(ICON)
Prudential
Institutional
Liquidity
Portfolio, Inc.
Institutional Money
Market Series
SEMI
ANNUAL
REPORT
Sept. 30, 1995
(LOGO)
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Performance At A Glance.
Money market investors have enjoyed returns several percentage points higher
than the rate of inflation in 1995. But as economic growth slowed this year,
the Federal Reserve reduced short-term interest rates for the first time
since 1992. While money market yields have probably peaked for this economic
cycle, the yield of the Prudential Institutional Liquidity
Portfolio -- Institutional Money Market Series (PILP) remains significantly
higher than it was a year ago. The Series' 7-day current yield was 5.58% on
September 26, 1995: up from 4.44% on September 27, 1994, but down from
5.81% on March 28, 1995. (The IBC/Donoghue statistics are computed on
Tuesdays).
Over the last six months, the Series has performed much better than the
average competing fund, as measured by IBC/Donoghue. We have done so by
carefully managing the Series' weighted average maturity and by adding value
through security selection.
<TABLE>
<CAPTION>
7-Day Net Asset Weighted
Total Net
Current Yld. Value Avg. Mat.
Assets (mil.)
<C> <S> <C> <C> <C>
<C>
Fund Facts PILP 5.63% $1.00 53 days
$514
As of 9/30/95 IBC/Donoghue
Money Fund Average 5.21 1.00 54 days
N/A
(All Taxable)*
</TABLE>
Note: Yields will fluctuate from time to time and past performance is no
guarantee of future results. 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.
*This is the average 7-day current yield, net asset value and weighted
average maturity of 751 funds in International Business Communications/
Donoghue's all taxable money market fund category as of September 26,1995.
Falling Rates/Historical Yield Curve
(GRAPH)
<PAGE>
Robert L. Wofchuck, Fund Manager
Portfolio
Manager's Report
Prudential Institutional Liquidity Portfolio -- Institutional Money Market
Series seeks high current income consistent with the preservation of
principal and liquidity. The Series is a diversified portfolio of U.S.
dollar- denominated money market securities issued by the U.S. government
and its agencies, major corporations and commercial banks of the U.S.
and foreign countries. Maturities can range from one day to a maximum
of 13 months.
Overview.
As of September 30, 1995, the Series' investments were rated in the
highest category by at least two major rating agencies, or, if unrated,
deemed to be of equivalent quality by our credit research staff. Although
thereis never a guarantee that the share price of Prudential Institutional
Liquidity Portfolio -- Institutional Money Market Series will remain at $1,
we at Prudential emphasize a conservative, quality-oriented investment
approach.
Strategy Session.
Since we last reported to you at the end of March, interest rates have
generally trended lower amid signs of slower economic growth. A sharp
deterioration in the manufacturing and interest rate sensitive sectors
of the economy, such as housing and autos, reduced second quarter Gross
Domestic Product (GDP) to 1.3% from 2.7% in the first quarter. This is
well below the 2.5% level that many analysts believe is consistent
with sustainable, non-inflationary economic growth. Furthermore, the
accompanying drop in employment growth led us to believe that the Federal
Reserve would lean toward easier monetary policy.
We started to lengthen the Series' weighted average maturity (WAM) at the
end of the first quarter and continued this strategy throughout the second
quarter to lock in higher yields in anticipation of falling interest rates.
By June 30, our WAM was 14 days longer than the 51-day all taxable money
fund average recorded by IBC/Donoghue.
Citing receding inflationary pressures, the Federal Reserve reduced
short-term rates on July 6 by lowering its federal funds target rate
by a quarter of a percentage point to 5.75%.
Since that time, there have been many conflicting reports about the
strength of the economy. For example, housing and automobile sales have
rebounded while employment growth still remains sluggish. As a result,
the Federal Reserve has left monetary policy unchanged since July. Given
the current level of uncertainty resulting from ambiguous economic data,
we shifted the Series' average maturity closer to the competition.
<PAGE>
What Went Well.
We Purchased
Longer Maturities.
As the economy started to show signs of weakness earlier this year, we
purchased securities with longer maturities. We bought these securities
because their yields exceeded our own expectations of future interestrate
increases. Since the Federal Reserve actually lowered the target federal
funds rate in July, buying these securities in the early summer allowed
us to lock in yields that are higher than currently available.
We Increased Holdings
In Fixed Rate Securities.
We also focused on replacing maturing adjustable rate securities with
purchases of fixed-rate securities. The coupons on adjustable rate securities
adjust periodically off of money market indices such as the federal funds
rate, the three month Treasury bill or LIBOR (London Interbank Offered Rate).
In a declining interest rate environment, adjustable rate securities may be
less desirable since the coupon will be reset lower as interest rates fall.
On the other hand, the yield on fixed rate securities remains stable until
maturity, which can be advantageous as rates fall.
Of course, we will continue to purchase adjustable rate securities that
provide value in any interest rate environment.
We have significantly reduced the Fund's holdings in adjustable rate
securities from 26% of assets on March 31 to 18% as of September 30.
The Fund held as much as 42% on August 31, 1994.
We Seized Investment
Opportunities.
Interest rates were extremely volatile in the second quarter as the market
speculated about the timing and direction of the Federal Reserve's next move.
This situation allowed us to purchase federal agency securities at yields
similar to high quality corporate obligations. We bought one year, fixed-rate
Federal Home Loan Bank securities which offered an attractive yield premium
to comparable maturity U.S. Treasuries yet carry the implicit backing of
the U.S. government.
And Not So Well.
Longer WAM Would
Have Helped Earlier.
In retrospect, the Series could have lengthened its WAM earlier in 1995
when short-term interest rates peaked. While we did extend our maturities
earlier than many of our competitors, we did not believe that the economy
would slow as quickly as it did. As it turned out, GDP growth has averaged
only 2% in the first half of 1995, half the 4% pace of 1994.
Looking Ahead.
Analysts argue that the current federal funds target, compared to the
economy's low rate of inflation, is too restrictive. Furthermore, if an
agreement for credible deficit reduction is reached in Washington, the
Federal Reserve may lower rates to offset the potentially contractionary
effects of tighter fiscal policy. For these reasons, many analysts believe
that monetary policy is overly restrictive, and they expect further
reductions in the federal funds target rate. On the other hand, any signs
of an economic rebound will forestall additional reductions.
1
<PAGE>
President's Letter November 20, 1995
(PHOTO)
Dear Shareholder:
We hope you like the fresh look and information we've given your shareholder
letter. We've also introduced another feature, called Getting the Most Out
of Your Prudential Mutual Fund, which will appear from time to time at the
back of your report. Look for topics like "Understanding Risk & Reward" as
well as easy-to-understand explanations of financial terms. Why are we
providing such information? Because at Prudential Mutual Funds, we believe
an informed investor makes smart investment decisions.
New Investments for '96
One investment opportunity that investors should watch for in 1996 concerns
retirement savings. Congress and President Clinton have both put forth plans
to reform the way contributions are made to Individual Retirement Accounts
including raising the contribution ceiling and allowing married couples to
make contributions individually rather than jointly. Our favorite has been
the American Dream Savings Account, a new form of IRA that allows investors
access to their funds after five years (without penalty) in order to pay
certain expenses. We believe this plan offers a common-sense approach to
long-term savings.
As I write this letter, the debate over the federal budget is in full swing
and the outcome for any of these plans is uncertain. What is clear is that
investors should keep alert to developments and have the financial flexibility
to respond accordingly.In Closing One final note: if you're a Class B
shareholder of Prudential Mutual Funds, you'll begin noticing a change on
your statements once you've held your shares for seven years. At that time,
they will automatically begin to convert to Class A shares on a quarterly
basis. Since Class A shares carry lower annual distribution charges than
Class B shares, your total returns will be higher after the conversion
than they would have been without it. Conversions started earlier this
year and beginning in December they will take place during each calendar
quarter -- December, March, June and September. It's our way of thanking
you for your loyalty -- and rewarding you for maintaining a long-term
investment program by helping you earn more total investment return on
your Prudential Mutual Fund. I hope you'll find this information useful
as you work with your financial advisor or registered representative to
develop your personal investment plan.
Thank you for choosing Prudential Mutual Funds for your mutual fund
investment.
Sincerely,
Richard A. Redeker
President
2
<PAGE>
PRUDENTIAL INSTITUTIONAL
Portfolio of Investments as of LIQUIDITY PORTFOLIO, INC.
September 30, 1995 (Unaudited) INSTITUTIONAL MONEY MARKET SERIES
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Bank Notes--8.1%
Bank of America NT & SA
$4,000 5.81%, 10/17/95 $ 4,000,016
Bank One Indianapolis, N.A.
1,000 7.18%, 2/5/96 1,001,362
Huntington National Bank
2,000 6.20%, 11/3/95 2,000,149
Mellon Bank, N. A.
2,000 6.20%, 11/1/95 1,999,966
NationsBank of Texas, N.A.
1,000 6.82%, 10/31/95 1,000,124
3,000 7.55%, 1/9/96 3,006,509
2,500 7.30%, 1/26/96 2,503,328
17,000 7.00%, 2/6/96 17,003,199
Northern Trust Co.
8,000 6.60%, 11/17/95 8,003,204
Wachovia Bank of North Carolina
1,000 4.625%, 6/14/96 990,565
------------
41,508,422
- ------------------------------------------------------------
Certificates Of Deposit - Domestic--1.7%
Bank of New York
3,000 6.27%, 10/31/95 3,000,167
Chemical Bank
5,000 6.04%, 11/15/95 5,000,804
National Westminster Bank, Delaware
1,000 5.85%, 12/26/95 1,000,000
------------
9,000,971
- ------------------------------------------------------------
Certificates Of Deposit - Foreign Issuers--16.3%
Abbey National Treasury Services
4,000 5.65%, 12/7/95 3,998,376
5,000 5.73%, 12/8/95 4,998,681
Bank of Montreal
$2,000 5.75%, 10/16/95 $ 1,999,962
Banque Nationale de Paris
1,000 5.78%, 10/24/95 999,964
Caisse Nationale de Credit Agricole
4,000 6.22%, 11/2/95 4,000,065
3,000 5.60%, 11/7/95 2,999,180
Fuji Bank, Ltd.
23,000 6.10%, 10/12/95 23,000,210
National Westminster Bank, PLC
3,000 6.125%, 11/8/95 3,000,701
Rabobank Nederland
4,000 6.66%, 2/27/96 3,996,857
Societe Generale
3,000 5.77%, 10/10/95 2,999,959
8,000 5.80%, 10/10/95 8,000,000
4,000 5.80%, 10/13/95 3,999,970
4,000 5.80%, 11/13/95 3,999,893
1,000 7.60%, 1/11/96 1,002,005
Sumitomo Bank, Ltd.,
7,000 5.89%, 10/4/95 6,999,816
8,000 5.90%, 10/10/95 7,999,531
------------
83,995,170
- ------------------------------------------------------------
Commercial Paper - Domestic--41.5%
American Express Credit Corp.
8,000 5.90%, 10/16/95 7,980,333
7,000 5.67%, 10/17/95 6,982,360
2,650 5.82%, 2/2/96 2,596,876
American General Finance Corp.
5,000 5.70%, 12/18/95 4,938,250
American Home Products Corp.
3,055 5.80%, 10/13/95 3,049,094
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
3
<PAGE>
PRUDENTIAL INSTITUTIONAL
Portfolio of Investments as of LIQUIDITY PORTFOLIO, INC.
September 30, 1995 (Unaudited) INSTITUTIONAL MONEY MARKET SERIES
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Commercial Paper - Domestic (cont'd.)
Aristar, Inc.
$1,000 5.80%, 11/1/95 $ 995,006
1,000 5.75%, 11/17/95 992,493
1,000 5.76%, 11/17/95 992,480
Associates Corp. of North America
7,000 5.80%, 11/27/95 6,935,717
Bankers Trust New York Corp.
13,774 6.10%, 10/10/95 13,752,995
Barnett Banks, Inc.
9,635 5.80%, 10/6/95 9,627,238
Beneficial Corp.
7,000 5.65%, 12/18/95 6,914,308
Chemical Banking Corp.
3,000 5.75%, 10/26/95 2,988,021
Coca-Cola Enterprises, Inc.
7,075 6.00%, 11/3/95 7,036,088
Engelhard Corp.
2,250 5.74%, 10/20/95 2,243,184
Finova Capital Corp.
1,000 5.82%, 10/4/95 999,515
1,000 5.86%, 10/11/95 998,372
1,000 5.82%, 10/13/95 998,060
13,400 5.82%, 10/23/95 13,352,341
4,000 5.85%, 10/23/95 3,985,700
1,000 5.84%, 10/24/95 996,269
1,000 5.85%, 10/24/95 996,263
Ford Motor Credit Corp.
6,000 5.64%, 12/11/95 5,933,260
8,960 5.65%, 12/12/95 8,858,752
General Electric Capital Corp.
11,590 6.05%, 10/18/95 11,556,888
General Electric Capital Services
2,000 5.72%, 10/26/95 1,992,056
Heinz (H.J.) Co.
2,200 5.75%, 11/17/95 2,183,836
Lehman Brothers Holdings, Inc.
12,645 6.90%, 10/2/95 12,642,576
Merrill Lynch & Co., Inc.
$1,645 5.73%, 11/3/95 $ 1,636,360
Monsanto Co.
2,935 6.00%, 10/30/95 2,920,814
NationsBank Corp.
4,000 5.80%, 10/10/95 3,994,200
Norwest Corp.
5,000 5.75%, 10/25/95 4,980,833
Nynex Corp.
15,000 5.755%, 10/12/95 14,973,623
PHH Corp.
4,373 5.73%, 10/13/95 4,364,648
Preferred Receivables Funding Corp.
2,000 5.72%, 10/12/95 1,996,504
100 5.74%, 10/18/95 99,729
1,775 5.72%, 11/6/95 1,764,847
Smith Barney, Inc.
15,000 5.75%, 10/11/95 14,976,042
Weyerhauser Mortgage Corp.
7,786 6.85%, 10/2/95 7,784,518
Whirlpool Corp.
5,000 5.80%, 10/13/95 4,990,333
Whirlpool Financial Corp.
3,271 5.825%, 11/10/95 3,249,829
Xerox Corp.
2,000 5.65%, 12/12/95 1,977,400
------------
213,228,011
- ------------------------------------------------------------
Commercial Paper - Foreign--7.0%
75 State Street Capital Corp.
12,000 5.80%, 10/10/95 11,982,600
American Honda Finance Corp.
1,000 5.85%, 10/4/95 999,513
BHF Finance, Inc.
10,000 5.66%, 12/11/95 9,888,372
Bridgestone/Firestone, Inc.
1,896 6.25%, 10/12/95 1,892,379
- --------------------------------------------------------------------------------
4 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL INSTITUTIONAL
Portfolio of Investments as of LIQUIDITY PORTFOLIO, INC.
September 30, 1995 (Unaudited) INSTITUTIONAL MONEY MARKET SERIES
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Commercial Paper - Foreign (cont'd)
Cogentrix of Richmond, Inc.
$3,000 5.75%, 10/25/95 $ 2,988,500
Province of Quebec
3,000 5.73%, 11/17/95 2,977,557
SRD Finance, Inc.
1,000 6.25%, 10/12/95 998,090
Sumitomo Corp. of America
4,300 6.25%, 10/16/95 4,288,802
------------
36,015,813
- ------------------------------------------------------------
Corporate Bonds--1.8%
Associates Corp. of North America
5,000 4.50%, 2/15/96 4,958,549
1,000 8.80%, 3/1/96 1,009,223
Ford Motor Credit Corp.
1,000 8.875%, 3/15/96 1,008,522
1,200 8.875%, 8/1/96 1,228,261
General Electric Company
1,050 7.875%, 5/1/96 1,060,787
------------
9,265,342
- ------------------------------------------------------------
Variable Rate Obligations(b)--17.9%
American Express Centurion Bank
4,000 5.875%, 10/16/95 3,999,698
General Electric Capital Corp.
5,000 5.80469%, 10/23/95 5,000,000
1,000 5.8125%, 11/24/95 1,000,000
General Motors Acceptance Corp.
10,000 6.0375%, 11/21/95 10,001,249
Goldman Sachs Group, L.P.
7,000 6.00%, 11/27/95 7,000,000
18,000 6.1875%, 11/27/95 18,000,000
Lehman Brothers Holdings, Inc.
$12,000 6.1063%, 11/20/95 $ 12,000,000
Merrill Lynch & Co., Inc.
5,000 4.885%, 10/2/95 4,999,997
15,000 5.875%, 10/2/95 14,995,625
Money Market Auto Loan Trust 1990-1
4,900 6.005%, 10/16/95 4,900,000
Morgan Stanley Group, Inc.
3,000 5.953130%, 10/16/95 3,000,000
5,000 6.08637%, 10/18/95 5,000,000
2,000 6.00%, 11/15/95 2,000,000
------------
91,896,569
- ------------------------------------------------------------
U.S. Government Agencies--3.9%
Federal Farm Credit Bank
5,000 5.75%, 8/1/96 4,993,018
Federal National Mortgage
Association
10,000 5.8125%, 9/27/96 10,000,000
5,000 5.8125%, 10/4/96 4,993,750
------------
19,986,768
- ------------------------------------------------------------
Loan Participations--0.4%
Nomura Holding America, Inc.
2,000 6.00%, 10/10/95 2,000,000
- ------------------------------------------------------------
Medium-Term Notes--2.6%
Ford Motor Credit Corp.
3,000 6.125%, 12/1/95 3,000,962
2,000 6.125%, 12/11/95 1,997,736
3,000 5.15%, 3/15/96 2,982,408
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
5
<PAGE>
PRUDENTIAL INSTITUTIONAL
Portfolio of Investments as of LIQUIDITY PORTFOLIO, INC.
September 30, 1995 (Unaudited) INSTITUTIONAL MONEY MARKET SERIES
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------
Medium-Term Obligations (cont'd.)
General Motors Acceptance Corp.
$1,500 8.85%, 2/26/96 $ 1,516,287
3,000 5.30%, 7/12/96 2,979,251
1,000 8.70%, 8/2/96 1,021,310
------------
13,497,954
- ------------------------------------------------------------
Total Investments--101.2%
(amortized cost $520,395,020(a)) 520,395,020
Liabilities in excess of other
assets--(1.2%) (6,196,998)
------------
Net Assets--100% $514,198,022
------------
------------
</TABLE>
- ---------------
(a) The cost of securities for federal income tax purposes is substantially the
same as for financial reporting purposes.
(b) For purposes of amortized cost valuation, the maturity date of variable rate
instruments is considered to be the earliest of the next date on which the
security can be redeemed at par or the next date on which the rate of
interest is adjusted.
The industry classification of portfolio holdings and net liabilities shown as
a
percentage of net assets as of September 30, 1995 was as follows:
<TABLE>
<S> <C>
Commercial Banks................................... 35.4%
Securities Brokers & Dealers....................... 18.8
Personal Credit Institutions....................... 12.9
Business Credit (Finance).......................... 11.6
Domestic Bank Holding Companies.................... 6.9
Federal Credit Agencies............................ 3.9
Telephone & Communications......................... 2.9
Asset Backed....................................... 1.7
Paper & Allied Products............................ 1.5
Beverages.......................................... 1.4
Auto Rental & Leasing.............................. 0.8
Commodity Trading.................................. 0.8
Canadian Government................................ 0.6
Pharmaceutical..................................... 0.6
Canned Fruit & Vegetables.......................... 0.4
Petroleum Refining................................. 0.4
Photographic Equipment............................. 0.4
Electrical......................................... 0.2
Liabilities in excess of other assets.............. (1.2)
-----
100.0%
-----
-----
</TABLE>
- --------------------------------------------------------------------------------
6 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL INSTITUTIONAL
Statement of Assets LIQUIDITY PORTFOLIO, INC.
and Liabilities (Unaudited) INSTITUTIONAL MONEY MARKET SERIES
- --------------------------------------------------------------------------------
<TABLE>
<S>
<C>
ASSETS
September 30, 1995
------------------
Investments, at
value........................................................................
............... $ 520,395,020
Interest
receivable...................................................................
...................... 3,534,850
Other
assets.......................................................................
......................... 11,832
--------------
Total
assets.......................................................................
...................... 523,941,702
--------------
Liabilities
Payable for investments
purchased....................................................................
....... 7,177,586
Dividends
payable......................................................................
..................... 2,273,335
Accrued expenses and other
liabilities..................................................................
.... 183,289
Management fee
payable......................................................................
................ 83,222
Distribution fee
payable......................................................................
.............. 26,248
--------------
Total
liabilities..................................................................
...................... 9,743,680
--------------
Net
Assets.......................................................................
........................... $ 514,198,022
--------------
--------------
Net assets were comprised of:
Common stock, at
par..........................................................................
........... $ 514,198
Paid-in capital in excess of
par.........................................................................
513,683,824
--------------
Net assets at September 30,
1995............................................................................
$ 514,198,022
--------------
--------------
Net asset value, offering and redemption price per share
($514,198,022 / 514,198,022 shares of $.001 par value common stock issued and
outstanding)............... $1.00
--------------
--------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
7
<PAGE>
PRUDENTIAL INSTITUTIONAL
LIQUIDITY PORTFOLIO, INC.
INSTITUTIONAL MONEY MARKET SERIES
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
September
30,
Net Investment Income 1995
------------
<S> <C>
Income
Interest and discount earned................ $ 16,136,903
------------
Expenses
Management fee.............................. 523,767
Distribution fee............................ 314,260
Transfer agent's fees and expenses.......... 126,000
Custodian's fees and expenses............... 89,000
Registration fees........................... 20,000
Directors' fees............................. 20,000
Reports to shareholders..................... 17,500
Audit fees.................................. 13,500
Insurance expense........................... 8,000
Legal fees.................................. 7,000
Miscellaneous............................... 4,605
------------
Total expenses........................... 1,143,632
------------
Net investment income.......................... 14,993,271
Realized Gain on Investments
Net realized gain on investment transactions... 35,402
------------
Net Increase in Net Assets
Resulting from Operations...................... $ 15,028,673
------------
------------
</TABLE>
PRUDENTIAL INSTITUTIONAL
LIQUIDITY PORTFOLIO, INC.
INSTITUTIONAL MONEY MARKET SERIES
Statement of Changes in Net Assets (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Six Months
Ended Year Ended
Increase (Decrease) September 30, March 31,
in Net Assets 1995 1995
-------------- --------------
<S> <C> <C>
Operations
Net investment income....... $ 14,993,271 $ 18,800,412
Net realized gain on
investment
transactions............. 35,402 16,348
-------------- --------------
Net increase in net assets
resulting from
operations............... 15,028,673 18,816,760
-------------- --------------
Dividends and distributions to
shareholders................ (15,028,673) (18,816,760)
-------------- --------------
Fund share transactions
Net proceeds from shares
subscribed............... 1,213,298,303 1,920,194,727
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions........ 14,613,419 16,326,258
Cost of shares reacquired... (1,189,942,207) (1,845,315,406)
-------------- --------------
Net increase in net assets
from Fund share
transactions............. 37,969,515 91,205,579
-------------- --------------
Total increase................. 37,969,515 91,205,579
Net Assets
Beginning of period............ 476,228,507 385,022,928
-------------- --------------
End of period.................. $ 514,198,022 $ 476,228,507
-------------- --------------
-------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
8 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL INSTITUTIONAL
LIQUIDITY PORTFOLIO, INC.
Notes to Financial Statements (Unaudited) INSTITUTIONAL MONEY MARKET SERIES
- --------------------------------------------------------------------------------
Prudential Institutional Liquidity Portfolio, Inc.--Institutional Money Market
Series (the ``Fund'') is registered under the Investment Company Act of 1940 as
an open-end, diversified management investment company. The investment objective
of the Fund is high current income consistent with the preservation of principal
and liquidity. The Fund invests primarily in money market instruments maturing
in thirteen months or less whose ratings are within the two highest ratings
categories by a nationally recognized statistical rating organization or, if not
rated, are of comparable quality. The ability of the issuers of the securities
held by the Fund to meet its obligations may be affected by economic
developments in a specific industry or region.
- ------------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Securities Valuations: Portfolio securities are valued at amortized cost, which
approximates market value. The amortized cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of any discount or premium.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of investments
are calculated on the identified cost basis. Interest income is recorded on the
accrual basis.
Federal Income Taxes: It is the intent of the Fund to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable net income to its shareholders.
Therefore, no federal income tax provision is required.
Dividends and Distributions: The Fund declares all of its net investment income
and net realized short-term capital gains/losses, if any, as dividends daily to
its shareholders of record at the time of such declaration. Net investment
income for dividend purposes includes interest accrued or discount earned less
amortization of premium and the estimated expenses applicable to the dividend
period. The Fund does not expect to realize long-term capital gains or losses.
- ------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential Mutual Fund Management, Inc.
(``PMF''). Pursuant to this agreement, PMF has responsibility for all investment
advisory services and supervises the subadviser's performance of such services.
PMF has entered into a subadvisory agreement with The Prudential Investment
Corporation (``PIC''); PIC furnishes investment advisory services in connection
with the management of the Fund. PMF pays for the cost of the subadviser's
services, the compensation of officers of the Fund, occupancy and certain
clerical and bookkeeping costs of the Fund. The Fund bears all other costs and
expenses.
The management fee paid PMF is computed daily and payable monthly, at an annual
rate of .20 of 1% of the average daily net assets of the Fund.
The Fund has a distribution agreement with Prudential Mutual Fund Distributors,
Inc. (``PMFD''), who acts as the distributor of the Fund's shares. To reimburse
PMFD for its expenses incurred pursuant to a plan of distribution, the Fund pays
PMFD a reimbursement which is accrued daily and payable monthly at an annual
rate of .12 of 1% of the average daily net assets of the Fund. PMFD pays various
broker-dealers or financial institutions, including Prudential Securities
Incorporated (``PSI'') and Pruco Securities Corporation, affiliated
broker-dealers, for account servicing fees and other expenses incurred by such
broker-dealers.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are indirect,
wholly-owned subsidiaries of The Prudential Insurance Company of America.
- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services, Inc. (``PMFS''), a wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent. During six months ended September 30,
1995, the Fund incurred fees of $120,000 for the services of PMFS. As of
September 30, 1995, $20,000 of such fees were due to PMFS. Transfer agent fees
and expenses in the Statement of Operations include certain out-of-pocket
expenses paid to non-affiliates.
- --------------------------------------------------------------------------------
9
<PAGE>
PRUDENTIAL INSTITUTIONAL
LIQUIDITY PORTFOLIO, INC.
Financial Highlights (Unaudited INSTITUTIONAL MONEY MARKET SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six
Months
Ended
Year Ended March 31,
September
30, ----------------------------------
PER SHARE OPERATING PERFORMANCE: 1995
1995 1994 1993
- ------------- -------- -------- --------
<S> <C>
<C> <C> <C>
Net asset value, beginning of period............................... $
1.000 $ 1.000 $ 1.000 $ 1.000
Net investment income and net realized gains.......................
.029 .046 .029 .033
Dividends and distributions to shareholders........................
(.029) (.046) (.029) (.033)
- ------------- -------- -------- --------
Net asset value, end of period..................................... $
1.000 $ 1.000 $ 1.000 $ 1.000
- ------------- -------- -------- --------
- ------------- -------- -------- --------
TOTAL RETURN(a):...................................................
2.91% 4.69% 2.92% 3.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).................................... $
514,198 $476,229 $385,023 $497,214
Average net assets (000)........................................... $
522,336 $402,678 $445,867 $543,694
Ratios to average net assets:
Expenses, including distribution fee............................
.44%(b) .46% .48% .44%
Expenses, excluding distribution fee............................
.32%(b) .34% .36% .32%
Net investment income...........................................
5.74%(b) 4.67% 2.87% 3.28%
<CAPTION>
PER SHARE OPERATING PERFORMANCE: 1992
1991
--------
--------
<S> <C>
<C>
Net asset value, beginning of period............................... $ 1.000
$ 1.000
Net investment income and net realized gains....................... .054
.076
Dividends and distributions to shareholders........................ (.054)
(.076)
--------
--------
Net asset value, end of period..................................... $ 1.000
$ 1.000
--------
--------
--------
--------
TOTAL RETURN(a):................................................... 5.57%
8.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).................................... $443,172
$519,802
Average net assets (000)........................................... $540,380
$479,849
Ratios to average net assets:
Expenses, including distribution fee............................ .42%
.46%
Expenses, excluding distribution fee............................ .30%
.34%
Net investment income........................................... 5.32%
7.58%
</TABLE>
- ---------------
(a) Total return is calculated assuming a purchase of shares on the first
day and a sale on the last day of each year reported and includes
reinvestment of dividends and distributions. Total returns for periods
of less than a full year are not annualized.
(b) Annualized.
- --------------------------------------------------------------------------------
10 See Notes to Financial Statements.
<PAGE>
Getting The Most From Your Prudential Mutual Fund
When you invest through Prudential Mutual Funds, you receive financial advice
through a Prudential Securities financial advisor or Prudential/Pruco
Securities registered representative. Your advisor or representative can
provide you with the following services:
There's No Reward Without Risk; But Is This Risk Worth It?
Your financial adviser or registered representative can help you match the
reward you seek with the risk you can tolerate. And risk can be difficult
to gauge --sometimes even the simplest investments bear surprising risks.
The educated investor knows that markets seldom move in just one
direction -- there are times when a market sector or asset class will
lose value or provide little in the way of total return. Managing your
own expectations is easier with help from someone who understands the
markets and who knows you!
Keeping Up With The Joneses.
A financial adviser or registered representative can help you wade through
the numerous mutual funds available to find the ones that fit your own
individual investment profile and risk tolerance. While the newspapers
and popular magazines are full of advice about investing, they are aimed
at generic groups of people or representative individuals, not at you
personally. Your financial advisor or registered representative will review
your investment objectives with you. This means you can make financial
decisions based on the assets and liabilities in your current portfolio
and your risk tolerance -- not just based on the current investment fad.
Buy Low, Sell High.
Buying at the top of a market cycle and selling at the bottom are among
the most common investor mistakes. But sometimes it's difficult to hold
on to an investment when it's losing value every month. Your financial
adviser or registered representative can answer questions when you're
confused or worried about your investment, and remind you that you're
investing for the long haul.
<PAGE>
Getting The Most From Your Prudential Mutual Fund
Change Your Mind.
You can exchange your shares in most Prudential Mutual Funds for shares
in most other Prudential Mutual Funds, without charges. This may be most
helpful if your investment needs change.
Reinvest Dividends Free Of Charge.
Reinvest your dividends and/or capital gains distributions automatically --
without charge.
Invest For Retirement.
There is no minimum investment for an IRA. Plus, you defer taxes on your
investment earnings by investing in an IRA.
If you'd like, you can contribute up to $2,000 a year in an IRA. If you
are married, you and your spouse (if not working outside the home) can
contribute up to $2,250 a year. (Withdrawals are taxed as ordinary income
and may be subject to a 10% penalty prior to age 59 1/2.)
Change Your Job.
You can take your pension with you. Use a rollover IRA to manage your
company-sponsored retirement plan while retaining the special tax-deferred
advantages.
Invest In Your Children.
There's no fee to open a custodial account for a child's education or
other needs.
Take Income.
Would you like to receive monthly or quarterly checks in any amount from
your fund account? Just let us know. We'll take care of it. Of course,
there are minimum amounts. And shares redeemed may be subject to tax,
and Class B and C shares may be subject to contingent deferred sales charges.
We'll gladly answer your questions.
Keep Informed.
We want to keep you up-to-date. Of course, you receive account activity
statements every quarter. But you also receive annual and semi-annual fund
reports, as well as other important updates on events that affect your
investments, including tax information.
This material is only authorized for distribution when preceded or accompanied
by a current prospectus. Read the prospectus carefully before you invest
or send money.
<PAGE>
Directors
Eugene C. Dorsey
Donald D. Lennox
Richard A. Redeker
Stanley E. Shirk
Robin B. Smith
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Eugene S. Stark, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Marguerite E. H. Morrison, Assistant Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributor
Prudential Mutual Fund Distributors, Inc.
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852
The accompanying financial statements as of September 30, 1995 were not
audited and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective investors
unless preceded or accompanied by a current prospectus.
<PAGE>
(LOGO) BULK RATE
U.S. POSTAGE
Prudential Mutual Funds PAID
One Seaport Plaza Permit 6807
New York, NY 10292 New York, NY
Toll Free (800) 225-1852
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