FORM N-CSR

N-CSR 1 ncsr0307.htm FORM N-CSR

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-01728

Nicholas Fund, Inc.

(Exact name of registrant as specified in charter)

700 North Water Street, Milwaukee, Wisconsin 53202

(Address of principal executive offices) (Zip code)

Jeffrey T. May, Senior Vice President, Secretary and Treasurer

700 North Water Street

Milwaukee, Wisconsin 53202

(Name and address of agent for service)

Registrant's telephone number, including area code: 414-272-4650

Date of fiscal year end: 03/31/2007

Date of reporting period: 03/31/2007

Item 1. Report to Stockholders.

May 2007

Report to Fellow Shareholders:

For the first three months of calendar year 2007, Nicholas Fund returned (0.91)% versus 0.64% for the Standard & Poor's 500 Index. For the fiscal year ended March 31, 2007, the Fund was up 2.55% compared to 11.83% for its benchmark, the S&P 500. The Fund also is lagging in the three-and five-year periods. These numbers are unacceptable to management, and we are working hard to change it. For the period from the Fund's first public offering in July, 1969, we have outperformed the S&P 500.

Returns for Nicholas Fund, Inc. and selected indices are provided in the chart below for the period ended March 31, 2007.

		Average Annual Total Return
	3 Month	1 Year	3 Year	5 Year	10 Year	15 Year	Life*
Nicholas Fund, Inc.	(0.91)%	2.55%	7.47%	5.45%	5.74%	8.30%	11.41%
Standard & Poor's 500 Index	0.64%	11.83%	10.06%	6.27%	8.20%	10.88%	10.94%
Consumer Price Index	1.16%	2.78%	3.10%	2.82%	2.53%	2.62%	4.67%
Ending value of $10,000 invested in Nicholas Fund, Inc.	$9,909	$10,255	$12,411	$13,037	$17,473	$33,076	$588,783
Fund Expense Ratio (from 07/31/06 Prospectus): 0.77%

* The life of the Fund is 37.7 years from the date of its initial public offering, July 14, 1969. Starting time period for the Standard & Poor's 500 Index and the Consumer Price Index was June 30, 1969.

The Fund's expense ratio for the period ended March 31, 2007 can be found in the financial highlights included within this report.

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

The Fund is net of expenses, the market indices are gross of fees. The ending values above illustrate the performance of a hypothetical $10,000 investment made in the Fund over the timeframes listed. Assumes reinvestment of dividends and capital gains, but does not reflect the effect of any applicable sales charge or redemption fees. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. These figures do not imply any future performance.

At March 31, 2007, the Fund was fully invested with 3.41% cash. The diversified portfolio consisted of 49 equities. The Fund's top five holdings were Berkshire Hathaway - Class A, Affiliated Managers Group, Marshall & Ilsley, Thermo Fisher Scientific and Kinder Morgan Management. These stocks represented 24.24% of the total portfolio. In terms of sectors, the Fund had 27.77% in financials, 15.70% in consumer discretionary, 15.28% in industrials, 13.59% in health care and 8.01% in energy. Stocks that were helpful to the Fund's performance in the fiscal year were Berkshire Hathaway Class A, UST and Thermo Fischer Scientific. Stocks that hurt performance included NVR, Pentair and D.R. Horton.

In our view the U.S. economy is slowing. There are signs of strength, but more signs of weakness, lead by the housing industry slump, weak car sales and a decline in consumer spending. Gas prices over $3.00 a gallon are not helping. At this point, we expect this mid-cycle slowdown to continue but not turn into a recession. Inflation is still a concern of the Federal Reserve Board, but looks to be steady or declining at around 2 to 2 1/2 %. Based on these facts, we believe interest rates should hold around current levels, with the above-average probability that the Fed will cut short-term rates before the end of the year. The 10-year Treasury Bond, presently yielding approximately 4.69%, might yield closer to 4.0% by calendar year-end. We need to keep in mind that, in the aggregate, foreign economies, which represent approximately 70% of world Gross Domestic Product, are strong.

Management is concerned about stock prices, short-term, mainly because the market has not had a correction of 10% or more for over four years. Longer term, we are cautiously optimistic, feeling there are opportunities offered through astute stock picking.

Thank you for your continued interest in the Fund.

Sincerely,
Albert O. Nicholas	David O. Nicholas
Co-Portfolio Manager	Co-Portfolio Manager

The Fund may invest in smaller companies, which involve additional risks such as limited liquidity and greater volatility.

Please refer to the Schedule of Investments in the report for complete Fund holdings information. Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security.

The S&P 500 Index is a broad based unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general. The Consumer Price Index represents changes in prices of all goods and services purchased for consumption by urban households. One cannot invest directly in an index.

Must be preceded or accompanied by a prospectus.

The Nicholas Funds are distributed by Quasar Distributors, LLC. (05/07)

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN

NICHOLAS FUND, INC. AND S&P 500 INDEX

The line graph which follows compares the initial account value and subsequent account value at the end of each of the most recently completed ten fiscal years of the Fund, to the same investment over the same periods in the S&P 500 Index. The graph assumes a $10,000 investment in the Fund and the index at the beginning of the period.

	Nicholas Fund, Inc.	% Total Return	S&P 500 Index	% Total Return
03/31/97	10,000.00		10,000.00
03/31/98	15,098.00	50.98%	14,800.21	48.00%
03/31/99	15,117.63	0.13%	17,532.27	18.46%
03/31/00	16,138.07	6.75%	20,677.77	17.94%
03/31/01	13,436.55	(16.74)%	16,195.56	(21.68)%
03/31/02	13,402.96	(0.25)%	16,234.43	0.24%
03/31/03	10,105.83	(24.60)%	12,214.78	(24.75)%
03/31/04	14,078.44	39.31%	16,502.66	35.10%
03/31/05	15,178.49	7.81%	17,607.35	6.69%
03/31/06	17,038.60	12.25%	19,670.95	11.72%
03/31/07	17,472.71	2.55%	21,998.81	11.83%

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

	One Year Ended March 31, 2007	Five Years Ended March 31, 2007	Ten Years Ended March 31, 2007
Average Annual Total Return	2.55%	5.45%	5.74%

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

Financial Highlights (NICSX)

For a share outstanding throughout each period

-----------------------------------------------------------------------------

                                          Year ended March 31,

                               ----------------------------------------------

                                2007      2006      2005      2004      2003

                               ------    ------    ------    ------    ------

NET ASSET VALUE,

 BEGINNING OF PERIOD .......   $61.49    $60.05    $56.14    $40.37    $53.74

  INCOME (LOSS) FROM

  INVESTMENT OPERATIONS

   Net investment income ...      .80       .26       .10       .09       .18

   Net gain (loss) on

    securities (realized

    and unrealized) ........      .71      6.75      4.29     15.77    (13.39)

                               ------    ------    ------    ------    ------

      Total from investment

       operations ..........     1.51      7.01      4.39     15.86    (13.21)

                               ------    ------    ------    ------    ------

   LESS DISTRIBUTIONS

   From net investment

    income .................     (.82)     (.25)     (.07)     (.09)     (.16)

   From net capital gain ...    (4.33)    (5.32)     (.41)       --        --

                               ------    ------    ------    ------    ------

      Total distributions ..    (5.15)    (5.57)     (.48)     (.09)     (.16)

                               ------    ------    ------    ------    ------

NET ASSET VALUE, END

 OF PERIOD .................   $57.85    $61.49    $60.05    $56.14    $40.37

                               ------    ------    ------    ------    ------

                               ------    ------    ------    ------    ------

TOTAL RETURN ...............    2.55%    12.25%     7.81%    39.31%  (24.60)%

SUPPLEMENTAL DATA:

Net assets, end of

 period (millions) ......... $2,213.5  $2,504.9  $2,434.5  $2,470.8  $1,985.2

Ratio of expenses to

 average net assets ........     .75%      .77%      .75%      .73%      .75%

Ratio of net investment

 income to average

 net assets ................    1.30%      .41%      .17%      .17%      .38%

Portfolio turnover rate ....   29.96%    32.48%    20.94%    18.18%    33.36%

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

                                    highlights.

-------------------------------------------------------------------------------

Top Ten Equity Portfolio Holdings

March 31, 2007 (unaudited)

-------------------------------------------------------------------------------

                                                                  Percentage

        Name                                                    of Net Assets

        ----                                                    -------------

        Berkshire Hathaway Inc. - Class A .....................      7.09%

        Affiliated Managers Group, Inc. .......................      6.29%

        Marshall & Ilsley Corporation .........................      4.30%

        Thermo Fisher Scientific Inc. .........................      3.49%

        Kinder Morgan Management, LLC .........................      3.08%

        O'Reilly Automotive, Inc. .............................      3.07%

        W.R. Berkley Corporation ..............................      3.03%

        DaVita, Inc. ..........................................      3.01%

        Tyco International Ltd. ...............................      2.78%

        Apache Corporation ....................................      2.71%

                                                                    ------

        Total of top ten ......................................     38.85%

                                                                    ------

                                                                    ------

-------------------------------------------------------------------------------

Sector Diversification (As a Percentage of Portfolio)

March 31, 2007 (unaudited)

-------------------------------------------------------------------------------

        BAR CHART PLOT POINTS

        Financials ................................................    27.77%

        Consumer Discretionary ....................................    15.70%

        Industrials ...............................................    15.28%

        Health Care ...............................................    13.59%

        Energy ....................................................     8.01%

        Consumer Staples ..........................................     7.96%

        Information Technology ....................................     4.21%

        Materials .................................................     3.63%

        Short-Term Investments ....................................     3.41%

        Telecommunication Services ................................     0.44%

-------------------------------------------------------------------------------

Fund Expenses

For the six month period ended March 31, 2007 (unaudited)

-------------------------------------------------------------------------------

As a shareholder of the Fund, you incur two types of costs: (1) transaction

costs and (2) ongoing costs, including management fees and other operating

expenses.  The following table is intended to help you understand your ongoing

costs (in dollars) of investing in the Fund and to compare these costs with

those of other mutual funds.

The example is based on an investment of $1,000 made at the beginning of the

period and held for the entire period.

The first line of the table below provides information about the actual account

values and actual expenses.  You may use the information in this line, together

with the amount you invested, to estimate the expenses that you paid over the

period.  Simply divide your account value by $1,000 (for example, an $8,600

account value divided by $1,000 = 8.6), then multiply the result by the number

in the first line under the heading entitled "Expenses Paid During Period" to

estimate the expenses you paid on your account during this period.

The second line of the table below provides information about hypothetical

account values and hypothetical expenses based on the Fund's actual expense

ratio and an assumed rate of return of 5% per year before expenses, which is

not the Fund's actual return.  The hypothetical account values and expenses may

not be used to estimate the actual ending account balance or expenses you paid

for the period.  You may use this information to compare the ongoing costs of

investing in the Fund with other funds.  To do so, compare this 5% hypothetical

example with the 5% hypothetical examples that appear in the shareholder

reports of other funds.

Please note that the expenses shown in the table are meant to highlight your

ongoing costs only and do not reflect any transactional costs, such as wire

fees.  Therefore, the second line of the table is useful in comparing ongoing

costs only, and will not help you determine the relative total costs of owning

different funds.  In addition, if these transactional costs were included, your

costs would have been higher.

                      Beginning         Ending              Expenses

                       Account          Account            Paid During

                        Value            Value               Period*

                      09/30/06          03/31/07       10/01/06 - 03/31/07

        ------------------------------------------------------------------

        Actual        $1,000.00        $1,048.00              $3.78

        Hypothetical   1,000.00         1,021.31               3.73

         (5% return before expenses)

        * Expenses are equal to the Fund's six-month annualized expense ratio

        of 0.74%, multiplied by the average account value over the period,

        multiplied by 182 then divided by 365 to reflect the one-half year

        period.

Schedule of Investments

March 31, 2007

-------------------------------------------------------------------------------

 Shares or

 Principal

  Amount                                                            Value

-----------                                                    --------------

COMMON STOCKS - 96.61%

             Consumer Discretionary - Consumer Durables &

              Apparel -- 5.67%

   700,000   Fortune Brands, Inc.                              $   55,174,000

 1,469,900   Helen of Troy Limited *                               33,381,429

   450,000   Mohawk Industries, Inc. *                             36,922,500

                                                               --------------

                                                                  125,477,929

                                                               --------------

             Consumer Discretionary - Hotels,

              Restaurants & Leisure -- 3.48%

   443,300   California Pizza Kitchen, Inc. *                      14,580,137

 1,250,000   Six Flags, Inc. *                                      7,512,500

   950,000   Yum! Brands, Inc.                                     54,872,000

                                                               --------------

                                                                   76,964,637

                                                               --------------

             Consumer Discretionary - Media -- 1.32%

 1,125,000   Comcast Corporation *                                 29,193,750

                                                               --------------

             Consumer Discretionary - Retail -- 5.24%

 1,000,000   Bed Bath & Beyond Inc. *                              40,170,000

 2,050,000   O'Reilly Automotive, Inc. *                           67,855,000

   864,100   Sally Beauty Company, Inc. *                           7,941,079

                                                               --------------

                                                                  115,966,079

                                                               --------------

             Consumer Staples - Food & Staple Retail -- 4.82%

 1,200,000   Walgreen Co.                                          55,068,000

 1,100,000   Wal-Mart Stores, Inc.                                 51,645,000

                                                               --------------

                                                                  106,713,000

                                                               --------------

             Consumer Staples - Food, Beverage &

              Tobacco -- 2.25%

 2,354,800   Constellation Brands, Inc. - Class A *                49,874,664

                                                               --------------

             Consumer Staples - Household &

              Personal Products -- 0.89%

   864,100   Alberto-Culver Company                                19,770,608

                                                               --------------

             Energy -- 8.01%

   850,000   Apache Corporation                                    60,095,000

   230,000   Kayne Anderson Energy Development Company              5,729,300

   700,000   Kayne Anderson Energy Total Return Fund, Inc.         18,711,000

   700,000   Kayne Anderson MLP Investment Company                 24,654,000

 1,330,433   Kinder Morgan Management, LLC *                       68,171,362

                                                               --------------

                                                                  177,360,662

                                                               --------------

             Financials - Banks -- 4.97%

 1,300,000   Bank Mutual Corporation                               14,781,000

 2,054,126   Marshall & Ilsley Corporation                         95,126,575

                                                               --------------

                                                                  109,907,575

                                                               --------------

             Financials - Diversified -- 10.67%

 1,286,000   Affiliated Managers Group, Inc. *                    139,338,100

   800,000   American Express Company                              45,120,000

   685,340   Capital One Financial Corporation                     51,715,756

                                                               --------------

                                                                  236,173,856

                                                               --------------

             Financials - Insurance -- 12.14%

     1,439   Berkshire Hathaway Inc. - Class A *                  156,836,610

   760,800   Mercury General Corporation                           40,352,832

   100,000   Philadelphia Consolidated Holding Corp. *              4,399,000

 2,024,312   W.R. Berkley Corporation                              67,045,214

                                                               --------------

                                                                  268,633,656

                                                               --------------

             Health Care - Equipment -- 2.07%

   936,196   Medtronic, Inc.                                       45,929,776

                                                               --------------

             Health Care - Pharmaceuticals &

              Biotechnology -- 3.49%

 1,650,688   Thermo Fisher Scientific Inc. *                       77,169,664

                                                               --------------

             Health Care - Services -- 8.03%

   801,087   Cardinal Health, Inc.                                 58,439,297

 1,250,000   DaVita, Inc. *                                        66,650,000

   650,000   WellPoint, Inc. *                                     52,715,000

                                                               --------------

                                                                  177,804,297

                                                               --------------

             Industrials - Capital Goods -- 9.67%

   600,000   General Dynamics Corporation                          45,840,000

 1,130,600   Oshkosh Truck Corporation                             59,921,800

 1,500,000   Pentair, Inc.                                         46,740,000

 1,950,000   Tyco International Ltd.                               61,522,500

                                                               --------------

                                                                  214,024,300

                                                               --------------

             Industrials - Commerical Services &

              Supplies -- 2.47%

 1,100,000   Brady Corporation                                     34,320,000

   450,000   Cintas Corporation                                    16,245,000

   150,000   Copart, Inc. *                                         4,201,500

                                                               --------------

                                                                   54,766,500

                                                               --------------

             Industrials - Transportation -- 3.14%

   550,000   FedEx Corporation                                     59,086,500

   650,000   Heartland Express, Inc.                               10,322,000

                                                               --------------

                                                                   69,408,500

                                                               --------------

             Information Technology - Hardware &

              Equipment -- 3.02%

   750,000   CDW Corporation                                       46,072,500

   900,000   Dell Inc. *                                           20,889,000

                                                               --------------

                                                                   66,961,500

                                                               --------------

             Information Technology - Software &

              Services -- 1.19%

   900,000   Hewitt Associates, Inc. *                             26,307,000

                                                               --------------

             Materials -- 3.63%

   850,000   Bemis Company, Inc.                                   28,381,500

 1,300,000   CEMEX, S.A. de C.V.                                   42,575,000

   355,300   STEPAN COMPANY                                         9,326,625

                                                               --------------

                                                                   80,283,125

                                                               --------------

             Telecommunication Services -- 0.44%

 1,600,000   Level 3 Communications, Inc. *                         9,760,000

                                                               --------------

                  TOTAL COMMON STOCKS

                   (cost $1,245,445,735)                        2,138,451,078

                                                               --------------

SHORT-TERM INVESTMENTS -- 3.41%

             Commercial Paper -- 3.24%

$4,000,000   Kraft Foods Inc. 04/02/07, 5.30%                       4,000,000

 4,000,000   Kraft Foods Inc. 04/03/07, 5.30%                       3,999,411

   775,000   Verizon Communications Inc. 04/03/07, 5.35%              774,885

 4,000,000   Fiserv, Inc. 04/04/07, 5.32%                           3,998,818

 4,000,000   Prudential Financial, Inc. 04/05/07, 5.27%             3,998,243

 4,625,000   Verizon Communications Inc. 04/09/07, 5.30%            4,620,234

 6,000,000   Prudential Financial, Inc. 04/10/07, 5.27%             5,992,973

 7,000,000   Verizon Communications Inc. 04/11/07, 5.27%            6,990,777

 5,045,000   Walt Disney Company (The) 04/12/07, 5.25%              5,037,643

 2,750,000   Fiserv, Inc. 04/13/07, 5.32%                           2,745,530

 2,439,000   Fiserv, Inc. 04/16/07, 5.32%                           2,433,954

 4,900,000   Fortune Brands, Inc. 04/17/07, 5.29%                   4,889,200

 1,750,000   Time Warner Cable Inc. 04/20/07, 5.33%                 1,745,336

 3,825,000   Fiserv, Inc. 04/25/07, 5.32%                           3,811,999

 1,425,000   Time Warner Cable Inc. 04/27/07, 5.34%                 1,419,716

 4,000,000   Time Warner Cable Inc. 04/30/07, 5.33%                 3,983,418

 2,175,000   General Mills, Inc. 05/04/07, 5.28%                    2,164,792

 2,650,000   Fortune Brands, Inc. 5/21/07, 5.30%                    2,630,883

 3,500,000   Barclays U.S. Funding Corp. 05/23/07, 5.225%           3,474,093

 3,050,000   Fortune Brands, Inc. 05/24/07, 5.31%                   3,026,606

                                                               --------------

                                                                   71,738,511

                                                               --------------

             Variable Rate Security -- 0.17%

 3,749,637   Wisconsin Corporate Central Credit Union (1)

              04/02/07, 4.99%                                       3,749,637

                                                               --------------

                  TOTAL SHORT-TERM INVESTMENTS

                   (cost $75,488,148) ........................     75,488,148

                                                               --------------

                  TOTAL INVESTMENTS

                   (cost $1,320,933,883) -- 100.02% ..........  2,213,939,226

                                                               --------------

             LIABILITIES, NET OF OTHER ASSETS -- (0.02)% .....      (408,336)

                                                               --------------

                  TOTAL NET ASSETS

                   (basis of percentages

                   disclosed above) -- 100% .................. $2,213,530,890

                                                               --------------

                                                               --------------

  * Non-income producing security.

(1) Subject to a demand feature as defined by the Securities and Exchange Commission.

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

Statement of Assets and Liabilities

March 31, 2007

-------------------------------------------------------------------------------

ASSETS

    Investments in securities at value (cost $1,320,933,883) .. $2,213,939,226

                                                                --------------

    Receivables -

         Investment securities sold ...........................      5,350,103

         Dividend and interest ................................        738,800

                                                                --------------

              Total receivables ...............................      6,088,903

                                                                --------------

    Other .....................................................         18,188

                                                                --------------

              Total assets ....................................  2,220,046,317

                                                                --------------

LIABILITIES

    Payables -

         Investment securities purchased ......................      4,971,030

         Due to adviser -

              Management fee ..................................      1,268,139

              Accounting and administrative fee ...............         46,698

         Capital stock redemption .............................          3,642

         Other payables and accrued expense ...................        225,918

                                                                --------------

              Total liabilities ...............................      6,515,427

                                                                --------------

              Total net assets ................................ $2,213,530,890

                                                                --------------

                                                                --------------

NET ASSETS CONSIST OF

    Paid in capital ........................................... $1,189,907,891

    Net unrealized appreciation on investments ................    893,005,343

    Accumulated undistributed net realized

     gain on investments ......................................    129,186,422

    Accumulated undistributed net investment income ...........      1,431,234

                                                                --------------

              Total net assets ................................ $2,213,530,890

                                                                --------------

                                                                --------------

NET ASSET VALUE PER SHARE ($.50 par value,

 200,000,000 shares authorized), offering price and

 redemption price (38,261,971 shares outstanding) .............         $57.85

                                                                        ------

                                                                        ------

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

                                  statement.

Statement of Operations

For the year ended March 31, 2007

-------------------------------------------------------------------------------

INCOME

    Dividend ..................................................  $  43,117,455

    Interest...................................................      5,007,611

    Other .....................................................          5,310

                                                                 -------------

         Total income .........................................     48,130,376

                                                                 -------------

EXPENSES

    Management fee ............................................     15,236,560

    Transfer agent fees .......................................        991,361

    Accounting and administrative fees ........................        732,994

    Postage and mailing .......................................        237,386

    Custodian fees ............................................        117,136

    Insurance .................................................         92,526

    Printing ..................................................         61,236

    Registration fees .........................................         31,777

    Audit and tax fees ........................................         28,000

    Directors' fees ...........................................         19,375

    Telephone .................................................         18,406

    Accounting system and pricing service fees ................         12,016

    Legal fees ................................................         10,724

    Other operating expenses ..................................          5,193

                                                                 -------------

         Total expenses .......................................     17,594,690

                                                                 -------------

         Net investment income ................................     30,535,686

                                                                 -------------

NET REALIZED GAIN (LOSS) ON INVESTMENTS

    Nonaffiliated issuers .....................................    256,162,197

    Affiliated issuers (Note 5) ...............................       (220,585)

                                                                 -------------

                                                                   255,941,612

                                                                 -------------

CHANGE IN NET UNREALIZED APPRECIATION/DEPRECIATION

 ON INVESTMENTS ...............................................   (230,048,616)

                                                                 -------------

    Net realized and unrealized gain on investments ...........     25,892,996

                                                                 -------------

    Net increase in net assets resulting from operations ......  $  56,428,682

                                                                 -------------

                                                                 -------------

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, 2007 and 2006

-------------------------------------------------------------------------------

                                                  2007                2006

                                             --------------      --------------

INCREASE IN NET ASSETS

 FROM OPERATIONS

    Net investment income .................. $   30,535,686      $   10,223,740

    Net realized gain on investments .......    255,941,612         185,767,499

    Change in net unrealized

     appreciation/depreciation

     on investments ........................   (230,048,616)         90,179,671

                                             --------------      --------------

         Net increase in net assets

          resulting from operations ........     56,428,682         286,170,910

                                             --------------      --------------

DISTRIBUTIONS TO SHAREHOLDERS

    From net investment income .............    (31,175,873)         (9,973,063)

    From net realized gain on investments ..   (166,426,986)       (211,181,343)

                                             --------------      --------------

         Total distributions ...............   (197,602,859)       (221,154,406)

                                             --------------      --------------

CAPITAL SHARE TRANSACTIONS

    Proceeds from shares issued

     (388,782 and 728,559

     shares, respectively) .................     23,039,681          44,522,535

    Reinvestment of distributions

     (3,133,778 and 3,430,247

     shares, respectively) .................    181,936,479         202,524,598

    Cost of shares redeemed

     (5,994,558 and 3,967,009

     shares, respectively) .................   (355,161,454)       (241,669,892)

                                             --------------      --------------

         Increase (decrease) in net assets

          derived from capital share

          transactions .....................   (150,185,294)          5,377,241

                                             --------------      --------------

         Total increase (decrease)

          in net assets ....................   (291,359,471)         70,393,745

                                             --------------      --------------

NET ASSETS

    Beginning of period ....................  2,504,890,361       2,434,496,616

                                             --------------      --------------

    End of period (including accumulated

     undistributed net investment income

     of $1,431,234 and $2,071,421,

     respectively) ......................... $2,213,530,890      $2,504,890,361

                                             --------------      --------------

                                             --------------      --------------

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

                                  statements.

Notes to Financial Statements

March 31, 2007

------------------------------------------------------------------------------

(1) Summary of Significant Accounting Policies --

    Nicholas Fund, Inc. (the "Fund") is organized as a Maryland corporation and

    is registered as an open-end, diversified management investment company

    under the Investment Company Act of 1940, as amended.  The primary

    objective of the Fund is long-term growth.  The following is a summary of

    the significant accounting policies of the Fund:

    (a)  Equity securities traded on a stock exchange will ordinarily be valued

         on the basis of the last sale price on the date of valuation on the

         securities principal exchange, or if in the absence of any sale on

         that day, the closing bid price.  For securities principally traded on

         the NASDAQ market, the Fund uses the NASDAQ Official Closing Price.

         Debt securities, excluding short-term investments, are valued at their

         current evaluated bid price as determined by an independent pricing

         service, which generates evaluations on the basis of dealer quotes for

         normal, institutional-sized trading units, issuer analysis, bond

         market activity and various other factors.  Securities for which

         market quotations may not be readily available are valued at their

         fair value as determined in good faith by procedures adopted by the

         Board of Directors.  Variable rate demand notes are valued at cost,

         which approximates market value.  U.S. Treasury Bills and commercial

         paper are stated at amortized cost, which approximates market value.

         Investment transactions for financial statement purposes are recorded

         on trade date.

    (b)  Net realized gain (loss) on portfolio securities was computed on the

         basis of specific identification.

    (c)  Dividend income is recorded on the ex-dividend date, and interest

         income is recognized on an accrual basis.  Non-cash dividends, if any,

         are recorded at value on date of distribution.  Dividends and

         distributions paid to shareholders are recorded on the ex-dividend

         date.  Generally, discounts and premiums on long-term debt security

         purchases, if any, are amortized over the expected lives of the

         respective securities using the effective yield method.

    (d)  Provision has not been made for federal income taxes or excise taxes

         since the Fund has elected to be taxed as a "regulated investment

         company" and intends to distribute substantially all net investment

         income and net realized capital gains on sales of investments to its

         shareholders and otherwise comply with the provisions of Subchapter M

         of the Internal Revenue Code applicable to regulated investment

         companies.

    (e)  Distributions from net investment income are generally declared and

         paid semiannually.  Distributions of net realized capital gain, if

         any, are declared and paid at least annually.

         The amount of distributions from net investment income and net

         realized capital gain are determined in accordance with federal income

         tax regulations, which may differ from U.S. generally accepted

         accounting principles.  To the extent these book and tax differences

         are permanent in nature, such amounts are reclassified among paid in

         capital, accumulated undistributed net realized gain (loss) on

         investments and accumulated undistributed net investment income.  At

         March 31, 2007, no reclassifications were recorded.

         The tax character of distributions paid during the years ended March

         31 were as follows:

                                                2007             2006

                                            ------------     ------------

              Distributions paid from:

              Ordinary income ............  $ 31,175,873     $ 17,455,522

              Long-term capital gain .....   166,426,986      203,698,884

                                            ------------     ------------

              Total distributions paid ...  $197,602,859     $221,154,406

                                            ------------     ------------

                                            ------------     ------------

         As of March 31, 2007, investment cost for federal tax purposes was

         $1,321,229,582 and the tax basis components of net assets were as

         follows:

              Unrealized appreciation ..................... $  908,440,565

              Unrealized depreciation .....................    (15,730,921)

                                                            --------------

              Net unrealized appreciation.                     892,709,644

                                                            --------------

              Undistributed ordinary income ...............        154,154

              Accumulated undistributed net realized

               capital gain ...............................    130,759,201

              Paid in capital .............................  1,189,907,891

                                                            --------------

              Net assets .................................. $2,213,530,890

                                                            --------------

                                                            --------------

         The differences between book-basis and tax-basis unrealized

         appreciation (depreciation), undistributed ordinary income and

         realized capital gain are attributable primarily to the tax deferral

         of losses from wash sales, holdings in partnership interests and

         return of capital from investments.

         As of March 31, 2007, the Fund has no capital loss carryforward.

         As of March 31, 2007, the Fund realized no post-October losses for tax

         purposes.

         As of March 31, 2007, the Fund had a tax deferral of wash loss sales

         of approximately $1,573,000.

    (f)  The preparation of financial statements in conformity with U.S.

         generally accepted accounting principles requires management to make

         estimates and assumptions that affect the amounts reported in the

         financial statements and accompanying notes.  Actual results could

         differ from estimates.

(2) Related Parties--

    (a)  Investment Adviser and Management Agreement --

         The Fund has an agreement with Nicholas Company, Inc. (with whom

         certain officers and directors of the Fund are affiliated) (the

         "Adviser") to serve as investment adviser and manager.  Under the

         terms of the agreement, a monthly fee is paid to the Adviser based on

         an annualized fee of .75% of the average net asset value up to and

         including $50 million and .65% of the average net asset value in

         excess of $50 million.  Also, the Adviser may be paid for accounting

         and administrative services rendered by its personnel, subject to the

         following guidelines: (i) up to five basis points, on an annual basis,

         of the average net asset value of the Fund up to and including $2

         billion and up to three basis points, on an annual basis, of the

         average net asset value of the Fund greater than $2 billion, based on

         the average net asset value of the Fund as determined by valuations

         made at the close of each business day of each month, and (ii) where

         the preceding calculation results in an annual payment of less than

         $50,000, the Adviser, in its discretion, may charge the Fund up to

         $50,000 for such services.

    (b)  Legal Counsel --

         A director of the Adviser is affiliated with a law firm that provides

         services to the Fund.  The Fund incurred expenses of $6,224 for the

         year ended March 31, 2007 for legal services rendered by this law firm.

(3) Investment Transactions --

    For the year ended March 31, 2007, the cost of purchases and the proceeds

    from sales of investment securities, other than short-term obligations,

    aggregated $676,417,037 and $1,019,231,360, respectively.

(4) Future Adoption of New Accounting Standards --

    On July 13, 2006, the Financial Accounting Standards Board ("FASB")

    released FASB Interpretation No. 48 "Accounting for Uncertainty in Income

    Taxes" ("FIN 48"). FIN 48 provides guidance for how uncertain tax positions

    should be recognized, measured, presented and disclosed in the financial

    statements.  FIN 48 requires the evaluation of tax positions taken or

    expected to be taken in the course of preparing the Fund's tax returns to

    determine whether the tax positions are "more-likely-than-not" of being

    sustained by the applicable tax authority.  To the extent that a tax

    benefit of a position is not deemed to meet the more-likely-than-not

    threshold, the Fund would report an income tax expense in the Statement of

    Operations.  The adoption of FIN 48 is required for the last net asset

    value calculation in the first financial statement reporting period for

    fiscal years beginning after December 15, 2006.  The Fund will apply FIN 48

    to all open tax years on the date of adoption.  At this time, management is

    evaluating the implications of FIN 48 and its impact in the financial

    statements has not yet been determined.

    In September 2006, FASB issued Statement on Financial Accounting Standards

    No. 157, "Fair Value Measurements" ("FAS 157"). This standard clarifies the

    definition of fair value for financial reporting, establishes a framework

    for measuring fair value and requires additional disclosures about the use

    of fair value measurements.  FAS 157 is effective for financial statements

    issued for fiscal years beginning after November 15, 2007 and interim

    periods within those fiscal years.  As of March 31, 2007, the Fund does not

    believe the adoption of FAS 157 will impact the amounts reported in the

    financial statements, however, additional disclosures will be required

    about the inputs used to develop the measurements of fair value and the

    effect of certain of the measurements reported in the statement of

    operations for a fiscal period.

(5) Transactions with Affiliates -

    Following is a summary of fiscal 2007 transactions with "affiliated

    companies" as defined by the Investment Company Act of 1940:

                                                                                                     Amount of

                                                                                                      Capital

                                                                                       Amount of    Gain/(Loss)

                                                                                       Dividends      Realized

                                                       Share Activity                  Credited       on Sale

                                        --------------------------------------------   to Income     of Shares

                                         Balance                           Balance     in Fiscal     in Fiscal

           Security Name                 03/31/06   Purchases    Sales     03/31/07      2007           2007

           -------------                ----------  ---------  ---------  ----------  -----------   -----------

       Helen of Troy Limited            1,715,000       --      245,100   1,469,900      $ --       $(220,585)

                                                                                      -----------   -----------

                                                                                      -----------   -----------

    As of March 31, 2007, the Fund is no longer affiliated with this company.

Report of Independent Registered Public Accounting Firm

-------------------------------------------------------------------------------

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

We have audited the accompanying statement of assets and liabilities of

Nicholas Fund, Inc. (the "Fund"), including the schedule of investments, as of

March 31, 2007, and the related statement of operations for the year then

ended, the statements of changes in net assets for each of the two years in the

period then ended, and the financial highlights for each of the five years in

the period then ended.  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 financial highlights based on our

audits.

We conducted our audits in accordance with the standards of the Public Company

Accounting Oversight Board (United States).  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.  We were not engaged to perform an audit of the Fund's internal

control over financial reporting.  Our audits included consideration of

internal control over financial reporting as a basis for designing audit

procedures that are appropriate in the circumstances, but not for the purposes

of expressing an opinion on the effectiveness of the Fund's internal control

over financial reporting.  Accordingly, we express no such opinion.  An audit

also includes examining, on a test basis, evidence supporting the amounts and

disclosures in the financial statements and financial highlights, assessing the

accounting principles used and significant estimates made by management, and

evaluating the overall financial statement presentation.  Our procedures

included confirmation of securities owned as of March 31, 2007, by

correspondence with the custodian and brokers or by other appropriate auditing

procedures where replies from brokers were not received.  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 Fund, Inc., at March 31, 2007, the results of its operations for the

year then ended, the changes in its net assets for each of the two years in the

period then ended, and the financial highlights for each of the five years in

the period then ended, in conformity with U.S. generally accepted accounting

principles.

                                         ERNST & YOUNG LLP

Chicago, Illinois,

May 3, 2007

Historical Record

(unaudited)

--------------------------------------------------------------------------------------------------

                                     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)

                        -----------  --------------  -------------  --------------  --------------

July, 14 1969 (1) ......  $ 6.59        $  --          $   --             --           $ 10,000

March 31, 1985 .........   29.24         0.6420          1.5760          13.2 times      69,858

March 31, 1986 .........   35.26         0.5750          0.6100          15.8            87,699

March 31, 1987 .........   39.94         0.8820          0.1870          16.3           102,387

March 31, 1988 .........   32.15         1.8400          4.0340          14.1            98,557

March 31, 1989 .........   35.27         1.0250          0.4510          13.2           113,155

March 31, 1990 .........   37.72         0.9240          1.0540          14.9           127,360

March 31, 1991 .........   42.99         0.7900          0.2250          16.9           149,180

March 31, 1992 .........   49.68         0.6790          0.8240          19.4           178,011

March 31, 1993 .........   52.91         0.6790          2.0420          18.5           200,098

March 31, 1994 .........   51.10         0.8175          1.0470          16.7           200,182

March 31, 1995 .........   52.22         0.7070          3.3170          17.2           221,970

March 31, 1996 .........   63.81         0.5650          4.0945          21.0           293,836

March 31, 1997 .........   67.11         0.4179          5.3166          21.7           336,973

March 31, 1998 .........   93.98         0.3616          5.8002          30.0           508,762

March 31, 1999 .........   85.20         0.5880          8.2716          31.7           509,446

March 31, 2000 .........   84.56         0.3114          5.9433          37.3           543,813

March 31, 2001 .........   54.11         0.1900         19.2500          26.6           452,780

March 31, 2002 .........   53.74         0.2360            --            23.8           451,627

March 31, 2003 .........   40.37         0.1585            --            16.4           340,547

March 31, 2004 .........   56.14         0.0905            --            19.4           474,406

March 31, 2005 .........   60.05         0.0678          0.4100          19.4           511,476

March 31, 2006 .........   61.49         0.2512          5.3194          18.4           574,151

March 31, 2007 .........   57.85         0.8173 (a)      4.3310 (b)      16.6           588,783

(1) Date of Initial Public Offering.

(2) Based on latest 12 months accomplished earnings.

(3) Assuming reinvestment of all distributions.

(a) Paid $0.0833 on June 7, 2006 to shareholders of record on June 6, 2006.

    Paid $0.7340 on December 26, 2006 to shareholders of record on December 22, 2006.

(b) Paid $1.0310 on June 7, 2006 to shareholders of record on June 6, 2006.

    Paid $3.3000 on December 26, 2006 to shareholders of record on December 22, 2006.

Range in quarter end price/earnings ratios since December 31, 1974

               High                     Low

       --------------------      -------------------

       March 31, 2000  37.3      March 31, 1982  8.3

Approval of Investment Advisory Contract

(unaudited)

-------------------------------------------------------------------------------

A discussion of the Approval by the Board of Directors of the Fund's Investment

Advisory Contract can be found in the Fund's Semiannual Report dated September

30, 2006.

Tax Information

March 31, 2007 (unaudited)

------------------------------------------------------------------------------

The Fund designates 100% of its ordinary income distribution for the year ended

March 31, 2007 as qualified dividend income under the Jobs and Growth Tax

Relief Reconciliation Act of 2003.

For the year ended March 31, 2007, 100% of the dividends paid from net ordinary

income qualify for the dividends received deduction available to corporate

shareholders.

The Fund hereby designates approximately $166,426,986 as a capital gain

dividend for the year ended March 31, 2007.

Information on Proxy Voting

(unaudited)

-------------------------------------------------------------------------------

A description of the policies and procedures that the Fund uses to determine

how to vote proxies relating to portfolio securities is available, without

charge, upon request by calling 800-544-6547 (toll-free) or 414-276-0535.  It

also appears in the Fund's Statement of Additional Information, which can be

found on the SEC's website, www.sec.gov.  A record of how the Fund voted its

proxies for the most recent twelve-month period ended June 30, also is

available on the Fund's website, www.nicholasfunds.com, and the SEC's website,

www.sec.gov.

Quarterly Portfolio Schedule

(unaudited)

------------------------------------------------------------------------------

The Fund files its complete schedule of investments with the SEC for the first

and third quarters of each fiscal year on Form N-Q.  The Fund's Form N-Q's are

available on the SEC's website at www.sec.gov and may be reviewed and copied at

the SEC's Public Reference Room in Washington, D.C.  Information on the

operation of the Public Reference Room may be obtained by calling

1-800-SEC-0330.

Directors and Officers of the Fund

(unaudited)

-----------------------------------------------------------------------------------------------------------------------

    The following table sets forth the pertinent information about the Fund's directors and officers as of March 31,

2007.  Unless otherwise listed, the business address of each director and officer is 700 North Water Street, Milwaukee,

WI 53202.

                                                                                             Number of

                                                  Term of                                  Portfolios in      Other

                                                 Office and                                Fund Complex   Directorships

                                Positions Held   Length of      Principal Occupations        Overseen         Held

   Name and Age                    With Fund    Time Served      During Past 5 Years        by Director    by Director

-----------------------------------------------------------------------------------------------------------------------

INTERESTED DIRECTOR

Albert O. Nicholas, 76 (1), (3)  President,     (2), 38 years  Chief Executive Officer,           3            None

                                 Co-Portfolio                  President and Chairman of the

                                 Manager and                   Board, Nicholas Company, Inc.,

                                 Director                      the Adviser to the Fund.

                                                               He is Co-Portfolio Manager of

                                                               Nicholas Equity Income Fund, Inc.

                                                               and the Fund since each fund's

                                                               inception.

DISINTERESTED DIRECTORS

Robert H. Bock, 75               Director       (2), 29 years  Private Investor, Consultant,      6            None

                                                               Dean Emeritus of Business

                                                               Strategy and Ethics, University of

                                                               Wisconsin School of Business,

                                                               1997 to present.

Jay H. Robertson, 55             Director       (2), 4 years   Private Investor, April 2000       7            None

                                                               to present.  Chairman of the

                                                               Board of Robertson-Ryan and

                                                               Associates, Inc., an insurance

                                                               brokerage firm from 1993 to

                                                               March 2000.

OFFICERS

David L. Johnson, 65 (3)         Executive       Annual,       Executive Vice President,

                                 Vice President  27 years      Nicholas Company, Inc., the

                                                               Adviser to the Fund.

Jeffrey T. May, 50               Senior Vice     Annual,       Senior Vice President, Treasurer

                                 President,      14 years      and Chief Compliance Officer, Nicholas

                                 Treasurer,                    Company, Inc., the Adviser to the

                                 Secretary and                 Fund.  He is Portfolio Manager

                                 Chief Compliance              of Nicholas Money Market Fund, Inc.

                                 Officer

David O. Nicholas, 45 (3)        Senior Vice     Annual,       Chief Investment Officer and

                                 President and   18 years      Director, Nicholas Company, Inc.,

                                 Co-Portfolio                  the Adviser to the Fund.

                                 Manager                       He is Portfolio Manager

                                                               of Nicholas II, Inc. and

                                                               Nicholas Limited Edition, Inc.

                                                               and is Co-Portfolio Manager

                                                               of Nicholas High Income Fund, Inc.,

                                                               Nicholas Equity Income Fund, Inc.

                                                               and the Fund.

Lynn S. Nicholas, 50 (3)         Senior Vice     Annual,       Senior Vice President, Nicholas

                                 President       21 years      Company, Inc. the Adviser to the

                                                               Fund.

Lawrence J. Pavelec, 48          Senior Vice     Annual,       Senior Vice President, Nicholas

                                 President       2 years       Company, Inc., the Adviser to the

                                                               Fund.  He has been Co-Portfolio

                                                               Manager of Nicholas High Income Fund,

                                                               Inc. since April 2003.  He was a

                                                               portfolio manager for Brandes

                                                               Investment Partners from 1999 to

                                                               April 2003.

Mark J. Giese, 36                Vice President  Annual,       Vice President, Nicholas Company,

                                                 10 years      Inc., the Adviser to the Fund. He is

                                                               Portfolio Manager of Nicholas

                                                               Liberty Fund.

Candace L. Lesak, 49             Vice President  Annual,       Employee, Nicholas Company, Inc.,

                                                 21 years      the Adviser to the Fund.

____________________

(1)     Albert O. Nicholas is the only director of the Fund who is an "interested person" of the Fund,

        as that term is defined in the 1940 Act.  Mr. Nicholas is Chief Executive Officer, President and a Director of

        the Adviser and owns 97% of the outstanding voting securities of the Adviser.

(2)     Until duly elected or re-elected at a subsequent annual meeting of the Fund.

(3)     David O. Nicholas and Lynn S. Nicholas are the son and daughter, respectively, of Albert O.

        Nicholas.  David L. Johnson is a brother-in-law of Albert O. Nicholas.

    The Fund's Statement of Additional Information includes additional information about Fund

directors and is available, without charge, upon request, by calling 800-544-6547 (toll-free)

or 414-276-0535.

Privacy Policy

(unaudited)

-------------------------------------------------------------------------------

      Nicholas Fund, Inc. respects each shareholders' right to privacy.  We are

committed to safeguarding the information that you provide us to maintain and

execute transactions on your behalf.

      We collect the following non-public personal information about you:

      * Information we receive from you on applications or other forms, whether

we receive the form in writing or electronically.  This includes, but is not

limited to, your name, address, phone number, tax identification number, date

of birth, beneficiary information and investment selection.

      * Information about your transactions with us and account history with

us.  This includes, but is not limited to, your account number, balances and

cost basis information.  This also includes transaction requests made through

our transfer agent.

      * Other general information that we may obtain about you such as

demographic information.

              WE DO NOT SELL ANY NON-PUBLIC PERSONAL INFORMATION

                     ABOUT CURRENT OR FORMER SHAREHOLDERS.

                  INFORMATION SHARED WITH OUR TRANSFER AGENT,

                   A THIRD PARTY COMPANY, ALSO IS NOT SOLD.

      We may share, only as permitted by law, non-public personal information

about you with third party companies. Listed below are some examples of third

parties to whom we may disclose non-public personal information.  While these

examples do not cover every circumstance permitted by law, we hope they help

you understand how your information may be shared.

      We may share non-public personal information about you:

      * With companies who work for us to service your accounts or to process

transactions that you may request.  This would include, but is not limited to,

our transfer agent to process your transactions, mailing houses to send you

required reports and correspondence regarding the Fund and its Adviser, the

Nicholas Company, Inc., and our dividend disbursing agent to process fund

dividend checks.

      * With a party representing you, with your consent, such as your broker

or lawyer.

      * When required by law, such as in response to a subpoena or other legal

process.

      The Fund and its Adviser maintain policies and procedures to safeguard

your non-public personal information.  Access is restricted to employees who

the Adviser determines need the information in order to perform their job

duties.  To guard your non-public personal information we maintain physical,

electronic, and procedural safeguards that comply with federal standards.

      In the event that you hold shares of the Fund with a financial

intermediary, including, but not limited to, a broker-dealer, bank, or trust

company, the privacy policy of your financial intermediary would govern how

your non-public personal information would be shared with non-affiliated third

parties.

AUTOMATIC INVESTMENT PLAN - AN UPDATE

(unaudited)

-------------------------------------------------------------------------------

The Nicholas Family of Funds' Automatic Investment Plan provides a simple

method to dollar cost average into the fund(s) of your choice.

Dollar cost averaging involves making equal systematic investments over an

extended time period.  A fixed dollar investment will purchase more shares when

the market is low and fewer shares when the market is high.  The automatic

investment plan is an excellent way for you to become a disciplined investor.

The following table illustrates what dollar cost averaging can achieve.  Please

note that past performance is no guarantee of future results.  Nicholas Company

recommends dollar cost averaging as a practical investment method.  It should

be consistently applied for long periods so that investments are made through

several market cycles.  The table will be updated and appear in future

financial reports issued by the Fund.

                                                              Nicholas Fund

                                                           -------------------

      $1,000 initial investment on .......................  07/14/69* 03/31/97

      Number of years investing $100 each month following

       the date of initial investment ....................      37.7        10

      Total cash invested ................................   $46,300   $13,000

      Total dividends and capital gains distributions

       reinvested ........................................  $728,853    $5,020

      Total full shares owned at 03/31/07 ................    15,422       289

      Total market value at 03/31/07 .....................  $892,197   $16,726

The results above assume purchase on the last day of the month.  The Nicholas

Automatic Investment Plan actually invests on the 20th of each month (or on the

alternate date specified by the investor).  Total market value includes

reinvestment of all distributions.

*Date of Initial Public Offering.

Nicholas Funds Services Offered

(unaudited)

-------------------------------------------------------------------------------

*     IRAs

      * Traditional      * SIMPLE

      * Roth             * SEP

*     Coverdell Education Accounts

*     Profit Sharing Plan

*     Automatic Investment Plan

*     Direct Deposit of Dividend and Capital Gain Distributions

*     Systematic Withdrawal Plan with Direct Deposit

*     Monthly Automatic Exchange between Funds

*     Telephone Redemption

*     Telephone Exchange

*     24-hour Automated Account Information (1-800-544-6547)

*     24-hour Internet Account Access (www.nicholasfunds.com)

Please call a shareholder representative for further information on the above

services or with any other questions you may have regarding the Nicholas Funds

(1-800-544-6547).

                            Directors and Officers

                  ALBERT O. NICHOLAS, President and Director

                           ROBERT H. BOCK, Director

                          JAY H. ROBERTSON, Director

                  DAVID L. JOHNSON, Executive Vice President

                   DAVID O. NICHOLAS, Senior Vice President

                    LYNN S. NICHOLAS, Senior Vice President

               JEFFREY T. MAY, Senior Vice President, Secretary,

                    Treasurer and Chief Compliance Officer

                  LAWRENCE J. PAVELEC, Senior Vice President

                         MARK J. GIESE, Vice President

                       CANDACE L. LESAK, Vice President

                              Investment Adviser

                            NICHOLAS COMPANY, INC.

                             Milwaukee, Wisconsin

                             www.nicholasfunds.com

                         414-276-0535 or 800-544-6547

                                Transfer Agent

                        U.S. BANCORP FUND SERVICES, LLC

                             Milwaukee, Wisconsin

                         414-276-0535 or 800-544-6547

                                  Distributor

                           QUASAR DISTRIBUTORS, LLC

                             Milwaukee, Wisconsin

                                   Custodian

                                U.S. BANK N.A.

                             Milwaukee, Wisconsin

                 Independent Registered Public Accounting Firm

                               ERNST & YOUNG LLP

                               Chicago, Illinois

                                    Counsel

                         MICHAEL BEST & FRIEDRICH LLP

                             Milwaukee, Wisconsin

This report is submitted for the information of shareholders of the Fund.  It

is not authorized for distribution to prospective investors unless preceded or

accompanied by an effective prospectus.

Item 2. Code of Ethics.

CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND

SENIOR FINANCIAL OFFICERS

I. Covered Officers/Purpose of the Code

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

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

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

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

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

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

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

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

* * *

Each Covered Officer must:

* not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Company whereby the Covered Officer would benefit personally to the detriment of the Company;
* not cause the Company to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Company;
* not use material non-public knowledge of portfolio transactions made or contemplated for the Company to trade personally or cause others to trade personally in contemplation of the market effect of such transactions;
* report, at least annually:

* officer and director positions in corporations, public or private, for profit or not for profit, or in which the Covered Officer or any of his immediate family members holds 5% or more of its outstanding stock;
* Positions as a trustee, executor or other fiduciary;
* Ownership interest in any broker-dealer or bank;
* Transactions between the Covered Officer and any of the Nicholas Family of Funds, the Nicholas Company or any company in which any director of any of the Nicholas Family of Funds is an officer or director.
* Situations in which any immediate family member of the Covered Employee is an officer, director or employee of any company in which any officer or director of the Nicholas Company or any of the Nicholas Family of Funds is a director or executive officer.

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

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

III. Disclosure and Compliance

* Each Covered Officer should familiarize himself with the disclosure requirements generally applicable to the Company;
* each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company's directors and auditors, and to governmental regulators and self-regulatory organizations;
* each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds files with, or submits to, the SEC and in other public communications made by the Funds; and
* it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations.

IV. Reporting and Accountability

Each Covered Officer must:

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

Jeffrey T. May is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation; provided that if the situation involves Jeffrey T. May directly, then Mr. David O. Nicholas is responsible for applying the Code to him and he has authority to interpret the Code with respect to such application. Both Jeffrey T. May and David O. Nicholas are encouraged to discuss the matter with counsel to the Fund. However, any approvals or waivers sought by the Principal Executive Officer will be considered by the Independent Directors (the "Committee").

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

* Jeffrey T. May or David O. Nicholas, with the advice of counsel will take all appropriate action to investigate any potential violations reported to him;
* if, after such investigation, the officer making such investigation believes that no violation has occurred, he is not required to take any further action;
* any matter that the officer making the investigation believes is a violation will be reported to the independent directors;
* if the independent directors concur that a violation has occurred, they will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer;
* the independent directors will be responsible for granting waivers, as appropriate; and
* any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules.

V. Other Policies and Procedures

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

VI. Amendments

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

VII. Confidentiality

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

VIII. Internal Use

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

Date: November 20, 2003

Affirmed: November 6, 2006

Exhibit A

Persons Covered by this Code of Ethics

The Nicholas Company	Albert O. Nicholas	Jeffrey T. May
Nicholas Fund, Inc.	Albert O. Nicholas	Jeffrey T. May
Nicholas II, Inc.	David O. Nicholas	Jeffrey T. May
Nicholas Limited Edition, Inc.	David O. Nicholas	Jeffrey T. May
Nicholas Income Fund, Inc.	David O. Nicholas	Jeffrey T. May
Nicholas Equity Income Fund, Inc.	Albert O. Nicholas	Jeffrey T. May
Nicholas Liberty Fund	David O. Nicholas	Jeffrey T. May
Nicholas Money Market Fund, Inc.	Albert O. Nicholas	Jeffrey T. May

Item 3. Audit Committee Financial Expert.

The Fund's Board of Directors has determined that no member of the Board of Directors is an audit committee financial expert as that term is defined for purposes of this item. The Fund's Board of Directors routinely holds its meetings with the other six funds in the Nicholas complex, there is substantial overlap in the boards of each of those funds, auditors for funds in the Nicholas complex make presentations jointly to the boards of the funds which they audit and three of those funds have the same auditor as the Fund. The boards of directors of five of those other funds have determined that one of their members meets the definition of an audit committee financial expert; however, that person is not a director of the Fund. The Fund believes that the joint meetings and presentations with the other funds in the Nicholas complex and the availability and presence of the board member of other funds in the Nicholas complex who is an audit committee financial expert gives the Fund some of the benefit of having a board member who meets the definition of an audit committee financial expert. The Fund can call upon this person from time to time should circumstances warrant. The independent members of the Fund's Board of Directors are considering the possibility of adding that person as an independent director of the Fund and adding other independent directors; however, under present SEC rules, such additions may require that the Fund hold a meeting of the shareholders. Current SEC proposals, if adopted, may change the required percentage of independent directors for mutual funds. The Board of Directors of the Fund believes that it is not in the best interest of the Fund to hold a shareholder meeting until after such SEC proposals are finalized, at which time the Board can more easily evaluate the resulting requirements, the methods which will then be available to satisfy those requirements and the benefit to the Fund of holding a shareholder meeting.

Item 4. Principal Accountant Fees and Services.

(a) Audit Fees. The aggregate fees billed for each of the last two fiscal years (the "Reporting Periods") for professional services rendered by the Fund's principal accountant (the "Auditor") for the audit of the Fund's annual financial statements, or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $23,000 in 2007 and $25,000 in 2006.

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

(c) Tax Fees. The aggregate fees billed in the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax advice and tax planning ("Tax Services") were $5,000 in 2007 and $4,500 in 2006. These services consisted of (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local tax planning, advice and assistance regarding statutory, regulatory or administrative developments, (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired or held.

There were no fees billed in each of the last two fiscal years for Tax Services by the Auditor to the Fund's investment adviser which required pre-approval by the Board of Directors as described in paragraph (e)(1) of this Item 4.

(d) All Other Fees. The aggregate fees billed for professional services rendered by the Auditor to the Fund's investment adviser were $15,000 in 2006 and $10,000 in 2005. These services were for the audit of the investment adviser for the adviser's fiscal years ended 10/31/2006 and 10/31/2005.

There were no fees billed in each of the last two fiscal years for Non-Audit Services by the Auditor to the Fund's investment adviser which required pre-approval by the Board of Directors as described in paragraph (e)(1) of this Item 4.

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

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

(g) There were no non-audit fees billed in each of the last two fiscal years by the Auditor for services rendered to the Fund or the Fund's investment adviser that provides ongoing services.

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

Item 5. Audit Committee of Listed Registrants.

Not applicable to this filing.

Item 6. Schedule of Investments.

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

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

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

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

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

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

Applicable only to closed-end funds.

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

Not applicable to this filing.

Item 11. Controls and Procedures.

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

Item 12. Exhibits.

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

Not applicable to this filing.

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

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

Applicable only to closed-end funds.

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

SIGNATURES

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

(Registrant) Nicholas Fund, Inc.

By: /s/ Albert O. Nicholas

Name: Albert O. Nicholas

Title: Principal Executive Officer

Date: 05/30/2007

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By: /s/ Albert O. Nicholas

Name: Albert O. Nicholas

Title: Principal Executive Officer

Date: 05/30/2007

By: /s/ Jeffrey T. May

Name: Jeffrey T. May

Title: Principal Financial Officer

Date: 05/30/2007