VANGUARD EQUITY INCOME FUND, INC.
PROSPECTUS SUPPLEMENT
NOVEMBER 23, 1994
On November 18, 1994, the Board of Directors of Vanguard Equity Income
Fund, Inc. (the "Fund") approved the appointment of Spare, Kaplan,
Bischel & Associates of San Francisco, California ("Spare, Kaplan")
and John A. Levin & Company of New York, New York ("Levin") as
additional investment advisers to the Fund. Each of these advisers
will receive an initial allocation of approximately $100 million,
however, the proportion of the net assets of the Fund managed by each
of the Fund's investment advisers (see section entitled "Investment
Adviser") may be changed by the Board of Directors as circumstances
warrant. The Fund's fundamental objective will remain unchanged.
An Information Statement providing detailed information concerning
these new investment advisory relationships will be mailed to
shareholders of the Fund at least 30 days before the effective date of
the new investment advisory agreement. It is expected that the
effective date of both agreements will be on January 1, 1995.
Under the terms of the agreement with Spare, Kaplan, the Fund will pay
Spare, Kaplan a basic advisory fee at the end of each fiscal quarter,
calculated by applying a quarterly rate, based on the following annual
percentage rates, to the average month-end assets of the Fund managed
by Spare, Kaplan for the quarter:
Net Assets Annual Rate
First $500 million 0.175%
Next $500 million 0.125%
Over $1 billion 0.10%
The basic fee paid to Spare, Kaplan, as provided above, may be
increased or decreased by applying an incentive/penalty adjustment to
the basic fee reflecting the investment performance of the assets
managed by Spare, Kaplan relative to the return of the Standard and
Poor's Value Index. Under the rules of the Securities and Exchange
Commission, the incentive/penalty fee will not be fully operable until
the quarter ending December 31, 1997, and until that date, will be
calculated according to certain transition rules.
Under the terms of the agreement with Levin, the Fund will pay Levin a
basic advisory fee at the end of each fiscal quarter, calculated by
applying a quarterly rate, based on the following annual percentage
rates, to the average month-end assets of the Fund managed by Levin
for the quarter:
Net Assets Annual Rate
First $100 million 0.40%
Next $200 million 0.25%
over $300 million 0.30%
The basic fee paid to Levin, as provided above, may be increased or
decreased by applying an incentive/penalty adjustment to the basic fee
reflecting the investment performance of the assets managed by Levin
relative to the return of the Standard and Poor's 500 Index. Under the
rules of the Securities and Exchange Commission, the incentive/penalty
fee will not be fully operable until the quarter ending December 31,
1997, and until that date, will be calculated according to certain
transition rules.
PS65
