NICHOLAS II INC, 485BPOS, 1999-01-29

NICHOLAS II INC
485BPOS, 1999-01-29

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{letterhead}

VIA EDGAR TRANMISSION January 29, 1999

Securities and
Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20540

Re: Nicholas II, Inc. (the "Fund")
SEC File No. 2-85030
Pre-Effective Amendment No.___
Post-Effective Amendment No. 15
Registration Statement on Form N-1A

To whom it may concern:

In connection with the amendment by the Fund of its
registration statement on Form N-1A under Section 8 of the
Investment Company Act of 1940, as amended, and pursuant to the
provisions of Rule 472 and Rule 485 under the Securities Act of
1933, as amended, and pursuant to Regulation S-T relating to
electronic filings, we enclose for filing a copy of Post-
Effective Amendment No. 15 to the Registration Statement.
As indicated in the Exhibit Index certain exhibits will follow
in subsequent filing(s) as well as other pertinent financial data.

Very truly yours,

NICHOLAS COMPANY, INC.

/s/ Jeffery T. May
--------------------
JEFFREY T. MAY
Senior Vice President and Treasurer
Enclosure

As filed with the Securities and Exchange Commission on January 29, 1999.

File No. 2-85030
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. __
POST-EFFECTIVE AMENDMENT NO. 15

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 15

NICHOLAS II, INC.
(Exact Name of Registrant as Specified in Charter)

700 North Water Street, Milwaukee, Wisconsin 53202
(Address of Principal Executive Offices) (Zip Code)

(414) 272-6133
(Registrant's Telephone Number, including Area Code)

ALBERT O. NICHOLAS, PRESIDENT
NICHOLAS II, INC.
700 NORTH WATER STREET
MILWAUKEE, WISCONSIN 53202
(Name and Address of Agent for Service)

Copy to:
Teresa M. Levy
MICHAEL BEST & FRIEDRICH LLP
100 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202

It is proposed that this filing will become effective:
_ immediately upon filing pursuant to paragraph (b)
X on January 30, 1999 pursuant to paragraph (b)
_ 60 days after filing pursuant to paragraph (a)(1)
_ on ________________ pursuant to paragraph (a)(1)
_ 75 days after filing pursuant to paragraph(a)(2)
_ on _______________ pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following box:
_ This post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.

Title of Securities Being Registered: Common Stock, $0.01 par value per share
---------------------------------------
Pursuant to Rule 24f-2, the Registrant hereby registers an
indefinite amount of securities. On December 31, 1998,
Registrant filed the necessary Rule 24f-2 Notice and filing fee
with the Commission for its fiscal year ended September 30, 1998.

NICHOLAS II, INC.

Form N-1A

PART A: PROSPECTUS
NICHOLAS II, INC.

PROSPECTUS
JANUARY 30, 1999

The Fund's investment objective is long-term growth with income
as secondary consideration. To achieve its objective, the Fund will
invest in a diversified list of common stocks that have growth potential.

This Prospectus gives vital information about the Fund. For
your own benefit and protection, please read it before you
invest, and keep it on hand for future reference.

Investment Adviser
NICHOLAS COMPANY, INC.

Minimum Initial Investment - $500

AS WITH ALL MUTUAL FUNDS, THE
SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
OF THE FUND'S SHARES OR DETERMINED WHETHER THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE
WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME.

700 NORTH WATER STREET SUITE 1010
MILWAUKEE, WISCONSIN 53202
(414) 272-6133 (800) 227-5987

TABLE OF CONTENTS
Page

AN OVERVIEW OF THE FUND............................. __

FUND INVESTMENTS.................................... __

INVESTMENT RISKS.................................... __

FINANCIAL HIGHLIGHTS................................ __

MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE......... __

PERFORMANCE DATA.................................... __

THE FUND'S INVESTMENT ADVISER....................... __

PRICING OF FUND SHARES.............................. __

PURCHASE OF FUND SHARES............................. __

REDEMPTION OF FUND SHARES........................... __

EXCHANGE BETWEEN FUNDS.............................. __

TRANSFER OF FUND SHARES............................. __

DIVIDENDS AND FEDERAL TAX STATUS.................... __

DIVIDEND REINVESTMENT PLAN.......................... __

SYSTEMATIC WITHDRAWAL PLAN.......................... __

INDIVIDUAL RETIREMENT ACCOUNTS...................... __

MASTER RETIREMENT PLAN.............................. __

YEAR 2000........................................... __

FOR MORE INFORMATION ABOUT THE FUND................. Back Cover

No person has been authorized to give any information or to
make any representations other than those contained in this
Prospectus and the Statement of Additional Information dated
January 30, 1999 and, if given or made, such information or
representations may not be relied upon as having been authorized
by Nicholas II, Inc.

This Prospectus does not constitute an offer to sell
securities in any state or jurisdiction in which such offering
may not lawfully be made. The delivery of this Prospectus at any
time shall not imply that there has been no change in the affairs
of Nicholas II, Inc. since the date hereof.

AN OVERVIEW OF THE FUND

GOALS

The Fund seeks long-term growth, with income as a secondary
consideration.

PRINCIPAL INVESTMENT STRATEGIES

To pursue the Fund's goal of long-term capital growth, the Fund
primarily invests in common stocks of domestic small and medium-sized
companies. The Fund believes a company's annual sales volume and the
market capitalization (the number of shares outstanding multiplied by the
per share price) are the factors most illustrative of a company's
size. In distinguishing company size in terms of sales volume, the Fund
considers a company's sales volume relative to peer companies in the
company's industry. In terms of market capitalization, the Fund
generally considers companies with market capitalizations up to $1.0
billion as "small," between $1.0 billion and $5.0 billion as "medium" and
greater than $5.0 billion as "large." To a lesser extent, the Fund may
invest in companies with large market capitalizations.

The Fund looks for established companies with the potential for
superior growth in sales and earnings in a diversified group of
industries. The Fund seeks companies that are well positioned to take
advantage of emerging long-term social and economic trends, and have
ample resources to sustain their growth. The Fund's investment
philosophy is basically a long-term growth philosophy, based upon the
assumption that if a company achieves superior growth in sales and
earnings, eventually the company's stock will achieve superior
performance. Income is not a significant factor in selecting the Fund's
investments.

It is anticipated that a major portion of the Fund's portfolio will
be invested in common stocks of the types of companies, and in the
manner, as described above, at all times. The Fund does not have a pre-
set asset allocation strategy which would require that the Fund maintain
a specific percentage of its assets in equity-related securities (i.e.,
stocks) and income-related securities (i.e., bonds). In addition, there
is no minimum or maximum percentage of the Fund's assets which is
required to be invested in the securities of companies in any particular
industry or group of industries. However, the Fund also may invest in
the securities of unseasoned companies (companies with a record of less
than three years of continuous operation) (but in no event in an
aggregate amount in excess of 5% of the Fund's total assets), debt
securities, debt securities and preferred stock convertible into common
stock, securities of other investment companies (up to 10% of the Fund's
total assets) and securities offered in private placements.

For further information on the Fund's principal investment
strategies and how the Fund invests, see "Fund Investments" starting on
page 5.

PRINCIPAL RISKS OF INVESTING

As with any mutual fund, there can be no guarantee that the Fund
will meet its goals or that the Fund's performance will be positive over
any period of time. In addition, the value of the Fund's investments,
and therefore, the value of your Fund shares, may go up or down. Value
changes in the Fund's investments and consequently, your Fund shares may
occur because a particular stock market is rising or falling. At other
times, there may be specific factors that may affect the value of a
particular investment of the Fund. If the value of the Fund shares or
the value of the Fund's investments go down, you may lose money.

In addition, because the Fund will invest most of its assets in the
securities of small- and medium-sized companies, the Fund will be subject
to additional risks. Small- to medium-sized companies often have a
limited market for their securities and limited financial resources, and
are usually more affected by changes in the economy. Securities of small-
to medium-sized companies also often fluctuate in price more than common
stocks of larger companies, such as many of those included in the Dow
Jones Industrial Average. Therefore, during the history of the Fund, its
price per share has often been more volatile, in both "up" and "down"
markets, than most of the popular stock averages.

The Fund also is subject to selection risk, which is the risk that
the stocks the Fund's adviser selects will underperform markets or other
mutual funds with similar investment objectives and strategies. In
addition, although the Fund generally will invest in the common stocks of
small- and medium-sized companies, certain investments by the Fund and
certain investment techniques the Fund may use entail other risks, as
described in further detail herein.

In view of the risks inherent in all investments in securities,
there is no assurance that the Fund's objectives will be achieved.
Before you invest, please read "Investment Risks" starting on page 6.

WHO MAY WANT TO INVEST

The Fund may be appropriate for investors who:

* Have longer time horizons
* Are willing to accept higher short-term risk along with
higher potential long-term returns
* Want to diversify their portfolios
* Are seeking a fund for the growth portion of an asset
allocation portfolio
* Are investing with long-term goals in mind, such as
retirement or to fund a child's future education

The Fund may NOT be appropriate if you:

* Are investing with a shorter time horizon in mind
* Are uncomfortable with an investment that will go up and
down in value
* Are looking for current income.

PERFORMANCE INFORMATION

Mutual fund performance is commonly measured as total return. Total
return measures the price change in a share assuming reinvestment of all
dividend income and capital gain distributions. All mutual funds must
use the same formula to calculate total return. The total returns that
follow are based on historical results and do not reflect the effect of
taxes.

The bar chart and table shown below indicate the risks of investing
in the Fund, by showing the variability of the Fund's total return over
time and by showing how the Fund's historical performance compares with
alternative broad measures of market performance.

The bar chart below shows the Fund's calendar year total return
for the ten years.(1)

BAR CHART PLOT POINTS

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
17.66% -6.21% 39.56% 9.38% 6.40% 1.03% 28.55% 19.38% 37.01% 9.24%
_________

(1) The Fund's fiscal year end is September 30. The Fund's year-to-
date return (nine months) as of September 30, 1998 was (5.85)%.

During the ten calendar year period shown in the above bar chart,
the highest quarterly return was 20.79% (for the quarter ended March 31,
1991) and the lowest quarterly return was (17.3)% (for the quarter ended
September 30, 1990).

The table below shows how the Fund's average annual returns for the
one, five and ten calendar year periods ending on December 31, 1998 (the
Fund's most recently completed calendar year), compare to the returns of
the Russell 2000 Index and the Lipper Mid Cap Fund Index.

PAST ONE FIVE TEN
CALENDAR YEAR CALENDAR YEARS CALENDAR YEARS

THE FUND............ 9.24% 18.34% 15.32%
RUSSELL 2000 INDEX.. (2.55)% 11.86% 12.92%
LIPPER MID CAP
FUND INDEX....... 13.92% 15.20% 17.00%

The Russell 2000 Index is an unmanaged index that represents the
average performance of a group of stocks of approximately 2000 companies
and is a widely used benchmark for small-capitalization U.S. stocks. The
Lipper Mid Cap Fund Index is an unmanaged equally weighted index of the
30 largest mutual funds included in the Lipper Mid Cap Fund category.

OF COURSE, THE FUND'S PAST PERFORMANCE IS NO GUARANTEE OF ITS FUTURE RETURNS.

FEES AND EXPENSES OF THE FUND

FUND INVESTORS PAY VARIOUS EXPENSES, EITHER DIRECTLY OR INDIRECTLY.
THE TABLE BELOW DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU
BUY AND HOLD SHARES OF THE FUND.

SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchases.............. None
Maximum Deferred Sales Charge (Load).......................... None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends... None
Redemption Fees............................................... (1)
Exchange Fee.................................................. (2)
Maximum Account Fee........................................... None

ANNUAL FUND OPERATING EXPENSES (3) (AS A PERCENTAGE OF AVERAGE NET ASSETS)
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees............................................... 0.52%
Distribution [and/or Service] (12b-1) Fees (4)................ None
Other Expenses................................................ 0.07%
Total Annual Fund Operating Expenses.......................... 0.59%
__________

(1) A fee of $12.00 is charged for each wire redemption.
(2) A fee of $5.00 is charged for each telephone exchange.
(3) Annual Fund Operating Expenses are based on expenses incurred for the
fiscal year ended September 30, 1998.
(4) Some mutual funds charge these fees to pay for advertising and
other costs of selling shares.

EXAMPLE: THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COSTS OF
INVESTING IN THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL
FUNDS.(1)

One Three Five Ten
Year Years Years Years
---- ----- ----- -----
THE EXAMPLE ASSUMES THAT YOU
INVEST $10,000 IN THE FUND FOR THE
TIME PERIODS INDICATED AND THEN
REDEEM ALL OF YOUR SHARES AT THE
END OF THOSE PERIODS. THE
EXAMPLE ALSO ASSUMES THAT YOUR
INVESTMENT HAS A 5% RETURN
EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES REMAIN
THE SAME. ALTHOUGH YOUR
ACTUAL COSTS MAY BE HIGHER OR
LOWER, BASED ON THESE
ASSUMPTIONS, YOUR COSTS WOULD BE: $60 $189 $329 $738

YOU WOULD PAY THE FOLLOWING EXPENSES
IF YOU DID NOT REDEEM YOUR SHARES: $60 $189 $329 $738

__________

(1) This example should not be considered a representation of past or
future expenses. Actual expenses may be greater or lesser than
those shown.

For a further description of the fees paid to the Fund's adviser,
The Nicholas Company, Inc., see "The Fund's Investment Adviser" on page
12.

PORTFOLIO MANAGEMENT

Mr. David O. Nicholas is Senior Vice President and the Portfolio
Manager of the Fund and is primarily responsible for the day-to-day
management of the Fund's portfolio. David O. Nicholas is President and
Chief Investment Officer of Nicholas Company, Inc., the Fund's Adviser
(the "Adviser"), and has been employed by the Adviser since 1985. He
has been Portfolio Manager for, and primarily responsible for the
day-to-day management of, the portfolios of the Fund and Nicholas
Limited Edition, Inc. since March 1993. He also has been Co-Portfolio
Manager of Nicholas Fund, Inc. since November 1996. He is a Chartered
Financial Analyst.

FUND INVESTMENTS

The Fund's main goal is long-term capital growth
through investments primarily in a diversified portfolio of
equity securities of small- and medium-sized companies
located in the United States.

The Fund believes a company's annual sales volume and market
capitalization (the number of shares outstanding multiplied by the per
share price)are the factors most illustrative of a company's size.
In distinguishing company size in terms of sales volume, the Fund
considers a company's sales volume relative to peer companies in the
company's industry. In terms of market capitalization, the Fund uses
the following standard:

MARKET CAPITALIZATION
---------------------
Small........................ 0 to $1.0 Billion
Medium....................... $1.0 Billion to $5.0 Billion
Large........................ Over $5.0 Billion

The Fund generally invests in common stocks of small
and medium-sized companies. To a lesser extent, the Fund
may invest in companies with large capitalizations. The
Fund believes the stocks of successful, well-run, small- and
medium-sized companies have superior appreciation potential
because their revenues and earnings often are growing more
rapidly than those of larger companies. The Fund also
believes small- to medium-sized companies often have the
potential for more rapid, and greater, long-term growth
because of newer and more innovative products. The Fund's
investment philosophy is basically a long-term growth
philosophy, based upon the assumption that if a company
achieves superior growth in sales and earnings, eventually
the company's stock will achieve superior performance.

The Fund looks for established companies with the
potential for superior growth in sales and earnings. The
Fund seeks companies that are well positioned to take
advantage of emerging, long-term social and economic trends,
and have ample financial resources to sustain their growth.
The Fund considers a number of factors in assessing a
company's value, including the following:

* a company's strategic position in its industry
* sales and earnings growth
* product development
* quality of management
* overall business prospects
* a company's price to earnings ratio (including an
analysis of such ratio in relation to the company's
growth rate and industry trends.)

The Fund does not invest for income. The Fund does not
have a pre-set asset allocation strategy which would require
that the Fund maintain a specific percentage of its assets
in equity-related securities (i.e., stocks) and income-
related securities (i.e., bonds). In addition, there is no
minimum or maximum percentage of the Fund's assets which is
required to be invested in the securities of companies in
any particular industry or group of industries. However,
the Fund may not invest more than 5% of its total net assets
in the securities of any one issuer, and not more than 25%
of the value of the Fund's total net assets may be
concentrated in companies in any particular industry or
group of industries. In addition, the Fund may not hold
more than 10% of the voting securities of any one issuer.

The Fund has no stated minimum holding period for
investments, and will buy or sell securities whenever the
Fund sees an appropriate opportunity. Securities are not
purchased with a view toward rapid turnover or to obtain
short-term trading profits (defined as profits on assets
held less than twelve months). The Fund may reduce or sell
investments in companies if there is an actual or perceived
deterioration in the fundamentals of a company (including
the company's financial condition or performance, management-
related problems, product-line or service-line issues, or
industry problems). The Fund also may reduce or sell
investments in companies if a company's market
capitalization grows to a point that it is clearly no longer
a small or medium-capitalization stock or if a company's stock
price appreciates excessively in relation to its fundamental
prospects. Investments in companies also may be sold if
they fail to realize their growth potential or if there are
other more attractive opportunities elsewhere.

It is anticipated that a major portion of the Fund's
portfolio will be invested in common stocks of the types of
companies, and in the manner, as described above at all
times. However, the Fund also may invest in the securities
of unseasoned companies (companies with a record of less
than three years of continuous operation) (but in no event
in an aggregate amount in excess of 5% of the Fund's total
assets), debt securities and preferred stock convertible
into common stock, securities of other investment companies
(up to 10% of the Fund's total assets) and securities
offered in private placements. The Fund also may invest in
certain higher-risks securities and engage in other
investment practices.

For liquidity or flexibility, or as a temporary defensive
tactic because of adverse market, economic, political or other
conditions, the Fund also may invest in cash, investment
grade and non-investment grade fixed income securities and repurchase
agreements. In the event the Fund employs a temporary defensive
tactic in response to abnormal market or other conditions, and
invests Fund assets in cash, investment grade fixed income securities or
repurchase agreements, the Fund may not achieve its investment
objective during the period in which the Fund maintains such
defensive position.

All percentage limitations apply on the date of investment by the
Fund. As a result, if the percentage restriction is adhered to at the
time of the investment, a later increase in percentage resulting from a
change in market value of the investment or the total assets of the Fund
will not constitute a violation of that restriction. The Fund may use
many different investment strategies in seeking its investment objectives,
and it has certain investment restrictions. These strategies and certain
of the restrictions and policies governing the Fund's
investments are explained in detail in the Fund's Statement
of Additional Information, which is incorporated by
reference herein. If you would like to learn more about how
the Fund may invest, you should request a copy of the
Statement of Additional Information. To learn how to obtain
a copy of the Statement of Additional Information, see the
back cover page of this Prospectus.

INVESTMENT RISKS

This section contains a summary description of the
general risks of investing in the Fund. As with any mutual
fund, there can be no guarantee that the Fund will meet its
goals or that the Fund's performance will be positive over
any period of time.

MARKET RISK. The value of the Fund's investments, and
therefore, the value of your Fund shares, may go up or down.
Value changes in the Fund's investments and consequently,
your Fund shares may occur because a particular stock market
is rising or falling. Stock markets tend to run in cycles,
with periods when stock prices generally go up, known as
"bull markets," and periods when stock prices generally go
down, referred to as "bear markets." Stock prices in
general may decline over short or extended periods. Thus,
there is a possibility that the value of the Fund's
investments will fall because of declines in the stock
market, regardless of the success or failure of the
operations of the Fund's portfolio companies. At other
times, there are specific factors that may adversely affect
the value of a particular investment of the Fund, which in
turn may reduce the value of the Fund's investments, and
consequently, your Fund shares. If the value of the Fund
shares or the value of the Fund's investments go down, you
may lose money.

PORTFOLIO-SPECIFIC RISK. Because the Fund will invest
most of its assets in the securities of small- and medium-
sized companies, the Fund will be subject to additional
risks. Small- to medium-sized companies often have a
limited market for their securities and limited financial
resources, and are usually more affected by changes in the
economy. Securities of small- to medium-sized companies
also often fluctuate in price more than common stocks of
larger companies, such as many of those included in the Dow
Jones Industrial Average. Therefore, during the history of
the Fund, its price per share has often been more volatile.

SELECTION RISK. The Fund also is subject to selection
risk, which is the risk that the stocks the Fund's adviser
selects will underperform the markets or other mutual funds
with similar investment objectives and strategies. It is
anticipated that a major portion of the Fund's portfolio
will be invested in common stocks of the types of companies,
and in the manner, as described above, at all times. However,
the Fund does not have a pre-set asset allocation strategy
which would require that the Fund maintain a specific percentage
of its assets in equity-related securities (i.e., stocks) and
income-related securities (i.e., bonds). In addition, there
is no minimum or maximum percentage of the Fund's assets which
is required to be invested in the securities of companies in
any particular industry or group of industries.

OTHER RISKS RELATED TO CERTAIN PORTFOLIO INVESTMENTS
AND STRATEGIES. Although the Fund generally will invest in
the common stocks of small- and medium-sized companies,
certain investments the Fund may acquire and certain
investment techniques the Fund may use entail other risks:

LIQUIDITY, INFORMATION AND VALUATION RISKS OF CERTAIN
PORTFOLIO INVESTMENTS

From time to time, the Fund may acquire the
securities of unseasoned companies (i.e., companies
which have a record of less than three years continuous
operation) and securities issued in private placements
(i.e., securities not registered for purchase and sale
by the public under the Securities Act of 1933, as amended).
Securities of unseasoned companies and securities
issued in private placements may be illiquid or
volatile making it potentially difficult or impossible
to sell them at the time and at the price the Fund
would like. In addition, important information about
these types of companies, securities or the markets in
which they trade, may be inaccurate or unavailable.
Consequently, it may be difficult to value accurately
these securities as well.

These types of investments are made by the Fund
when the Adviser believes such investments offer the
possibility of capital appreciation. The Fund may not
invest more than 5% of the Fund's total assets in the
securities of unseasoned companies. In addition, the
Fund may not invest more than 5% of the Fund's total
assets in bonds, debentures or other debt securities
distributed in private placements.

DEBT SECURITIES AND PREFERRED STOCK

From time to time, the Fund may acquire debt
securities and preferred stock that are convertible
into or carry rights to acquire common stock, and other
debt securities, such as those selling at substantial
discounts.

Debt securities, such as bonds, involve credit
risk, which is the risk that the borrower will not make
timely payments of principal and interest. Debt
securities also are subject to interest rate risk,
which is the risk that the value of the security may
fall when interest rates rise. In general, the market
price of debt securities with longer maturities will go
up or down more in response to changes in interest
rates than shorter term securities. The value of
preferred stock and debt securities convertible into
common stock generally will be affected by its stated
dividend rate or interest rate, as applicable, and the
value of the underlying common stock. As a result of
the conversion feature, the dividend rate or interest
rate on convertible preferred stock or convertible debt
securities generally is less than would be the case if
the security were not convertible. Therefore, the
value of convertible preferred stock and debt
securities will be affected by the factors that affect
both equity securities (such as stock market movements
generally) and debt securities (such as interest
rates). Some convertible securities might require the
Fund to sell the securities back to the issuer or a
third party at a time that is disadvantageous to the
Fund.

These types of investments are made by the Fund
when the Adviser believes such investments offer the
possibility of appreciation in value. The Adviser
intends generally to limit the Fund's purchase of debt
securities and preferred stock to those which are rated
in one of the top four rating categories by any of the
nationally recognized statistical rating organizations
("NRSROs"), or will be unrated instruments but deemed
by the Adviser to be comparable in quality to
instruments so rated on the date of purchase. However,
this policy does not prevent the Fund from retaining a
security if its credit quality is downgraded to a non-
investment grade level after purchase.

REPURCHASE AGREEMENTS

The Fund may only enter into repurchase agreements
with a member bank of the Federal Reserve System or a
primary dealer in U.S. Government securities. Under
such agreements, the Fund buys U.S. Government securities
from the bank or primary dealer and simultaneously agrees
to sell the securities back to the bank or primary dealer
at a mutually agreed upon time and price. While
the underlying obligation is a U.S. Government security,
the obligation of the seller to repurchase the security
is not guaranteed by the U.S. Government. Delays or
losses could result if the bank or primary dealer defaults
on its repurchase obligation or becomes insolvent, which
could adversely impact the Fund's net asset value.

Not more than 20% of the Fund's total net assets,
taken at market, may be invested in repurchase
agreements; provided, however, that repurchase
agreements maturing in more than seven days may not
constitute more than 5% of the Fund's total net assets,
taken at market.

FIXED INCOME SECURITIES

The Fund may temporarily invest in investment grade and
non-investment grade fixed income securities as a temporary defensive
measure when conditions are deemed to warrant such action.
"Investment grade fixed income securities" refers to
fixed income securities ranked in one of the top four
debt security rating categories of any of the NRSROs,
or unrated but deemed by the Adviser to be comparable
in quality to instruments so rated on the date of
purchase. However, this policy does not prohibit the
Fund from retaining a security if its credit quality is
downgraded to a non-investment grade level after
purchase.

The fixed income securities described in the
fourth category of these rating services possess
speculative characteristics. In addition non-investment
grade securities tend to reflect individual corporate
developments to a greater extent, tend to be more
sensitive to economic conditions and tend to have a
weaker capacity to pay interest and repay principal
than higher rated securities. Because the market for
lower rated securities may be thinner and less active
than for higher rated securities, there may be market
price volatility for these securities and limited
liquidity in the resale market. Factors adversely
impacting the market value of high yielding, high risk
securities also will adversely impact the Fund's net
asset value.

BORROWINGS

The use of borrowings can increase the Fund's
exposure to market risk. If the fund borrows money to
make more investments than it otherwise could or to
meet redemptions, the Fund's share price may be subject
to greater fluctuation until the borrowing is paid off.
The Fund may make borrowings but only for temporary or
emergency purposes and then only in amounts not in
excess of 5% of the lower of cost or market value of
the Fund's total net assets.

INVESTMENTS IN OTHER MUTUAL FUNDS

The Fund may invest generally up to 10% of its
total assets in securities of other investment companies.
Investments in the securities of other mutual funds
will involve duplication of advisory fees and certain
other expenses.

In view of the risks inherent in all investments in
securities, there is no assurance that the Fund's objectives
will be achieved.

FINANCIAL HIGHLIGHTS

THE FINANCIAL HIGHLIGHTS TABLE BELOW IS INTENDED TO
HELP YOU UNDERSTAND THE FUND'S FINANCIAL PERFORMANCE FOR THE
PAST FIVE FISCAL YEARS. CERTAIN INFORMATION REFLECTS
FINANCIAL RESULTS FOR A SINGLE FUND SHARE. THE TOTAL
RETURNS IN THE TABLE REPRESENT THE RATE THAT AN INVESTOR
WOULD HAVE EARNED OR LOST ON AN INVESTMENT IN THE FUND
(ASSUMING REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS).
THE FOLLOWING FINANCIAL HIGHLIGHTS OF THE FUND FOR THE
FIVE YEARS ENDED SEPTEMBER 30, 1998, HAVE BEEN EXAMINED BY
ARTHUR ANDERSEN LLP, INDEPENDENT PUBLIC ACCOUNTANTS, WHOSE
REPORT THEREON IS INCLUDED IN THE FUND'S ANNUAL REPORT FOR
THE FISCAL YEAR ENDED SEPTEMBER 30, 1998. THE TABLE SHOULD
BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND
RELATED NOTES INCLUDED IN THE FUND'S ANNUAL REPORT, WHICH
ARE INCORPORATED BY REFERENCE INTO THE STATEMENT OF
ADDITIONAL INFORMATION AND WHICH MAY BE OBTAINED WITHOUT
CHARGE BY WRITING OR CALLING THE FUND.

<TABLE>
Year Ended September 30
-------------------------
1998 1997 1996 1995 1994

---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR $40.65 $33.34 $30.07 $26.71 $26.94
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .13 .08 .10 .24 .21
Net gains (losses) on
securities (realized and
unrealized) (.69) 10.47 5.84 5.22 1.23

Total from investment
operations (.56) 10.55 5.94 5.46 1.44

LESS DISTRIBUTIONS:
Dividends (from net
investment income) (.08) (.08) (.18) (.21) (.20)
Distributions (from capital
gains) (5.23) (3.16) (2.49) (1.89) (1.47)

Total distributions (5.31) (3.24) (2.67) (2.10) (1.67)

NET ASSET VALUE, END
OF YEAR $34.78 $40.65 $33.34 $30.07 $26.71

TOTAL RETURN (1.66) 34.94% 21.35% 22.39% 5.49%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year (millions) $960.0 $994.4 $774.8 $682.2 $624.7
Ratio of expenses to average
net assets .59% .61% .62% .66% .67%
Ratio of net investment income
to average net assets .33% .23% .29% .68% .72%
Portfolio turnover rate 20.47% 30.21% 24.47% 19.63% 17.38%

</TABLE>

Please consider the performance information above in light of the Fund's
investment objectives and policies, and market conditions during the reported
time periods.

Again, you must remember that historical performance does not
necessarily indicate what will happen in the future. The value of your Fund
shares may go up or down.

MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE

Individual stock selection is the focal point of the
Adviser's equity philosophy. The Adviser's efforts are
directed toward purchasing stocks that meet the criteria
outlined below. It also is the Adviser's strong conviction
that superior long-term results are achieved through the
minimization of capital losses during adverse periods in the
general market. The Adviser primarily seeks stocks where
the price/earnings ratio is low in relation to earnings
growth or where the price is reasonable in relation to
book value. Above average secular earnings growth and
strong current earnings momentum are important factors.
The Fund's primary objective is long-term growth. In an effort
to achieve this objective, the Adviser purchases stocks
for the Fund in small and medium-size companies that
represent good value in relation to their growth prospects.

The Fund ended fiscal 1998 with a net asset value per share of
$34.78, a total return of (1.66)% (distributions reinvested), and
approximately $960 million in total net assets.

At September 30, 1998, the Fund's portfolio consisted of
holdings in 54 companies, representing 95.24% of the Fund's total net
assets. The other 4.76% of the Fund's total net assets were invested
in convertible bonds, short-term investments and cash. The Fund's
performance in fiscal 1998 was driven primarily by certain large
individual holdings in the health care services and products area,
specialty retail and business service sectors. In fiscal 1998, the
Fund significantly increased its holdings of Health Management Associates,
Inc. (a health care services company and the Fund's largest equity holding
at September 30, 1998), as well as the number of shares held of Fiserv, Inc.
and Mutual Risk Management, Ltd., (the Fund's second and third largest
equity holdings at September 30, 1998, respectively). The Fund's
performance was negatively impacted by decreases in the market values
of its holdings in the following areas: the health care services sector,
where medical reimbursement is a concern; the financial sector, due to
concerns over the international economic crisis and companies which are
perceived to be cyclical due to recessionary fears. In addition, certain
of the companies held in the Fund's portfolio, which are impacted by
international economics, were negatively impacted by the depression overseas.

In terms of overall portfolio mix, the Fund continues to have
significant positions in health care service companies (15.01% of
the Fund's total assets at September 30, 1998); health care product
companies (11.20%); media, communications and entertainment (11.36%),
business service companies (10.70%); and banks and finance (9.03%).
During fiscal 1998, the Fund significantly increased its relative
percentage of net assets invested in media, communications and
entertainment, and industrial products and services, and modestly
increased its percentage of net assets invested in insurance and
real estate. In addition, the Fund modestly decreased its percentage
of net assets invested in retail trade and transportation.

The Fund will continue to look for and hold stocks in
well-managed, quality companies with attractive valuations.
Furthermore, since many of the companies represented in the
Fund's portfolio are small to mid-sized domestic businesses,
international economics do not tend to affect their
performance as much as it affects larger, multi-national
companies.

Set forth below are two line graphs showing a
comparison of the initial account value and subsequent
account values at the end of each of the most recently
completed ten fiscal years, and the most recently completed
quarter ended December 31, 1998 of the Fund, assuming a
$10,000 investment in the Fund at the beginning of the first
fiscal year, to the same investment over the same periods in
two different sets of peer group indices. The peer group in
the first graph includes the Standard & Poor's 500r
Composite Stock Price Index, the Russell 2000 Index and the
NASDAQ OTC Composite Index. This peer group is consistent
with the peer group used in the performance graph which
appeared in the Fund's Prospectus, dated January 30, 1998.
The peer group in the second graph includes the Lipper Mid
Cap Fund Index ("Lipper Mid Cap") and the Russell 2000 Index.
The Fund intends to use the peer group indices in the second
graph as its peer group indices in its performance graphs in Fund
prospectuses in future years. The Fund believes the returns
of the Lipper Mid Cap Fund and Russell 2000 indices are more
representative of the performance of small and medium-capitalized
companies, which are the types of companies in which the Fund
primarily invests. Therefore, the Fund believes the Lipper Mid
Cap and Russell 2000 indices provide a more meaningful and
representative basis of comparison for Fund investors.

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
NICHOLAS II, INC., S&P 500 INDEX, RUSSELL 2000 INDEX
AND NASDAQ OTC COMPOSITE INDEX

<TABLE>
Nicholas % Total Russell % total S&P 500 % Total Nasdaq %total
II Inc. Return 2000 return Return Return
------- ------- ------- ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

09/30/88 10,000 -1.48% 10,000 -10.81% 10,000 -12.54% 10,000 -12.73%
09/30/89 11,988 19.88% 12,149 21.49% 13,273 32.73% 12,199 21.99%
09/30/90 10,053 -16.14% 8,850 -27.16% 12,028 - 9.38% 8,886 -27.16%
09/30/91 14,166 40.91% 12,840 45.90% 15,791 31.29% 13,590 52.94%
09/30/92 14,958 5.59% 13,989 8.95% 17,531 11.02% 15,045 10.71%
09/30/93 17,081 14.19% 18,625 33.14% 19,809 13.00% 19,676 30.78%
09/30/94 18,018 5.49% 19,124 2.68% 20,534 3.66% 19,716 0.20%
09/30/95 22,053 22.39% 23,591 23.36% 26,642 29.75% 26,914 36.51%
09/30/96 26,760 21.35% 26,688 13.13% 32,062 20.34% 31,644 17.57%
09/30/97 36,110 34.94% 35,546 33.19% 45,031 40.45% 43,476 37.39%
09/30/98 35,511 - 1.66% 28,785 -19.02% 49,105 9.05% 43,686 0.48%
12/31/98 41,200 16.02% 33,480 16.31% 59,562 21.30% 56,552 29.45%

</TABLE>

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
NICHOLAS II, INC., LIPPER MID CAP INDEX AND RUSSELL 2000 INDEX
<TABLE>

% TOTAL RUSSELL % TOTAL LIPPER % TOTAL
NICHOLAS II, INC. RETURN 2000 RETURN MID CAP RETURN
----------------- ------- ------- ------- --- -------
<S> <C> <C> <C> <C> <C> <C>
09/30/88 10,000 -1.48% 10,000 -10.81% 10,000 0.00%
09/30/89 11,988 19.88% 12,149 21.49% 12,990 29.90%
09/30/90 10,053 -16.14% 8,850 -27.16% 10,951 -15.70%
09/30/91 14,166 40.91% 12,840 45.09% 16,670 52.23%
09/30/92 14,958 5.59% 13,989 8.95% 17,742 6.43%
09/30/93 17,081 14.19% 18,625 33.14% 22,908 29.12%
09/30/94 18,018 5.49% 19,124 2.68% 23,101 0.84%
09/30/95 22,053 22.39% 23,591 23.36% 29,987 29.81%
09/30/96 26,760 21.35% 26,688 13.13% 35,103 17.06%
09/30/97 36,100 34.94% 35,546 33.19% 43,756 24.65%
09/30/98 35,511 - 1.66% 28,785 -19.02% 38,374 -12.30%
12/31/98 41,200 16.02% 33,480 16.31% 47,484 23.74%

</TABLE>

The Fund's 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
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
------------------ ------------------ ------------------
Average Annual Total
Return........ (1.66)% 15.76% 13.51%

Past performance is not predictive of future performance.

PERFORMANCE DATA

The Fund may from time to time include its "total return" or
"average annual total return" in advertisements or in information
furnished to present or prospective shareholders. The "TOTAL
RETURN" of the Fund is expressed as a ratio of the increase (or
decrease) in value of a hypothetical investment in the Fund at
the end of a measuring period to the amount initially invested.
The "AVERAGE ANNUAL TOTAL RETURN" is the total return discounted
for the number of represented time periods and is expressed as a
percentage. The rate represents the annual rate achieved on the
initial investment to arrive at the ending redeemable value. The
ending value assumes reinvestment of dividends and capital gains
and the reduction of account charges, if any. This computation
does not reflect any sales load or other nonrecurring charges,
since the Fund is not subject to such charges.

The "total return" and the "average annual total return"
calculations are historical measures of performance and are not
necessarily indicative of future performance. Such measurements
will vary from time to time depending upon market conditions, the
composition of the Fund's portfolio, operating expenses, and the
distribution policy as determined by the Board of Directors.
These factors should be considered when evaluating the Fund's
performance. For additional information regarding the
calculation of this performance data, see the Statement of
Additional Information.

In sales materials, reports and other communications to
shareholders, the Fund may compare its performance to certain
indices, including the Dow Jones Industrial Average, the Standard
& Poor's 500r Composite Stock Price Index, the National
Association of Securities Dealers Automated Quotation System, the
Russell 2000 Index and the United States Department of Labor
Consumer Price Index. The Fund also may include evaluations of
the Fund published by nationally recognized financial
publications and ranking services, such as Forbes, Money,
Financial World, Barron's, Lipper Analytical Services Mutual Fund
Performance Analysis, Morningstar, Inc., CDA Investment
Technologies, Inc. and Value Line, Inc.

THE FUND'S INVESTMENT ADVISER

The Adviser also is the investment adviser to five other
mutual funds and to approximately 25 institutions and individuals
with substantial investment portfolios. The Adviser acts as
investment adviser to the following additional mutual funds:
Nicholas Fund, Inc., Nicholas Income Fund, Inc., Nicholas Limited
Edition, Inc., Nicholas Money Market Fund, Inc. and Nicholas
Equity Income Fund, Inc. As of December 31, 1998, the Adviser
had approximately $8 billion in assets under management.

The annual fee paid to the Adviser is paid monthly and is
based on the average net asset value of the Fund, as determined
by valuations made at the close of each business day of the
month.

The following table illustrates the calculation of the Adviser's
annual fee:
BASED ON THE AVERAGE
NET ASSET NET ASSET VALUE OF THE FUND
VALUE OF THE FUND ANNUAL FEE CALCULATION
----------------- ----------------------
Up to and including $50,000,000 0.75 of 1%

Over $50,000,000 and 0.60 of 1%
including $100,000,000

In excess of $100,000,000 0.50 of 1%

The Fund pays all of its operating expenses. Included as
"operating expenses" are fees of directors who are not interested
persons of the Adviser or officers or employees of the Fund,
salaries of administrative and clerical personnel, association
membership dues, auditing, accounting and tax consulting
services, legal fees and expenses, printing, fees and expenses of
any custodian or trustee having custody of Fund assets, postage,
charges and expenses of dividend disbursing agents, registrars
and stock transfer agents, including the cost of keeping all
necessary shareholder records and accounts and handling any
problems related thereto, and certain other costs and costs
related to the aforementioned items.

The Adviser has undertaken to reimburse the Fund to the
extent that the aggregate annual operating expenses, including
the investment advisory fee, but excluding interest, taxes,
brokerage commissions, litigation and extraordinary expenses,
exceed the lowest, i.e., most restrictive, percentage of the
Fund's average net assets established by the laws of the states
in which the Fund's shares are registered for sale, as determined
by valuations made as of the close of each business day of the
year. The Adviser shall reimburse the Fund at the end of any
fiscal year in which the aggregate annual operating expenses
exceed such restrictive percentage.

Albert O. Nicholas is President and a Director of both the
Fund and Chief Executive Officer and Director of the Adviser,
and is a controlling person of the Adviser through his ownership
of 91% of the outstanding voting securities of the Adviser.

Mr. David O. Nicholas is Senior Vice President and the
Portfolio Manager of the Fund and is primarily responsible for
the day-to-day management of the Fund's portfolio. David O.
Nicholas is Senior Vice President of the Adviser, and has been
employed by the Adviser since 1985. He has been Portfolio
Manager for, and primarily responsible for the day-to-day
management of, the portfolios of the Fund and Nicholas Limited
Edition, Inc. since March 1993. He also has been Co-Portfolio
Manager of Nicholas Fund, Inc. since November 1996. He is a
Chartered Financial Analyst.

PRICING OF FUND SHARES

When you buy shares of the Fund, the price per share you pay
is the NET ASSET VALUE per share of the Fund. The NET ASSET
VALUE of a share of the Fund is determined by dividing the total
value in U.S. dollars of the Fund's total net assets by the total
number of shares outstanding at that time. Net assets of the
Fund are determined by deducting the liabilities of the Fund from
the total assets of the Fund. The net asset value is determined
as of the close of trading on the New York Stock Exchange
("NYSE") on each day the NYSE is open for unrestricted trading.

Equity securities traded on a stock exchange will ordinarily be
valued on the basis of the last sale price on the date of
valuation, or in the absence of any sale on that day, the closing
bid price. Most debt securities, excluding short term investments, are
valued at current evaluated bid price. Any securities for which there
are no readily available market quotations will be valued at fair value,
as determined in good faith by the Fund's Board of Directors. Brokerage
commissions will be excluded in calculating values. All assets
other than securities will be valued at their then current fair
value using methods determined in good faith by the Fund's Board
of Directors.

PURCHASE OF FUND SHARES

MINIMUM To Open An Account....... $500
INVESTMENTS To Add To An Account..... $100
$ Minimum Balance.......... $500
[ICON]
The Fund's Automatic Investment Plan has
a minimum monthly investment of $50. Due to
fixed expenses incurred by the Fund in
maintaining individual accounts, the Fund
reserves the right to redeem accounts that
fall below the $500 minimum investment
required due to shareholder redemption (but
not solely due to a decrease in net asset
value of the Fund). In order to exercise
this right, the Fund will give advance
written notice of at least 30 days to the
accounts below such minimum.
APPLICATION
INFORMATION You may apply to purchase shares of
[ICON] the Fund by submitting an application to
Nicholas II, Inc., c/o Firstar Mutual Funds
Services, LLC ("Firstar"), P.0. Box 2944,
Milwaukee, Wisconsin 53201-2944. See the
back cover page of this Prospectus for
information on how to contact the Fund. The
Fund also has available an Automatic
Investment Plan for shareholders. Anyone
interested should contact the Fund for
additional information.

When you make a purchase, your purchase
price per share will be the net asset value
("NAV") per share next determined after the
time the Fund receives your application
in proper order. The NAV is calculated once a
day based on the closing market price for
each security held in the Fund's portfolio.
The determination of NAV for a particular day
is applicable to all purchase applications
received by the close of trading
on the (NYSE) on that day (usually 4:00
p.m., New York time).

* Applications to purchase Fund shares
received on a day the NYSE is open
for trading, prior to the close
of trading on that day, will be based on
the NAV as of the close of trading on that day.

* Applications to purchase Fund shares received
after the close of trading on
the NYSE will be based on the NAV as
determined as of the close of trading on
the next day the NYSE is open.

Purchase of shares will be made in full
and fractional shares computed to three
decimal places.

You should be aware that DEPOSIT in the
U.S. mail or with other independent delivery
services, or receipt at Firstar's Post Office
Box, of purchase applications DOES NOT
constitute receipt by Firstar or the Fund. DO
NOT MAIL LETTERS BY OVERNIGHT COURIER TO THE
POST OFFICE BOX ADDRESS. OVERNIGHT COURIER
DELIVERY SHOULD BE SENT TO FIRSTAR MUTUAL
FUNDS SERVICES, LLC, THIRD FLOOR, 615 EAST
MICHIGAN STREET, MILWAUKEE, WISCONSIN 53202.

All applications to purchase Fund shares
are subject to acceptance or rejection by
the Fund and are not binding until accepted.
Your application must be in proper order to
be accepted and may only be accepted by the
Fund or an authorized agent of the Fund.
Applications will not be accepted unless they
are accompanied by payment in U.S. funds.
Payment should be made by check drawn on a
U.S. bank, savings and loan or credit union.
Checks are accepted subject to collection at
full face value in U.S. funds. The custodian
will charge a $20 fee against a shareholder's
account, in addition to any loss sustained by
the Fund, for any payment check returned to
the custodian for insufficient funds. The
Fund will not accept applications under
circumstances or in amounts considered
disadvantageous for shareholders. Any
account (including custodial accounts) opened
without a proper social security number or
taxpayer identification number may be
liquidated and distributed to the owner(s) of
record on the first business day following
the 60th day of investment, net of the
back-up withholding tax amount.

WIRE PAYMENTS
[ICON] You also may purchase Fund shares via
the Federal Reserve wire system. Please call
Firstar (414-276-0535 or 800-544-6547) with
the appropriate account information prior to
sending the wire. Firstar will provide you
with a confirmation number for the wire
purchase which will ensure the prompt and
accurate handling of funds. To purchase
shares of the Fund by federal wire transfer,
instruct your bank to use the following
instructions:

Wire To: Firstar Bank Milwaukee, N.A.
ABA 075000022

Credit: Firstar Mutual Funds Services, LLC
Account 112-952-137

Further
Credit: Nicholas II, Inc.
(shareholder account number)
(shareholder registration)

The Fund and its transfer agent
are not responsible for the consequences of
delays resulting from the banking or Federal
Reserve wire system, or from incomplete
wiring instructions.

CERTIFICATES
[ICON] Certificates representing Fund shares
purchased will not be issued unless the shareholder
specifically requests certificates by written
notice to the Fund. Signature guarantees may
be required. Certificates are mailed to
requesting shareholders approximately two
weeks after receipt of the request by the
Fund. In no instance will certificates be
issued for fractional shares. Where
certificates are not requested, the Fund's
transfer agent, Firstar , will credit the
shareholder's account with the number of
shares purchased. Written confirmations
are issued for all purchases of Fund shares.

THIRD PARTY USE OF A PROCESSING INTERMEDIARY TO PURCHASE FUND SHARES
PURCHASES --------------------------------------------------------
[ICON]
Shares of the Fund may be purchased through
certain broker-dealers, financial
institutions or other service providers
("Processing Intermediaries"). When shares
of the Fund are purchased this way, the
Processing Intermediary, rather than its
customer, may be the shareholder of record.
Processing Intermediaries may use procedures
and impose restrictions in addition to or
different from those applicable to
shareholders who invest in the Fund directly.
An investor intending to invest in the Fund
through a Processing Intermediary should read
the program materials provided by the
Processing Intermediary in conjunction with
this Prospectus.

Processing Intermediaries may
charge fees or other charges for the services
they provide to their customers. Such
charges may vary among Processing
Intermediaries, but in all cases will be
retained by the Processing Intermediary and
not remitted to the Fund or the Adviser.

The Fund also may enter into an
arrangement with some Processing
Intermediaries authorizing them to process
purchase orders on behalf of the Fund on an
expedited basis (an "authorized agent").
Receipt of a purchase order by an authorized
agent will be deemed to be received by the
Fund for purposes of determining the NAV of the Fund
shares to be purchased. For purchase orders
placed through an authorized agent, a
shareholder will pay the Fund's NAV per share
next computed after the receipt by the
authorized agent of such purchase order, plus
any applicable transaction charge imposed by
the agent.

REDEMPTION OF FUND SHARES

REDEMPTION
PRICE You may redeem Fund shares in whole
$ or in part by any of the methods
[ICON] described below. All redemptions will be
processed immediately upon receipt and written
confirmations will be issued for all redemptions
of fund shares. The redemption price will
be the Fund's NAV next computed after the time of
receipt by Firstar (or by an authorized agent
of the Fund) of the certificate(s), or
written request in the proper form as
described below, or pursuant to proper
telephone instructions as described below.

* Requests for redemption of Fund shares
received in proper form and accepted on
a day the NYSE is open for trading, prior
to the close of trading on that day, will
be based on the NAV as of the close of
trading on that day.

* Requests for redemption of Fund shares
received in proper form and accepted after the close
of trading on the NYSE will be based on the NAV as
determined as of the closing of trading
on the next day the NYSE is open.

REDEMPTION REQUESTS THAT CONTAIN
RESTRICTIONS AS TO THE TIME OR DATE
REDEMPTIONS ARE TO BE EFFECTED WILL BE
RETURNED AND WILL NOT BE PROCESSED.

WRITTEN If you redeem in writing, you must ensure
REDEMPTIONS that the redemption request is signed
[ICON] by each shareholder in the exact manner as
the Fund account is registered and includes
the amount of redemption and the shareholder
account number.

* WHEN SHARES ARE REPRESENTED BY CERTIFICATES,
you may redeem by delivering to the Fund, c/o
Firstar Mutual Funds Services, LLC, P.O.
Box 2944, Milwaukee, Wisconsin
53201-2944, the certificate(s) for the
full shares to be redeemed. The
certificate(s) must be properly endorsed
or accompanied by instrument of
transfer, in either case with signatures
guaranteed by an "eligible guarantor
institution," which is a bank, a savings
and loan association, a credit union, or
a member firm of a national securities
exchange. A notary public is not an
acceptable guarantor.

* IF CERTIFICATES HAVE NOT BEEN ISSUED,
you may redeem by delivering an original
signed written request for redemption addressed to
Nicholas II, Inc., c/o Firstar Mutual
Funds Services, LLC, P.O. Box 2944,
Milwaukee, Wisconsin 53201-2944. If the
account registration is individual,
joint tenants, sole proprietorship,
custodial (Uniform Transfer to Minors
Act), or general partners, the written
request must be signed exactly as the
account is registered. If the account
is owned jointly, all owners must sign.

FACSIMILE TRANSMISSION OF REDEMPTION
REQUESTS IS NOT ACCEPTABLE.

The Fund may require additional
supporting documents for written redemptions
made by corporations, executors,
administrators, trustees and guardians.
Specifically, if the account is registered in
the name of a corporation or association, the
written request must be accompanied by a
corporate resolution signed by the authorized
person(s). A redemption request for accounts
registered in the name of a legal trust must
have a copy of the title and signature page
of the trust agreement on file or must be
accompanied by the trust agreement and signed
by the trustee(s).

IF THERE IS DOUBT AS TO WHAT
DOCUMENTS OR INSTRUCTIONS ARE NECESSARY IN
ORDER TO REDEEM SHARES IN WRITING, PLEASE
WRITE OR CALL FIRSTAR 414-272-0535 OR 800-544-
6547), PRIOR TO SUBMITTING A WRITTEN
REDEMPTION REQUEST. A WRITTEN REDEMPTION
REQUEST WILL NOT BECOME EFFECTIVE UNTIL ALL
DOCUMENTS HAVE BEEN RECEIVED IN PROPER FORM
BY FIRSTAR.

Shareholders who have an
individual retirement account ("IRA"), a
master retirement plan or other retirement
plan must indicate on their written
redemption requests whether or not to
withhold federal income tax. Redemption
requests lacking an election not to have
federal income tax withheld will be subject
to withholding. Please consult your current
Disclosure Statement for any applicable fees.

You should be aware that DEPOSIT in the
mail or with other independent delivery
services or receipt at Firstar's Post Office
Box of redemption REQUESTS DOES NOT
constitute receipt by Firstar or the Fund.
DO NOT mail letters by overnight courier to
the Post Office Box address. OVERNIGHT
COURIER DELIVERY SHOULD BE SENT TO THE
FIRSTAR MUTUAL FUNDS SERVICES, LLC, THIRD
FLOOR, 615 EAST MICHIGAN STREET, MILWAUKEE,
WISCONSIN 53202.

TELEPHONE Telephone redemption is automatically
REDEMPTIONS extended to all accounts in the Fund unless
[ICON] this privilege is declined in writing. This
option does not apply to IRA accounts and master
retirement plans for which Firstar acts as
custodian. Telephone redemptions can only be
made by calling Firstar at 800-544-6547 or
414-276-0535. In addition to the account
registration, you will be required to provide
the account number and social security
number. Telephone calls will be recorded.

Telephone redemption requests
must be received prior to the closing of the
NYSE (usually 4:00 p.m., New York time) to
receive that day's NAV. There will be no
exceptions due to market activity. During
periods of substantial economic or market
changes, telephone transactions may be
difficult to implement. If a shareholder is
unable to contact Firstar by telephone,
shares also may be redeemed by delivering the
redemption request in person or by mail. The
maximum telephone redemption is $25,000 per
account/per business day. The maximum
telephone redemption for related accounts is
$100,000 per business day. The minimum
telephone redemption is $500 except when
redeeming an account in full.

The Fund reserves the right to
refuse a telephone redemption if it is
believed advisable to do so. Procedures for
redeeming Fund shares by telephone may be
modified or terminated at any time by the
Fund or Firstar. Neither the Fund nor
Firstar will be responsible for the
authenticity of redemption instructions
received by telephone which they reasonably
believe to be genuine, even if such
instructions prove to be unauthorized or
fraudulent. The Fund and Firstar will employ
reasonable procedures to confirm that
instructions received by telephone are
genuine, and if they do not, they may be
liable for losses due to unauthorized or
fraudulent instructions.

EFFECT OF
REDEMPTION For federal income tax purposes, a
[ICON] redemption generally is treated as
a sale of the shares being redeemed,
with the shareholder recognizing
capital gain or loss equal to the
difference between the redemption price and
the shareholder's cost for the shares being
redeemed.

The Fund ordinarily will make payment
for redeemed shares within seven days
after receipt of a request in proper form,
except as provided by the rules of the
Securities and Exchange Commission.
Redemption proceeds to be wired also
ordinarily will be wired within seven days
after receipt of the request, and normally
will be wired on the next business day after
a net asset value is determined. The Fund
reserves the right to hold payment up to 15
days or until satisfied that investments made
by check have been collected.

You may instruct Firstar to mail
the proceeds to the address of record or to
directly mail the proceeds to a pre-
authorized bank account. The proceeds also
may be wired to a pre-authorized account at a
commercial bank in the United States.
Firstar charges a wire redemption fee of
$12.00. Please contact the Fund for the
appropriate form if you are interested in
setting your account up with wiring
instructions.

SIGNATURE A signature guarantee of each owner
GUARANTEES is required to redeem shares in the following
[ICON] situations, for all size transactions:

* if you change the ownership on your account

* upon redemption of shares when certificates
have been issued for your account

* when you want the redemption proceeds sent to a
different address than is registered on
the account

* for both certificated and uncertificated shares,
if the proceeds are to be made payable
to someone other than the account owner(s)

* any redemption transmitted by federal wire transfer
to your bank not previously set up with the
Fund

* if a change of address request has been received
by the Fund or Firstar within 15 days of a
redemption request

In addition, signature guarantees
will be required for all redemptions of
$100,000 or more from any shareholder account
in the Nicholas Family of Funds. A
redemption will not be processed until the
signature guarantee, if required, is received
in proper form. A notary public is not an
acceptable guarantor.

THIRD PARTY USE OF A PROCESSING INTERMEDIARY TO REDEEM FUND SHARES.
REDEMPTIONS As with the purchase of Fund shares, shares of the Fund
[ICON] may be sold through certain broker-dealers,
financial institutions and other service
providers ("Processing Intermediaries"). An
investor intending to redeem Fund shares
through his or her Processing Intermediary
should read the program materials provided by
the Processing Intermediary and follow the
instructions and procedures outlined therein.

Processing Intermediaries may
charge fees or other charges for the services
they provide to their customers. Such
charges vary among Processing Intermediaries,
but in all cases will be retained by the
Processing Intermediary and not remitted to
the Fund or the Adviser.

Investors who do not wish to use
the services of a Processing Intermediary, or
pay the fees that may be charged for such
services, may want to consider investing
directly with the Fund. IF YOU HOLD FUND
SHARES THROUGH A PROCESSING INTERMEDIARY, YOU
MUST REDEEM YOUR SHARES THROUGH SUCH
PROCESSING INTERMEDIARY. IN SUCH EVENT, YOU
SHOULD CONTACT THE PROCESSING INTERMEDIARY
FOR INSTRUCTIONS ON HOW TO REDEEM. If an
investor has originally invested directly
with the Fund, direct sale of Fund shares
through the Fund (and not the Processing
Intermediary) may be made without a
redemption charge.

The Fund also may enter into an
arrangement with some Processing
Intermediaries authorizing them to process
redemption requests on behalf of the Fund on
an expedited basis (an "authorized agent").
Receipt of a redemption request by an
authorized agent will be deemed to be
received by the Fund for purposes of
determining the NAV of Fund shares to be
redeemed. For redemption orders placed
through an authorized agent, a shareholder
will receive redemption proceeds which
reflect net asset value per share next
computed after the receipt by the authorized
agent of the redemption order, less any
redemption fees imposed by the agent.

EXCHANGE BETWEEN FUNDS
You may exchange Fund shares for shares of other
mutual funds for which Nicholas Company, Inc.
serves as the investment adviser.

GENERAL Nicholas Company, Inc. also is
adviser to the following funds which have
investment objectives and net assets as noted
below:

NET ASSETS AT
FUND INVESTMENT OBJECTIVE SEPTEMBER 30, 1998
---- -------------------- ------------------
Nicholas Fund, Inc. Capital appreciation; Income as
a secondary consideration $4,953,318,383

Nicholas Limited Long-term growth; Income as a
Edition, Inc.(1) secondary consideration $ 313,538,915

Nicholas Equity Reasonable income; Moderate
Income Fund, Inc. long-term growth as a secondary
Consideration $ 25,280,201

Nicholas Income High current income consistent
Fund, Inc. with the preservation and
conservation of capital value $ 248,338,012

Nicholas Money High level of current income as
Market Fund, Inc. as is consistent with preserving
capital and liquidity $ 167,303,067
____________

(1) Shareholders are reminded, however,
that Nicholas Limited Edition, Inc. is
restricted in size to ten
million shares (without taking into account
shares outstanding as a result of capital
gain and dividend distributions), and that
the exchange privilege into that mutual
fund may be terminated or modified at any
time or times when that maximum is reached.

If you choose to exercise
the exchange privilege, the shares will be
exchanged at their next determined net asset
value. When an exchange into the Nicholas
Money Market Fund, Inc. would involve
investment of the exchanged amount on a day
when the New York Stock Exchange is open for
trading but the Federal Reserve Banks are
closed, shares of the Fund will be redeemed on
the day upon which the exchange request is
received; however, issuance of Nicholas Money
Market Fund, Inc. shares may be delayed an
additional business day in order to avoid the
dilutive effect on return (i.e. reduction in
net investment income per share) which would
result from issuance of such shares on a day
when the exchanged amount cannot be invested.
In such a case, the exchanged amount would be
uninvested for this one day period.

Shareholders interested in exercising the
exchange privilege must obtain the appropriate
prospectus from Nicholas Company, Inc.

An exchange constitutes a sale for
federal tax purposes and a capital gain or
loss generally will be recognized upon
the exchange, depending upon whether the net
asset value at the time is more or less than
the shareholder's cost. An exchange between
the funds involving master retirement (Keogh)
plans and IRA accounts generally will not
constitute a taxable transaction for federal
tax purposes. The exchange privilege may be
terminated or modified only upon 60 days
advance notice to shareholders; however,
procedures for exchanging Fund shares by
telephone may be modified or terminated at any
time by the Fund or Firstar.

EXCHANGE You may exchange shares of the Fund for
BY shares of other available Nicholas mutual funds
MAIL directly through Nicholas Company, Inc.
[ICON] without cost by written request. If you are
interested in exercising the exchange by mail
privilege, you may obtain the appropriate
prospectus from Nicholas Company, Inc.
Signatures required are the same as previously
explained under "Redemption of Fund Shares."

EXCHANGE You may exchange by telephone among
BY all funds for which the Nicholas Company, Inc.
TELEPHONE serves as investment adviser. Only exchanges of
[ICON] $500 or more may be executed using the telephone
exchange privilege. Firstar charges a $5.00 fee
for each telephone exchange. In an effort to
avoid the risks often associated with large
market timers, the maximum telephone exchange
per account per day is set at $100,000, with a
maximum of $l,000,000 per day for related accounts.
Four telephone exchanges per account during any
twelve month period will be allowed. Exchanges
between the Fund and Nicholas Equity Income Fund,
Inc. are limited to $25,000 per day and $100,000
per day for related accounts.

Procedures for exchanging Fund shares by
telephone may be modified or terminated at any
time by the Fund or Firstar.
Neither the Fund nor Firstar will be
responsible for the authenticity of exchange
instructions received by telephone. Telephone
exchanges can only be made by calling Firstar
at 414-276-0535 or 800-544-6547. You will be
required to provide pertinent information
regarding your account. Calls will be
recorded.

TRANSFER OF FUND SHARES

You may transfer Fund shares in instances such as the death of
a shareholder, change of account registration, change of account
ownership and in cases where shares of the Fund are transferred as
a gift. Documents and instructions necessary to transfer capital
stock can be obtained by writing or calling Firstar (414-276-0535
or 800-544-6547) or Nicholas Company, Inc. (414-272-6133 or 800-
227-5987) prior to submitting any transfer requests.

DIVIDENDS AND FEDERAL TAX STATUS

The Fund intends to continue to qualify annually as a
"regulated investment company" under the Internal Revenue Code of
1986 and intends to take all other action required to ensure that
little or no federal income or excise taxes will be payable by the
Fund. As a result, the Fund generally will distribute annually to
its shareholders substantially all of its net investment income
and net capital gains (after utilization of any available capital
loss carryovers).

For federal income tax purposes, distributions by the Fund,
whether received in cash or invested in additional shares of the
Fund, will be taxable to the Fund's shareholders, except those
shareholders that are not subject to tax on their income. Long-
term capital gain distributed by the Fund will retain the
character that it had at the Fund level. The maximum tax rate on
long-term capital gains(for sales of securities held greater than
twelve months) is 20%. Income distributed from the Fund's net investment
income and net realized short-term capital gains are taxable to
shareholders as ordinary income. Distributions generally will be
made annually in December. The Fund will provide information to
shareholders concerning the character and federal tax treatment of
all dividends and distributions.

At the time of purchase of shares the Fund may have
undistributed income or capital gains included in the computation
of the net asset value per share. Therefore, a dividend or capital
gain distribution received shortly after such purchase by a
shareholder may be taxable to the shareholder, although it is, in
whole or in part, a return of capital and may have the effect of
reducing the net asset value per share.

Under federal law, some shareholders may be subject to a 31%
"backup withholding" on reportable dividends, capital gain
distributions (if any) and redemption payments. Generally,
shareholders subject to backup withholding will be those (i) for
whom a taxpayer identification number is not on file with the Fund
or who, to the Fund's knowledge, have furnished an incorrect
number, or (ii) who have failed to declare or underreported
certain income on their federal returns. When establishing an
account, an investor must certify under penalties of perjury that
the taxpayer identification number supplied to the Fund is correct
and that he or she is not subject to backup withholding.

The foregoing tax discussion relates to federal income taxes
only and is not intended to be a complete discussion of all
federal tax consequences. Shareholders should consult with a tax
adviser concerning the application of federal, state and local
taxes to an investment in the Fund.

DIVIDEND REINVESTMENT PLAN

Unless you elect to accept cash in lieu of shares, all dividend
and capital gain distributions are automatically reinvested in
additional shares of the Fund through the Dividend Reinvestment
Plan. An election to accept cash may be made in an application
to purchase shares, by separate written notification or by
telephone. All reinvestments are at the net asset value per share
in effect on the dividend or distribution date and are credited to
the shareholder's account. Shareholders will be advised of the
number of shares purchased and the price following each
reinvestment.

You may withdraw from or thereafter elect to participate in the
Dividend Reinvestment Plan at any time by giving written or
telephonic notice to the Transfer Agent. An election must be
received by the Transfer Agent prior to the dividend record date
of any particular distribution for the election to be effective
for that distribution. If an election to withdraw from or
participate in the Dividend Reinvestment Plan is received between
a dividend record date and payment date, it shall become effective
on the day following the payment date. The Fund may modify or
terminate the Dividend Reinvestment Plan at any time on 30 days'
written notice to participants.

SYSTEMATIC WITHDRAWAL PLAN

Shareholders who have purchased or currently own $10,000 or
more of Fund shares at the current market value may open a
Systematic Withdrawal Plan ("Plan") and receive monthly, quarterly,
semi-annual or annual checks for any designated amount. Firstar
reinvests all income and capital gain dividends in shares
of the Fund. Shareholders may add shares to, withdraw shares
from, or terminate the Plan, at any time. Each withdrawal may be
a taxable event to the shareholder. Liquidation of the shares in
excess of distributions may deplete or possibly use up the initial
investment, particularly in the event of a market decline, and
withdrawals cannot be considered a yield or income on the
investment. In addition to termination of the Plan by the Fund or
shareholders, the Plan may be terminated by Firstar upon written
notice mailed to the shareholders. Please contact
Nicholas Company, Inc. for copies of the Plan documents.

INDIVIDUAL RETIREMENT ACCOUNTS

Individuals may be able to establish a traditional IRA, a Roth
IRA and/or an education IRA. The Fund offers prototype IRA
plans for adoption by individuals who qualify. A description of
applicable service fees and application forms are available upon
request from the Fund. The IRA documents also contain a
Disclosure Statement which the IRS requires to be furnished to
individuals who are considering adopting an IRA. It is important
you obtain up-to-date information from the Fund before opening an
IRA.

Individuals who receive compensation, including earnings from
self-employment, may be entitled to establish and make
contributors to a traditional IRA. Taxation of the income and
gains paid to a traditional IRAs by the Fund is deferred until
distribution from the IRA.

Contributions to a Roth IRA are not currently deductible,
the amounts within the accounts accumulate tax-free and qualified
distributions will not be included in a shareholder's taxable
income. The contribution limit is $2,000 annually ($4,000 for
joint returns) in aggregate with contributions to traditional
IRAs. Certain income phaseouts apply.

Like the Roth IRA, contributions to an education IRS are
non-deductible, but the investment earnings accumulate tax-free, and
distributions used for higher education expenses are not taxable.
Contribution limits are $500 per account and certain income
phaseouts apply.

As long as the aggregate IRA contributions meet the Fund's
minimum investment requirement of $500, the Fund will accept
any allocation of such contributions between spousal, deductible
and non-deductible accounts. The acceptability of this
calculation is the sole responsibility of the shareholder. For
this reason, it is advisable for taxpayers to consult with their
personal tax adviser to determine the deductibility of their IRA
contributions.

Because a retirement program involves commitments covering
future years, it is important that the investment objectives of
the Fund are consistent with your own retirement objectives.
Premature withdrawals from an IRA may result in adverse tax
consequences. Consultation with a tax adviser regarding tax
consequences is recommended.

MASTER RETIREMENT PLAN

The Fund has available a master retirement plan (formerly
called a "Keogh" Plan) for self-employed individuals. Any person
seeking additional information or wishing to participate in the
plan may contact the Fund. Consultation with a tax adviser
regarding the tax consequences of the plan is recommended.

YEAR 2000 ISSUES

The "Year 2000" issue presents a significant technological
challenge for the securities industry. Due to the limited memory
and the high cost of storage space associated with early computer
equipment, the century was implied rather than actually stored.
As a result, many computer systems are unable to interpret dates
beyond 1999. Software and hardware which is not designed to work
across centuries may potentially malfunction on January 1, 2000.
Because dates are part of every securities transaction, accurate
date calculations are critical.

The Fund has focused on the "Year 2000" computer conversion
issue and management believes that there should be a smooth
transition on the part of suppliers of services to the Fund. The
Fund's custodian bank and transfer agent has reported that the
necessary conversion process is in progress, and it appears to
have dedicated the appropriate level of resources to solve the
problem.

The Adviser has identified and is taking steps it believes are
reasonably designed to resolve potential problems and address
the Year 2000 issue, although there can be no assurances that
these steps will be sufficient. The Adviser, which performs
the Fund's internal accounting and pricing functions, is in
the process of re-engineering its hardware to handle the
century date, and has identified and is taking steps to
resolve potential software problems. Some systems are
currently compliant. Internal testing is ongoing, and the
Fund expects that all systems will have been converted by mid-1999.

In addition, there can be no assurances that the Year
2000 issue will not have an adverse effect on issuers
who securities are held by the fund or on global markets
or economies generally.

PROSPECTUS

January 30, 1999

NICHOLAS II, INC.

FOR MORE INFORMATION ABOUT THE FUND:

The Fund's Statement of Additional Information ("SAI"), dated
January 30, 1999, contains more detailed information on all
aspects of Nicholas II, Inc., and is incorporated by reference in
this Prospectus. Additional information about the Fund also is
available in the Fund's Annual and Semi-Annual Report to
Shareholders.

To request a free copy of the current Annual/Semi-Annual
report or SAI, or to make shareholder inquiries, please write or
call: Nicholas II, Inc. 700 North Water Street, Milwaukee,
Wisconsin 53202, 800-227-5987 (toll-free). Additional
information about the Fund also can be obtained from the Fund's
Internet website at www.nicholasfunds.com.

In addition, you can review the Fund's reports and SAIs at the
Public Reference Room of the Securities and Exchange Commission in
Washington, D.C. Information on the operation of the Public
Reference Room may be obtained by calling the Commission at 1-800-
SEC-0330. Reports and other information about the Fund also are
available on the Commission's Internet website at www.sec.gov.
For a fee, copies of such information may be obtained by writing
the Public Reference Section of the Commission, Washington, D.C.
20549-6000.

For the most current price and return information for the
Fund, you may call the Fund at 800-227-5987 (toll-free) or 414-272-4650.
You also can find the most current price of the Fund's shares in the
business section of your newspaper in the mutual fund section under
the heading "Nicholas Group" and the symbol "Nch II." If you prefer
to obtain this information from an on-line computer service, you can
do so by using the ticker symbol "NCTWX."

Investment Adviser
NICHOLAS COMPANY, INC.
Milwaukee, Wisconsin
414-272-6133 or 800-227-5987

Custodian
FIRSTAR BANK MILWAUKEE, N.A.
Milwaukee, Wisconsin

Transfer Agent
FIRSTAR MUTUAL FUND SERVICES, LLC
Milwaukee, Wisconsin
414-276-0535 or 800-544-6547

Independent Public Accountants
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin

Counsel
MICHAEL BEST & FRIEDRICH LLP
Milwaukee, Wisconsin
414-276-0535 or 800-544-6547

NICHOLAS II, INC.
700 NORTH WATER STREET SUITE 1010
MILWAUKEE, WISCONSIN 53202

INVESTMENT COMPANY ACT FILE NO. 2-85030

Nicholas II, Inc.

Form N-1A

PART B: STATEMENT OF ADDITIONAL INFORMATION
NICHOLAS II, INC.

STATEMENT OF ADDITIONAL INFORMATION

700 North Water Street, Suite 1010
Milwaukee, Wisconsin 53202
414-272-6133
800-227-5987

This Statement of Additional Information is not a prospectus
and contains information in addition to and more detailed than
that set forth in the current Prospectus of Nicholas II, Inc.
(the "Fund"), dated January 30, 1999. It is intended to provide
you with additional information regarding the activities and
operations of the Fund, and should be read in conjunction with
the Fund's current Prospectus and the Fund's Annual Report for
the fiscal year ended September 30, 1998, which is incorporated
herein by reference, as they may be revised from time to time.
The Fund's Prospectus provides the basic information you should
know before investing in the Fund.

To obtain a free copy of the Fund's Prospectus and Annual
Report, please write or call the Fund at the address and
telephone number set forth above.

NO LOAD FUND - NO SALES CHARGE

Investment Adviser
NICHOLAS COMPANY, INC.

January 30, 1999

TABLE OF CONTENTS

Page

INTRODUCTION.............................................. _

INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES. _

INVESTMENT RESTRICTIONS................................... _

INVESTMENT RISKS.......................................... _

THE FUND'S INVESTMENT ADVISER............................. _

MANAGEMENT - DIRECTORS, EXECUTIVE OFFICERS
AND PORTFOLIO MANAGER OF THE FUND....................... _

PRINCIPAL SHAREHOLDERS.................................... _

PRICING OF FUND SHARES.................................... _

PURCHASE OF FUND SHARES................................... _

REDEMPTION OF FUND SHARES................................. _

EXCHANGE BETWEEN FUNDS.................................... _

TRANSFER OF FUND SHARES................................... _

DIVIDENDS AND FEDERAL TAX STATUS.......................... _

DIVIDEND REINVESTMENT PLAN................................ _

SYSTEMATIC WITHDRAWAL PLAN................................ _

INDIVIDUAL RETIREMENT ACCOUNTS............................ _

MASTER RETIREMENT PLAN.................................... _

BROKERAGE................................................. _

PERFORMANCE DATA.......................................... _

CAPITAL STRUCTURE......................................... _

STOCK CERTIFICATES........................................ _

ANNUAL MEETING............................................ _

SHAREHOLDER REPORTS....................................... _

YEAR 2000 ISSUES.......................................... _

CUSTODIAN AND TRANSFER AGENT.............................. _

INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL................. _

FINANCIAL INFORMATION..................................... _

INTRODUCTION

Nicholas II, Inc. ("Fund") was incorporated under the
laws of Maryland on June 28, 1983. The Fund is an open-end,
diversified management investment company registered under
the Investment Company Act of 1940, as amended (the "1940
Act"). As an open-end investment company, it obtains its
assets by continuously selling shares of its Common Stock,
$0.01 par value per share, to the public. Proceeds from
such sales are invested by the Fund in securities of other
companies. The resources of many investors are combined and
each individual investor has an interest in every one of the
securities owned by the Fund. The Fund provides each
individual investor with diversification by investing in the
securities of many different companies in a variety of
industries and furnishes experienced management to select
and watch over its investments. As an open-end investment
company, the Fund will redeem any of its outstanding shares
on demand of the owner at their net asset value next
determined following receipt of the redemption request. The
investment adviser to the Fund is Nicholas Company, Inc.
("Adviser").

INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES

The Fund has adopted primary investment objectives,
which are fundamental policies. The Fund also has adopted
secondary investment objectives and certain other policies
which are not fundamental and may be changed by the Board of
Directors without shareholder approval. However, any
changes will be made only upon advance notice to
shareholders. Such changes may result in the Fund having
secondary investment and other policy objectives different
from the objectives which a shareholder considered
appropriate at the time of investment in the Fund.

The primary investment objective of the Fund is
long-term growth, and securities are selected for its
portfolio on that basis. Current income will be a secondary
factor in considering the selection of investments. There
are market risks inherent in any investment and there can be
no assurance the objective of the Fund will be realized, nor
can there be any assurance against possible loss in the
value of the Fund's portfolio.

It is the policy of the Fund to invest in securities
which are believed by both the Adviser and the Board of
Directors of the Fund to offer possibilities for increase in
value, which for the most part are common stocks of
companies the Adviser considers to have favorable long-term
prospects. Since the major portion of the Fund's portfolio
consists of common stocks, its net asset value may be
subject to greater fluctuation than a portfolio containing a
substantial amount of fixed income securities.

The Fund's investment philosophy is basically a
long-term growth philosophy, inherent in which is the
assumption that if a company achieves superior growth in
sales and earnings, eventually the company's stock will
achieve superior performance. While small and medium-size
companies often have a limited market for their securities
and limited financial resources, and are usually more
affected by changes in the economy in general, they also may
have the potential for more rapid, and greater, long-term
growth because of newer and more innovative products. The
Adviser believes a company's annual sales volume and the
market capitalization of a company are the factors most
illustrative of a company's size and are factors commonly
used by investors in determining size. In terms of market
capitalization, the following standard is used by the
Adviser in distinguishing company size and are considered
reasonable:

MARKET CAPITALIZATION
---------------------
Small........................ 0 to $1.0 Billion
Medium....................... $1.0 Billion to $5.0 Billion
Large........................ Over $5.0 Billion

In seeking capital appreciation, the Fund will often
purchase common stocks of small- and medium-sized companies
which often fluctuate in price more than common stocks of
larger companies, such as many of those included in the Dow
Jones Industrial Average. Therefore, during the history of
the Fund, its price per share has often been more volatile.

Securities of unseasoned companies, where the risks are
considerably greater than with securities of more
established companies, also may be acquired from time to
time by the Fund when the Adviser believes such investments
offer possibilities of capital appreciation. However, the
Fund is limited to 5% in the percentage of total Fund assets
which may be invested in the securities of unseasoned
companies (i.e., companies which have a record of less than
three years' continuous operation).

Debt securities and preferred stock that are
convertible into or carry rights to acquire common stock,
and other debt securities, such as those selling at
substantial discounts, may be acquired from time to time
when the Adviser believes such investments offer the
possibility of appreciation in value. The Adviser intends
generally to limit the Fund's purchase of debt securities
and preferred stock to those which are rated in one of the
top four rating categories by any of the nationally
recognized statistical rating organizations ("NRSROs") as
defined in Section 270.2a-7 of the Code of Federal
Regulations, or will be unrated instruments but deemed by
the Adviser to be comparable in quality to instruments so
rated on the date of purchase. However, this policy will
not preclude the Fund from retaining a security if its
credit quality is downgraded to a non-investment grade level
after purchase.

It is anticipated the major portion of the portfolio
will be invested in common stocks at all times. However,
there is no minimum or maximum percentage of the Fund's
assets which is required to be invested in any type of
security. Cash and cash equivalent securities will be
retained by the Fund in an amount sufficient to provide
moderate liquid reserves so that the Fund has sufficient
cash to meet shareholder redemption requests and other
operating expenses. The Fund reserves freedom to
temporarily invest its assets in investment and non-investment
grade fixed income securities as a defensive measure when
conditions are deemed to warrant such action. "Investment grade
fixed income securities" refers to fixed income securities ranked
in one of the top four debt security rating categories of
any of the NRSROs, or unrated but deemed by the Adviser to
be comparable in quality to instruments so rated on the date
of purchase. However, this policy will not preclude the
Fund from retaining a security if its credit quality is
downgraded to a non-investment grade level after purchase.
The fixed income securities described in the fourth category
of these rating services possess speculative
characteristics. In addition non-investment grade securities
tend to reflect individual corporate developments to a greater
extent, tend to be more sensitive to economic conditions and
tend to have a weaker capacity to pay interest and repay
principal than higher rated securities. Because the market
for lower rated securities may be thinner and less active
than for higher rated securities, there may be market price
volatility for these securities and limited liquidity in the
resale market. Factors adversely impacting the market value
of high yielding, high risk securities will adversely impact
the Fund's net asset value.

Securities are not purchased with a view to rapid
turnover or to obtain short-term trading profits.
Short-term trading profits are defined as profits on assets
held less than twelve months. The term "portfolio turnover
rate" refers to the percentage determined by dividing the
lesser of the cost of purchases or the proceeds from sales
of portfolio securities during the year by the average of
the value of the portfolio securities owned by the Fund
during the year. "Portfolio turnover rate" excludes
investments in securities with less than one year to
maturity at the time of purchase.

The Fund has reserved the right to invest in repurchase
agreements as a defensive measure. Repurchase agreements
may be entered into only with a member bank of the Federal
Reserve System or a primary dealer in U.S. Government
securities. Under such agreements, the bank or primary
dealer agrees, upon entering into the contract, to
repurchase the security from the Fund at a mutually agreed
upon time and price. The prices at which the trades are
conducted do not reflect accrued interest on the underlying
obligation. While the obligation is a U.S. Government
security, the obligation of the seller to repurchase the
security is not guaranteed by the U.S. Government, thereby
creating the risk that the seller may fail to repurchase the
security.

Repurchase agreements may be construed to be
collateralized loans by the purchaser to the seller secured
by the securities transferred to the purchaser. The Fund
will require the seller to provide additional collateral if
the market value of the securities falls below the
repurchase price at any time during the term of the
repurchase agreement. In the event of default by the seller
under a repurchase agreement construed to be a
collateralized loan, the underlying securities are not owned
by the Fund but only constitute collateral for the seller's
obligation to pay the repurchase price. Therefore, the Fund
may suffer time delays and incur costs or losses in
connection with the disposition of the collateral. The Fund
also would retain ownership of the securities in the event
of a default under a repurchase agreement that is construed
not to be a collateralized loan. In such event, the Fund
also would have rights against the seller for breach of
contract with respect to any losses arising from market
fluctuations following the failure of the seller to perform.
1 The Fund also may invest in securities which are issued
in private placements pursuant to Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act").
Such securities are not registered for purchase and sale by
the public under the Securities Act. The determination of
the liquidity of these securities is a question of fact for
the Board of Directors to determine, based upon the trading
markets for the specific security, the availability of
reliable price information and other relevant information.
There may be a risk of little or no market for resale
associated with such private placement securities if the
Fund does not hold them to maturity. In addition, to the
extent that qualified institutional buyers do not purchase
restricted securities pursuant to Rule 144A, the Fund's
investing in such securities may have the effect of
increasing the level of illiquidity in the Fund's portfolio.
The Fund is limited in its investments in Section 4(2) and
Rule 144A debt securities by the investment restriction set
forth in 1(c) under "Investment Restrictions" below.

The Fund may invest generally up to 10% of its total
assets in securities of other investment companies.
Investments in the securities of other investment companies
will involve duplication of advisory fees and certain other
expenses.

INVESTMENT RESTRICTIONS

The Fund has adopted the following restrictions, which
are matters of fundamental policy and cannot be changed
without the approval of the holders of a majority of its
outstanding shares, or, if less, 67% of the shares
represented at a meeting of shareholders at which 50% or
more of the holders are represented in person or by proxy.

1. The Fund will not purchase securities on
margin, participate in a joint trading account,
sell securities short, or act as an underwriter or
distributor of securities other than its own
capital stock. The Fund will not lend money,
except for:

(a) the purchase of a portion of an
issue of publicly distributed debt
securities;

(b) investment in repurchase agreements
in an amount not to exceed 20% of the total
net assets, taken at market, of the Fund;
provided, however, that repurchase agreements
maturing in more than seven days will not
constitute more than 5% of the value of total
net assets, taken at market; and

(c) the purchase of a portion of bonds,
debentures or other debt securities of types
commonly distributed privately to financial
institutions in an amount not to exceed 5% of
the value of total net assets, taken at
market, of the Fund;

provided, however, that the total investment
of the Fund in repurchase agreements maturing in
more than seven days, when combined with the type
of investment set forth in 1(c) above, will not
exceed 5% of the value of the Fund's total net
assets, taken at market.

2. The Fund will not purchase or sell real
estate or interests in real estate, commodities or
commodity futures. The Fund may invest in the
securities of real estate investment trusts, but
not more than 10% in value of the Fund's total net
assets will be so invested.

3. The Fund may make temporary bank borrowings
(not in excess of 5% of the lower of cost or
market value of the Fund's total net assets).

4. The Fund will not pledge any of its assets.

5. Investments will not be made for the purpose
of exercising control or management of any
company. The Fund will not purchase securities of
any issuer if, as a result of such purchase, the
Fund would hold more than 10% of the voting
securities of such issuer.

6. Not more than 5% of the Fund's total net
assets, taken at market value, will be invested in
the securities of any one issuer (not including
U.S. Government securities).

7. Not more than 25% of the value of the Fund's
total net assets will be concentrated in companies
of any particular one industry or group of
industries.

8. The Fund will not acquire or retain any
security issued by a company, if an officer or
director of such company is an officer or director
of the Fund, or is an officer, director,
shareholder or other interested person of the
Adviser.

In addition to the foregoing restrictions, the Fund has
adopted the following restrictions which may be changed by
the Board of Directors of the Fund without shareholder
approval. Any such change would be made only upon advance
notice to shareholders in the form of an amended Statement
of Additional Information filed with the Securities and
Exchange Commission.

1. The Fund will not invest more than 5% of its
total net assets in equity securities which are
not readily marketable and in securities of
unseasoned companies (i.e., companies which have a
record of less than three years' continuous
operation, including the operation of any
predecessor business of a company which came into
existence as a result of a merger, consolidation,
reorganization or purchase of substantially all of
the assets of such predecessor business).

2. The Fund will not invest in interests in oil,
gas or other mineral exploration programs, but
this shall not prohibit the Fund from investing in
securities of companies engaged in oil, gas or
mineral activities.

3. The Fund will not invest in puts, calls,
straddles, spreads or any combination thereof.

4. Securities of other open-end investment
companies will not be purchased.

5. The Fund may not issue senior securities in
violation of the 1940 Act. The Fund may make
borrowings but only for temporary or emergency
purposes and then only in amounts not in excess of
5% of the lower of cost or market value of the
Fund's total net assets.

All percentage limitations apply on the date of
investment by the Fund. As a result, if a percentage
restriction is adhered to at the time of investment, a later
increase in percentage resulting from a change in market
value of the investment or the total assets of the Fund will
not constitute a violation of that restriction.

INVESTMENT RISKS

MARKET RISK. The value of the Fund's investments, and
-----------
therefore, the value of your Fund shares, may go up or down.
Value changes in the Fund's investments and consequently,
your Fund shares may occur because a particular stock market
is rising or falling. Stock markets tend to run in cycles,
with periods when stock prices generally go up, known as
"bull markets," and periods when stock prices generally go
down, referred to as "bear markets". Stock prices in
general may decline over short or extended periods. Thus,
there is a possibility that the value of the Fund's
investments will fall because of declines in the stock
market, regardless of the success or failure of the
operations of the Fund's portfolio companies. At other
times, there are specific factors that may adversely affect
the value of a particular investment of the Fund, which in
turn may reduce the value of the Fund's investments, and
consequently, your Fund shares. If the value of the Fund
shares or the value of the Fund's investments go down, you
may lose money.

PORTFOLIO-SPECIFIC RISK. Because the Fund will invest
-----------------------
most of its assets in the securities of small- and medium-
sized companies, the Fund will be subject to additional
risks. Small- to medium-sized companies often have a
limited market for their securities and limited financial
resources, and are usually more affected by changes in the
economy. Securities of small- to medium-sized companies
also often fluctuate in price more than common stocks of
larger companies, such as many of those included in the Dow
Jones Industrial Average. Therefore, during the history of
the Fund, its price per share has often been more volatile,
in both "up" and "down" markets, than most of the popular
stock averages.

SELECTION RISK. The Fund also is subject to selection risk,
--------------
which is the risk that the stocks the Fund's adviser selects
will underperform the markets or other mutual funds with similar
investment objectives and strategies. It is anticipated that
a major portion of the Fund's portfolio will be invested in
common stocks of the types of companies, and in the manner,
as described above, at all times. However, the Fund does not
have a pre-set asset allocation strategy which would require
that the Fund maintain a specific percentage of its assets
in equity-related securities (i.e., stocks) and income
related securities (i.e., bonds). In addition, there is
no minimum or maximum percentage of the Fund's assets which
is required to be invested in the securities of companies
in any particular industry or group of industries.

OTHER RISKS RELATED TO CERTAIN PORTFOLIO INVESTMENTS
----------------------------------------------------
AND STRATEGIES. Although the Fund generally will invest in
- ---------------
the common stocks of small- and medium-sized companies,
certain investments the Fund may acquire and certain
investment techniques the Fund may use entail other risks:

LIQUIDITY, INFORMATION AND VALUATION RISKS OF CERTAIN
PORTFOLIO INVESTMENTS

From time to time, the Fund may acquire the
securities of unseasoned companies (i.e., companies
which have a record of less than three years continuous
operation) and securities issued in private placements
(i.e., securities not registered for purchase and sale
by the public under the Securities Act of 1933, as
amended). Securities of unseasoned companies and
securities issued in private placements may be illiquid or
volatile making it potentially difficult or impossible
to sell them at the time and at the price the Fund
would like. In addition, important information about
these types of companies, securities or the markets in
which they trade, may be inaccurate or unavailable.
Consequently, it may be difficult to value accurately
these securities as well.

DEBT SECURITIES AND PREFERRED STOCK

These types of investments are made by the Fund
when the Adviser believes such investments offer the
possibility of appreciation in value. The Adviser
intends generally to limit the Fund's purchase of debt
securities and preferred stock to those which are rated
in one of the top four rating categories by any of the
NRSRO, or will be unrated instruments but deemed
by the Adviser to be comparable in quality to
instruments so rated on the date of purchase. However,
this policy does not prevent the Fund from retaining a
security if its credit quality is downgraded to a non-
investment grade level after purchase.

REPURCHASE AGREEMENTS

The Fund may only enter into repurchase agreements
with a member bank of the Federal Reserve System or
a primary dealer in U.S. Government securities. Under
such agreements, the Fund buys U.S. Government securities
from the bank or primary dealer and simultaneously agrees
to sell the securities back to the bank or primary dealer
at a mutually agreed upon time and price. While the
underlying obligation is a U.S. Government security,
the obligation of the seller to repurchase the security
is not guaranteed by the U.S. Government. Delays or
losses could result if the bank or primary dealer
defaults on its repurchase obligation or becomes
insolvent, which could adversely impact the Fund's
net asset value.

FIXED INCOME SECURITIES

The Fund may temporarily invest in investment
grade and non-investment grade fixed income securities
as a temporary defensive measure when conditions are
deemed to warrant such action. "Investment grade fixed
income securities" refers to fixed income securities
ranked in one of the top four debt security rating
categories of any of the NRSROs, or unrated but
deemed by the Adviser to be comparable in quality
to instruments so rated on the date of purchase.
However, this policy does not prohibit the
Fund from retaining a security if its credit quality is
downgraded to a non-investment grade level after
purchase.

BORROWINGS

INVESTMENTS IN OTHER MUTUAL FUNDS

In view of the risks inherent in all investments in
securities, there is no assurance that the Fund's
objectives will be achieved.

THE FUND'S INVESTMENT ADVISER

Nicholas Company, Inc., located at 700 North Water
Street, Suite 1010, Milwaukee, Wisconsin, is the Fund's
investment adviser. The Adviser furnishes the Fund with
continuous investment service and is responsible for overall
management of the Fund's business affairs, subject to
supervision by the Fund's Board of Directors. The Adviser
is the investment adviser to approximately 25 institutions
and individuals with substantial investment portfolios, and
to five other mutual funds, which are sold without sales
charge. The other funds for which the Adviser serves as
investment adviser are Nicholas Fund, Inc., Nicholas Income
Fund, Inc., Nicholas Limited Edition, Inc., Nicholas Money
Market Fund, Inc. and Nicholas Equity Income Fund, Inc.,
with primary investment objectives and net assets as set
forth below.

NET ASSETS AT
FUND INVESTMENT OBJECTIVE SEPTEMBER 30, 1998
---- -------------------- --------------
Nicholas Fund, Inc. Capital appreciation $4,953,318,383

Nicholas Limited Long-term growth $ 313,538,915

Nicholas Equity
Income Fund, Inc. Reasonable income $ 25,280,201

Nicholas Income
Fund, Inc. High current income $ 248,338,012

Nicholas Money
Market Fund, Inc. Current income $ 167,303,067

The annual fee paid to the Adviser is paid monthly and
is based on the average net asset value of the Fund, as
determined by valuations made at the close of each business
day of the month.

The following table illustrates the calculation of the
Adviser's annual fee:

BASED ON THE AVERAGE
NET ASSET NET ASSET VALUE OF THE FUND
VALUE OF THE FUND ANNUAL FEE CALCULATION
----------------- ----------------------
Up to and including $50,000,000 0.75 of 1%

Over $50,000,000 and 0.60 of 1%
including $100,000,000

In excess of $100,000,000 0.50 of 1%

For the fiscal year ended September 30, 1998, total net
assets of the Fund were $960,029,925. The Fund paid the
Adviser a fee for the fiscal year ended September 30, 1998
totaling $5,548,861.

Under an Investment Advisory Agreement with the Fund,
the Adviser, at its own expense and without reimbursement
from the Fund, furnishes the Fund with office space, office
facilities, executive officers and executive expenses (such
as health insurance premiums for executive officers). The
Adviser also bears all sales and promotional expenses of the
Fund other than expenses incurred in complying with laws
regulating the issue or sale of securities, and fees paid
for attendance at Board meetings to directors who are not
interested persons of the Adviser or officers or employees
of the Fund. The Fund pays all of its operating expenses,
including, but not limited to, the costs of preparing and
printing post-effective amendments to its registration
statements required under the Securities Act and the 1940
Act, and any amendments thereto and of preparing and
printing registration statements in the various states, the
printing and distribution cost of prospectuses mailed to
existing shareholders, the cost of stock certificates,
reports to shareholders, interest charges, taxes and legal
expenses. Also included as "operating expenses" which are
paid by the Fund are fees of directors who are not
interested persons of the Adviser or officers or employees
of the Fund, salaries of administrative and clerical
personnel, association membership dues, auditing, accounting
and tax consulting services, fees and expenses of any
custodian or trustees having custody of Fund assets,
postage, charges and expenses of dividend disbursing agents,
registrars and stock transfer agents, including the cost of
keeping all necessary shareholder records and accounts and
handling any problems related thereto, and certain other
costs and costs related to the aforementioned items.

The Adviser has undertaken to reimburse the Fund to the
extent the aggregate annual operating expenses, including
the investment advisory fee, but excluding interest, taxes,
brokerage commissions, litigation and extraordinary expenses
exceed the lowest (i.e. most restrictive) percentage of the
Fund's average net assets established by the laws of the
states in which the Fund's shares are registered for sale,
as determined by valuations made as of the close of each
business day of the year. The Adviser shall, on a monthly
basis, reimburse the Fund by offsetting against its monthly
fee all expenses in excess of these amounts as pro rated on
an annual basis. During the fiscal years ended September
30, 1998, 1997, 1996, the Fund paid the Adviser an aggregate
of $5,548,861, $4,371,278 and $3,830,524, respectively,
in fees. During none of the foregoing fiscal years did
the expenses borne by the Fund exceed the expense limitation
then in effect and the Adviser was not required to reimburse
the Fund for any additional expenses.

The Investment Advisory Agreement with the Adviser is
not assignable and may be terminated by either party,
without penalty, on 60 days notice. Otherwise, the
Investment Advisory Agreement continues in effect so long as
it is approved annually by (i) the Board of Directors or by
a vote of a majority of the outstanding shares of the Fund
and (ii) in either case, by the affirmative vote of a
majority of directors who are not parties to the Investment
Advisory Agreement or "interested persons" of the Adviser or
of the Fund, as defined in the 1940 Act cast in person at a
meeting called for the purpose of voting for such approval.

The Investment Advisory Agreement with the Adviser
provides for payment by the Fund of fees for attendance at
meetings of the Fund's Board of Directors to directors who
are not interested persons of the Fund. The amount of such
fees is subject to increase or decrease at any time, but is
subject to the overall limitation of the Fund's annual
expenses. During the fiscal year ended September 30, 1998,
a total of $13,500 was paid in fees to the Fund's non-
interested directors.

Albert O. Nicholas is President and a Director of the
Fund, and Chairman and Chief Executive Officer and a
Director of the Adviser, and is a controlling person of the
Adviser through his ownership of 91% of the outstanding
voting securities of the Adviser. Thomas J. Saeger,
Executive Vice President and Secretary of the Fund, is
Executive Vice President and Assistant Secretary of the
Adviser. David L. Johnson is Executive Vice President of
the Fund and Executive Vice President of the Adviser. He is
a brother-in-law of Albert O. Nicholas. David O. Nicholas,
Senior Vice President and portfolio manager of the Fund, is
President and Chief Investment Officer and a Director of the
Advisor. Lynn S. Nicholas is a Senior Vice President of the
Fund and of the Adviser. David O. Nicholas is the son of Albert
O. Nicholas, and Lynn S. Nicholas is a daughter of Albert O.
Nicholas. Jeffrey T. May, Senior Vice President and Treasurer
of the Fund, also is Senior Vice President and Treasurer of
the Adviser. Candace L. Lesak, Vice President of the Fund,
also is an employee of the Adviser. Mark J. Giese, a Vice
President of the Fund, also is a Vice President of the
Adviser. Kathleen A. Evans, Assistant Vice President of the
Fund, is also a Vice President of the Adviser. Tracy C.
Eberlein, an Assistant Vice President of the Fund, also is
an employee of the Adviser. David E. Leichtfuss, 100 E.
Wisconsin Avenue, Milwaukee, Wisconsin is a Director and the
Secretary of the Adviser. Mr. Leichtfuss is a partner with
the law firm of Michael Best & Friedrich LLP, Milwaukee,
Wisconsin, legal counsel to the Fund and the Adviser.
Daniel J. Nicholas, 2618 Harlem Boulevard, Rockford,
Illinois, is the only other Director of the Adviser. Mr.
Nicholas, a brother of Albert O. Nicholas, is a private
investor.

MANAGEMENT - DIRECTORS, EXECUTIVE OFFICERS
AND PORTFOLIO MANAGER OF THE FUND

The overall operations of the Fund are conducted by the
officers of the Fund under the control and direction of its
Board of Directors. The following table sets forth the
pertinent information about the Fund's officers and
directors as of December 31, 1998:

Name, Age and Positions Principal Occupations
Address Held During Past
with Fund Five Years
------------------- ------------- -------------------------
* Albert O. Nicholas, President and Chairman and Chief Executive
67 Director Officer, Nicholas Company
700 N. Water Street Inc since April 1998.
Milwaukee, WI 53202 Director of Nicholas Company
Inc. since 1967, and President
of Nicholas Company, Inc. From 1967
to 1998. He has been
Portfolio Manager (or Co-
Portfolio Manager, in
the case of Nicholas
Fund, Inc., since
November 1996) for, and
primarily responsible
for the day-to-day
management of, the
portfolios of Nicholas
Fund, Inc., Nicholas
Income Fund, Inc.,
and Nicholas
Equity Income Fund, Inc.
since the Nicholas
Company, Inc. has served
as investment adviser
for such funds. He is a
Chartered Financial Analyst.
Melvin L. Schultz, 65 Director Director and Management
10625 W. North Ave. Consultant, Professional
Wauwatosa, WI 53226 Management of Milwaukee,
Inc. He offers
financial advice to
members of the medical
and dental professions
and is a Certified
Professional Business
Consultant.
Richard Seaman, 73 Director Management Consultant,
5270 N. Maple Lane on an independent basis,
Nashotah, WI 53058 primarily in the areas
of mergers, acquisitions
and strategic planning.
Robert H. Bock, 66 Director Professor of Business
3132 Waucheeta Trail Strategy, Ethics and
Madison, WI 53711 Venture Capital,
University of Wisconsin
School of Business,
since 1965. From 1972 to
1984, he was Dean of the
School of Business.
David L. Johnson, 56 Executive Vice Executive Vice
700 N. Water Street President President, Nicholas
Milwaukee, WI 53202 Company, Inc., the
Adviser to the Fund, and
employed by the Adviser
since 1980. He is a
Chartered Financial
Analyst.
Thomas J. Saeger, 54 Executive Vice Executive Vice President
700 N. Water Street President and and Assistant Secretary,
Milwaukee, WI 53202 Secretary Nicholas Company, Inc.,
the Adviser to the Fund,
and employed by the
Adviser since 1969. He
is a Certified Public
Accountant.

David O. Nicholas, 37 Senior Vice President and Chief
700 N. Water Street President and Investment Officer of
Milwaukee, WI 53202 Portfolio Manager Nicholas Company, Inc.,
the Adviser to the Fund,
since April 1998. Director
of the Advisor since
December 1997,
and employed by the
Adviser since December
1985. He has been
Portfolio Manager for,
and primarily
responsible for the day-
to-day management of,
the portfolios of
Nicholas II, Inc. and
Nicholas Limited
Edition, Inc. since
March 1993. He also has
been Co-Portfolio
Manager of Nicholas
Fund, Inc. since
November 1996. He also
is a Chartered Financial
Analyst.
Lynn S. Nicholas, 42 Senior Vice Senior Vice President,
700 N. Water Street President Nicholas Company, Inc.,
Milwaukee, WI 53202 the Adviser to the Fund,
and employed by the
Adviser since September
1983. She is a
Chartered Financial
Analyst.
Jeffrey T. May, 42 Senior Vice Senior Vice President
700 N. Water Street President and and Treasurer, Nicholas
Milwaukee, WI 53202 Treasurer Company, Inc., the
Adviser to the Fund, and
employed by the Adviser
since July 1987. He is
a Certified Public
Accountant.
Candace L. Lesak, 41 Vice President Employee, Nicholas
700 N. Water Street Company, Inc., the
Milwaukee, WI 53202 Adviser to the Fund,
since February 1983.
She is a Certified
Financial Planner.

Kathleen A. Evans, 50 Assistant Vice Vice President, Nicholas
700 N. Water Street President Company, Inc., the
Milwaukee, WI 53202 Adviser to the Fund, and
employed by the Adviser
since March 1985.

Mark J. Giese, 28 Vice President Vice President, Nicholas
700 N. Water Street Company, Inc., the
Milwaukee, WI 53202 Adviser to the Fund,
and employed by the advisor
since July 1994. He
graduated from the
University of Wisconsin
- Madison with a Masters
of Science degree in
Finance in May of 1994.
He is a Certified Public
Accountant and a
Chartered Financial
Analyst.
Tracy C. Eberlein, 38 Assistant Vice Employee, Nicholas
700 N. Water Street President Company, Inc., the
Milwaukee, WI 53202 Adviser to the Fund,
since January 1985. She
is a Certified Financial
Planner.

* Albert O. Nicholas is the only director of the Fund who
is an "interested person" in the Adviser, as that term
is defined in the 1940 Act.

Mr. David O. Nicholas is the Portfolio Manager of the
Fund and is primarily responsible for the day-to-day
management of the Fund's portfolio.

Mr. Albert O. Nicholas is a member of the Board of
Directors of Nicholas Fund, Inc., Nicholas Income Fund,
Inc., Nicholas Limited Edition, Inc., Nicholas Money Market
Fund, Inc. and Nicholas Equity Income Fund, Inc. Messrs.
Bock and Seaman serve as directors of Nicholas Fund, Inc.
and Nicholas Equity Income Fund, Inc. Mr. Schultz is a
member of the Board of Directors of Nicholas Fund, Inc.,
Nicholas Limited Edition, Inc., Nicholas Equity Income Fund,
Inc., Nicholas Income Fund, Inc. and Nicholas Money Market
Fund, Inc.

The Investment Advisory Agreement between the Fund and
Nicholas Company, Inc. states that the Fund shall pay the
directors' fees of directors who are not interested persons
of Nicholas II, Inc. The amount of such fees is subject to
increase or decrease at any time, but is subject to the
overall limitation on the Fund's annual expenses.

The table below sets forth the aggregate compensation
received from the Fund by all directors of the Fund during
the fiscal year ended September 30, 1998. No officers of
the Fund receive any compensation from the Fund, but rather,
are compensated by the Adviser in accordance with its
investment advisory agreement with the Fund.

<TABLE>
Pension or Estimated Total Compensation
Aggregate Retirement Annual From Fund and Fund
Name and Compensation Benefits Benefits Complex Paid to
Position From the Accrued As Upon Directors (1)
Fund Part of Fund Retirement
Expenses
--------- ------------- ------------ ---------- -------------------
<S> <C> <C> <C> <C>
Albert O. Nicholas (2) $ 0 $ 0 $ 0 $ 0
Melvin L. Schultz (2) $ 4,500 $ 0 $ 0 $ 19,300
Richard Seaman (2) $ 4,500 $ 0 $ 0 $ 10,700
Robert H. Bock (2) $ 4,500 $ 0 $ 0 $ 10,700
</TABLE>

(1) During the fiscal year ended September 30, 1998, the Fund and
other funds in its Fund Complex (i.e., those funds which also
have Nicholas Company, Inc. as its investment adviser, namely
Nicholas Fund, Inc., Nicholas Equity Income Fund, Inc.,
Nicholas Limited Edition, Inc., Nicholas Income Fund, Inc.
and Nicholas Money Market Fund, Inc.) compensated those
directors who are not "interested persons" of the Adviser in
the form of an annual retainer per director per fund and
meeting attendance fees. During the fiscal year ended
September 30, 1998, the Fund compensated the disinterested
directors at a rate of $500 per director per meeting attended
($750 commencing January 1, 1998) and an annual retainer of
$2,000 per year. The disinterested directors did not receive
any other form or amount of compensation from the Fund
Complex during the fiscal year ended September 30, 1998. All
other directors and officers of the Fund were compensated by
the Adviser in accordance with its investment advisory
agreement.

(2) Mr. Nicholas also is a member of the Board of Directors of
Nicholas Fund, Inc., Nicholas Equity Income Fund, Inc.,
Nicholas Limited Edition, Inc., Nicholas Income Fund, Inc.
and Nicholas Money Market Fund, Inc. Mr. Schultz also is a
member of the Board of Directors of Nicholas Fund, Inc.,
Nicholas Limited Edition, Inc., Nicholas Income Fund, Inc.,
Nicholas Equity Income Fund, Inc. and Nicholas Money Market
Fund, Inc. Mr. Seaman also is a member of the Board of
Directors of Nicholas Fund, Inc. and Nicholas Equity Income
Fund, Inc. Mr. Bock also is a member of the Board of
Directors of Nicholas Fund, Inc. and Nicholas Equity Income
Fund, Inc.

PRINCIPAL SHAREHOLDERS

No persons are known to the Fund to own beneficially or of
record 5% or more of the full shares of Common Stock of the Fund
as of September 30, 1998. All directors and executive officers of
the Fund as a group (13 in number) beneficially own approximately
3.0% of the full shares of Common Stock of the Fund as of
September 30, 1998.

PRICING OF FUND SHARES

When shares of the Fund are purchased, the purchase price
per share is the NET ASSET VALUE per share of the Fund. The NET
ASSET VALUE of a share is determined by dividing the total value
in U.S. dollars of the Fund's total net assets by the total
number of shares outstanding at that time. Net assets of the
Fund are determined by deducting the liabilities of the Fund from
the total assets of the Fund. The net asset value is determined
as of the close of trading on the New York Stock Exchange
("NYSE") on each day the NYSE is open for trading. The NYSE is
open for trading Monday through Friday except New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Martin Luther King Day, Thanksgiving Day and Christmas
Day. Additionally, if any of the aforementioned holidays falls
on a Saturday, the NYSE will not be open for trading on the
preceding Friday, and when any such holiday falls on a Sunday,
the NYSE will not be open for trading on the succeeding Monday,
unless unusual business conditions exist (such as the ending of a
monthly or yearly accounting period).

Equity securities traded on a stock exchange will ordinarily be
valued on the basis of the last sale price on the date of
valuation, or in the absence of any sale on that day, the closing
bid price. Most debt securities, excluding short term investments
are valued at the evaluated current bid price. Any securities for
which there are no readily available market quotations will be valued
at fair value, as determined in good faith by the Board of Directors.
Brokerage commissions will be excluded in calculating values. All
assets other than securities will be valued at their then current
fair value using methods determined in good faith by the Board of
Directors.

PURCHASE OF FUND SHARES

MINIMUM INVESTMENTS. The minimum initial purchase is $500
-------------------
and the minimum for any subsequent purchase is $100, except in
the case of reinvestment of distributions. The Automatic
Investment Plan has a minimum monthly investment of $50. Due to
the fixed expenses incurred by the Fund in maintaining individual
accounts, the Fund reserves the right to redeem accounts that
fall below the $500 minimum required investment due to
shareholder redemption (but not solely due to a decrease in net
asset value of the Fund). In order to exercise this right, the
Fund will give advance written notice of at least 30 days to the
accounts below such minimum.

APPLICATION INFORMATION. Applications for the purchase of
-----------------------
shares are made to Nicholas II, Inc., c/o Firstar Mutual Funds
Services, LLC, P.0. Box 2944, Milwaukee, Wisconsin 53201-2944.
The Fund also has available an Automatic Investment Plan for
shareholders. Anyone interested should contact the Fund for
additional information.

When shares of the Fund are purchased, the purchase price
per share will be the net asset value ("NAV") per share next
determined after the time the Fund receives the application to
purchase Fund shares in proper form The determination of the
NAV for a particular day is applicable to all applications for
the purchase of shares received at or before the close of trading
on the NYSE on that day (usually 4:00 p.m., New York time).

* Applications to purchase Fund shares received in proper
form on a day the NYSE is open for trading, prior to the
close of trading on that day, will be based on the NAV
valued as of the close of trading on that day.

* Applications to purchase Fund shares received
after the close of trading on the NYSE will be based on
the NAV as determined as of the close of
trading on the next day the NYSE is open.

Purchase of shares will be made in full and fractional shares
computed to three decimal places.

The Fund does not consider the U.S. Postal Service or other
independent delivery services to be its agents. Therefore,
deposit in the mail or with such services, or receipt at Firstar
Mutual Funds Services, LLC's ("Firstar") Post Office Box, of
purchase applications does not constitute receipt by Firstar or
the Fund. DO NOT MAIL LETTERS BY OVERNIGHT COURIER TO THE POST
OFFICE BOX ADDRESS. OVERNIGHT COURIER DELIVERY SHOULD BE SENT TO
FIRSTAR MUTUAL FUNDS SERVICES, LLC, THIRD FLOOR, 615 EAST
MICHIGAN STREET, MILWAUKEE, WISCONSIN 53202-5207.

All applications to purchase Fund shares are subject to
acceptance or rejection by the Fund and are not binding until
accepted. Applications must be in proper order to be accepted
and may only be accepted by the Fund or an authorized agent of
the Fund. Applications will not be accepted unless they are
accompanied by payment in U.S. funds. Payment should be made by
check drawn on a U.S. bank, savings & loan or credit union.
Checks are accepted subject to collection at full face value in
U.S. funds. The custodian will charge a $20 fee against a
shareholder's account, in addition to any loss sustained by the
Fund, for any payment check returned to the custodian for
insufficient funds. The Fund will not accept applications under
circumstances or in amounts considered disadvantageous for
shareholders. Any account (including custodial accounts) opened
without a proper social security number or taxpayer
identification number may be liquidated and distributed to the
owner(s) of record on the first business day following the 60th
day of investment, net of the back-up withholding tax amount.

WIRE PAYMENTS. If a wire purchase is to be an initial purchase,
- -------------
please call Firstar (414-276-0535 or 800-544-6547) with the
appropriate account information prior to sending the wire. To
purchase shares of the Fund by federal wire transfer, instruct
your bank to use the following instructions:

Wire To: Firstar Bank Milwaukee, N.A.
ABA 075000022

Credit: Firstar Mutual Funds Services, LLC
Account 112-952-137

Further Credit: Nicholas II, Inc.
(shareholder account number)
(shareholder registration)

Please call Firstar at 414-276-0535 or 800-544-6547 prior to
sending the wire in order to obtain a confirmation number and to
ensure prompt and accurate handling of funds. The Fund and its
transfer agent are not responsible for the consequences of delays
resulting from the banking or Federal Reserve wire system, or
from incomplete wiring instructions.

CERTIFICATES. Certificates representing Fund shares
------------
purchased will not be issued unless the shareholder specifically
requests certificates by written notice to the Fund.
Certificates are mailed to requesting shareholders approximately
two weeks after receipt of the request by the Fund. In no
instance will certificates be issued for fractional shares.
Where certificates are not requested, the Fund's transfer agent,
Firstar, will credit the shareholder's account with the number of
shares purchased. Written confirmations are issued for all
purchases of Fund shares.

THIRD PARTY PURCHASES - USE OF A PROCESSING INTERMEDIARY TO
-----------------------------------------------------------
PURCHASE FUND SHARES. Shares of the Fund may be purchased
- --------------------
through certain broker-dealers, financial institutions or other
service providers ("Processing Intermediaries"). When shares of
the Fund are purchased this way, the Processing Intermediary,
rather than its customer, may be the shareholder of record.
Processing Intermediaries may use procedures and impose
restrictions in addition to or different from those applicable to
shareholders who invest in the Fund directly. An investor
intending to invest in the Fund through a Processing Intermediary
should read the program materials provided by the Processing
Intermediary in conjunction with this Prospectus.

Processing Intermediaries may charge fees or other charges
for the services they provide to their customers. Such charges
may vary among Processing Intermediaries, but in all cases will
be retained by the Processing Intermediary and not remitted to
the Fund or the Adviser.

The Fund also may enter into arrangements with some
Processing Intermediaries authorizing them to process purchase
orders on behalf of the Fund on an expedited basis (an
"authorized agent"). Receipt of a purchase order by an
authorized agent will be deemed to be received by the Fund for
purposes of determining the net asset value of Fund shares to be
purchase. For purchase orders placed through an authorized
agent, a shareholder will pay the Fund's net asset value per
share next computed after the receipt by the authorized agent of
such purchase order, plus any applicable transaction charge
imposed by the agent.

REDEMPTION OF FUND SHARES

REDEMPTION PRICE. A shareholder may redeem Fund shares in whole
- ----------------
or in part by any of the methods described below. All
redemptions will be processed immediately upon receipt and written
confirmation will be issued for all redemptions of fund shares. The
redemption price will be the Fund's NAV next computed
after the time of receipt by Firstar (or by an authorized agent
of the Fund) of the certificate(s), or written request in the
proper form and described below, or pursuant to proper telephone
instructions as described below.

* Requests for redemption of Fund shares received in proper
on form a day the NYSE is open for trading, prior to the close
of trading on that day, will be based on the NAV as of the close
of trading on that day.

* Requests for redemption of Fund shares received
after the close of trading on the NYSE will be based on
the NAV as determined as of the closing of
trading on the next day the NYSE is open.

REDEMPTION REQUESTS THAT CONTAIN RESTRICTIONS AS TO THE
TIME OR DATE REDEMPTIONS ARE TO BE EFFECTED WILL BE RETURNED AND
WILL NOT BE PROCESSED.

WRITTEN REDEMPTIONS. If you redeem in writing, you must
-------------------
ensure that the redemption request is signed by each shareholder
in the exact manner as the Fund account is registered and
includes the amount of redemption and the shareholder account
number.

* When shares are represented by certificates, you
may redeem by delivering to the Fund, c/o Firstar
Mutual Funds Services, LLC, P.O. Box 2944, Milwaukee,
Wisconsin 53201-2944, the certificate(s) for the full
shares to be redeemed. The certificate(s) must be
properly endorsed or accompanied by instrument of
transfer, in either case with signatures guaranteed by
an "eligible guarantor institution," which is a bank, a
savings and loan association, a credit union, or a
member firm of a national securities exchange. A
notary public is not an acceptable guarantor.

* If certificates have not been issued, you may
redeem by delivering an original signed written request
for redemption addressed to Nicholas II, Inc., c/o
Firstar Mutual Funds Services, LLC, P.O. Box 2944,
Milwaukee, Wisconsin 53201-2944. Facsimile
transmission of redemption requests is NOT acceptable.
If the account registration is individual, joint
tenants, sole proprietorship, custodial (Uniform
Transfer to Minors Act), or general partners, the
written request must be signed exactly as the account
is registered. If the account is owned jointly, all
owners must sign.

The Fund may require additional supporting documents for
written redemptions made by corporations, executors,
administrators, trustees and guardians. Specifically, if the
account is registered in the name of a corporation or
association, the written request must be accompanied by a
corporate resolution signed by the authorized person(s). A
redemption request for accounts registered in the name of a legal
trust must have a copy of the title and signature page of the
trust agreement on file or must be accompanied by the trust
agreement and signed by the trustee(s).

IF THERE IS DOUBT AS TO WHAT DOCUMENTS OR INSTRUCTIONS ARE
NECESSARY IN ORDER TO REDEEM SHARES IN WRITING, PLEASE WRITE OR
CALL FIRSTAR (414-276-0535 OR 800-544-6547), PRIOR TO SUBMITTING
A WRITTEN REDEMPTION REQUEST. A WRITTEN REDEMPTION REQUEST WILL
NOT BECOME EFFECTIVE UNTIL ALL DOCUMENTS HAVE BEEN RECEIVED IN
PROPER FORM BY FIRSTAR.

Shareholders who have an individual retirement account
("IRA"), a master retirement plan or other retirement plan must
indicate on their written redemption requests whether or not to
withhold federal income tax. Redemption requests lacking an
election not to have federal income tax withheld will be subject
to withholding. Please consult your current Disclosure Statement
for any applicable fees.

A shareholder should be aware that DEPOSIT in the mail or with
other independent delivery services or receipt at Firstar's Post
Office Box of redemption requests DOES NOT constitute receipt by
Firstar or the Fund. DO NOT mail letters by overnight courier to
the Post Office Box address. OVERNIGHT COURIER DELIVERY SHOULD
BE SENT TO THE FIRSTAR MUTUAL FUNDS SERVICES, LLC, THIRD FLOOR,
615 EAST MICHIGAN STREET, MILWAUKEE, WISCONSIN 53202.

TELEPHONE REDEMPTIONS. Telephone redemption is
---------------------
automatically extended to all accounts in the Fund unless this
privilege is declined in writing. This option does not apply to
IRA accounts and master retirement plans for which Firstar acts
as custodian. Telephone redemptions can only be made by calling
Firstar at 800-544-6547 or 414-276-0535. In addition to the
account registration, you will be required to provide the account
number and social security number. Telephone calls will be
recorded.

Telephone redemption requests must be received prior to the
closing of the NYSE (usually 4:00 p.m., New York time) to receive
that day's NAV. There will be no exceptions due to
market activity. During periods of substantial economic or
market changes, telephone transactions may be difficult to
implement. If a shareholder is unable to contact Firstar by
telephone, shares also may be redeemed by delivering the
redemption request in person or by mail. The maximum telephone
redemption is $25,000 per account/per business day. The maximum
telephone redemption for related accounts is $100,000 per
business day. The minimum telephone redemption is $500 except
when redeeming an account in full.

The Fund reserves the right to refuse a telephone redemption
if it is believed advisable to do so. Procedures for redeeming
Fund shares by telephone may be modified or terminated at any
time by the Fund or Firstar. Neither the Fund nor Firstar will
be responsible for the authenticity of redemption instructions
received by telephone which they reasonably believe to be
genuine, even if such instructions prove to be unauthorized or
fraudulent. The Fund and Firstar will employ reasonable
procedures to confirm that instructions received by telephone are
genuine, and if they do not, they may be liable for losses due to
unauthorized or fraudulent instructions.

EFFECT OF REDEMPTION. For federal income tax purposes, a
--------------------
redemption generally is treated as a sale of the shares being
redeemed, with the shareholder recognizing capital gain or loss
equal to the difference between the redemption price and the
shareholder's cost for the shares being redeemed.

The Fund ordinarily will make payment for redeemed shares
within seven days after receipt of a request in proper form,
except as provided by the rules of the Securities and Exchange
Commission. Redemption proceeds to be wired also ordinarily will
be wired within seven days after receipt of the request, and
normally will be wired on the next business day after a net asset
value is determined. The Fund reserves the right to hold payment
up to 15 days or until satisfied that investments made by check
have been collected.

The shareholder may instruct Firstar to mail the proceeds to
the address of record or to directly mail the proceeds to a pre-
authorized bank account. The proceeds also may be wired to a pre-
authorized account at a commercial bank in the United States.
Firstar charges a wire redemption fee of $12.00. Please
contact the Fund for the appropriate form if you are interested
in setting your account up with wiring instructions.

SIGNATURE GUARANTEES. A signature guarantee of each owner
--------------------
is required to redeem shares in the following situations, for all
---
size transactions:
- ----
* if you change the ownership on your account

* upon redemption of shares when certificates have
been issued for your account

* when you want the redemption proceeds sent to a
different address than is registered on the account

* for both certificated and uncertificated shares,
if the proceeds are to be made payable to someone other
than the account owner(s)

* any redemption transmitted by federal wire
transfer to your bank not previously set up with the
Fund

* if a change of address request has been
received by the Fund or Firstar within 15 days of a
redemption request.

In addition, signature guarantees will be required for all
redemptions of $100,000 or more from any shareholder account in
the Nicholas Family of Funds. A redemption will not be processed
until the signature guarantee, if required, is received in proper
form. A notary public is not an acceptable guarantor.

THIRD PARTY REDEMPTIONS - USE OF A PROCESSING INTERMEDIARY
----------------------------------------------------------
TO REDEEM FUND SHARES. As with the purchase of Fund shares,
- ---------------------
shares of the Fund may be sold through certain broker-dealers,
financial institutions and other service providers ("Processing
Intermediaries"). An investor intending to redeem Fund shares
through his or her Processing Intermediary should read the program
materials provided by the Processing Intermediary and follow the
instructions and procedures outlined therein.

Processing Intermediaries may charge fees or other charges
for the services they provide to their customers. Such charges
vary among Processing Intermediaries, but in all cases will be
retained by the Processing Intermediary and not remitted to the
Fund or the Adviser.

Investors who do not wish to use the services of a
Processing Intermediary, or pay the fees that may be charged for
such services, may want to consider investing directly with the
Fund. IF YOU HOLD FUND SHARES THROUGH A PROCESSING INTERMEDIARY,
YOU MUST REDEEM YOUR SHARES THROUGH SUCH PROCESSING INTERMEDIARY.
IN SUCH EVENT, YOU SHOULD CONTACT THE PROCESSING INTERMEDIARY FOR
INSTRUCTIONS ON HOW TO REDEEM. If an investor has originally
invested directly with the Fund, direct sale of Fund shares
through the Fund (and not the Processing Intermediary) may be
made without a redemption charge.

The Fund also may enter into an arrangement with some
Processing Intermediaries authorizing them to process redemption
requests on behalf of the Fund on an expedited basis (an
"authorized agent"). Receipt of a redemption request by an
authorized agent will be deemed to be received by the Fund for
purposes of determining the net asset value of Fund shares to be
redeemed. For redemption orders placed through an authorized
agent, a shareholder will receive redemption proceeds which
reflect net asset value per share next computed after the receipt
by the authorized agent of the redemption order, less any
redemption fees imposed by the agent.

EXCHANGE BETWEEN FUNDS

Shares of the Fund may be exchanged for shares of other
mutual funds for which Nicholas Company, Inc. serves as the
investment adviser. Nicholas Company, Inc. is also the
investment adviser to the following funds which have investment
objectives and net assets as noted below:

NET ASSETS AT
FUND INVESTMENT OBJECTIVE SEPTEMBER 30, 1998
---- -------------------- --------------
Nicholas Fund, Inc. Capital appreciation; Income as
a secondary consideration $4,953,318,383

Nicholas Limited Long-term growth; Income as a
Edition, Inc.(1) secondary consideration $ 313,538,915

Nicholas Equity Reasonable income; Moderate
Income Fund, Inc long-term growth as a secondary
Consideration $ 25,280,201

Nicholas Income High current income consistent
Fund, Inc. with the preservation and
conservation of capital value $ 248,338,012

Nicholas Money High level of current income as
Market Fund, Inc. as is consistent with preserving
capital and liquidity $ 167,303,067
____________

(1)Shareholders are reminded, however, that Nicholas Limited
Edition, Inc. is restricted in size to ten million shares
(without taking into account shares outstanding as a result
of capital gain and dividend distributions), and that the
exchange privilege into that mutual fund may be terminated or
modified at any time or times when that maximum is reached.

If a shareholder chooses to exercise the exchange privilege,
the shares will be exchanged at their next determined NAV.
When an exchange into the Nicholas Money Market Fund,
Inc. would involve investment of the exchanged amount on a day
when the NYSE is open for trading but the Federal Reserve Banks
are closed, shares of the Fund will be redeemed on the day upon
which the exchange request is received; however, issuance of
Nicholas Money Market Fund, Inc. shares may be delayed an
additional business day in order to avoid the dilutive effect on
return (i.e., reduction in net investment income per share) which
would result from issuance of such shares on a day when the
exchanged amount cannot be invested. In such a case, the
exchanged amount would be uninvested for this one day period.
Shareholders interested in exercising the exchange privilege must
obtain the appropriate prospectus from Nicholas Company, Inc.

An exchange constitutes a sale for federal tax purposes and
a capital gain or loss generally will be recognized upon the
exchange, depending upon whether the NAV at the time
is more or less than the shareholder's cost. An exchange between
the funds involving master retirement (Keogh) plans and IRA
accounts generally will not constitute a taxable transaction for
federal tax purposes. The exchange privilege may be terminated
or modified only upon 60 days advance notice to shareholders;
however, procedures for exchanging Fund shares by telephone may
be modified or terminated at any time by the Fund or Firstar.

Exchange of shares can be accomplished in the following
ways:

Exchange by Mail. An exchange of shares of the Fund for
----------------
shares of other available Nicholas mutual funds directly
through Nicholas Company, Inc. will be made without cost to
the investor through written request. Shareholders
interested in exercising the exchange by mail privilege may
obtain the appropriate prospectus from Nicholas Company,
Inc. Signatures required are the same as previously
explained under "Redemption of Fund Shares."

Exchange by Telephone. Shareholders may exchange by
---------------------
telephone among all funds for which the Nicholas Company,
Inc. serves as investment adviser. Only exchanges of $500
or more may be executed using the telephone exchange
privilege. Firstar charges a $5.00 fee for each telephone
exchange. In an effort to avoid the risks often associated
with large market timers, the maximum telephone exchange per
account per day is set at $100,000 with a maximum of
$l,000,000 per day for related accounts. Four telephone
exchanges per account during any twelve month period will be
allowed. Exchanges between the Fund and Nicholas Equity
Income Fund, Inc. are limited to $25,000 per day and
$100,000 per day for related accounts.

Procedures for exchanging Fund shares by telephone may be
modified or terminated at any time by the Fund or Firstar.
Neither the Fund nor Firstar will be responsible for the
authenticity of exchange instructions received by telephone.
Telephone exchanges can only be made by calling Firstar at 414-
276-0535 or 800-544-6547. You will be required to provide
pertinent information regarding your account. Calls will be
recorded.

TRANSFER OF FUND SHARES

Shares of the Fund may be transferred in instances such as
the death of a shareholder, change of account registration,
change of account ownership and in cases where shares of the Fund
are transferred as a gift. Documents and instructions necessary
to transfer capital stock can be obtained by writing or calling
Firstar (414-276-0535 or 800-544-6547) or Nicholas Company, Inc.
(414-272-6133 or 800-227-5987) prior to submitting any transfer
requests.

DIVIDENDS AND FEDERAL TAX STATUS

The Fund intends to continue to qualify annually as a
"regulated investment company" under the Internal Revenue Code of
1986 and intends to take all other action required to ensure that
little or no federal income or excise taxes will be payable by
the Fund. As a result, the Fund generally will distribute
annually to its shareholders substantially all of its net
investment income and net realized capital gain (after
utilization of any available capital loss carryovers).

Distributions by the Fund, whether received in cash or invested
in additional shares of the Fund, will be taxable to the Fund's shareholders,
except those shareholders that are not subject to tax on their income.
Long-term capital gain distributed by the Fund will retain the
character that it had at the Fund level. The maximum tax rate on
long-term capital gains(for sales of securities held greater than
twelve months) is 20%. Income distributed from the Fund's net investment
income and net realized short-term capital gains are taxable to
shareholders as ordinary income. Distributions generally will be
made annually in December. The Fund will provide information to
shareholders concerning the character and federal tax treatment of
all dividends and distributions.

At the time of purchase of shares, the Fund may have
undistributed income or capital gains included in the computation
of the NAV per share. Therefore, a dividend or capital gain
distribution received shortly after such purchase by
a shareholder may be taxable to the shareholder, although it is,
in whole or in part, a return of capital and may have the effect
of reducing the net asset value per share.

Under federal law, some shareholders may be subject to a 31%
back-up withholding on reportable dividends, capital gain
distributions (if any) and redemption payments. Generally,
shareholders subject to back-up withholding will be those (i) for
whom a taxpayer identification number is not on file with the
Fund or who, to the Fund's knowledge, have furnished an incorrect
number, or (ii) who have failed to declare or underreported
certain income on their federal returns. An investor must
certify under penalties of perjury that the taxpayer
identification number supplied to the Fund is correct and that he
is not subject to back-up withholding when establishing an
account.

The foregoing tax discussion relates to federal income taxes
only and is not intended to be a complete discussion of all
federal tax consequences. Shareholders should consult with a tax
advisor concerning the application of federal, state and local
taxes to an investment in the Fund.

DIVIDEND REINVESTMENT PLAN

Unless a shareholder elects to accept cash in lieu of
shares, all dividend and capital gain distributions are
automatically reinvested in additional shares of the Fund through
the Dividend Reinvestment Plan. A shareholder may elect to
accept cash on an application to purchase shares, by separate
written notification or by telephone. All reinvestments are at
the net asset value per share in effect on the dividend or
distribution date and are credited to the shareholder's account.
If the application of such distributions to the purchase of
additional shares of the Fund would result in the issuance of
fractional shares, the Fund may, at its option, either issue
fractional shares (computed to three decimal places) or pay to
the shareholder cash equal to the value of the fractional share
on the dividend or distribution payment date. Shareholders will
be advised of the number of shares purchased and the price
following each reinvestment. As in the case of normal purchases,
stock certificates are not issued unless requested. In no
instance will a certificate be issued for a fraction of a share.

Shareholders may withdraw from or thereafter elect to
participate in the Dividend Reinvestment Plan at any time by
giving notice written or telephonic to the Transfer Agent. An
election must be received by Firstar prior to the dividend record
date of any particular distribution for the election to be
effective for that distribution. If an election to withdraw from
or participate in the Dividend Reinvestment Plan is received
between a dividend record date and payment date, it shall become
effective on the day following the payment date. The Fund may
modify or terminate the Dividend Reinvestment Plan at any time on
30 days' written notice to participants.

SYSTEMATIC WITHDRAWAL PLAN

Shareholders who have purchased or currently own Fund shares
worth $10,000 or more at the current market value may open a
Systematic Withdrawal Plan ("Plan") and receive monthly, quarterly, semi-
annual or annual checks for any designated amount. Firstar
reinvests all income and capital gain dividends in shares of the
Fund. Shareholders may add shares to, withdraw shares from, or
terminate the Plan, at any time. Each withdrawal may be a
taxable event to the shareholder. Liquidation of shares in
excess of distributions may deplete or possibly use up the
initial investment, particularly in the event of a market
decline, and withdrawals cannot be considered a yield or income
on the investment. In addition to termination of the Plan by the
Fund or shareholders, the Plan may be terminated by Firstar upon
written notice mailed to the shareholders. Please contact the
Nicholas Company for copies of the Plan documents.

INDIVIDUAL RETIREMENT ACCOUNTS

Individuals may be able to establish a traditional IRA, a
Roth IRA and/or an education IRA. The Fund offers a prototype
IRA plans for adoption by individuals who qualify. A description
of applicable service fees and application forms are available
upon request from the Fund. The IRA documents also contain a
Disclosure Statement which the IRS requires to be furnished to
individuals who are considering adopting an IRA. It is important
you obtain up-to-date information from the Fund before opening an
IRA.

Individuals who receive compensation, including earnings from
self-employment, may be entitled to establish and make
contributors to a traditional IRA. Taxation of the income and
gains paid to a traditional IRA by the Fund is deferred until
distribution from the IRA.

Like the Roth IRA, contributions are non-deductible, but the
investment earnings accumulate tax-free, and distributions used for
higher education expenses are not taxable. Contribution limits are
$500 per account and certain income phaseouts apply.

As long as the aggregate IRA contributions meet the Fund's
minimum investment requirement of $500, the Fund will accept any
allocation of such contribution between spousal, deductible and
non-deductible accounts. The acceptability of this calculation
is the sole responsibility of the shareholder. For this reason,
it is advisable for taxpayers to consult with their personal tax
adviser to determine the deductibility of their IRA
contributions.

Because a retirement program involves commitments covering
future years, it is important that the investment objectives of
the Fund be consistent with the participant's retirement
objectives. Premature withdrawals from a retirement plan may
result in adverse tax consequences. Consultation with a tax
adviser regarding the tax consequences of the Plan is
recommended.

MASTER RETIREMENT PLAN

The Fund has available a master retirement plan (formerly
called a "Keogh" Plan) for self-employed individuals. Any person
seeking additional information or wishing to participate in the
Plan may contact the Fund. Consultation with a tax adviser
regarding the tax consequences of the Plan is recommended.

BROKERAGE

The Adviser is responsible for decisions to buy and sell
securities for the Fund and for the placement of the Fund's
investment business and the negotiations of the commissions to be
paid on such transactions. The Adviser selects a broker or
dealer for the execution of a portfolio transaction on the basis
that such broker or dealer will execute the order as promptly and
efficiently as possible subject to the overriding policy of the
Fund. This policy is to obtain the best market price and
reasonable execution for all its transactions, giving due
consideration to such factors as reliability of execution and the
value of research, statistical and price quotation services
provided by such broker or dealer. The research services
provided by brokers consist of recommendations to purchase or
sell specific securities, the rendering of advice regarding
events involving specific issuers of securities and events and
current conditions in specific industries, and the rendering of
advice regarding general economic conditions affecting the stock
market and the U.S. economy.

Section 28(e) of the Securities Exchange Act of 1934
("Section 28(e)") permits an investment adviser, under certain
circumstances, to cause an account to pay a broker or dealer a
commission for effecting a transaction in recognition of the
value of the brokerage and research service provided by the
broker or dealer. Brokerage and research services include (i)
furnishing advice as to the value of securities, the advisability
of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of
securities; (ii) furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts; and (iii)
effecting securities transactions and performing functions
incidental thereto.

Purchases and sales of portfolio securities are frequently
placed, without any agreement or undertaking to do so, with
brokers and dealers who provide the Adviser with such brokerage
and research services. The Adviser may cause the Fund to pay a
broker, which provides brokerage and research services to the
Adviser, a commission for effecting a securities transaction in
excess of the amount another broker would have charged for
effecting the transaction. The Adviser believes it is important
to its investment decision-making process to have access to
independent research. The Adviser understands that since the
brokers and dealers rendering such services are compensated
through commissions, such services would be unilaterally reduced
or eliminated by the brokers and dealers if none of the Fund's
transactions were placed through them. While these services have
value which cannot be measured in dollars, the Adviser believes
such services do not reduce the Fund's or the Adviser's expenses.
Higher commissions may be paid by the Fund, provided (i) the
Adviser determines in good faith that the amount is reasonable in
relation to the services in terms of the particular transaction
or in terms of the Adviser's overall responsibilities with
respect to the accounts as to which it exercises investment
discretion; (ii) such payment is made in compliance with the
provisions of Section 28(e) and other applicable state and
federal law; and (iii) in the Adviser's opinion, the total
commissions paid by the Fund will be reasonable in relation to
the benefits to the Fund over the long term.

In instances where it is determined by the Adviser that the
supplemental research and statistical services are of significant
value, it is the practice of the Adviser to place the Fund's
transactions with brokers or dealers who are paid a higher
commission than other brokers or dealers. However, commissions
paid are generally lower than those paid prior to the elimination
of fixed minimum rates in 1975 and are no higher than rates which
could be obtained from other brokers or dealers who would also
furnish comparable supplemental research and statistical
services. The Adviser utilizes research and other information
obtained from brokers and dealers in managing its other client
accounts. On the other hand, the Adviser obtains research and
information from brokers and dealers who transact trades for the
Advisor's other client accounts, which are also utilized by the
Adviser in managing the Fund's portfolio. The aggregate amount
of brokerage commissions paid by the Fund for its fiscal year
ended September 30, 1998 was $352,279. Brokerage commissions
paid by the Fund during the fiscal years ended September 30, 1997
and September 30, 1996 totaled $522,280 and $415,710,
respectively. The Fund's portfolio turnover rates were 20.47%,
30.21% and 24.47%, respectively, for the fiscal years ended
September 30, 1998, 1997, and 1996.

The following table shows the dollar amount of brokerage
commissions paid to firms by the fund for certain research services
provided and the approximate dollar amount of the transactions
involved for the fiscal year ended September 30, 1998.

Amount of Commissions
Paid to Firms that Amount of
Provided Research Brokerage Transactions
Services(1) Involved(1)
__________________ ___________________
The Fund............... $36,445 $34,989,818

(1) The provision of such research services was not the only factor considered
in the placement of all noted business with such firms. In addition, the
amounts disclosed do not include commissions paid to firms who provided
unsolicited research services as well as research customarily provided by
brokerage firms in the normal course of business.

The Adviser does not specifically negotiate commissions and
charges with a broker or dealer in advance of each transaction.
The approximate brokerage discount and charges are, however,
generally known to the Adviser prior to effecting the
transaction. In determining the overall reasonableness of the
commissions paid, the Adviser compares the commission rates to
those it pays on transactions for its other client accounts and
to the rates generally charged in the industry to institutional
investors such as the Fund. The commissions also are considered
in view of the value of the research, statistical and price
quotation services, if any, rendered by the broker or dealer
through whom a transaction is placed.

The Adviser, which is the investment adviser to the Nicholas
Fund, Inc., Nicholas Income Fund, Inc., Nicholas Limited Edition,
Inc., Nicholas Money Market Fund, Inc. and Nicholas Equity Income
Fund, Inc., as well as to the Fund, may occasionally make
investment decisions which would involve the purchase or sale of
securities for the portfolios of more than one of the funds at
the same time. As a result, the demand for securities being
purchased or the supply of securities being sold may increase,
and this could have an adverse effect on the price of those
securities. It is the Adviser's policy not to favor one fund
over another in making recommendations or in placing orders. If
two or more of the Adviser's clients are purchasing a given
security on the same day from the same broker or dealer, the
Adviser may average the price of the transactions and allocate
the average among the clients participating in the transactions.
It is the Advisor's policy to allocate the commission charged by
such broker or dealer to each fund in direct proportion to the
number of shares bought or sold by the particular fund involved.

Furthermore, the Adviser has adopted procedures that provide
generally for the Adviser to bunch orders for the purchase or
sale of the same security for the Fund, other mutual funds
managed by the Adviser, and other advisory clients. The Adviser
will bunch orders when it deems it to be appropriate and in the
best interest of the client accounts. When a bunched order is
filled in its entirety, each participating client account will
participate at the average share price for the bunched order on
the same business day, and transaction costs shall be shared pro
rata based on each client's participation in the bunched order.
When a bunched order is only partially filled, the securities
purchased will be allocated on a pro rata basis to each client
account participating in the bunched order based upon the initial
amount requested for the account (subject to certain exceptions)
and each participating account will participate at the average
share price for the bunched order on the same business day.

The Adviser may effect portfolio transactions with brokers or
dealers who recommend the purchase of the Fund's shares. The
Adviser may not allocate brokerage on the basis of
recommendations to purchase shares of the Fund.

Over-the-counter market purchases and sales are generally
transacted directly with principal market makers who retain the
difference between their cost in a security and its selling
price. In some circumstances where, in the opinion of the
Adviser, better prices and executions are available elsewhere,
the transactions are placed through brokers who are paid
commissions directly.

PERFORMANCE DATA

The Fund may quote a "total return" or an "average annual
total return" from time to time in advertisements or in
information furnished to present or prospective shareholders.
The "total return" of the Fund is expressed as a ratio of the
increase (or decrease) in value of a hypothetical investment in
the Fund at the end of a measuring period to the amount initially
invested. The "average annual total return" is determined by
discounting the "total return" for the number of time periods
represented. The rate represents the annual rate achieved on the
initial investment to arrive at the ending redeemable value. The
ending value assumes reinvestment of dividends and capital gains
and the reduction of account charges, if any. This computation
does not reflect any sales load or other nonrecurring charges,
since the Fund is not subject to such charges. These values are
computed according to the following formulas:

The "total return" and "average annual total return" are
computed according to the following formulas:

n
P(1+T) = ERV
or
Total Return = ERV - 1
---
P
n
Average Annual Total Return = the nth root of ERV - 1
-----
P

where:
P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years from initial investment to the end of the period.
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the stated
periods at the end of the stated periods.

<TABLE>
ONE YEAR ENDED FIVE YEARS ENDED TEN YEARS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
---------------------- ---------------------- ------------------
<S> <C> <C> <C>
Total Return........... 1.66% 107.91% 255.12%

Average Annual Total
Return................. 1.66% 15.76% 13.51%

</TABLE>

For purposes of these calculations, the following
assumptions are made: (1) all dividends and distributions by the
Fund are reinvested at the net asset value calculated on the
reinvestment dates during the period; (2) a complete redemption
at the end of the periods is made; and (3) all recurring fees
that are charged to all shareholder accounts are included.

These figures are computed by adding the total number of
shares purchased by a hypothetical $1,000 investment in the Fund
to all additional shares purchased within a one year period with
reinvested dividends and distributions, reducing the number of
shares by those redeemed to pay account charges, taking the value
of those shares owned at the end of the year and reducing it by
any deferred charges, and then dividing that amount by the
initial $1,000 investment. This computation does not reflect any
sales load or other nonrecurring charges, since the Fund is not
subject to such charges.

The "total return" and "average annual total return"
calculations are historical measures of performance and are not
necessarily indicative of future performance. Such measurements
will vary from time to time depending upon market conditions, the
composition of the Fund's portfolio, operating expenses, and the
distribution policy as determined by the Board of Directors.
These factors should be considered when evaluating the Fund's
performance.

In sales materials, reports and other communications to
shareholders, the Fund may compare its performance to certain
indices, including the Dow Jones Industrial Average, the Standard
& Poor's 500r Index Composite Stock Price, the National
Association of Securities Dealers Automated Quotation System, the
Russell 2000 Index and the United States Department of Labor
Consumer Price Index. The Fund also may include evaluations of
the Fund published by nationally recognized financial
publications and ranking services, such as Forbes, Money,
Financial World, Barron's, Lipper Analytical Services Mutual Fund
Performance Analysis, Morningstar , Inc., CDA Investment
Technologies Inc. and Value Line, Inc..

CAPITAL STRUCTURE

The Fund is authorized to issue 200,000,000 shares of Common
Stock, par value $0.01 per share. Each share has one vote and
all shares participate equally in dividends and other
distributions by the Fund, and in the residual assets of the Fund
in the event of liquidation. There are no conversion or sinking
fund provisions applicable to shares, and holders have no
preemptive rights and may not cumulate their votes in the
election of directors. Shares are redeemable and are
transferable. Fractional shares entitle the holder to the same
rights as whole shares except fractional shares have no voting
rights.

STOCK CERTIFICATES

The Fund will not issue certificates evidencing shares
purchased unless so requested in writing. Where certificates are
not issued, the shareholder's account will be credited with the
number of shares purchased, relieving shareholders of
responsibility for safekeeping of certificates and the need to
deliver them upon redemption. Written confirmations are issued
for all purchases of shares. Any shareholder may deliver
certificates to the Fund's transfer agent, Firstar, and direct
that his account be credited with the shares. A shareholder may
in writing direct Firstar at any time to issue a certificate for
his shares without charge.

ANNUAL MEETING

Under the laws of the State of Maryland, registered
investment companies, such as the Fund, may operate without an
annual meeting of shareholders under specified circumstances if
an annual meeting is not required by the 1940 Act. The Fund has
adopted the appropriate provisions in its By-Laws and will not
hold annual meetings of shareholders unless otherwise required to
do so.

In the event the Fund is not required to hold annual
meetings of shareholders to elect Directors, the Board of
Directors of the Fund will promptly call a meeting of
shareholders of the Fund for the purpose of voting upon the
question of removal of any Director when requested in writing to
do so by the record holders of not less than l0% of the
outstanding shares of Common Stock of the Fund. The affirmative
vote of two-thirds of the outstanding shares, cast in person or
by proxy at a meeting called for such purpose, is required to
remove a Director of the Fund. The Fund will assist shareholders
in communicating with each other for this purpose pursuant to the
requirements of Section 16(c) of the 1940 Act.

SHAREHOLDER REPORTS

Shareholders will be provided at least semiannually with a
report or a current prospectus showing the Fund's portfolio and
other information. After the close of the Fund's fiscal year,
which ends September 30, an annual report or current prospectus
containing financial statements audited by the Fund's independent
public accountants, Arthur Andersen LLP, will be sent to
shareholders.

YEAR 2000 ISSUES

The Adviser has identified and is taking steps it believes
are reasonably designed to resolve potential problems and
address the Year 2000 issue, although there can be no
assurances that these steps will be sufficient. The Adviser,
which performs the Fund's internal
accounting and pricing functions, is in the process of re-
engineering its hardware to handle the century date, and has
identified and is taking steps to resolve potential software
problems. Some systems are currently compliant. Internal testing
is ongoing, and the Fund expects that all systems will have been
converted by mid-1999.

In addition, there can be no assurances that the Year 2000
issue will not have an adverse effect on issuers who securities
are held by the fund or on global markets or economies generally.

CUSTODIAN AND TRANSFER AGENT

Firstar Bank Milwaukee, N.A. ("Firstar Bank") acts as Custodian
of the fund. Firstar, 615 East Michigan Street, Milwaukee, Wisconsin
53202-5207, acts as Transfer Agent of the Fund and Dividend Disbursing
agent. As such, Firstar Bank holds all securities and cash of the
Fund, delivers and receives payment for securities sold, receives
and pays for securities purchased, collects income from
investments and performs other duties, all as directed by
officers of the Fund. Firstar Bank and Firstar do not exercise
any supervisory function over the management of the Fund, the
purchase and sale of securities or the payment of distributions
to shareholders.

INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL

Arthur Andersen LLP, 100 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, are the independent accountants for the Fund.
Michael Best & Friedrich LLP, 100 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202, has passed on the legality of the
shares of Common Stock of the Fund being offered.

FINANCIAL INFORMATION

The schedule of investments, the financial statements and
notes thereto and the Report of Independent Public Accountants
contained in the Annual Report of the Fund for the fiscal year
ended September 30, 1998, which have been filed with the SEC
pursuant to Rule 30d-1 of the 1940 Act, are incorporated herein
by reference. You may obtain a copy of the Annual Report without
charge by writing or calling the Fund.

Nicholas II, Inc.

Form N-1A

PART C. OTHER INFORMATION

Item 23. All exhibits required to be filed with this Form N-lA
pursuant to Item 23 thereof are listed in the Exhibit Index
appearing elsewhere in this Registration Statement and (i) appear
in their entirety herein or (ii) are incorporated by reference to
previous filings with the Securities and Exchange Commission.

Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE
-------------------------------------------------------
FUND
----
The Registrant is not under common control with any
other person. The Registrant, Nicholas Fund, Inc., Nicholas
Income Fund, Inc., Nicholas Limited Edition, Inc., Nicholas Money
Market Fund, Inc. and Nicholas Equity Income Fund, Inc., which
are all Maryland corporations, share a common investment adviser,
Nicholas Company, Inc.; however, each such fund has an
independent Board of Directors responsible for supervising the
investment and business management services provided by the
adviser. The Registrant does not control any other person.

Item 25. INDEMNIFICATION
---------------
Article VII, Section 7 of the By-Laws of the Registrant
provides for the indemnification of its officers and director
against liabilities incurred in such capacities to the extent
described therein, subject to the provisions of the Maryland
General Business Corporation Law; such Section 7 is incorporated
herein by reference to the By-Laws of the Registrant previously
filed with the Securities and Exchange Commission. In addition,
Registrant maintains a joint errors and omissions insurance
policy with a $2.0 million limit of liability under which the
Registrant, the Adviser and the other funds advised by the
Adviser, and each of their respective directors and officers, are
named insureds.

The investment adviser to the Registrant, Nicholas
Company, Inc., has, by resolution of its Board of Directors,
agreed to indemnify Registrant's officers, directors and
employees to the extent of any deductible or retention amount
required under insurance policies providing coverage to such
persons in connection with liabilities incurred by them in such
capacities.

Item 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT
-------------------------------------------------------
ADVISER
-------
Incorporated by reference to pages __-__ of the
Statement of Additional Information pursuant to Rule 411 under
the Securities Act of 1933, as amended.

Item 27. PRINCIPAL UNDERWRITERS
----------------------
None.

Item 28. LOCATION OF ACCOUNTS AND RECORDS
--------------------------------
All accounts, books or other documents required to be
maintained pursuant to Section 31(a) of the Investment Company
Act of 1940, as amended, and the rules of the Securities and
Exchange Commission promulgated thereunder, are located at the
offices of Registrant, 700 North Water Street, Milwaukee,
Wisconsin, and at the offices of Registrant's custodian and
transfer agent, Firstar Trust Company, 615 East Michigan Street,
Milwaukee, Wisconsin.

Item 29. MANAGEMENT SERVICES
-------------------
None.

Item 30. UNDERTAKINGS
------------
The Registrant's By-Laws provide that it will indemnify
the Officers and Directors of Registrant for liabilities incurred
by them in any proceeding arising by reason of the fact that any
such person was or is a director or officer of the Registrant.
Insofar as indemnification for liability arising under the
Securities Act of 1933, as amended ("Act") may be permitted to
directors, officers and controlling persons of the Registrant
pursuant to the Act, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and may, therefore, be unenforceable. In
the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.

The undersigned Registrant hereby undertakes to deliver
or cause to be delivered with the prospectus, to each person to
whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the
prospectus and furnished pursuant to and meeting the requirements
of Rule 14a-3 or Rule 14c-3 under the Securities and Exchange Act
of 1934, as amended; and, where interim financial information
required to be presented by Article 3 of Regulation S-X are not
set forth in the prospectus, to deliver, or cause to be delivered
to each person to whom the prospectus is sent or given, the
latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial
information.

EXHIBIT INDEX

Sequential
Exhibit No. Description Page No.
- ----------- ----------- ----------
(a) Articles of Incorporation of Registrant (as amended) *

(b) By-Laws of Registrant *

(d) Investment Advisory Agreement between Registrant
and Nicholas Company, Inc *

(e) Custodian Agreement between Registrant and First
Wisconsin Trust Company *

(f) Opinion of Michael Best & Friedrich LLP, counsel
to the Registrant, concerning the legality of
Registrant's common stock, including consent to
the use thereof. **

(g) Consent of Arthur Andersen LLP, independent public
accountants. **

(h) Financial Data Schedule **

(*) Powers of Attorney *

* Incorporated by reference to previous filings with the
Securities and Exchange Commission.
** To be filed by amendment

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
the Registrant, Nicholas II, Inc., a corporation organized and
existing under the laws of the State of Maryland, hereby
certifies that it meets all of the requirements for effectiveness
of this Amendment to its Registration Statement pursuant to Rule
485(a) under the Securities Act of 1933, and has duly caused this
Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, on the
29th day of January, 1999.

NICHOLAS II, INC.

By: /s/ Thomas J. Saeger
-------------------------
Thomas J. Saeger, Executive
Vice President, Secretary and
Principal Financial
and Accounting Officer

Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
this Amendment to the Registration Statement has been signed
below by the following persons in the capacity indicated on the
29th day of January, 1999.

Albert O. Nicholas*
- --------------------- President (Chief Executive
Albert O. Nicholas Officer), and Director

Thomas J. Saeger*
- -------------------- Executive Vice President,
Thomas J. Saeger Secretary, Chief Financial
Officer, and Chief Accounting
Officer

Robert H. Bock*
- --------------- Director
Robert H. Bock

Melvin L. Schultz*
- ------------------ Director
Melvin L. Schultz

Richard Seaman*
- --------------- Director
Richard Seaman

* By: /s/ Thomas J. Saeger
----------------------------------
Thomas J. Saeger, as
Attorney-in-Fact for the above officers
and directors, under authority of
Powers of Attorney previously filed

LIST OF CONSENTS

1. Consent of Michael Best & Friedrich LLP
(included in Exhibit (i)

2. Consent of Arthur Andersen LLP
(included in Exhibit (j)

January 29, 1999

Nicholas II, Inc.
700 North Water Street
Suite 1010
Milwaukee, WI 53202

Gentlemen:

We have acted as counsel to Nicholas II, Inc. (the
"Fund"), a corporation organized under the laws of the State
of Maryland, in connection with the preparation and filing
of a registration statement on Form N-1A and amendments
thereto ("Registration Statement"), relating to the
registration of the shares of common stock of the Fund
("Common Stock") under the Securities Act of 1933, as
amended.

We have reviewed the Articles of Incorporation and By-
Laws of the Fund and the Registration Statement; we also
have examined such other corporate records, certified
documents and other documents as we deem necessary for the
purposes of this opinion and we have considered such
questions of law as we believe to be involved. We have
assumed without independent verification the genuineness of
signatures and the conformity with originals of all
documents submitted to us as copies. Based upon the
foregoing, we are of the opinion that:

1. The Fund is validly incorporated under the laws of
the State of Maryland, and has the corporate power to carry
on its present business.

2. The Fund is authorized to issue up to two hundred
million (200,000,000) shares of Common Stock, par value $.01
per share, including those shares currently issued and
outstanding.

<PAGE>

Nicholas II, Inc.
January 29, 1999
Page Two

3. The shares of Common Stock of the Fund to be
offered for sale pursuant to the Registration Statement have
been duly authorized and, upon the effectiveness of Post-
Effective Amendment No. 15 to the Registration Statement and
compliance with applicable federal and state securities laws
and regulations, when sold, issued (within the limits
authorized under the Articles of Incorporation of the Fund)
and paid for as contemplated in the Registration Statement,
such shares will have been validly and legally issued, fully
paid and non-assessable.

We consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to us in
the prospectus comprising Part A and elsewhere in the
Registration Statement.

Very truly yours,

MICHAEL BEST & FRIEDRICH

/s/ David E. Leichtfuss
----------------------
David E. Leichtfuss

ARTHUR ANDERSEN LLP

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report,
and to all references to our Firm, included in or made a part of this Form N-1A
registration statement for Nicholas II, Inc.

ARTHUR ANDERSEN LLP

Milwaukee, Wisconsin,
January 22, 1999.

<ARTICLE> 6

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 614409477
<INVESTMENTS-AT-VALUE> 953573538
<RECEIVABLES> 10741900
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 964315438
<PAYABLE-FOR-SECURITIES> 3651536
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 633977
<TOTAL-LIABILITIES> 4285513
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 517359511
<SHARES-COMMON-STOCK> 27606085
<SHARES-COMMON-PRIOR> 24462981
<ACCUMULATED-NII-CURRENT> 3168886
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 100475226
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 339026302
<NET-ASSETS> 960029925
<DIVIDEND-INCOME> 7618713
<INTEREST-INCOME> 2281738
<OTHER-INCOME> 0
<EXPENSES-NET> 6365353
<NET-INVESTMENT-INCOME> 3535098
<REALIZED-GAINS-CURRENT> 100477543
<APPREC-INCREASE-CURRENT> (122367451)
<NET-CHANGE-FROM-OPS> (18354810)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1981807
<DISTRIBUTIONS-OF-GAINS> 127849595
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4358514
<NUMBER-OF-SHARES-REDEEMED> 4605308
<SHARES-REINVESTED> 3389898
<NET-CHANGE-IN-ASSETS> (34350700)
<ACCUMULATED-NII-PRIOR> 1615595
<ACCUMULATED-GAINS-PRIOR> 127847278
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5548861
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6365353
<AVERAGE-NET-ASSETS> 1076093612
<PER-SHARE-NAV-BEGIN> 40.65
<PER-SHARE-NII> .13
<PER-SHARE-GAIN-APPREC> (.69)
<PER-SHARE-DIVIDEND> .08
<PER-SHARE-DISTRIBUTIONS> 5.23
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 34.78
<EXPENSE-RATIO> .59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>