Prudential
IncomeVertibleR
Fund, Inc.
SEMI ANNUAL REPORT
June 30, 1995
(LOGO)
<PAGE>
Prudential IncomeVertibleR Fund, Inc.
Performance At A Glance.
Convertible securities performed well during the last six months, propelled
largely by declining U.S. interest rates and strong stock and bond markets. We
are pleased to report that the Prudential IncomeVertibleR Fund, Inc. performed
better than the average Lipper Convertible Securities Fund Average.
Cumulative Total Returns1 As of 6/30/95
<TABLE>
<CAPTION>
Six One Five Since
Months Year Years Inception2
<S> <C> <C> <C> <C>
Class A 14.5% 16.5% 58.8% 60.7%
Class B 14.2 15.7 53.0 142.7
Class C 14.2 N/A N/A 11.4
Lipper Avg* 10.1 10.6 53.0 9.9
</TABLE>
Average Annual Total Returns1 As of 6/30/95
<TABLE>
<CAPTION>
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A 10.6% 8.6% 8.1%
Class B 10.8 8.7 9.7
Class C N/A N/A 10.4
</TABLE
Past performance is not a guarantee of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
1Source: Prudential Mutual Fund Management, Inc. and Lipper Analytical
Services, Inc. The cumulative total returns do not take into account sales
charges.
The Average Annual Total Returns do take into account applicable sales charges.
The Fund charges a maximum front end sales load of 5% for Class A shares. Class
B shares are subject to a declining contingent deferred sales charge (CDSC) of
5%, 4%, 3%, 2%, 1% and 1%, for six years. Class C shares have a 1% CDSC for one
year. Class B shares will automatically convert to Class A shares on a
quarterly basis, after approximately seven years.
2Inception dates: 1/22/90 Class A; 12/5/85 Class B; 8/1/94 Class C.
*These are the average returns of 36 funds in the Lipper Convertible Fund
category for six months; 30 funds for one year; 19 funds for five years; and 6
funds since inception of the Class B shares on 12/5/85, as determined by Lipper
Analytical Services, Inc.
(GRAPH)
Source: Lipper Analytical Services, Inc. Financial markets change, so a mutual
fund's past performance should never be used to predict future results. The
risks to each of the investments listed above are different -- we provide
12-month total returns for several Lipper mutual fund categories to show you
that reaching for higher yields means tolerating more risk. The greater the
risk, the larger the potential reward or loss. In addition, we've added
historical 20-year average annual returns to show that 1995's returns (so far)
are higher than normal. These returns assume the reinvestment of dividends.
Stock funds will fluctuate a great deal. Smaller capitalization stocks offer
greater potential for long term growth but may be more volatile than larger
capitalization stocks. Investors receive higher historical total returns from
stocks than from most other investments.
Bond funds provide more income than stock funds, which can help smooth out
their total returns year by year. But their prices still fluctuate (sometimes
a
good deal) and their returns are historically lower than those of stock funds.
Sector or specialty stock funds usually entail the greatest risks because they
are not widely diversified. They are designed for sophisticated investors who
can tolerate additional risk in exchange for higher potential rewards or losses.
Money market funds attempt to preserve a constant share value; they don't
fluctuate much in price but their returns are generally among the lowest of the
major investment categories.
<PAGE>
Greg Goldberg,
Fund Manager
(PICTURE)
Portfolio
Manager's Report
The Prudential IncomeVertibleR Fund, Inc. seeks both current income and capital
appreciation. It invests primarily in convertible securities and/or in
combinations of securities, comprising nonconvertible fixed-income securities
and warrants or call options, which resemble convertible securities in many
respects. The balance of the Fund's assets may be invested largely in stocks
or bonds.
Overview
Shareholders have been asked to approve a merger of the Fund with the
Prudential Allocation Fund/Conservatively Managed Portfolio. If approved, the
merger would become effective on September 25, 1995.
(CHART)
1. Strategy Session.
What We See Now.We are emphasizing true convertible securities (as opposed
to synthetic products), to give the Fund a high degree of economic
sensitivity and considerable exposure to medium- and larger- sized
companies. During the period, convertible securities performed exceedingly
well because of the lack of supply in the new issue market (which helped to
lift prices), declining U.S. interest rates and strong stock and bond
markets.
For the last six months, the benchmark Standard & Poor's 500 Index returned
an extraordinary 20%, while the Dow Jones Industrial Average surpassed 4600
early in July for the first time in history. The Dow measures the
performance of far fewer stocks than the S&P 500, but it is a more widely
reported measure of the stock market.
The Fund also benefited from holding 19% of net assets in the technology
sector (as of June 30) -- the Fund's largest sector and the leading
performer in the market over the last six months.
<PAGE>
2. What Went Well.
Searching for Value.
We continue to focus on convertibles that tend to follow the performance of
the stock market. This strategy proved beneficial because the stock market
rose to new highs. We've begun to see an influx of new-issue convertibles
coming to market -- particularly in the technology sector. Although many are
overpriced, we have been able to find some good values.
Common Stocks.
We continued to hold a substantial position (21% of net assets as of June
30) in common stocks. Top-performing stocks held by the Fund during the
last six months included: Cisco Systems, Inc. (software), Computer
Associates International, Inc. (software) and Federal National Mortgage
Association, all of which returned about 30% over the past six months.
The Right Sectors.
We emphasized stocks in the technology, basic industry and energy sectors.
We have believed that these sectors will continue to benefit from worldwide
economic growth. A number of our holdings produced outstanding results,
including: Seagate Technologies (computer hardware), which rose 25%; and
Reading and Bates (oil service), which gained 38%.
Patience in Mexico.
Throughout the last six months, we maintained our position in Mexico (now
at 3% of net assets), anticipating that it would recover from its fourth
quarter 1994 decline (a fall prompted by the devaluation of the peso, and
subsequent decline in the Mexican securities market). This strategy paid
off, as the Mexican securities market improved dramatically in March. To
date, some of our Mexican holdings have recovered as much as 30% from their
lows. Among these are Cemex, a cement company, and Banamex, one of the
largest banks in Mexico.
3. And Not So Well.
Energy Picks Lag Expectations.
While we remain optimistic about energy companies, a few of our holdings
performed slightly below our expectations, including Amoco Petroleum and
McDermott International convertibles.These two holdings suffered from
weakness in natural gas prices--weakness we see dissipating as investors
come to realize natural gas storage levels are near normal, not in surplus.
4. Looking Ahead.
We expect economic growth to remain moderate for the remainder of the year,
and believe the decline in U.S. interest rates will continue to support
stock and convertible prices going forward. We believe the Fund is
well-positioned to benefit from continued economic growth. However, we must
emphasize that the stock market's robust performance in the past six months
is quite unusual. We expect much more modest returns in the future, and we
believe that you should, too.
1
President's Letter July 31, 1995
(PICTURE)
Dear Shareholder:
You've probably noticed your shareholder report looks different this month.
We've designed it to provide clear, concise and forthright information about
your investment, its performance, risks and potential rewards. And, from time
to time, I'll share some thoughts with you about the industry, mutual fund
trends and how we're responding to them at Prudential Mutual Funds.
On The Hill
One recent trend we like is part of the "Contract with America." It's called
the American Dream Savings Account and it was approved by the House of
Representatives earlier in the year. The Senate has now taken up the proposal,
which would improve the traditional Individual Retirement Account program by
allowing higher non-working spouse contributions. The proposed law would also
allow tax-free and penalty-free withdrawals from the account before age
59 1/2, for certain expenses. Prudential Mutual Funds supports the proposal
and we urge you to share your opinion about it with your Senator. You can
reach your Senator's office by calling 202-224-3121.
In Closing
One final note: if you're a Class B shareholder, you'll begin noticing a
change on your statements once you've held your shares for seven years. At
that time they will automatically begin to convert to Class A shares on a
quarterly basis. Since Class A shares carry lower annual distribution charges
than Class B shares, your total returns will automatically rise after the
conversion. Conversions started earlier this year and will occur each calendar
quarter--beginning in December, 1995, they'll take place every March, June,
September and December.
I hope you'll find this information useful as you work with your financial
advisor or registered representative to develop your personal investment plan.
Thank you for choosing Prudential Mutual Funds for your mutual fund investment.
Sincerely,
Richard A. Redeker
President
2
<PAGE>
Portfolio of Investments as
of June 30, 1995 (Unaudited) PRUDENTIAL INCOMEVERTIBLE(R) FUND, INC.
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
Value
(000) Shares Description
(Note 1)
<C> <C> <S>
<C>
-----------------------------------------------------------------------------
-------------------------------------------------
LONG-TERM INVESTMENTS--97.3%
-----------------------------------------------------------------------------
-------------------------------------------------
Aerospace/Defense--1.5%
$ 3,649 GenCorp, Inc., Conv. Sub. Deb., 8.00%, 8/1/02
$ 3,530,408
-----------------------------------------------------------------------------
-------------------------------------------------
Automobiles & Trucks--1.3%
108,000 Ford Motor Co., Conv. Pfd. Stock
3,213,000
-----------------------------------------------------------------------------
-------------------------------------------------
Banks--6.6%
3,750 Banco Nacionale de Mexico, Conv. Bond, 7.00%, 12/15/99
(ADR) (Mexico) 2,709,375
38,000 Citicorp, Conv. Pfd. Stock
6,037,250
119,500 Republic New York Corp., Conv. Pfd. Stock
6,901,125
------------
15,647,750
-----------------------------------------------------------------------------
-------------------------------------------------
Communications Equipment--4.9%
1,802 General Instrument Corp., Conv. Bond, 5.00%, 6/15/00
2,974,976
10,575 Motorola Inc., Zero Coupon Conv. Sub. Deb., 9/27/13
8,671,500
------------
11,646,476
-----------------------------------------------------------------------------
-------------------------------------------------
Computer Hardware--5.4%
5,500 Integrated Device Technology, 5.50%, 6/1/02
5,761,745
2,096 Seagate Technology, Conv. Sub. Deb., 5.00%, 11/1/03
3,248,800
160,000 VeriFone, Inc., Common Stock*
3,920,000
------------
12,930,545
-----------------------------------------------------------------------------
-------------------------------------------------
Computer Products--2.1%
3,636 EMC Corp., 4.25%, 1/1/01
4,926,780
-----------------------------------------------------------------------------
-------------------------------------------------
Computer Software & Services--4.4%
100,000 Cisco Systems, Inc., Common Stock*
5,056,250
80,000 Computer Associates International, Inc., Common Stock
5,420,000
------------
10,476,250
-----------------------------------------------------------------------------
-------------------------------------------------
Conglomerates--2.5%
250,000 Canadian Pacific Limited, Common Stock (Canada)
4,343,750
2,665 Nippon Denro Ispat, Ltd., Conv. Bond, 3.00%, 4/1/01
(ADR) (India) 1,612,325
------------
5,956,075
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 3 -----
<PAGE>
<PAGE>
Portfolio of Investments as
of June 30, 1995 (Unaudited) PRUDENTIAL INCOMEVERTIBLE(R) FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
Value
(000) Shares Description
(Note 1)
<C> <C> <S>
<C>
-----------------------------------------------------------------------------
-------------------------------------------------
Consumer Services--0.8%
54,600 Browning-Ferris Industries, Common Stock*
$ 1,992,900
-----------------------------------------------------------------------------
-------------------------------------------------
Drugs & Medical Supplies--3.3%
$ 7,500 Alza Corp., Conv. Bond, 7/14/14
2,868,750
200,000 U.S. Surgical Corp., Conv. Pfd. Stock
5,100,000
------------
7,968,750
-----------------------------------------------------------------------------
-------------------------------------------------
Electronics--1.8%
107,000 Tencor Instruments, Common Stock*
4,387,000
-----------------------------------------------------------------------------
-------------------------------------------------
Engineering--1.7%
92,000 McDermott International, Inc., Conv. Pfd. Stock
4,117,000
-----------------------------------------------------------------------------
-------------------------------------------------
Exploration & Production--1.8%
2,275 Cross Timbers Oil Co., Conv. Deb., 5.25%, 11/1/03
1,928,063
2,600 Oryx Energy Co., Conv. Bond, 7.50%, 5/15/14
2,265,900
------------
4,193,963
-----------------------------------------------------------------------------
-------------------------------------------------
Financial Services--2.0%
51,000 Federal National Mortgage Association, Common Stock
4,813,125
-----------------------------------------------------------------------------
-------------------------------------------------
Foods--2.6%
1,004,000 RJR Nabisco Holdings Corp., Conv. Pfd. Stock
6,149,500
-----------------------------------------------------------------------------
-------------------------------------------------
Gas Pipelines--2.5%
54,900 Tejas Gas Corp., Conv. Pfd. Stock
2,491,087
58,000 Williams Cos., Inc., Conv. Pfd. Stock
3,577,875
------------
6,068,962
-----------------------------------------------------------------------------
-------------------------------------------------
Hospital Management--4.4%
100,100 Beverly Enterprises, Inc., Conv. Pfd. Stock
5,230,225
225,000 FHP International Corp., Conv. Pfd. Stock
5,343,750
------------
10,573,975
-----------------------------------------------------------------------------
-------------------------------------------------
Household Products--1.7%
5,975 Roche Holdings, Inc., Zero Coupon Conv. Bond, 9/23/08
4,048,063
</TABLE>
--------------------------------------------------------------------------------
----- 4 See Notes to Financial Statements.
<PAGE>
<PAGE>
Portfolio of Investments as
of June 30, 1995 (Unaudited) PRUDENTIAL INCOMEVERTIBLE(R) FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
Value
(000) Shares Description
(Note 1)
<C> <C> <S>
<C>
-----------------------------------------------------------------------------
-------------------------------------------------
Industrials--3.7%
$ 2,473 Cemex, Conv. Bond, 4.25%, 11/1/97 (Mexico)
$ 1,891,845
3,051 Empresas Ica Sociedad Control, Conv. Sub. Deb., 5.00%,
3/15/04 (ADR) (Mexico) 1,647,540
15,000 Valhi, Inc., Zero Coupon, 10/20/07
5,325,000
------------
8,864,385
-----------------------------------------------------------------------------
-------------------------------------------------
Insurance--4.9%
94,700 Allstate Corp., Common Stock
3,859,025
42,400 American General, Conv. Pfd. Stock
2,199,500
48,500 U.S. HealthCare, Inc., Common Stock
1,485,313
7,675 USF&G Corp., Zero Coupon Conv. Sub. Note, 3/3/09
4,240,437
------------
11,784,275
-----------------------------------------------------------------------------
-------------------------------------------------
Integrated Producers--8.4%
5,810 Amoco Canada Petroleum Corp., Conv. Bond, 7.375%,
9/1/13 (Canada) 7,353,136
89,200 Atlantic Richfield Co., Conv. Pfd. Stock
2,319,200
89,100 Occidental Petroleum Corp., Conv. Pfd. Stock
5,095,406
4,608 Pennzoil Co., Conv. Sub. Deb., 6.50%, 1/15/03
5,416,243
------------
20,183,985
-----------------------------------------------------------------------------
-------------------------------------------------
Leisure--1.1%
1,850 Carnival Cruise Lines, Inc., Conv. Note, 4.50%, 7/1/97
2,519,959
-----------------------------------------------------------------------------
-------------------------------------------------
Media--1.6%
7,800 News America Holdings, Inc., Zero Coupon Conv. Sr.
Deb., 3/11/13 3,744,000
-----------------------------------------------------------------------------
-------------------------------------------------
Non-Ferrous Metals--0.6%
150,000 Pegasus Gold, Inc., Common Stock* (Canada)
1,518,750
-----------------------------------------------------------------------------
-------------------------------------------------
Oil Services--7.0%
130,700 BJ Services Co., Common Stock*
2,973,425
4,769 Noble Affiliates Inc., Conv. Sub. Deb., 4.25%, 11/1/03
4,519,104
75,500 Parker & Parsley Capital, Conv. Pfd. Stock
3,369,187
89,700 Reading & Bates Corp., Conv. Pfd. Stock
2,556,450
3,038 Seacor Holdings, Inc., Conv. Deb., 6.00%, 7/1/03
3,216,483
------------
16,634,649
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 5 -----
<PAGE>
<PAGE>
Portfolio of Investments as
of June 30, 1995 (Unaudited) PRUDENTIAL INCOMEVERTIBLE(R) FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
Value
(000) Shares Description
(Note 1)
<C> <C> <S>
<C>
-----------------------------------------------------------------------------
-------------------------------------------------
Paper & Forest Products--2.7%
$ 3,175 Stone Container Corp., Conv. Sub. Deb., 8.875%,
7/15/00 $ 6,357,937
-----------------------------------------------------------------------------
-------------------------------------------------
Railroads--2.1%
75,600 Burlington Northern Inc., Conv. Pfd. Stock
5,103,000
-----------------------------------------------------------------------------
-------------------------------------------------
Retail--2.3%
3,195 Pier 1 Imports, Inc., Conv. Sr. Sub. Deb., 6.875%,
4/1/02 3,171,038
2,424 Price/Costco, Inc., Conv. Deb. Sub., 5.50%, 2/28/12
2,278,560
------------
5,449,598
-----------------------------------------------------------------------------
-------------------------------------------------
Specialty Chemicals--1.2%
7,000 RPM, Inc., Zero Coupon Conv. Deb., 9/30/12
2,940,000
-----------------------------------------------------------------------------
-------------------------------------------------
Steel--2.3%
110,000 AK Steel Hldgs., Conv. Pfd. Stock
3,162,500
142,500 National Steel Corp., Common Stock*
2,208,750
------------
5,371,250
-----------------------------------------------------------------------------
-------------------------------------------------
Telecommunication Services--2.3%
115,000 Comsat Corp., Common Stock
2,256,875
225,000 NEXTEL Communications, Inc., Common Stock*
3,178,125
------------
5,435,000
-----------------------------------------------------------------------------
-------------------------------------------------
Telephone--0.9%
65,500 Nacional Financiera, Conv. Pfd. Stock (ADR) (Mexico)
2,046,875
-----------------------------------------------------------------------------
-------------------------------------------------
Trucking & Shipping--0.6%
140,000 Worldway Corp., Common Stock*
1,330,000
-----------------------------------------------------------------------------
-------------------------------------------------
U.S. Government Securities--4.4%
5,000 U.S. Treasury Notes, 7.75%, 1/31/00
5,342,200
5,000 U.S. Treasury Notes, 6.50%, 5/15/05
5,106,250
------------
10,448,450
------------
Total long-term investments--97.3%
(cost $221,215,272)
232,372,635
</TABLE>
--------------------------------------------------------------------------------
----- 6 See Notes to Financial Statements.
<PAGE>
<PAGE>
Portfolio of Investments as
of June 30, 1995 (Unaudited) PRUDENTIAL INCOMEVERTIBLE(R) FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
Value
(000) Shares Description
(Note 1)
<C> <C> <S>
<C>
-----------------------------------------------------------------------------
-------------------------------------------------
SHORT-TERM INVESTMENTS--2.3%
-----------------------------------------------------------------------------
-------------------------------------------------
Repurchase Agreement--2.3%
$ 5,547 Joint Repurchase Agreement Account, 6.12%, due 7/3/95
(Note 5)
(cost $5,547,000)
$ 5,547,000
-----------------------------------------------------------------------------
-------------------------------------------------
Total Investments--99.6%
(cost $226,762,272; Note 4)
237,919,635
Other assets in excess of liabilities--0.4%
1,022,235
------------
Net Assets--100%
$238,941,870
------------
------------
</TABLE>
---------------
* Non-income producing security.
ADR--American Depository Receipt.
--------------------------------------------------------------------------------
See Notes to Financial Statements. 7 -----
<PAGE>
<PAGE>
Statement of Assets and
Liabilities (Unaudited) PRUDENTIAL INCOMEVERTIBLE(R) FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<S>
<C>
Assets
June 30, 1995
Investments, at value (cost
$226,762,272)................................................................
.... $237,919,635
Receivable for investments
sold.........................................................................
..... 5,538,176
Dividends and interest
receivable...................................................................
......... 1,588,323
Receivable for Fund shares
sold.........................................................................
..... 20,018
Other
assets.......................................................................
.......................... 12,674
------------
Total
assets.......................................................................
.................... 245,078,826
------------
Liabilities
Payable for investments
purchased....................................................................
........ 5,226,269
Payable for Fund shares
reacquired...................................................................
........ 587,402
Management fee
payable......................................................................
................. 149,797
Accrued expenses and other
liabilities..................................................................
..... 100,561
Distribution fee
payable......................................................................
............... 72,927
------------
Total
liabilities..................................................................
.................... 6,136,956
------------
Net
Assets.......................................................................
............................ $238,941,870
------------
------------
Net assets were comprised of:
Common stock, at
par..........................................................................
............ $ 1,980,165
Paid-in capital in excess of
par..........................................................................
216,925,588
------------
218,905,753
Undistributed net investment
income.......................................................................
317,624
Accumulated net realized gain on
investments..............................................................
8,561,125
Net unrealized appreciation on
investments................................................................
11,157,368
------------
Net assets, June 30,
1995.........................................................................
........... $238,941,870
------------
------------
Class A:
Net asset value and redemption price per share
($158,774,002 / 13,163,994 shares of common stock issued and
outstanding).............................. $12.06
Maximum sales charge (5% of offering
price)...............................................................
.63
Maximum offering price to
public..........................................................................
$12.69
Class B:
Net asset value, offering price and redemption price per share
($80,164,897 / 6,637,407 shares of common stock issued and
outstanding)................................ $12.08
Class C:
Net asset value, offering price and redemption price per share
($2,971 / 246 shares of common stock issued and
outstanding)........................................... $12.08
</TABLE>
--------------------------------------------------------------------------------
----- 8 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL INCOMEVERTIBLE(R) FUND, INC.
Statement of Operations (Unaudited)
Changes in Net Assets (Unaudited)
------------------------------------------------------------
------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
Net Investment Income 1995
------------
<S> <C>
Income
Interest (net of foreign withholding
taxes of $35,444)........................ $ 3,635,731
Dividends (net of foreign withholding
taxes of $22,208)........................ 2,437,585
------------
Total income............................. 6,073,316
------------
Expenses
Distribution fee--Class A................... 161,195
Distribution fee--Class B................... 529,397
Distribution fee--Class C................... 6
Management fee.............................. 900,468
Transfer agent's fees and expenses.......... 208,000
Reports to shareholders..................... 101,500
Custodian's fees and expenses............... 73,500
Registration fees........................... 33,000
Legal fees.................................. 24,000
Franchise taxes............................. 22,000
Audit fee................................... 20,500
Directors' fees............................. 17,500
Insurance expense........................... 4,000
Miscellaneous............................... 3,135
------------
Total expenses........................... 2,098,201
------------
Net investment income.......................... 3,975,115
------------
Realized and Unrealized
Gain on Investments
Net realized gain on investment transactions... 8,568,085
Net change in unrealized appreciation of
investments................................. 19,862,462
------------
Net gain on investments........................ 28,430,547
------------
Net Increase in Net Assets
Resulting from Operations...................... $ 32,405,662
------------
------------
</TABLE>
<TABLE>
PRUDENTIAL INCOMEVERTIBLE(R) FUND, INC.
Statement of Changes in Net Assets (Unaudited)
Changes in Net Assets (Unaudited)
<CAPTION>
Six Months Year Ended
Increase (Decrease) Ended December 31,
in Net Assets June 30, 1995 1994
------------- -------------
<S> <C> <C>
Operations
Net investment income........ $ 3,975,115 $ 8,792,899
Net realized gain on
investments............... 8,568,085 22,871,648
Net change in unrealized
appreciation/depreciation
of investments............ 19,862,462 (42,907,216)
------------- -------------
Net increase (decrease) in
net assets resulting from
operations................ 32,405,662 (11,242,669)
------------- -------------
Net equalization debits......... (611,643) (381,058)
------------- -------------
Dividends and distributions (Note 1)
Dividends to shareholders from
net investment income
Class A................... (2,388,575) (374,482)
Class B................... (985,244) (8,218,618)
Class C................... (25) (3)
------------- -------------
(3,373,844) (8,593,103)
------------- -------------
Distributions to shareholders
from net realized capital
gains
Class A................... (2,399,797) (402,007)
Class B................... (1,327,646) (10,141,618)
Class C................... (19) (8)
------------- -------------
(3,727,462) (10,543,633)
------------- -------------
Fund share transactions (net
of share conversions) (Note 5)
Proceeds from shares sold.... 111,379,387 152,308,757
Net asset value of shares
issued in reinvestment of
dividends and
distributions............. 5,981,022 16,008,785
Cost of shares reacquired.... (146,390,356) (219,563,960)
------------- -------------
Net decrease in net assets
from Fund share
transactions.............. (29,029,947) (51,246,418)
------------- -------------
Total decrease.................. (4,337,234) (82,006,881)
Net Assets
Beginning of period............. 243,279,104 325,285,985
------------- -------------
End of period................... $ 238,941,870 $ 243,279,104
------------- -------------
------------- -------------
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 9 -----
<PAGE>
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL INCOMEVERTIBLE(R) FUND, INC.
--------------------------------------------------------------------------------
Prudential IncomeVertiblet Fund, Inc. (the ``Fund'') is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. Investment operations commenced on December 5, 1985. The investment
objective of the Fund is to seek both high current income and appreciation of
capital. The Fund seeks to achieve its investment objective by investing
primarily in convertible securities and/or in combinations of securities,
comprised of non-convertible fixed-income securities and warrants or call
options. The ability of issuers of debt securities held by the Fund to meet
their obligations may be affected by economic and political developments in a
specific industry or region.
------------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Security Valuation: Any security for which the primary market is on an exchange
and NASDAQ National Market System equity securities are valued at the last sale
price on such exchange on the day of valuation or, if there was no sale on such
day, the mean between the last bid and asked prices quoted on such day.
Corporate bonds and U.S. Government securities that are actively traded in the
over-the-counter market are valued on the basis of valuations provided by a
pricing service which uses information with respect to transactions in bonds,
quotations from bond dealers and market transactions in comparable securities
in
determining value. Other securities are valued at the mean between the most
recently quoted bid and asked prices. Securities which are otherwise not readily
marketable or securities for which market quotations are not readily available
are valued in good faith at fair value in accordance with procedures adopted by
the Fund's Board of Directors.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.
In connection with repurchase agreement transactions, it is the Fund's policy
that its custodian or designated sub-custodians, as the case may be under
triparty repurchase agreements, take possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. If
the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains or losses on sales of investments are
calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis.
Net investment income (other than distribution fees) and unrealized and realized
gains or losses are allocated daily to each class of shares based upon the
relative proportion of net assets of each class at the beginning of the day.
Dividends and Distributions: Dividends from net investment income are declared
and paid quarterly. The Fund will distribute at least annually any net capital
gains in excess of loss carryforwards. Dividends and distributions are recorded
on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
Equalization: The Fund follows the accounting practice known as equalization by
which a portion of the proceeds from sales and costs of reacquisitions of Fund
shares, equivalent on a per share basis to the amount of distributable net
investment income on the date of the transaction, is credited or charged to
undistributed net investment income. As a result, undistributed net investment
income per share is unaffected by sales or reacquisitions of the Fund's shares.
Taxes: It is the Fund's policy to continue to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable net income to shareholders. Therefore, no federal
income tax provision is required.
Withholding taxes on foreign dividends and interest have been provided for in
accordance with the Fund's understanding of the applicable country's tax rates.
------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential Mutual Fund Management, Inc.
(``PMF''). Pursuant to this agreement, PMF has responsibility for all investment
advisory services and supervises the subadviser's
--------------------------------------------------------------------------------
----- 10
<PAGE>
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL INCOMEVERTIBLE(R) FUND, INC.
--------------------------------------------------------------------------------
performance of such services. PMF has entered into a subadvisory agreement with
The Prudential Investment Corporation (``PIC''); PIC furnishes investment
advisory services in connection with the management of the Fund. PMF pays for
the cost of the subadviser's services, the compensation of officers of the Fund,
occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears
all other costs and expenses.
The management fee paid PMF is computed daily and payable monthly, at an annual
rate of .75% of the Fund's average daily net assets up to $500 million, .70% of
the next $250 million, .65% of the next $250 million and .60% of the Fund's
average daily net assets in excess of $1 billion.
The Fund has distribution agreements with Prudential Mutual Fund Distributors,
Inc. (``PMFD''), which acts as the distributor of the Class A shares of the
Fund, and with Prudential Securities Incorporated (``PSI''), which acts as
distributor of the Class B shares and Class C shares of the Fund, (collectively
the ``Distributors''). The Fund compensates the Distributors for distributing
and servicing the Fund's Class A, Class B and Class C shares, pursuant to plans
of distribution, (the ``Class A, B and C Plans'') regardless of expenses
actually incurred by them. The distribution fees are accrued daily and payable
monthly.
Pursuant to the Class A, B and C Plans, the Fund contractually compensates the
Distributors for distribution-related activities at an annual rate of up to .30
of 1%, 1% and 1% of the average daily net assets of the Class A, B and C shares,
respectively. Such expenses under the Class A Plan were .25 of 1% of the average
daily net assets of the Class A shares for the six months ended June 30, 1995.
Prior to June 15, 1995, Class B and C distribution expenses were 1% of the
average daily net assets. Effective June 15, 1995, such expenses under the Class
B and C Plans were reduced to .25 of 1% of the average daily net assets of Class
B and C shares.
PMFD has advised the Fund that it has received approximately $25,800 in
front-end sales charges resulting from sales of Class A shares during the six
months ended June 30, 1995. From these fees, PMFD paid such sales charges to PSI
and Pruco Securities Corporation, affiliated broker-dealers, which in turn paid
commissions to salespersons and incurred other distribution costs.
PSI has advised the Fund that for the six months ended June 30, 1995, it
received approximately $114,300 in contingent deferred sales charges imposed
upon redemptions by certain Class B and Class C shareholders.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are (indirect)
wholly-owned subsidiaries of The Prudential Insurance Company of America
(``Prudential'').
------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services, Inc. (``PMFS''), a wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent. During the six months ended June 30,
1995, the Fund incurred fees of approximately $175,000 for the services of PMFS.
As of June 30, 1995, approximately $29,000 of such fees were due to PMFS.
Transfer agent fees and expenses in the Statement of Operations also include
certain out-of-pocket expenses paid to non-affiliates.
For the six months ended June 30, 1995, PSI earned approximately $9,700 in
brokerage commissions from portfolio transactions executed on behalf of the
Fund.
------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the six months ended June 30, 1995, were $93,689,139 and $114,420,654,
respectively.
The cost basis of the Fund's investments for federal income tax purposes, at
June 30, 1995 was substantially the same as for reporting purposes and
accordingly, net unrealized appreciation of investments for federal income tax
purposes was $11,157,363 (gross unrealized appreciation--$24,951,754; gross
unrealized depreciation--$13,794,391).
------------------------------------------------------------
Note 5. Joint Repurchase Agreement Account
The Fund, along with other affiliated registered investment companies, transfers
uninvested cash balances into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. Treasury or federal agency obligations. As of June 30, 1995, the Fund
has a 0.8% undivided interest in the joint account. The undivided interest for
the Fund represents $5,547,000 in principal amount. As of such date, each
repurchase agreement in the joint account and the collateral therefore were as
follows:
Bear, Stearns & Co., Inc., 6.125%, in the principal amount of $200,000,000,
repurchase price $200,102,083, due 7/3/95. The value of the collateral including
accrued interest was $204,321,562.
--------------------------------------------------------------------------------
11 -----
<PAGE>
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL INCOMEVERTIBLE(R) FUND, INC.
--------------------------------------------------------------------------------
CS First Boston Corp., 6.13%, in the principal amount of $160,000,000,
repurchase price $160,081,733, due 7/3/95. The value of the collateral including
accrued interest was $163,246,196.
Goldman, Sachs & Co., 6.10%, in the principal amount of $116,557,000, repurchase
price $116,616,250, due 7/3/95. The value of the collateral including accrued
interest was $118,889,059.
Smith Barney, Inc., 6.13%, in the principal amount of $200,000,000, repurchase
price $200,102,167, due 7/3/95. The value of the collateral including accrued
interest was $204,000,775.
------------------------------------------------------------
Note 6. Capital
The Fund issued Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge of up to 5%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Class C shares are sold with a contingent
deferred sales charge of 1% during the first year. Commencing in February 1995,
Class B shares will automatically convert to Class A shares on a quarterly basis
approximately seven years after purchase. A special exchange privilege is also
available for shareholders who qualified to purchase Class A shares at net asset
value.
The Fund has authorized 2 billion shares of common stock at $.10 par value per
share equally divided into three classes, designated Class A, Class B and Class
C common stock. Transactions in shares of common stock for the six months ended
June 30, 1995 and the year ended December 31, 1994 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
----------------------------------- ----------- -------------
<S> <C> <C>
Six months ended June 30, 1995:
Shares sold........................ 9,667,700 $ 108,911,282
Shares issued in reinvestment of
dividends and distributions...... 356,739 4,009,139
Shares reacquired.................. (11,290,339) (128,079,513)
----------- -------------
Net decrease in shares outstanding
before conversion................ (1,265,900) (15,159,092)
Shares issued upon conversion from
Class B.......................... 13,292,229 145,760,540
----------- -------------
Net increase in shares
outstanding...................... 12,026,329 $ 130,601,448
----------- -------------
----------- -------------
Year ended December 31, 1994:
Shares sold........................ 8,319,804 $ 98,336,113
Shares issued in reinvestment of
dividends and distributions...... 65,244 729,890
Shares reacquired.................. (8,505,822) (101,128,946)
----------- -------------
Net decrease in shares
outstanding...................... (120,774) $ (2,062,943)
----------- -------------
----------- -------------
<CAPTION>
Class B Shares Amount
----------- -------------
<S> <C> <C>
Six months ended June 30, 1995:
Shares sold........................ 222,058 $ 2,465,556
Shares issued in reinvestment of
dividends and distributions...... 176,331 1,971,842
Shares reacquired.................. (1,700,492) (18,310,843)
----------- -------------
Net decrease in shares outstanding
before conversion................ (1,302,103) (13,873,445)
Shares reacquired upon conversion
into Class A..................... (13,292,229) (145,760,540)
----------- -------------
Net decrease in shares
outstanding...................... (14,594,332) $(159,633,985)
----------- -------------
----------- -------------
Year ended December 31, 1994:
Shares sold........................ 4,517,035 $ 53,972,444
Shares issued in reinvestment of
dividends and distributions...... 1,368,841 15,278,889
Shares reacquired.................. (9,907,704) (118,435,014)
----------- -------------
Net decrease in shares
outstanding...................... (4,021,828) $ (49,183,681)
----------- -------------
----------- -------------
<CAPTION>
Class C
<S> <C> <C>
Six months ended June 30, 1995:
Shares sold........................ 225 $ 2,549
Shares issued in reinvestment of
dividends and distributions...... 4 41
----------- -------------
Net increase in shares
outstanding...................... 229 $ 2,590
----------- -------------
----------- -------------
August 1, 1994* through
December 31, 1994
Shares sold........................ 17 $ 200
Shares issued in reinvestment of
dividends and distributions...... -- 6
----------- -------------
Net increase in shares
outstanding...................... 17 $ 206
----------- -------------
----------- -------------
---------------
* Commencement of offering of Class C shares.
</TABLE>
------------------------------------------------------------
Note 7. Proposed Reorganization
On June 14, 1995, the Board of Directors of the Fund approved an Agreement and
Plan of Reorganization and Liquidation (the ``Plan'') which provides for the
transfer of substantially all of the assets and liabilities of the Fund to the
Conservatively Managed Portfolio of Prudential Allocation Fund (``Allocation
Fund''). Class A, Class B and Class C shares of the Fund would be exchanged at
net asset value for Class A, Class B and Class C shares, respectively, of
equivalent value of Allocation Fund. The Fund would then cease operations.
The Plan requires the approval of shareholders of the Fund to become effective
and a proxy/prospectus was mailed to shareholders in late July 1995. If the Plan
is approved, it is expected that the reorganization will take place in or about
September 1995. The Fund and Allocation will each bear their pro-rata share of
the costs of the reorganization, including costs of proxy solicitation.
--------------------------------------------------------------------------------
----- 12
<PAGE>
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL INCOMEVERTIBLE(R) FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------------------
January 22,
Six Months
1990(b)
Ended Year
Ended December 31, Through
June 30,
------------------------------------------- December 31,
1995 1994
1993 1992(c) 1991 1990
<S> <C> <C> <C>
<C> <C> <C>
---------- -------
------- ------- ------- ------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 10.87 $ 12.26 $
11.33 $ 11.07 $ 9.87 $ 10.88
---------- -------
------- ------- ------- ------------
Income from investment operations
Net investment income......................... 0.19 0.46
0.48 0.59 0.66 0.75
Net realized and unrealized gain (loss) on
investment transactions..................... 1.36 (0.89)
0.93 0.31 1.31 (0.88)
---------- -------
------- ------- ------- ------------
Total from investment operations............ 1.55 (0.43)
1.41 0.90 1.97 (0.13)
---------- -------
------- ------- ------- ------------
Less distributions
Dividends from net investment income.......... (0.18) (0.46)
(0.48) (0.59) (0.66) (0.75)
Distributions from net realized capital
gains....................................... (0.18) (0.50)
-- -- -- (0.09)
Distributions to shareholders in excess of net
investment income........................... -- --
-- (0.05) (0.11) (0.04)
---------- -------
------- ------- ------- ------------
Total distributions......................... (0.36) (0.96)
(0.48) (0.64) (0.77) (0.88)
---------- -------
------- ------- ------- ------------
Net asset value, end of period................ $ 12.06 $ 10.87 $
12.26 $ 11.33 $ 11.07 $ 9.87
---------- -------
------- ------- ------- ------------
---------- -------
------- ------- ------- ------------
TOTAL RETURN(e)............................... 14.52% (3.58)%
12.60% 8.31% 20.55% (1.18)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $158,774 $12,364
$15,432 $ 9,422 $11,475 $ 7,397
Average net assets (000)...................... $130,025 $11,724
$12,954 $11,096 $ 8,486 $ 5,980
Ratios to average net assets:
Expenses, including distribution fees....... 1.42%(a) 1.34%
1.29% 1.34% 1.30% 1.37%(a)
Expenses, excluding distribution fees....... 1.17%(a) 1.09%
1.09% 1.14% 1.10% 1.17%(a)
Net investment income....................... 3.67%(a) 3.45%(d)
3.85% 5.39% 6.18% 7.05%(a)
Portfolio turnover............................ 43% 70%
84% 109% 82% 76%
</TABLE>
---------------
(a) Annualized.
(b) Commencement of offering of Class A shares.
(c) Calculated based upon weighted average shares outstanding during the year.
(d) The net investment income ratio including nonrecurring item would be
3.84%, 3.09% and 4.13% for the Class A, B and C shares, respectively.
(e) Total return does not consider the effects of sales loads. Total return
is calculated assuming a purchase of shares on the first day and a sale
on the last day of each period reported and includes reinvestment of
dividends and distributions. Total returns for periods of less than one
full year are not annualized.
--------------------------------------------------------------------------------
See Notes to Financial Statements. 13 -----
<PAGE>
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL INCOMEVERTIBLE(R) FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
----------------------------------------------------------------------------
Six Months
Ended
Year Ended December 31,
June 30,
------------------------------------------------------------
1995 1994
1993 1992(c) 1991 1990
<S> <C> <C>
<C> <C> <C> <C>
----------- --------
-------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 10.88 $ 12.27
$ 11.33 $ 11.08 $ 9.87 $ 11.35
----------- --------
-------- -------- -------- --------
Income from investment operations
Net investment income......................... 0.16 0.38
0.38 0.51 0.59 0.66
Net realized and unrealized gain (loss) on
investment transactions..................... 1.36 (0.89)
0.94 0.30 1.31 (1.35)
----------- --------
-------- -------- -------- --------
Total from investment operations............ 1.52 (0.51)
1.32 0.81 1.90 (0.69)
----------- --------
-------- -------- -------- --------
Less distributions
Dividends from net investment income.......... (0.14) (0.38)
(0.38) (0.51) (0.59) (0.66)
Distributions from net realized capital
gains....................................... (0.18) (0.50)
-- -- -- (0.09)
Distributions to shareholders in excess of net
investment income........................... -- --
-- (0.05) (0.10) (0.04)
----------- --------
-------- -------- -------- --------
Total distributions......................... (0.32) (0.88)
(0.38) (0.56) (0.69) (0.79)
----------- --------
-------- -------- -------- --------
Net asset value, end of period................ $ 12.08 $ 10.88
$ 12.27 $ 11.33 $ 11.08 $ 9.87
----------- --------
-------- -------- -------- --------
----------- --------
-------- -------- -------- --------
TOTAL RETURN(e)............................... 14.21% (4.22)%
11.77% 7.43% 19.76% (6.10)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $ 80,165 $230,914
$309,854 $334,383 $400,961 $423,390
Average net assets (000)...................... $ 112,089 $270,496
$327,995 $357,956 $412,869 $492,335
Ratios to average net assets:
Expenses, including distribution fees....... 2.12%(a) 2.09%
2.09% 2.14% 2.10% 2.12%
Expenses, excluding distribution fees....... 1.17%(a) 1.09%
1.09% 1.14% 1.10% 1.12%
Net investment income....................... 2.97%(a) 2.70%(d)
3.01% 4.64% 5.43% 6.33%
Portfolio turnover............................ 43% 70%
84% 109% 82% 76%
<CAPTION>
Class C
August 1,
Six Months 1994(b)
Ended Through
June 30, December 31,
1995 1994
<S> <C> <C>
---------- ------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $10.88 $ 11.90
----- ------------
Income from investment operations
Net investment income......................... 0.16 0.20
Net realized and unrealized gain (loss) on
investment transactions..................... 1.36 (0.49)
----- ------------
Total from investment operations............ 1.52 (0.29)
----- ------------
Less distributions
Dividends from net investment income.......... (0.14) (0.23)
Distributions from net realized capital
gains....................................... (0.18) (0.50)
Distributions to shareholders in excess of net
investment income........................... -- --
----- ------------
Total distributions......................... (0.32) (0.73)
----- ------------
Net asset value, end of period................ $12.08 $ 10.88
----- ------------
----- ------------
TOTAL RETURN(e)............................... 14.21% (2.49)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $ 3 $ 189(f)
Average net assets (000)...................... $ 1 $ 200(f)
Ratios to average net assets:
Expenses, including distribution fees....... 2.12%(a) 1.27%(a)
Expenses, excluding distribution fees....... 1.17%(a) 0.27%(a)
Net investment income....................... 2.97%(a)
2.92%(a)/(d)
Portfolio turnover............................ 43% 70%
</TABLE>
---------------
(a) Annualized.
(b) Commencement of offering of Class C shares.
(c) Calculated based upon weighted average shares outstanding during the year.
(d) The net investment income ratio including nonrecurring item would be
3.84%, 3.09% and 4.13% for the Class A, B and C shares, respectively.
(e) Total return does not consider the effects of sales loads. Total return
is calculated assuming a purchase of shares on the first day and a sale
on the last day of each period reported and includes reinvestment of
dividends and distributions. Total returns for periods of less than one
full year are not annualized.
(f) Figures are actual and not rounded to the nearest thousand.
--------------------------------------------------------------------------------
----- 14 See Notes to Financial Statements.
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
PAGE
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852
Directors
Thomas R. Anderson
Robert R. Fortune
Delayne D. Gold
Harry A. Jacobs, Jr.
Thomas A. Owens, Jr.
Richard A. Redeker
Merle T. Welshans
Officers
Richard A. Redeker, President
David W. Drasnin, Vice President
Robert F. Gunia, Vice President
Eugene S. Stark, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Marguerite E. H. Morrison, Assistant Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributors
Prudential Mutual Fund Distributors, Inc.
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
Legal Counsel
Fulbright & Jaworski LLP
666 Fifth Avenue
New York, NY 10103-0229
The accompanying financial statements as of June 30, 1995 were not audited
and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
<PAGE>
The Prudential IncomeVertibleR Fund, Inc.
and the S&P 500 Index: Comparing a $10,000 Investment.
(CHART)
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so an investor's shares, when redeemed, will be
worth more or less than their original cost. The charts on the right are
designed to give you an idea how much the Fund's returns can fluctuate from
year to year by measuring the best and worst years in terms of total annual
return since inception of each share class.
These graphs are furnished to you in accordance with SEC regulations. They
compare a $10,000 investment in the Prudential IncomeVertibleR Fund, Inc.
(Class A, Class B and Class C) with a similar investment in the S&P 500 Index
by portraying the initial account values at the commencement of operations of
each class, and subsequent account values at the end of this reporting period
(June 30), as measured on a quarterly basis, beginning in 1990 for Class A
shares, in 1985 for Class B shares and in 1994 for Class C shares. For purposes
of the graphs, and unless otherwise indicated, in the accompanying tables it
has been assumed (a) that the maximum applicable front-end sales charge was
deducted from the initial $10,000 investment in Class A shares; (b) the
maximum applicable contingent deferred sales charge was deducted from the value
of the investment in Class B and Class C shares, assuming full redemption on
June 30, 1995; (c) all recurring fees (including management fees) were
deducted; and (d) all dividends and distributions were reinvested. Class B
shares will automatically convert to Class A shares on a quarterly basis,
beginning approximately seven years after purchase. This conversion feature is
not reflected in the graph.
The S&P 500 is a capital-weighted index, representing the aggregate market
value of the common equity of 500 stocks primarily traded on the New York
Stock Exchange. The S&P 500 is an unmanaged index and includes the reinvestment
of all dividends, but does not reflect the payment of transaction costs and
advisory fees associated with an investment in the Fund. The securities in the
S&P 500 may differ substantially from the securities in the Fund. The S&P 500
is not the only index that may be used to characterize performance of stock
funds and other indexes may portray different comparative performance.
<PAGE>
(LOGO)
BULK RATE
U.S. POSTAGE
PAID
Permit 6807
New York, NY
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852
743912206
743912107 MF129E2
743912305 Cat# 642657P
