Nicholas Income Fund N-CSRS Certified semi-annual shareholder report (management investment company)

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 811-00216
Nicholas High Income Fund, Inc.
(Exact Name of Registrant as specified in charter)
411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
(Address of Principal Executive Offices)	(Zip Code)
Jennifer R. Kloehn, Senior Vice President and Treasurer
411 East Wisconsin Avenue
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: 12/31/2017

Date of reporting period: 06/30/2017

Item 1. Report to Stockholders.

SEMIANNUAL REPORT

June 30, 2017

NICHOLAS HIGH
INCOME FUND, INC.

WWW.NICHOLASFUNDS.COM

NICHOLAS HIGH INCOME FUND, INC.

August 2017

Report to Fellow Shareholders:

Market Overview

     The high yield bond market followed the lead of the equity market’s move higher as investor expectations remained elevated following the Trump election in 2016. Expectations for significant regulatory reform of healthcare, finance and taxes boosted prices and returns on equities and high yield. The belief that reform would benefit corporate profits and boost consumer spending drove markets to new highs during the first half of 2017. By summer, doubts rose about accomplishing the aggressive reform agenda and markets stalled. The equity and high yield markets pulled back from previous highs even as corporate earnings were generally positive. We believe the markets may need a combination of better economic growth, regulatory reform and improved earnings to regain momentum in the coming months.

     The high yield bond market generated solid returns for the first six months of 2017 with the Bank of America Merrill Lynch (“BAML”) U.S. High Yield Constrained Index returning 4.90%. As measured by the respective BAML indices, lower quality, riskier assets provided the greater returns with CCC & Lower-rated bonds at 6.95% for the period ended June 30, 2017. The higher quality BB-rated bonds earned 4.65%. Over the past twelve months these two indices generated 23.08% and 9.82%, respectively. The expectations driving equity prices benefitted the high yield market as well. Sectors leading performance included banking/finance, home construction and transportation, all expecting to benefit from deregulation and better economic activity. Sectors lagging during the six-month period were energy, supermarkets and wirelines.

     The Nicholas High Income Fund (Fund) Class I provided a 3.73% return for the period ended June 30, 2017. This was competitive with the Morningstar High Yield Category return of 4.09%, which is net of fees. The BAML U.S. High Yield Constrained Index was 4.90% for the six months led by the lower quality sectors as noted earlier. The Fund performance benefitted from the allocation and security selection in the basic industry, capital goods, technology and service sectors. Companies in these sectors are positioned to take advantage of an improving economy. Performance was negatively impacted by an underweight position in the healthcare and media sectors. The Fund was underweight based on the view companies in these sectors continue to struggle with disruptive technologies and policies causing a shift in demand and price pressures. It does not appear to us this wave of disruption will end in the near future and we intend to continue to underweight companies that operate in these areas.

     The Fund has moved to a more defensive posture over the last 12-18 months in an effort to protect shareholders from the potential risks associated with an extended credit cycle and changing Federal Reserve policy. A shift toward securities in the BB/Ba rated bucket has been the focus. The bonds offer stronger business models and balance sheets that should withstand an unexpected market correction or economic downturn. The tradeoff is a lower yield but our view is an upgrade in quality is worth the cost of a modestly lower yield. The portfolio continues to have a shorter effective duration compared to the market. We do not anticipate a near term risk to dramatically higher interest rates, but we do not believe interest rates can move drastically lower from these levels. A shorter portfolio maturity structure seems more prudent at this point in the cycle.

     Our view for the balance of 2017 is the economy, markets and interest rates will remain range bound. We believe economic growth is likely to remain approximately 2%, the high yield market is likely to produce mid-single digit returns, and 10-year U.S. Treasury yields will remain in a range of 2.0% to 3.0%. We believe the Federal Reserve will defer further hikes in the Fed Funds rate until 2018, but they have telegraphed their intention to initiate an unwinding of their massive balance sheet. The challenge will be how attractive current interest rates remain to investors after the Federal Reserve ends their buying program. Investor reaction to this unprecedented move is uncertain.

Performance

     Nicholas High Income Fund – Class I produced a net return of 3.73% for the six-month period ended June 30, 2017. Returns for Nicholas High Income Fund, Inc. Class I and N, and selected indices are provided in the chart below for the periods ended June 30, 2017. The Fund and Morningstar performance data is net of fees, while the BAML Indices are gross of fees.

					Average Annual Total Return
		6 Month			1 Year		3 Year			5 Year			10 Year
Nicholas High Income
Fund, Inc. – Class I		3.73	%		8.48	%	1.98	%		4.40	%		5.08	%
Nicholas High Income
Fund, Inc. – Class N		3.55	%		8.09	%	1.61	%		4.02	%		4.75	%
BAML U.S. High Yield
Constrained Index		4.90	%		12.74	%	4.49	%		6.92	%		7.62	%
BAML BB-B U.S.
High Yield Index		4.57	%		11.21	%	4.54	%		6.67	%		7.08	%
Morningstar High Yield
Bond Funds Category		4.09	%		10.78	%	3.02	%		5.70	%		6.04	%
Ending value of $10,000 invested
in Nicholas High Income
Fund, Inc. – Class I	$	10,373		$	10,848	$	10,606		$	12,400		$	16,414
Ending value of $10,000 invested
in Nicholas High Income
Fund, Inc. – Class N	$	10,355		$	10,809	$	$10,490		$	12,177			15,899
Fund’s Class I Expense Ratio (from 04/30/17 Prospectus): 0.69%
(includes 0.01% in acquired funds fees and expenses)
Fund’s Class N Expense Ratio (from 04/30/17 Prospectus): 1.04%
(includes 0.01% in acquired funds fees and expenses)

The Fund’s expense ratios for the period ended June 30, 2017 can be found in the financial highlights included within this report.

Performance data quoted represents past performance and is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.nicholasfunds.com/returns.html.

The 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 I shares and Class N 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.

Philosophy and Process

     The returns earned by the Fund are consistent with our investment philosophy and style. Our approach has been to identify undervalued securities using rigorous financial analysis to verify that the fundamental outlook is properly aligned with current valuations. An analysis of trends in earnings, EBITDA, leverage and asset coverage are critical for making a sound investment. Security valuation is the primary gatekeeper in deciding whether to add or eliminate a holding from the portfolio. Financially sound companies with fully priced securities do not necessarily represent a good value, while companies that have stumbled financially should not automatically be dismissed as bad investments if we believe the valuations offer a sufficient margin of safety. This process suggests a more conservative approach to investing in high yield bonds, which we believe has the potential to allow for more consistent returns with less downside risk.

     We remain committed to the Fund’s long-term strategy, which is based on a process that seeks to identify value opportunities in out-of-favor or poorly followed securities of financially sound companies. Opportunities tend to arise over time in securities of companies that fall temporarily out-of-favor due to specific company or industry issues that may taint the issuers. Often times these companies are in a period of transition or restructuring where market sentiment is overly harsh or negative resulting in an undervalued situation. We are keenly aware that a cheap price alone does not guarantee a good investment; therefore, we seek to identify a catalyst we believe will allow the company and its securities to regain favor and be rewarded with higher valuations. We believe that investing in securities trading below their fair values due to non-fundamental short-term issues, emotion or misunderstanding offers significant long-term potential returns.

Thank you for your investment in the Nicholas High Income Fund.

Lawrence J. Pavelec, CFA
Senior Vice President
Portfolio Manager

The information above represents the opinions of the Fund manager, is subject to change, and any forecasts made cannot be guaranteed.

Mutual fund investing involves risk. Principal loss is possible. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investment by the Fund in lower-rated and non-rated securities presents a greater risk of loss to principal and interest than higher-rated securities. The Fund may invest in illiquid securities which involve the risk that the securities will not be able to be sold at the time or prices desired by the fund, particularly during times of market turmoil.

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 portfolio holdings are subject to risk.

Earnings before interest, taxes, depreciation and amortization (EBITDA) is an approximate measure of a company’s operating cash flow based on data from the company’s income statement. Calculated by looking at earnings before the deduction of interest expenses, taxes, depreciation, and amortization.

Effective Duration is a calculation for bonds with embedded options. Effective duration takes into account that expected cash flows with fluctuate as interest rates change.

Index Definitions - You cannot invest directly in an index.

The Bank of America Merrill Lynch U.S. High Yield Index tracks the performance of US dollar denominated below investment grade corporate debt publicly issued in the US domestic market. Qualifying securities must have at least one year remaining term to final maturity, a fixed coupon schedule and a minimum amount outstanding of $250 million.

The Bank of America Merrill Lynch U.S. High Yield Constrained Index limits any individual issuer included in the Bank of America Merrill Lynch U.S. High Yield Index to a maximum of 2% benchmark exposure.

The Bank of America Merrill Lynch U.S. High Yield BB Index is a subset of the Bank of America Merrill Lynch U.S. High Yield Index including all securities rated BB1 through BB3.

The Bank of America Merrill Lynch BB-B U.S. High Yield Index is a subset of the Bank of America Merrill Lynch U.S. High Yield Index including all securities rated BB1 through B3, inclusive.

The Bank of America Merrill Lynch U.S. High Yield CCC and Lower Rated Index is a subset of the Merrill Lynch US High Yield Index including all securities rated CCC1 or lower.

Credit Quality reflects the credit rating assigned by Fitch, Moody’s or S&P. Ratings are subject to change and generally expressed as a scale from AAA to D, where higher-rated bonds are in the A’s and lower-rated in the C’s. Any bond rated BBB or higher is considered investment grade debt. Any bond rated BBB- or below is considered below investment grade and are seen as having higher default risk or other adverse credit events, but typically pay higher yields than better quality bonds in order to make them attractive. The credit quality of the investments in the portfolio does not apply to the stability or safety of the Fund or its shares.

Each Morningstar Category average represents a universe of Funds with similar invest objectives.

Must be preceded or accompanied by a prospectus.

The Nicholas Funds are distributed by Quasar Distributors, LLC.

Financial Highlights Class I (NCINX)

For a share outstanding throughout each period

		Six Months
		Ended
		06/30/2017						Years Ended December 31,
		(unaudited)			2016			2015			2014			2013			2012
NET ASSET VALUE,
BEGINNING OF PERIOD	$	9.08		$	8.65		$	9.52		$	9.86		$	9.86		$	9.28
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
Net investment income		.23	(1)		.43	(1)		.43			.52			.58			.64
Net gain (loss) on securities
(realized and unrealized)		.11			.42			(.84	)		(.35	)		.00	(2)		.58
Total from
investment operations		.34			.85			(.41	)		.17			.58			1.22
LESS DISTRIBUTIONS
From net investment income		(.13	)		(.42	)		(.46	)		(.51	)		(.58	)		(.64	)
NET ASSET VALUE,
END OF PERIOD	$	9.29		$	9.08		$	8.65		$	9.52		$	9.86		$	9.86
TOTAL RETURN		3.73	%(3)		9.94	%		(4.54	)%		1.62	%		5.91	%		13.36	%
SUPPLEMENTAL DATA:
Net assets, end of
period (millions)	$	102.7		$	100.5		$	93.1		$	101.1		$	103.8		$	103.0
Ratio of expenses
to average net assets.		.72	%(4)		.68	%		.70	%		.67	%		.66	%		.66	%
Ratio of net investment income
to average net assets.		5.03	%(4)		4.83	%		4.61	%		5.24	%		5.74	%		6.52	%
Portfolio turnover rate		44.92	%(4)		44.28	%		41.30	%		50.76	%		51.47	%		62.31	%

(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.

– 5–

Financial Highlights Class N (NNHIX)

For a share outstanding throughout each period

		Six Months
		Ended
		06/30/2017						Years Ended December 31,
		(unaudited)			2016			2015			2014			2013			2012
NET ASSET VALUE,
BEGINNING OF PERIOD	$	9.22		$	8.78		$	9.66		$	9.99		$	9.98		$	9.39
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
Net investment income		.22	(1)		.40	(1)		.39			.48			.54			.61
Net gain (loss) on securities
(realized and unrealized)		.11			.43			(.85	)		(.34	)		.01			.59
Total from
investment operations		.33			.83			(.46	)		.14			.55			1.20
LESS DISTRIBUTIONS
From net investment income		(.12	)		(.39	)		(.42	)		(.47	)		(.54	)		(.61	)
NET ASSET VALUE,
END OF PERIOD	$	9.43		$	9.22		$	8.78		$	9.66		$	9.99		$	9.98
TOTAL RETURN		3.55	%(2)		9.58	%		(4.97	)%		1.34	%		5.54	%		12.96	%
SUPPLEMENTAL DATA:
Net assets, end of
period (millions)	$	4.4		$	8.1		$	2.7		$	6.6		$	6.3		$	9.3
Ratio of expenses
to average net assets.		1.05	%(3)		1.03	%		1.05	%		1.02	%		1.01	%		1.01	%
Ratio of net investment income
to average net assets.		4.73	%(3)		4.42	%		4.29	%		4.90	%		5.45	%		6.15	%
Portfolio turnover rate		44.92	%(3)		44.28	%		41.30	%		50.76	%		51.47	%		62.31	%

(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.

– 6–

Top Ten Equity Portfolio Issuers

June 30, 2017 (unaudited)

	Percentage
Name	of Net Assets
Mercer International Inc.	2.12	%
Zayo Group, LLC	1.96	%
Equinix, Inc.	1.96	%
LPL Holdings, Inc.	1.94	%
GEO Group, Inc. (The)	1.94	%
FAGE International S.A.	1.92	%
PetSmart, Inc.	1.88	%
Beacon Roofing Supply, Inc.	1.76	%
Koppers Inc.	1.74	%
Valvoline Finco Two LLC	1.66	%
Total of top ten	18.88	%

Sector Diversification (as a percentage of portfolio)

 June 30, 2017 (unaudited)

– 7–

Fund Expenses

For the six month period ended June 30, 2017 (unaudited)

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other operating expenses. The following table is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with those of other mutual funds.

The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period.

The first line of the table below for each share class of the Fund provides information about the actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratios for each class of the Fund and an assumed rate of return of 5% per year before expenses, which are not the Fund’s actual returns. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as wire fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Class I
		Beginning		Ending		Expenses
		Account		Account		Paid During
		Value		Value		Period*
		12/31/16		06/30/17		01/01/17 - 06/30/17
Actual	$	1,000.00	$	1,037.30	$	3.64
Hypothetical		1,000.00		1,021.43		3.61
(5% return before expenses)

*      Expenses are equal to the Class I six-month annualized expense ratio of 0.72%, multiplied by the average account value over the period, multiplied by 181 then divided by 365 to reflect the one- half year period.

– 8–

Fund Expenses (continued)

For the six month period ended June 30, 2017 (unaudited)

Class N
		Beginning		Ending		Expenses
		Account		Account		Paid During
		Value		Value		Period**
		12/31/16		06/30/17		01/01/17 - 06/30/17
Actual	$	1,000.00	$	1,035.50	$	5.30
Hypothetical		1,000.00		1,019.79		5.26
(5% return before expenses)

**      Expenses are equal to the Class N six-month annualized expense ratio of 1.05%, multiplied by the average account value over the period, multiplied by 181 then divided by 365 to reflect the one-half year period.

– 9–

	Schedule of Investments
	June 30, 2017 (unaudited)
	Shares or
	Principal
	Amount			Value
	NON-CONVERTIBLE BONDS — 91.47%
		Automotive – Parts & Equipment — 2.87%
$	1,500,000	Allison Transmission, Inc. 144A restricted, 5.00%, 10/01/24	$	1,537,500
	1,500,000	American Axle & Manufacturing, Inc. 6.625%, 10/15/22		1,537,500
				3,075,000
		Banking — 0.81%
	1,000,000	BAC Capital Trust XIV Floating Rate Preferred Hybrid
		Income Term Securities 4.00%(1), 03/15/43		872,000
		Basic Industry – Building Materials — 3.47%
	1,750,000	Beacon Roofing Supply, Inc. 6.375%, 10/01/23		1,881,250
	1,000,000	HD Supply, Inc. 144A restricted, 5.75%, 04/15/24		1,062,500
	750,000	USG Corporation 144A restricted, 4.875%, 06/01/27		771,563
				3,715,313
		Basic Industry – Chemicals — 4.86%
	1,750,000	Koppers Inc. 144A restricted, 6.00%, 02/15/25		1,859,375
	1,500,000	PolyOne Corporation 5.25%, 03/15/23		1,575,000
	1,680,000	Valvoline Finco Two LLC 144A restricted, 5.50%, 07/15/24		1,776,600
				5,210,975
		Basic Industry – Forestry & Paper — 3.56%
	1,500,000	Louisiana-Pacific Corporation 4.875%, 09/15/24		1,531,875
	2,125,000	Mercer International Inc. 7.75%, 12/01/22		2,276,406
				3,808,281
		Basic Industry – Metal/Mining Excluding Steel — 2.28%
	1,250,000	Alcoa Nederland Holding B.V. 144A restricted, 6.75%, 09/30/24		1,356,250
	1,000,000	Grinding Media Inc. 144A restricted, 7.375%, 12/15/23		1,087,500
				2,443,750
		Capital Goods – Diversified — 0.98%
	1,000,000	Park-Ohio Industries, Inc. 144A restricted, 6.625%, 04/15/27		1,050,000
		Capital Goods – Machinery — 1.08%
	1,000,000	Manitowoc Foodservice, Inc. 9.50%, 02/15/24		1,160,000
		Capital Goods – Packaging — 4.36%
	1,000,000	Ball Corporation 5.00%, 03/15/22		1,067,500
	1,500,000	Crown Americas LLC 144A restricted, 4.25%, 09/30/26		1,496,250
	1,500,000	Reynolds Group Holdings Limited 144A restricted, 5.125%, 07/15/23		1,558,125
	500,000	Sealed Air Corporation 144A restricted, 5.50%, 09/15/25		546,250
				4,668,125
		Consumer Goods – Food-Wholesale — 7.10%
	1,000,000	B&G Foods, Inc. 5.25%, 04/01/25		1,020,000
	2,000,000	FAGE International S.A. 144A restricted, 5.625%, 08/15/26		2,059,600
	500,000	KeHE Distributors, LLC 144A restricted, 7.625%, 08/15/21		501,250
	1,000,000	Lamb Weston Holdings, Inc. 144A restricted, 4.625%, 11/01/24		1,030,000

The accompanying notes to financial statements are an integral part of this schedule.

– 10 –

Schedule of Investments (continued)

June 30, 2017 (unaudited)

	Shares or
	Principal
	Amount			Value
	NON-CONVERTIBLE BONDS — 91.47% (continued)
		Consumer Goods – Food-Wholesale — 7.10% (continued)
$	600,000	Pinnacle Foods Inc. 5.875%, 01/15/24	$	640,500
	500,000	Post Holdings, Inc. 144A restricted, 5.50%, 03/01/25		515,625
	1,250,000	TreeHouse Foods, Inc. 4.875%, 03/15/22		1,290,625
	528,000	Wells Enterprises, Inc. 144A restricted, 6.75%, 02/01/20		545,820
				7,603,420
		Consumer Goods – Personal & Household Products — 2.61%
	500,000	Energizer Holdings, Inc. 144A restricted, 5.50%, 06/15/25		523,125
	1,465,000	FGI Operating Company, LLC 7.875%, 05/01/20		981,550
	500,000	Tempur Sealy International, Inc. 5.625%, 10/15/23		518,750
	750,000	Vista Outdoor Inc. 5.875%, 10/01/23		770,625
				2,794,050
		Energy – Exploration & Production — 0.94%
	1,000,000	RSP Permian, Inc. 144A restricted, 5.25%, 01/15/25		1,001,250
		Energy – Gas-Distribution — 3.37%
	1,500,000	Cheniere Corpus Christi Holdings LLC
		144A restricted, 5.125%, 06/30/27		1,537,500
	750,000	Tesoro Logistics LP 5.25%, 01/15/25		787,500
	1,000,000	Transcontinental Gas Pipe Line Company, LLC 7.85%, 02/01/26		1,286,553
				3,611,553
		Energy – Oil Field Equipment & Services — 2.19%
	1,000,000	Hornbeck Offshore Services, Inc. 5.00%, 03/01/21		537,500
	1,000,000	Parker Drilling Company 6.75%, 07/15/22		767,500
	1,000,000	Weatherford International Ltd. 144A restricted, 9.875%, 02/15/24		1,045,000
				2,350,000
		Energy – Oil Refining & Marketing — 0.40%
	500,000	Calumet Specialty Products Partners, L.P. 6.50%, 04/15/21		432,500
		Financial Services – Brokerage — 4.10%
	1,500,000	Jefferies Finance LLC 144A restricted, 7.375%, 04/01/20		1,537,500
	2,000,000	LPL Holdings, Inc. 144A restricted, 5.75%, 09/15/25		2,080,000
	774,000	Oppenheimer Holdings Inc. 8.75%, 04/15/18		776,786
				4,394,286
		Financial Services – Investments &
		Miscellaneous Financial Services — 0.94%
	1,000,000	Icahn Enterprises L.P. 4.875%, 03/15/19		1,010,000
		Healthcare – Facilities — 1.71%
	750,000	HealthSouth Corporation 5.75%, 09/15/25		789,375
	1,000,000	Sabra Health Care Limited Partnership 5.50%, 02/01/21		1,040,000
				1,829,375

The accompanying notes to financial statements are an integral part of this schedule.

– 11 –

Schedule of Investments (continued)

June 30, 2017 (unaudited)

	Shares or
	Principal
	Amount			Value
	NON-CONVERTIBLE BONDS — 91.47% (continued)
		Healthcare – Medical Products — 1.18%
$	1,225,000	Teleflex Incorporated 5.25%, 06/15/24	$	1,267,875
		Leisure – Gaming — 1.39%
	1,500,000	Scientific Games International, Inc. 6.25%, 09/01/20		1,486,875
		Leisure – Theaters & Entertainment — 0.96%
	1,000,000	Cinemark USA, Inc. 5.125%, 12/15/22		1,030,000
		Media – Advertising — 1.45%
	1,500,000	Nielsen Company (Luxembourg) S.ar.l. (The)
		144A restricted, 5.50%, 10/01/21		1,552,500
		Media – Content — 1.01%
	1,000,000	Netflix, Inc. 5.50%, 02/15/22		1,085,930
		Real Estate – Development & Management — 0.49%
	500,000	CBRE Services, Inc. 5.00%, 03/15/23		520,931
		Retail – Food & Drug Retailer — 1.18%
	1,500,000	Fresh Market, Inc. (The) 144A restricted, 9.75%, 05/01/23		1,258,125
		Retail – Restaurants — 1.24%
	1,300,000	Wok Acquisition Corp. 144A restricted, 10.25%, 06/30/20		1,326,000
		Retail – Specialty Retail — 5.71%
	1,000,000	Levi Strauss & Co. 5.00%, 05/01/25		1,045,000
	1,000,000	Murphy Oil USA, Inc. 6.00%, 08/15/23		1,055,000
	1,750,000	PetSmart, Inc. 144A restricted, 7.125%, 03/15/23		1,557,500
	500,000	PetSmart, Inc. 144A restricted, 8.875%, 06/01/25		461,800
	1,120,000	Rent-A-Center, Inc. 4.75%, 05/01/21		1,013,600
	1,000,000	Wolverine World Wide, Inc. 144A restricted, 5.00%, 09/01/26		986,250
				6,119,150
		Services – Support-Services — 10.48%
	1,500,000	ADT Corporation (The) 3.50%, 07/15/22		1,450,800
	1,500,000	Aramark Services, Inc. 5.125%, 01/15/24		1,576,875
	1,000,000	Avis Budget Car Rental, LLC 144A restricted, 5.125%, 06/01/22		990,000
	1,000,000	Cardtronics, Inc. 5.125%, 08/01/22		1,015,000
	1,000,000	Corrections Corporation of America 4.625%, 05/01/23		1,010,000
	2,000,000	GEO Group, Inc. (The) 6.00%, 04/15/26		2,075,000
	1,500,000	Ritchie Bros. Auctioneers Incorporated
		144A restricted, 5.375%, 01/15/25		1,563,750
	1,500,000	United Rentals (North America), Inc. 5.50%, 05/15/27		1,545,000
				11,226,425
		Technology & Electronics – Hardware & Equipment — 5.92%
	500,000	Brocade Communications Systems, Inc. 4.625%, 01/15/23		514,375
	1,500,000	CommScope, Inc. 144A restricted, 5.00%, 06/15/21		1,533,750

The accompanying notes to financial statements are an integral part of this schedule.

– 12 –

Schedule of Investments (continued)

June 30, 2017 (unaudited)

	Shares or
	Principal
	Amount			Value
	NON-CONVERTIBLE BONDS — 91.47% (continued)
Technology & Electronics – Hardware & Equipment — 5.92% (continued)
$	1,500,000	Dell Inc. 144A restricted, 7.125%, 06/15/24	$	1,648,884
	1,000,000	NCR Corporation 5.875%, 12/15/21		1,040,000
	500,000	NCR Corporation 5.00%, 07/15/22		510,000
	1,000,000	Western Digital Corporation 144A restricted, 7.375%, 04/01/23		1,098,750
				6,345,759
		Technology & Electronics – Software & Services — 2.41%
	1,000,000	CDK Global, Inc. 144A restricted, 4.875%, 06/01/27		1,027,500
	1,500,000	First Data Corporation 144A restricted, 5.75%, 01/15/24		1,558,125
				2,585,625
		Telecommunications – Wireless — 2.38%
	1,500,000	Digicel Limited 144A restricted, 6.00%, 04/15/21		1,438,125
	1,000,000	Sprint Corporation 7.25%, 09/15/21		1,111,250
				2,549,375
		Telecommunications – Wireline Integrated & Services — 4.98%
	1,000,000	Cincinnati Bell Inc. 144A restricted, 7.00%, 07/15/24		1,045,200
	1,500,000	Equinix, Inc. 5.375%, 04/01/23		1,558,125
	591,000	Frontier Communications Corporation 8.50%, 04/15/20		621,289
	2,000,000	Zayo Group, LLC 6.00%, 04/01/23		2,105,000
				5,329,614
		Transportation – Infrastructure/Services — 1.46%
	1,500,000	XPO Logistics, Inc. 144A restricted, 6.125%, 09/01/23		1,561,875
		Utility – Electric-Generation — 1.60%
	1,000,000	Calpine Corporation 5.375%, 01/15/23		975,000
	250,000	Dynegy Inc. 144A restricted, 8.00%, 01/15/25		242,500
	500,000	Dynegy Inc. 7.375%, 11/01/22		493,750
				1,711,250
		TOTAL NON-CONVERTIBLE BONDS
		(cost $97,018,364)		97,987,187
	COMMON STOCKS — 1.48%
		Energy — 0.44%
	17,500	Enterprise Products Partners L.P.		473,900
		Real Estate — 1.04%
	5,500	CoreSite Realty Corporation		569,415
	1,250	Equinix, Inc.		536,450
				1,105,865
		TOTAL COMMON STOCKS
		(cost $1,603,434)		1,579,765

The accompanying notes to financial statements are an integral part of this schedule.

– 13 –

Schedule of Investments (continued)

June 30, 2017 (unaudited)

	Shares or
	Principal
	Amount			Value
	CONVERTIBLE PREFERRED STOCKS — 1.86%
		Energy — 0.89%
	22,000	Kinder Morgan, Inc. 9.75%, Cumulative, Convertible, Series A	$	953,040
		Healthcare – Pharmaceuticals,
		Biotechnology & Life Sciences — 0.97%
	1,200	Allergan plc 5.25%, Cumulative, Mandatory Convertible, Series A		1,038,000
		TOTAL CONVERTIBLE PREFERRED STOCKS
		(cost $1,973,469)		1,991,040
	SHORT-TERM INVESTMENTS — 3.58%
		U.S. Government Securities — 2.33%
$	1,000,000	U.S. Treasury Bill 0.670%, 07/06/17		999,945
	1,500,000	U.S. Treasury Bill 0.771%, 07/20/17		1,499,462
				2,499,407
		Money Market Fund — 1.25%
	1,339,759	Morgan Stanley Liquidity Funds
		Government Portfolio (Institutional Class), 7-day net yield 0.84%		1,339,759
		TOTAL SHORT-TERM INVESTMENTS
		(cost $3,839,166)		3,839,166
		TOTAL INVESTMENTS
		(cost $104,434,433) — 98.39%		105,397,158
		OTHER ASSETS, NET OF LIABILITIES — 1.61%		1,730,005
		TOTAL NET ASSETS
		(basis of percentages disclosed above) – 100%	$	107,127,163

(1) The greater of (i) 3-month LIBOR plus 0.40% and (ii) 4.00%, such rate being reset quarterly.

Securities purchased pursuant to Rule 144A under the Securities Act of 1933 may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933.

The accompanying notes to financial statements are an integral part of this schedule.

– 14 –

Statement of Assets and Liabilities

June 30, 2017 (unaudited)

ASSETS
Investments in securities at value (cost $104,434,433)	$	105,397,158
Receivables —
Investment securities sold		371,091
Interest and dividend		1,610,523
Capital stock subscription		1,278
Total receivables		1,982,892
Other		14,338
Total assets		107,394,388
LIABILITIES
Payables —
Investment securities purchased		159,155
Due to adviser —
Management fee		41,525
Accounting and administrative fee		4,384
Total due to adviser		45,909
12b-1 and servicing fee		22,099
Other payables and accrued expense		40,062
Total liabilities		267,225
Total net assets	$	107,127,163
NET ASSETS CONSIST OF
Paid in capital	$	118,647,131
Net unrealized appreciation on investments		962,725
Accumulated net realized loss on investments		(13,985,590	)
Accumulated undistributed net investment income		1,502,897
Total net assets	$	107,127,163
Class I
Net assets	$	102,745,913
Shares outstanding		11,064,173
NET ASSET VALUE PER SHARE ($.05 par value, 75,000,000
shares authorized), offering price and redemption price	$	9.29
Class N
Net assets	$	4,381,250
Shares outstanding		464,598
NET ASSET VALUE PER SHARE ($.05 par value, 25,000,000
shares authorized), offering price and redemption price	$	9.43

The accompanying notes to financial statements are an integral part of this statement.

– 15 –

Statement of Operations
For the six months ended June 30, 2017 (unaudited)
INCOME
Interest	$	2,959,142
Dividend		136,221
Total income		3,095,363
EXPENSES
Management fee		238,483
Registration fees		30,001
Accounting and administrative fees		25,068
Transfer agent fees		23,529
Accounting system and pricing service fees		19,367
Audit and tax fees		16,656
Printing		9,628
12b-1 fees – Class N		8,364
Directors’ fees		6,250
Legal fees		5,392
Custodian fees		3,278
Servicing fees – Class N		2,971
Postage and mailing		2,323
Insurance		2,243
Other operating expenses		2,487
Total expenses		396,040
Net investment income		2,699,323
NET REALIZED GAIN ON INVESTMENTS		935,765
CHANGE IN NET UNREALIZED APPRECIATION/DEPRECIATION
ON INVESTMENTS		327,333
Net realized and unrealized gain on investments		1,263,098
Net increase in net assets resulting from operations	$	3,962,421

The accompanying notes to financial statements are an integral part of this statement.

– 16 –

Statements of Changes in Net Assets

For the six months ended June 30, 2017 (unaudited) and the year ended December 31, 2016

		Six Months Ended
		06/30/2017			Year Ended
		(unaudited)			12/31/2016
INCREASE (DECREASE) IN
NET ASSETS FROM OPERATIONS
Net investment income	$	2,699,323		$	4,974,542
Net realized gain/(loss) on investments		935,765			(4,896,343	)
Change in net unrealized
appreciation/depreciation on investments		327,333			9,705,394
Net increase in net assets
resulting from operations		3,962,421			9,783,593
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income – Class I		(1,403,176	)		(4,571,047	)
From net investment income – Class N		(70,168	)		(308,943	)
Total distribution		(1,473,344	)		(4,879,990	)
CAPITAL SHARE TRANSACTIONS
Proceeds from shares issued – Class I
(294,299 and 573,580 shares, respectively)		2,703,822			5,145,275
Reinvestment of distributions – Class I
(136,938 and 451,928 shares, respectively)		1,259,827			4,083,524
Cost of shares redeemed – Class I
(436,920 and 719,387 shares, respectively)		(4,028,369	)		(6,460,066	)
Proceeds from shares issued – Class N
(1,265,485 and 2,389,816 shares, respectively)		11,823,222			21,740,142
Reinvestment of distributions – Class N
(7,178 and 32,387 shares, respectively)		67,114			297,307
Cost of shares redeemed – Class N
(1,685,052 and 1,850,845 shares, respectively)		(15,756,158	)		(16,911,469	)
Change in net assets derived from
capital share transactions		(3,930,542	)		7,894,713
Total increase (decrease) in net assets		(1,441,465	)		12,798,316
NET ASSETS
Beginning of period		108,568,628			95,770,312
End of period (including accumulated
undistributed net investment income of
$1,502,897 and $49,781, respectively)	$	107,127,163		$	108,568,628

The accompanying notes to financial statements are an integral part of these statements.

– 17 –

Notes to Financial Statements

June 30, 2017 (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 generally accepted accounting principles (“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 December 31, 2016.

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 High Income Fund, 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
high current income consistent with the preservation and conservation of capital values.
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 net asset value, which is calculated as of the
close of regular trading on the New York Stock Exchange. Debt securities, excluding
short-term investments, are valued at their current evaluated bid price as determined
by an independent pricing service, which generates evaluations on the basis of
dealer quotes for normal institutional-sized trading units, issuer analysis, bond
market activity and various other factors. Securities for which market quotations
may not be readily available are valued at their fair value as determined in good faith
by procedures adopted by the Board of Directors. Short-term investments
purchased at par are valued at cost, which approximates market value. Short-term
investments purchased at a premium or discount are stated at amortized cost, which
approximates market value. The Fund did not maintain any positions in derivative
instruments or engage in hedging activities during the year. Investment transactions
for financial statement purposes are recorded on trade date.

In accordance with Accounting Standards Codification (“ASC”) 820-10, “Fair Value
Measurements and Disclosures” (“ASC 820-10”), fair value is defined as the price
that the Fund would receive upon selling an investment in a timely transaction to an
independent buyer in the principal or most advantageous market of the investment.
ASC 820-10 established a three-tier hierarchy to maximize the use of observable
market data and minimize the use of unobservable inputs and to establish
classification of fair value measurements for disclosure purposes. Inputs refer
broadly to the assumptions that market participants would use in pricing the asset
or liability, including assumptions about risk, for example, the risk inherent in a
particular valuation technique used to measure fair value such as a pricing model

– 18 –

Notes to Financial Statements (continued)

June 30, 2017 (unaudited)

and/or the risk inherent in the inputs to the valuation technique. Inputs may be
observable or unobservable. Observable inputs are inputs that reflect the
assumptions market participants would use in pricing the asset or liability based on
market data obtained from sources independent of the reporting entity.
Unobservable inputs are inputs that reflect the reporting entity’s own assumptions
about the assumptions market participants would use in pricing the asset or liability
based on the best information available in the circumstances. The three-tier
hierarchy of inputs is summarized in the three broad levels listed below.

Level 1 – quoted prices in active markets for identical investments

Level 2 – other significant observable inputs (including quoted prices for
similar investments, interest rates, benchmark yields, bids, offers,
transactions, spreads and other relationships observed in the
markets among market securities, underlying equity of the issuer,
proprietary pricing models, credit risk, etc.)

Level 3 – significant unobservable inputs (including the Fund’s own
assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities.

The following is a summary of the inputs used as of June 30, 2017 in valuing the
Fund’s investments carried at value:

		Investments
Valuation Inputs		in Securities
Level 1 –
Common Stocks(1)	$	1,579,765
Money Market Fund		1,339,759
Level 2 –
Non-Convertible Bonds(1)		97,987,187
Convertible Preferred Stocks(1)		1,991,040
U.S. Treasury Bills	��	2,499,407
Level 3 –
None		—
Total	$	105,397,158
(1) See Schedule of Investments for further detail by industry.

There were no transfers between levels during the period ended June 30, 2017 and
the Fund did not hold any Level 3 investments during the period.

(b) Net realized gain (loss) on portfolio securities was computed on the basis of
specific identification.

(c) Dividend income is recorded on the ex-dividend date, and interest income is
recognized on an accrual basis. Non-cash dividends, if any, are recorded at value
on date of distribution. Generally, discounts and premiums on long-term debt
security purchases, if any, are amortized over the expected lives of the respective
securities using the effective yield method.

– 19 –

Notes to Financial Statements (continued)

June 30, 2017 (unaudited)

(d) Provision has not been made for federal income taxes or excise taxes since the
Fund has elected to be taxed as a “regulated investment company” and intends to
distribute substantially all net investment income and net realized capital gains on
sales of investments to its shareholders and otherwise comply with the provisions
of Subchapter M of the Internal Revenue Code applicable to regulated investment
companies.

Investment income, net capital gains (losses) and all expenses incurred by the Fund
are allocated based on the relative net assets of each class, except for service fees
and certain other fees and expenses related to one class of shares.

Class N shares are subject to a 0.25% 12b-1 fee and a 0.10% servicing fee, as
described in its prospectus. Subsequent to April 30, 2017 through period-end, the
servicing fee was voluntarily reduced to 0.06%. Income, expenses (other than
expenses attributable to a specific class), and realized and unrealized gains and
losses are allocated daily to each class of shares based upon the relative net asset
value of outstanding shares.

(e) Dividends and distributions paid to shareholders are recorded on the ex-dividend
date. Distributions from net investment income are generally declared and paid at
least quarterly. Distributions of net realized capital gain, if any, are declared and
paid at least annually.

The amount of distributions from net investment income and net realized capital
gain are determined in accordance with federal income tax regulations, which may
differ from U.S. generally accepted accounting principles (“U.S. GAAP”) for
financial reporting purposes. Financial reporting records are adjusted for
permanent book-to-tax differences to reflect tax character. At June 30, 2017,
reclassifications were recorded to increase accumulated undistributed net
investment income by $227,137, increase accumulated net realized loss on
investments by $226,891 and decrease paid in capital by $246.

The tax character of distributions paid during the six months ended June 30, 2017
and the year ended December 31, 2016 was as follows:

		06/30/2017		12/31/2016
Distributions paid from:
Ordinary income	$	1,473,344	$	4,879,990

As of June 30, 2017, investment cost for federal tax purposes was $104,434,433
and the tax basis components of net assets were as follows:

Unrealized appreciation	$	3,140,041
Unrealized depreciation		(2,177,316	)
Net unrealized appreciation	$	962,725

There were no differences between the book-basis and tax-basis components of net
assets.

For the year ended December 31, 2016, the Fund had capital loss carryforwards of
approximately $14,694,000, which expire as follows: $6,834,000 in 2017 and

– 20 –

Notes to Financial Statements (continued)
June 30, 2017 (unaudited)

$7,860,000 indefinitely. To the extent the Fund has future net realized capital gains,
distributions of capital gains to shareholders will be offset by any unused capital
loss carryforward utilizing the indefinite carryforward prior to the others.

The Fund had no material uncertain tax positions and has not recorded a liability for
unrecognized tax benefits as of June 30, 2017. Also, the Fund recognized no
interest and penalties related to uncertain tax benefits during the period ended
June 30, 2017. At June 30, 2017, the fiscal years 2013 through 2016 remain open
to examination in the Fund’s major tax jurisdictions.

(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 June 30, 2017. There have been no significant subsequent events
since June 30, 2017 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 0.50% of the average net asset
value up to and including $50 million, 0.40% of the average net asset value in
excess of $50 million and up to and including $100 million and 0.30% 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.

– 21 –

Notes to Financial Statements (continued)
June 30, 2017 (unaudited)

(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 $2,892 for the period ended June 30, 2017
for legal services rendered by this law firm.

(3) Investment Transactions —
For the period ended June 30, 2017, the cost of purchases and the proceeds from sales
of investment securities, other than short-term obligations, aggregated $23,127,531 and
$28,006,476, respectively.

(4) Concentration of Risk —
The Fund invests primarily in high yield debt securities. The market values of these high
yield debt securities tend to be more sensitive to economic conditions and individual
corporate developments than those of higher rated securities. In addition, the market for
these securities is generally less liquid than for higher rated securities.

– 22 –

Historical Record Class I⁽¹⁾

(unaudited)

		Net		Net Investment			Growth of an
		Asset Value		Income Distributions			Initial $10,000
		Per Share		Per Share			Investment(3)
November 21, 1977(2)	$	25.50	$	—		$	10,000
December 31, 1992		16.90		1.4775			35,143
December 31, 1993		17.60		1.4450			39,695
December 31, 1994		16.05		1.5050			39,626
December 31, 1995		17.10		1.4750			46,029
December 31, 1996		17.65		1.4800			51,721
December 31, 1997		18.45		1.4515			58,514
December 31, 1998		16.95		1.5775			58,788
December 31, 1999		15.30		1.6560			58,749
December 31, 2000		12.00		1.5300			51,620
December 31, 2001		11.80		1.2150			56,144
December 31, 2002		9.65		0.9925			50,459
December 31, 2003		10.95		0.8450			61,937
December 31, 2004		11.15		0.8200			67,915
December 31, 2005		10.50		0.7895			68,849
December 31, 2006		10.70		0.7455			75,221
December 31, 2007		10.18		0.7502			76,820
December 31, 2008		7.18		0.7140			58,955
December 31, 2009		9.09		0.6581			80,426
December 31, 2010		9.52		0.7230			90,876
December 31, 2011		9.28		0.7070			95,354
December 31, 2012		9.86		0.6375			108,095
December 31, 2013		9.86		0.5757			114,488
December 31, 2014		9.52		0.5065			116,347
December 31, 2015		8.65		0.4592			111,068
December 31, 2016		9.08		0.4204			122,109
June 30, 2017		9.29		0.1278	(a)		126,669

(1) Per share amounts presented for the periods prior to December 31, 2007 in this historical record
have been restated or adjusted to reflect a reverse stock split of one share for every five shares
outstanding effected on January 29, 2007.
(2) Initial date under Nicholas Company, Inc. management.
(3) Assuming reinvestment of distributions.

(a) Paid on April 26, 2017 to shareholders of record on April 25, 2017.

The Fund distributed no capital gains for the time periods listed.

– 23 –

Historical Record Class N⁽¹⁾
(unaudited)

		Net		Net Investment			Growth of an
		Asset Value		Income Distributions			Initial $10,000
		Per Share		Per Share			Investment(3)
February 28, 2005(2)	$	11.20	$	—		$	10,000
December 31, 2005		10.40		0.7320			9,947
December 31, 2006		10.60		0.7140			10,846
December 31, 2007		10.06		0.7119			11,018
December 31, 2008		7.24		0.5238			8,448
December 31, 2009		9.18		0.6323			11,501
December 31, 2010		9.64		0.6683			12,946
December 31, 2011		9.39		0.6782			13,522
December 31, 2012		9.98		0.6062			15,275
December 31, 2013		9.99		0.5367			16,121
December 31, 2014		9.66		0.4697			16,337
December 31, 2015		8.78		0.4197			15,525
December 31, 2016		9.22		0.3926			17,012
June 30, 2017		9.43		0.1165	(a)		17,616

(1) Per share amounts presented for the periods prior to December 31, 2007 in this historical record
have been restated or adjusted to reflect a reverse stock split of one share for every five shares
outstanding effected on January 29, 2007.
(2) Date of Initial Public Offering.
(3) Assuming reinvestment of distributions.

(a) Paid on April 26, 2017 to shareholders of record on April 25, 2017.

The Fund distributed no capital gains for the time periods listed.

– 24 –

Approval of Investment Advisory Contract

(unaudited)

In January 2017, 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 January 2018. 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 fiscal year ended December 31, 2016, the management fee was 0.44% and the Fund’s Class I and Class N total expense ratios (including the management fee but absent acquired funds fees and expenses) were 0.68% and 1.03%, 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 Class I expense ratio, which was the second lowest in its overall peer group; (ii) the Fund’s performance on a short-term and long-term basis; (iii) the Fund’s management fee; and (iv) the range and quality of the services offered by the Adviser. The peer group fund data included high-yield bond funds with similar asset sizes, credit quality and number of holdings. In terms of the peer group data used for performance comparisons, the Fund’s Class I was ranked 7th, 8th, and 7th out of 10 funds for the one-, three- and five-year periods and 6th out of seven funds for the 10-year period all ending December 31, 2016. The Fund’s Class I ranked 5th in terms of 12-month yield out of the 10 funds.

The Board considered the range of services to be provided by the Adviser to the Fund under the Advisory Agreement. The Board discussed the nature, extent, and quality of the services to be provided by the Adviser and concluded that the services 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. The Board reviewed the actual relative short-term and long-term performance of the Fund. The Board expressed satisfaction with the Fund’s performance. 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 by the Adviser. The Board also considered the profits to be realized by the Adviser from the relationship with the Fund. The Board expressed the opinion that given the Board’s focus on performance and maintaining a low fee structure, 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 discussed the Fund’s relatively low fees, historical returns and risk profile and management’s strategies to improve the absolute and relative performance of the Fund. The Board agreed that the Adviser had the resources, financial management and administrative capacity to continue to provide quality services. The Board expressed satisfaction with the Fund’s performance, management’s control of expenses and the rate of the management fee for the Fund and the overall level of services provided to the Fund by the Adviser.

– 25 –

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 on Form N-Q. The Fund’s Form N-Q’s are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.

– 26 –

Privacy Policy

(unaudited)

     Nicholas High Income Fund, 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.

– 27 –

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).

– 28 –

Notes

Directors and Officers
DAVID O. NICHOLAS, President and Director

JOHN A. HAUSER, Director

TIMOTHY P. REILAND, Director

JAY H. ROBERTSON, Director

DAVID L. JOHNSON, Executive Vice President

JENNIFER R. KLOEHN, Senior Vice President,
Treasurer and Chief Compliance Officer

LAWRENCE J. PAVELEC, Senior Vice President and Secretary

CANDACE L. LESAK, Vice President

Investment Adviser
NICHOLAS COMPANY, INC.
Milwaukee, Wisconsin
www.nicholasfunds.com
414-276-0535 or 800-544-6547

Transfer Agent
U.S. BANCORP FUND SERVICES, LLC
Milwaukee, Wisconsin
414-276-0535 or 800-544-6547

Distributor
QUASAR DISTRIBUTORS, LLC
Milwaukee, Wisconsin

Custodian
U.S. BANK N.A.
Milwaukee, Wisconsin

Independent Registered Public Accounting Firm
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin

Counsel
MICHAEL BEST & FRIEDRICH LLP
Milwaukee, Wisconsin

This report is submitted for the information of shareholders of the Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.

Item 2. Code of Ethics.
Applicable only to annual reports.

Item 3. Audit Committee Financial Expert.
Applicable only to annual reports.

Item 4. Principal Accountant Fees and Services.
Applicable only to annual reports.

Item 5. Audit Committee of Listed Registrants.
Not applicable to this filing.

Item 6. Schedule of Investments.

The schedule of investments in securities of unaffiliated issuers is included as part of the report to shareholders filed under Item 1.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Applicable only to annual reports filed by closed-end funds.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Applicable only to annual reports filed by closed-end funds.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers.

Applicable only to closed-end funds.

Item 10. Submission of Matters to a Vote of Security Holders.

Not applicable to this filing.

Item 11. Controls and Procedures.

The Fund's principal executive officer and principal financial officer have concluded that the Fund's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. There were no significant changes or corrective actions with regard to significant deficiencies or material weaknesses in the Fund's internal controls or in other factors that could significantly affect the Fund's internal controls subsequent to the date of their evaluation.

Item 12. Exhibits.

(a)(1) Code of Ethics -- Any code of ethics, or amendments thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit.

Not applicable to this filing.

(a)(2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbannes-Oxley Act of 2002, attached hereto as part of EX-99.CERT.

(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more person.

Applicable only to closed-end funds.

(b) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbannes-Oxley Act of 2002, attached hereto as part of EX-99.906CERT.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant) Nicholas High Income Fund, Inc.

By: /s/ David O. Nicholas
Name: David O. Nicholas
Title: Principal Executive Officer

Date: 08/30/2017

     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: 08/30/2017

By: /s/ Jennifer R. Kloehn
Name: Jennifer R. Kloehn
Title: Principal Financial Officer
Date: 08/30/2017