Investment Objective
The Nicholas II, Inc. seeks capital appreciation by investing in a diversified portfolio of small- and mid-sized companies. The Fund looks for established companies with the potential for superior sales and earnings growth that are positioned to benefit from emerging, long-term social and economic trends. The goal is to find great companies early and hold them for the long-term.

Investment Policies & Considerations
The Nicholas II's  management team believes that company selection is the key to providing superior returns over time. Our goal is to find companies that have the potential for outstanding earnings and sales growth, and are positioned to benefit from long-term economic and social trends. Some of the factors we consider in assessing companies include:

• Growth rate of 12% or better
• High return on capital
• Strong cash flow
• Consistent earnings
• Return on equity (ROE) of 15%, or an improving ROE
• Debt to total capitalization of less than 50%
• A price-to-earnings ratio lower than two times the growth rate
• An enduring franchise or brand
• Honest, capable management
• Significant management ownership of stock
• Long-term and short-term business momentum

It is our strong conviction that superior long-term results are achieved by minimizing capital losses in adverse markets. We do not attempt to forecast short-term market swings, but work to preserve gains and minimize losses using long-term, fundamental valuation techniques. Our portfolio turnover is moderate as our goal is to find, and hold, stock in great companies. However, if a stock is not meeting our expectations, or has become over-valued, we will sell it.

At Nicholas, our watchword is patience. We believe it is the key to superior long-term results.

Mutual fund investing involves risk; loss of principal is possible. The Fund invests in smaller companies, which involve additional risks such as limited liquidity and greater volatility.

Price to earnings ratio is a common tool for comparing the prices of different common stocks and is calculated by dividing the current market price of a stock by the earnings per share.

Return on Equity (ROE)-A measure of a corporation’s profitability. Represents average return on equity on the securities in the portfolio, not the actual return on equity on the portfolio.