<PAGE> 1
VANGUARD/WELLESLEY INCOME FUND, INC.
PROSPECTUS SUPPLEMENT
FEBRUARY 2, 1996
The Board of Directors of Vanguard/Wellesley Income Fund, Inc. (the "Fund") has
approved a revised investment advisory agreement with Wellington Management
Company ("WMC"), the Fund's investment adviser. The new agreement involves a
reduction in the annual rate of advisory fees to be paid to WMC.
Under the terms of the new agreement, the Fund will pay WMC a basic
advisory fee at the end of each fiscal quarter, based on the Fund's average
month-end net assets during the quarter. The quarterly rate is applied
according to the following annual fee schedule:
<TABLE>
<CAPTION>
NET ASSETS ANNUAL BASIC FEE RATE
---------- ---------------------
<S> <C>
First $1 billion 0.100%
Next $2 billion 0.050
Next $7 billion 0.040
Over $10 billion 0.030
</TABLE>
The revised agreement provides that the Basic Fee may be increased or
decreased by applying an incentive/penalty fee adjustment based on the
investment performance of the Fund relative to the investment performance of "a
composite index" 65% of which shall be comprised of the Lehman Long-Term
Corporate AA or Better Bond Index and 35% of which shall be comprised of a
composite of 75% of the S&P BARRA Value Index and 25% of the S&P Utilities
Index. The following table sets forth the incentive/penalty adjustment to the
basic advisory fee payable by the Portfolio to WMC under the new advisory
agreement:
<TABLE>
<CAPTION>
Cumulative 36-Month Performance Performance Fee
versus the Composite Index Adjustment
------------------------- ----------
<S> <C>
Less than -3% -0.20 x Basic Fee*
Between -1.5% and -3% -0.10 x Basic Fee
Between -1.5% and 1.5% 0 x Basic Fee
Between 1.5% and 3% 0.10 x Basic Fee
More than 3% 0.20 x Basic Fee
</TABLE>
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* For purposes of this calculation, the Basic Fee is calculated by applying a
quarterly fee rate based on the Annual Basic Fee using average assets over the
same time period over which the performance is measured.
This revised investment advisory agreement replaces the Fund's original
agreement with the adviser dated May 1, 1993, and will go into effect on or
about April 1, 1996. (Under the rules of the Securities and Exchange
Commission, the new incentive/penalty fee will not be fully operable until the
quarter ending June 30, 1999, and until that date, will be calculated according
to certain transition rules.) Until the effective date, the adviser has agreed
to waive its advisory fees to the extent necessary to abide by the new fee
schedule.
AFWY
