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VANGUARD EQUITY INCOME FUND, INC.
PROSPECTUS SUPPLEMENT
JUNE 10, 1996
On May 13, 1996, John A. Levin & Co., Inc. ("Levin"), one of the investment
advisers to Vanguard Equity Income Fund, Inc. (the "Fund"), entered into an
agreement with Baker Fentress & Company ("Baker Fentress") under which, subject
to certain conditions, LEVCO Management, a newly formed, wholly owned
subsidiary of Baker Fentress, would acquire substantially all of the operating
assets and business of Levin (the "Transaction"). LEVCO Management would then
immediately transfer certain assets formerly owned by Levin, including Levin's
advisory agreement with the Fund, to a wholly owned subsidiary of LEVCO
Management ("New LEVCO"). New LEVCO will continue to use the name of "John A.
Levin & Co., Inc." and will operate as an indirect wholly owned subsidiary of
Baker Fentress. Levin has served as an adviser to the Fund since January 1,
1995.
The Fund's Board of Directors approved a new advisory agreement with
Levin to become effective on the date the Transaction is consummated. The
terms of the new investment advisory agreement approved by the Board, including
the fees paid for advisory services, are identical to those of the current
advisory agreement. The day-to-day investment operations of the Levin-managed
portion of the Fund will continue using the same personnel and the same
investment philosophy. Under an exemptive order approved by the Securities and
Exchange Commission, the approval of the new advisory agreement did not require
shareholder approval. The new advisory agreement will not become effective
until at least 30 days after written notice, which includes detailed
information concerning the new advisory agreement, is given to shareholders.
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