(ICON)
Prudential
Institutional
Liquidity
Portfolio, Inc.
- -------------------------
Institutional Money
Market Series
SEMI
ANNUAL
REPORT
Sept. 30, 1997
(LOGO)
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Performance At A Glance.
The Prudential Institutional Liquidity Portfolio -
- - Institutional Money
Market Series provided returns that were well
ahead of the average
money market fund for the six-month period ending
in September by
emphasizing higher yielding, one-year money market
securities.
The 7-day current yield on PILP's Class I shares
stood at 5.57%
as of September 30, 1997 compared with 5.33% for
the average
institutional money fund tracked by IBC Financial
Data.
<TABLE>
<CAPTION>
Fund Facts
As of 9/30/97
7-Day Net Asset
Weighted Total Net
Current Yld. Value
Avg. Mat. Assets (mil.)
<S> <C> <C>
<C> <C>
PILP Class A 5.52% $1.00
60 Days $80.7
PILP Class I 5.57 1.00
60 Days 555.4
IBC Financial Data
Institutional Avg. 5.33 1.00
48 Days N/A
(1st & 2nd Tier)*
</TABLE>
Note: Yields will fluctuate from time to time and
past performance
is not indicative of future results. An investment
in PILP is
neither insured nor guaranteed by the U.S.
government and there
can be no assurance that PILP will be able to
maintain a stable
$1 net asset value per share.
*This is the average seven-day current yield, NAV
and WAM of all
funds in the International Business Communications
Financial
Data's institutional money fund category as of
September 30, 1997
How Investments Compared.
(As of 9/30/97)
(GRAPH)
Source: Lipper Analytical Services. Financial
markets change,
so a mutual fund's past performance should never
be used to
predict future results. The risks to each of the
investments
listed above are different -- we provide 12-month
total
returns for several Lipper mutual fund categories
to show
you that reaching for higher returns means
tolerating more
risk. The greater the risk, the larger the
potential
reward or loss. In addition, we've included
historical
20-year average annual returns. These returns
assume
the reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal.
Investors
have received higher historical total returns from
stocks
than from most other investments. Smaller
capitalization
stocks offer greater potential for long-term
growth but
may be more volatile than larger capitalization
stocks.
General Bond Funds provide more income than stock
funds,
which can help smooth out their total returns year
by year.
But their prices still fluctuate (sometimes
significantly)
and their returns have been historically lower
than those
of stock funds.
General Municipal Debt Funds invest in bonds
issued by
state governments, state agencies and/or
municipalities.
This investment provides income that is usually
exempt
from federal and state income taxes.
Money Market Funds attempt to preserve a constant
share
value; they don't fluctuate much in price but,
historically,
their returns have been generally among the lowest
of the
major investment categories.
<PAGE>
Robert L. Wofchuck, Fund Manager
(PICTURE)
Portfolio
Manager's Report
The 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 high quality, 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. We typically purchase
securities rated
in one of the two highest ratings categories by at
least two
major, independent rating agencies or, if not
rated, deemed
to be of equivalent quality by our credit research
staff.
There can be no assurance that the Series will
achieve its
investment goal.
Strategy Session.
Fed Watching & Waiting.
After the federal funds rate (what banks charge
each other for
overnight loans) was increased by a quarter
percentage point to
5.5% in March, investors continued to push yields
higher (and
prices lower) in early April because they expected
the Federal
Reserve to raise rates again. The economy expanded
at an
average annualized rate of 4.1% during the first
half of
the year so investors reasoned that another
federal funds
rate increase may be necessary to keep the economy
from
overheating. By the end of April, your Series'
weighted
average maturity or WAM was longer than that of
its
competition because we purchased higher yielding
one-year
money market securities. As time drew near for the
central
bank meeting in May, we scaled back the Series'
WAM to be
prepared to purchase higher yielding money market
securities
just in case there was a second rate increase.
But it soon became clear that the Federal Reserve
would leave
monetary policy unchanged. Indeed to date, the
federal funds
rate has remained at 5.5%. While robust economic
growth has
historically caused inflationary pressures to
build, price
pressures have been virtually non-existent thus
far. Federal
Reserve Chairman Alan Greenspan attributed the
favorable
inflation data to productivity gains and the
beneficial
impact of global competition.
Greenspan's comments combined with reports showing
tame
inflation and moderating economic growth sparked a
bond
market rally that pushed down the yield on the 30-
year
U.S. Treasury bond to 6.30% on July 31, its lowest
level
of the reporting period. Just as abruptly, bond
yields
turned higher after a report released in August
showed
the job market remained strong with the
unemployment
rate below 5%. These conditions could increase the
probability of another pre-emptive interest rate
increase because of concern that rising workers'
wages might ignite higher inflation. With this in
mind, we again reduced the Series' WAM prior to
the Federal Reserve meeting in August only to
lengthen it again when the central bankers voted
to leave monetary policy unchanged.
We're Here
To Serve You.
On June 2, 1997, we lowered the Series' fees and
extended
its hours for deposits and withdrawals. The
Series' Class
A shares current annual expense ratio is 0.20 of
1% and
investments and redemptions are now being accepted
through
4 p.m. New York time. In addition, the Series'
Class I
shares current annual expense ratio is 0.15 of 1%
since
inception on July 9. We will continue to look for
ways
to increase your yield and make doing business
with us
more convenient.
<PAGE>
What Went Well.
The Longer, The Better.
History tells us that changes in Federal Reserve
monetary policy
are rarely one shot deals. So investors who
expected another
federal funds rate increase demanded higher yields
on longer
term money market securities, which caused the
yield curve to steepen.
We took advantage of this trend by purchasing one-
year securities
to lock in higher yields. As a result, the Series'
WAM was often
longer than its competition which worked well over
the past six
months. For example, we extended the Series' WAM
in late June
to 66 days. Lengthening the WAM in June was a good
idea because
yields on money market securities slid sharply in
July after
the central bank stood pat on interest rates.
For the period, we were comfortable holding longer
term
money market securities because even if the Fed
did move,
any federal funds interest rate increase would
have likely
been a modest one and additional rate increases
were
already priced into our securities.
And Not So Well.
We Wavered.
While the Series' WAM was generally longer than
its competition,
we adopted a more defensive approach prior to the
May, July and
August Federal Reserve meetings by shortening the
WAM. With the
U.S. economy growing at a brisk clip, central
bankers could have
acted pre-emptively to ward off higher inflation
by increasing
the federal funds rate. So like many other market
participants,
we reduced the Series' WAM to be prepared to
purchase any
higher yielding money market securities should
rates rise.
Of course, the federal funds rate stayed at 5.5%.
Had we
stuck to our guns and kept the Series' WAM longer
than
its competition, our performance would have been
even better.
Looking Ahead.
The Federal Reserve is caught between a rock and a
hard
place. With the unemployment rate tumbling to a 24-
year
low of 4.7% in October, central bankers are
probably
itching to increase the federal funds rate to
prevent
robust economic growth from reigniting inflation.
But
higher U.S. interest rates could spark further
turmoil
by luring investments away from Asia's embattled
markets.
Southeast Asia's financial crisis had spread
through
global stock markets, sending the Dow Jones
Industrial
Average plunging a record 554 points on October
27.
While concern about stirring up more financial
turbulence could temporarily postpone another
rate increase, we believe central bankers will
likely move again in 1998.
1
<PAGE>
President's Letter
November 12, 1997
(PICTURE)
Keep Events In Perspective.
Dear Shareholder:
For investors, the late October decline
experienced by the financial
markets was unsettling -- but let's put events in
perspective.
October's downturn was the third significant one
this year.
Stock prices fell sharply in early spring and
dropped again
in late summer. Yet following each episode the
financial
markets recovered any lost ground. That's very
important
because it shows that investors today are not
easily swayed
by temporary setbacks -- they choose to stay the
course
and are investing for the long term.
Despite the recent volatility, it has been a very
good
year for investors. Plus, the U.S. economy is
strong,
inflation remains low, and unemployment is down.
At the
end of the sell-off on October 27, the Standard &
Poor's
500 Index had still gained more than 18% for the
year.
The Dow Jones Industrial Average was also up 11%
and
the Nasdaq Composite nearly 19%.
Here are a few more thoughts that may help you
during
times of market uncertainty:
- -- Keep your expectations realistic. Seasoned
investors know
that financial markets rise and fall -- as will
the value of
their holdings. Over time, however, stocks have
been shown to
produce very attractive returns. As a matter of
fact, the S&P
500 rose more than 280% from the time of the last
major
market downturn (October 31, 1987) through
December 31,
1996, according to Lipper Analytical Services.
- -- Don't make rash decisions. If you have an
investment
plan, stick to it. While past performance is not
indicative
of future results, historically, investors have
profited by
taking advantage of the long-term growth potential
of U.S. stocks.
- -- We're on your side. Your Prudential Securities
Financial
Advisor or Pruco Securities Registered
Representative can
help you understand what's happening in the
financial
markets. Why not call him or her today?
Thank you for your continued confidence in
Prudential
Mutual Funds and Annuities. We'll do everything we
can
to keep you informed and to earn your trust.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds & Annuities
2
<PAGE>
Portfolio of Investments as PRUDENTIAL
INSTITUTIONAL
of September 30, 1997 LIQUIDITY
PORTFOLIO, INC.
(Unaudited) INSTITUTIONAL
MONEY MARKET SERIES
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value
(Note 1)
<C> <S>
<C>
---------------------------------------------
- ---------------
Bank Notes--12.1%
American Express Centurion Bank
$2,000 5.62625%, 10/3/97 (b)
$ 2,000,130
4,000 5.62625%, 10/9/97 (b)
4,000,000
1,000 5.62625%, 10/14/97 (b)
999,963
1,000 5.62625%, 10/22/97 (b)
999,978
1,000 5.70625%, 10/24/97 (b)
1,000,032
Bank of America
2,000 5.57%, 11/7/97
1,999,487
Bank of New York
2,000 5.94%, 6/30/98
2,000,520
Bank One, N. A.
10,000 5.50%, 10/8/97
9,999,882
Comerica Bank
2,000 5.55625%, 10/6/97 (b)
1,999,563
7,000 5.55125%, 10/14/97 (b)
6,998,275
FCC National Bank
9,000 5.51281%, 10/2/97 (b)
8,994,743
First Bank, N.A.
1,000 5.55625%, 10/15/97 (b)
999,956
4,000 5.57625%, 10/15/97 (b)
3,999,186
4,000 5.61625%, 10/15/97 (b)
4,000,000
First USA Bank
5,000 5.95%, 10/15/97 (b)
5,003,648
3,000 6.01875%, 11/19/97 (b)
3,006,248
Morgan Guaranty Trust Co.
13,000 5.625%, 11/14/97 (b)
12,998,858
Wachovia Bank, N.A.
6,000 6.14%, 6/1/98
6,000,000
- ------------
77,000,469
- --------------------------------------------------
- ----------
Certificates Of Deposit - Domestic--1.1%
CoreStates Bank, N.A.
1,000 5.57625%, 10/20/97 (b)
999,903
1,000 5.72%, 10/23/97 (b)
1,000,000
Harris Trust & Savings Bank
5,000 6.625%, 10/1/97
5,000,000
- ------------
6,999,903
Certificates Of Deposit - Eurodollar--5.8%
Banco Santander, S.A.
$6,000 5.56%, 11/30/97
$ 6,000,053
Bankers Trust Co.
8,000 5.64%, 10/10/97
8,000,038
Kredietbank, S.A.
14,000 5.59%, 11/10/97
14,000,154
Westdeutsche Landesbank Girozentrale
9,000 5.82%, 8/3/98
8,994,155
- ------------
36,994,400
- --------------------------------------------------
- ----------
Certificates Of Deposit - Yankee--15.5%
Banque Nationale de Paris
19,910 6.50%, 10/1/97
19,910,000
Commerzbank
5,000 5.97%, 8/17/98
4,998,743
Credit Agricole Indosuez
5,000 5.87%, 8/10/98
4,997,950
Deutsche Bank
2,000 5.69%, 10/28/97
1,999,956
National Westminster Bank PLC
3,000 6.06%, 5/26/98
2,999,071
Royal Bank of Canada
2,000 5.725%, 10/17/97
1,999,967
5,000 5.91%, 6/17/98
4,997,965
Societe Generale
4,500 5.72%, 10/20/97
4,499,579
1,000 5.91%, 10/21/97
1,000,095
1,000 5.61%, 11/3/97
999,753
1,000 5.60%, 11/12/97
999,680
5,000 6.19%, 5/6/98
4,998,238
1,000 6.105%, 5/26/98
1,001,196
13,000 6.01%, 6/16/98
12,997,366
7,000 5.88%, 7/17/98
6,998,940
Swiss Bank Corp.
8,000 5.98%, 3/19/98
7,999,292
15,000 5.86%, 7/17/98
14,996,591
- ------------
98,394,382
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as PRUDENTIAL
INSTITUTIONAL
of September 30, 1997 LIQUIDITY
PORTFOLIO, INC.
(Unaudited) INSTITUTIONAL
MONEY MARKET SERIES
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value
(Note 1)
<C> <S>
<C>
---------------------------------------------
- ---------------
Commercial Paper--39.4%
AC Acquisition Holding Co.
$4,000 5.53%, 10/23/97
$ 3,986,482
American Honda Finance Corp.
17,965 5.59%, 10/21/97
17,909,209
Aon Corp.
1,000 5.59%, 11/7/97
994,255
3,000 5.60%, 11/24/97
2,974,800
Barclays U.S. Funding Corp.
6,000 5.525%, 10/14/97
5,988,029
CIT Group Holdings, Inc.
3,000 5.53%, 10/27/97
2,988,018
1,150 6.20%, 4/15/98
1,150,137
Commercial Credit Co.
11,570 5.53%, 10/23/97
11,530,900
Corporate Receivables Corp.
8,000 5.55%, 10/16/97
7,981,500
9,000 5.54%, 10/22/97
8,970,915
CXC, Inc.
7,000 5.53%, 10/3/97
6,997,849
22,859 5.55%, 10/20/97
22,792,042
Ford Motor Credit Co.
2,927 6.00%, 10/6/97
2,924,561
General Electric Capital Corp.
5,000 5.70%, 1/12/98
4,918,458
General Motors Acceptance Corp.
10,000 5.54%, 10/20/97
9,970,761
Grand Metropolitan Capital Corp.
4,000 6.45%, 10/1/97
4,000,000
GTE Corp.
5,000 5.55%, 10/7/97
4,995,375
International Nederlanden U.S.
Holdings
2,000 5.57%, 10/3/97
1,999,381
Johnson Controls, Inc.
8,000 5.65%, 11/7/97
7,953,545
Kredietbank Financial Corp.
5,600 5.80%, 10/8/97
5,593,684
Lehman Brothers Holdings, Inc.
15,635 5.90%, 10/7/97
15,619,626
Market Street Funding Corp.
$2,000 5.57%, 10/16/97
$ 1,995,358
7,000 5.57%, 10/23/97
6,976,173
Martin Marietta Material, Inc.
2,000 5.58%, 10/7/97
1,998,140
Mitsubishi International Corp.
5,000 5.57%, 10/17/97
4,987,622
Monte Rosa Capital Corp.
6,000 5.58%, 11/6/97
5,966,520
5,000 5.57%, 12/1/97
4,952,810
Newell Co.
4,000 5.55%, 10/14/97
3,991,983
Old Line Funding Corp.
3,000 5.56%, 10/16/97
2,993,050
5,000 5.57%, 10/22/97
4,983,754
1,000 5.56%, 11/6/97
994,440
Pfizer, Inc.
1,880 6.00%, 10/8/97
1,877,807
Safeco Corp.
10,000 5.61%, 11/7/97
9,942,342
5,000 5.60%, 11/17/97
4,963,444
Smith Barney Holdings, Inc.
15,000 5.54%, 10/22/97
14,951,525
Special Purpose Accounts Receivables
Corp.
7,000 5.57%, 10/16/97
6,983,754
UBS Finance (Delaware), Inc.
7,000 5.62%, 10/14/97
6,985,794
WCP Funding, Inc.
3,000 5.54%, 10/14/97
2,993,998
1,000 5.55%, 10/23/97
996,608
1,000 5.55%, 11/19/97
992,446
Wood Street Funding Corp.
2,000 5.57%, 10/6/97
1,998,453
6,031 5.57%, 10/20/97
6,013,271
- ------------
250,778,819
- --------------------------------------------------
- ----------
Loan Participations--1.3%
Countrywide Home Loans, Inc.
8,000 5.90%, 10/7/97
8,000,000
- ------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as PRUDENTIAL
INSTITUTIONAL
of September 30, 1997 LIQUIDITY
PORTFOLIO, INC.
(Unaudited) INSTITUTIONAL
MONEY MARKET SERIES
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value
(Note 1)
<C> <S>
<C>
---------------------------------------------
- ---------------
Other Corporate Obligations--25.3%
American General Finance Corp.
$2,109 7.70%, 11/15/97
$ 2,113,839
Associates Corp. of North America
1,500 7.75%, 11/1/97
1,502,577
2,250 8.375%, 1/15/98
2,266,074
Avco Financial Services, Inc.
3,000 5.71%, 11/17/97 (b)
2,999,945
BP America, Inc.
1,500 8.875%, 12/1/97
1,507,830
CoreStates Capital Corp.
1,000 5.62625%, 10/24/97 (b)
1,000,000
Ford Motor Credit Co.
2,500 9.375%, 12/15/97
2,517,594
General Motors Acceptance Corp.
23,000 5.68703%, 11/3/97 (b)
22,997,144
Goldman Sachs Group, L.P.
5.80859%, 10/22/97
(cost $21,000,000, date purchased
6/3/96) (b)(c)
21,000,000
21,000
International Lease Finance Corp.
3,250 6.125%, 10/15/97 (b)
3,250,487
Merrill Lynch & Co., Inc.
3,000 5.68625%, 10/16/97 (b)
3,000,038
30,000 5.61625%, 10/8/98 (b)
29,997,009
Morgan Stanley Group, Inc.
3,000 5.875%, 10/15/97 (b)
3,000,000
2,000 5.88281%, 11/17/97 (b)
2,000,000
5,000 6.00438%, 12/17/97 (b)
5,007,304
NationsBank Corp.
1,500 5.86875%, 12/29/97 (b)
1,501,275
Norwest Financial, Inc.
2,000 6.50%, 11/15/97
2,001,748
PNC Bank Student Loan Trust I 1997-2
$6,410 5.59625%, 10/27/97 (b)
$ 6,409,843
Restructured Asset Securities
1997-MM-8-5
17,000 5.64625%, 10/28/97 (b)
17,000,000
Short-Term Card Account Trust 1996-1
18,000 5.67625%, 10/15/97 (b)
18,000,000
Short-Term Repackaged Asset Trust
1996-A
5.65625%, 10/15/97
(cost $5,999,736, date purchased
12/27/96) (b)(c)
5,999,736
6,000
SMM Trust Notes 1997-Q
5,000 5.65625%, 10/15/97 (b)
5,000,000
Transamerica Finance Corp.
1,000 6.90%, 12/1/97
1,001,810
- ------------
161,074,253
- --------------------------------------------------
- ----------
Total Investments--100.5%
(amortized cost $639,242,226(a))
639,242,226
Liabilities in excess of other
assets--(0.5)%
(3,180,984)
- ------------
Net Assets--100%
$636,061,242
- ------------
- ------------
</TABLE>
- ---------------
(a) The cost of securities for federal income tax
purposes is substantially the
same as for financial reporting purposes.
(b) Variable rate instrument. The maturity date
presented for these instruments
is the later 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.
(c) Private placement restricted as to resale and
does not have a readily
available market; the aggregate cost of such
securities is $26,999,736. The
aggregate value ($26,999,736) is approximately
4.2% of net assets.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 5
<PAGE>
PRUDENTIAL INSTITUTIONAL
LIQUIDITY PORTFOLIO, INC.
INSTITUTIONAL MONEY MARKET SERIES
Portfolio of Investments as of September 30, 1997
(Unaudited)
- --------------------------------------------------
- ----------
The industry classification of portfolio holdings
and other assets in excess of
liabilities shown as a percentage of net assets as
of September 30, 1997 was as
follows:
Commercial
Banks................................... 39.6%
Asset Backed
Securities............................ 17.0
Securities Brokers &
Dealers....................... 17.0
Finance
Lessors.................................... 5.2
Fire & Marine Casualty
Insurance................... 5.2
Personal Credit
Institutions....................... 4.5
Business Credit
(Finance).......................... 2.4
Bank Holding
Companies............................. 1.7
Mortgage
Banks..................................... 1.3
Regulatory
Controls................................ 1.3
Pharmaceuticals...................................
. 0.9
Commodity
Trading.................................. 0.8
Telephone &
Communications......................... 0.8
Accident & Health
Insurance........................ 0.6
Bakery
Products....................................
0.6
Furniture.........................................
. 0.6
Equipment Rental &
Leasing......................... 0.5
Mining............................................
. 0.3
Petroleum
Refining................................. 0.2
- -----
Liabilities in excess of other
assets.............. (0.5)
- -----
100.0%
- -----
- -----
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 6
<PAGE>
PRUDENTIAL
INSTITUTIONAL
Statement of Assets and LIQUIDITY
PORTFOLIO, INC.
Liabilities (Unaudited)
INSTITUTIONAL MONEY MARKET SERIES
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Assets
September 30, 1997
<S>
<C>
Investments, at amortized cost which approximates
market
value.........................................
$639,242,226
Interest
receivable........................................
............................................
3,743,503
Deferred expenses and other
assets............................................
......................... 11,779
- ------------------
Total
assets............................................
............................................
642,997,508
- ------------------
Liabilities
Payable for investments
purchased.........................................
............................. 6,000,053
Dividends
payable...........................................
...........................................
794,947
Accrued
expenses..........................................
.............................................
102,233
Management fee
payable...........................................
......................................
37,206
Distribution fee
payable...........................................
....................................
1,827
- ------------------
Total
liabilities.......................................
............................................
6,936,266
- ------------------
Net
Assets............................................
.................................................
$636,061,242
- ------------------
- ------------------
Net assets were comprised of:
Common stock, at
par...............................................
................................. $
636,061
Paid-in capital in excess of
par...............................................
..................... 635,425,181
- ------------------
Net assets, September 30,
1997..............................................
........................... $636,061,242
- ------------------
- ------------------
Class A:
Net asset value, offering and redemption price per
share
($80,697,027 / 80,697,027 shares of common
stock issued and
outstanding)............................
$1.00
- ------------------
- ------------------
Class I:
Net asset value, offering and redemption price per
share
($555,364,215 / 555,364,215 shares of 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
Net Investment Income
September 30, 1997
<S> <C>
Income
Interest.................................
$ 18,669,153
---
- ---------------
Expenses
Management fee...........................
653,974
Distribution fee--Class A................
201,024
Transfer agent's fees and expenses.......
126,000
Custodian's fees and expenses............
58,000
Registration fees........................
37,000
Legal fees and expenses..................
17,000
Reports to shareholders..................
17,000
Audit fee................................
12,500
Directors' fees and expenses.............
6,000
Insurance expenses.......................
5,000
Miscellaneous............................
5,434
---
- ---------------
Total expenses........................
1,138,932
Less: Expense subsidy (Note 4)...........
(191,158)
Management fee waiver (Note 2)........
(120,984)
Distribution fee waiver (Note 2)......
(57,751)
---
- ---------------
Net expenses
769,039
---
- ---------------
Net investment income.......................
17,900,114
---
- ---------------
Realized Gain on Investments
Net realized gain on investment
transactions.............................
2,347
---
- ---------------
Net Increase in Net Assets
Resulting from Operations...................
$ 17,902,461
---
- ---------------
---
- ---------------
</TABLE>
PRUDENTIAL INSTITUTIONAL
LIQUIDITY PORTFOLIO, INC.
INSTITUTIONAL MONEY MARKET SERIES
Statement of Changes in Net Assets (Unaudited)
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Six Months
Ended
Year Ended
Increase (Decrease) September 30,
March 31,
in Net Assets 1997
1996
<S> <C>
<C>
Operations
Net investment income..... $ 17,900,114
$ 22,586,704
Net realized gain on
investment
transactions........... 2,347
11,251
---------------
- ---------------
Net increase in net assets
resulting from
operations............. 17,902,461
22,597,955
---------------
- ---------------
Dividends and distributions
(Note 1)
Class A................ (9,038,533)
(22,597,955)
Class I................ (8,863,928)
- --
---------------
- ---------------
(17,902,461)
(22,597,955)
---------------
- ---------------
Series share transactions
(net of conversions) (Note
5)
Net Proceeds from shares
sold................... 2,927,771,760
2,069,514,977
Net asset value of shares
issued in reinvestment
of
dividends and
distributions.......... 17,413,816
21,346,132
Cost of shares
reacquired............. (2,787,169,339)
(2,053,657,829)
---------------
- ---------------
Net increase in net assets
from Series share
transactions........... 158,016,237
37,203,280
---------------
- ---------------
Total increase............... 158,016,237
37,203,280
Net Assets
Beginning of period.......... 478,045,005
440,841,725
---------------
- ---------------
End of period................ $ 636,061,242
$ 478,045,005
---------------
- ---------------
---------------
- ---------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 8
<PAGE>
PRUDENTIAL INSTITUTIONAL
Notes to Financial Statements
LIQUIDITY PORTFOLIO, INC.
(Unaudited)
INSTITUTIONAL MONEY MARKET SERIES
- --------------------------------------------------
- ------------------------------
Prudential Institutional Liquidity Portfolio, Inc.
(the 'Fund') is registered
under the Investment Company Act of 1940 as an
open-end, diversified management
investment company. The Fund consists of two
series--the Institutional Money
Market Series (the 'Series') and the Liquid Asset
Series. The Liquid Asset
Series has not yet begun operations. The
investment objective of the Series is
high current income consistent with the
preservation of principal and liquidity.
The Series 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
Series to meet their 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, and the Series, 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 Net 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. Expenses are recorded on the
accrual basis which may require the
use of certain estimates by management.
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 Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has
responsibility for all
investment advisory services and supervises the
subadviser's performance of such
services. PIFM 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. PIFM
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 PIFM is computed daily and
payable monthly, at an annual
rate of .20 of 1% of the average daily net assets
of the Series. PIFM has agreed
to waive a portion (.05 of 1% of the Series'
average daily net assets) of its
management fee, which amounted to $120,984 ($.0002
per share) for the six months
ended September 30, 1997. The Series is not
required to reimburse PIFM for such
waiver.
The Fund has a distribution agreement with
Prudential Securities Incorporated
('PSI'), which acts as the distributor of the
Class A and Class I shares of the
Fund. The Fund reimburses PSI for distributing and
servicing the Fund's Class A
shares pursuant to the plan of distribution at an
annual rate of .12 of 1% of
the Series' average daily net assets of the Class
A shares. PSI has agreed to
waive a portion (.07 of 1% of the Series' average
daily net assets) of its
distribution fee, which amounted to $57,751
($.0007 per share) for the six
months ended September 30, 1997. The Series is not
required to reimburse PSI for
such waiver. The Class A distribution fee is
accrued daily and payable monthly.
No distribution or service fees are paid to PSI as
distributor of the Class I
shares of the Fund.
PSI, PIFM and PIC are indirect, wholly-owned
subsidiaries of The Prudential
Insurance Company of America.
- --------------------------------------------------
- ----------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a
wholly-owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the
six months ended September 30,
1997, the Series incurred fees of $120,000 for the
services of PMFS. As of
September 30, 1997, $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
Notes to Financial Statements
LIQUIDITY PORTFOLIO, INC.
(Unaudited)
INSTITUTIONAL MONEY MARKET SERIES
- --------------------------------------------------
- ------------------------------
Note 4. Expense Subsidy
PIFM voluntarily agreed to subsidize operating
expenses so that total Series
operating expenses do not exceed .20% and .15% of
the average daily net assets
of the Class A and Class I shares, respectively.
For the six months ended
September 30, 1997, such reimbursement amounted to
$191,158 ($0.0003 per share
for Class A and I shares; .06% of average net
assets, annualized).
- --------------------------------------------------
- ----------
Note 5. Capital
The Series currently offers Class A and Class I
shares. Effective July 9, 1997,
the Series commenced offering Class I shares.
The Series has authorized 10 billion shares of
common stock, $.001 par value per
share, divided into 5 billion authorized Class A
shares and 5 billion authorized
Class I shares.
Transactions in shares of common stock (at $1 per
share) were as follows:
<TABLE>
<CAPTION>
Shares
and
Dollar
Class A
Amount
- --------------------------------------------- --
- ------------
<S>
<C>
Six months ended September 30, 1997:
Shares sold..................................
1,358,216,434
Shares issued in reinvestment of dividends
and distributions..........................
9,814,383
Shares reacquired............................
(1,180,650,999)
--
- ------------
Net increase in shares outstanding before
conversion.................................
187,379,818
Shares reacquired upon conversion into Class
I..........................................
(584,727,797)
--
- ------------
Net decrease in shares outstanding...........
(397,347,979)
--
- ------------
--
- ------------
Year ended March 31, 1997:
Shares sold..................................
2,069,514,977
Shares issued in reinvestment of dividends
and
distributions..............................
21,346,132
Shares reacquired............................
(2,053,657,829)
--
- ------------
Net increase in shares outstanding...........
37,203,280
--
- ------------
--
- ------------
<CAPTION>
Class I
- ---------------------------------------------
<S>
<C>
July 9, 1997* through September 30, 1997:
Shares sold..................................
1,569,555,326
Shares issued in reinvestment of dividends
and
distributions..............................
7,599,433
Shares reacquired............................
(1,606,518,340)
--
- ------------
Net decrease in shares outstanding before
conversion.................................
(29,363,581)
Shares issued upon conversion from Class A...
584,727,797
--
- ------------
Net increase in shares outstanding...........
555,364,216
--
- ------------
--
- ------------
</TABLE>
- ---------------
* Commencement of offering of Class I shares.
- --------------------------------------------------
- ------------------------------
10
<PAGE>
PRUDENTIAL INSTITUTIONAL
LIQUIDITY
PORTFOLIO, INC.
Financial Highlights (Unaudited)
INSTITUTIONAL MONEY MARKET SERIES
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class A
-
- --------------------------------------------------
- ---------------------------
Six Months
Ended Year Ended March
31,
September 30, --------------------------------
- ----------------------------
1997 1997 1996 1995
1994 1993
-
- ------------ -------- -------- -------
- - -------- --------
<S>
<C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..........
$ 1.000 $ 1.000 $ 1.000 $ 1.000
$ 1.000 $ 1.000
Net investment income and net realized
gains......................................
.027(d) .050 .056 .046
.029 .033
Dividends and distributions to shareholders...
(.027) (.050) (.056) (.046)
(.029) (.033)
-
- ------------ -------- -------- -------
- - -------- --------
Net asset value, end of period................
$ 1.000 $ 1.000 $ 1.000 $ 1.000
$ 1.000 $ 1.000
-
- ------------ -------- -------- -------
- - -------- --------
-
- ------------ -------- -------- -------
- - -------- --------
TOTAL RETURN(a):..............................
2.78% 5.16% 5.72% 4.69%
2.92% 3.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...............
$ 80,697 $478,045 $440,842 $476,229
$385,023 $497,214
Average net assets (000)......................
$ 334,121 $449,393 $519,946 $402,678
$445,867 $543,694
Ratios to average net assets:
Expenses, including distribution fee.......
.32%(c)/(d) .46% .43% .46%
.48% .44%
Expenses, excluding distribution fee.......
.23%(c)/(d) .34% .31% .34%
.36% .32%
Net investment income......................
5.39%(c)/(d) 5.03% 5.56% 4.67%
2.87% 3.28%
<CAPTION>
Class I
--
- ----------------
July 9, 1997(b)
Through
September 30,
1997
--
- ----------------
<S>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..........
$ 1.000
Net investment income and net realized
gains......................................
.013(d)
Dividends and distributions to shareholders...
(.013)
- -------
Net asset value, end of period................
$ 1.000
- -------
- -------
TOTAL RETURN(a):..............................
1.28%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...............
$555,364
Average net assets (000)......................
$692,917
Ratios to average net assets:
Expenses, including distribution fee.......
.15%(c)/(d)
Expenses, excluding distribution fee.......
.15%(c)/(d)
Net investment income......................
5.56%(c)/(d)
</TABLE>
- ---------------
(a) Total return is calculated assuming a purchase
of shares on the first day
and a sale on the last day of each period
reported and includes reinvestment
of dividends and distributions. Total returns
for less than a full year are
not annualized.
(b) Commencement of offering of Class I shares.
(c) Annualized.
(d) Net of management and distribution fee waiver
and expense subsidy.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 11
<PAGE>
Getting
The Most
From Your
Prudential
Mutual
Fund.
How many times have you read these letters -- or
other
financial materials -- and stumbled across a word
that
you don't understand?
Many shareholders have run into the same problem.
We'd
like to help. So we'll use this space from time to
time
to explain some of the words you might have read,
but not
understood. And if you have a favorite word that
no one
can explain to your satisfaction, please write to
us.
Basis Point: One 1/100th of 1%. For example, one
half of one
percentage point is 50 basis points.
Call Option: A contract giving the holder a right
to buy stocks
or bonds at a predetermined price (called the
strike price)
before a predetermined expiration date. A buyer of
a call
option generally expects to benefit from a rise in
the price of the
stock or bond.
Capital Gain/Capital Loss: The difference between
the cost
of a capital asset (for example, a stock, bond or
mutual
fund share) and its selling price. Under current
law the
federal income tax rate for individuals on a long-
term
capital gain is up to 28%.
Collateralized Mortgage Obligations (CMOs): Pools
of
mortgage-backed securities sliced in maturity
ranges
that bear differing interest rates. These
instruments
are sensitive to changes in interest rates and
homeowner
refinancing activity. They are subject to
prepayment and
maturity extension risk.
Derivatives: Securities that derive their value
from another
security. The rate of return of these financial
products
rises and falls -- sometimes very suddenly -- in
response
to changes in some specific interest rate,
currency, stock or other
variable.
Discount Rate: The interest rate charged by the
Federal
Reserve on loans to banks and other depository
institutions.
Federal Funds Rate: The interest rate charged by
one bank
to another on overnight loans.
Futures Contract: An agreement to deliver a
specific amount
of a commodity or financial instrument at a set
price at a
stipulated time in the future.
Leverage: The use of borrowed assets to enhance
return on
equity. The expectation is that the interest rate
charged
will be lower than the return on the investment.
While
leverage can increase profits, it can also magnify
losses.
Liquidity: The ease with which a financial
instrument (or
mutual fund) can be bought or sold (converted into
cash)
in the financial markets.
Price/Earnings Ratio: The price of a share of
stock divided
by the earnings per share for a 12-month period.
Option: An agreement to sell something, such as
shares of
stock, by a certain time for a specified price. An
option
need not be exercised.
Spread: The difference between two values; most
often used
to describe the difference between prices bid
and asked for a security.
Yankee Bond: A bond denominated in U.S. dollars
but sold
by a foreign company or government in the U.S.
market.
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Directors
Edward D. Beach
Stephen C. Eyre
Delayne Dedrick Gold
Robert F. Gunia
Don G. Hoff
Robert E. LaBlanc
Mendel A. Melzer
Richard A. Redeker
Robin B. Smith
Stephen Stoneburn
Nancy H. Teeters
Officers
Richard A. Redeker, President
Thomas A. Early, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Robert C. Rosselot, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
The views expressed in this report and information
about the
Series' portfolio holdings are for the period
covered by this
report and are subject to change thereafter.
The accompanying financial statements as of
September 30,
1997 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)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
BULK RATE
U.S. POSTAGE
PAID
Permit 6807
New York, NY
744350109 MF 137E2
744350604
