NICHOLAS EQUITY INCOME FUND INC, 485BPOS, 1998-07-31

NICHOLAS EQUITY INCOME FUND INC
485BPOS, 1998-07-31

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{letterhead}

July 31, 1998

VIA EDGAR TRANMISSION

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

Re: Nicholas Equity Income Fund, Inc. (the "Fund")
SEC File No. 33-69804
Post-Effective Amendment No. 5
Registration Statement on Form N-1A

Gentlemen:

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. 5 to the
Registration Statement, including exhibits relating thereto, marked to show
changes effected by the Amendment.

This Amendment shall be effective on the date of filing, in accordance with
Rule 485(b). As legal counsel to the Fund, we have prepared the Amendment, and
we hereby represent pursuant to Rule 485(b)(4) that the Amendment does not
contain disclosures which would render it ineligible to become effective
pursuant to Rule 485(b).

Very truly yours,

MICHAEL BEST & FRIEDRICH

Kate M. Fleming
KMF/ljg
Enclosure
As filed with the Securities and Exchange Commission on July 31, 1998

Registration No. 33-69804
811-8062

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 5

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Post-Effective Amendment No. 5

NICHOLAS EQUITY INCOME FUND, INC.
(Exact Name of Registrant as Specified in Charter)

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

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

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

Copy to:
Kate M. Fleming
Michael Best & Friedrich LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202

It is proposed that the filing will become effective:

X immediately upon filing pursuant to paragraph (b)
on ______________ 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:
x 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 under the Investment Company Act of
1940, the Registrant hereby elects to register an indefinite
number of shares of its Common Stock. On June 30, 1998, the
Registrant filed the necessary Rule 24f-2 Notice and filing fee
with the Commission for its fiscal year ended March 31, 1998.

NICHOLAS EQUITY INCOME FUND, INC.
CROSS-REFERENCE SHEET
(As required by Rule 481(a))

Part A. Information Required in Prospectus Heading
- ------- ---------------------------------- ------
Item 1. Cover Page............ Cover Page
Item 2. Synopsis.............. Performance Data
Item 3. Condensed Financial
Information........... Fund Fees and
Expenses; Financial
Highlights
Item 4. General Description of
Registrant............ Introduction; Investment
Objectives and Policies;
Investment Restrictions
Item 5. Management of the Fund Investment Adviser
Item 5A. Management's Discussion
of Fund Performance.... Management's Discussion
of Fund Performance.
Item 6. Capital Stock and Other
Securities............. transfer of Capital
Stock; Dividends and
Federal Tax Status;
Capital Structure; Annual
Meeting; Shareholder
Reports
Item 7. Purchase of Securities
Being Offered.......... Purchase and Redemption
of Capital Stock;
Exchange Between Funds;
Transfer of Capital
Stock; Determination of
Net Asset Value; Dividend
Reinvestment Plan;
Individual Retirement
Accounts; Systematic
Withdrawal Plan; Self-
Employed Master
Retirement Plan
Item 8. Redemption or Repurchase Purchase of Capital
Stock; Redemption of
Capital Stock
Item 9. Pending Legal Proceedings Introduction

Part B. Information Required in Statement of Additional Information
Item 10. Cover Page............. Cover Page
Item 11. Table of Contents...... Table of Contents
Item 12. General Information and
History................ Introduction
Item 13. Investment Objectives and
Policies............... Investment Objectives and
Policies; Investment
Restrictions
Item 14. Management of the
Fund................... Investment Adviser;
Management - Directors,
Executive Officers and
Portfolio Managers of the
Fund
Item 15. Control Persons and
Principal Holders of
Securities............. Principal Shareholders
Item 16. Investment Advisory and
Other Services......... Investment Adviser;
Custodian and Transfer
Agent; Independent
Accountants and Legal
Counsel
Item 17. Brokerage Allocation
and Other Practices.... Brokerage

Item 18. Capital Stock and Other
Securities............. Transfer of Capital
Stock; Dividends and
Federal Tax Status;
Capital Structure;
Shareholder Reports;
Annual Meeting

Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered.......... Purchase of Capital
Stock; Redemption of
Capital Stock; Exchange
Between Funds; Transfer
of Capital Stock;
Determination of Net
Asset Value; Dividend
Reinvestment Plan;
Systematic Withdrawal
Plan; Individual
Retirement Accounts;
Master Retirement Plan
Item 20. Tax Status............. Dividends and Federal Tax
Status
Item 21. Underwriters........... N/A
Item 22. Calculations of
Performance Data....... Performance Data
Item 23. Financial Statements Financial Information

Part C. Other Information

Item 24. Financial Statements and
Exhibits............... Part C
Item 25. Persons Controlled By or
Under Common Control
with Registrant....... Part C
Item 26. Number of Holders of
Securities............. Part C
Item 27. Indemnification........ Part C
Item 28. Business and Other Connections
of Investment Adviser.. Part C
Item 29. Principal Underwriters Part C
Item 30. Location of Accounts and
Records................ Part C
Item 31. Management Services.... Part C
Item 32. Undertakings........... Part C

Nicholas Equity Income Fund, Inc.

Form N-1A

PART A: PROSPECTUS
NICHOLAS EQUITY INCOME FUND, INC.

PROSPECTUS

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

Nicholas Equity Income Fund, Inc. (the "Fund") is an
open-end management investment company whose primary investment
objective is to produce reasonable income for the investor.
Moderate long-term growth is a secondary consideration. To
achieve its primary investment objective, the Fund generally will
have at least 65% of its total assets invested in income-
producing equity securities. See "Investment Objectives and
Policies" for a further description of the Fund's primary and
secondary investment objectives.

NO-LOAD FUND - NO SALES CHARGE

Investment Adviser
NICHOLAS COMPANY, INC.

Minimum Initial Investment - $2,000

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS
THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

This Prospectus sets forth concisely the information about
the Fund that a prospective investor should know before
investing. Additional information about the Fund has been filed
with the Securities and Exchange Commission in the form of a
Statement of Additional Information, dated July 31, 1998. Upon
request to the Fund at the address and telephone number set forth
above, the Fund will provide copies of the Statement of
Additional Information without charge to each person to whom a
Prospectus is delivered.

July 31, 1998

INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE
TABLE OF CONTENTS

Page

INTRODUCTION.......................................... 1
FUND FEES AND EXPENSES ......................... 1
FINANCIAL HIGHLIGHTS.................................. 3
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE........... 4
PERFORMANCE DATA...................................... 5
INVESTMENT OBJECTIVES AND POLICIES.................... 6
INVESTMENT RESTRICTIONS............................... 9
INVESTMENT ADVISER.................................... 10
PURCHASE OF CAPITAL STOCK............................. 11
REDEMPTION OF CAPITAL STOCK........................... 13
EXCHANGE BETWEEN FUNDS................................ 15
TRANSFER OF CAPITAL STOCK............................. 16
DETERMINATION OF NET ASSET VALUE...................... 16
DIVIDENDS AND FEDERAL TAX STATUS...................... 17
DIVIDEND REINVESTMENT PLAN............................ 17
SYSTEMATIC WITHDRAWAL PLAN............................ 18
INDIVIDUAL RETIREMENT ACCOUNTS........................ 18
MASTER RETIREMENT PLAN................................ 18
CAPITAL STRUCTURE..................................... 18
ANNUAL MEETING........................................ 19
SHAREHOLDER REPORTS................................... 19

YEAR 2000

CUSTODIAN AND TRANSFER AGENT.......................... 19
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL............. 19

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 July
31, 1998, and, if given or made, such information or
representations may not be relied upon as having been authorized
by Nicholas Equity Income Fund, 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 Equity Income Fund, Inc. since the date hereof.

INTRODUCTION

Nicholas Equity Income Fund, Inc. (the "Fund") was
incorporated under the laws of Maryland on September 1, 1993.
The Fund is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as
amended. As an open-end investment company, it obtains its
assets by continuously selling shares of its common stock, $.0001
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. The Fund also 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 the net asset
value next determined following receipt of the redemption
request. The investment adviser to the Fund is Nicholas Company,
Inc. (the "Adviser").

The Fund's primary objective is to produce reasonable income
for the investor. Moderate long-term growth is a secondary goal.
The Fund seeks an income yield that exceeds the composite
dividend yield on the securities included in the Standard &
Poor's 500R Composite Stock Price Index ("S&P 500 Index"). The
Fund generally will have at least 65% of its total assets
invested in income-producing equity securities to achieve these
objectives. The equity securities in which the Fund may invest
include, but are not limited to, common stocks, preferred stocks
and convertible securities. The Fund generally will focus on
dividend-paying stocks. The Fund is designed for investors who
seek higher current income and less volatility than the typical
growth or capital appreciation equity fund.

FUND FEES AND EXPENSES

Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases........................ None
Maximum Sales Load Imposed on Reinvested Dividends............. None
Maximum deferred Sales Load ................................... None
Redemption Fees ............................................... None
Exchange Fee(2)................................................ None

Annual Fund Operating Expenses(3) (as a percentage of average net assets)
Management Fees (net of reimbursement)(4)...................... 0.52%
12b-1 Fees..................................................... None
Other Expenses................................................. 0.38%
Total Fund Operating Expenses (net of reimbursement)(4)........ 0.90%

(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 Expense percentages are based on
expenses incurred for the fiscal year ended March 31, 1998.

(4) Management Fees and Total Fund Operating Expenses reflect
the Adviser's reimbursement for expenses during the fiscal
year ended March 31, 1998, as described below. Absent
reimbursement of expenses, Management Fees and Total Fund
Operating Expenses would have been 0.70% and 1.08%,
respectively.

From time to time, the Adviser may decide to absorb all or a
portion of the Fund's operating expenses, including the
investment advisory fee, in excess of a certain percentage of the
average net assets of the Fund on an annual basis. As a result,
the Fund's total return, yield and distribution rate will be
higher than if the fees and expenses had been paid by the Fund.

Commencing on February 12, 1996, the Adviser began to absorb
all Fund operating expenses, including the investment advisory
fee, in excess of 0.90% of the average net assets of the Fund on
an annual basis, until further notice. As a result, the Fund's
total return, yield and distribution rate will be higher than if
the fees and expenses had been paid by the Fund. From time to
time and in its sole discretion, the Adviser may: (i) further
reduce or waive its fee or reimburse the Fund for certain of its
expenses in order to reduce the Fund's expense ratio; or (ii)
decrease the amount of absorption of, or eliminate its absorption
of, the Fund's operating expenses in excess of 0.90% of the
average net assets of the Fund on an annual basis.

EXAMPLE

One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
A shareholder would pay the
following expenses on a $1,000
investment, assuming: (1) 5%
annual return and (2) redemption
at the end of each period... $9 $29 $50 $111

This Example is based upon total operating
expenses of the Fund, net of reimbursement,
as shown in the expense table. This Example
should not be considered a representation of
past or future expenses. Actual expenses may
be greater or lesser than those shown.

The purpose of the table is to assist the prospective
investor in understanding the various costs and expenses that an
investor in the Fund will bear directly and indirectly. For a
description of "Management Fees" and "Other Expenses," see
"Investment Adviser."

FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)

The following Financial Highlights of the Fund for the four
fiscal years ended March 31, 1998 and for the period from
November 23, 1993 (date of initial public offering) through March
31, 1994, 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 March 31, 1998.
The Financial Highlights should be read in conjunction with the
financial statements and related notes included in the Fund's
Annual Report which is incorporated by reference into the
Statement of Additional Information and which may be obtained
without charge by writing or calling the Fund.

FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the year)
- ---------------------------------------------------------------------

<TABLE>
Year Ended March 31,
--------------------
1998 1997 1996 1995 1994 (1)
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $12.27 $12.35 $10.56 $10.04 $10.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .47 .48 .36 .30 .06
Net gains (losses) on
securities (realized
and unrealized) 2.77 .44 1.77 .50 (.01)
----- ----- ----- ----- -----
Total from investment
operations 3.24 .92 2.13 .80 .05
----- ----- ----- ----- -----

LESS DISTRIBUTIONS:
Dividends (from net
investment income) (.50) (.45) (.34) (.28) (.01)
Distributions (from
capital gains) (.66) (.55) -- -- --
----- ----- ----- ----- ----

Total distributions (1.16) (1.00) (.34) (.28) (.01)
----- ------ ------ ------ -----

NET ASSET VALUE, END OF
YEAR $14.35 $12.27 $12.35 $10.56 $10.04
----- ----- ------ ------ -----
----- ----- ------ ------ -----

TOTAL RETURN 27.83% 7.83% 20.61% 8.13% .53% (2)

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(millions) $29.0 $20.8 $15.8 $11.8 $5.8
Ratio of expenses to
average net assets 0.90%(4) 0.90%(4) 1.38% (4) 1.73% 1.70% (3)
Ratio of net investment
income to average net
assets 3.61%(4) 4.12%(4) 3.26% (4) 3.32% 2.53% (3)
Portfolio turnover rate 36.83% 23.05% 68.85% 10.98% 0%
Average commission rate
paid by the Fund on
portfolio investment
transactions (5) $0.0473 $0.0467 $0.0472 N/A N/A

(1) For the period from November 23, 1993 (date of initial public offering)
through March 31, 1994.

(2) Not annualized.

(3) Net of reimbursements by the Adviser. Absent reimbursement of
expenses, the ratio of expenses to average net assets would have been
1.08%, 1.18% and 1.40% for the fiscal years ended March 31, 1998, 1997
and 1996, respectively. Also, the ratio of net investment income to
average net assets would have been 3.43%, 3.84% and 3.24% for the
fiscal years ended March 31, 1998, 1997 and 1996, respectively.

(4) Annualized.

(5) Disclosure of this rate is required by the Securities and Exchange
Commission on a prospective basis beginning with the Fund's 1996
fiscal year end.

MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE

The Fund's primary investment objective is to produce
reasonable income for the investor. Moderate long-term growth is
a secondary goal. The Fund seeks an income yield that exceeds the
composite dividend yield on the securities included in the S&P
500 Index. The term "reasonable income" refers to the Adviser's
judgment that reasonable income would be an income yield greater
than the composite dividend yield on the securities included in
the S&P 500 Index. As of March 31, 1998, the Fund's income yield
(i.e., the 30-day SEC yield) was 2.59%, the Fund's cash
distribution rate was 3.49%, and the composite dividend yield on
the securities included in the S&P 500 Index was approximately
1.70%. The Fund's total return for the fiscal year ended March
31, 1998 was 27.83%, while the total return for the S&P 500 Index
was 47.96% and the total return for the Lehman Brothers
Intermediate Corporate Bond Index was 10.64%. Commencing on
February 12, 1996, the Adviser began to absorb expenses in excess
of 0.90% of total net assets, until further notice. As a result,
the Fund's total return, yield and distribution rate during the
fiscal year ended March 31, 1998, was higher than if the Fund
paid for all expenses and fees. If the Fund had paid for all
expenses and fees, the Fund's total return, yield and
distribution rate would have been 27.65% (compared to the actual
27.83%), 2.41% (compared to the actual 2.59%), and 3.31%
(compared to the actual 3.49%), respectively.

As of March 31, 1998, the Fund was invested approximately
70.28% in common stocks, 3.60% in a non-convertible bond, 19.34%
in convertible bonds and 6.60% in short-term investments. Of the
Fund's investments in common stocks, approximately 95% were in
income-producing equity securities, while the remainder were in
securities of companies which the Adviser believes offer
possibilities for increase in value and/or have favorable long-
term prospects. The equity investments made by the Fund tend to
have higher cash dividend returns than the equity investments
made by the growth mutual funds for which the Adviser serves as
investment adviser. Management believes this strategy should
reduce the overall volatility of the Fund and more adequately
protect the Fund's capital as compared to the other growth mutual
funds for which the Adviser serves as investment adviser. During
the fiscal year ended March 31, 1998, the Adviser shifted the
Fund's portfolio to a greater percentage invested in dividend-
paying common stocks, and a lesser percentage invested in
convertible equity and debt securities and non-convertible bonds.

Set forth below is a comparison of the initial account value
and subsequent account value at the end of each of the completed
fiscal quarters and years of the Fund, assuming a $10,000
investment in the Fund at the beginning of the period, to the
same investment over the same periods in the S&P 500 Index and
the Lehman Brothers Intermediate Corporate Bond Index.

(The performance graph plot points are as follows:)

</TABLE>
<TABLE>
<CAPTION>
Lehman
Nicholas Intermediate
Equity Income % S&P 500 % Corporate Bonds %
Value returns Value returns Value returns
----- ------- ----- ------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>

11/30/93 10,000.00 10,000.00 10,000.00
12/31/93 9,930.00 -0.07 10,120.75 1.21 10,062.00 0.62
03/31/94 10,052.96 0.60 9,736.90 -3.79 9,787.31 -2.73
06/30/94 10,108.25 0.55 9,777.89 0.42 9,710.97 -0.78
09/30/94 10,540.88 4.28 10,255.95 4.89 9,810.99 1.03
12/31/94 10,407.01 -1.27 10,254.34 -0.02 9,794.31 -0.17
03/31/95 10,870.13 4.45 11,252.75 9.74 10,316.35 5.33
06/30/95 10,969.04 0.91 12,326.98 9.55 10,963.18 6.27
09/30/95 11,773.07 7.33 13,306.74 7.95 11,187.93 2.05
12/31/95 12,196.90 3.60 14,108.55 6.03 11,654.46 4.17
03/31/96 13,109.23 7.48 14,865.99 5.37 11,492.47 -1.39
06/30/96 13,204.93 0.73 15,533.25 4.49 11,547.63 0.48
09/30/96 13,367.35 1.23 16,013.52 3.09 11,772.81 1.95
12/31/96 14,134.64 5.74 17,348.28 8.34 12,116.58 2.92
03/31/97 14,134.64 0.00 17,813.47 2.68 12,066.90 -0.41
06/30/97 15,085.90 6.73 20,923.48 17.46 12,485.62 3.47
09/30/97 16,325.96 8.22 22,490.79 7.49 12,881.41 3.17
12/31/97 16,872.88 3.35 23,136.74 2.87 13,128.74 1.92
03/31/98 18,069.17 7.09 26,364.21 13.95 13,349.30 1.68

The Fund's average annual total returns for the one year and
life periods ended on the last day of the most recent fiscal year
are as follows:
Time Period From Inception
One Year Ended (November 23, 1993)
March 31, 1998 to March 31, 1998
-------------- -------------------------
Average Annual Total Return 27.83% 14.57%

Total returns are historical and include change in share
price and reinvestment of dividend and capital gain
distributions. Past performance is not predictive of future
performance. Principal value and return will fluctuate so an
investment, when redeemed, may be worth more or less than
original cost.

PERFORMANCE DATA

The Fund may from time to time include its "total return,"
"average annual total return," "yield" and "distribution rate" 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 " 30-day yield" of the Fund is calculated by dividing
the Fund's net investment income per share, as defined by the
Securities and Exchange Commission, for the 30-day period by the
net asset value per share on the last day of the stated period.
Net investment income represents dividends and interest generated
by the Fund's portfolio securities reduced by all expenses and
any other charges that have been applied to all shareholder
accounts. The calculation assumes the 30-day net investment
income is compounded monthly for six months and then annualized.
The Fund's distribution rate is calculated by using annualized
net investment income distributions and dividing by the net asset
value per share on the last day of the period. Generally, the
distribution rate reflects the amounts actually paid to
shareholders at a point in time and is based on book income,
whereas the yield reflects the earning power, net of expenses, of
the Fund's portfolio securities at a point in time.

The Fund's yield may be more or less than the amount
actually distributed to shareholders. Methods used to calculate
advertised yields and total returns are standardized for all bond
and stock mutual funds by the Securities and Exchange Commission.

All performance 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 these
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 Index Composites, 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.

INVESTMENT OBJECTIVES AND POLICIES

The Fund has adopted primary investment objectives, which
are fundamental policies and may not be changed without
shareholder approval. 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 such change 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 Fund's primary investment objective is to produce
reasonable income for the investor, and the Fund seeks an income
yield that exceeds the composite dividend yield on the securities
included in the S&P 500 Index. The term "reasonable income"
refers to the Adviser's judgment that reasonable income would be
an income yield greater than the composite dividend yield on the
securities included in the S&P 500 Index. The Fund's secondary
investment objective is moderate long-term growth. The term
"moderate long-term growth" refers to the Adviser's judgment that
moderate long-term growth would be approximately three-fourths of
the average total return achieved over a five-year period on the
S&P 500 Index. The Fund will not be managed as a balanced
portfolio and is not required to maintain a portion of its
investments in each of the Fund's permitted investments at all
times. The asset allocation mix for the Fund will be determined
by the Adviser at any given time in light of its assessment of
current economic conditions and investment opportunities. There
is no assurance the Fund will achieve its investment objectives,
nor is there any assurance the Fund will achieve reasonable
income or moderate long-term growth, as such terms are defined by
the Adviser.

During normal market conditions, the Fund generally will
have at least 65% of its total assets invested in income-
producing equity securities with expected dividend yields that
are higher than the yield of the S&P 500 Index. The equity
securities in which the Fund may invest include common stocks,
preferred stocks and convertible securities. Most of the equity
securities purchased by the Fund will have a dividend-paying
history or will pay a current dividend, while the remainder of
the equity securities will be securities of companies which offer
possibilities for increase in value and/or have favorable long-
term prospects. To the extent the Fund invests in small and
medium-sized companies, such companies often have a limited
market for their securities, limited financial resources and
usually are more affected by changes in the economy in general,
and the market price of their securities often fluctuates more
than securities of larger companies. However, such small and
medium-sized companies also may have the potential for more
rapid, and greater, long-term growth because of newer and more
innovative products. If the Fund holds a stock that pays
dividends at a rate which is below the yield of the S&P 500 Index
at the time of purchase, the Adviser will attempt to offset this
lower rate through other holdings that pay dividends or interest
at rates deemed to be sufficient so that the Fund's current net
income exceeds the yield of the S&P 500 Index. The Fund also may
invest in preferred stock and convertible securities, but only to
the extent that such securities also provide a current interest
or dividend payment stream on the date of purchase. The Fund may
invest in preferred stock and convertible securities which are
not 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 are unrated instruments but deemed by the Adviser
to be comparable in quality to instruments so rated on the date
of purchase; provided, however, that the Fund shall not invest
more than 35% of its total assets (at the time of purchase) in
preferred stocks, convertible securities or debt securities which
are not rated in one of the top four rating categories by any of
the NRSROs, or are unrated securities but deemed by the Adviser
to be comparable in quality to securities so rated on the date of
purchase, and provided further that the Fund may invest only in
securities rated at least B (or its equivalent) by any NRSRO (or
unrated but comparable in quality) at the time of purchase. (See
the Statement of Additional Information for a description of the
ratings used by Standard & Poor's Corporation and Moody's
Investor Services, Inc.) A convertible security typically is a
fixed income security, such as a bond or preferred stock, which
may be converted at a stated price within a specified period of
time into a specified number of shares of common stock of the
same or different issuer. While providing a fixed income stream
(generally higher in yield than the income derivable from a
common stock but lower than that afforded by a non-convertible
debt security), a convertible security also affords an investor
the opportunity, through its conversion feature, to participate
in the capital appreciation of the common stock into which it is
convertible. In general, the market value of a convertible
security is the higher of its investment value (i.e., its value
as a fixed income security) or its conversion value (i.e., the
value of the underlying shares of common stock if the security is
converted). Convertible securities frequently have speculative
characteristics.

The remainder of the Fund's assets generally will be
invested in corporate and governmental fixed income securities.
The Fund may invest in debt securities, including notes, bonds
and debentures, which are not investment grade quality on the
date of purchase (as rated by any of the NRSROs) or are unrated
obligations but deemed by the Adviser to be comparable in quality
to instruments so rated on the date of purchase; provided,
however, that the Fund shall not invest more than 35% of its
total assets (at the time of purchase) in preferred stocks,
convertible securities or debt securities which are not rated in
one of the top four rating categories by any of the NRSROs, or
are unrated securities but deemed by the Adviser to be comparable
in quality to securities so rated on the date of purchase, and
provided further that the Fund may invest only in securities
rated at least B (or its equivalent) by any NRSRO (or unrated but
comparable in quality) at the time of purchase. "Investment
grade" refers to fixed income securities ranked in one of the top
four categories as rated by Standard & Poor's Corporation,
Moody's Investor Services, Inc., or any other NRSRO. Obligations
rated in the lowest of the top four rating categories are
considered to have speculative characteristics. (See the
Statement of Additional Information for a description of the
ratings used by Standard & Poor's Corporation and Moody's
Investor Services, Inc.) Governmental fixed income securities
include obligations supported by the full faith and credit of the
United States, such as U.S. Treasury obligations and the
obligations of certain instrumentalities and agencies, and
mortgage-backed and related securities issued or guaranteed by
the United States Government, its agencies or instrumentalities,
or issued or guaranteed by private issuers and guarantors
equivalent to the quality standards of corporate fixed income
securities. The net asset value of the fixed income securities
held by the Fund will be affected primarily by changes in
interest rates, average maturities and the investment and credit
quality of the fixed income securities.

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 may adversely
impact the Fund's net asset value. The Fund also may incur
additional expenses to the extent it is required to seek recovery
upon a default in the payment of principal or interest on its
portfolio holding. In addition to relying, in part, on the
ratings assigned to the debt securities, the Fund also will rely
on the Adviser's judgment, analysis and experience in evaluating
the creditworthiness of the issuer. In this evaluation, the
Adviser will consider, among other things, the issuer's financial
resources, its sensitivity to economic conditions and trends, its
operating history, the quality of the issuer's management and
regulatory matters. The achievement of the Fund's investment
objectives may be more dependent on the Adviser's own credit
analysis than is the case for higher rated securities.

Since some issuers do not seek ratings for their securities,
unrated securities will be considered for investment by the Fund,
but only when the Adviser believes the financial condition of the
issuers of such securities and/or protection afforded by the
terms of the securities limit the risk to the Fund to a degree
comparable to that of rated securities in which the Fund may
invest. Although unrated securities are not necessarily of lower
quality than rated securities, the market for them may not be as
liquid and thus they may carry greater market risk and higher
yield than rated securities. These factors may have the effect
of limiting the availability of securities for purchase by the
Fund and also may limit the ability of the Fund to sell such
securities at their fair market value either to meet redemption
requests or in response to changes in the economy or in the
financial markets.

An investment in the Fund may be considered more speculative
than an investment in shares of a fund which invests primarily in
higher rated securities. All investments will be made in
conformance with the Fund's primary investment objective which is
to seek to obtain reasonable income and moderate long-term
growth. While the risk of investing in lower rated securities
with speculative characteristics is greater than the risk of
investing in higher rated securities, the Fund will attempt to
minimize this risk through diversification of its investments and
by analysis of each issuer and its ability to make timely
payments of income and principal. The Fund may invest only in
securities rated at least B (or its equivalent) by any NRSRO (or
unrated but comparable in quality) at the time of purchase;
however, subsequent to purchase, the ratings of the securities so
purchased may fall below B (or its equivalent) and the Fund will
not be precluded from retaining such a security whose credit
quality is so downgraded. As of March 31, 1998, 22.94% of the
Fund's total net assets were invested in rated and unrated
convertible and non-convertible corporate debt securities ("Debt
Securities"). As of March 31, 1998, as rated by Standard &
Poor's Corporation, of the Fund's total net assets, 12.31% were
invested in Debt Securities rated A, none rated BBB, none rated
BB, 7.35% rated B, none were rated CCC, CC, C or D, and 3.28%
were unrated by Standard & Poor's or Moody's but believed to be
equivalent to a B or better rating.

The Fund reserves the flexibility to temporarily invest its
assets in short-term, investment grade fixed income securities as
a defensive measure when conditions, such as a decline in the
stock market, are deemed to warrant such action or for investment
of idle cash balances. These short-term instruments include
United States ("U.S.") Government obligations (including Treasury
Bills, Notes and Bonds), certificates of deposit, bankers'
acceptances, commercial paper (rated A-1 or A-2 by Standard &
Poor's or Prime-1 or Prime-2 by Moody's, or the equivalent by any
other NRSRO, or unrated but deemed by the Adviser to be
comparable in quality to instruments so rated on the date of
purchase), short-term corporate debt issues and repurchase
agreements. 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 "Act"). Such securities
are not registered for purchase and sale by the public under the
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 also is limited
in its investments in Section 4(2) and Rule 144A debt securities
by the investment restrictions set forth in 1(d) under
"Investment Restrictions," below.

The Fund has reserved the right to invest in repurchase
agreements as a temporary defensive measure, but only up to 20%
of its total net assets at the time of purchase. 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 selling bank or primary
dealer agrees to repurchase such securities from the Fund at a
specified time and place. 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. In the event of a bankruptcy or default of certain
sellers of repurchase agreements, the Fund could experience costs
and delays in liquidating the underlying security, which is held
as collateral, and the Fund might incur a loss if the value of
the collateral held declines during this period.

The Fund also may invest in the securities of real estate
investment trusts and other real estate-based securities
(including securities of companies whose assets consist
substantially of real property and interests therein) listed on a
national securities exchange or authorized for quotation on the
National Association of Securities Dealers Automated Quotation
System. Although the Fund will not invest directly in real
estate, it may invest in real estate-based securities, and
therefore, an investment in the Fund may be subject to certain
risks associated with the direct ownership of real estate. Risks
associated with investment in the real estate industry include
declines in the value of real estate, risks related to general
and local economic conditions, increases in property taxes and
operating expenses, costs associated with environmental problems,
changes in zoning laws, variations in rental income and changes
in interest rates. The value of securities of companies which
service the real estate industry also may be affected by such
risks. Investing in real estate investment trusts involves
certain other risks in addition to those risks associated with
investing in the real estate investment industry in general.
Real estate investment trusts may be affected by changes in the
value of the underlying property owned and the quality of any
credit extended, and are subject to cash flow dependency, default
by borrowers and tax exemption disqualification.

The Fund's objective stresses reasonable income. Although
the Adviser will consider the possibility of some capital
appreciation in selecting investments for the Fund, an investor
should not expect the Fund to reach the growth potential of funds
which have growth or capital appreciation as their primary
objective.

Since the Fund generally will invest a significant portion
of its assets in equity securities, its per share price may
fluctuate more than funds which primarily invest in fixed income
securities. Furthermore, there are market risks inherent in any
investment and there can be no assurance the objectives of the
Fund will be realized, nor can there be any assurance against
possible loss in the value of the Fund's portfolio.

Generally, the Fund does not intend to purchase securities
for short-term trading; however, when circumstances warrant,
securities may be sold without regard to the length of time held.
Furthermore, the Fund does not intend to engage in investment
techniques such as leveraging, short-selling, options and futures
transactions or lending portfolio securities. 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. Limitations set forth below apply on the
date of investment by the Fund.

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) the purchase of bank certificates of
deposit or commercial paper;

(c) investment in repurchase agreements in
an amount not to exceed 20% of the total net
assets of the Fund; provided, however, that
repurchase agreements maturing in more than seven
days will not constitute more than 10% of the
value of the total net assets; and

(d) the purchase of a portion of bonds,
debentures or other debt securities of types
commonly distributed in private placements to
financial institutions, such illiquid amount of
which shall not exceed 10% of the value of the
total net assets of the Fund.

3. The Fund will not mortgage, pledge or hypothecate
any of its assets except to secure permitted borrowings
and then only in an amount up to 15% of the value of
the Fund's total net assets taken at cost at the time
of such borrowings.

4. Investments will not be made for the purpose of
exercising control or management of any company. In
addition, 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.
5. The Fund may not purchase the securities of any
one issuer, except securities issued or guaranteed by
the United States or its instrumentalities or agencies,
if immediately after and as a result of such purchase
the value of the holdings of the Fund in the securities
of such issuer exceeds 5% of the value of the Fund's
total assets.

6. Not more than 25% of the value of the Fund's total
net assets will be concentrated in companies of any one
industry or group of related industries. This
restriction does not apply to U.S. Government
securities, which are obligations issued or guaranteed
by the U.S. Government, its agencies or
instrumentalities.

7. The Fund may 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 and other real estate-based
securities (including securities of companies whose
assets consist substantially of real property and
interests therein) listed on a national securities
exchange or authorized for quotation on the National
Association of Securities Dealers Automated Quotation
System, but not more than 10% in value of the Fund's
total assets will be invested in real estate investment
trusts nor will more than 25% in value of the Fund's
total assets be invested in the real estate industry in
the aggregate.

In addition to the foregoing restrictions, the Fund has
adopted other restrictions to comply with the securities laws of
various states, including prohibiting the making of short sales
of securities. These restrictions may be changed by the Board of
Directors of the Fund without shareholder approval.

INVESTMENT ADVISER

Under an investment advisory agreement dated November 23,
1993, Nicholas Company, Inc. (the "Adviser"), 700 North Water
Street, Suite 1010, Milwaukee, Wisconsin, 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. Nicholas Company, Inc. is the
investment adviser to five other mutual funds, which like the
Fund are sold without a sales charge, and to approximately 25
institutions and individuals with substantial investment
portfolios. The other funds for which Nicholas Company, Inc.
acts as investment adviser are Nicholas Fund, Inc., Nicholas
Income Fund, Inc., Nicholas II, Inc., Nicholas Limited Edition,
Inc. and Nicholas Money Market Fund, Inc. As of March 31, 1998,
the Adviser had approximately $8.5 billion in assets under
management.

Under the Investment Advisory Agreement, the Adviser
furnishes the Fund with office space, office facilities,
executive officers and executive expenses (such as health
insurance premiums for executive officers), any or all of which
are subject to reimbursement by the Fund at the Adviser's
request. The Adviser bears all sales and promotional expenses of
the Fund other than expenses incurred in complying with laws
regulating the issuance or sale of securities. The Fund pays all
of its operating expenses. 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 and
accounting services, legal fees and expenses, printing, fees and
expenses of any custodian or trustee having custody of Fund
assets, postage, charges and expenses of dividend disbursing
agents, registrars and stock transfer agents, including the cost
of keeping all necessary shareholder records and accounts and
handling any problems related thereto, and certain other costs
and costs related to the aforementioned items.

Albert O. Nicholas, President, Portfolio Manager and a
Director of the Fund, also is Chairman 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. 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 the Fund, Nicholas Fund, Inc. and Nicholas Income
Fund, Inc. since the Nicholas Company, Inc. has served as
investment adviser for such funds. He also was Portfolio Manager
for Nicholas II, Inc. and Nicholas Limited Edition, Inc. from the
date of each such fund's inception until March 1993. He is a
Chartered Financial Analyst. As of June 30, 1998, Mr. Nicholas
may be deemed to beneficially own 27.10% of the issued and
outstanding shares of Common Stock of the Fund, and therefore may
be deemed to "control" the Fund, as such term is defined in the
1940 Act.

Mr. David O. Nicholas, Senior Vice President of the Fund and
President of the Adviser, assists in the management of the Fund.
He has been employed by the Adviser since December 1985, and is a
Chartered Financial Analyst. 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, and has been Co-Portfolio Manager of
Nicholas Fund, Inc. since November 1996.

PURCHASE OF CAPITAL STOCK

Applications for the purchase of shares are made to
Nicholas Equity Income Fund, Inc., c/o Firstar Trust Company,
P.O. Box 2944, Milwaukee, Wisconsin 53201-2944. The Fund has
available an Automatic Investment Plan for shareholders. Anyone
interested should contact the Fund for additional information.

The price per share will be the net asset value next
computed after the time the application is received in proper
order and accepted by the Fund or by an authorized agent of the
Fund. The determination of the net asset value for a particular
day is applicable to all applications for the purchase of shares
received at or before the close of trading on the New York Stock
Exchange (the "Exchange") on that day (usually 4:00 p.m., New
York time). Accordingly, purchase orders received on a day the
Exchange is open for trading, prior to the close of trading on
that day, will be valued as of the close of trading on that day.
Applications for purchase of shares received after the close of
trading on the Exchange will be based on the net asset value as
determined as of the close of trading on the next day the
Exchange is open.

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
Trust Company's Post Office Box, does not constitute receipt by
Firstar Trust Company or the Fund. Correspondence intended for
overnight courier should not be sent to the Post Office Box
address. OVERNIGHT COURIER DELIVERY SHOULD BE SENT TO FIRSTAR
TRUST COMPANY, THIRD FLOOR, 615 EAST MICHIGAN STREET, MILWAUKEE,
WISCONSIN 53202.

All applications to purchase capital stock are subject
to acceptance or rejection by authorized officers of the Fund and
are not binding until accepted. Applications will not be
accepted unless they are accompanied by payment. Payment should
be made by check or money order drawn on a U.S. bank, savings and
loan or credit union. 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. It is the policy of the Fund
not to accept applications under circumstances or in amounts
considered disadvantageous to 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).

The Fund has established $2,000 as the minimum initial
purchase. The minimum for any subsequent purchases are $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 $2,000 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 30 days advance written notice to the accounts below such
minimum.

Purchase of shares will be made in full and fractional
shares computed to three decimal places. If a wire purchase is
to be an initial purchase, please call Firstar Trust Company
(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 Trust Company
Account 112-952-137
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202

Further Credit: Nicholas Equity Income Fund, Inc.
(shareholder account number)
(shareholder registration)

Please call Firstar Trust Company 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.

Shares of Common Stock of the Fund may be purchased or sold
through certain broker-dealers, financial institutions or other
service providers ("Processing Intermediaries"). When shares of
Common Stock of the Fund are purchased this way, the Processing
Intermediary, rather than its customer, may be the shareholder of
record. Certain service providers may receive compensation from
the Fund for providing transfer agent-type services relating to
the accounts held in street name. Processing Intermediaries may
use procedures and impose restrictions in addition to or
different from those applicable to shareholders who invest in the
Fund directly. A Processing Intermediary may be required to
register as a broker or dealer under certain state laws.

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 broker-dealers, but in all cases will be
retained by the broker-dealer and not remitted to the Fund or the
Adviser. Investors who do not wish to receive 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. Direct purchase or sale of shares of Common Stock of the
Fund may be made without a sales or redemption charge.

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

Certificates representing Fund shares purchased will not be
issued unless the shareholder specifically requests certificates
by signed written request 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.
When certificates are not requested, the Fund's transfer agent,
Firstar Trust Company, will credit the shareholder's account with
the number of shares purchased. Written confirmations are issued
for all purchases and redemptions of Fund shares.

REDEMPTION OF CAPITAL STOCK

A shareholder may require the Fund at any time during normal
business hours to redeem his/her shares in whole or in part. If
in writing, redemption requests must be signed by each
shareholder in the exact manner as the Fund account is registered
and must state the amount of redemption. The shareholder account
number and tax identification number or social security number
also are necessary. When shares are represented by certificates,
redemption is accomplished by delivering to the Fund, c/o Firstar
Trust Company, 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" as defined in
Section 240.17Ad-15 of the Code of Federal Regulations. An
"eligible guarantor institution" includes 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, redemption can be
accomplished by delivering an original signed written request for
redemption addressed to Nicholas Equity Income Fund, Inc., c/o
Firstar Trust Company. 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.
Both owners must sign if the account is owned jointly. Written
confirmations are issued for all redemptions of Fund shares.

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 be accompanied by the trust agreement
and signed by the trustee(s). A copy of the trust document
certified within the last 60 days is required if the trustee's
name is not registered on the account.

Please write or call Firstar Trust Company (414-276-0535 or
800-544-6547), prior to submitting a written redemption request
if there is doubt as to what documents or instruments are
necessary in order to redeem shares. A written redemption
request will not become effective until all documents have been
received in proper form by Firstar Trust Company. See "Purchase
of Capital Stock" for a description of certain arrangements the
Fund may enter into with Processing Intermediaries to process
redemption requests on an expedited basis.

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.

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
Trust Company's Post Office Box of redemption requests does not
constitute receipt by Firstar Trust Company or the Fund. DO NOT
MAIL LETTERS BY OVERNIGHT COURIER TO THE POST OFFICE BOX ADDRESS.
CORRESPONDENCE MAILED BY OVERNIGHT COURIER SHOULD BE SENT TO
FIRSTAR TRUST COMPANY, THIRD FLOOR, 615 EAST MICHIGAN STREET,
MILWAUKEE, WISCONSIN 53202.

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 Trust Company acts as
custodian. Telephone redemptions can only be made by calling
Firstar Trust Company at 414-276-0535 or 800-544-6547. In an
effort to prevent unauthorized or fraudulent redemption requests
by telephone, the Fund and its transfer agent employ reasonable
procedures to confirm that such instructions are genuine. In
addition to the account registration, you will be required to
provide the account number and the social security number.
Telephone calls will be recorded. Telephone redemption requests
must be received prior to the closing of the New York Stock
Exchange (usually 4:00 p.m., New York time) to receive that day's
net asset value. 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 Trust Company 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 Trust Company. Neither the Fund nor
Firstar Trust Company 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 Trust
Company 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.

The shareholder may instruct Firstar Trust Company 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. Please contact the Fund for the appropriate form
if you are interested in setting your account up with wiring
instructions.

The redemption price is the net asset value next computed
after the time of receipt by Firstar Trust Company (or by an
authorized agent of the Fund) of the certificate(s) or written
request in the proper form set forth above, or pursuant to proper
telephone instructions. Shares tendered for redemption on a
day the New York Stock Exchange is open for trading, prior to the
close of trading on that day, will be valued as of the close of
trading on that day. Requests for redemption of shares received
after the close of trading on the Exchange will be based on the
net asset value as determined as of the close of trading on the
next day the Exchange is open. The redemption price will depend
on the market value of the investments in the Fund's portfolio at
the time of redemption and may be more or less than the cost of
shares redeemed. A redemption generally is treated as a sale
of the shares being redeemed for federal income tax purposes.
This means the shareholder recognizes a capital gain or loss
equal to the difference between the redemption price and the
shareholder's cost for the shares being redeemed.

All redemptions will be processed immediately upon receipt.
The Fund will return redemption requests that contain
restrictions as to the time or date redemptions are to be
effected. 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 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. Firstar Trust Company charges a wire
redemption fee of $12.00. The Fund reserves the right to hold
payment up to 15 days or until satisfied that investments made by
check have been collected.

Due to the fixed expenses incurred by the Fund in
maintaining individual accounts, the Fund reserves the right to
redeem accounts that fall below $2,000 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 30 days advance written notice to the accounts below such
minimum.

Signature Guarantees. A signature guarantee of each owner
is required to redeem shares in the following situations, for all
size transactions: (i) if you change the ownership on your
account; (ii) upon redemption of shares when certificates have
been issued for your account; (iii) when you want the redemption
proceeds sent to a different address than is registered on the
account; (iv) for both certificated and uncertificated shares if
the proceeds are to be made payable to someone other than the
account owner(s); (v) any redemption transmitted by federal wire
transfer to your bank not previously set up with the Fund; or
(vi) if a change of address request has been received by the Fund
or Firstar Trust Company within 15 days of a redemption request.
In addition, signature guarantees are 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.

EXCHANGE BETWEEN FUNDS

If a shareholder chooses 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. Such an exchange constitutes a sale for federal
tax purposes and a capital gain or loss generally will be
recognized upon the exchange. This depends 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) or 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. Shareholders are
reminded, however, that Nicholas Limited Edition, Inc. is
restricted in size, and thus the exchange privilege into that
fund may be terminated or modified at a time when that maximum is
reached.

Shares of the Fund may be exchanged for shares of other
investment companies for which Nicholas Company, Inc. serves as
the investment adviser. Nicholas Company, Inc. is also the
investment adviser to Nicholas Fund, Inc., Nicholas II, Inc.,
Nicholas Income Fund, Inc., Nicholas Limited Edition, Inc. and
Nicholas Money Market Fund, Inc. Nicholas Fund, Inc. has an
investment objective of capital appreciation. Nicholas II, Inc.
and Nicholas Limited Edition, Inc. have long-term growth as their
investment objective. Nicholas Income Fund, Inc.'s investment
objective is to seek high current income consistent with the
preservation and conservation of capital value. Nicholas Money
Market Fund, Inc. has an investment objective of achieving as
high a level of current income as is consistent with preserving
capital and providing liquidity.

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 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 Capital Stock."

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
Trust Company 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.

Procedures for exchanging Fund shares by telephone may be
modified or terminated at any time by the Fund or Firstar Trust
Company. Neither the Fund nor Firstar Trust Company will be
responsible for the authenticity of exchange instructions
received by telephone. Telephone exchanges can only be made by
calling Firstar Trust Company 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 CAPITAL STOCK

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 to
transfer capital stock can be obtained by writing or calling
Firstar Trust Company (414-276-0535 or 800-544-6547) or Nicholas
Company, Inc. (414-272-6133 or 800-227-5987) prior to submitting
any transfer requests.

DETERMINATION OF NET ASSET VALUE

The net asset value per share will be computed by the
Adviser as of the close of trading on the New York Stock Exchange
on each day the Exchange is open for unrestricted trading. The
net asset value per share is determined by dividing the total
value of the assets of the Fund, less its liabilities, by the
total number of shares outstanding at the time of determination.
A portfolio security which is traded on a national securities
exchange or NASDAQis ordinarily will be valued at the price of
the last sale on such exchange. If no sale has occurred on the
date as of which assets are valued, it normally will be valued at
the latest bid price

Long-term debt securities will be valued at the current
evaluated bid price. Bid prices for debt securities are obtained
from the Fund's pricing service which consults one or more market
makers of each debt security being priced. Debt securities
listed on a national exchange may be priced at the last sales
price if the Fund's pricing service believes that such price
represents market value of the security for institutional trades.
The pricing of all debt securities takes into account the fact
that the Fund trades in institutional size trading units.
Securities for which there are no readily available market
quotations and other assets and liabilities of the Fund will be
valued at fair value using methods determined in good faith by
the Board of Directors.

DIVIDENDS AND FEDERAL TAX STATUS

Dividends of the Fund, if any, are paid to shareholders
usually in April, July, October and December. In those years in
which sales of portfolio securities result in net realized
capital gains (after utilization of any available capital loss
carry-overs), such gains are distributed to shareholders usually
in December and April. It is the practice of the Fund to
distribute capital gains in shares of the Fund at net asset value
or, at each shareholder's election, in cash.

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.

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 Taxpayer Relief Act of 1997 reduced from 28%
to 20% the maximum tax rate on long-term capital gains. This
reduced rate generally applies to securities held more than 18
months. Subsequent legislation has reduced the 18 month holding
period to 12 months for all sales on or after January 1, 1998.
Income distributed from the Fund's net investment income
and net realized short-term capital gains are taxable to
shareholders as ordinary income. 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%
back-up withholding on reportable dividends, capital gain
distributions (if any) and redemption payments. Generally under
federal law, 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 have 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 or she is not subject to backup withholding when
establishing an account.

The foregoing tax discussion relates solely 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 federal, state and local tax
aspects of 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. An election to accept cash may
be made on an application to purchase shares or 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.

Shareholders 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 Fund shares
worth $10,000 or more at the current market value may open a
Systematic Withdrawal Plan and receive monthly, quarterly, semi-
annual or annual checks for any designated amount. Firstar Trust
Company 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 Trust
Company 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 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.

As long as the aggregate IRA contributions meet the Fund's
minimum investment requirement of $2,000, 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.

The applicable forms and a description of the applicable
service fees 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 because changes
occur from time to time in existing IRA regulations.

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. See "Redemption of Capital Stock." 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.

CAPITAL STRUCTURE

The Fund is authorized to issue five hundred million
(500,000,000) shares of common stock, $.0001 par value per share.
Each full 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. The
shares are fully paid and non-assessable when issued. There are
no conversion or sinking fund provisions applicable to shares,
and shareholders 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 shareholder
to the same rights as whole shares.

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 Articles of
Incorporation 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 10% 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 with a report or a current
prospectus showing the Fund's portfolio and other information at
least semiannually. After the close of the Fund's fiscal year,
which ends March 31, an annual report or current prospectus
containing financial statements audited by the Fund's independent
public accountants will be sent to shareholders. Inquiries
concerning the Fund may be made by telephone at 414-272-6133 or
800-227-5987, or by writing to Nicholas Equity Income Fund, Inc.,
700 North Water Street, Suite 1010, Milwaukee, Wisconsin 53202.
A copy of the Fund's most recent Annual Report may be otained
without charge by calling or writing the Fund.

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.

CUSTODIAN AND TRANSFER AGENT

Firstar Trust Company, 615 East Michigan Avenue, Milwaukee,
Wisconsin 53202 acts as Custodian and Transfer Agent for the
Fund.

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.

PROSPECTUS

NICHOLAS EQUITY INCOME FUND, INC.

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

Custodian and Transfer Agent
FIRSTAR TRUST COMPANY
Milwaukee, Wisconsin
414-276-0535 or 800-544-6547

Independent Public Accountants
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin

Counsel
MICHAEL BEST & FRIEDRICH LLP
Milwaukee, Wisconsin

NICHOLAS EQUITY INCOME FUND, INC.

700 North Water Street
Milwaukee, Wisconsin 53202
July 31, 1998

Nicholas Equity Income Fund, Inc.

Form N-1A

PART B: STATEMENT OF ADDITIONAL INFORMATION
NICHOLAS EQUITY INCOME FUND, INC.

STATEMENT OF ADDITIONAL INFORMATION

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

This Statement of Additional Information, which is not a
prospectus, supplements and should be read in conjunction with
the current Prospectus of Nicholas Equity Income Fund, Inc. (the
"Fund"), dated July 31, 1998. To obtain a 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.

July 31, 1998

TABLE OF CONTENTS

Page

INTRODUCTION............................................ 1

INVESTMENT OBJECTIVES AND POLICIES...................... 1

INVESTMENT RESTRICTIONS................................. 5

DESCRIPTION OF RATINGS.................................. 8

INVESTMENT ADVISER...................................... 12

MANAGEMENT - DIRECTORS, EXECUTIVE OFFICERS
AND PORTFOLIO MANAGERS OF THE FUND..................... 13

PRINCIPAL SHAREHOLDERS.................................. 16

PURCHASE OF CAPITAL STOCK............................... 16

REDEMPTION OF CAPITAL STOCK............................. 18

EXCHANGE BETWEEN FUNDS.................................. 19

TRANSFER OF CAPITAL STOCK............................... 20

DETERMINATION OF NET ASSET VALUE........................ 20

DIVIDENDS AND FEDERAL TAX STATUS........................ 21

DIVIDEND REINVESTMENT PLAN.............................. 21

SYSTEMATIC WITHDRAWAL PLAN.............................. 22

INDIVIDUAL RETIREMENT ACCOUNT........................... 22

MASTER RETIREMENT PLAN.................................. 22

BROKERAGE............................................... 22

PERFORMANCE DATA........................................ 24

CAPITAL STRUCTURE....................................... 25

STOCK CERTIFICATES...................................... 25

ANNUAL MEETING.......................................... 25

SHAREHOLDER REPORTS..................................... 26

YEAR 2000............................................... 26

CUSTODIAN AND TRANSFER AGENT............................ 26

INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL............... 26

FINANCIAL INFORMATION................................... 26

INTRODUCTION

Nicholas Equity Income Fund, Inc. (the "Fund") was
incorporated under the laws of Maryland on September 1, 1993.
The Fund is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as
amended. As an open-end investment company, it obtains its
assets by continuously selling shares of its common stock, $.0001
par value per share, to the public. Proceeds from such sales are
invested in securities of other companies by the Fund. 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. The Fund also 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 the net asset
value next determined following receipt of the redemption
request. The investment adviser to the Fund is Nicholas Company,
Inc. (the "Adviser").

The Fund's primary objective is to produce reasonable income
for the investor. Moderate long-term growth is a secondary goal.
The Fund seeks an income yield that exceeds the composite
dividend yield on the securities included in the Standard &
Poor's 500R Composite Stock Price Index ("S&P 500 Index"). The
Fund generally will have at least 65% of its total assets
invested in income-producing equity securities to achieve these
objectives. The equity securities in which the Fund may invest
include, but are not limited to, common stocks, preferred stocks,
or convertible securities. The Fund generally will focus on
dividend-paying stocks. The Fund is designed for investors who
seek higher current income and less volatility than the typical
growth or capital appreciation equity fund.

INVESTMENT OBJECTIVES AND POLICIES

The Fund has adopted primary investment objectives, which are
fundamental policies and may not be changed without shareholder
approval. 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 such change 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.

During normal market conditions, the Fund generally will have
at least 65% of its total assets invested in income-producing
equity securities with expected dividend yields that are higher
than the yield of the S&P 500 Index. The equity securities in
which the Fund may invest include common stocks, preferred stocks
and convertible securities. Most of the equity securities
purchased by the Fund will have a dividend-paying history or will
pay a current dividend, while the remainder of the equity
securities will be securities of companies which offer
possibilities for increase in value and/or have favorable long-
term prospects. To the extent the Fund invests in small and
medium-sized companies, such companies often have a limited
market for their securities, limited financial resources and
usually are more affected by changes in the economy in general,
and the market price of their securities often fluctuates more
than securities of larger companies. However, such small and
medium-sized companies also may have the potential for more
rapid, and greater, long-term growth because of newer and more
innovative products. If the Fund holds a stock that pays
dividends at a rate which is below the yield of the S&P 500 Index
at the time of purchase, the Adviser will attempt to offset this
lower rate through other holdings that pay dividends or interest
at rates deemed to be sufficient so that the Fund's current net
income exceeds the yield of the S&P 500 Index. The Fund also may
invest in preferred stock and convertible securities, but only to
the extent that such securities also provide a current interest
or dividend payment stream on the date of purchase. The Fund may
invest in preferred stock and convertible securities which are
not 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 are unrated instruments but deemed by the Adviser
to be comparable in quality to instruments so rated on the date
of purchase; provided, however, that the Fund shall not invest
more than 35% of its total assets (at the time of purchase) in
preferred stocks, convertible securities or debt securities which
are not rated in one of the top four rating categories by any of
the NRSROs, or are unrated securities but deemed by the Adviser
to be comparable in quality to securities so rated on the date of
purchase, and provided further that the Fund may invest only in
securities rated at least B (or its equivalent) by any NRSRO (or
unrated but comparable in quality) at the time of purchase. A
convertible security typically is a fixed income security, such
as a bond or preferred stock, which may be converted at a stated
price within a specified period of time into a specified number
of shares of common stock of the same or different issuer. While
providing a fixed income stream (generally higher in yield than
the income derivable from a common stock but lower than that
afforded by a non-convertible debt security), a convertible
security also affords an investor the opportunity, through its
conversion feature, to participate in the capital appreciation of
the common stock into which it is convertible. In general, the
market value of a convertible security is the higher of its
investment value (i.e., its value as a fixed income security) or
its conversion value (i.e., the value of the underlying shares of
common stock if the security is converted). Convertible
securities frequently have speculative characteristics.

The remainder of the Fund's assets generally will be invested
in corporate and governmental fixed income securities. The Fund
may invest in debt securities, including notes, bonds and
debentures, which are not investment grade quality on the date of
purchase (as rated by any of the NRSROs) or are unrated
obligations but deemed by the Adviser to be comparable in quality
to instruments so rated on the date of purchase; provided,
however, that the Fund shall not invest more than 35% of its
total assets (at the time of purchase) in preferred stocks,
convertible securities or debt securities which are not rated in
one of the top four rating categories by any of the NRSROs, or
are unrated securities but deemed by the Adviser to be comparable
in quality to securities so rated on the date of purchase, and
provided further that the Fund may invest only in securities
rated at least B (or its equivalent) by any NRSRO (or unrated but
comparable in quality) at the time of purchase. "Investment
grade" refers to fixed income securities ranked in one of the top
four categories as rated by Standard & Poor's Corporation,
Moody's Investor Services, Inc., or any other NRSRO. Obligations
rated in the lowest of the top four rating categories are
considered to have speculative characteristics. Governmental
fixed income securities include obligations supported by the full
faith and credit of the United States, such as U.S. Treasury
obligations and the obligations of certain instrumentalities and
agencies, and mortgage-backed and related securities issued or
guaranteed by the United States Government, its agencies or
instrumentalities, or issued or guaranteed by private issuers and
guarantors equivalent to the quality standards of corporate fixed
income securities. The net asset value of the fixed income
securities held by the Fund will be affected primarily by changes
in interest rates, average maturities and the investment and
credit quality of the fixed income securities.

An investment in the Fund may be considered more speculative
than an investment in shares of a fund which invests primarily in
higher rated securities. All investments will be made in
conformance with the Fund's primary investment objective which is
to seek to obtain reasonable income and moderate long-term
growth. While the risk of investing in lower rated securities
with speculative characteristics is greater than the risk of
investing in higher rated securities, the Fund will attempt to
minimize this risk through diversification of its investments and
by analysis of each issuer and its ability to make timely
payments of income and principal. The Fund will invest only in
securities rated at least B (or its equivalent) by any NRSRO (or
unrated but comparable in quality) at the time of purchase;
however, subsequent to purchase, the ratings of the securities so
purchased may fall below B (or its equivalent) and the Fund will
not be precluded from retaining such a security whose credit
quality is so downgraded. As of March 31, 1998, 22.94% of the
Fund's total net assets were invested in rated and unrated
convertible and non-convertible corporate debt securities ("Debt
Securities"). As of March 31, 1998, as rated by Standard &
Poor's Corporation, of the Fund's total net assets, 12.31% were
invested in Debt Securities rated A, none rated BBB, none rated
BB, 7.35% rated B, none were rated CCC, CC, C or D, and 3.28%
were unrated by Standard & Poor's or Moody's but believed to be
equivalent to a B or better rating.

From time to time, proposals have been discussed regarding
new legislation designed to limit the use of certain high
yielding, high risk securities by issuers in connection with
leveraged buy-outs, mergers and acquisitions, or to limit the
deductibility of interest payouts on such securities. Such
proposals, if enacted into law, could negatively affect the
financial condition of issuers of high yield, high risk
securities by removing or reducing a source of future financing,
and could negatively affect the value of specific high yield,
high risk issues and the high yield, high risk market in general.
However, the likelihood of any such legislation or the effect
thereof is uncertain.

The Fund reserves the flexibility to temporarily invest its
assets in short-term, investment grade fixed income securities as
a defensive measure when conditions, such as a decline in the
stock market, are deemed to warrant such action or for investment
of idle cash balances. These short-term instruments include
United States ("U.S.") Government obligations (including Bills,
Notes and Bonds), certificates of deposit, bankers' acceptances,
commercial paper (rated A-1 or A-2 by Standard & Poor's or Prime-
1 or Prime-2 by Moody's, or the equivalent by any other NRSRO, or
unrated but deemed by the Adviser to be of comparable quality to
instruments so rated on the date of purchase), short-term
corporate debt issues and repurchase agreements. 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 "Act"). Such securities are not registered for
purchase and sale by the public under the 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 also is limited in its investments
in Section 4(2) and Rule 144A debt securities by the investment
restrictions set forth in 1(d) under "Investment Restrictions,"
below.

The Fund also may invest in the securities of real estate
investment trusts and other real estate-based securities
(including securities of companies whose assets consist
substantially of real property and interests therein) listed on a
national securities exchange or authorized for quotation on the
National Association of Securities Dealers Automated Quotation
System. Although the Fund will not invest directly in real
estate, it may invest in real estate-based securities, and
therefore, an investment in the Fund may be subject to certain
risks accounted with the direct ownership of real estate. Risks
associated with investment in the real estate industry include
declines in the value of real estate, risks related to general
and local economic conditions, increases in property taxes and
operating expenses, costs associated with environmental problems,
changes in zoning laws, variations in rental income and changes
in interest rates. The value of securities of companies which
service the real estate industry also may be affected by such
risks. Investing in real estate investment trusts involves
certain other risks in addition to those risks associated with
investing in the real estate investment industry in general.
Real estate investment trusts may be affected by changes in the
value of the underlying property owned and the quality of any
credit extended, and are subject to cash flow dependency, default
by borrowers and tax exemption disqualification.

Since the Fund generally will invest a significant portion of
its assets in equity securities, its per share price generally
will fluctuate more than funds which primarily invest in fixed
income securities. Furthermore, there are market risks inherent
in any investment and there can be no assurance the objectives of
the Fund will be realized, nor can there be any assurance against
possible loss in the value of the Fund's portfolio.

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 (all percentage limitations apply on the
date of investment by the Fund):

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

(b) the purchase of bank certificates of
deposit or commercial paper;

(c) investment in repurchase agreements in an
amount not to exceed 20% of the total net assets of
the Fund; provided, however, that repurchase
agreements maturing in more than seven days will
not constitute more than 10% of the value of the
total net assets; and

2. The Fund may not issue senior securities in
violation of the Investment Company Act of 1940, as
amended (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, and the
Fund may make borrowings from banks, provided that
immediately after any such borrowing all borrowings of
the Fund do not exceed one-third of the Fund's net
assets. The exceptions to this restriction are not for
investment leverage purposes but are solely for
extraordinary or emergency purposes and to facilitate
management of the Fund's portfolio by enabling the Fund
to meet redemption requests when the liquidation of
portfolio instruments is deemed to be disadvantageous or
not possible. While the Fund has borrowings in excess
of 5% of the value of the Fund's total assets
outstanding, it will not make any purchases of portfolio
instruments. If due to market fluctuations or other
reasons, the net assets of the Fund fall below 300% of
its borrowings, the Fund will promptly reduce its
borrowings in accordance with the 1940 Act. To do this,
the Fund may have to sell a portion of its investments
at a time when it may be disadvantageous to do so.

3. The Fund will not mortgage, pledge or hypothecate
any of its assets except to secure permitted borrowings
and then only in an amount up to 15% of the value of the
Fund's total net assets taken at cost at the time of
such borrowings.

5. The Fund may not purchase the securities of any one
issuer, except securities issued or guaranteed by the
United States or its instrumentalities or agencies, if
immediately after and as a result of such purchase the
value of the holdings of the Fund in the securities of
such issuer exceeds 5% of the value of the Fund's total
assets.

6. Not more than 25% of the value of the Fund's total
net assets will be concentrated in companies of any one
industry or group of related industries. This
restriction does not apply to U.S. government
securities, which are obligations issued or guaranteed
by the U.S. Government, its agencies or
instrumentalities.

7. The Fund may 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 and other real estate-based
securities (including securities of companies whose
assets consist substantially of real property and
interests therein) listed on a national securities
exchange or authorized for quotation on the National
Association of Securities Dealers Automated Quotations
System, but not more than 10% in value of the Fund's
total assets will be invested in real estate investment
trusts nor will more than 25% in value of the Fund's
total assets be invested in the real estate industry in
the aggregate.

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, in
order to comply with the securities laws of various states. 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.
All percentage limitations apply on the date of investment by the
Fund.

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 leases, 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, and will not invest
in options, financial futures or stock index futures,
other than hedging positions or positions covered by
cash or securities, if as result thereof, more than 5%
of its assets would be so invested.

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

5. The Fund will not engage in short sales of
securities.

6. The Fund will not purchase or sell real property
(including limited partnership interests, but excluding
readily marketable interests in real estate investment
trusts or readily marketable services of companies which
invest in real estate).

7. The Fund will not purchase securities of other
investment companies, except to the extent permitted by
the 1940 Act. Subject to certain exemptions, as of the
date of this Statement of Additional Information, the
1940 Act prohibits the Fund from investing more than 5%
of its total assets in securities of another investment
company, investing more than 10% of its total assets in
securities of such investment company and all other
investment companies, or purchasing more than 3% of the
total outstanding voting stock of another investment
company. Investments in the securities of other
investment companies may involve duplication of advisory
fees and certain other expenses.

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.

DESCRIPTION OF RATINGS

As set forth in the Prospectus, the Fund may invest in
various debt securities, convertible securities and preferred
stock that are assigned specific ratings by NRSROs, including
Standard & Poor's Corporation and Moody's Investor Services, Inc.
A brief description of various of the ratings and their meanings
follows.

Debt Securities

Standard and Poor's Corporation. An S&P corporate debt
rating is a current assessment of the creditworthiness of an
obligor with respect to a specific obligation. This assessment
may take into consideration obligors such as guarantors, insurers
or lessees. The ratings are based in varying degrees on the
following considerations: (i) likelihood of default-capacity and
willingness of the obligor as to the timely payment of interest
and repayment of principal in accordance with the terms of the
obligation; (ii) nature of and provisions of the obligation; and
(iii) protection afforded by, and the relative position of the
obligation in the event of bankruptcy, reorganization or other
arrangement under the laws of bankruptcy and other laws affecting
creditors' rights.

S&P's rating categories are as follows:
AAA rated bonds are highest grade obligations. They
possess the ultimate degree of protection as to
principal and interest. Marketwise, they move with
interest rates, and hence, provide the maximum safety on
all counts.

AA rated bonds also qualify as high-grade obligations,
and in the majority of instances differ from AAA issues
only in a small degree. Here, too, prices move with the
long-term money market.

A rated bonds are regarded as upper medium-grade.
They have considerable investment strength but are not
entirely free from adverse effects of changes in
economic and trade conditions. Interest and principal
are regarded as safe. They predominantly reflect money
rates in their market behavior, but to some extent, also
economic conditions.

BBB rated bonds, or medium-grade category bonds, are
borderline between definitely sound obligations and
those where the speculative element begins to
predominate. These bonds have adequate asset coverage
and normally are protected by satisfactory earnings.
Their susceptibility to changing conditions,
particularly to depressions, necessitates constant
watching. Marketwise, the bonds are more responsive to
business and trade conditions than to interest rates.
This group is the lowest which qualifies for commercial
bank investment.

BB-B rated bonds are regarded, on balance, as
predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in
accordance with the terms of the obligation. While such
bonds will likely have some quality and protective
characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse
conditions.

CCC rated bonds have a currently identifiable
vulnerability to default, and are dependent upon
favorable business, financial and economic conditions to
meet timely payment of interest and repayment of
principal. In the event of adverse business, financial
or economic conditions, they are not likely to have the
capacity to pay interest and repay principal.

CC-C rated bonds are usually bonds which are
subordinated to senior debt that is assigned an actual
or implied "CCC" or "CCC-" rating. A "C" rated bond may
also involve a situation where a bankruptcy petition has
been filed, but debt service payments are continued.

D ted bonds are in payment default. They involve a
situation where interest payments or principal payments
are not made on the date due even if the applicable
grace period has not expired, unless Standard & Poor's
believes such payments will be made during such grace
period. A "D" rated bond may also involve the filing of
a bankruptcy petition if debt service payments are
jeopardized.

Moody's Investors Services, Inc. Moody's bond rating
categories are as follows:

Aaa rated bonds are judged to be of the best quality.
They carry the smallest degree of investment risk and
are generally referred to as "gilt edged." Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the
various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa rated bonds are judged to be of high quality by all
standards. Together with the Aaa group they comprise
what are generally known as high-grade bonds. They are
rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or
fluctuation of protective elements may be of greater
amplitude, or there may be other elements present which
make the long-term risk appear somewhat larger than in
Aaa securities.

A rated bonds possess many favorable investment
attributes and are to be considered as upper medium-
grade obligations. Factors giving security to principal
and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment
sometime in the future.

Baa rated bonds are considered as medium-grade
obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal
security appear adequate for the present, but certain
protective elements may be lacking or may be
characteristically unreliable over any great length of
time. Such bonds lack outstanding investment
characteristics and, in fact, have speculative
characteristics as well.

Ba rated bonds are judged to have speculative
elements; their future cannot be considered as well
assured. Often the protection of interest and principal
payments may be very moderate and thereby not well
safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in
this class.

B rated bonds generally lack characteristics of the
desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of
the contract over any long period of time may be small.

Caa rated bonds are of poor standing. Such issues may
be in default or there may be present elements of danger
with respect to principal or interest.

Ca rated bonds represent obligations which are
speculative in a high degree. They are often in default
or have other marked shortcomings.

C rated bonds are the lowest rated class of bonds.
Bonds so rated can be regarded as having extremely poor
prospects of ever attaining any real investment
standing.

The ratings of S&P and Moody's represent their opinions as to
the quality of the instruments rated by them. Such ratings,
which are subject to revision or withdrawal, are general and are
not absolute standards of quality.
Preferred Stock

Standard & Poor's Corporation. An S&P preferred stock rating
is an assessment of the capacity and willingness of an issuer to
pay preferred stock dividends and any applicable sinking fund
obligations. A preferred stock rating differs from a bond rating
inasmuch as it is assigned to an equity issue, which issue is
intrinsically different from, and subordinated to, a debt issue.
Therefore, to reflect this difference, the preferred stock rating
symbol will normally not be higher than the bond rating symbol
assigned to, or that would be assigned to, the senior debt of the
same issuer.

The preferred stock ratings are based on the following
considerations:

I. Likelihood of payment - capacity and willingness of
the issuer to meet the timely payment of preferred stock
dividends and any applicable sinking fund requirements
in accordance with the terms of the obligation.

II. Nature of, and provisions of, the issue.

III. Relative position of the issue in the event of
bankruptcy, reorganization, or other arrangements
affecting creditors' rights.

S&P's rating categories for preferred stock are as follows:

AAA This is the highest rating that may be assigned by S&P to a
preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.

AA A preferred stock issue rated "AA" also qualifies as a high-
quality fixed income security. The capacity to pay preferred
stock obligations is very strong, although not as
overwhelming as for issues rated "AAA."

A An issue rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more
susceptible to the adverse effects of changes in
circumstances and economic conditions.

BBB An issue rated "BBB" is regarded as backed by an adequate
capacity to pay the preferred stock obligations. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely
to lead to a weakened capacity to make payments for a
preferred stock in this category than for issues in the "A"
category.
BB, B
CCC Preferred stock rated "BB," "B," and "CCC" are regarded, on
balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. "BB"
indicates the lowest degree of speculation and "CCC" the
highest degree of speculation. While such issues will
likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

CC The rating "CC" is reserved for a preferred stock issue in
arrears on dividends or sinking fund payments but that is
currently paying.

CA Preferred stock rated "C" is a non-paying issue.

DA Preferred stock rated "D" is a non-paying issue with the
issuer in default on debt instruments.

Moody's Investors Services, Inc. Because of the fundamental
differences between preferred stocks and bonds, Moody's uses a
variation of its bond rating symbols in the quality ranking of
preferred stock. The symbols, presented below, are designed by
Moody's to avoid comparison with bond quality in absolute terms.
It should always be borne in mind that preferred stock occupies a
junior position to bonds within a particular capital structure
and these securities are rated by Moody's within the universe of
preferred stocks.

Moody's preferred stock ratings are as follows:

aaa An issue which is rated "aaa" is considered to be a top-
quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within
the universe of preferred stocks.

aa An issue which is rated "aa" is considered a high-grade
preferred stock. This rating indicates that there is a
reasonable assurance the earnings and asset protection will
remain relatively well maintained in the foreseeable future.

a An issue which is rated "a" is considered to be an upper-
medium grade preferred stock. While the risks are judged to
be somewhat greater than in the "aaa" and "aa"
classification, earnings and asset protection are,
nevertheless, expected to be maintained at adequate levels.

baa An issue which is rated "baa" is considered to be a medium
grade preferred stock, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at
present but may be questionable over any great length of
time.

ba An issue which is rated "ba" is considered to have
speculative elements and its future cannot be considered well
assured. Earnings and asset protection may be very moderate
and not well safeguarded during adverse periods. Uncertainty
of position characterizes preferred stocks in this class.

b An issue which is rated "b" generally lacks the
characteristics of a desirable investment. Assurance of
dividend payments and maintenance of other terms of the issue
over any long period of time may be small.

caa An issue which is rated "caa" is likely to be in arrears on
dividend payments. This rating designation does not purport
to indicate the future status of payments.

ca An issue which is rated "ca" is speculative in a high degree
and is likely to be in arrears on dividends with little
likelihood of eventual payments.

c This is the lowest rated class of preferred or preference
stock. Issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment
standing.

General

The S&P "AA" and "A" ratings may be modified by the addition
of a plus or minus sign to show relative standing within the
major rating categories.

Moody's security rating symbols may contain numerical
modifiers of a generic rating classification. The modifier 1
indicates that the security ranks in the higher end of its
generic rating category, the modifier 2 indicates a mid-range
ranking, and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.

The ratings of S&P and Moody's represent their opinions as to
the quality of the instruments rated by them. It should be
emphasized that such ratings, which are subject to revision or
withdrawal, are general and are not absolute standards of
quality.
INVESTMENT ADVISER

Under an investment advisory agreement dated November 23,
1993, Nicholas Company, Inc. (the "Adviser"), 700 North Water
Street, Suite 1010, Milwaukee, Wisconsin 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. Nicholas Company, Inc. is the
investment adviser to five other mutual funds, which like the
Fund are sold without a sales charge, and to approximately 25
institutions and individuals with substantial investment
portfolios. The other funds for which Nicholas Company, Inc.
acts as investment adviser are Nicholas Fund, Inc., Nicholas
Income Fund, Inc., Nicholas II, Inc., Nicholas Limited Edition,
Inc. and Nicholas Money Market Fund, Inc., with primary
investment objectives and net assets as set forth below.

Net Assets at
Fund Primary Investment Objective March 31, 1998
------- ---------------------------- --------------
Nicholas Fund, Inc. Capital Appreciation $5,907,204,282
Nicholas II, Inc. Long-Term Growth $1,177,064,447
Nicholas Limited Edition, Inc. Long-Term Growth $ 389,577,554
Nicholas Income Fund, Inc. High Current Income $ 268,671,650
Nicholas Money Market Fund, Inc. Current Income $ 128,816,879
Nicholas Equity Income Fund, Inc. Reasonable Income $ 28,971,893

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 annual fee is seven-tenths of one percent (.70 of 1%)
of the average net asset value of the Fund, up to and including
$50,000,000, and six-tenths of one percent (.60 of 1%) of the
average net asset value in excess of $50,000,000. From time to
time, the Adviser may voluntarily waive all or a portion of its
management fee and/or absorb certain Fund expenses without
further notification of the commencement or termination of such
waiver or absorption. Any such waiver or absorption will
temporarily lower the Fund's overall expense ratio and increase
the Fund's overall return to investors. Effective February 12,
1996, the Adviser began to absorb all Fund expenses in excess of
0.90% of net assets. For the fiscal year ended March 31, 1996,
the Adviser reimbursed $2,144 to the Fund, for the fiscal year
ended March 31, 1997, the Adviser reimbursed $50,419 to the Fund,
and for the fiscal year ended March 31, 1998, the Adviser
reimbursed $46,168 to the Fund. During the fiscal years ended
March 31, 1996, 1997 and 1998, the Fund paid the Adviser an
aggregate of $94,349 (after reimbursement of $2,144), $77,384
(after reimbursement of $50,419), and $129,059 (after
reimbursement of $46,168), respectively, in fees.

Under the Investment Advisory Agreement, the Adviser
furnishes the Fund with office space, office facilities,
executive officers and executive expenses (such as health
insurance premiums for executive officers), any of which are
subject to reimbursement by the Fund at the Adviser's request.
The Adviser bears all sales and promotional expenses of the Fund
other than expenses incurred in complying with laws regulating
the issue or sale of securities. 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 and
accounting services, legal fees and expenses, printing, fees and
expenses of any custodian or trustee having custody of Fund
assets, postage, charges and expenses of dividend disbursing
agents, registrars and stock transfer agents, including the cost
of keeping all necessary shareholder records and accounts and
handling any problems related thereto, and certain other costs
and costs related to the aforementioned items.

The Adviser also 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. The total expenses of the
Fund as a percentage of net assets for the fiscal years ended
March 31, 1997 and 1998 were 0.90% in each year. The Adviser was
not required to reimburse the Fund for excess expenses for the
fiscal years ended March 31, 1997 or 1998, but did voluntarily
waive a portion of its management fee during these two years.

Albert O. Nicholas, President, Portfolio Manager and a
Director of the Fund, is also Chairman 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. Lynn S.
Nicholas, Senior Vice President of the Fund, is Senior Vice
President of the Adviser. She is the daughter of Albert O.
Nicholas. David O. Nicholas, Senior Vice President of the Fund,
is President and a Director of the Adviser. He is the son of
Albert O. Nicholas. Candace L. Lesak, Vice President of the
Fund, is an employee of the Adviser. Tracy C. Eberlein, an
Assistant Vice President of the Fund, also is an employee of the
Adviser. Jeffrey T. May, Senior Vice President and Treasurer of
the Fund, is Senior Vice President and Treasurer of the Adviser.
Mark J. Giese, Vice President of the Fund, also is Vice President
of the Adviser. David E. Leichtfuss, Secretary and Director of
the Adviser, is a partner in the law firm of Michael Best &
Friedrich LLP, Milwaukee, Wisconsin, legal counsel to both the
Fund and the Adviser. Daniel J. Nicholas, 2618 Harlem Boulevard,
Rockford, Illinois, is a Director of the Adviser, a brother of
Albert O. Nicholas, and a private investor.

MANAGEMENT - DIRECTORS, EXECUTIVE OFFICERS AND PORTFOLIO MANAGERS
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 state of Maryland permits registered
investment companies, such as the Fund, to operate without an
annual meeting of shareholders under specified circumstances if
an annual meeting is not required by the Investment Company Act
of 1940, as amended. The Fund has adopted appropriate provisions
in its Articles of Incorporation and will not hold annual
meetings of shareholders to elect directors unless otherwise
required to do so. The Fund will hold shareholder meetings at
such time as may be required to fill existing vacancies on the
Board in the event less than a majority of the directors then in
office have been elected by shareholders. The following table
sets forth the pertinent information about the Fund's officers
and directors at June 30, 1998:

NAME AGE AND POSITIONS PRINCIPAL OCCUPATIONS
ADDRESS HELD WITH DURING PAST FIVE YEARS
FUND
- ------------------------ ----------- --------------------------------
* Albert O. Nicholas, 67 President, Chairman and Director, Nicholas
700 N. Water Street Portfolio Company, Inc., since 1967. He
Milwaukee, WI 53202 Manager and 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.
and Nicholas Income Fund, Inc.
since the Nicholas Company, Inc.
has served as investment adviser
for such funds. He also was
Portfolio Manager for Nicholas
II, Inc. and Nicholas Limited
Edition, Inc. from the date of
each such fund's inception until
March 1993. He is a Chartered
Financial Analyst.
Melvin L. Schultz, 65 Director Director and Management
3636 N. 124th Street Consultant, Professional
Wauwatosa, WI 53222 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, 72 Director Management Consultant, on an
5270 N. Maple Lane independent basis, primarily in
Nashotah, WI 53058 the areas of mergers,
acquisitions and strategic
planning.
Robert H. Bock, 66 Director Professor of Business Strategy,
3132 Waucheeta Trail Ethics and Venture Capital,
Madison, WI 53711 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 Executive Vice President,
700 N. Water Street Vice Nicholas Company, Inc., the
Milwaukee, WI 53202 President Adviser to the Fund, and employed
by the Adviser since 1980. He is
a Chartered Financial Analyst.
Thomas J. Saeger, 54 Executive Executive Vice President and
700 N. Water Street Vice Assistant Secretary, Nicholas
Milwaukee, WI 53202 President Company, Inc., the Adviser to the
and Fund, and employed by the Adviser
Secretary since 1969. He is a Certified
Public Accountant.
Lynn S. Nicholas, 41 Senior Vice Senior Vice President, Nicholas
700 N. Water Street President Company, Inc., the Adviser to the
Milwaukee, WI 53202 Fund, and employed by the Adviser
since September 1983. She is a
Chartered Financial Analyst.
David O. Nicholas, 37 Senior Vice President, and a
700 N. Water Street President Director of Nicholas
Milwaukee, WI 53202 Company, Inc., the Adviser to the
Fund, 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 is a Chartered
Financial Analyst.
Jeffrey T. May, 42 Senior Vice Senior Vice President and
700 N. Water Street President Treasurer, Nicholas Company,
Milwaukee, WI 53202 and Inc., the Adviser to the Fund and
Treasurer employed by the Adviser since
July 1987. He is a Certified
Public Accountant.

Mark J. Giese, 27 Vice Vice President, Nicholas
700 N. Water Street President Company, Inc., 700 N.
Milwaukee, WI 53202 Water Street, Milwaukee,
WI 53202, the Adviser to
the Fund, 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.
Candace L. Lesak, 40 Vice Employee, Nicholas Company, Inc.,
700 N. Water Street President the Adviser to the Fund, since
Milwaukee, WI 53202 February 1983. She is a
Certified Financial Planner.
Tracy C. Eberlein, 37 Assistant Employee, Nicholas Company, Inc.,
700 N. Water Street Vice the Adviser to the Fund, since
Milwaukee, WI 53202 President 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. Albert O. Nicholas serves as Portfolio Manager of the
Fund and is primarily responsible for the day-to-day management
of the Fund's portfolio. Mr. David O. Nicholas assists in such
management.

Reference is made to the Section "Investment Adviser" for a
description of the relationships of the officers of the Fund to
the Adviser and the family relationships between directors of the
Adviser and officers and directors of the Fund. All directors
and executive officers of the Fund as a group (twelve in number)
beneficially owned approximately 35.7% of the shares of Common
Stock of the Fund at June 30, 1998.

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 Equity Income Fund, Inc.

The table below sets forth the aggregate compensation
received from the Fund by all directors of the Fund during the
fiscal year ended March 31, 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>
<TABLE>
<CAPTION>
AGGRREGATE PENSION OR RETIREMENT ESTIMATED TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED AS ANNUAL BENEFITS FROM FUND TO FUND
FROM THE FUND PART OF FUND EXPENSES UPON RETIREMENT COMPLEX PAID TO DIRECTORS (1)
------------- --------------------- --------------- -------------------------
<S> <C> <C> <C> <C>
Albert O. Nicholas (2) $0 $0 $0 $0
Melvin L. Schultz (2) $1200 $0 $0 $17,400
Richard Seaman (2) $1200 $0 $0 $10,200
Robert H. Bock (2) $1200 $0 $0 $10,200
</TABLE>

(1) During the fiscal year ended March 31, 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 II, 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 March 31, 1998, the Fund compensated
the disinterested directors at a rate of $300 per director per
meeting attended. The disinterested directors did not receive
any other form or amount of compensation from the Fund Complex
during the fiscal year ended March 31, 1998. All other directors
and officers of the Fund were compensated by the Adviser in
accordance with its investment advisory agreement.

(2) Mr. Albert O. Nicholas also is a member of the Board of
Directors of Nicholas Fund, Inc., Nicholas II, 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 II, Inc.,
Nicholas Limited Edition, Inc., Nicholas 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 II,
Inc. Mr. Bock also is a member of the Board of Directors of
Nicholas Fund, Inc. and Nicholas II, Inc.

PRINCIPAL SHAREHOLDERS

The following table sets forth the beneficial ownership of
shares of Common Stock of the Fund at June 30, 1998 by each
person known to the Fund to own more than 5% of the issued and
outstanding shares of Common Stock of the Fund.

Number of Shares Percent of
Name and Address of Common Stock Total
of Beneficial Owner Beneficially Owned Outstanding Shares
- ------------------- ------------------ ------------------
Albert O. Nicholas
700 North Water Street
Milwaukee, WI 53202 562,197(1) 27.1%(1)

Nicholas Family Foundation
c/o Lynn S. Nicholas
10309 N. River Road
Mequon, WI 53092 117,360(2) 5.7%(2)

(1) Nicholas Company, Inc., the investment adviser to the Fund,
owns no shares of Common Stock. Albert O. Nicholas,
President and a Director of the Fund, Chairman and a
Director of the Adviser, and owner of 91% of the outstanding
voting securities of the Adviser, owns no shares of Common
Stock. Nancy Nicholas, the spouse of Mr. Nicholas, owns
517,089 shares of Common Stock. Mr. Nicholas, along with
David E. Leichtfuss, are the trustees of the Nicholas
Company, Inc. Profit-Sharing Trust, which owns 45,108
shares of Common Stock. Both have the right, in conjunction
with one another, to vote these shares of Common Stock. As
a beneficial owner of more than 25% of the issued and
outstanding shares of Common Stock of the Fund, Mr. Nicholas
may be deemed to "control" the Fund, as such term is defined
in the Investment Company Act of 1940.
(2) All shares of Common Stock listed are owned of record by the
Nicholas Family Foundation.

PURCHASE OF CAPITAL STOCK

All applications to purchase capital stock are subject to
acceptance or rejection by authorized officers of the Fund and
are not binding until accepted. Applications will not be
accepted unless they are accompanied by payment. Payment should
be made by check or money order drawn on a U.S. bank, savings and
loan or credit union. 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. It is the policy of the Fund
not to accept applications under circumstances or in amounts
considered disadvantageous to 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).

The Fund has established $2,000 as the minimum initial
purchase. The minimum for any subsequent purchases 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 $2,000 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 30 days advance written notice to the accounts below such
minimum.

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

Credit: Firstar Trust Company
Account 112-952-137
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202

Further Credit: Nicholas Equity Income Fund, Inc.
(shareholder account number)
(shareholder registration)

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 broker-dealers, but in all cases will be
retained by the broker-dealer and not remitted to the Fund or the
Adviser. Investors who do not wish to receive 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. Signature guarantees may be required. Direct purchase or
sale of shares of Common Stock of the Fund may be made without a
sales or redemption charge.

The Fund also may enter into arrangements with some
Processing Intermediaries authorizing them to process purchase
orders or redemption requests on behalf of the Fund on an
expedited basis (an "authorized agent"). Receipt of a purchase
order or redemption request by an authorized agent will be deemed
to be receipt by the Fund for purposes of determining the net
asset value of Fund shares to be purchased or redeemed. 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. For
redemption orders placed through an authorized agent, a
shareholder will receive redemption proceeds which reflect the
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.

Certificates representing Fund shares purchased will not be
issued unless the shareholder specifically requests certificates
by signed written request 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. When certificates are not
requested, the Fund's transfer agent, Firstar Trust Company, will
credit the shareholder's account with the number of shares
purchased. Written confirmations are issued for all purchases
and redemptions of Fund shares.

REDEMPTION OF CAPITAL STOCK

The redemption price is the net asset value next computed
after the time of receipt by Firstar Trust Company (or by an
authorized agent of the Fund) of the certificate(s) or written
request in the proper form set forth above, or pursuant to proper
telephone instructions. Shares tendered for redemption on a day
the New York Stock Exchange is open for trading, prior to the
close of trading on that day, will be valued as of the close of
trading on that day. Requests for redemption of shares received
after the close of trading on the Exchange will be based on the
net asset value as determined as of the close of trading on the
next day the Exchange is open. The redemption price will depend
on the market value of the investments in the Fund's portfolio at
the time of redemption and may be more or less than the cost of
shares redeemed. A redemption generally is treated as a sale of
the shares being redeemed for federal income tax purposes. This
means the shareholder recognizes a capital gain or loss equal to
the difference between the redemption price and the shareholder's
cost for the shares being redeemed.

EXCHANGE BETWEEN FUNDS

Exchange of shares can be accomplished in the following
ways:

Telephone exchanges can only be made by calling Firstar
Trust Company at 414-276-0535 or 800-544-6547. You will be
required to provide pertinent information regarding your account
(social security number and account number). Calls will be
recorded.

TRANSFER OF CAPITAL STOCK

DETERMINATION OF NET ASSET VALUE

The net asset value per share will be computed by the
Adviser as of the close of trading on the New York Stock Exchange
on each day the Exchange is open for unrestricted trading. The
Exchange generally 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 Exchange will
not be open for trading on the preceding Friday, and when any
such holiday falls on a Sunday, the Exchange 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). The net asset value per share is determined
by dividing the total value of the assets of the Fund, less its
liabilities, by the total number of shares outstanding at the
time of determination. A portfolio security which is traded on a
national securities exchange or NASDAQ ordinarily will be valued
at the price of the last sale on such exchange. If no sale has
occurred on the date as of which assets are valued, it normally
will be valued at the latest bid price.

DIVIDENDS AND FEDERAL TAX STATUS

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 under
federal law, 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. 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 when
establishing an account.

DIVIDEND REINVESTMENT PLAN

SYSTEMATIC WITHDRAWAL PLAN

INDIVIDUAL RETIREMENT ACCOUNTS

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.

The Taxpayer Relief Act of 1997 has created the new Roth IRA.
While 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.

The Taxpayer Relief Act of 1997 also has created the new
education 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.

MASTER RETIREMENT PLAN

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 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.

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.

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. 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 Adviser's other client accounts,
which also are utilized by the Adviser in managing the Fund's
portfolio.

The Adviser, which is the investment adviser to the Nicholas
Fund, Inc., Nicholas Income Fund, Inc., Nicholas Limited Edition,
Inc., Nicholas II, Inc. and Nicholas Money Market 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 six 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. 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 generally are
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. The Fund paid aggregate brokerage
commissions of approximately $13,577, $10,970 and $13,877 for the
fiscal years ended March 31, 1996, 1997 and 1998, respectively.
The Fund's portfolio turnover rate was 23.05% and 36.83% for the
fiscal years ended March 31, 1997 and 1998, respectively.

PERFORMANCE DATA

The Fund may from time to time include its "total return,"
"average annual total return," "yield" and "distribution rate" in
advertisements or in information furnished to present and
prospective shareholders. All performance figures are based on
historical earnings and are not intended to indicate future
results. 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 "average annual total return" and "total return" are
computed according to the following formulas:

n
P(1+T) = ERV
or
Total Return = ERV - 1
---
P

Average Annual Total Return = 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 = at the end of the stated period, the ending redeemable
value of a hypothetical $1,000 payment made at the beginning of
the stated period.
For the Time
For the One Year Period From Inception
Period Ended (November 23, 1993)
March 31, 1998 to March 31, 1998
---------------- ---------------------------
Total Return 27.83% 80.72%
Average Annual Total Return 27.83% 14.57%

For purposes of the above 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 "30-day yield" of the Fund is calculated by dividing the
Fund's net investment income per share, as defined by the
Securities and Exchange Commission, for the 30-day period by the
net asset value per share on the last day of the stated period.
Net investment income represents dividends and interest generated
by the Fund's portfolio securities reduced by all expenses and
any other charges that have been applied to all shareholder
accounts. The calculation assumes the 30-day net investment
income is compounded monthly for six months and then annualized.
The Fund's distribution rate is calculated by using annualized
distributions and dividing by the net asset value per share on
the last day of the period. Generally, the distribution rate
reflects the amounts actually paid to shareholders at a point in
time and is based on book income, whereas the yield reflects the
earning power, net of expenses, of the Fund's portfolio
securities at a point in time. The Fund's yield may be more or
less than the amount actually distributed to shareholders
("distribution rate"). Methods used to calculate advertised
yields and total returns are standardized for all bond and stock
mutual funds by the Securities and Exchange Commission.

The yield is computed as follows:

Yield = 2[(((A-B/CD)+1)^6)-1]
where:
A = Dividend and interest income
B = Expenses accrued for the period (net of expense
reimbursement)
C = Average daily number of shares outstanding during
the period that were entitled to
receive dividends
D = Maximum offering price per share on the last day
of the period

In sales materials, reports and other communications to
shareholders, the Fund may compare its performance to certain
indices, including, but not limited to, the Standard & Poor'sR
Index Composites, National Association of Securities Dealers
Automated Quotation System, the Russell 2000R Index and 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 five hundred million
(500,000,000) shares of Common Stock, $.0001 par value per share.
Each full 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. The
shares are fully paid and non-assessable when issued. There are
no conversion or sinking fund provisions applicable to shares,
and shareholders 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 shareholder
to the same rights as whole shares.

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 Trust Company,
and direct that his account be credited with the shares. A
shareholder may in writing direct Firstar Trust Company 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 Investment Company Act
of 1940, as amended. The Fund has adopted the appropriate
provisions in its By-Laws and will not hold annual meetings of
shareholders for the following purposes unless otherwise required
to do so: (i) election of directors; (ii) approval of the
investment advisory agreement; (iii) ratification of the
selection of independent auditors; and (iv) approval of any
distribution agreement.

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 10% 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 Investment Company Act of
1940, as amended.

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 March 31, 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

CUSTODIAN AND TRANSFER AGENT

Firstar Trust Company, 615 East Michigan Avenue, Milwaukee,
Wisconsin 53202, acts as Custodian of the Fund. As such, Firstar
Trust Company 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 Trust Company does not exercise any supervisory function
over the management of the Fund, the purchase and sale of
securities or the payment of distributions to shareholders.
Firstar Trust Company also acts as the Fund's Transfer Agent and
Dividend Disbursing Agent.

INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL

Arthur Andersen LLP, 100 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, has been selected as 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 financial statements and other financial information
relating to the Fund contained in the Annual Report of the Fund
for the fiscal year ended March 31, 1998 are incorporated herein
by reference.

Nicholas Equity Income Fund, Inc.

Form N-1A

PART C: OTHER INFORMATION

PART C. OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements: Per share income and capital
changes information with respect to the Registrant's Common Stock
appears in Part A; the Registrant's statement of assets and
liabilities, including the schedule of investments, as of March
31, 1998, and the related statement of operations for the year
then ended, and the per share income and capital changes for the
year then ended are incorporated in Parts A and B by reference to
the Annual Report to Shareholders of the Registrant for its
fiscal year ended March 31, 1998.

(b) Exhibits: All exhibits required to be filed with this
Form N-lA pursuant to Item 24(b) thereof are listed in the
Exhibit Index appearing elsewhere in this Registration Statement
and (i) appear in their entirety herein or (ii) were previously
filed.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT

The Registrant is not under common control with any
other person. However, as of June 30, 1998, Albert O. Nicholas
may be deemed to beneficially own 27.1% of the issued and
outstanding shares of Common Stock of the Fund, and therefore may
be deemed to "control" the Fund, as such term is defined in the
Investment Company Act of 1940. The Registrant, Nicholas Fund,
Inc., Nicholas Income Fund, Inc., Nicholas Limited Edition, Inc.,
Nicholas II, Inc. and Nicholas Money Market Fund, Inc., which are
all Maryland corporations and are diversified management-type
investment companies registered under the Investment Company Act
of 1940, as amended, 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 26. NUMBER OF HOLDERS OF SECURITIES

Title of Class Number of Record Holders
-------------- ------------------------
Common Stock, $.0001
par value per share 843

Item 27. INDEMNIFICATION

(a) Article Fourteenth of the Articles of Incorporation of
Registrant provides that the Registrant shall indemnify and
advance expenses to its current acting and its former officers
and directors to the fullest extent that indemnification of
officers and directors is permitted by the Maryland General
Corporation Law.

(b) Article VII, Section 7 of the By-laws of Registrant
provides for the indemnification of officers and directors of
Registrant for claims arising from his or her service to
Registrant, excepting claims in which such officer or director
has been adjudicated guilty of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in
the conduct of his or her office. In the absence of any
adjudication, indemnification will be determined by resolution of
two-thirds of the members of the Board of Directors who are not
"interested persons" and not involved in such action or claim.
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.

(c) Registrant will maintain insurance coverage for the
benefit of officers and directors with respect to many types of
claims that may be made against them, some of which may be in
addition to those described in Article VII, Section 7 of the By-
laws of Registrant, subject to the limitations of federal law
(see Item 27(e), below). The investment adviser to the
Registrant, Nicholas Company, Inc., has, by resolution of its
Board of Directors, agreed to indemnify the 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.

(d) The Annotated Code of Maryland, Corporations and
Associations, Section 2-418 generally provides that, under
certain circumstances, corporations may indemnify any person who
was or is a party to any action by virtue of having been an
officer, director, employee or agent of the corporation,
including indemnification for judgments, fines, settlement
amounts and reasonable expenses actually incurred if the person
acted in good faith. This statute also provides a corporation
may maintain insurance on behalf of directors, officers,
employees or agents for liabilities arising out of such persons'
actions in such position. Such state law is subject to the
limitations of applicable federal law (see Item 27(e), below).

(e) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 or the Investment Company Act of
1940 may be permitted to officers, directors, controlling
persons, employees and agents of Registrant pursuant to the
Articles of Incorporation, Article VII, Section 7 of the By-laws
of Registrant, Maryland law or otherwise, Registrant has been
advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in said Acts and is, therefore, unenforceable. In the
event a claim for indemnification for such liabilities (other
than payment by Registrant of expenses incurred or paid by an
officer, director, controlling person, employee or agent in
connection with the successful defense of any action, suit or
proceeding) is asserted by such officer, director, controlling
person, employee or agent in connection with the securities being
registered, 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
said Acts and will be governed by the final adjudication of such
issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Incorporated by reference to pages 11-14 of the
Statement of Additional Information pursuant to Rule 411 under
the Securities Act of 1933, as amended.

ITEM 29. PRINCIPAL UNDERWRITERS

None.

ITEM 30. 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 Avenue,
Milwaukee, Wisconsin.

ITEM 31. MANAGEMENT SERVICES

None.

ITEM 32. UNDERTAKINGS

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; 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.
(b)(1) Articles of Incorporation of Registrant ____

(b)(2) By-Laws of Registrant ____

(b)(3) None.
(b)(4) Specimen certificate evidencing common
stock, $.0001 par value per share, of
Registrant (2) ____

(b)(5) Investment Advisory Agreement between
Registrant and Nicholas Company, Inc. (1) ____

(b)(6) None.

(b)(7) None.

(b)(8) Custodian Agreement between Registrant
and Firstar Trust Company (1) ____

(b)(9) Transfer Agent Agreement between Registrant
and Firstar Trust Company (1) ____

(b)(10) Opinion of Michael Best & Friedrich LLP,
counsel to the Registrant, concerning the
legality of Registrant's common stock,
including consent to the use thereof ____

(b)(11) Consent of Arthur Andersen LLP, independent
public accountants ____

(b)(12) Statements of Assets and Liabilities of
Registrant, including the Schedule of
Investments as of March 31, 1998, and the
related Statement of Change in Net Assets
and the Financial Highlights for the period
ended March 31, 1998 (included in the Annual
Report to Shareholders of Registrant for the
fiscal year ended March 31, 1998.) ____

(b)(13) Subscription Agreement between the Registrant
and the Nicholas Company, Inc. Profit Sharing
Trust as initial shareholder representing that
the initial purchase was without any present
intention of redeeming or reselling
(as amended)(2) ____

(b)(14.1) Registrant's Prototype IRA Plan (1) ____

(b)(14.2) Registrant's Master Retirement Plan
for Self-Employed Individuals ____

(b)(15) None.

(b)(16) Schedule for computation of performance
quotation provided in response to Item
22 of Form N-lA. ____

(b)(17) Financial Data Schedule ____

(b)(99) Powers of Attorney (1) ____

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
Nicholas Equity Income Fund, 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(b) under the Securities Act of 1933, and has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 29 day of July,
1998.

NICHOLAS EQUITY INCOME FUND, INC.

By: /s/ Thomas J. Saeger
------------------------
Thomas J. Saeger,
Executive Vice
President and Secretary

Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
this Registration Statement has been signed below by the
following persons in the capacities indicated on the ____ day of
July, 1998.

Signature Title
--------- -----

/s/ Albert O. Nicholas* President, Chief Executive
------------------- Officer and Director
Albert O. Nicholas

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

/s/Robert H. Bock* Director
----------------
Robert H. Bock

/s/Richard Seaman* Director
----------------
Richard Seaman

/s/Melvin L. Schultz* Director
------------------
Melvin L. Schultz

* 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

1. Consent of Michael Best & Friedrich
(included in Exhibit (b)(10))

2. Consent of Arthur Andersen LLP
(included as Exhibit (b)(11))

July 29, 1998

Nicholas Equity Income Fund, Inc.
700 North Water Street
Suite 1010
Milwaukee, Wisconsin 53202

Gentlemen:

We have acted as counsel to Nicholas Equity Income Fund, 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 these
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 independant verification of the genuiness of
signatures and to 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 organized under the laws of the State
of Maryland, and has the corporate power to carry on its present
business and is duly authorized to own its properties and conduct
its business in those states where such authorization is presently
required.

2. The Fund is authorized to issue up to five hundred million
(500,000,000) shares of Common Stock, par value $.0001 per share,
including those shares currently issued and outstanding.

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. 4 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 benn 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,

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

David E Leichtfuss

MICHAEL BEST & FRIEDRICH

DEL/ljg

May 27, 1998

Report to Fellow Shareholders:

Nicholas Equity Income Fund had a total return of 27.83% for the fiscal
year ended March 31, 1998. Net assets at March 31 were $29 million, and net
asset value per share was $14.35. Returns for periods ended March 31, 1998
are shown below:
<TABLE>
Average Annual Total Return*
---------------------------
3 Months* One Year* Three Years*
-------- --------- ------------
<S> <C> <C> <C>
Nicholas Equity Income Fund
(Distributions reinvested).................... + 7.09% +27.83% +18.46%
Standard & Poor's 500
(Dividends reinvested)........................ +13.94% +47.96% +32.79%
Lehman Brothers Intermediate
Corporate Bond Index.......................... + 1.68% +10.64% + 8.98%

</TABLE>

The Equity Income Fund is pursuing its mission of producing a reasonable
current income yield while providing the opportunity for long-term capital
appreciation. As of March 31, 1998, the 30-day annualized yield was 2.59%.
The annualized composite dividend return of the Standard & Poor's 500 as of
March 31 was approximately 1.70%. Also at March 31, the portfolio composition
was a follows: 6.8% of assets in cash, 3.6% in bonds and 89.6% in stocks and
convertible securities. With this alignment, we expect less volatility in
share price than with our growth funds.

Thank you for your interest in Nicholas Equity Income Fund.

Sincerely,

/S/ Albert O. Nicholas
------------------
Albert O. Nicholas
President

*Total returns are historical and include change in share price and
reinvestment of dividend and capital gain distributions. Past
performance is no guarantee of future results. Principal value and
return will fluctuate so an investment, when redeemed, may be worth more
or less than original cost. The Fund's average annual total return for
the life of the Fund (November 23, 1993 through March 31, 1998) is 14.57%

FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the year)
- ---------------------------------------------------------------------
<TABLE>
Year Ended March 31,
--------------------
1998 1997 1996 1995 1994 (1)
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $12.27 $12.35 $10.56 $10.04 $10.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .47 .48 .36 .30 .06
Net gains (losses) on
securities (realized
and unrealized) 2.77 .44 1.77 .50 (.01)
----- ----- ----- ----- -----
Total from investment
operations 3.24 .92 2.13 .80 .05
----- ----- ----- ----- -----

LESS DISTRIBUTIONS:
Dividends (from net
investment income) (.50) (.45) (.34) (.28) (.01)
Distributions (from
capital gains) (.66) (.55) -- -- --
----- ----- ----- ----- ----

Total distributions (1.16) (1.00) (.34) (.28) (.01)
----- ------ ------ ------ -----

NET ASSET VALUE, END OF
YEAR $14.35 $12.27 $12.35 $10.56 $10.04
----- ----- ------ ------ -----
----- ----- ------ ------ -----

TOTAL RETURN 27.83% 7.83% 20.61% 8.13% .53% (2)

(1) For the period from November 23, 1993 (date of initial public offering)
through March 31, 1994.
(2) Not annualized.
(3) Annualized.
(4) Net of reimbursements by adviser. Absent reimbursement of expenses,
the ratio of expenses to average net assets would have been 1.08%,
1.18% and 1.40% for the fiscal years ended March 31, 1998, 1997 and
1996 respectively. Also, the respective ratios of net investment
income to average net assets would have been 3.43%, 3.84% and 3.24%.
(5) Disclosure of this rate is required by the Securities and Exchange
Commission on a prospective basis beginning with the
Fund's 1996 fiscal year end.
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.

TOP TEN HOLDINGS
March 31, 1998 (unaudited)
- ----------------------------------------------------------------------
Percentage
Name of Net Assets
- ---- -------------

General Cable Corporation..................................... 6.26%
U.S. Bancorp.................................................. 5.17%
Medallion Financial Corporation............................... 4.96%
American Home Products Corporation............................ 4.94%
Wallace Computer Services, Inc................................ 4.78%
Household International, Inc.................................. 4.75%
Thermo Optek Corporation, 5.00%, due October 15, 2000*........ 4.69%
RPM, Inc...................................................... 4.61%
Edwards (A.G.), Inc........................................... 4.53%
ThermoQuest Corporation, 5.00%, due August 15, 2000*........... 3.95%
-------
Total of top ten holdings................................ 48.64%
-------
-------
*Convertible Bond.

SCHEDULE OF INVESTMENTS
March 31, 1998
- ---------------------------------------------------------------------

Shares or Quoted
Principal Market
Amount Value
- ----------- -------------
(Note 1 (a))
COMMON STOCKS - 70.28%
Banks and Finance - 25.26%
55,500 Bando McGlocklin Capital Corporation $ 638,250
30,000 Edwards (A.G.), Inc. 1,312,500
23,600 Firstar Corporation 932,200
10,000 Household Internatianal , Inc. 1,377,500
13,238 InvestorsBancorp, Inc. * 122,452
53,000 Medallion Financial Corporation 1,437,625
12,000 U.S. Bancorp 1,497,000
-----------
7,317,527
-----------

BUSINESS SERVICES - 4.78%
40,000 Wallace Computer Services, Inc. 1,385,000
-----------

CONSUMER PRODUCTS AND SERVICES - 3.46%
20,000 Pitney Bowes Credit Corporation 1,003,750
-----------

HEALTH CARE - 4.94%
15,000 American Home Products Corporation 1,430,625
-----------

INDUSTRIAL PRODUCTS AND SERVICES - 10.87%
40,000 General Cable Corporation 1,815,000
75,000 RPM, Inc. 1,335,938
-----------
3,150,938
-----------
INSURANCE - 3.35%
15,000 American General Corporation 970,312
-----------

INVESTMENT MANAGEMENT - 2.24%
25,000 Waddell & Reed Financial, Inc. - Class A 650,000
-----------
MEDIA, COMMUNICATIONS AND ENTERTAINMENT - 4.80%
18,000 General Motors Corporation - Class H* 814,500
10,123 Raytheon Company - Class A 575,746
----------
1,390,246
----------

REAL ESTATE - 7.78%
24,032 Meditrust Corporation, Paired ctf. 741,988
27,000 National Health Investors, Inc. 1,076,625
16,500 Reckson Associates Realty Corporation 435,187
----------
2,253,800
----------

MISCELLANEOUS - 2.80%
30,000 Landauer, Inc. 810,000
----------

TOTAL COMMON STOCKS 20,362,198
(cost $14,149,226) ----------

NON-CONVERTIBLE BOND - 3.60%
HEALTH CARE - 3.60%
$1,000,000 Beverly Enterprises, Inc.
9.00%, February 15, 2006 1,042,500
----------

TOTAL NON-CONVERTIBLE BOND 1,042,500
(cost $1,000,250) ----------

CONVERTIBLE BONDS - 19.34%
CONSUMER PRODUCTS AND SERVICES - 7.62%
1,000,000 ThermoQuest Corporation
5.00%, August 15, 2000 1,145,000
1,100,000 ThermoTrex Corporation
3.32%, November 1, 2007 1,062,875
----------
2,207,875
----------
HEALTH CARE - 3.28%
1,195,000 Emeritus Corporation
6.25%, January 1, 2006 950,025
----------

INDUSTRIAL PRODUCTS AND SERVICES - 8.44%
1,100,000 Richey Electronics, Inc.
7.00%, March 1, 2006 1,086,250
1,100,000 Thermo Optek Corporation
5.00%, October 15, 2000 1,358,500
----------
2,444,750
----------

TOTAL CONVERTIBLE BONDS
(cost $5,377,024) 5,602,650
----------

SHORT-TERM INVESTMENTS - 6.60%
Commercial Paper - 5.17%
500,000 WICOR Industries, Inc.
5.75%, due April 3, 1998 499,840
1,000,000 Manpower Inc.
5.75%, due April 8, 1998 998,882
----------
1,498,722
----------

Variable Rate Demand Notes - 1.43%
10,838 Johnson Controls, Incorporated
5.29%, due April 1, 1998 10,838
84,496 Pitney Bowes Credit Corporation
5.29%, due April 1, 1998 84,496
114,490 Sara Lee Corporation
5.29%, due April 1, 1998 114,490
205,009 Warner Lambert Company
5.27%, due April 1, 1998 205,009
----------
414,833
-----------

TOTAL SHORT-TERM INVESTMENTS
(cost $1,911,878) 1,913,555
-----------
TOTAL INVESTMENTS
(cost $22,438,378) 28,920,903
-----------

CASH AND RECEIVABLES,
NET OF LIABILITIES - 0.18% 50,990
-----------

TOTAL NET ASSETS
(Basis of percentages
disclosed above) $28,971,893
-----------
-----------

* Nondividend paying security.

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

HISTORICAL RECORD (unaudited)
- ----------------------------------------------------------------------
<TABLE>
Net Investment Dollar Growth of
Net Income Capital Gain Weighted An Initial
Asset Value Distributions Distributions Price/Earnings $10,000
Per Share Per Share Per Share Ratio (2) Investment (3)
----------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
November 23, 1993 (1)...................... $10.00 $ -- $ -- -- $10,000
March 31, 1994............................. 10.04 0.0133 -- 14.4 10,053
March 31, 1995............................. 10.56 0.2810 -- 14.6 10,871
March 31, 1996............................. 12.35 0.3370 -- 16.8 13,111
March 31, 1997............................. 12.27 0.4527 0.5483 15.9 14,138
March 31, 1998............................. 14.35 0.5014(4) 0.6586(4) 23.0 18,072

(1) Date of Initial Public Offering. (4) Paid $0.1210 in net investment income and $0.2750 in
(2) Based on latest 12 months accomplished earnings. capital gains on May 2, 1997 to shareholders of
(3) Assuming reinvestment of all distributions. record April 30, 1997.
Paid $0.1250 in net investment income on July 30, 1997
to shareholders of record July 24, 1997.
Paid $0.1040 in net investment income on October 29, 1997
Range in quarter end price/earnings ratios to shareholders of record October 23, 1997.
Paid $0.1514 in net investment income and $0.3836
High Low in capital gains on December 31, 1997 to shareholders of
--------- --------- record December 29, 1997.
3/31/98 - 23.0 12/31/94 - 13.9

</TABLE>

STATEMENT OF ASSETS AND LIABILITIES
March 31, 1998
- ----------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value (cost $22,438,378)(Note 1 (a))................... $28,920,903
Dividend and interest receivables.......................................................... 126,859
-----------
Total assets................................................................... 29,047,762
-----------

LIABILITIES:
Payables --
Management fee (Note 2).............................................................. 55,003
Other payables and accrued expenses.................................................. 20,866
-----------
Total liabilities.............................................................. 75,869
-----------
Total net assets............................................................... $28,971,893
-----------
-----------

NET ASSETS CONSIST OF:
Fund shares issued and outstanding......................................................... $22,286,315
Net unrealized appreciation on investments (Note 3)........................................ 6,480,848
Accumulated undistributed net realized gains on investments................................ 28,039
Accumulated undistributed net investment income............................................ 176,691
-----------

$28,971,893
-----------
-----------

NET ASSET VALUE PER SHARE ($.0001 par value, 500,000,000 shares authorized),
offering price and redemption price ($28,971,893 /2,018,918 shares outstanding)........... $14.35
------
------

</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.

STATEMENT OF OPERATIONS
For the year ended March 31, 1998
- ----------------------------------------------------------------------
<TABLE>
<S> <C>
INCOME:
Interest..................................................................................... $639,050
Dividends.................................................................................... 448,816
Other Income................................................................................. 38,769
-----------
1,126,635
-----------

EXPENSES:
Management fee (Note 2)...................................................................... 175,227
Legal fees................................................................................... 33,141
Registration fees............................................................................ 22,448
Audit and tax consulting fees................................................................ 18,775
Transfer agent fees.......................................................................... 8,391
Insurance.................................................................................... 3,810
Directors' fees.............................................................................. 3,600
Postage and mailing fees..................................................................... 2,780
Printing..................................................................................... 2,021
Custodian fees............................................................................... 1,267
-----------
Total expenses before reimbursement................................................. 271,460
Reimbursement of expenses by adviser (Note 2)....................................... 46,168
-----------
225,292
-----------
Net investment income............................................................... 901,343
-----------
NET REALIZED GAINS ON INVESTMENTS (Note 1 (b))..................................................... 778,333
-----------

NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS............................................. 4,450,636
-----------
Net gain on investments............................................................. 5,228,969
-----------

Net increase in net assets resulting from operations................................ $6,130,312
-----------
-----------

</TABLE>

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

STATEMENTS OF CHANGES IN NET ASSETS
For the years ended March 31, 1998 and 1997
- ----------------------------------------------------------------------

1998 1997
--------- ---------
OPERATIONS:
Net investment income......................... $ 901,343 $ 752,119
Net realized gain on
investments (Note 1 (b))...................... 778,333 717,947
Net increase (decrease) in
unrealized appreciation on investments........ 4,450,636 (113,756)
------------ ---------
Net increase in net assets
resulting from operations................ 6,130,312 1,356,310
------------ ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.5014 and $0.4527 per share, respectively) (932,718) (665,203)
Distrbutions from net realized gains on ------------ ---------
investment transactions ($0.6586 and $0.5483
respectively)................................. (1,225,096) (760,192)
----------- -----------
Total distributions...................... (2,157,814) (1,425,395)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued (447,302 and 463,715
shares, respectively)....................... 5,856,564 5,666,425
Net asset value of shares issued in
distributions from net investment income
and net realized gains (158,330 and
114,109 shares, respectively)............... 2,037,382 1,376,641
Cost of shares redeemed (283,616 and 161,928
shares, respectively)....................... (3,715,860) (1,968,355)
------------ ----------
Increase in net assets derived from
capital share transactions............... 4,178,086 5,074,711
------------ ----------

Total increase in net assets............. 8,150,584 5,005,626
------------ ----------

NET ASSETS, at the beginning of the year (including
undistributed net investment income of $208,066
and $121,150, respectively)..................... 20,821,309 15,815,683
------------ ----------

NET ASSETS, at the end of the year (including
undistributed net investment income of $176,691
and $208,066, respectively).....................$ 28,971,893 $20,821,309
----------- ----------
----------- ----------

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

NOTES TO FINANCIAL STATEMENTS
March 31, 1998
- ----------------------------------------------------------------------

(1) Summary of Significant Accounting Policies --
The Nicholas Equity Income Fund, Inc. (the "Fund") is an open-end,
diversified management investment company registered under the
Investment Company Act of 1940, as amended. The primary objective of
the Fund is to produce reasonable income with moderate long-term
growth as a secondary consideration. To achieve its primary
objective, the Fund generally will have at least 65% of its total
assets invested in income-producing equity securities. The following
is a summary of the significant accounting policies of the Fund:

(a) Each equity security is valued at the last sale price reported
by the principal security exchange on which the issue is traded,
or if no sale is reported, the latest bid price. Market values
of most debt securities are based on valuations provided by a
pricing service which determines valuations for normal
institutional-size trading units of securities using market
information, transactions for comparable securities and various
other relationships between securities which are generally
recognized by institutional traders. Variable rate demand notes
are valued at cost which approximates market value. U.S.
Treasury Bills and commercial paper are stated at market value
with the resultant difference between market value and original
purchase price being recorded as interest income. Investment
transactions are recorded no later than the first business day
after the trade date. Cost amounts, as reported on the schedule
of investments and the statement of assets and liabilities, are
the same for Federal income tax purposes.

(b) Net realized gains and losses on common stocks were computed on
the basis of specific certificates.

(c) Provision has not been made for Federal income taxes or excise
taxes since the Fund has elected to be taxed as a "regulated
investment company" and intends to distribute substantially all
taxable income to its shareholders and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies.

(d) Dividend income and distributions to shareholders are recorded
on the ex-dividend date. Non-cash dividends, if any, are
recorded at fair market value on date of distribution.

(e) The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from the estimates.

(2) Investment Adviser and Management Agreement --
The Fund has an agreement with Nicholas Company, Inc. (with whom
certain officers and directors of the Fund are affiliated) to serve
as investment adviser and manager. Under the terms of the agreement,
a monthly fee is paid to the investment adviser based on
approximately 1/17th of 1% (.70 of 1% on an annual basis) of the
average net asset value up to and including $50 million, and 1/20th
of 1% (.60 of 1% on an annual basis) of the average net asset value
in excess of $50 million. The adviser has decided to absorb all
expenses of the Fund in excess of 0.90% of net assets. The adviser
reimbursed $46,168 to the Fund which represents the expenses in
excess of .90% (annualized) of net assets for the fiscal year ended
March 31, 1998. Also, the investment adviser may be reimbursed for
clerical and administrative services rendered by its personnel. The
advisory agreement is subject to an annual review by the Directors of
the Fund.

(3) Net Unrealized Appreciation --
Aggregate gross unrealized appreciation (depreciation) as of March
31, 1998, based on investment cost for Federal tax purposes is as
follows:
Aggregate gross unrealized appreciation on investments $6,723,943
Aggregate gross unrealized depreciation on investments (243,095)
----------
Net unrealized appreciation ...................... $6,480,848
----------
----------
(4) Investment Transactions --
For the year ended March 31, 1998, the cost of purchases and the
proceeds from sales of investments, other than short-term
obligations, aggregated $11,623,229 and $8,233,057, respectively.

Report of Independent Public Accountants

To the Shareholders and Board of Directors
of Nicholas Equity Income Fund, Inc.:

We have audited the accompanying statement of assets and liabilities of
NICHOLAS EQUITY INCOME FUND, INC. (a Maryland corporation), including the
schedule of investments, as of March 31, 1998, and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the financial
highlights for each of the periods presented. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
finanial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 1998, by correspondence with the custodian
and brokers. As to securities purchased but not yet received, we requested
confirmation from brokers and, when replies were not received, we carried out
other alternative auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Nicholas Equity Income Fund, Inc. as of March 31, 1998, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and the financial
highlights for the periods presented in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

Milwaukee, Wisconsin,
April 24, 1998

NICHOLAS FAMILY OF FUNDS
Services Offered
- ---------------------------------------------------------------------
* IRAs
*Traditional *Educational
*Roth *SEP

*Self-employed Master Retirement Plan
*Money Purchase *Profit Sharing

*Automatic Investment Plan

*Direct Deposite of Distributions

*Systematic Withdrawl Plan

*Monthly Automatic Exchange between Funds

*Telephone Redemption (Regular accounts only)

*Telephone Exchange

*24-hour Automated Account Information (800-544-6547)

Please call a shareholder representative for further information on
the above services or with any other questions you may have regarding
the Nicholas Family of Funds.

800-227-5987

Officers and Directors

ALBERT O. NICHOLAS
President and Director

ROBERT H. BOCK
Director

MELVIN L. SCHULTZ
Director

RICHARD SEAMAN
Director

DAVID L. JOHNSON
Executive Vice President

THOMAS J. SAEGER
Executive Vice President and Secretary

DAVID O. NICHOLAS
Senior Vice President

LYNN S. NICHOLAS
Senior Vice President

JEFFREY T. MAY
Senior Vice President and Treasurer

CANDACE L. LESAK
Vice President

MARK J. GIESE
Vice President

TRACY C. EBERLEIN
Assistant Vice President

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

Custodian and Transfer Agent
FIRSTAR TRUST COMPANY
Milwaukee, Wisconsin
414-276-0535 or 800-544-6547

Counsel
MICHAEL, BEST & FRIEDRICH LLP
Milwaukee, Wisconsin

Auditors
ARTHUR ANDERSON LLP
Milwaukee, Wisconsin

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

CONSENT OF INDEPENDANT PUBLIC ACCOUNTANTS

As independant public accountants, we hereby consent to the use
of our report, and to all references to our, included in or made
a part of this form N-1A registration statement for the Nicholas
Equity Income Fund, Inc.

/s/ ARTHUR ANDERSON & CO.

Milwaukee, Wisconsin
July 24, 1998

<ARTICLE> 6

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 22438378
<INVESTMENTS-AT-VALUE> 28920903
<RECEIVABLES> 126859
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 29047762
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 75869
<TOTAL-LIABILITIES> 75869
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22286315
<SHARES-COMMON-STOCK> 2018918
<SHARES-COMMON-PRIOR> 1696902
<ACCUMULATED-NII-CURRENT> 176691
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 28039
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6480848
<NET-ASSETS> 28971893
<DIVIDEND-INCOME> 448816
<INTEREST-INCOME> 639050
<OTHER-INCOME> 38769
<EXPENSES-NET> 225292
<NET-INVESTMENT-INCOME> 901343
<REALIZED-GAINS-CURRENT> 778333
<APPREC-INCREASE-CURRENT> 4450636
<NET-CHANGE-FROM-OPS> 6130312
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 932718
<DISTRIBUTIONS-OF-GAINS> 1225096
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 447302
<NUMBER-OF-SHARES-REDEEMED> 283616
<SHARES-REINVESTED> 158330
<NET-CHANGE-IN-ASSETS> 8150584
<ACCUMULATED-NII-PRIOR> 208066
<ACCUMULATED-GAINS-PRIOR> 474802
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 175227
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 271460
<AVERAGE-NET-ASSETS> 24925780
<PER-SHARE-NAV-BEGIN> 12.27
<PER-SHARE-NII> .47
<PER-SHARE-GAIN-APPREC> 2.77
<PER-SHARE-DIVIDEND> .50
<PER-SHARE-DISTRIBUTIONS> .66
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.35
<EXPENSE-RATIO> .9
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

Compound and Total Return Calculation NICHOLAS EQUITY INCOME FUND 03/31/97 THRU 03/31/98

Starting date: 03/31/97 future value 1,278.32
Ending date: 03/31/98 present valu 1,000.00

Total Return 27.8320% # years 1
Average annual return 27.8320% # days 365.00

Investment Redemption
Lump sum Lump sum
Annuity Annuity

</TABLE>
<TABLE>
<CAPTION>

Compound and Total Return Calculation NICHOLAS EQUITY INCOME FUND 11/23/93 THRU 03/31/98

Starting date: 11/23/93 future value 1,807.23
Ending date: 03/31/98 present valu 1,000.00

Total Return 80.7226% # years 4.3506849315
Average annual return 14.5708% # days 1589.00

Investment Redemption
Lump sum Lump sum
Annuity Annuity

PRICE INV INC CAP GAIN # of SHARES REINVESTED REINVESTED CUM TOTAL
DATE /SHARE /SHARE /SHARE INVEST PURCHASED INV INC CAP GAIN SHARES MARKET VALUE
- ----------- ------------- ----------- ----------- ------------- ---------- ----------- ---------- ---------- ------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/23/93 D 10.00 1000 100.000 100.000 $1,000.00
12/30/93 D 9.97 0.0133 0.000 0.133 0.000 100.133 $998.33
12/31/93 A 9.98 0.000 0.000 0.000 100.133 $999.33
03/31/94 Q 10.04 0.000 0.000 0.000 100.133 $1,005.34
04/30/94 D 10.07 0.0450 0.000 0.447 0.000 100.581 $1,012.85
06/30/94 S 10.05 0.000 0.000 0.000 100.581 $1,010.84
07/31/94 D 10.09 0.0780 0.000 0.778 0.000 101.358 $1,022.71
09/30/94 Q 10.40 0.000 0.000 0.000 101.358 $1,054.13
10/21/94 D 10.28 0.0650 0.000 0.641 0.000 101.999 $1,048.55
12/29/94 D 10.07 0.0930 0.000 0.942 0.000 102.941 $1,036.62
12/31/94 A 10.11 0.000 0.000 0.000 102.941 $1,040.74
03/31/95 Q 10.56 0.000 0.000 0.000 102.941 $1,087.06
04/30/95 D 10.39 0.0750 0.000 0.743 0.000 103.684 $1,077.28
06/30/95 S 10.58 0.000 0.000 0.000 103.684 $1,096.98
07/21/95 D 10.63 0.0810 0.000 0.790 0.000 104.474 $1,110.56
09/30/95 Q 11.27 0.000 0.000 0.000 104.474 $1,177.43
10/20/95 D 11.04 0.0880 0.000 0.833 0.000 105.307 $1,162.59
12/28/95 D 11.45 0.0930 0.000 0.855 0.000 106.163 $1,215.56
12/31/95 A 11.49 0.000 0.000 0.000 106.163 $1,219.81
03/31/96 Q 12.35 0.000 0.000 0.000 106.163 $1,311.11
04/26/96 D 12.07 0.1360 0.3590 0.000 1.196 3.158 110.516 $1,333.93
06/30/96 S 11.95 0.000 0.000 0.000 110.516 $1,320.67
07/19/96 D 11.51 0.1030 0.000 0.989 0.000 111.505 $1,283.43
09/30/96 Q 11.99 0.000 0.000 0.000 111.505 $1,336.95
10/18/96 D 11.83 0.1170 0.000 1.103 0.000 112.608 $1,332.15
12/30/96 D 12.33 0.2770 0.0090 0.000 2.530 0.082 115.220 $1,420.66
12/31/96 A 12.27 0.000 0.000 0.000 115.220 $1,413.75
03/31/97 Q 12.27 0.000 0.000 0.000 115.220 $1,413.75
05/01/97 D 12.09 0.1800 0.2160 0.000 1.715 2.059 118.994 $1,438.64
06/30/97 S 12.68 0.000 0.000 0.000 118.994 $1,508.84
07/25/97 D 12.88 0.1250 0.000 1.155 0.000 120.149 $1,547.52
09/30/97 Q 13.59 0.000 0.000 0.000 120.149 $1,632.82
10/24/97 D 13.58 0.1040 0.000 0.920 0.000 121.069 $1,644.12
12/30/97 D 13.30 0.3900 0.1450 0.000 3.550 1.320 125.939 $1,674.99
12/31/97 A 13.40 0.000 0.000 0.000 125.939 $1,687.58
03/31/98 Q 14.35 0.000 0.000 0.000 125.939 $1,807.23

</TABLE>