Nicholas Income Fund NCSR Certified 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: 12/31/2017

Item 1. Report to Stockholders.

ANNUAL REPORT
December 31, 2017

NICHOLAS HIGH
INCOME FUND, INC.

WWW.NICHOLASFUNDS.COM

NICHOLAS HIGH INCOME FUND, INC.

February 2018

Report to Fellow Shareholders:

Market Overview

U.S. markets finished 2017 on a high note with much higher than anticipated returns. Risk assets, equities, and high yield pushed to new market highs on a near daily basis in the closing months of 2017. With only minor pull-backs, the Standard & Poor’s (S&P) 500 Index rose 21.83% for all of 2017, with the largest increase in the second half of the year. As the equity markets rose so followed other risk asset classes, including high yield. The Bloomberg Barclays US Corporate High Yield Bond Index earned 7.50% for the year. This was driven primarily by the lower rated bonds, with Caa-rated bonds earning 10.38% for the period.

High yield debt has always been a hybrid, tracking both equity and interest rate moves. Bloomberg Barclays Index research notes that since 1984 high yield bonds have a closer monthly returns correlation to the S&P 500 Index, +0.58, than government bonds, +0.08. The valuation of high yield bonds is driven primarily by the fundamental performance of the company issuing the debt, the structure of the instrument and the direction of interest rates. This historical correlation may be tested in the future as the yield spread between high yield debt and risk-free rate treasuries has compressed to a level that may not offer as much a cushion against rising interest rates.

The financial markets overcame many uncertainties including the first year of the Trump administration, a failed attempt to repeal ACA/Obamacare, a last-minute Hail Mary federal tax cut and additional rate hikes by the Fed. Amid all the consternation, corporate earnings rose more than expected and markets responded positively. Even with the gains achieved, we believe the equity markets appear closer to being fairly priced versus overvalued. This has investors leaning positively into 2018.

The ICE BofAML US High Yield Index generated solid returns for year ended December 31, 2017 with a 7.48% total return. Lower quality, riskier assets once again provided greater returns with the ICE BofAML US High Yield CCC and Lower Rated Index earning 10.59% for the period. The higher quality measuring ICE BofAML US High Yield BB Index turned in 7.16%. Over the past three years, these two cohorts generated 8.64% and 6.28%, respectively. Sectors leading performance included the more cyclically influenced areas such as Chemicals, Banking, Oil Refining, Transportation, and Metals and Mining, all expecting to benefit from deregulation, better economic activity and infrastructure spending. Sectors lagging during the period were Retail Department Stores, Consumer Goods and Cable.

Nicholas High Income Fund (Fund) provided a 4.28% return for the one-year period ended December 31, 2017, compared to the Morningstar High Yield Category return of 6.47%. Fund performance lagged over the last six months of the year as the portfolio moved to a more defensive posture. This strategy included targeting a portfolio duration of 3.7 years and securities with maturities primarily in the three- to eight-year range. The quality of bond issuers was raised with a weighted average credit quality target of Ba/BB. On a security basis, emphasis will be on company competitive advantage, balance sheets, leverage, cash flow and valuation. The rationale for moving to a more defensive posture is based on emerging headwinds from a tighter Federal Reserve policy, gradually rising interest rates, significant net new government debt issuance and the uncertainty over how the U.S. economy will handle higher rates.

Our view for 2018, is the economy, markets and interest rates will experience greater challenges and volatility. We believe economic growth is likely to remain near 2.5-3.0%, high yield bonds are likely to produce mid-single digit returns, and interest rates will trend higher in 2018, but are unlikely to move significantly above 3.00% on the ten-year Treasury Note. The Federal Reserve will likely follow their stated plan to raise Fed Funds 3 to 4 times in 2018 taking the rate to 2.00%-2.50%. The challenge we see is how the market responds to the gradual monetary tightening from an unprecedented level. It is unclear whether consumers and investors will retain their current exuberance should interest rates move significantly higher than a 2.50% Fed Funds rate and a 3.00% ten-year Treasury note.

Performance

Nicholas High Income Fund – Class I produced a net return of 4.28% for the period ended December 31, 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 December 31, 2017. The Fund and Morningstar performance data is net of fees, while the ICE BofAML Indices are gross of fees.


		Average Annual Total Return
		1 Year			3 Year			5 Year			10 Year
Nicholas High Income Fund, Inc. – Class I		4.28	%		3.05	%		3.33	%		5.18	%
Nicholas High Income Fund, Inc. – Class N		4.03	%		2.70	%		2.99	%		4.85	%
ICE BofAML US High Yield Constrained Index		7.48	%		6.39	%		5.81	%		7.95	%
ICE BofAML US High Yield BB-B Bond Index		6.98	%		6.04	%		5.58	%		7.30	%
Morningstar High Yield Bond Funds Category		6.47	%		4.91	%		4.63	%		6.43	%
Ending value of $10,000 invested in
Nicholas High Income Fund, Inc. – Class I	$	10,428		$	10,944		$	11,780		$	16,575
Ending value of $10,000 invested in
Nicholas High Income Fund, Inc. – Class N	$	10,403		$	10,833		$	11,586		$	16,062
Fund’s Class I Expense Ratio (from 04/30/17 Prospectus): 0.69%
Fund’s Class N Expense Ratio (from 01/29/18 Prospectus): 1.05%

The Fund’s expense ratios for the for the current period 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. The 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.

Average credit quality is an average of each bond’s credit rating, adjusted for its relative weighting in the portfolio. It gives a snapshot of the portfolio’s overall credit quality.

Cash Flow measures the cash generating capability of a company by adding non-cash charges (e.g.depreciation) and interest expense to pretax income.

Correlation is a statistical measure of how one investment moves in relation to another and ranges from -1 for a perfectly negative correlation to +1 for a perfectly positive correlation. An uncorrelated investment pair would have a correlation coefficient close to zero.

Duration is a commonly used measure of the potential volatility of the price of a debt security, or the aggregate market value of a portfolio of debt securities, prior to maturity. Securities with a longer duration generally have more volatile prices than securities of comparable quality with a shorter duration.

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.

High yield bond spread is the percentage difference in current yields of various classes of high-yield bonds compared against investment-grade corporate bonds, Treasury bonds, or another benchmark bond measure.

Index Definitions – You cannot invest directly in an index.

The Bloomberg Barclays US Corporate High Yield Bond Index measures the US dollar denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on Barclays emerging market country definitions, are excluded.

The ICE BofAML US 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 ICE BoAML US High Yield Constrained Index limits any individual issuer included in the ICE BoAML US High Yield Index to a maximum of 2% benchmark exposure.

The ICE BoAML BB-B US High Yield Index is a subset of the ICE BoAML US High Yield Index including all securities rated BB1 through B3, inclusive.

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 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.

The S&P 500 Index is a broad based unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general.

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.

The line graph, which follows, compares the initial account value and subsequent account values at the end of each of the most recently completed ten fiscal years of the Fund’s Class I, to the same investment over the same periods in the ICE BofAML U.S. High Yield Constrained Index. The graph assumes a $100,000 investment in the Fund’s Class I and the index at the beginning of the first fiscal year.

COMPARISON OF CHANGE IN VALUE OF $100,000 INVESTMENT IN NICHOLAS HIGH INCOME FUND, INC. CLASS I AND

ICE BofAML U.S. HIGH YIELD CONSTRAINED INDEX

The Fund’s Class I average annual total returns for the one, five and ten year periods ended on the last day of the most recent fiscal year are as follows:


	One Year Ended		Five Years Ended		Ten Years Ended
	December 31,		December 31,		December 31,
	2017		2017		2017
Average Annual Total Return	4.28	%	3.33	%	5.18	%

Past performance is not predictive of future performance, and the above graph and table do not reflect deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

– 5–

Financial Highlights Class I (NCINX)

For a share outstanding throughout each period


					Years Ended December 31,
		2017			2016			2015			2014			2013
NET ASSET VALUE, BEGINNING OF PERIOD	$	9.08		$	8.65		$	9.52		$	9.86		$	9.86
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
Net investment income.		.44	⁽¹⁾		.43	⁽¹⁾		.43			.52			.58
Net gain (loss) on securities
(realized and unrealized)		(.05	)		.42			(.84	)		(.35	)		.00	⁽²⁾
Total from investment operations		.39			.85			(.41	)		.17			.58
LESS DISTRIBUTIONS
From net investment income		(.47	)		(.42	)		(.46	)		(.51	)		(.58	)
NET ASSET VALUE, END OF PERIOD	$	9.00		$	9.08		$	8.65		$	9.52		$	9.86

TOTAL RETURN		4.28	%		9.94	%		(4.54	)%		1.62	%		5.91	%

SUPPLEMENTAL DATA:
Net assets, end of period (millions)	$	101.9		$	100.5		$	93.1		$	101.1		$	103.8
Ratio of expenses to average net assets		.69	%		.68	%		.70	%		.67	%		.66	%
Ratio of net investment income
to average net assets		4.80	%		4.83	%		4.61	%		5.24	%		5.74	%
Portfolio turnover rate.		44.80	%		44.28	%		41.30	%		50.76	%		51.47	%

(1)	Computed based on average shares outstanding.
(2)	The amount rounds to $0.00.

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

– 6–

Financial Highlights Class N (NNHIX)

For a share outstanding throughout each period


					Years Ended December 31,
		2017			2016			2015			2014			2013
NET ASSET VALUE, BEGINNING OF PERIOD	$	9.22		$	8.78		$	9.66		$	9.99		$	9.98
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
Net investment income.		.43	⁽¹⁾		.40	⁽¹⁾		.39			.48			.54
Net gain (loss) on securities
(realized and unrealized)		(.06	)		.43			(.85	)		(.34	)		.01
Total from investment operations		.37			.83			(.46	)		.14			.55
LESS DISTRIBUTIONS
From net investment income		(.43	)		(.39	)		(.42	)		(.47	)		(.54	)
NET ASSET VALUE, END OF PERIOD	$	9.16		$	9.22		$	8.78		$	9.66		$	9.99

TOTAL RETURN		4.03	%		9.58	%		(4.97	)%		1.34	%		5.54	%

SUPPLEMENTAL DATA:
Net assets, end of period (millions)	$	3.3		$	8.1		$	2.7		$	6.6		$	6.3
Ratio of expenses to average net assets		1.02	%		1.03	%		1.05	%		1.02	%		1.01	%
Ratio of net investment income
to average net assets		4.55	%		4.42	%		4.29	%		4.90	%		5.45	%
Portfolio turnover rate.		44.80	%		44.28	%		41.30	%		50.76	%		51.47	%

(1) Computed based on average shares outstanding.

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

– 7–

Top Ten Portfolio Issuers
December 31, 2017 (unaudited)


	Percentage
Name	of Net Assets
Zayo Group, LLC	1.98	%
Lamb Weston Holdings, Inc.	1.97	%
Allison Transmission, Inc.	1.96	%
GEO Group, Inc. (The)	1.95	%
LPL Holdings, Inc.	1.94	%
Mercer International Inc.	1.86	%
FAGE International S.A.	1.84	%
Beacon Roofing Supply, Inc.	1.77	%
Koppers Inc.	1.76	%
Valvoline Inc.	1.70	%
Total of top ten	18.73	%

Sector Diversification (as a percentage of portfolio)
December 31, 2017 (unaudited)

– 8–

Fund Expenses
For the six month period ended December 31, 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*
		06/30/17		12/31/17		07/01/17 - 12/31/17
Actual	$	1,000.00	$	1,005.20	$	3.35
Hypothetical		1,000.00		1,021.66		3.38
(5% return before expenses)

*	Expenses are equal to the Class I six-month annualized expense ratio of 0.67%, multiplied by the average account value over the period, multiplied by 182 then divided by 365 to reflect the one- half year period.

– 9–

Fund Expenses (continued)
For the six month period ended December 31, 2017 (unaudited)


Class N
		Beginning		Ending		Expenses
		Account		Account		Paid During
		Value		Value		Period**
		06/30/17		12/31/17		07/01/17 - 12/31/17
Actual	$	1,000.00	$	1,004.60	$	4.90
Hypothetical		1,000.00		1,020.11		4.94
(5% return before expenses)

**	Expenses are equal to the Class N six-month annualized expense ratio of 0.98%, multiplied by the average account value over the period, multiplied by 182 then divided by 365 to reflect the one-half year period.

– 10 –

Schedule of Investments
December 31, 2017


	Shares or
	Principal
	Amount			Value
	NON-CONVERTIBLE BONDS — 91.77%
		Automotive – Parts & Equipment — 3.46%
$	2,000,000	Allison Transmission, Inc. 144A restricted, 5.00%, 10/01/24	$	2,062,500
	1,500,000	American Axle & Manufacturing, Inc. 144A restricted, 6.25%, 04/01/25		1,578,750
				3,641,250
		Banking — 0.85%
	1,000,000	BAC Capital Trust XIV Floating Rate Preferred Hybrid
		Income Term Securities 4.00%⁽¹⁾, 03/15/43		893,630
		Basic Industry – Building Materials — 4.00%
	1,750,000	Beacon Roofing Supply, Inc. 6.375%, 10/01/23		1,861,562
	1,000,000	HD Supply, Inc. 144A restricted, 5.75%, 04/15/24		1,062,500
	500,000	JELD-WEN, Inc. 144A restricted, 4.625%, 12/15/25		503,750
	750,000	USG Corporation 144A restricted, 4.875%, 06/01/27		777,413
				4,205,225
		Basic Industry – Chemicals — 4.96%
	1,750,000	Koppers Inc. 144A restricted, 6.00%, 02/15/25		1,855,000
	1,500,000	PolyOne Corporation 5.25%, 03/15/23		1,578,750
	1,680,000	Valvoline Inc. 5.50%, 07/15/24		1,785,000
				5,218,750
		Basic Industry – Forestry & Paper — 3.34%
	1,500,000	Louisiana-Pacific Corporation 4.875%, 09/15/24		1,548,750
	1,850,000	Mercer International Inc. 7.75%, 12/01/22		1,961,000
				3,509,750
		Basic Industry – Metal/Mining Excluding Steel — 1.54%
	500,000	Alcoa Nederland Holding B.V. 144A restricted, 6.75%, 09/30/24		545,000
	1,000,000	Grinding Media Inc. 144A restricted, 7.375%, 12/15/23		1,073,700
				1,618,700
		Capital Goods – Diversified — 1.02%
	1,000,000	Park-Ohio Industries, Inc. 6.625%, 04/15/27		1,077,500
		Capital Goods – Machinery — 1.08%
	1,000,000	Manitowoc Foodservice, Inc. 9.50%, 02/15/24		1,138,750
		Capital Goods – Packaging — 4.41%
	1,000,000	Ball Corporation 5.00%, 03/15/22		1,067,500
	1,500,000	Crown Americas LLC 4.25%, 09/30/26		1,477,500
	1,500,000	Reynolds Group Holdings Limited 144A restricted, 5.125%, 07/15/23		1,552,500
	500,000	Sealed Air Corporation 144A restricted, 5.50%, 09/15/25		545,000
				4,642,500
		Consumer Goods – Food-Wholesale — 6.37%
	1,000,000	B&G Foods, Inc. 5.25%, 04/01/25		1,017,150
	2,000,000	FAGE International S.A. 144A restricted, 5.625%, 08/15/26		1,930,000

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

– 11 –

Schedule of Investments (continued)
December 31, 2017


	Shares or
	Principal
	Amount			Value
	NON-CONVERTIBLE BONDS — 91.77% (continued)
		Consumer Goods – Food-Wholesale — 6.37% (continued)
$	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
	1,000,000	Lamb Weston Holdings, Inc. 144A restricted, 4.875%, 11/01/26		1,045,000
	600,000	Pinnacle Foods Inc. 5.875%, 01/15/24		634,500
	528,000	Wells Enterprises, Inc. 144A restricted, 6.75%, 02/01/20		537,900
				6,695,800
		Consumer Goods – Personal & Household Products — 1.49%
	1,465,000	FGI Operating Company, LLC 7.875%, 05/01/20		322,300
	500,000	Tempur Sealy International, Inc. 5.625%, 10/15/23		520,000
	750,000	Vista Outdoor Inc. 5.875%, 10/01/23		720,000
				1,562,300
		Energy – Exploration & Production — 2.47%
	1,500,000	RSP Permian, Inc. 5.25%, 01/15/25		1,537,500
	1,000,000	Southwestern Energy Company 7.50%, 04/01/26		1,062,500
				2,600,000
		Energy – Gas-Distribution — 6.46%
	1,500,000	Cheniere Corpus Christi Holdings, LLC 5.125%, 06/30/27		1,551,600
	750,000	NGPL PipeCo LLC 144A restricted, 4.875%, 08/15/27		778,125
	1,400,000	Suburban Propane Partners L.P. 5.50%, 06/01/24		1,386,000
	1,000,000	Tallgrass Energy Partners, LP 144A restricted, 5.50%, 01/15/28		1,012,200
	750,000	Tesoro Logistics LP 5.25%, 01/15/25		788,775
	1,000,000	Transcontinental Gas Pipe Line Company, LLC 7.85%, 02/01/26		1,278,169
				6,794,869
		Energy – Oil Field Equipment & Services — 1.79%
	1,000,000	Parker Drilling Company 6.75%, 07/15/22		820,000
	1,000,000	Weatherford International Ltd. 9.875%, 02/15/24		1,062,500
				1,882,500
		Financial Services – Brokerage — 3.40%
	1,500,000	Jefferies Finance LLC 144A restricted, 7.375%, 04/01/20		1,543,125
	2,000,000	LPL Holdings, Inc. 144A restricted, 5.75%, 09/15/25		2,035,000
				3,578,125
		Healthcare – Facilities — 1.71%
	750,000	HealthSouth Corporation 5.75%, 09/15/25		780,000
	1,000,000	Sabra Health Care Limited Partnership 5.50%, 02/01/21		1,021,250
				1,801,250
		Healthcare – Medical Products — 1.21%
	1,225,000	Teleflex Incorporated 5.25%, 06/15/24		1,277,063

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

– 12 –

Schedule of Investments (continued)
December 31, 2017


	Shares or
	Principal
	Amount			Value
	NON-CONVERTIBLE BONDS — 91.77% (continued)
		Healthcare – Services — 0.48%
$	500,000	DaVita HealthCare Partners Inc. 5.125%, 07/15/24	$	505,000
		Leisure – Recreation & Travel — 0.23%
	250,000	ClubCorp Holdings, Inc. 144A restricted, 8.50%, 09/15/25		243,750
		Leisure – Theaters & Entertainment — 0.97%
	1,000,000	Cinemark USA, Inc. 5.125%, 12/15/22		1,022,500
		Media – Advertising — 1.47%
	1,500,000	Nielsen Company (Luxembourg) S.ar.l. (The)
		144A restricted, 5.50%, 10/01/21		1,541,250
		Media – Cable & Satellite TV — 0.94%
	1,000,000	CCO Holdings, LLC 144A restricted, 5.125%, 05/01/27		985,000
		Media – Content — 2.35%
	1,500,000	AMC Networks Inc. 4.75%, 08/01/25		1,486,875
	1,000,000	Netflix, Inc. 144A restricted, 4.875%, 04/15/28		980,000
				2,466,875
		Real Estate – Development & Management — 0.49%
	500,000	CBRE Services, Inc. 5.00%, 03/15/23		514,160
		Retail – Specialty Retail — 2.93%
	1,000,000	Levi Strauss & Co. 5.00%, 05/01/25		1,042,500
	1,000,000	Murphy Oil USA, Inc. 6.00%, 08/15/23		1,042,500
	1,000,000	Wolverine World Wide, Inc. 144A restricted, 5.00%, 09/01/26		997,500
				3,082,500
		Services – Support-Services — 11.71%
	1,500,000	ADT Corporation (The) 3.50%, 07/15/22		1,477,500
	1,500,000	Aramark Services, Inc. 5.125%, 01/15/24		1,574,250
	1,000,000	Avis Budget Car Rental, LLC 144A restricted, 5.125%, 06/01/22		1,012,500
	1,000,000	Corrections Corporation of America 4.625%, 05/01/23		1,022,500
	2,000,000	GEO Group, Inc. (The) 6.00%, 04/15/26		2,055,000
	1,000,000	IHS Markit Ltd. 144A restricted, 4.75%, 02/15/25		1,055,000
	1,000,000	Iron Mountain Incorporated 144A restricted, 5.25%, 03/15/28		995,000
	1,500,000	Ritchie Bros. Auctioneers Incorporated
		144A restricted, 5.375%, 01/15/25		1,548,750
	1,500,000	United Rentals (North America), Inc. 5.50%, 05/15/27		1,578,750
				12,319,250
		Technology & Electronics – Hardware & Equipment — 7.02%
	1,500,000	Brocade Communications Systems, Inc. 4.625%, 01/15/23		1,533,750
	1,500,000	CommScope Technologies LLC 144A restricted, 6.00%, 06/15/25		1,593,750
	1,500,000	Dell Inc. 144A restricted, 7.125%, 06/15/24		1,642,296
	500,000	NCR Corporation 5.00%, 07/15/22		508,750

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

– 13 –

Schedule of Investments (continued)
December 31, 2017


	Shares or
	Principal
	Amount			Value
	NON-CONVERTIBLE BONDS — 91.77% (continued)
		Technology & Electronics – Hardware & Equipment — 7.02% (continued)
$	1,000,000	NCR Corporation 5.875%, 12/15/21	$	1,025,000
	1,000,000	Western Digital Corporation 144A restricted, 7.375%, 04/01/23		1,078,750
				7,382,296
		Technology & Electronics – Software & Services — 2.91%
	1,000,000	CDK Global, Inc. 144A restricted, 4.875%, 06/01/27		1,012,500
	1,000,000	First Data Corporation 144A restricted, 5.75%, 01/15/24		1,035,000
	1,000,000	Vantiv, LLC 144A restricted, 4.375%, 11/15/25		1,012,680
				3,060,180
		Telecommunications – Wireless — 2.90%
	1,500,000	Digicel Limited 144A restricted, 6.00%, 04/15/21		1,476,390
	500,000	SBA Communications Corporation 4.875%, 09/01/24		513,750
	1,000,000	Sprint Corporation 7.25%, 09/15/21		1,058,750
				3,048,890
		Telecommunications – Wireline Integrated & Services — 5.35%
	1,000,000	Cincinnati Bell Inc. 144A restricted, 7.00%, 07/15/24		992,500
	1,500,000	Equinix, Inc. 5.375%, 04/01/23		1,551,000
	591,000	Frontier Communications Corporation 8.50%, 04/15/20		490,530
	500,000	QTS Finance Corporation 144A restricted, 4.75%, 11/15/25		505,000
	2,000,000	Zayo Group, LLC 6.00%, 04/01/23		2,083,100
				5,622,130
		Transportation – Infrastructure/Services — 1.51%
	1,500,000	XPO Logistics, Inc. 144A restricted, 6.125%, 09/01/23		1,586,250
		Utility – Electric-Generation — 0.95%
	500,000	Calpine Corporation 144A restricted, 5.25%, 06/01/26		490,005
	500,000	Dynegy Inc. 5.875%, 06/01/23		506,250
				996,255
		TOTAL NON-CONVERTIBLE BONDS
		(cost $95,818,964)		96,514,248
	CONVERTIBLE PREFERRED STOCKS — 1.36%
		Energy — 0.61%
	17,000	Kinder Morgan, Inc. 9.75%, Cumulative, Convertible, Series A		638,860
		Healthcare – Pharmaceuticals,
		Biotechnology & Life Sciences — 0.75%
	1,350	Allergan plc 5.25%, Cumulative, Mandatory Convertible, Series A		788,906
		TOTAL CONVERTIBLE PREFERRED STOCKS
		(cost $1,855,685)		1,427,766

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

– 14 –

Schedule of Investments (continued)
December 31, 2017


	Shares or
	Principal
	Amount			Value
	SHORT-TERM INVESTMENTS — 5.54%
		U.S. Government Security — 4.28%
$	4,500,000	U.S. Treasury Bill 0.941%, 01/04/2018	$	4,499,652
		Money Market Fund — 1.26%
	1,325,926	Morgan Stanley Liquidity Funds
		Government Portfolio (Institutional Class), 7-day net yield 1.20%		1,325,926
		TOTAL SHORT-TERM INVESTMENTS
		(cost $5,825,578)		5,825,578
		TOTAL INVESTMENTS
		(cost $103,500,227) — 98.67%		103,767,592
		OTHER ASSETS, NET OF LIABILITIES — 1.33%		1,397,492
		TOTAL NET ASSETS
		(basis of percentages disclosed above) — 100%	$	105,165,084

(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.

– 15 –

Statement of Assets and Liabilities
December 31, 2017


ASSETS
Investments in securities at value (cost $103,500,227)	$	103,767,592
Interest receivables		1,498,854
Other		15,221
Total assets		105,281,667

LIABILITIES
Payables —
Due to adviser —
Management fee		39,532
Accounting and administrative fee		4,247
Total due to adviser		43,779
12b-1 and servicing fee		22,433
Other payables and accrued expense		50,371
Total liabilities		116,583
Total net assets	$	105,165,084

NET ASSETS CONSIST OF
Paid in capital	$	113,110,290
Net unrealized appreciation on investments		267,365
Accumulated net realized loss on investments		(8,262,040	)
Accumulated undistributed net investment income		49,469
Total net assets	$	105,165,084

Class I
Net assets	$	101,879,116
Shares outstanding		11,314,209
NET ASSET VALUE PER SHARE ($.05 par value, 75,000,000
shares authorized), offering price and redemption price	$	9.00

Class N
Net assets	$	3,285,968
Shares outstanding		358,759
NET ASSET VALUE PER SHARE ($.05 par value, 25,000,000
shares authorized), offering price and redemption price	$	9.16

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

– 16 –

Statement of Operations
For the year ended December 31, 2017


INCOME
Interest	$	5,655,848
Dividend		247,493
Other		15,020
Total income		5,918,361

EXPENSES
Management fee		473,135
Accounting and administrative fees		50,000
Transfer agent fees		45,615
Registration fees		41,477
Accounting system and pricing service fees		38,639
Audit and tax fees		33,081
Directors’ fees		15,775
Printing		13,914
12b-1 fees – Class N		13,524
Legal fees		9,307
Custodian fees		6,032
Insurance		4,477
Servicing fees – Class N		4,209
Postage and mailing		3,649
Other operating expenses		5,066
Total expenses		757,900
Net investment income		5,160,461

NET REALIZED LOSS ON INVESTMENTS		(174,673	)

CHANGE IN NET UNREALIZED APPRECIATION/DEPRECIATION
ON INVESTMENTS		(368,027	)
Net realized and unrealized loss on investments		(542,700	)
Net increase in net assets resulting from operations	$	4,617,761

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

– 17 –

Statements of Changes in Net Assets
For the years ended December 31, 2017 and 2016


		2017			2016
INCREASE (DECREASE) IN
NET ASSETS FROM OPERATIONS
Net investment income	$	5,160,461		$	4,974,542
Net realized loss on investments		(174,673	)		(4,896,343	)
Change in net unrealized
appreciation/depreciation on investments		(368,027	)		9,705,394
Net increase in net
assets resulting from operations		4,617,761			9,783,593

DISTRIBUTIONS TO SHAREHOLDERS
From net investment income – Class I		(5,178,816	)		(4,571,047	)
From net investment income – Class N		(209,094	)		(308,943	)
Total distributions		(5,387,910	)		(4,879,990	)

CAPITAL SHARE TRANSACTIONS
Proceeds from shares issued – Class I
(424,326 and 573,580 shares, respectively)		3,898,793			5,145,275
Reinvestment of distributions – Class I
(507,284 and 451,928 shares, respectively)		4,644,299			4,083,524
Cost of shares redeemed – Class I
(687,257 and 719,387 shares, respectively)		(6,333,256	)		(6,460,066	)
Proceeds from shares issued – Class N
(1,365,178 and 2,389,816 shares, respectively)		12,753,444			21,740,142
Reinvestment of distributions – Class N
(20,264 and 32,387 shares, respectively)		188,966			297,307
Cost of shares redeemed – Class N
(1,903,670 and 1,850,845 shares, respectively)		(17,785,641	)		(16,911,469	)
Change in net assets derived from
capital share transactions		(2,633,395	)		7,894,713
Total increase (decrease) in net assets		(3,403,544	)		12,798,316

NET ASSETS
Beginning of period		108,568,628			95,770,312
End of period (including accumulated
undistributed net investment income of
$49,469 and $49,781, respectively)	$	105,165,084		$	108,568,628

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

– 18 –

Notes to Financial Statements
December 31, 2017

(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
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.

– 19 –

Notes to Financial Statements (continued)
December 31, 2017

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 December 31, 2017 in valuing
the Fund’s investments carried at value:


		Investments
Valuation Inputs		in Securities
Level 1 –
Money Market Fund	$	1,325,926
Level 2 –
Non-Convertible Bonds⁽¹⁾		96,514,248
Convertible Preferred Stocks⁽¹⁾		1,427,766
U.S. Government Security		4,499,652
Level 3 –
None		—
Total	$	103,767,592
(1) See Schedule of Investments for further detail by industry.

There were no transfers between levels during the year ended December 31, 2017
and the Fund did not hold any Level 3 investments during the year.

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

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

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

– 20 –

Notes to Financial Statements (continued)
December 31, 2017

Investment income, net capital gains (losses) and all expenses incurred by the Fund
are allocated based on the relative net assets of each class, except for 12b-1 and
servicing fees and certain other fees and expenses related to one class of shares.

Class N shares are subject to a 0.25% 12b-1 fee and a 0.10% servicing fee, as
described in its prospectus. 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 December 31, 2017,
reclassifications were recorded to increase accumulated undistributed net
investment income by $227,137, decrease accumulated net realized loss on
investments by $6,607,097 and decrease paid in capital by $6,834,234.

The tax character of distributions paid during the years ended December 31 was as
follows:


		12/31/2017		12/31/2016
Distributions paid from:
Ordinary income	$	5,387,910	$	4,879,990

As of December 31, 2017, investment cost for federal tax purposes was
$103,512,422 and the tax basis components of net assets were as follows:


Unrealized appreciation	$	2,553,971
Unrealized depreciation		(2,298,801	)
Net unrealized appreciation		255,170
Undistributed ordinary income		49,469
Accumulated net realized capital loss		(8,249,845	)
Paid in capital		113,110,290
Net assets	$	105,165,084

The difference between book-basis and tax-basis net unrealized appreciation is
attributable primarily to the deferral of wash sales losses.

Approximately $6,834,000 of capital loss carryforwards expired at the end of 2017.
As of December 31, 2017, the Fund has capital loss carryforwards of approximately
$8,250,000, which have no expiration date. To the extent the Fund has future net
realized capital gains, distributions of capital gains to shareholders will be offset by

– 21 –

Notes to Financial Statements (continued)
December 31, 2017

any unused capital loss carryforwards. The Fund had no material uncertain tax
positions and has not recorded a liability for unrecognized tax benefits as of
December 31, 2017. Also, the Fund recognized no interest and penalties related to
uncertain tax benefits during the year ended December 31, 2017. At December 31,
2017, the fiscal years 2014 through 2017 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 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 December 31, 2017. There have been no material subsequent events
since December 31, 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.

(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 $4,557 for the year ended December 31, 2017
for legal services rendered by this law firm.

– 22 –

Notes to Financial Statements (continued)
December 31, 2017

(3) Investment Transactions —
For the year ended December 31, 2017, the cost of purchases and the proceeds from
sales of investment securities, other than short-term obligations, aggregated
$45,525,975 and $52,124,056, 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.

– 23 –

Report of Independent Registered

Public Accounting Firm

To the shareholders and the Board of Directors of Nicholas High Income Fund, Inc.

Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities of Nicholas High Income
Fund, Inc. (the “Fund”), including the schedule of investments, as of December 31, 2017, and
the related statement of operations for the year then ended, the statements of changes in net
assets for each of the two years in the period then ended, the financial highlights for each of
the five years in the period then ended, and the related notes. In our opinion, the financial
statements and financial highlights present fairly, in all material respects, the financial position
of the Fund as of December 31, 2017, and the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended, in conformity with
accounting principles generally accepted in the United States of America.

Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s
management. Our responsibility is to express an opinion on the Fund’s financial statements and
financial highlights based on our audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Fund in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement, whether due to
error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. As part of our audits we are required to obtain an
understanding of internal control over financial reporting but not for the purpose of
expressing an opinion on the effectiveness of the Fund’s internal control over financial
reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of
the financial statements and financial highlights, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on
a test basis, evidence regarding the amounts and disclosures in the financial statements and
financial highlights. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of
the financial statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 2017, by correspondence with the custodian. We
believe that our audits provide a reasonable basis for our opinion.

Milwaukee, Wisconsin
February 28, 2018

We have served as the auditor of one or more Nicholas investment companies since 1977.

– 24 –

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
December 31, 2017		9.00		0.4675	(a)		127,333

(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, $0.1278 to Class I shareholders of record as of April 25, 2017.
Paid on July 26, 2017, $0.1175 to Class I shareholders of record as of July 25, 2017.
Paid on October 26, 2017, $0.1147 to Class I shareholders of record as of October 25, 2017.
Paid on December 28, 2017, $0.1075 to Class I shareholders of record as of December 27, 2017.

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

– 25 –

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
December 31, 2017		9.16		0.4313	(a)		17,698

(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, $0.1165 to Class N shareholders of record as of April 25, 2017.
Paid on July 26, 2017, $0.1082 to Class N shareholders of record as of July 25, 2017.
Paid on October 26, 2017, $0.1073 to Class N shareholders of record as of October 25, 2017.
Paid on December 28, 2017, $0.0993 to Class N shareholders of record as of December 27, 2017.

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

– 26 –

Approval of Investment Advisory Contract
(unaudited)

A discussion of the Approval by the Board of Directors of the Fund’s Investment Advisory
Contract can be found in the Fund’s Semiannual Report dated June 30, 2017.

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.

– 27 –

Directors and Officers of the Fund
(unaudited)

The following table sets forth the pertinent information about the Fund’s directors and officers
as of December 31, 2017. Unless otherwise listed, the business address of each director and
officer is 411 East Wisconsin Avenue, Milwaukee, WI 53202.


				Number of
		Term of		Portfolios
	Positions	Office and	Principal	in Fund	Other
	Held	Length of	Occupations	Complex	Directorships
	With	Time	During Past	Overseen	Held
Name and Age	Fund	Served	5 Years	by Director	by Director
INTERESTED DIRECTOR
David O. Nicholas, CFA	President	⁽³⁾, 13 years	President, Chief Executive	4	None
56⁽¹⁾⁽²⁾	and		Officer, Chief Investment
	Director		Officer and Director,
			Nicholas Company, Inc.,
			the Adviser to the Fund.
			He also is the Portfolio
			Manager of Nicholas II, Inc.,
			Nicholas Limited Edition,
			Inc., Co-Portfolio Manager of
			Nicholas Equity Income Fund,
			Inc. and Lead Portfolio
			Manager of Nicholas Fund, Inc.
DISINTERESTED DIRECTORS
John A. Hauser	Director	⁽³⁾, 1 year	Private Investor, January	5	None
59			2017 to present. Senior Vice
			President Trust and
			Community Relations,
			Nicolet Bank, October
			2016 to December 2016.
			Senior Vice President –
			Director of Wealth
			Services, Nicolet Bank,
			April 2016 to October 2016.
			Prior to its acquisition by
			Nicolet Bank in April 2016,
			Mr. Hauser served in various
			senior management roles for
			Baylake Bank from 1984 to
			2008 and from 2009 to
			April 2016.
Timothy P. Reiland, CFA	Director	⁽³⁾, 13 years	Private Investor, Consultant, 5		None
61			Executive Chairman,
			Musicnotes, Inc., October
			2001 to present. Investment
			Analyst from 1987 to
			October 2001, Tucker Anthony
			Incorporated, a brokerage firm.

– 28 –

Directors and Officers of the Fund (continued)
(unaudited)


				Number of
		Term of		Portfolios
	Positions	Office and	Principal	in Fund	Other
	Held	Length of	Occupations	Complex	Directorships
	With	Time	During Past	Overseen	Held
Name and Age	Fund	Served	5 Years	by Director	by Director
Jay H. Robertson	Director	⁽³⁾, 23 years	Private Investor, April	5	None
66			2000 to present.
			Chairman of the Board
			of Robertson-Ryan and
			Associates, Inc., an
			insurance brokerage
			firm from 1993 to
			March 2000.
		Term of
	Positions	Office and
	Held	Length of
	With	Time
Name and Age	Fund	Served	Principal Occupations During Past 5 Years
OFFICERS
David L. Johnson, CFA	Executive	Annual,	Executive Vice President, Nicholas Company, Inc.,
75⁽²⁾	Vice	36 years	the Adviser to the Fund.
	President
Lawrence J. Pavelec, CFA	Senior	Annual,	Executive Vice President, Secretary and Chief
59	Vice	15 years	Operating Officer, Nicholas Company, Inc., the
	President,		Adviser to the Fund, and employed by the Adviser
	Secretary		since April 2003. He has been Portfolio Manager
	and Portfolio		for Nicholas High Income Fund, Inc.
	Manager		since April 2008.
Jennifer R. Kloehn, CPA	Senior	Annual,	Executive Vice President, Treasurer, Chief
44	Vice	1 year	Financial Officer and Chief Compliance
	President,		Officer, Nicholas Company, Inc. the Adviser
	Treasurer		to the Fund. Compliance Officer and Assistant
	and Chief		Vice President from July 2004 to April 2016.
	Compliance
	Officer
Candace L. Lesak, CFP	Vice	Annual,	Employee, Nicholas Company, Inc., the Adviser to
60	President	31 years	the Fund.

(1)	David O. Nicholas is the only director of the Fund who is an “interested person” of the Fund, as that term is defined in the 1940 Act. Mr. Nicholas is a Director of the Adviser and owns 60% of the outstanding voting securities of the Adviser.
(2)	David L. Johnson is an uncle of David O. Nicholas.
(3)	Until duly elected or re-elected at a subsequent annual meeting of the Fund.

The Fund’s Statement of Additional Information includes additional information about the
Fund directors and is available, without charge, upon request, by calling 800-544-6547 or
414-276-0535.

– 29 –

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.

– 30 –

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).

– 31 –

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.

CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND

SENIOR FINANCIAL OFFICERS

I. Covered Officers/Purpose of the Code

The Nicholas Family of Funds code of ethics (this “Code”) for the investment companies within the complex (collectively, “Funds” and each, “Company”) applies to the Company’s Principal Executive Officer and Principal Financial Officer (the “Covered Officers” each of whom are set forth in Exhibit A) for the purpose of promoting:

honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the Securities and Exchange Commission (“SEC”) and in other public communications made by the Company;
compliance with applicable laws and governmental rules and regulations;
the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and
accountability for adherence to the Code.

Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest.

II. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest

Overview. A “conflict of interest” occurs when a Covered Officer’s private interest interferes with the interests of, or his or her service to, the Company. For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper personal benefits as a result of his position with the Company.

Certain conflicts of interest arise out of the relationships between Covered Officers and the Company and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (“Investment Company Act”) and the Investment Advisers Act of 1940 (“Investment Advisers Act”). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Company because of their status as “affiliated persons” of the Company. The Company’s and the investment adviser’s compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not

intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code.

Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Company and the investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Company or for the adviser, or for both), be involved in establishing policies and implementing decisions that will have different effects on the adviser and the Company. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Company and the adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Company. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds’ Boards of Directors (“Boards”) that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes.

Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Company.

* * *

Each Covered Officer must:

	not use his or her personal influence or personal relationships improperly to influence
		decisions or financial reporting by the Company whereby the Covered Officer
		benefit personally to the detriment of the Company;
	not cause the Company to take action, or fail to take action, for the individual personal benefit
		the Covered Officer rather than the benefit of the Company;
	not use material non-public knowledge of portfolio transactions made or contemplated for the
		to trade personally or cause others to trade personally in contemplation of the market
		of such transactions;
	report, at least annually:
		officer and director positions in corporations, public or private, for profit or not for profit, or in which the Covered Officer or any of his or her immediate family members holds 5% or more of its outstanding stock;

Positions as a trustee, executor or other fiduciary;
Ownership interest in any broker-dealer or bank;
Transactions between the Covered Officer and any of the Nicholas Family of Funds, the Nicholas Company or any company in which any director of any of the Nicholas Family of Funds is an officer or director.
Situations in which any immediate family member of the Covered Employee is an officer, director or employee of any company in which any officer or director of the Nicholas Company or any of the Nicholas Family of Funds is a director or executive officer.

There are some conflict of interest situations that should always be discussed with the appropriate officer if material. If the matter involves Jennifer R. Kloehn, she should discuss the matter with David O. Nicholas. If the matter involves any other person, that person should discuss the matter with Jennifer R. Kloehn. In each case, the officer with whom such matter is discussed is encouraged to review the matter with counsel to the Company. Examples of these include:

service as a director on the board of any public company;
the receipt of any non-nominal gifts;
the receipt of any entertainment from any company with which the Company has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety;
any ownership interest in, or any consulting or employment relationship with, any of the Company’s service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof;
a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Company for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer’s employment, such as compensation or equity ownership.

III. Disclosure and Compliance

Each Covered Officer should familiarize himself or herself with the disclosure requirements generally applicable to the Company;
each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company’s directors and auditors, and to governmental regulators and self-regulatory organizations;

each Covered Officer should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds files with, or submits to, the SEC and in other public communications made by the Funds; and
it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations.

IV. Reporting and Accountability

Each Covered Officer must:

promptly after adoption of the Code or thereafter as applicable upon becoming a Covered Officer, affirm in writing to the Board that he or she has received, read, and understands the Code;
annually thereafter affirm to the Board that he or she has complied with the requirements of the Code;
not retaliate against any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; and
notify the appropriate person promptly if he or she knows of any violation of this Code. Failure to do so is itself a violation of this Code. Each Covered Officer should notify Jennifer R.
Kloehn unless the person violating the Code is Jennifer R. Kloehn, in which case such person should notify David O. Nicholas. In each case, each Covered Officer is encouraged to also contact counsel to the Fund.

Jennifer R. Kloehn is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation; provided that if the situation involves Jennifer R. Kloehn directly, then Mr. David O. Nicholas is responsible for applying the Code to her and he has authority to interpret the Code with respect to such application. Both Jennifer R. Kloehn and David O. Nicholas are encouraged to discuss the matter with counsel to the Fund. However, any approvals or waivers sought by the Principal Executive Officer will be considered by the independent directors.

The Company will follow these procedures in investigating and enforcing this Code:

Jennifer R. Kloehn or David O. Nicholas, with the advice of counsel will take all appropriate action to investigate any potential violations reported to her or him;
if, after such investigation, the officer making such investigation believes that no violation has occurred, they are not required to take any further action;

any matter that the officer making the investigation believes is a violation will be reported to the independent directors;
if the independent directors concur that a violation has occurred, they will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer;
the independent directors will be responsible for granting waivers, as appropriate; and
any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules.

V. Other Policies and Procedures

This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds’ adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds’ and their investment adviser’s codes of ethics under Rule 17j-1 under the Investment Company Act and the adviser’s more detailed policies and procedures are separate requirements applying to the Covered Officers and others, and are not part of this Code.

VI. Amendments

Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Board, including a majority of independent directors.

VII. Confidentiality

All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board and its counsel, the appropriate Company and the Nicholas Company.

VIII. Internal Use

The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Company, as to any fact, circumstance, or legal conclusion.

The undersigned, the duly elected secretary of the funds (the "Funds"), does hereby certify that the foregoing Code of Ethics (the "Code") is in the form adopted by the Board of Directors of each such Fund at which such person is the secretary, at a meeting duly called and convened on October 28, 2016, at which meeting all of the members of the Board of Directors, including all of the directors who are not "interested persons" of each such Fund, as such term is defined under the Investment Company Act of 1940, voted in favor of adoption of such Code presented at that meeting, and that the Code, in such form, as amended, has been adopted or will be ratified by all of the directors of each such Fund, including all of the directors of each such Fund who are not "interested persons" of the Fund.

Dated: November 22, 2016

Affirmed: November 29, 2017

/s/ Lawrence J. Pavelec
Lawrence J. Pavelec, Secretary
Nicholas Fund, Inc.
Nicholas II, Inc.
Nicholas High Income Fund, Inc.
Nicholas Equity Income Fund, Inc.
Nicholas Limited Edition, Inc.
Nicholas Money Market Fund, Inc.

Exhibit A


Persons Covered by this Code of Ethics
The Nicholas Company	David O. Nicholas	Jennifer R. Kloehn
Nicholas Fund, Inc.	David O. Nicholas	Jennifer R. Kloehn
Nicholas II, Inc.	David O. Nicholas	Jennifer R. Kloehn
Nicholas Limited Edition, Inc.	David O. Nicholas	Jennifer R. Kloehn
Nicholas High Income Fund, Inc.	David O. Nicholas	Jennifer R. Kloehn
Nicholas Equity Income Fund, Inc.	David O. Nicholas	Jennifer R. Kloehn

Item 3. Audit Committee Financial Expert.

The Fund's Board of Directors has determined that Mr. Timothy P. Reiland, an independent director, qualifies as an audit committee financial expert as that term is defined for purposes of this item.

Item 4. Principal Accountant Fees and Services.

(a) Audit Fees. The aggregate fees billed for each of the last two fiscal years (the "Reporting Periods") for professional services rendered by the Fund's principal accountant (the "Auditor") for the audit of the Fund's annual financial statements, or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $26,031 in 2017 and $25,800 in 2016.

(b) Audit-Related Fees. There were no fees billed in each of the last two fiscal years for assurance and related services rendered by the Auditor to the Fund that are reasonably related to the performance of the audit of the Fund's financial statements and are not reported under paragraph (a) of this Item 4.

(c) Tax Fees. The aggregate fees billed in the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax advice and tax planning ("Tax Services") were $5,775 in 2017 and $5,825 in 2016. These services consisted of (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local tax planning, advice and assistance regarding statutory, regulatory or administrative developments, (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired or held.

(d) All Other Fees. The aggregate fees billed for professional services rendered by the Auditor to the Fund's investment adviser were approximately $17,000 in 2016 and $16,500 in 2015. These services were for the audit of the investment adviser for the adviser's fiscal year ended 10/31/2016 and 10/31/2015, respectively.

(e) (1) Audit Committee Pre-Approval Policies and Procedures. The Fund's Board of Director's has not adopted any pre-approval policies and procedures as described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. The Fund's Board of Directors meets with the Auditors and management to review and authorize the Auditor's engagements for audit and non-audit services to the Fund and its Adviser prior to each engagement.

(e) (2) The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows:

(b)	N/A
(c)	N/A
(d)	N/A

(f)	No disclosures are required by this Item 4(f).
(g)	There were no non-audit fees billed in each of the last two fiscal years by the Auditor for services

rendered to the Fund or the Fund's investment adviser that provides ongoing services.

(h) No disclosures are required by this Item 4(h).

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: February 28, 2018

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: February 28, 2018

By: /s/ Jennifer R. Kloehn
Name: Jennifer R. Kloehn
Title: Principal Financial Officer
Date: February 28, 2018

Nicholas Income Fund N-CSRCertified annual shareholder report (management investment company)