PRUDENTIAL INSTITUTIONAL LIQUIDITY PORTFOLIO INC, 485APOS, 1995-08-04

PRUDENTIAL INSTITUTIONAL LIQUIDITY PORTFOLIO INC
485APOS, 1995-08-04

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As filed with the Securities and Exchange Commission on August 4, 1995

Securities Act Registration Statement No. 33-17224
Investment Company Act Registration No. 811-5336
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 10 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 11 [X]
(Check appropriate box or boxes)

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PRUDENTIAL INSTITUTIONAL LIQUIDITY PORTFOLIO, INC.
(Exact name of registrant as specified in charter)

ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292
(Address of Principal Executive Offices) (Zip Code)

----------

Registrant's Telephone Number, Including Area Code: (212) 214-1250

S. Jane Rose, Esq.
One Seaport Plaza
New York, New York 10292

(Name and Address of Agent for Service of Process)

Approximate date of proposed public offering:
As soon as practicable after the effective
date of the Registration Statement.

It is proposed that this filing will become effective
(check appropriate box):

[ ] immediately upon filing pursuant to paragraph (b)

[ ] on (date) pursuant to paragraph (b)

[ ] 60 days after filing pursuant to paragraph (a)(1)

[ ] on (date) pursuant to paragraph (a)(1)

[X] 75 days after filing pursuant to paragraph (a)(2)

[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:

[ ] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.

Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
previously registered an indefinite number of shares of Common Stock, par value
$.001 per share. The Registrant filed a notice under such Rule for its fiscal
year ended March 31, 1995 on or before May 31, 1995.
================================================================================

<PAGE>

CROSS REFERENCE SHEET
(as required by Rule 495)
<TABLE>
<CAPTION>

N-1A Item No. Location
- ------------- --------
Part A
<S> <C> <C>
Item 1. Cover Page ........................................................ Cover Page

Item 2. Synopsis .......................................................... Fund Expenses; Fund Highlights

Item 3. Condensed Financial Information ................................... Fund Expenses; Calculation of Yield

Item 4. General Description of Registrant ................................. Cover Page; How the Fund Invests;
General Information

Item 5. Management of the Fund ............................................ How the Fund Is Managed; General
Information

Item 6. Capital Stock and Other Securities ................................ Taxes, Dividends and
Distributions; General Information

Item 7. Purchase of Securities Being Offered .............................. Shareholder Guide; How the Fund Values
Its Shares

Item 8. Redemption or Repurchase .......................................... Shareholder Guide; General Information

Item 9. Pending Legal Proceedings ......................................... Not Applicable

Part B

Item 10. Cover Page ........................................................ Cover Page

Item 11. Table of Contents ................................................. Table of Contents

Item 12. General Information and History ................................... General Information

Item 13. Investment Objectives and Policies ................................ Investment Objective and Policies;
Investment Restrictions

Item 14. Management of the Fund ............................................ Directors and Officers; Manager;
Distributor

Item 15. Control Persons and Principal Holders of Securities ............... Directors and Officers

Item 16. Investment Advisory and Other Services ............................ Manager; Distributor; Custodian, Transfer
and Shareholder Servicing Agent
and Independent Accountants

Item 17. Brokerage Allocation and Other Practices .......................... Portfolio Transactions

Item 18. Capital Stock and Other Securities ................................ Not Applicable

Item 19. Purchase, Redemption and Pricing of Securities Being Offered ...... Net Asset Value; Purchase of Shares

Item 20. Tax Status ........................................................ Taxes

Item 21. Underwriters ...................................................... Distributor

Item 22. Calculation of Performance Data ................................... Calculation of Yield

Item 23. Financial Statements .............................................. Financial Statements

Part C
</TABLE>

Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Post-Effective Amendment to the
Registration Statement.

<PAGE>

The Prospectus of Institutional Money Market Series is incorporated herein
by reference in its entirety from Post-Effective Amendment No. 9 to Registrant's
Registration Statement (File No. 33-17224) filed on May 26, 1995. The Statement
of Additional Information is incorporated herein by reference in its entirety
from Post-Effective Amendment No. 9 to Registrant's Registration Statement (File
No. 33-17224) filed on May 26, 1995.

This Registration Statement is not intended to amend the Prospectus dated
May 30, 1995 of Institutional Money Market Series nor the Registrant's Statement
of Additional Information dated May 30, 1995, except as set forth herein, all of
which shall remain in full force and effect.

<PAGE>

Prudential Institutional Liquidity Portfolio, Inc.

Liquid Assets Series
- --------------------------------------------------------------------------------
Prospectus dated _________ , 1995
- --------------------------------------------------------------------------------

The Liquid Assets Series (the Series) is one of two series of Prudential
Institutional Liquidity Portfolio, Inc. (the Fund), an open-end, diversified
management investment company, or mutual fund. The Series offers investors an
efficient and economical means of investing in a professionally managed
portfolio of high quality money market instruments. The investment objective of
the Series is high current income consistent with the preservation of principal
and liquidity. There can be no assurance that the Series' investment objective
will be achieved. See "How the Fund Invests--Investment Objective and Policies."
Shares of the Series are offered only to investment advisory clients of
Prudential Securities Incorporated (Prudential Securities) (a) which participate
in a managed account program sponsored by Prudential Securities and (b) which
are "Eligible Benefit Plans" as defined below. "Eligible Benefit Plans" include
(i) employee benefit plans as defined in Section 3(3) of the Employee
Retirement Income Security Act (ERISA) other than governmental plans as defined
in Section 3(32) of ERISA and church plans as defined in Section 3(33) of ERISA,
(ii) pension, profit-sharing or other employee benefit plans qualified under
Section 401 of the Internal Revenue Code, (iii) deferred compensation and
annuity plans under Section 457 or 403(b)(7) of the Internal Revenue Code, and
(iv) Individual Retirement Accounts (IRAs) as defined in Section 408(a) of the
Internal Revenue Code. See "Purchase of Shares" in the Statement of Additional
Information for a list of the managed account programs sponsored by Prudential
Securities.

An investment in the Series is neither insured nor guaranteed by the U.S.
Government and there can be no assurance that the Series will be able to
maintain a stable net asset value of $1.00 per share. See "How the Fund Values
Its Shares."

The Fund's address is One Seaport Plaza, New York, New York 10292, and its
telephone number is (800) 521-7466.

This Prospectus sets forth concisely the information about the Fund and the
Series that a prospective investor ought to know before investing. Additional
information about the Fund and the Series has been filed with the Securities and
Exchange Commission in a Statement of Additional Information, dated May 30,
1995, and restated on ________, 1995, which information is incorporated herein
by reference (is legally considered a part of this Prospectus) and is available
without charge at the address or telephone number noted above.
- --------------------------------------------------------------------------------
Investors are advised to read the Prospectus and retain it for future reference.
- --------------------------------------------------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<PAGE>

FUND HIGHLIGHTS

The following summary is intended to highlight certain information
contained in this Prospectus and is qualified in its entirety by the more
detailed information appearing elsewhere herein.

What Is Prudential Institutional Liquidity Portfolio, Inc.?

Prudential Institutional Liquidity Portfolio, Inc. is a mutual fund whose
shares are offered in two series, each of which operates as a separate fund. A
mutual fund pools the resources of investors by selling its shares to the public
and investing the proceeds of such sale in a portfolio of securities designed to
achieve its investment objective. Technically, the Fund is an open-end,
diversified management investment company. Only the Liquid Asset Series is
offered through this Prospectus.

What Is the Series' Investment Objective?

The Series' investment objective is high current income consistent with the
preservation of principal and liquidity. The Series invests primarily in a
portfolio of U.S. government obligations, financial institution obligations, and
other high quality money market instruments maturing in thirteen months or less.
There can be no assurance that the Series' investment objective will be
achieved. See "How the Fund Invests--Investment Objective and Polices" at page
5.

Risk Factors and Special Characteristics

It is anticipated that the net asset value of the Series will remain
constant at $1.00 per share, although this cannot be assured. In order to
maintain such constant net asset value, the Series will value its portfolio
securities at amortized cost. While this method provides certainty in valuation,
it may result in periods during which the value of a security in the Series'
portfolio, as determined by amortized cost, is higher or lower than the price
the Series would receive if it sold such security. See "How the Fund Values its
Shares" at page 11.

Who Manages the Fund?

Prudential Mutual Fund Management, Inc. (PMF or the Manager) is the Manager
of the Fund. Although PMF does not charge a management fee for investment
advisory services provided to the Series, PMF is reimbursed by the Series for
certain administrative costs and expenses it incurs in providing services to
the Series. As of June 30, 1995, PMF served as manager or administrator to 68
investment companies, including 38 mutual funds, with aggregate assets of
approximately $49 billion. The Prudential Investment Corporation (PIC or the
Subadviser) furnishes investment advisory services in connection with the
management of the Fund under a Subadvisory Agreement with PMF. See "How the Fund
is Managed--Manager" at page 9.

2
<PAGE>

Who Distributes the Series' Shares?

Prudential Mutual Fund Distributors, Inc. (PMFD or the Distributor) acts as
the Distributor of the Series' shares pursuant to a distribution agreement with
the Fund and serves without compensation from the Series. See "How the Fund is
Managed--Distributor" at page 10.

What Is the Minimum Investment?

There are no minimum investment requirements. See "Shareholder Guide--How
to Buy Shares of the Fund" at page 14 and "Shareholder Guide--Shareholder
Services" at page 16.

How Do I Purchase Shares?

How Do I Sell My Shares?

You may redeem shares of the Series at any time at the NAV next determined
after Prudential Securities receives a request in proper form. Prudential
Securities will redeem shares on behalf of participating clients each business
day pursuant to automatic redemption procedures. See "Shareholder Guide--How to
Sell Your Shares" at page 15.

How Are Dividends and Distributions Paid?

The Series expects to declare daily and pay monthly dividends of net
investment income and short-term capital gains, if any. Dividends and
distributions will be automatically reinvested in additional shares of the
Series at NAV unless Prudential Securities has requested on your behalf that
they be paid to you in cash. See "Taxes, Dividends and Distributions" at page
12.

<PAGE>

FUND EXPENSES

Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases ......................... None
Maximum Sales Load Imposed on Reinvested Dividends .............. None
Deferred Sales Load ............................................. None
Redemption Fees ................................................. None
Exchange Fees ................................................... None

Annual Series Operating Expenses
(as a percentage of average net assets)

Management Fees ................................................. None*
12b-1 Fees ...................................................... None
Other Expenses .................................................. .26*
----
Total Series Operating Expenses ................................. .26
====
Example

1 year 3 years
------ -------
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the
end of each time period: .................................... $3 $8
- ----------

The above example is based on expenses expected to have been incurred if the
Series had been in existence for the fiscal year ended March 31, 1995. The
example should not be considered a representation of past or future expenses.
Actual expenses may be greater or less than those shown.

The purpose of the table is to assist an investor in understanding the various
costs and expenses that an investor in the Series will bear, whether directly or
indirectly. For more complete descriptions of the various costs and expenses,
see "How the Fund is Managed." "Other Expenses" includes operating expenses of
the Series, such as Directors' and professional fees, registration fees, reports
to shareholders, transfer agency and custodian fees and certain administrative
costs.

* Shares of the Series are offered only to investment advisory clients of
Prudential Securities (a) which participate in a managed account program
sponsored by Prudential Securities and (b) which are "Eligible Benefit
Plans" as defined below. "Eligible Benefit Plans" include (i) employee
benefit plans as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 (ERISA) other than governmental plans as defined in
Section 3(32) of ERISA and church plans as defined in Section 3(33) of
ERISA, (ii) pension, profit-sharing or other employee benefit plans
qualified under Section 401 of the Internal Revenue Code, (iii) deferred
compensation and annuity plans under Section 457 or 403(b)(7) of the
Internal Revenue Code, and (iv) Individual Retirement Accounts (IRAs) as
defined in Section 408(a) of the Internal Revenue Code. These programs
charge varying investment management fees based on a percentage of assets
under management. The Series is not charged a separate investment
management fee. The Series pays an administrative fee at an annual rate of
.04 of 1% and a transfer agency fee to an affiliate of the Manager. These
fees are included in "Other Expenses" above. See "How the Fund is Managed,"
and "Custodian and Transfer and Shareholder Servicing Agent."

<PAGE>

CALCULATION OF YIELD

The Series calculates its "current yield" based on the net change,
exclusive of realized and unrealized capital gains or losses, in the value of a
hypothetical account over a seven calendar day base period. The Series will also
calculate its "effective annual yield" assuming weekly compounding.

The yield will fluctuate from time to time and does not indicate future
performance.

Yield is computed in accordance with a standardized formula described in
the Statement of Additional Information. In addition, comparative performance
information may be used from time to time in advertising or marketing the shares
of the Series, including data from Lipper Analytical Services, Inc., Morningstar
Publications, Inc., IBC/Donoghue's Money Fund Report, The Bank Rate Monitor,
other industry publications, business periodicals and market indices.

HOW THE FUND INVESTS

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Series is high current income consistent
with the preservation of principal and liquidity. The Series pursues its
investment objective through the investment policies described below. There can
be no assurance that this objective will be achieved.

The Series' investment objective is a fundamental policy and, therefore,
may not be changed without the approval of the holders of a majority of the
Series' outstanding voting securities, as defined in the Investment Company Act
of 1940, as amended (the Investment Company Act). The Series' policies that are
not fundamental may be modified by the Board of Directors.

The assets of the Series will be invested in high quality money market
instruments maturing in thirteen months or less, and the dollar-weighted average
maturity of the portfolio of the Series will be 90 days or less. The Series also
may hold cash reserves as the investment adviser deems necessary for temporary
defensive or emergency purposes.

In selecting portfolio securities for investment by the Series, the
investment adviser considers ratings assigned by major rating services,
information concerning the financial history and condition of the issuer and its
revenue and expense prospects. The Board of Directors monitors the credit
quality of securities purchased for the Series' portfolio. If a portfolio
security held by the Series is assigned a lower rating or ceases to be rated,
the investment adviser under the supervision of the Board of Directors will
promptly reassess whether that security presents minimal credit risks and
whether the Series should continue to hold the security in its portfolio. If a
portfolio security no longer presents minimal credit risks or is in default, the
Series will dispose of the security as soon as reasonably practicable unless the
Board of Directors determines that to do so is not in the best interest of the
Series and its shareholders.

The Series utilizes the amortized cost method of valuation in accordance
with regulations of the Securities and Exchange Commission (SEC). See "How the
Fund Values its Shares." Accordingly, the Series will limit its portfolio
investments to those instruments which present minimal credit risks and which
are of "eligible quality," as determined by the Fund's investment adviser under
the supervision of the Board of Directors. "Eligible quality," for this purpose,
means (i) a security rated in one of the two highest rating categories by at
least two nationally recognized statistical rating organizations assigning a
rating to the security or issuer (or, if only one such rating organization
assigned a rating, that rating organization) or (ii) an unrated security deemed
of comparable quality by the Fund's investment adviser under the supervision of
the Board of Directors.

5
<PAGE>

As long as the Series utilizes the amortized cost method of valuation, it
will also comply with certain diversification requirements and will invest no
more than 5% of its total assets in "second-tier securities," with no more than
1% of the Series' assets in any one issuer of a second-tier security. A
"second-tier security," for this purpose, is a security of "eligible quality"
that does not have the highest rating from at least two rating organizations
assigning a rating to that security or issuer (or, if only one rating
organization assigned a rating, that rating organization) or an unrated security
that is deemed of comparable quality by the Fund's investment adviser under the
supervision of the Fund's Board of Directors.

Under normal market conditions, the Series will invest its assets in high
quality U.S. dollar-denominated money market obligations of domestic and foreign
issuers and U.S. Government and financial institution obligations described
below. There is no limitation on the percentage of the Series' assets that may
be invested in each of these categories. In addition, the Series may utilize the
investment techniques described below under "Other Investments and Policies."

U.S. Government Obligations. The Series may invest in obligations issued or
guaranteed as to principal and interest by the U.S. Government or its agencies
or instrumentalities.

U.S. Treasury Obligations. The Series may invest in U.S. Treasury
obligations, including bills, notes, bonds and other debt obligations issued by
the U.S. Treasury. These instruments are direct obligations of the U.S.
Government and, as such, are backed by the "full faith and credit" of the United
States. They differ primarily in their interest rates, the lengths of their
maturities and the dates of their issuances.

Obligations Issued or Guaranteed by U.S. Government Agencies and
Instrumentalities. The Series may also invest in obligations issued by agencies
of the U.S. Government or instrumentalities established or sponsored by the U.S.
Government. These obligations, including those which are guaranteed by federal
agencies or instrumentalities, may or may not be backed by the full faith and
credit of the United States. Obligations of the Government National Mortgage
Association (GNMA), the Farmers Home Administration and the Small Business
Administration are backed by the full faith and credit of the United States. In
the case of obligations not backed by the full faith and credit of the United
States, the Series must look principally to the agency issuing or guaranteeing
the obligation for ultimate repayment and may not be able to assert a claim
against the United States if the agency or instrumentality does not meet its
commitments. Instruments in which the Series may invest which are not backed by
the full faith and credit of the United States include obligations issued by the
Federal Home Loan Banks, the Federal Home Loan Mortgage Corporation (FHLMC), the
Federal National Mortgage Association (FNMA), the Resolution Funding
Corporation, the Student Loan Marketing Association, and the Tennessee Valley
Authority, each of which has the right to borrow under certain circumstances
from the U.S. Treasury to meet its obligations, and obligations of the Farm
Credit System, the obligations of which may be satisfied only by the individual
credit of the issuing agency. The Series' investment in mortgage-backed
securities (e.g., GNMA, FNMA and FHLMC certificates) will be made only to the
extent such securities are used as collateral for repurchase agreements entered
into by the Series.

Financial Institution Obligations. The Series may invest in obligations
(including certificates of deposit and bankers' acceptances) of (a) banks
organized under the laws of the United States or any state thereof (including
foreign branches of such banks) or (b) U.S. branches of foreign banks or (c)
foreign banks and foreign branches thereof; provided that such banks have, at
the time of acquisition by the Series of such obligations, total assets of not
less than $1 billion or its equivalent. The term "certificates of deposit"
includes both Eurodollar certificates of deposit, for which there is generally a
market, and Eurodollar time deposits, for which there is generally not a market.
Eurodollars are U.S. dollars deposited in branches of banks outside the United
States.

Other Money Market Instruments. The Series may invest in commercial paper,
variable amount demand master notes, bills, notes and other obligations issued
by a U.S. company, a foreign company or a foreign government, its

6
<PAGE>

agencies or instrumentalities, maturing in thirteen months or less,
denominated in U.S. dollars, which, at the date of investment, are of "eligible
quality." If such obligations are guaranteed or supported by a letter of credit
issued by a bank, such bank (including a foreign bank) must meet the
requirements set forth above under "Financial Institution Obligations." If such
obligations are guaranteed or insured by an insurance company or other non-bank
entity, such insurance company or other non-bank entity must represent a credit
of comparable quality, as determined by the Fund's investment adviser under the
supervision of the Fund's Board of Directors. In the case of instruments issued
by foreign companies or a foreign government, the Series will only invest in
instruments which are not currently subject to foreign withholding taxes.

OTHER INVESTMENTS AND POLICIES

Liquidity Puts

The Series may purchase instruments of the types described above together
with the right to resell the instruments to brokers, dealers or financial
institutions at an agreed-upon price or yield within a specified period prior to
the maturity date of the instruments. Such a right to resell is commonly known
as a "put," and the aggregate price that the Series pays for instruments with a
put may be higher than the price that otherwise would be paid for the
instruments. Puts may be exercised prior to the expiration date in order to fund
obligations to purchase other securities or meet redemption requests.

Since the value of the put is dependent on the ability of the put writer to
meet its obligation to repurchase, the Series' policy is to enter into put
transactions only with such brokers, dealers or financial institutions which
present minimal credit risks. There is a credit risk associated with the
purchase of puts in that the broker, dealer or financial institution might
default on its obligation to repurchase an underlying security. In the event
such a default should occur, the Fund is unable to predict whether all or any
portion of any loss sustained could subsequently be recovered from the broker,
dealer or financial institution.

Floating Rate and Variable Rate Securities

The Fund may purchase "floating rate" and "variable rate" obligations. The
interest rates on such obligations fluctuate generally with changes in market
interest rates, and in some cases, the Fund is able to demand repayment of the
principal amount of such obligations at par plus accrued interest. For
additional information concerning variable rate and floating rate obligations,
see "Investment Objective and Policies" in the Statement of Additional
Information.

When-Issued and Delayed Delivery Securities

The Series may purchase securities on a "when-issued" or delayed delivery
basis. When-issued or delayed delivery transactions arise when securities are
purchased by the Series with payment and delivery taking place as much as a
month or more into the future in order to secure what is considered to be an
advantageous price and yield to the Series at the time of entering into the
transaction. The Series will limit such purchases to those in which the date for
delivery and payment falls within 90 days of the date of the commitment. The
Series will make commitments for such when-issued transactions only with the
intention of actually acquiring the securities. The Fund's Custodian will
maintain, in a segregated account of the Series, cash, U.S. Government
securities or other high grade, liquid debt obligations having a value equal to
or greater than the Series' purchase commitments. If the Series chooses to
dispose of the right to acquire a when-issued security prior to its acquisition,
it could, as with the disposition of any other portfolio security, incur a gain
or loss due to market fluctuations. The securities so purchased are subject to
market fluctuation and no interest accrues to the purchaser during the period
between purchase and settlement.

Pledging of Assets and Borrowing

The Series may borrow (including through entering into reverse repurchase
agreements) up to 15% of the value of its total assets (computed at the time the
loan is made) from banks for temporary, extraordinary or emergency purposes.

7
<PAGE>

The Series may pledge up to 15% of its total assets to secure such borrowings.
The Series will not purchase portfolio securities if its borrowings exceed 5% of
its net assets.

Repurchase Agreements and Reverse Repurchase Agreements

The Series may purchase securities and concurrently enter into "repurchase
agreements" with the seller, whereby the seller agrees to repurchase such
securities at a specified price within a specified time (generally seven days or
less). Repurchase agreements will only be entered into with member banks of the
Federal Reserve System or primary reporting dealers in U.S. Government
obligations and will be fully secured only by obligations permitted by the
Series' investment policies. The repurchase agreements provide that the Series
will sell the underlying instruments back to the dealer or the bank at the
specified price and at a fixed time in the future, usually not more than seven
days from the date of purchase. The difference between the purchase price and
the resale price represents the interest earned by the Series, which is
unrelated to the coupon rate or maturity of the purchased security. Repurchase
agreements will at all times be fully collateralized in an amount at least equal
to the repurchase price, including accrued interest earned on the underlying
securities. Such collateral will be held by the Fund's Custodian, either
physically or in a book-entry account.

The Series participates in a joint repurchase account with other investment
companies managed by Prudential Mutual Fund Management, Inc. pursuant to an
order of the Securities and Exchange Commission. See "Investment Objective and
Policies--Liquid Assets Series--Repurchase Agreements" in the Statement of
Additional Information.

The Series will enter into repurchase transactions only with parties which
meet creditworthiness standards approved by the Fund's Board of Directors. The
Fund's investment adviser monitors the creditworthiness of such parties under
the general supervision of the Board of Directors. In the event of a default or
bankruptcy by a seller, the Series will promptly seek to liquidate the
collateral. To the extent that the proceeds from any sale of such collateral
upon a default in the obligation to repurchase are less than the repurchase
price, the Series will suffer a loss. If the financial institution that is a
party to the repurchase agreement petitions for bankruptcy or becomes subject to
the U.S. Bankruptcy Code, the law regarding the rights of the Fund is unsettled.
As a result, under these extreme circumstances, there may be a restriction on
the Series' ability to sell the collateral, and the Series could suffer a loss.

Reverse repurchase agreements have the characteristics of borrowing and
involve the sale of securities held by the Series with an agreement to
repurchase the securities at a specified price, date and interest payment. The
Series intends only to use the reverse repurchase technique when it will be to
its advantage to do so. These transactions are only advantageous if the Series
has an opportunity to earn a greater rate of interest on the cash derived from
the transaction than the interest cost of obtaining that cash. The Series may be
unable to realize earnings from the use of the proceeds equal to or greater than
the interest required to be paid. The use of reverse repurchase agreements may
exaggerate any increase or decrease in the value of the Series' portfolio. The
Fund's Custodian will maintain in a segregated account cash, U.S. Government
securities or other high grade, liquid debt obligations, maturing not later than
the expiration of the reverse repurchase agreements and having a value equal to
or greater than such commitments.

Securities Lending

The Series may lend its portfolio securities to brokers or dealers, banks
or other recognized institutional borrowers of securities, provided that the
borrower at all times maintains cash collateral in an amount equal to a least
100% of the market value of the securities loaned. During the time the portfolio
securities are on loan, the borrower will pay the Series an amount equivalent to
any interest paid on such securities and the Series may invest the cash
collateral and earn additional income.

Risks of Investing in Foreign Securities. There is no limitation on the
percentage of the Series' assets that may be invested in foreign securities
(which do not include obligations of foreign branches of U.S. banks). Since the
portfolio of the Series may contain obligations of foreign issuers, an
investment in the Series involves certain risks. These risks

8
<PAGE>

include future political and economic developments in the country of the
issuer, the possible imposition of withholding taxes on interest income payable
on such obligations held by the Series, the possible seizure or nationalization
of foreign deposits and the possible establishment of exchange controls or other
foreign governmental laws or restrictions which might affect adversely the
payment of principal and interest on such obligations held by the Series. In
addition, there may be less publicly available information about a foreign
issuer than about a domestic issuer, and such issuers may not be subject to the
same accounting, auditing and financial recordkeeping standards and requirements
as domestic issuers. Securities issued by foreign issuers may be subject to
greater fluctuations in price than securities issued by U.S. entities. Finally,
in the event of a default with respect to any such foreign debt obligations, it
may be more difficult for the Fund to obtain or to enforce a judgment against
the issuers of such securities.

Illiquid Securities

The Series may invest up to 10% of its net assets in illiquid securities
with legal or contractual restrictions on resale (restricted securities),
securities that are not readily marketable in securities markets either within
or outside of the United States, privately placed commercial paper and
repurchase agreements which have a maturity of longer than seven days.
Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933, as amended (the Securities Act), and privately placed
commercial paper that have a readily available market are not considered
illiquid for purposes of this limitation. The investment adviser will monitor
the liquidity of such restricted securities under the supervision of the Board
of Directors. Repurchase agreements subject to demand are deemed to have a
maturity equal to the applicable notice period.

INVESTMENT RESTRICTIONS

The Series is subject to certain investment restrictions which, like its
investment objective, constitute fundamental policies. Fundamental policies
cannot be changed without the approval of the holders of a majority of the
Series' outstanding voting securities, as defined in the Investment Company Act.
See "Investment Restrictions" in the Statement of Additional Information.

HOW THE FUND IS MANAGED

The Fund has a Board of Directors which, in addition to overseeing the
actions of the Fund's Manager, Subadviser and Distributor, as set forth below,
decides upon matters of general policy. The Fund's officers conduct and
supervise the daily business operations of the Fund. The Fund's Subadviser
furnishes daily investment advisory services.

The Series is responsible for the payment of certain fees and expenses
including, among others, the following:(i) certain administrative costs and
expenses of the Manager; (ii) the fees of unaffiliated Directors; (iii) the fees
of the Fund's Custodian and Transfer and Dividend Disbursing Agent; (iv) the
fees of the Fund's legal counsel and independent accountants; (v) brokerage
commissions incurred in connection with portfolio transactions; (vi) all taxes
and charges of governmental agencies; and (vii) expenses related to shareholder
communications including all expenses of shareholders' and Board of Directors'
meetings and of preparing, printing and mailing reports, proxy statements and
prospectuses to shareholders.

MANAGER

Prudential Mutual Fund Management, Inc. (PMF or the Manager), One Seaport
Plaza, New York, New York 10292, is the manager of the Fund. It was incorporated
in May 1987, under the laws of the State of Delaware. See "Manager" in the
Statement of Additional Information.

9
<PAGE>

As of June 30, 1995, PMF served as the manager to 38 open-end investment
companies, constituting all of the Prudential Mutual Funds, and as manager or
administrator to 30 closed-end investment companies. These companies have
aggregate assets of approximately $49 billion.

Under the Management and Administrative Services Agreement (the
Administrative Services Agreement) with the Fund, PMF manages the investment
operations of the Series and also administers the Fund's corporate affairs. See
"Manager" in the Statement of Additional Information. PMF does not charge a
management fee for investment advisory services provided to the Series. PMF is
reimbursed for certain administrative costs and expenses in providing services
to the Series at an annual rate of up to .04 of 1% of the average daily net
assets of the Series. These administrative costs and expenses include the
following: (i) furnishing office facilities; (ii) paying the salaries and
expenses of the Fund's officers and other personnel engaged in administering the
Fund's business; (iii) monitoring financial and shareholder accounting services
provided by State Street Bank and Trust Company and Prudential Mutual Fund
Services, Inc., respectively; (iv) responding to shareholder inquiries and
disseminating information to shareholders; (v) monitoring compliance with the
Series' registration statements and other operating documents, with federal and
state securities laws and rules thereunder and with the Internal Revenue Code;
(vi) preparing semi-annual and annual reports to shareholders; (vii) preparing
filings required by the SEC; (viii) preparing federal, state and local tax
returns; (ix) maintaining the Series' registration in each of the 50 states,
District of Columbia and Puerto Rico; (x) preparing information required by the
Board of Directors for ongoing review, approval and action; and (xi) organizing
meetings of the Board of Directors and annual and special meetings of the
Series' shareholders. See "Manager" in the Statement of Additional Information.

Under a Subadvisory Agreement between PMF and The Prudential Investment
Corporation (PIC or the Subadviser), PIC furnishes investment advisory services
in connection with the management of the Fund and is reimbursed by PMF for its
reasonable costs and expenses incurred in providing such services. Under the
Administrative Services Agreement, PMF continues to have responsibility for all
investment advisory services and supervises PIC's performance of such services.

PMF and PIC are wholly-owned subsidiaries of The Prudential Insurance
Company of America (Prudential), a major diversified insurance and financial
services company.

DISTRIBUTOR

Prudential Mutual Fund Distributors, Inc. (PMFD or the Distributor), One
Seaport Plaza, New York, New York 10292, is a corporation organized under the
laws of the State of Delaware and serves without compensation from the Series as
the Fund's Distributor pursuant to a distribution agreement. It is a
wholly-owned subsidiary of PMF.

The Manager (or one of its affiliates) may make payments out of its own
resources to dealers and other persons which distribute shares of the Fund. Such
payments may be calculated by reference to the net asset value of shares sold by
such persons or otherwise.

On October 21, 1993, PSI entered into an omnibus settlement with the SEC,
state securities regulators (with the exception of the Texas Securities
Commissioner, who joined the settlement on January 18, 1994) and the National
Association of Securities Dealers, Inc. (the NASD) to resolve allegations that
from 1980 through 1990 PSI sold certain limited partnership interests in
violation of securities laws to persons for whom such securities were not
suitable and misrepresented the safety, potential returns and liquidity of these
investments. Without admitting or denying the allegations asserted against it,
PSI consented to the entry of an SEC Administrative Order which stated that
PSI's conduct violated the federal securities laws, directed PSI to cease and
desist from violating the federal securities laws, pay civil penalties, and
adopt certain remedial measures to address the violations.

Pursuant to the terms of the SEC settlement, PSI agreed to the imposition
of a $10,000,000 civil penalty, established a settlement fund in the amount of
$330,000,000 and procedures to resolve legitimate claims for compensatory
damages

10
<PAGE>

by purchasers of the partnership interests. PSI has agreed to provide
additional funds, if necessary, for the purpose of the settlement fund. PSI's
settlement with the state securities regulators included an agreement to pay a
penalty of $500,000 per jurisdiction. PSI consented to the payment of a
$5,000,000 fine in settling the NASD action.

In October 1994, a criminal complaint was filed with the United States
Magistrate for the Southern District of New York alleging that PSI committed
fraud in connection with the sale of certain limited partnership interests in
violation of federal securities laws. An agreement was simultaneously filed to
defer prosecution of these charges for a period of three years from the signing
of the agreement, provided that PSI complies with the terms of the agreement.
If, upon completion of the three year period, PSI has complied with the terms of
the agreement, no prosecution will be instituted by the United States for the
offenses charged in the complaint. If on the other hand, during the course of
the three year period, PSI violates the terms of the agreement, the U.S.
Attorney can then elect to pursue these charges. Under the terms of the
agreement, PSI agreed, among other things, to pay an additional $330,000,000
into the fund established by the SEC to pay restitution to investors who
purchased certain PSI limited partnership interests.

For more detailed information concerning the foregoing matters, see
"Distributor" in the Statement of Additional Information, a copy of which may be
obtained at no cost by calling 1-800-225-1852.

The Fund is not affected by PSI's financial condition and is an entirely
separate legal entity separate from PSI, which has no beneficial ownership
therein, and the Fund's assets, which are held by State Street Bank and Trust
Company, an independent custodian, are separate and distinct from PSI.

PORTFOLIO TRANSACTIONS

Prudential Securities may also act as a broker for the Series, provided
that the commissions, fees or other remuneration it receives are fair and
reasonable. See "Portfolio Transactions" in the Statement of Additional
Information.

CUSTODIAN AND TRANSFER AND SHAREHOLDER SERVICING AGENT

State Street Bank and Trust Company (State Street), One Heritage Drive,
North Quincy, Massachusetts 02171, serves as Custodian for the Series' portfolio
securities and cash and, in that capacity, maintains certain financial and
accounting books and records pursuant to an agreement with the Fund. Its mailing
address is P.O. Box 1713, Boston, Massachusetts 02105.

Prudential Mutual Fund Services, Inc. (PMFS or the Transfer Agent), Raritan
Plaza One, Edison, New Jersey 08837, serves as Transfer Agent and as Shareholder
Servicing Agent and in those capacities maintains certain books and records for
the Fund. PMFS is a wholly-owned subsidiary of PMF. Its mailing address is P.O.
Box 15005, New Brunswick, New Jersey 08906-5005.

PMFS provides customary transfer agency services to the Series, including
the handling of shareholder communications, the processing of shareholder
transactions, the maintenance of shareholder account records, payment of
dividends and distributions and related functions. For these services, PMFS
receives an annual fee ($9.50) per shareholder account, a new account set up fee
($2.00) for each manually-established account and a monthly inactive zero
balance account fee ($0.20) per shareholder account plus its out-of-pocket
expenses, including but not limited to postage, stationery, printing, allocable
communications and other costs.

HOW THE FUND VALUES ITS SHARES

The Series' net asset value per share or NAV is determined by subtracting
its liabilities from the value of its assets and dividing the remainder by the
number of outstanding shares. The Board of Directors has fixed the

11
<PAGE>

specific time of day for the computation of the NAV to be as of 4:30 P.M.,
New York time, immediately after the daily declaration of dividends.

The Series will compute its NAV once daily on the days that the New York
Stock Exchange is open for trading, except on days on which no orders to
purchase, sell or redeem Series shares have been received or days on which
changes in the value of the Series' portfolio securities do not materially
affect the net asset value. The New York Stock Exchange is closed on the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

The Series determines the value of its portfolio securities by the
amortized cost method. This method involves valuing an instrument at its cost
and thereafter assuming a constant amortization to maturity of any discount or
premium regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Series would receive if it sold the
instrument. During these periods, the yield to an existing shareholder may
differ somewhat from that which could be obtained from a similar fund which
marks its portfolio securities to market each day. For example, during periods
of declining interest rates, if the use of the amortized cost method resulted in
a lower value of the Series' portfolio on a given day, a prospective investor in
the Series would be able to obtain a somewhat higher yield and existing
shareholders would receive correspondingly less income. The converse would apply
during periods of rising interest rates. The Board of Directors has established
procedures designed to stabilize, to the extent reasonably possible, the net
asset value of the shares of each Series at $1.00 per share.

TAXES, DIVIDENDS AND DISTRIBUTIONS

Taxation of the Series

The Series intends to elect to qualify and to remain qualified as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the Internal Revenue Code). Accordingly, the Series will not be subject to
federal income taxes on its investment income and capital gains, if any, that it
distributes to its shareholders provided that it distributes to shareholders
each year at least 90% of such income. If the Series defers until the subsequent
calendar year the distribution of more than a minimal amount of income, it will
be subject to a 4% nondeductible excise tax on the deferred distribution. The
Series intends to make timely and complete distributions in order to avoid any
such taxes.

Taxation of Shareholders

Dividends out of net investment income and net realized short-term capital
gains generally will be taxable to shareholders as ordinary income whether or
not reinvested. However, the Series intends to declare capital gains
distributions to the extent of its net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses). Capital gains
distributions, if any, are taxable to shareholders as net long-term capital
gains, regardless of the length of time a shareholder has owned its shares. The
Series does not anticipate realizing long-term capital gains.

Any gain or loss realized upon a sale or redemption of shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held more than one year and
otherwise as short-term capital gain or loss. Any such loss, however, although
otherwise treated as a short-term capital loss, will be treated as long-term
capital loss to the extent of any capital gain distributions received by the
shareholder, if the shares have been held for six months or less.

Dividends and distributions may be subject to state and local taxes.
Shareholders are advised to consult their own tax advisers regarding specific
questions as to federal, state or local taxes.

12
<PAGE>

Withholding Taxes

Under the Internal Revenue Code, the Fund is required to withhold and remit
to the U.S. Treasury 31% of dividends, capital gain income and redemption
proceeds on the accounts of those shareholders who fail to furnish their tax
identification numbers on IRS Form W-9 (or IRS Form W-8 in the case of certain
foreign shareholders) with the required certifications regarding the
shareholder's status under the federal income tax law. However, dividends of net
investment income and short-term capital gains to a foreign shareholder will
generally be subject to U.S. withholding tax at the rate of 30% (or lower treaty
rate).

Dividends and Distributions

The Series will declare a dividend, immediately prior to 4:30 P.M., New
York time, on each day that net asset value per share is determined, of all of
its daily net investment income to shareholders of record as of 4:30 P.M., New
York time, on the preceding business day. Net investment income of the Series
consists of interest accrued or discount earned (including both original issue
and market discount) on the obligations held by the Series, less amortization of
premium and the estimated expenses of the Series applicable to that dividend
period. The Series does not expect to realize long-term capital gains or losses.
Distributions of any net realized short-term capital gains will be taxable to
shareholders as ordinary income. The amount of discount or premium on
instruments held by the Series is fixed at the time of their purchase.

The net investment income of the Series for dividend purposes is determined
on a daily basis. Each such dividend will be payable to shareholders of record
at the time of its declaration. The amount of the dividend may fluctuate from
day to day and may be omitted on some days if net realized losses on portfolio
securities exceed the Series' net investment income. Dividends are accrued and
paid daily in additional full or fractional shares of the Series at the net
asset value per share determined on the date of declaration. Each shareholder
will receive periodically a summary of his or her account from Prudential
Securities, including information as to dividends paid.

The Internal Revenue Code imposes a 4% nondeductible excise tax to the
extent the Series does not meet certain minimum distribution requirements by the
end of each calendar year. The Series intends to make timely distributions in
order to avoid this excise tax. For this purpose, dividends declared in October,
November and December payable to shareholders of record on a specified date in
October, November and December and paid in the following January will be treated
as having been received by shareholders on December 31 of the calendar year in
which declared. Under this rule, therefore, a shareholder may be taxed in the
prior year on dividends or distributions actually received in January of the
following year.

Should the Series incur or anticipate any unusual expense or loss or
depreciation which would adversely affect its net asset value per share or
income for a particular period, the Board of Directors would at that time
consider whether to adhere to the present dividend policy described above or to
revise it in light of the then prevailing circumstances. For example, if the net
asset value per share of the Series is reduced, or is anticipated to be reduced,
below $1.00, the Board of Directors may suspend further dividend payments of the
Series until net asset value is returned to $1.00 per share. Thus, such expenses
or losses or depreciation could result in shareholders receiving no dividends
for the period during which they held their shares and in their receiving upon
redemption a price per share lower than that which they paid.

GENERAL INFORMATION

DESCRIPTION OF COMMON STOCK

The Fund was incorporated in Maryland on September 1, 1987. The Fund is
authorized to issue 5 billion shares of common stock of $.001 par value which
are currently divided into two portfolios or series.

13
<PAGE>

The Board of Directors may increase or decrease the aggregate number of
shares of common stock that the Fund has authority to issue. The Fund does not
intend to issue stock certificates unless requested. Shares of the Fund, when
issued, are fully paid, nonassessable, fully transferable and redeemable at the
option of the holder. Shares are also redeemable at the option of Prudential
Securities under certain circumstances as described under "Shareholder Guide--
How to Sell Your Shares." All shares of the Series are equal as to earnings,
assets and voting privileges. There are no conversion, preemptive or other
subscription rights. In the event of liquidation, each share of common stock of
the Series is entitled to its portion of all of the Series' assets after all
debts and expenses of the Series have been paid. The Series' shares do not have
cumulative voting rights for the election of Directors. Pursuant to the Fund's
Articles of Incorporation, the Board of Directors may authorize the creation of
additional series, with such preferences, privileges, limitations and voting and
dividend rights as the Board may determine. The Fund currently has two series.

The Fund does not intend to hold annual shareholder meetings unless
required by law. The Fund will not be required to hold annual meetings of
shareholders unless, for example, the election of Directors is required to be
acted on by shareholders under the Investment Company Act. Shareholders have
certain rights, including the right to call a meeting for the purpose of voting
on the removal of one or more Directors or to transact other business.

ADDITIONAL INFORMATION

This Prospectus, including the Statement of Additional Information which
has been incorporated by reference herein, does not contain all the information
set forth in the Registration Statement filed by the Fund with the SEC under the
Securities Act of 1933. Copies of the Registration Statement may be obtained at
a reasonable charge from the SEC or may be examined, without charge, at the
office of the SEC in Washington, D.C.

SHAREHOLDER GUIDE

HOW TO BUY SHARES OF THE FUND

Shares of the Series are offered only to investment advisory clients of
Prudential Securities (a) which participate in a managed account program
sponsored by Prudential Securities and (b) which are "Eligible Benefit Plans" as
defined below. "Eligible Benefit Plans" include (i) employee benefit plans as
defined in Section 3(3) of the Employee Retirement Income Security Act (ERISA)
other than governmental plans as defined in Section 3(32) of ERISA and church
plans as defined in Section 3(33) of ERISA, (ii) pension, profit-sharing or
other employee benefit plans qualified under Section 401 of the Internal Revenue
Code, (iii) deferred compensation and annuity plans under Section 457 or
403(b)(7) of the Internal Revenue Code, and (iv) Individual Retirement Accounts
(IRAs) as defined in Section 408(a) of the Internal Revenue Code. See "Purchase
of Shares" in the Statement of Additional Information for a list of the managed
account programs sponsored by Prudential Securities. A client will have any free
credit cash balances in the client's account invested in shares of the Liquid
Assets Series. Shares of the Series are continuously offered at their net asset
value next determined after receipt by the Series of a purchase order and
payment in proper form (i.e., a free credit cash balance in a client's managed
account, or a check or federal funds wired to Prudential Securities). There is
no sales charge. Prudential Securities will purchase shares of the Series on
behalf of participating clients each business day pursuant to the automatic
purchase procedures described below and shares will be entitled to dividend
income earned on the next business day. There are no minimum investment
requirements. The Fund does not intend to issue stock certificates unless
requested. The Series reserves the right to reject any purchase order or to
suspend or modify the continuous offering of its shares.

Automatic Purchase Procedures. Free credit cash balances of $1.00 or more
held in a managed account will automatically be invested in shares of the Series
as described below. Specifically, an order to purchase shares of the

<PAGE>

Series is placed (i) in the case of a free credit cash balance resulting
from the proceeds of a securities sale, on the settlement date of the securities
sale, and (ii) in the case of a free credit cash balance resulting from a
non-trade related credit (e.g., receipt of a dividend or interest payment, or a
cash payment by the client into the clients' account), on the business day after
the receipt by Prudential Securities of the non-trade related credit.

All shares purchased pursuant to these automatic purchase procedures will
begin earning dividends on the business day after the order is placed.
Prudential Securities will arrange for investment in shares of the Series at
4:30 P.M., New York time, on the business day the order is placed and cause
payment to be made in federal funds for the shares prior to 4:30 P.M., New York
time, on the next business day. Prudential Securities will have the use of free
credit cash balances until delivery to the Series.

Shares of the Series purchased by Prudential Securities on behalf of its
client will be held by Prudential Securities as record holder. Prudential
Securities will therefore receive statements and dividends directly from the
Fund and will in turn provide investors with Prudential Securities account
statements reflecting Fund purchases, redemptions and dividend payments. Clients
of Prudential Securities which participate in managed account programs are
required to consent to the automatic purchase procedures.

HOW TO SELL YOUR SHARES

The Series is obligated to redeem for cash all full and fractional shares.
The redemption price is the net asset value next determined after receipt by the
Transfer Agent of proper notice of redemption as described below. If such notice
is received by the Transfer Agent prior to the determination of net asset value
on any day, the redemption will be effective as of 4:30 P.M., New York time, on
such day. Payment of the redemption proceeds will be made on the same day the
redemption becomes effective. If the notice is received after the net asset
value is determined, the redemption will be effective as of 4:30 P.M., New York
time, on the next day that net asset value is determined, and payment will be
made on such next day.

Automatic Redemption. Redemptions will be automatically effected by
Prudential Securities on each business day to satisfy debit balances arising
from securities transactions in an account to the nearest highest dollar or to
satisfy redemption requests made on behalf of a participating client. Each
participating client's managed account will be automatically scanned for debits
each business day as of the close of business on that day and after application
of any free credit cash balances in the account to such debits, a sufficient
number of shares of the Series will be redeemed as of that business day to
satisfy any remaining debits in the account. In the event of an automatic
redemption of shares, the client will be entitled to dividends declared on the
redeemed shares through the business day preceding the day on which the
redemption is effective. Dividends declared on the date of redemption will be
retained by Prudential Securities which has advanced monies to satisfy debits in
the participating client's managed account.

The Fund may suspend the right of redemption or postpone the date of
payment for a period of up to seven days. Suspensions or postponements may not
exceed seven days except (1) for any period (a) during which the New York Stock
Exchange is closed other than customary weekend and holiday closings or (b)
during which trading on the New York Stock Exchange is restricted; (2) for any
period during which an emergency exists as a result of which (a) disposal by the
Series of securities owned by it is not reasonably practicable or (b) it is not
reasonably practicable for a Series fairly to determine the value of its net
assets; or (3) for such other periods as the SEC may by order permit for the
protection of shareholders of a Series. The SEC by rules and regulations
determines the conditions under which (i) trading shall be deemed to be
restricted and (ii) an emergency is deemed to exist within the meaning of clause
(2) above.

If the Board of Directors of the Fund determines that it would be
detrimental to the best interests of the remaining shareholders of the Series to
make payment wholly or partly in cash, the Series may pay the redemption price
in whole or in part by a distribution in kind of securities from the portfolio
of the Series, in lieu of cash in conformity with applicable

<PAGE>

rules of the SEC. If shares are redeemed in kind, the redeeming shareholder
might incur brokerage costs in converting the assets into cash. The method of
valuing portfolio securities is described under "How the Fund Values its
Shares," and such valuation will be made as of the same time the redemption
price is determined. The Fund, however, has elected to be governed by Rule 18f-1
under the Investment Company Act pursuant to which the Series is obligated to
redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset
value of the Series during any 90-day period for any one shareholder.

The total value of a shareholder's investment in the Series at the time of
redemption may be more or less than his or her cost, depending on the value of
the securities held by the Fund at such time and income earned.

Prudential Securities has the right to terminate an account for any reason.
In such event, all shares held in a shareholder's account will be redeemed.

SHAREHOLDER SERVICES

As a shareholder in the Series, you can take advantage of the following
additional services and privileges:

o Reports to Shareholders. The Fund will send you annual and semi-annual
reports. The financial statements appearing in the annual reports are audited by
independent accountants. In order to reduce duplicate mailing and printing
expenses the Fund will provide one annual and semi-annual shareholder report and
annual prospectus per household. You may request additional copies of such
reports by calling (800) 225-1852 or by writing to the Fund at One Seaport
Plaza, New York, New York 10292.

o Exchange Privilege. The Fund does not currently offer an exchange
privilege for shares of the Series.

o Shareholder Inquiries. Shareholder inquiries should be addressed to the
Fund at One Seaport Plaza, New York, New York 10292, or by telephone, at (800)
521-7466 (toll-free).

<PAGE>

DESCRIPTION OF SECURITY RATINGS

Moody's Investors Service

Bond Ratings

Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than Aaa bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

Short-Term Debt

Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations which have an original maturity not
exceeding one year.

P-1: Issuers rated "Prime-1" or "P-1" (or supporting institutions) have a
superior ability for repayment of senior short-term debt obligations.

P-2: Issuers rated "Prime-2" or "P-2" (or supporting institutions) have a
strong ability for repayment of senior short-term debt obligations.

Short-Term Ratings

VMIG-1: Variable rate short-term indebtedness rated "VMIG-1" is of the best
quality. There is present strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.

Standard & Poor's Ratings Group

Bond Ratings

AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.

Commercial Paper Ratings

A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market.

A-1: The A-1 designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.

A-2: Capacity for timely payment on issues with the designation A-2 is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

A-1
<PAGE>

Duff & Phelps Credit Rating Co

Long-Term Debt Ratings

AAA: Bonds rated AAA are considered to be of the highest credit quality.
The risk factors are negligible, being only slightly more than for risk-free
U.S. Treasury debt.

AA: Bonds rated AA are considered to be of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.

Short-Term Debt Ratings

Duff 1+: Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative sources of
funds, is outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.

Duff 1: Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk factors are
minor.

Duff 1-: High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.

Duff 2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.

Fitch Investors Service, Inc.

Bond Ratings

AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.

AA: Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated 'AAA'. Because bonds rated
in the 'AAA' and 'AA' categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated 'F-1+'.

Short-Term Debt Ratings

F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
'F-1+'.

F-2: Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as great
as the 'F-1+' and 'F-1' categories.

A-2

<PAGE>

THE PRUDENTIAL MUTUAL FUND FAMILY

Prudential Mutual Fund Management offers a broad range of mutual funds
designed to meet your individual needs. We welcome you to review the investment
options available through our family of funds. For more information on the
Prudential Mutual Funds, including charges and expenses, contact your Prudential
Securities financial adviser or Prusec registered representative or telephone
the Fund at (800) 225-1852 for a free prospectus. Read the prospectus carefully
before you invest or send money.

Taxable Bond Funds
Prudential Adjustable Rate Securities Fund, Inc.
Prudential Diversified Bond Fund, Inc.
Prudential Mortgage Income Fund, Inc.
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Prudential U.S. Government Fund
The BlackRock Government Income Trust

Tax-Exempt Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Yield Series
Insured Series
Intermediate Series
Prudential Municipal Series Fund
Arizona Series
Florida Series
Georgia Series
Hawaii Income Series
Maryland Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.

Global Funds
Prudential Europe Growth Fund, Inc.
Prudential Global Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Global Natural Resources Fund, Inc.
Prudential Intermediate Global Income Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential Short-Term Global Income Fund, Inc.
Global Assets Portfolio
Short-Term Global Income Portfolio
Global Utility Fund, Inc.

Equity Funds
Prudential Allocation Fund
Balanced Portfolio
Strategy Portfolio
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Growth Opportunity Fund, Inc.
Prudential IncomeVertible(R) Fund, Inc.
Prudential Multi-Sector Fund, Inc.
Prudential Utility Fund, Inc.
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund

Money Market Funds
o Taxable Money Market Funds
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund
Money Market Series
Prudential MoneyMart Assets
o Tax-Free Money Market Funds
Prudential Tax-Free Money Fund
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
o Command Funds
Command Money Fund
Command Government Fund
Command Tax-Free Fund
o Institutional Money Market Funds
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Liquid Assets Series

B-1

<PAGE>

No dealer, sales representative or any other person has been authorized to
give any information or to make any representations, other than those contained
in this Prospectus, in connection with the offer contained herein, and, if given
or made, such other information or representations must not be relied upon as
having been authorized by the Fund or the Distributor. This Prospectus does not
constitute an offer by the Fund or by the Distributor to sell or a solicitation
of any offer to buy any of the securities offered hereby in any jurisdiction to
any person to whom it is unlawful to make such offer in such jurisdiction.

- --------------------------------------------------------------------------------
TABLE OF CONTENTS

Page
----
FUND HIGHLIGHTS ........................................................... 2
Risk Factors and Special Characteristics ................................. 2

FUND EXPENSES ............................................................. 4
CALCULATION OF YIELD ...................................................... 5
HOW THE FUND INVESTS ...................................................... 5

Investment Objective and Policies ........................................ 5
Other Investments and Policies ........................................... 7
Investment Restrictions .................................................. 9
HOW THE FUND IS MANAGED ................................................... 9
Manager .................................................................. 9
Distributor .............................................................. 10
Portfolio Transactions ................................................... 11
Custodian and Transfer and
Shareholder Servicing Agent ............................................. 11
HOW THE FUND VALUES ITS SHARES ............................................ 11
TAXES, DIVIDENDS AND DISTRIBUTIONS ........................................ 12
GENERAL INFORMATION ....................................................... 13
Description of Common Stock .............................................. 13
Additional Information ................................................... 14

SHAREHOLDER GUIDE ......................................................... 14
How to Buy Shares of the Fund ............................................ 14
How to Sell Your Shares .................................................. 15
Shareholder Services ..................................................... 16
DESCRIPTION OF SECURITY RATINGS ........................................... A-1
THE PRUDENTIAL MUTUAL FUND FAMILY ......................................... B-1
- --------------------------------------------------------------------------------
MF137A 44071B

- --------------------------------------------------------------------------------
CUSIP No.: 750350109
- --------------------------------------------------------------------------------

Prudential
Institutional Liqudity
Portfolio, Inc.

----------

Liquid Assets
Series

Prudential Mutual Funds
Building Your Future [Logo]
On Our Strength(SM)

P
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S
P
E
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T
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1
9
9
5

<PAGE>

PRUDENTIAL INSTITUTIONAL LIQUIDITY PORTFOLIO, INC.

Statement of Additional Information
dated May 30, 1995 and restated on ___________, 1995

Prudential Institutional Liquidity Portfolio, Inc. (the Fund) is an
open-end, diversified management investment company comprised of two series--the
Institutional Money Market Series and the Liquid Assets Series. The Fund offers
investors an efficient and economical means of investing in professionally
managed portfolios of high quality money market instruments. The investment
objective of each Series is high current income consistent with the preservation
of principal and liquidity. See "Investment Objective and Policies." The minimum
initial investment for the Institutional Money Market Series is $100,000 and
there is no minimum investment requirement for the Liquid Assets Series. The
Fund's address is One Seaport Plaza, New York, New York 10292, and its telephone
number is (800) 521-7466.

This Statement of Additional Information has been restated effective _____,
1995 to reflect the addition of the Liquid Assets Series.

This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of the Institutional Money Market Series
dated May 30, 1995 and the Prospectus of the Liquid Assets Series, dated _____,
1995, copies of which may be obtained from the Fund upon request.

Subject to the specific restatements set forth below of certain sections of
the Statement of Additional Information dated May 30, 1995 (SAI), all general
statements relating to the "Series" in the SAI should be read to include the
Liquid Assets Series.

INVESTMENT OBJECTIVE AND POLICIES

Liquid Assets Series--Repurchase Agreements

The Liquid Assets Series participates in a joint repurchase account with
other investment companies managed by Prudential Mutual Fund Management, Inc.
(PMF or the Manager) pursuant to an order of the Securities and Exchange
Commission. On a daily basis, any uninvested cash balances of the Series may be
aggregated with those of such other investment companies and invested in one or
more repurchase agreements. Each fund participates in the income earned or
accrued in the joint account based on the percentage of its investment.

INVESTMENT RESTRICTIONS

Investment Restrictions Number 4 and 10 are not applicable to the Liquid
Assets Series. In addition, the Liquid Assets Series has adopted the following
investment restrictions:

The Liquid Assets Series may not:

1. Purchase any security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result, with respect to 75%
of the Series' total assets, more than 5% of the Series' total assets
(determined at the time of investment) would then be invested in the
securities of a single issuer.

2. Purchase any securities (other than obligations of the U.S.
Government, its agencies or instrumentalities) if as a result 25% or
more of the value of the Series' total assets (determined at the time
of investment) would be invested in the securities of one or more
issuers conducting their principal business activities in the same
industry, provided that there is no limitation with respect to money
market instruments of domestic banks. For purposes of this exception,
domestic banks shall include all banks which are organized under the
laws of the United States or a State (as defined in the Investment
Company Act), U.S. branches of foreign banks that are subject to the
same regulations as U.S. banks and foreign branches of domestic banks
(as permitted by SEC regulations).

MANAGER

The Fund, on behalf of the Liquid Assets Series, has a separate management
and administrative services agreement (the Administrative Services Agreement)
with PMF. The management and administrative services provided to the Liquid
Assets Series under its Administrative Services Agreement are described in the
Prospectus. The description of the Management Agreement on pages B-7 and B-8
refers to the Institutional Money Market Series only.

B-1
<PAGE>

Pursuant to the Administrative Services Agreement with the Liquid Assets
Series, PMF, subject to the supervision of the Fund's Board of Directors and in
conformity with the stated policies of the Series, manages both the investment
operations of the Series and the composition of the Series' portfolio, including
the purchase, retention, disposition and loan of securities. In connection
therewith, PMF is obligated to keep certain books and records of the Series. PMF
also administers the Series' corporate affairs and, in connection therewith,
furnishes the Series with the services enumerated in the prospectus. The
management services of PMF for the Series are not exclusive under the terms of
the Administrative Services Agreement and PMF is free to, and does, render
management services to others.

PMF is reimbursed for the administrative services it performs pursuant to
the Administrative Services Agreement in an amount up to .04 of 1% of the
average daily net assets of the Series. The fee is computed daily and payable
monthly. PMF does not receive an investment advisory fee in connection with the
management of the Series' portfolio. The Administrative Services Agreement
provides that, in the event the expenses of the Series (excluding interest,
taxes, brokerage commissions and litigation and indemnification expenses and
other extraordinary expenses not incurred in the ordinary course of the Fund's
business) for any fiscal year exceed the lowest applicable annual expense
limitation established and enforced pursuant to the statutes or regulations of
any jurisdiction in which the Series' shares are qualified for offer and sale,
the amount of reimbursement due to PMF will be reduced by the amount of such
excess. Currently, the Fund believes that the most restrictive expense
limitation of state securities commissions is 2-1/2% of the Series' average
daily net assets up to $30 million, 2% of the next $70 million of such assets
and 1-1/2% of such assets in excess of $100 million.

In connection with its management of the corporate affairs of the Fund, PMF
bears the following expenses:

(a) the salaries and expenses of all of its and the Fund's personnel
except the fees and expenses of Directors who are not affiliated
persons of PMF or the Fund's investment adviser;

(b) all expenses incurred by PMF or by the Fund in connection with
managing the ordinary course of the Fund's business, other than those
assumed by the Fund as described below; and

(c) the costs and expenses payable to The Prudential Investment
Corporation (PIC) pursuant to the subadvisory agreement between PMF
and PIC (the Subadvisory Agreement).

Under the terms of the Administrative Services Agreement, the Series is
responsible for the payment of the following expenses: (a) the expenses to be
reimbursed to the Manager, (b) the fees and expenses of Directors who are not
affiliated persons of the Manager or the Fund's investment adviser, (c) the fees
and certain expenses of the Custodian and Transfer and Dividend Disbursing
Agent, including the cost of providing records to the Manager in connection with
its obligation of maintaining required records of the Series and of pricing the
Series' shares, (d) the charges and expenses of legal counsel and independent
accountants for the Fund, (e) brokerage commissions and any issue or transfer
taxes chargeable to the Fund in connection with its securities transactions, (f)
all taxes and corporate fees payable by the Fund to governmental agencies, (g)
the fees of any trade associations of which the Fund may be a member, (h) the
cost of stock certificates representing shares of the Fund, (i) the cost of
fidelity and liability insurance, (j) the fees and expenses involved in
registering and maintaining registration of the Series and of its shares with
the Securities and Exchange Commission, registering the Fund as a broker or
dealer and qualifying its shares under state securities laws, including the
preparation and printing of the Fund's registration statements and prospectuses
for such purposes, (k) allocable communications expenses with respect to
investor services and all expenses of shareholders' and Directors' meetings and
of preparing, printing and mailing reports, proxy statements and prospectuses to
shareholders in the amount necessary for distribution to the shareholders, and
(l) litigation and indemnification expenses and other extraordinary expenses not
incurred in the ordinary course of the Fund's business.

The Administrative Services Agreement provides that PMF will not be liable
for any error of judgment or for any loss suffered by the Series in connection
with the matters to which the Administrative Services Agreement relates, except
a loss resulting from willful misfeasance, bad faith, gross negligence or
reckless disregard of duty. The Administrative Services Agreement provides that
it will terminate automatically if assigned, and that it may be terminated
without penalty by either party upon not more than 60 days' nor less than 30
days' written notice. The Administrative Services Agreement will continue in
effect for a period of more than two years from the date of execution only so
long as such continuance is specifically approved at least annually in
conformity with the Investment Company Act. The Administrative Services
Agreement was approved by the Board of Directors of the Fund, including all of
the Directors who are not parties to the contract or "interested persons" of any
such party, on __________, 1995, and by the sole shareholder of the Series, on
__________, 1995.

B-2
<PAGE>

DISTRIBUTOR

There is no plan of distribution for the Liquid Assets Series. All
references to the Plan of Distribution refer to that of the Institutional Money
Market Series. Prudential Mutual Fund Distributors, Inc. (PMFD), One Seaport
Plaza, New York, New York 10292, acts as distributor for the Liquid Assets
Series pursuant to a distribution agreement between PMFD and the Fund (the
Distribution Agreement). See "How the Fund is Managed--Distributor" in the
Prospectus for the Liquid Assets Series. PMFD is a wholly-owned subsidiary of
PMF. The services it provides to the Series are described in the Prospectus for
the Liquid Assets Series. See "How the Fund is Managed--Distributor."

The Distribution Agreement for the Liquid Asset Series provides that it
will terminate automatically if assigned and that it may be terminated, without
payment of any penalty, by a majority of the Directors who are not parties to
the Distribution Agreement or interested persons of any such parties and who
have no direct or indirect financial interest in the Distribution Agreement or
in any agreement related thereto or by vote of a majority of the outstanding
voting securities of the Series or by the Distributor, on 60 days' written
notice to the other party. The Distribution Agreement was last approved by the
Board of Directors, including a majority of the Directors who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
Distribution Agreement, on , 1995.

PURCHASE OF SHARES

Prudential Securities operates and provides a number of investment advisory
programs and services, including Gibraltar Advisors, Investment Management
Consulting & Research, Prudential Securities Portfolio Management (PSPM),
Quantum Portfolio Management, Managed Assets Consulting Services, Managed Assets
Consulting Services Custom Services, Prudential Securities Investment
Supervisory Group, The Financial Planning Division, and The Mutual Fund Timing
Service. Investment Management Services, a unit of the Client Advisory Services
Group of Prudential Securities, administers the Gibraltar Advisors, Investment
Management Consulting & Research, PSPM, Quantum Portfolio Management, Managed
Assets Consulting Services and Managed Assets Consulting Services Custom
Services programs.

B-3

<PAGE>

PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits.

(a) Financial Statements:

(1) Financial statements included in the Prospectuses constituting Part
A of this Registration Statement:

Financial Highlights for Institutional Money Market Series

(2) Financial statements included in the Statement of Additional
Information constituting Part B of this Registration Statement:

Portfolio of Investments at March 31, 1995 for Institutional Money
Market Series

Statement of Assets and Liabilities at March 31, 1995 for
Institutional Money Market Series

Statement of Operations for the Year Ended March 31, 1995 for
Institutional Money Market Series

Statement of Changes in Net Assets for the Years Ended March 31,
1995 and 1994 for Institutional Money Market Series

Notes to Financial Statements for Institutional Money Market Series

Financial Highlights for Institutional Money Market Series

Independent Auditors' Report

(b) Exhibits:

1. (a) Amended Articles of Incorporation of the Registrant,
incorporated by reference to Exhibit No. 1 to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A (File No.
33-17224) filed on November 6, 1987.

(b) Amendment to Articles of Incorporation dated January 16, 1989,
incorporated by reference to Exhibit No. 1(b) to Post-Effective
Amendment No. 2 to the Registration Statement on Form N-1A (File
No. 33-17224) filed on May 30, 1989.

2. (a) Amended By-Laws of the Registrant, incorporated by reference to
Exhibit No. 2 to Post-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (File No. 33-17224) filed on May 20, 1988.

(b) Amendment to By-Laws, incorporated by reference to Exhibit No.
2(b) to Post-Effective Amendment No. 3 to the Registration
Statement on Form N-1A (File No. 33-17224) filed on July 2, 1990.

4. (a) Specimen certificates for shares of common stock, $.001 par
value per share, of the Registrant, incorporated by reference to
Exhibit No. 4 to Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (File No. 33-17224) filed on May 20, 1988.

(b) Instruments defining rights of holders of the securities being
offered, incorporated by reference to Exhibit Nos. 1 and 2 above.

5. (a) Management Agreement between the Registrant and Prudential
Mutual Fund Management, Inc., incorporated by reference to Exhibit
No. 5(a) to Post-Effective Amendment No. 3 to the Registration
Statement on Form N-1A (File No. 33-17224) filed on July 2, 1990.

(b) Subadvisory Agreement between Prudential Mutual Fund Management,
Inc. and The Prudential Investment Corporation, incorporated by
reference to Exhibit No. 5(b) to Post-Effective Amendment No. 3
to the Registration Statement on Form N-1A (File No. 33-17224)
filed on July 2, 1990.

(c) Form of Management and Administrative Services Agreement between
the Fund, on behalf of the Liquid Assets Series, of the Registrant
and Prudential Mutual Fund Management, Inc.*

C-1

<PAGE>

6. (a) Distribution Agreement among the Registrant, Prudential-Bache
Securities Inc. and Prudential Mutual Fund Distributors, Inc.,
incorporated by reference to Exhibit No. 6 to Post-Effective
Amendment No. 2 to the Registration Statement on Form N-1A (File No.
33-17224) filed on May 30, 1989.

(b) Amended and Restated Distribution Agreement between the
Registrant and Prudential Mutual Fund Distributors, Inc., as
amended on July 1, 1993, incorporated by reference to Exhibit
6(b) to Post-Effective Amendment No. 8 to the Registration
Statement on Form N-1A (File No. 33-17224) filed via Edgar on
May 27, 1994.

(c) Amended and Restated Distribution Agreement incorporated by
reference to Exhibit 6(c) to Post-Effective Amendment No. 9 to
the Registration Statement on Form N-1A (File No. 33-17224)
filed via Edgar on May 26, 1995.

(d) Form of Distribution Agreement for the Liquid Assets Series.*

8. (a) Custodian Contract between the Registrant and State Street Bank
and Trust Company, incorporated by reference to Exhibit No. 8(a) to
Post-Effective Amendment No. 2 to the Registration Statement on
Form N-1A (File No. 33-17224) filed on May 30, 1989.

(b) Subcustodian Agreement between State Street Bank and Trust
Company and Security Pacific National Bank, incorporated by
reference to Exhibit No. 8(b) to Post-Effective Amendment No. 2
to the Registration Statement on Form N-1A (File No. 33-17224)
filed on May 30, 1989.

(c) Subcustodian Agreement for Repurchase Transactions between State
Street Bank and Trust Company and Security Pacific National
Bank, incorporated by reference to Exhibit No. 8(c) to
Post-Effective Amendment No. 2 to the Registration Statement on
Form N-1A (File No. 33-17224) filed on May 30, 1989.

9. Transfer Agency and Service Agreement between the Registrant and
Prudential Mutual Fund Services, Inc. incorporated by reference to
Exhibit No. 9 to Post-Effective Amendment No. 2 to the Registration
Statement on Form N-1A (File No. 33-17224) filed on May 30, 1989.

10. (a) Opinion of Counsel, incorporated by reference to Exhibit No. 10
to Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A (File No. 33-17224) filed on November 6, 1987.

(b) Opinion of Counsel, incorporated by reference to Exhibit No.
10(b) to Post-Effective Amendment No. 8 to the Registration
Statement on Form N-1A (File No. 33-17224) filed via Edgar on
May 27, 1994.

11. Consent of Independent Auditors.*

13. Purchase Agreement, incorporated by reference to Exhibit No. 13 to
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A (File No. 33-17224) filed on May 30, 1989.

15. (a) Plan of Distribution pursuant to Rule 12b-1, incorporated by
reference to Exhibit No. 15 to Post-Effective Amendment No. 2 to the
Registration Statement on Form N-1A (File No. 33-17224) filed
on May 30, 1989.

(b) Distribution and Service Plan between the Registrant and
Prudential Mutual Fund Distributors, Inc., as amended on July 1,
1993, incorporated by reference to Exhibit No. 15(b) to
Post-Effective Amendment No. 8 to the Registration Statement on
Form N-1A (File No. 33-17224) filed via Edgar on May 27, 1994.

27. Financial Data Schedule incorporated by reference to Exhibit No. 27
to Post-Effective Amendment No. 9 to Registration Statement on Form
N-1A (file No. 33-17224) filed via Edgar on May 26, 1995.

Other Exhibits
Powers of Attorney for:
Eugene C. Dorsey**
Donald D. Lennox**
Stanley F. Shirk**
Robin B. Smith**
- ------------
* Filed herewith.
** Executed copies filed under Other Exhibits to Post-Effective Amendment
No. 2 to the Registration Statement on Form N-1A filed on May 30, 1989
(File No. 33-17224).

C-2
<PAGE>

Item 25. Persons Controlled by or under Common Control with Registrant.
None.

Item 26. Number of Holders of Securities.

As of May 5, 1995 there were 587 record holders of shares of common stock,
$.001 par value per share, of the Institutional Money Market Series, the other
series of the Fund.

Item 27. Indemnification.

As permitted by Sections 17(h) and (i) of the Investment Company Act of
1940 (the 1940 Act) and pursuant to Article VII of the Registrant's By-Laws
(Exhibit 2(a) to the Registration Statement), officers, directors, employees and
agents of the Registrant will not be liable to the Registrant, any stockholder,
officer, director, employee, agent or other person for any action or failure to
act, except for bad faith, willful misfeasance, gross negligence or reckless
disregard of duties, and those individuals may be indemnified against
liabilities in connection with the Registrant, subject to the same
exceptions. Section 2-418 of Maryland General Corporation Law permits
indemnification of directors who acted in good faith and reasonably believed
that the conduct was in the best interests of the Registrant. As permitted by
Section 17(i) of the 1940 Act, pursuant to Section 10 of the Distribution
Agreement (Exhibit 6 to the Registration Statement), the Distributor of the
Registrant may be indemnified against liabilities which it may incur, except
liabilities arising from bad faith, gross negligence, willful misfeasance or
reckless disregard of duties.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (Securities Act) may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1940 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such director,
officer or controlling person in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1940 Act and will be governed by the final adjudication of such
issue.

The Registrant has purchased an insurance policy insuring its officers and
directors against liabilities, and certain costs of defending claims against
such officers and directors, to the extent such officers and directors are not
found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties. The
insurance policy also insures the Registrant against the cost of indemnification
payments to officers and directors under certain circumstances.

Section 9 of the Management Agreement (Exhibits 5(a) and 5(c) to the
Registration Statement) and Section 4 of the Subadvisory Agreement (Exhibit 5(b)
to the Registration Statement) limit the liability of Prudential Mutual Fund
Management, Inc. (PMF) and The Prudential Investment Corporation (PIC),
respectively, to liabilities arising from willful misfeasance, bad faith or
gross negligence in the performance of their respective duties or from reckless
disregard by them of their respective obligations and duties under the
agreements.

The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws and the Distribution Agreement in a manner consistent
with Release No. 11330 of the Securities and Exchange Commission under the 1940
Act so long as the interpretation of Sections 17(h) and 17(i) of such Act remain
in effect and are consistently applied.

C-3
<PAGE>

Item 28. Business and Other Connections of Investment Adviser

(a) Prudential Mutual Fund Management, Inc.

See "How the Fund Is Managed--Manager" in the Prospectuses constituting
Part A of this Registration Statement and "Manager" in the Statement of
Additional Information constituting Part B of this Registration Statement.

The business and other connections of the officers of PMF are listed in
Schedules A and D of Form ADV of PMF as currently on file with the Securities
and Exchange Commission, the text of which is hereby incorporated by reference
(File No. 801-31104, filed on March 30, 1995).

The business and other connections of PMF's directors and principal
executive officers are set forth below. Except as otherwise indicated, the
address of each person is One Seaport Plaza, New York, NY 10292.

Name and Address Position with PMF Principal Occupations
- ---------------- ----------------- ---------------------
<S> <C> <C>
Brendan D. Boyle Executive Vice President, Executive Vice President, Director of Marketing
Director of Marketing and and Director, PMF; Senior Vice President,
Director Prudential Securities Incorporated (Prudential
Securities); Chairman and Director of Prudential
Mutual Fund Distributors, Inc. (PMFD)

Stephen P. Fisher Senior Vice President Senior Vice President, PMF; Senior Vice President,
Prudential Securities; Vice President, PMFD

Frank W. Giordano Executive Vice Executive Vice President, General Counsel,
President, General Secretary and Director, PMF; Senior Vice President,
Counsel, Secretary and Prudential Securities; Executive Vice President,
Director General Counsel, Secretary and Director, PMFD;
Director, Prudential Mutual Fund Services, Inc. (PMFS)

Robert F. Gunia Executive Vice President, Executive Vice President, Chief Financial and
Chief Financial and Administrative Officer, Treasurer and Director, PMF;
Administrative Officer, Senior Vice President, Prudential Securities;
Treasurer and Director Executive Vice President, Treasurer, Comptroller
and Director, PMFD; Director, PMFS

Timothy J. O'Brien Director President, Chief Executive Officer, Chief Operating
Officer and Director, PMFD; Chief Executive Officer
and Director, PMFS; Director, PMF

Richard A. Redeker President, Chief Executive President, Chief Executive Officer and Director, PMF;
Officer and Director Executive Vice President, Director and Member of
Operating Committee, Prudential Securities;
Director, PSG; Executive Vice President, PIC;
Director, PMFD; Director, PMFS
</TABLE>

C-4

<PAGE>

Name and Address Position with PMF Principal Occupations
- ---------------- ----------------- ---------------------
<S> <C> <C>
S. Jane Rose Senior Vice President, Senior Vice President, Senior Counsel and Assistant
Senior Counsel and Secretary, PMF; Senior Vice President and Senior
Assistant Secretary Counsel, Prudential Securities
</TABLE>

(b) The Prudential Investment Corporation (PIC).

The business and other connections of PIC's directors and executive
officers are as set forth below. Except as otherwise indicated, the address of
each person is Prudential Plaza, Newark, NJ 07102.

Name and Address Position with PIC Principal Occupations
- ---------------- ----------------- ---------------------
<S> <C> <C>
William M. Bethke Senior Vice President Senior Vice President, Prudential; Senior Vice
Two Gateway Center President, PIC
Newark, NJ 07102

John D. Brookmeyer, Jr. Senior Vice President Senior Vice President, Prudential; Senior
51 JFK Pkwy. and Director Vice President and Director, PIC
Short Hills, NJ 07078

Theresa A. Hamacher Vice President Vice President, Prudential; Vice President, PIC

Harry E. Knapp, Jr. President, Director and President, Director and Chief Executive Officer,
Chief Executive Officer PIC; Vice President, Prudential

William P. Link Senior Vice President Executive Vice President, Prudential;
Four Gateway Center Senior Vice President, PIC
Newark, NJ 07102

Richard A. Redeker Executive Vice President President, Chief Executive Officer and Director, PMF;
Executive Vice President, Director and Member of
Operating Committee, Prudential Securities; Director,
PSG; Executive Vice President, PIC; Director, PMFD;
Director, PMFS

Arthur F. Ryan Director Chairman of the Board, President and Chief Executive
Officer, Prudential; Director, PIC; Chairman of the
Board and Director, PSG

Eric A. Simonsen Vice President and Director President and Chief Executive Officer, Prudential
Asset Management Group; Vice President and
Director, PIC; Executive Vice President, Prudential

Claude J. Zinngrabe, Jr. Executive Vice President Vice President, Prudential; Executive Vice
President, PIC
</TABLE>

C-5

<PAGE>
Item 29. Principal Underwriters.

(a) Prudential Mutual Fund Distributors, Inc.

Prudential Mutual Fund Distributors, Inc. is distributor for Command
Government Fund, Command Money Fund, Command Tax-Free Fund, Prudential
California Municipal Fund (California Money Market Series), Prudential
Government Securities Trust (Money Market Series and U.S. Treasury Money Market
Series), Prudential Institutional Liquidity Portfolio, Inc. (Institutional Money
Market Series), Prudential-Bache MoneyMart Assets Inc. (d/b/a Prudential
MoneyMart Assets Fund), Prudential Municipal Series Fund (Connecticut Money
Market Series, Massachusetts Money Market Series, New York Money Market Series
and New Jersey Money Market Series), Prudential-Bache Special Money Market Fund,
Inc. (d/b/a Prudential Special Money Market Fund), Prudential-Bache Tax-Free
Money Fund, Inc. (d/b/a Prudential Tax-Free Money Fund), and for Class A shares
of The BlackRock Government Income Trust, Global Utility Fund, Inc.,
Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth Equity Fund),
Prudential Adjustable Rate Securities Fund Inc., Prudential Allocation Fund,
Prudential California Municipal Fund (California Income Series and California
Series), Prudential Diversified Bond Fund, Inc., Prudential Equity Fund, Inc.,
Prudential Equity Income Fund, Prudential Europe Growth Fund, Inc., Prudential
Global Fund, Inc., Prudential Global Genesis Fund, Inc. Prudential Global
Natural Resources Fund, Inc., Prudential GNMA Fund, Inc., Prudential Government
Income Fund, Inc., Prudential Growth Opportunity Fund, Inc., Prudential High
Yield Fund, Inc., Prudential IncomeVertible(R) Fund, Inc., Prudential
Intermediate Global Income Fund, Inc., Prudential Multi-Sector Fund, Inc.,
Prudential Municipal Bond Fund, Prudential Municipal Series Fund (Arizona
Series, Georgia Series, Hawaii Income Series, Maryland Series, Massachusetts
Series, Michigan Series, Minnesota Series, New Jersey Series, North Carolina
Series, Ohio Series and Pennsylvania Series), Prudential National Municipals
Fund, Inc., Prudential Pacific Growth Fund, Inc., Prudential Short-Term Global
Income Fund, Inc., Prudential Structured Maturity Fund, Inc., Prudential U.S.
Government Fund, and Prudential Utility Fund, Inc.

(b) Prudential Mutual Fund Distributors, Inc.

<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name(1) Underwriter Registrant
- ------- ------------- -------------
<S> <C> <C>
Joanne Accurso-Soto ................... Vice President None

Dennis Annarumma ...................... Vice President, Assistant Treasurer and None
Assistant Comptroller

Phyllis J. Berman ..................... Vice President None

Brendan D. Boyle ...................... Chairman and Director None

Stephen P. Fisher ..................... Vice President None

Frank W. Giordano ..................... Executive Vice President, General Counsel, None
Secretary and Director

Robert F. Gunia ....................... Executive Vice President, Treasurer, Vice President
Comptroller and Director

Timothy J. O'Brien .................... President, Chief Executive Officer, Chief None
Operating Officer and Director

Richard A. Redeker .................... Director President and
Director

Andrew J. Varley ...................... Vice President None

Anita L. Whelan ....................... Vice President and Assistant Secretary None
</TABLE>
- ------------
(1) The address of each person named is One Seaport Plaza, New York, NY 10292
unless otherwise indicated. (c) Registrant has no principal underwriter who
is not an affiliated person of the Registrant.

C-6
<PAGE>

Item 30. Location of Accounts and Records

All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules thereunder are maintained at the
offices of State Street Bank and Trust Company, 1776 Heritage Drive, North
Quincy, Massachusetts 02171, The Prudential Investment Corporation, Prudential
Plaza, 745 Broad Street, Newark, New Jersey 07102, the Registrant, One Seaport
Plaza, New York, New York 10292, and Prudential Mutual Fund Services, Inc.,
Raritan Plaza One, Edison, New Jersey 08837. Documents required by Rules
31a-1(b)(5), (6), (7), (9), (10) and (11) and 31a-1(f) will be kept at Three
Gateway Center, documents required by Rules 31a-1(b)(4) and (11) and 31a-1(d) at
One Seaport Plaza and the remaining accounts, books and other documents required
by such other pertinent provisions of Section 31(a) and the Rules promulgated
thereunder will be kept by State Street Bank and Trust Company and Prudential
Mutual Fund Services, Inc.

Item 31. Management Services

Other than as set forth under the captions "How the Fund is
Managed--Manager" and "How the Fund is Managed--Distributor" in the Prospectuses
and the captions "Manager" and "Distributor" in the Statement of Additional
Information, constituting Parts A and B, respectively, of this Registration
Statement, Registrant is not a party to any management-related service contract.

Item 32. Undertakings

The Registrant hereby undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six months from
the effective date of this Registration Statement.

C-7

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
and State of New York, on the 3rd day of August, 1995.

PRUDENTIAL INSTITUTIONAL LIQUIDITY
PORTFOLIO, INC.

/s/ Richard A. Redeker
----------------------------------
Richard A. Redeker, President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

Signature Title Date
- --------- ----- ----
<S> <C> <C>

/s/ Eugene S. Stark Treasurer and Principal Financial August 3, 1995
- ------------------------------- and Accounting Officer
Eugene S. Stark

/s/ Eugene C. Dorsey Director August 3, 1995
- --------------------------------
Eugene C. Dorsey

/s/ Donald D. Lennox Director August 3, 1995
- --------------------------------
Donald D. Lennox

/s/ Richard A. Redeker Director and President August 3, 1995
- --------------------------------
Richard A. Redeker

/s/ Stanley E. Shirk Director August 3, 1995
- --------------------------------
Stanley E. Shirk

/s/ Robin B. Smith Director August 3, 1995
- --------------------------------
Robin B. Smith

</TABLE>

<PAGE>
EXHIBIT INDEX

Exhibit No. Description
- ----------- -----------

1. (a) Amended Articles of Incorporation of the Registrant. Incorporated by
reference to Exhibit No. 1 to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A (File No. 33-17224) filed on November 6,
1987.

(b) Amendment to Articles of Incorporation dated January 16, 1989.
Incorporated by reference to Exhibit No. 1(b) to Post-Effective Amendment
No. 2 to the Registration Statement on Form N-1A (File No. 33-17224) filed
on May 30, 1989.

2. (a) Amended By-Laws of the Registrant. Incorporated by reference to Exhibit
No. 2 to Post-Effective Amendment No. 1 to the Registration Statement on
Form N-1A (File No. 33-17224) filed on May 20, 1988.

(b) Amendment to By-Laws. Incorporated by reference to Exhibit No. 2(b) to
Post-Effective Amendment No. 3 to the Registration Statement on Form N-1A
(File No. 33-17224) filed on July 2, 1990.

4. (a) Specimen certificates for shares of common stock, $.001 par value per
share, of the Registrant. Incorporated by reference to Exhibit No. 4 to
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-1A
(File No. 33-17224) filed on May 20, 1988.

(b) Instruments defining rights of holders of securities being offered,
incorporated by reference to Exhibit Nos. 1 and 2 above.

5. (a) Management Agreement between the Registrant and Prudential Mutual Fund
Management, Inc. Incorporated by reference to Exhibit No. 5(a) to
Post-Effective Amendment No. 3 to the Registration Statement on Form N-1A
(File No. 33-17224) filed on July 2, 1990.

(b) Subadvisory Agreement between Prudential Mutual Fund Management, Inc.
and The Prudential Investment Corporation. Incorporated by reference to
Exhibit No. 5(b) to Post-Effective Amendment No. 3 to the Registration
Statement on Form N-1A (File No. 33-17224) filed on July 2, 1990.

(c) Form of Management Agreement between the Liquid Assets Series of the
Registrant and Prudential Mutual Fund Management, Inc.*

6. (a) Distribution Agreement among the Registrant, Prudential-Bache Securities
Inc. and Prudential Mutual Fund Distributors, Inc. Incorporated by reference
to Exhibit No. 6 to Post-Effective Amendment No. 2 to the Registration
Statement on Form N-1A (File No. 33-17224) filed on May 30, 1989.

(b) Amended and Restated Distribution Agreement between the Registrant and
Prudential Mutual Fund Distributors, Inc., as amended on July 1, 1993,
incorporated by reference to Exhibit 6(b) to Post-Effective Amendment
No. 8 to the Registration Statement on Form N-1A (File No. 33-17224)
filed via Edgar on May 27, 1994.

(c) Amended and Restated Distribution Agreement incorporated by reference to
Exhibit 6(c) to Post-Effective Amendment No. 9 to the Registration
Statement on Form N-1A (File No. 33-17224) filed via Edgar on May 26, 1995.

(d) Form of Distribution Agreement for the Liquid Assets Series.*

8. (a) Custodian Contract between the Registrant and State Street Bank and
Trust Company. Incorporated by reference to Exhibit No. 8(a) to
Post-Effective Amendment No. 2 to the Registration Statement on Form N-1A
(File No. 33-17224) filed on May 30, 1989.

(b) Subcustodian Agreement between State Street Bank and Trust Company and
Security Pacific National Bank. Incorporated by reference to Exhibit No.
8(b) to Post-Effective Amendment No. 2 to the Registration Statement on
Form N-1A (File No. 33-17224) filed on May 30, 1989.

(c) Subcustodian Agreement for Repurchase Transactions between State Street
Bank and Trust Company and Security Pacific National Bank. Incorporated by
reference to Exhibit No. 8(c) to Post-Effective Amendment No. 2 to the
Registration Statement on Form N-1A (File No. 33-17224) filed on May 30,
1989.

9. Transfer Agency and Service Agreement between the Registrant and Prudential
Mutual Fund Services, Inc. Incorporated by reference to Exhibit No. 9 to
Post-Effective Amendment No. 2 to the Registration Statement on Form N-1A
(File No. 33-17224) filed on May 30, 1989.

10. (a) Opinion of Counsel. Incorporated by reference to Exhibit No. 10 to
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-1A
(File No. 33-17224) filed on November 6, 1987.

(b) Opinion of Counsel. Incorporated by reference to Exhibit No. 10(b) to
Post-Effective No. 8 to the Registration Statement on Form N-1A (File
No. 33-17224) filed via Edgar on May 27, 1994.

<PAGE>
EXHIBIT INDEX

Exhibit No. Description
- ----------- -----------

11. Consent of Independent Auditors.*

13. Purchase Agreement. Incorporated by reference to Exhibit No. 13 to
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-1A
(File No. 33-17224) filed on May 30, 1989.

15. (a) Plan of Distribution pursuant to Rule 12b-1. Incorporated by reference
to Exhibit No. 15 to Post-Effective Amendment No. 2 to the Registration
Statement on Form N-1A (File No. 33-17224) filed on May 30, 1989.

(b) Distribution and Service Plan between the Registrant and Prudential
Mutual Fund Services, Inc., as amended on July 1, 1993, incorporated by
reference to Exhibit No. 15(b) to Post Effective Amendment No. 8 to the
Registration Statement on Form N-1A (File No. 33-17224) filed via Edgar
on May 27, 1994.

27. Financial Data Schedule, incorporated by reference to Exhibit No. 27 to
Post-Effective Amendment No. 9 to Registration Statement on Form N-1A (File
No. 33-17224) filed via Edgar on May 26, 1995.

Other Exhibits
Powers of Attorney for:

Eugene C. Dorsey**
Donald D. Lennox**
Stanley F. Shirk**
Robin B. Smith**

-----------
*Filed herewith.

**Executed copies filed under Other Exhibits to Post-Effective Amendment
No. 2 to the Registration Statement on Form N-1A filed on May 30, 1989
(File No. 33-17224).

PRUDENTIAL INSTITUTIONAL LIQUIDITY PORTFOLIO, INC.
(Liquid Assets Series)

Form of
Management and Administrative Services Agreement

Agreement, made this __ day of __________, 1995, between Prudential
Institutional Liquidity Portfolio, Inc. (the Fund), a Maryland corporation, and
Prudential Mutual Management, Inc. (the Manager), a Delaware corporation, with
respect to the Liquid Assets Series of the Fund.

W I T N E S S E T H

WHEREAS, the Fund is a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended (the 1940 Act);
and

WHEREAS, the shares of common stock of the Fund are divided into separate
series, each of which was established by the Board of Directors of the Fund in
accordance with the Fund's Articles of Incorporation, and the Board of
Directors may from time to time terminate such series or establish and terminate
additional series; and

WHEREAS, the Fund has entered into a management agreement dated July 31,
1989 with the Manager with respect to other series of the Fund and
notwithstanding Section 8 of that agreement and references in that agreement
to the effect that it covers the series of the Fund, this Management and
Administrative Services Agreement shall govern the arrangement between the
Manager and the Fund with respect to the Liquid Assets Series; and

WHEREAS, the Fund desires to retain the Manager to render or contract to
obtain as hereinafter provided investment

<PAGE>

advisory services to the Liquid Assets Series and the Fund also desires to avail
itself of the facilities available to the Manager with respect to the
administration of the day to day corporate affairs of the Liquid Assets Series,
and the Manager is willing to render such investment advisory and administrative
services;

NOW, THEREFORE, the parties agree as follows:

1. The Fund hereby appoints the Manager to act as manager of the Liquid
Assets Series and administrator of its corporate affairs for the period and on
the terms set forth in this Agreement. The Manager accepts such appointment and
agrees to render the services herein described, subject to reimbursement of
certain administrative costs as herein provided. Pursuant to a subadvisory
agreement (the Subadvisory Agreement), dated July 31, 1989, with The Prudential
Investment Corporation (PIC), PIC furnishes to each series of the Fund
(including the Liquid Assets Series) investment advisory services in connection
with the management of the Fund. The Manager shall have responsibility for all
investment advisory services furnished to the Liquid Assets Series pursuant to
the Subadvisory Agreement.

2. Subject to the supervision of the Board of Directors of the Fund, the
Manager shall administer the corporate affairs of the Liquid Assets Series and,
in connection therewith, shall furnish the Liquid Assets Series with office
facilities and with clerical, bookkeeping and recordkeeping services at such

2
<PAGE>

office facilities and, subject to Section 1 hereof, the Manager shall manage the
investment operations of the Liquid Assets Series and the composition of its
portfolio, including the purchase, retention and disposition thereof, in
accordance with its investment objectives, policies and restrictions as stated
in the Prospectus (hereinafter defined) and subject to the following
understandings:

(a) The Manager shall provide supervision of the Liquid Assets Series'
investments and determine from time to time what investments or securities
will be purchased, retained, sold or loaned by it, and what portion of its
assets will be invested or held uninvested as cash.

(b) The Manager, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Articles of
Incorporation, By-Laws and Prospectus (hereinafter defined) of the Fund and
with the instructions of the Board of Directors of the Fund and will
conform to and comply with the requirements of the 1940 Act and all other
applicable federal and state laws and regulations.

(c) The Manager shall determine the securities to be purchased or sold
by the Liquid Assets Series and will place orders pursuant to its
determinations with or through such persons, brokers or dealers (including
but

3
<PAGE>

not limited to Prudential Securities Incorporated) in conformity with the
policy with respect to brokerage as set forth in the Fund's Registration
Statement and Prospectus (hereinafter defined) or as the Board of Directors
may direct from time to time. In providing the Liquid Assets Series with
investment supervision, it is recognized that the Manager will give primary
consideration to securing the most favorable price and efficient execution.
Consistent with this policy, the Manager may consider the financial
responsibility, research and investment information and other services
provided by brokers or dealers who may effect or be a party to any such
transaction or other transactions to which other clients of the Manager may
be a party. It is understood that Prudential Securities Incorporated may be
used as principal broker for securities transactions but that no formula
has been adopted for allocation of the Series' investment transaction
business. It is also understood that it is desirable for the Liquid Assets
Series that the Manager have access to supplemental investment and market
research and security and economic analysis provided by brokers and that
such brokers may execute brokerage transactions at a higher cost to the
Series than may result when allocating brokerage to other brokers on the
basis of seeking the most favorable price and efficient execution.
Therefore, the Manager is

4
<PAGE>

authorized to pay higher brokerage commissions for the purchase and sale of
securities for the Liquid Assets Series to brokers who provide such
research and analysis, subject to review by the Fund's Board of Directors
from time to time with respect to the extent and continuation of this
practice. It is understood that the services provided by such broker may be
useful to the Manager in connection with its services to other clients.

On occasions when the Manager deems the purchase or sale of a security
to be in the best interest of the Liquid Assets Series as well as other
clients of the Manager or the Subadviser, the Manager, to the extent
permitted by applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities to be so sold or purchased in order
to obtain the most favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Manager in the manner it considers to be the most
equitable and consistent with its fiduciary obligations to the Liquid
Assets Series and to such other clients.

(d) The Manager shall maintain all books and records with respect to
the portfolio transactions of the Liquid Assets Series and shall render to
the Fund's Board of Directors such periodic and special reports as the

5
<PAGE>

Board may reasonably request.

(e) The Manager shall be responsible for the financial and accounting
records to be maintained by the Fund (including those being maintained by
the Fund's Custodian) with respect to the Liquid Assets Series.

(f) The Manager shall provide the Fund's Custodian on each business
day with information relating to all transactions concerning the assets of
the Liquid Assets Series.

(g) The investment management services of the Manager to the Liquid
Assets Series under this Agreement are not to be deemed exclusive, and the
Manager shall be free to render similar services to others.

3. The Fund has delivered to the Manager copies of each of the following
documents and will deliver to it all future amendments and supplements, if any:

(a) Articles of Incorporation of the Fund, as filed with the Secretary
of State of Maryland (such Articles of Incorporation, as in effect on the
date hereof and as amended from time to time, are herein called the
"Articles of Incorporation ");

(b) By-Laws of the Fund (such By-Laws, as in effect on the date hereof
and as amended from time to time, are herein called the "By-Laws");

6
<PAGE>

approving the form of this agreement;

(d) Registration Statement under the 1940 Act and the Securities Act
of 1933, as amended, on Form N-1A (the Registration Statement), as filed
with the Securities and Exchange Commission (the Commission) relating to
the Liquid Assets Series of the Fund and shares of its Common Stock and all
amendments thereto;

(e) Notification of Registration of the Fund under the 1940 Act on
Form N-8A as filed with the Commssion and all amendments thereto; and

(f) Prospectus of the Liquid Assets Series (such Prospectus and
Statement of Additional Information, as currently in effect and as amended
or supplemented from time to time, being herein called the "Prospectus").

4. The Manager shall authorize and permit any of its directors, officers
and employees who may be elected as directors or officers of the Fund to serve
in the capacities in which they are elected. All services to be furnished by the
Manager under this Agreement may be furnished through the medium of any such
directors, officers or employees of the Manager.

5. The Manager shall keep the books and records required to be maintained
by it pursuant to paragraph 2 hereof. The Manager agrees that all records which
it maintains for the Liquid Assets Series of the Fund are the property of the
Fund and will surrender promptly to the Fund any such records upon the Fund's
request, provided however that the Manager may retain a copy

7
<PAGE>

of such records. The Manager further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any such records as are required to
be maintained by the Manager pursuant Paragraph 2 hereof.

6. During the term of this Agreement, the Manager assumes and will pay the
costs and expenses payable to PIC for furnishing investment advisory services to
the Liquid Assets Series pursuant to the Subadvisory Agreement.

The Liquid Assets Series assumes and will pay the expenses described below:

(a) the al1ocable and direct (out-of-pocket) administrative costs and
expenses incurred by the Manager that are subject to reimbursement by the
Liquid Assets Series as set forth in paragraph 8 hereof;

(b) the fees and expenses of directors who are not affiliated persons
of the Manager or the Fund's investment adviser,

(c) the fees and expenses of the Custodian that relate to (i) the
custodial function and the recordkeeping connected therewith, (ii)
preparing and maintaining the general accounting records of the Liquid
Assets Series and the providing of any such records to the Manager useful
to the Manager in connection with the Manager's responsibility for the
accounting records of the Liquid Assets Series pursuant to Section 31 of
the 1940 Act and the rules promulgated thereunder, (iii) the pricing of the

8
<PAGE>

shares of the Liquid Assets Series, including the cost of any pricing
service or services which may be retained pursuant to the authorization of
the Board of Directors of the Fund, and (iv) for both mail and wire orders,
the cashiering function in connection with the issuance and redemption of
the securities of the Liquid Assets Series,

(d) the fees and expenses of the Fund's Transfer and Dividend
Disbursing Agent, which may be the Custodian, that relate to the
maintenance of each shareholder account of the Liquid Assets Series,

(e) the charges and expenses of legal counsel and independent
accountants for the Fund,

(f) brokers' commissions and any issue or transfer taxes chargeable to
the Liquid Assets Series in connection with its securities transactions,

(g) all taxes and corporate fees payable by the Fund with respect to
the Liquid Assets Series to federal, state or other governmental agencies,

(h) the fees of any trade associations of which the Fund may be a
member,

(i) the cost of stock certificates representing, and/or
non-negotiable share deposit receipts evidencing, shares of the Liquid
Assets Series,

(j) the cost of fidelity, directors and officers and errors and
omissions insurance,

(k) the fees and expenses involved in registering

9
<PAGE>

and maintaining registration of the Liquid Assets Series of the Fund and of
its shares with the Securities and Exchange Commission, registering the
Fund as a broker or dealer and qualifying its shares under state securities
laws, including the preparation and printing of the registration
statements, prospectuses and statements of additional information with
respect to the Liquid Assets Series for filing under federal and state
securities laws for such purposes,

(1) expenses of shareholders' and directors meetings and of preparing,
printing and mailing reports to shareholders in the amount necessary for
distribution to the shareholders, and

(m) litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Fund's business.

7. In the event the expenses of the Liquid Assets Series for any fiscal
year (excluding interest, taxes, brokerage commissions, and litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Fund's business) exceed the lowest applicable annual
expense limitation established and enforced pursuant to the statute or
regulations of any jurisdictions in which shares of the Liquid Assets Series are
then qualified for offer and sale, the reimbursement due the Manager will be
reduced by the amount of such excess.

10
<PAGE>

8. For the administrative services provided and the expenses assumed
pursuant to this Agreement, the Fund will reimburse the Manager at an annual
rate of up to .04 of 1% of the average daily net assets of the Liquid Assets
Series. The administrative costs and expenses subject to reimbursement include
the allocable and direct costs and expenses incurred by the Manager in providing
the following facilities and services to the Liquid Assets Series: (i)
furnishing office facilities; (ii) paying the salaries and expenses of the
Fund's officers and other personnel engaged in administering the Liquid Assets
Series' business; (iii) paying the costs and expenses incurred in managing the
Series' portfolio; (iv) monitoring financial and shareholder accounting services
provided to the Series; (v) responding to shareholder inquiries and
disseminating information to shareholders; (vi) monitoring compliance with the
Series' registration statements and other operating documents, with federal and
state securities laws and rules thereunder and with the Internal Revenue Code of
1986, as amended; (vii) preparing semi-annual and annual reports to
shareholders; (viii) preparing filings required by the Securities and Exchange
Commission; (ix) preparing federal, state and local tax returns; (x) maintaining
the Series' registration in each of the 50 states, District of Columbia and
Puerto Rico; (xi) preparing information required by the Board of Directors for
ongoing review, approval and action and (xii) organizing meetings of the Board
of Directors and annual and special meetings of the Series' shareholders.

11
<PAGE>

This reimbursement amount will be computed daily and will be paid to the
Manager monthly. Any reduction in the amount of reimbursement payable pursuant
to paragraph 7 shall be made monthly and is subject to readjustment during the
year.

9. The Manager shall not be liable for any error of judgment or for any
loss suffered by the Liquid Assets Series in connection with the matters to
which this Agreement relates, except a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services (in which case any
award of damages shall be limited to the period and the amount set forth in
Section 36(b)(3) of the 1940 Act) or loss resulting from willful misfeasance,
bad faith or gross negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this
Agreement.

10. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided, however, that this Agreement may be terminated with respect to the
Liquid Assets Series by the Fund at any time, without the payment of any
penalty, by the Board of Directors of the Fund or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Series, or by
the Manager at any time, without the payment of any penalty, on not more than 60
days' nor less than 30 days' written notice to the other party. This Agreement
shall terminate automatically in the event of its assignment (as defined

12
<PAGE>

in the 1940 Act).

11. Nothing in this Agreement shall limit or restrict the right of any
director, officer or employee of the Manager who may also be a director, officer
or employee of the Fund to engage in any other business or to devote his or her
time and attention in part to the management or other aspects of any business,
whether of a similar or dissimilar nature, nor limit or restrict the right of
the Manager to engage in any other business or to render services of any kind to
any other corporation, firm, individual or association.

12. Except as otherwise provided herein or authorized by the Board of
Directors of the Fund from time to time, the Manager shall for all purposes
herein be deemed to be an independent contractor and shall have no authority to
act for or represent the Liquid Assets Series or the Fund in any way or
otherwise be deemed an agent of the Series or the Fund.

13. During the term of this Agreement, the Fund agrees to furnish the
Manager at its principal office all prospectuses, proxy statements, reports to
shareholders, sales literature, or other material prepared for distribution to
shareholders of the Fund or the public, which refer in any way to the Manager,
prior to use thereof and not to use such material if the Manager reasonably
objects in writing within five business days (or such other time as may be
mutually agreed) after receipt thereof. In the event of termination of this
Agreement, the Fund will continue to furnish to the Manager copies of any of the
above

13
<PAGE>

mentioned materials which refer in any way to the Manager. Sales literature may
be furnished to the Manager hereunder by first-class or overnight mail,
facsimile transmission equipment or hand delivery. The Fund shall furnish or
otherwise make available to the Manager such other information relating to the
business affairs of the Fund as the Manager at any time, or from time to time,
reasonably requests in order to discharge its obligations hereunder.

14. This Agreement may be amended by mutual consent, but the consent of the
Series must be obtained in conformity with the requirements of the 1940 Act.

15. Any notice or other communication required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by registered mail,
postage prepaid, (1) to the Manager at One Seaport Plaza, New York, N.Y. 10292,
Attention: Secretary; or (2) to the Fund at One Seaport Plaza, New York, N.Y.
10292, Attention: President.

16. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.

17. The Fund may use the name "Prudential Institutional Liquidity
Portfolio, Inc." or any name including the word "Prudential" only for so long as
this Agreement or any extension, renewal or amendment hereof remains in effect,
including any similar agreement with any organization which shall have succeeded
to the Manager's business as Manager or any extension, renewal or amendment
thereof remain in effect. At such time as

14
<PAGE>

such an agreement shall no longer be in effect, the Fund will (to the extent
that it lawfully can) cease to use such a name or any other name indicating that
it is advised by, managed by or otherwise connected with the Manager, or any
organization which shall have so succeeded to such businesses. In no event shall
the Fund use the name "Prudential Institutional Liquidity Portfolio, Inc." or
any name including the word "Prudential" if the Manager's function is
transferred or assigned to a company of which The Prudential Insurance Company
of America does not have control.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.

PRUDENTIAL INSTITUTIONAL
LIQUIDITY PORTFOLIO, INC.
(Liquid Assets Series)

By_____________________________________

PRUDENTIAL MUTUAL FUND MANAGEMENT, INC.

By______________________________________

EX. 99.6(d)

PRUDENTIAL INSTITUTIONAL LIQUIDITY PORTFOLIO, INC.

Form of Distribution Agreement

Agreement dated as of ____________, 1995 between Prudential Institutional
Liquidity Portfolio, Inc., a Maryland Corporation (the Fund) and Prudential
Mutual Fund Distributors, Inc., a Delaware Corporation (the Distributor).

WITNESSETH

WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the Investment Company Act), as a diversified, open-end, management
investment company and it is in the interest of the Fund to offer its shares of
the Liquid Assets Series for sale continuously;

WHEREAS, the Distributor is a broker-dealer registered under the Securities
Exchange Act of 1934, as amended, and is engaged in the business of selling
shares of registered investment companies either directly or through other
broker-dealers;

WHEREAS, the Fund and the Distributor wish to enter into and agreement with
each other, with respect to the continuous offering of the shares of the Liquid
Assets Series from and after the date hereof in order to promote the growth of
the Liquid Assets Series and facilitate the distribution of its shares; and

WHEREAS, the Fund and the Distributor have previously entered into a
Distribution Agreement dated November 20, 1987, as amended and restated on July
1, 1993 and April 11, 1995, which does not pertain to the Liquid Assets Series;

NOW, THEREFORE, the parties agree as follows:

Section 1. Appointment of the Distributor
------------------------------
The Fund hereby appoints the Distributor as the principal underwriter and
distributor of the Liquid Assets Series to sell shares to the public on behalf
of the Liquid Assets Series and the Distributor hereby accepts such appointment
and agrees to act hereunder. The Fund hereby agrees during the term of this
Agreement to sell shares of the Liquid Assets Series through the Distributor on
the terms and conditions set forth below.

Section 2. Exclusive Nature of Duties
--------------------------
The Distributor shall be the exclusive representative of the Fund to act as
principal underwriter and distributor of the shares of the Liquid Assets Series,
except that:

2.1 The exclusive rights granted to the Distributor to sell shares of the
Liquid Assets Series shall not apply to shares of the Liquid Assets Series
issued in connection with the merger or

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consolidation of any other investment company or personal holding company with
the Liquid Assets Series or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding shares of any such company
by the Liquid Assets Series.

2.2 Such exclusive rights shall not apply to shares issued by the Liquid
Assets Series pursuant to reinvestment of dividends or capital gains
distributions.

2.3 Such exclusive rights shall not apply to shares issued by the Liquid
Assets Series pursuant to the reinstatement privilege afforded redeeming
shareholders.

2.4 Such exclusive rights shall not apply to purchases made through the
Fund's transfer and dividend disbursing agent in the manner set forth in the
currently effective Prospectus of the Liquid Assets Series. The term
"Prospectus" shall mean the Prospectus and Statement of Additional Information
of the Liquid Assets Series included as part of the Fund's Registration
Statement, as such Prospectus and Statement of Additional Information may be
amended or supplemented from time to time, and the term "Registration Statement"
shall mean the Registration Statement filed by the Fund with the Securities and
Exchange Commission and effective under the Securities Act of 1933, as amended
(Securities Act), and the Investment Company Act, as such Registration Statement
is amended from time to time.

Section 3. Purchase of Shares from the Fund
--------------------------------
3.1 The Distributor shall have the right to buy from the Fund on behalf of
investors the shares of the Liquid Assets Series needed, but not more than the
shares needed (except for clerical errors in transmission) to fill unconditional
orders for shares placed with the Distributor by investors or registered and
qualified securities dealers and other financial institutions (selected
dealers).

3.2 The shares shall be sold by the Distributor on behalf of the Liquid
Assets Series and delivered by the Distributor or selected dealers, as described
in Section 6.4 hereof, to investors at the offering price as set forth in the
Prospectus.

3.3 The Fund shall have the right to suspend the sale of the shares of the
Liquid Assets Series at times when redemption is suspended pursuant to the
conditions in Section 4.3 hereof or at such other times as may be determined by
the Directors. The Fund shall also have the right to suspend the sale of its
shares if a banking moratorium shall have been declared by federal or New York
authorities.

3.4 The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for shares of the Liquid Assets
Series received by the Distributor.

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Any order may be rejected by the Fund; provided, however, that the Fund will
not arbitrarily or without reasonable cause refuse to accept or confirm orders
for the purchase of shares of the Liquid Assets Series. The Fund (or its
agent) will confirm orders upon their receipt, will make appropriate book
entries and upon receipt by the Fund (or its agent) of payment therefor, will
deliver deposit receipts for such shares pursuant to the instructions of the
Distributor. Payment shall be made to the Fund in New York Clearing House funds
or federal funds. The Distributor agrees to cause such payment and such
instructions to be delivered promptly to the Fund (or its agent).

Section 4. Repurchase or Redemption of Shares by the Fund
----------------------------------------------
4.1 Any of the outstanding shares of the Liquid Assets Series may be
tendered for redemption at any time, and the Fund agrees to repurchase or redeem
the shares of the Liquid Assets Series so tendered in accordance with its
Articles of Incorporation as amended from time to time, and in accordance with
the applicable provisions of the Prospectus. The price to be paid to redeem or
repurchase the shares of the Liquid Assets Series shall be equal to the net
asset value determined as set forth in the Prospectus. All payments by the Fund
hereunder shall be made in the manner set forth in Section 4.2 below.

4.2 The Fund shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of the Distributor on or
before the seventh calendar day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of shares of the
Liquid Assets Series shall be paid by the Fund to or for the account of the
redeeming shareholder, in each case in accordance with applicable provisions of
the Prospectus.

4.3 Redemption of shares of the Liquid Assets Series or payment may be
suspended at times when the New York Stock Exchange is closed for other than
customary weekends and holidays, when trading on said Exchange is restricted,
when an emergency exists as a result of which disposal by the Liquid Assets
Series of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, or during any other period when the Securities and Exchange Commission,
by order, so permits.

Section 5. Duties of the Fund
------------------
5.1 Subject to the possible suspension of the sale of shares as provided
herein, the Fund agrees to sell shares of the Liquid Assets Series so long as it
has shares available.

5.2 The Fund shall furnish the Distributor copies of all information,
financial statements and other papers which the

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Distributor may reasonably request for use in connection with the distribution
of shares of the Liquid Assets Series, and this shall include one certified
copy, upon request by the Distributor, of all financial statements prepared for
the Liquid Asset Series of the Fund by independent public accountants. The Fund
shall make available to the Distributor such number of copies of its Prospectus
and annual and interim reports as the Distributor shall reasonably request.

5.3 The Fund shall take, from time to time, but subject to the necessary
approval of the Directors/Trustees and the shareholders, all necessary action to
fix the number of authorized shares of the Liquid Assets Series and such steps
as may be necessary to register the same under the Securities Act, to the end
that there will be available for sale such number of shares of the Liquid Assets
Series as the Distributor reasonably may expect to sell. The Fund agrees to file
from time to time such amendments, reports and other documents as may be
necessary in order that there will be no untrue statement of a material fact in
the Registration Statement, or necessary in order that there will be no omission
to state a material fact in the Registration Statement which omission would make
the statements therein misleading.

5.4 The Fund shall use its best efforts to qualify and maintain the
qualification of any appropriate number of shares of the Liquid Assets Series
for sale under the securities laws of such states as the Distributor and the
Fund may approve; provided that the Fund shall not be required to amend its
Articles of Incorporation or By-Laws to comply with the laws of any state, to
maintain an office in any state, to change the terms of the offering of its
shares in any state from the terms set forth in its Registration Statement, to
qualify as a foreign corporation in any state or to consent to service of
process in any state other than with respect to claims arising out of the
offering of shares of the Liquid Assets Series. Any such qualification may be
withheld, terminated or withdrawn by the Fund at any time in its discretion. As
provided in Section 8.1 hereof, the expense of qualification and maintenance of
qualification shall be borne by the Fund. The Distributor shall furnish such
information and other material relating to its affairs and activities as may be
required by the Fund in connection with such qualifications.

Section 6. Duties of the Distributor
-------------------------
6.1 The Distributor shall devote reasonable time and effort to effect sales
of shares of the Liquid Asset Series, but shall not be obligated to sell any
specific number of shares. Sales of the shares shall be on the terms described
in the Prospectus. The Distributor may enter into like arrangements with other
investment companies. The Distributor shall compensate the selected dealers as
set forth in the Prospectus.

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6.2 In selling the shares, the Distributor shall use its best efforts in
all respects duly to conform with the requirements of all federal and state laws
relating to the sale of such securities. Neither the Distributor nor any
selected dealer nor any other person is authorized by the Fund to give any
information or to make any representations, other than those contained in the
Registration Statement or Prospectus and any sales literature approved by
appropriate officers of the Fund.

6.3 The Distributor shall adopt and follow procedures for the confirmation
of sales to investors and selected dealers, the collection of amounts payable by
investors and selected dealers on such sales and the cancellation of unsettled
transactions, as may be necessary to comply with the requirements of the
National Association of Securities Dealers, Inc. (NASD).

6.4 The Distributor shall have the right to enter into selected dealer
agreements with registered and qualified securities dealers and other financial
institutions of its choice for the sale of shares, provided that the Fund shall
approve the forms of such agreements. Within the United States, the Distributor
shall offer and sell shares only to such selected dealers as are members in good
standing of the NASD. Shares sold to selected dealers shall be for resale by
such dealers only at the offering price determined as set forth in the
Prospectus.

Section 7. Allocation of Expenses
----------------------
7.1 The Fund shall bear all costs and expenses of the continuous offering
of shares of the Liquid Assets Series, including fees and disbursements of its
counsel and auditors, in connection with the preparation and filing of any
required Registration Statements and/or Prospectuses under the Investment
Company Act or the Securities Act, and all amendments and supplements thereto,
and preparing and mailing annual and periodic reports and proxy materials to
shareholders (including but not limited to the expense of setting in type any
such Registration Statements, Prospectuses, annual or periodic reports or proxy
materials). The Fund shall also bear the cost and expenses of qualification of
the shares of the Liquid Assets Series for sale, and, if necessary or advisable
in connection therewith, of qualifying the Fund as a broker or dealer, in such
states of the United States or other jurisdictions as shall be selected by the
Fund and the Distributor pursuant to Section 5.4 hereof and the cost and expense
payable to each such state for continuing qualification therein until the Fund
decides to discontinue such qualification pursuant to Section 5.4 hereof.

Section 8. Indemnification
---------------
8.1 The Fund agrees to indemnify, defend and hold the Distributor, its
officers and directors and any person who controls

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the Distributor within the meaning of Section 15 of the Securities Act, free and
harmless from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which the
Distributor, its officers, directors or any such controlling person may incur
under the Securities Act, or under common law or otherwise, arising out of or
based upon any untrue statement of a material fact contained in the Registration
Statement or Prospectus or arising out of or based upon any alleged omission to
state a material fact required to be stated in either thereof or necessary to
make the statements in either thereof not misleading, except insofar as such
claims, demands, liabilities or expenses arise out of or are based upon any such
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information furnished in writing by the
Distributor to the Fund for use in the Registration Statement or Prospectus;
provided, however, that this indemnity agreement shall not inure to the benefit
of any such officer, director, trustee or controlling person unless a court of
competent jurisdiction shall determine in a final decision on the merits, that
the person to be indemnified was not liable by reason of willful misfeasance,
bad faith or gross negligence in the performance of its duties, or by reason of
its reckless disregard of its obligations under this Agreement (disabling
conduct), or, in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnified person was not liable by
reason of disabling conduct, by (a) a vote of a majority of a quorum of
directors or trustees who are neither "interested persons" of the Fund as
defined in Section 2(a)(19) of the Investment Company Act nor parties to the
proceeding, or (b) an independent legal counsel in a written opinion. The Fund's
agreement to indemnify the Distributor, its officers and directors and any such
controlling person as aforesaid is expressly conditioned upon the Fund's being
promptly notified of any action brought against the Distributor, its officers or
directors or any such controlling person, such notification to be given by
letter or telegram addressed to the Fund at its principal business office. The
Fund agrees promptly to notify the Distributor of the commencement of any
litigation or proceedings against it or any of its officers or directors in
connection with the issue and sale of any shares.

8.2 The Distributor agrees to indemnify, defend and hold the Fund, its
officers and Directors and any person who controls the Fund, if any, within the
meaning of Section 15 of the Securities Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Fund, its officers and
Directors or any such controlling person may incur under the Securities Act or
under common law or otherwise, but only to the extent that such liability or
expense

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incurred by the Fund, its Directors or officers or such controlling person
resulting from such claims or demands shall arise out of or be based upon any
alleged untrue statement of a material fact contained in information furnished
in writing by the Distributor to the Fund for use in the Registration Statement
or Prospectus or shall arise out of or be based upon any alleged omission to
state a material fact in connection with such information required to be stated
in the Registration Statement or Prospectus or necessary to make such
information not misleading. The Distributor's agreement to indemnify the Fund,
its officers and Directors and any such controlling person as aforesaid, is
expressly conditioned upon the Distributor's being promptly notified of any
action brought against the Fund, its officers and Directors or any such
controlling person, such notification being given to the Distributor at its
principal business office.

Section 9. Duration and Termination of this Agreement
------------------------------------------
9.1 This Agreement shall become effective as of the date first above
written and shall remain in force for two years from the date hereof and
thereafter, but only so long as such continuance is specifically approved at
least annually by (a) the Directors of the Fund, or by the vote of a majority of
the outstanding voting securities of the shares of the Fund, and (b) by the vote
of a majority of those Directors who are not parties to this Agreement or
interested persons of any such parties and who have no direct or indirect
financial interest in this Agreement or in or in any agreement related thereto
(Rule 12b-1 Directors), cast in person at a meeting called for the purpose of
voting upon such approval.

9.2 This Agreement may be terminated at any time, without the payment of
any penalty, by a majority of the Rule 12b-1 Directors or by vote of a majority
of the outstanding voting securities of the shares of the Fund, or by the
Distributor, on sixty (60) days' written notice to the other party. This
Agreement shall automatically terminate in the event of its assignment.

9.3 The terms "affiliated person," "assignment," "interested person" and
"vote of a majority of the outstanding voting securities", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.

Section 10. Amendments to this Agreement
----------------------------
This Agreement may be amended by the parties only if such amendment is
specifically approved by (a) the Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the shares of the Fund, and (b)
by the vote of a majority of the Rule 12b-1 Directors cast in person at a
meeting called for the purpose of voting on such amendment.

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Section 11. Governing Law
-------------
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the Investment Company Act. To the extent that the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company Act, the
latter shall control.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year above written.

Prudential Mutual Fund
Distributors, Inc.

By:----------------------------------
Name: Robert F. Gunia
Title: Executive Vice President

Prudential Institutional
Liquidity Portfolio, Inc.

By:----------------------------------
Name: Richard A. Redeker
Title: President

CONSENT OF INDEPENDENT AUDITORS

We consent to the use in Post-Effective Amendment No. 10 to Registration
Statement No. 33-17224 of Prudential Institutional Liquidity Portfolio, Inc. of
our report dated May 11, 1995, appearing in the Statement of Additional
Information, which is incorporated by reference in such Registration Statement,
and to the references to us under the headings "Financial Highlights" in the
Prospectus of Institutional Money Market Series, which is incorporated by
reference in such Registration Statement, and "Custodian, Transfer and Dividend
Disbursing Agent and Independent Accountants" in the Statement of Additional
Information.

DELOITTE & TOUCHE LLP

Deloitte & Touche LLP
New York, New York
August 1, 1995