FEDERATED EQUITY INCOME FUND, INC.

Class A Shares
Class B Shares
Class C Shares
Class F Shares

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Supplement to Statement of Additional Information dated May 31, 2001

Please delete the following paragraphs under "Research Services:"

     "On March 31, 2001,  the Fund owned  securities  of the  following  regular
broker/dealers:  Morgan Stanley, Dean Witter & Co. $56,972,150 and Merrill Lynch
$40,730,080.

     Investment  decisions  for the Fund are made  independently  from  those of
other  accounts  managed by the Adviser.  When the Fund and one or more of those
accounts invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner  believed  by the Adviser to be  equitable.  While the  coordination  and
ability to  participate  in volume  transactions  may  benefit  the Fund,  it is
possible that this procedure could  adversely  impact the price paid or received
and/or the position obtained or disposed of by the Fund."

     Please add the following as the second and third paragraphs,  respectively,
under "Brokerage Transactions:"

     "Investment  decisions  for the Fund are made  independently  from those of
other accounts managed by the Adviser.  Except as noted below, when the Fund and
one or more of those  accounts  invests in, or disposes  of, the same  security,
available  investments or  opportunities  for sales will be allocated  among the
Fund and the  account(s)  in a manner  believed by the Adviser to be  equitable.
While the  coordination  and ability to participate in volume  transactions  may
benefit the Fund, it is possible that this procedure could adversely  impact the
price paid or received and/or the position  obtained or disposed of by the Fund.
Investments  for  Federated  Kaufmann  Fund and other  accounts  managed by that
fund's  portfolio   managers  in  initial  public  offerings  ("IPO")  are  made
independently  from any other  accounts,  and much of their non-IPO  trading may
also be conducted independently from other accounts.

     On March 31,  2001,  the Fund owned  securities  of the  following  regular
broker/dealers:  Morgan Stanley, Dean Witter & Co. $56,972,150 and Merrill Lynch
$40,730,080."










                                                                  April 25, 2002


Cusip 313915100
Cusip 313915209
Cusip 313915308
Cusip 313915407

27388 (4/02)