities engaged in
by investors through the use of omnibus accounts administered by financial
intermediaries who transmit purchase, exchange, or redemption orders to the Fund
on behalf of their customers who are the beneficial owners. Short-term trading
by these investors is likely to go undetected by the Fund.
If
the Fund is unable to detect and deter trading abuses, the Fund’s performance,
and its long-term shareholders, may be harmed. In addition, because the Fund has
not adopted specific limitations or restrictions on the trading of Fund shares,
shareholders may be harmed by the extra costs and portfolio management
inefficiencies that result from excessive or disruptive trading of Fund shares,
even when the trading is not for abusive purposes.
You
may transfer Fund shares in instances such as the death of a shareholder, change
of account registration, change of account ownership and in cases where shares
of the Fund are transferred as a gift. You can obtain documents and instructions
necessary to transfer Fund shares by writing or calling U.S. Bancorp
(800-544-6547 or 414-276-0535) prior to submitting any transfer
requests.
Quasar
Distributors, LLC (the “Distributor”), 111 East Kilbourn Avenue, Suite 2200,
Milwaukee, Wisconsin, 53202, serves as the distributor and principal underwriter
of the Funds’ shares. The Distributor is a registered broker-dealer and member
of the Financial Industry Regulatory Authority (“FINRA”).
The
Fund intends to qualify annually as a “regulated investment company” under the
Internal Revenue Code of 1986 and intends to take all other action required to
ensure that little or no federal income or excise taxes will be payable by the
Fund. Dividends of the Fund, if any, are paid to shareholders usually in May,
July, October and December. In those years in which sales of portfolio
securities result in net realized capital gains (after utilization of any
available capital loss carry-overs), such gains are distributed to shareholders
in December and/or May.
19
For
federal income tax purposes, dividends and distributions by the Fund, whether
received in cash or invested in additional shares of the Fund, will be taxable
to the Fund’s shareholders, except those shareholders that are not subject to
tax on their income. Net realized long-term gains are paid to shareholders as
capital gain distributions. Income distributed from the Fund’s net investment
income and net realized short-term gains are paid to shareholders as ordinary
income dividends. Distributions may be taxable at different rates depending on
the length of time the Fund holds a security. The Fund will provide information
to shareholders concerning the character and federal tax treatment of all
dividends and distributions. If you elect to receive distributions and/or
capital gains paid in cash, and the U.S. Postal Service cannot deliver the
check, or if a check remains outstanding for six months, the Fund reserves the
right to reinvest the distribution check in your account, at the Fund’s current
net asset value, and to reinvest all subsequent distributions.
At
the time of purchase of Fund shares, the Fund may have undistributed income or
capital gains included in the computation of the NAV. Therefore, a dividend or
capital gain distribution received shortly after such purchase by a shareholder
may be taxable to the shareholder, although it is, in whole or in part, a return
of capital and may have the effect of reducing the NAV.
Under
federal law, some shareholders may be subject to “backup withholding” on
reportable dividends, capital gain distributions (if any) and redemption
payments. Generally, shareholders subject to backup withholding will be those
(i) who, to the Fund’s knowledge, have furnished an incorrect taxpayer
identification number, or (ii) who have failed to declare or underreported
certain income on their federal returns. When establishing an account, you must
certify under penalties of perjury that the taxpayer identification number you
give to the Fund is correct and that you are not subject to backup
withholding.
The
foregoing tax discussion relates to federal income taxes only and is not
intended to be a complete discussion of all federal tax consequences. You should
consult with a tax adviser concerning the federal, state and local tax aspects
of an investment in the Fund.
Unless
you elect to accept cash in lieu of shares, all dividends and capital gain
distributions are automatically reinvested in additional shares of the Fund
through the Dividend and Distribution Reinvestment Plan (the “Reinvestment
Plan”). You may elect to accept cash on an application to purchase shares, by
telephone or by separate written notification. All reinvestments are at the NAV
in effect on the dividend or distribution date and are credited to the
shareholder’s account. U.S. Bancorp will notify you of the number of shares
purchased and the price following each reinvestment period.
You
may withdraw from or thereafter elect to participate in the Reinvestment Plan at
any time by giving written or telephonic notice to U.S. Bancorp. The Fund’s
transfer agent must receive an election prior to the dividend record date of any
particular distribution for the election to be effective for that distribution.
If an election to withdraw from or participate in the Reinvestment Plan is
received between a dividend record date and payment date, it shall become
effective on the day following the payment date. The Fund may modify or
terminate the Reinvestment Plan at any time on 30 days written notice to
participants.
If
you own $10,000 or more of Fund shares at the current market value, you may open
a Systematic Withdrawal Plan (the “Plan”) and receive monthly, quarterly,
semiannual or annual payments for any designated amount. You may elect to have a
check sent to you at your address of record, or proceeds can be sent directly to
your predesignated bank account via electronic funds transfer through the
Automated Clearing House network. When you participate in the Plan all income
and capital gain dividends should be reinvested in shares of the Fund. U.S.
Bancorp reinvests all income and capital gain dividends in shares of the Fund.
You may add shares to, withdraw shares from, or terminate the Plan, at any time
by contacting the Fund’s transfer agent at least five days prior to the next
scheduled withdrawal. Each withdrawal may be a taxable event to you. Liquidation
of shares in excess of distributions may deplete or possibly use up the initial
investment, particularly in the event of a market decline, and withdrawals
cannot be considered a yield or income on the investment. In addition to
termination of the Plan by the Fund or shareholders, the Fund’s transfer agent
may terminate the Plan upon written notice mailed to the shareholders. Please
contact Nicholas Company, Inc. for copies of the Plan documents.
20
If
you are eligible, you may set up one or more tax deferred accounts. A
contribution to certain of these plans also may be tax deductible. The Fund
offers the following tax deferred accounts: traditional, Roth, SEP, and SIMPLE
IRAs; and Coverdell Savings Accounts for qualified education expenses for
children under age 18. A description of applicable service fees and application
forms are available upon request from the Fund. These documents also contain a
Disclosure Statement which the IRS requires to be furnished to individuals who
are considering adopting these plans. It is important that you obtain up-to-date
information from the Fund before opening a tax deferred account. Investors
should consult with their tax adviser or legal counsel before investing in a tax
deferred account.
21
Investment
Adviser
NICHOLAS COMPANY, INC.
Milwaukee, Wisconsin
Distributor
QUASAR DISTRIBUTORS, LLC
Milwaukee, Wisconsin
Accountant
Dividend Disbursing Agent
Transfer Agent
U.S. BANCORP FUND SERVICES, LLC
Milwaukee, Wisconsin
414-276-0535 or 800-544-6547
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
NICHOLAS COMPANY, INC.
Milwaukee, Wisconsin
Distributor
QUASAR DISTRIBUTORS, LLC
Milwaukee, Wisconsin
Accountant
Dividend Disbursing Agent
Transfer Agent
U.S. BANCORP FUND SERVICES, LLC
Milwaukee, Wisconsin
414-276-0535 or 800-544-6547
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
The
Fund’s Statement of Additional Information (“SAI”), dated July 29, 2023,
contains more detailed information on all aspects of Nicholas Equity Income
Fund, Inc., and is incorporated by reference in this Prospectus. Additional
information about the Fund also is available in the Fund’s Annual and Semiannual
Report to Shareholders. The Fund’s Annual Report discusses the market conditions
and investment strategies that significantly affected the Fund’s performance
during its last fiscal year.
To
request a free copy of the current Annual/Semiannual Report or SAI or other
information about the Fund, or to make shareholder inquiries, please write or
call: Nicholas Equity Income Fund, Inc., 411 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, 800-544-6547 (toll-free). Along with the Fund’s
Annual/Semiannual Report and SAI, additional information about the Fund also can
be obtained from the Fund’s Internet website at
www.nicholasfunds.com.
Reports
and other information about the Fund also are available on the SEC’s Internet
website at www.sec.gov. For a duplicating fee, copies of such information may be
obtained by electronic request at the following e-mail address: [email protected].
For
the most current price and return information for the Fund, you may call the
Fund at 800-544-6547 (toll-free) or 414-276-0535 or check the Fund’s website at
www.nicholasfunds.com. You also can find the most current price of the Fund’s
shares in the business section of your newspaper in the mutual fund section
under the heading “Nicholas Group” - “NchEq.” If you prefer to obtain this
information from an on-line computer service, you can do so by using the ticker
symbol “NSEIX” or cusip number 653734103.
Investment
Company Act File No. 811-08062