(ICON)
Prudential
Institutional
Liquidity
Portfolio, Inc.
- -------------------------
Institutional Money
Market Series
ANNUAL
REPORT
March 31, 1999
(LOGO)
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Performance At A Glance
During our fiscal year ended March 31, 1999, money market
yields
trended lower. Yields began to fall dramatically after the
Federal
Reserve cut a key short-term interest rate three times in
the autumn
of 1998 to protect the U.S. economy from the threat of a
deepening
global financial crisis. Despite these challenging market
conditions,
your Prudential Institutional Liquidity Portfolio--
Institutional Money
Market Series provided a better-than-average yield.
<TABLE>
Fund Facts As of 3/31/99
<CAPTION>
7-Day Net Asset
Weighted Avg. Net Assets
Current Yld. Value (NAV)
Mat. (WAM) (Millions)
<S> <C> <C>
<C> <C>
PILP Class A 4.82% $1.00
69 Days $ 361.2
PILP Class I 4.87% $1.00
69 Days $1,750.2
IBC Financial Data
Institutional-Only Universe
Avg. (1st & 2nd Tier)* 4.63% $1.00
55 Days N/A
</TABLE>
Note: Yields will fluctuate from time to time, and past
performance
is not indicative of future results. An investment in PILP
is not
insured or guaranteed by the Federal Deposit Insurance
Corporation
or any other government agency. Although PILP seeks to
preserve
the value of your investment at $1.00 per share, it is
possible
to lose money by investing in PILP.
* IBC Financial Data reports a seven-day current yield, NAV,
and
WAM on Tuesdays. This is the data of all funds in the
International Business Communications (IBC) Financial Data
Institutional-Only Universe Average (1st & 2nd Tier)
category
as of March 30, 1999.
Money fund yields trended low
(GRAPH)
How Investments Compared
(As of 3/31/99)
(GRAPH)
Source: Lipper, Inc. Financial markets change, so a mutual
fund's past
performance should never be used to predict future results.
The risks
to each of the investments listed above are different--we
provide
12-month total returns for several Lipper mutual fund
categories
to show you that reaching for higher 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.
U.S. Taxable Money 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>
Portfolio Manager's Report
(PHOTO)
Manolita Brasil
Fund Manager
Investment Goals and Style
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, its agencies, and major corporations
and
commercial banks of the United States 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
rating 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 objective.
Market Review
Quarter-end purchases helped us
As our fiscal year began in April 1998, the Federal Reserve
was
considering raising the Federal funds rate which is the rate
U.S.
banks charge each other for overnight loans. Increasing this
key
short-term rate would boost borrowing costs which, in turn,
could
slow the brisk pace of U.S. economic growth and head off
higher
inflation. We had planned to take advantage of any
attractive
buying opportunities that emerged as money market yields
rose
along with the Federal funds rate. However, the economic
expansion began to slow in the spring as a financial crisis
in Asia caused overseas demand for American-made goods to
dwindle. Since the economy had begun to cool, there was
little
need to raise the Federal funds rate.Fortunately for us,
good
buying opportunities often occur at the end of each calendar
quarter when concurrent factors briefly drive money market
yields higher. For example, some companies borrowed cash at
quarter end to make their balance sheets look healthier.
Their demand for cash temporarily drove up the cost of
borrowing so that money market securities provided very
attractive yields. As yields climbed at the end of March and
June of 1998, we bought one-year securities at "fire-sale"
prices.
These purchases represented good value when you consider
that
the Federal Reserve did not increase the Federal funds rate
as expected.
We should have continued
to buy aggressively
We should have kept purchasing longer-term money market
securities
in July and early August before their yields unexpectedly
began
to tumble because the financial crisis spread beyond Asia.
Investors reacted by selling stocks and riskier bonds and
purchasing the safest investments such as the highest-
quality
money market securities. Yields on money market securities
also slid amid expectations the Federal funds rate would be
lowered to stimulate U.S. economic growth and help
calm global financial markets. Because we disagreed with
this outlook for monetary policy, we avoided purchasing
longer-term money market securities during this time.
After all, the Federal Reserve had considered increasing
the key short-term rate earlier in the year and the economy
had remained quite resilient.
In the autumn of 1998, however, the Federal Reserve was
compelled
to lower the Federal funds rate by a quarter percentage
point
three times, leaving the key rate at 4.75%. This
pushed money market yields even lower. We regretted not
locking
in yields on longer-term money
<PAGE>
market securities in July and early August. Had we
purchased these securities, the Series'
weighted average maturity (WAM) would have lengthened,
rather
than shortened substantially. WAM takes into account the
maturity
of each security held by a fund. It is a measurement tool
that
determines a fund's sensitivity to fluctuations in interest
rates.
Having a longer WAM would have enabled the Series'
yield to remain higher for a longer time as money market
yields
declined in the autumn of 1998.
Bargain-hunting enhanced
our yield
The Federal-funds-rate cuts seemed to reassure investors so
much that they began to sell the safest securities
and purchase stocks and other riskier assets. Although
money market yields lingered at low levels in December,
we were still able to buy securities with attractive yields
that matured in January and February as companies anxious to
borrow money over year end paid handsomely to do so.
In the new year, equity, fixed-income, and currency markets
continued to recover from the global financial crisis,
allowing investors to focus once again on the unrelenting
strength of the U.S. economy. Many investors believed the
next change in U.S monetary policy would be an increase in
the Federal funds rate to curb robust U.S. economic growth
and keep inflation in check. With this in mind, they began
to nudge money market yields higher.
Meanwhile, we believed the Federal Reserve would not
raise short-term rates anytime soon, because inflation
remained at low levels and the global economy was still
fragile. We, therefore, viewed the rise in money market
yields as a buying opportunity, and locked in attractive
yields on one-year bank securities in January and February.
These year-end and new-year bargains substantially
lengthened
the Series' WAM and boosted its yield.
Weighted average maturity compared to the average
institutional fund
(GRAPH)
Looking Ahead
Good buying opportunities seen
Continued brisk U.S. economic growth raises the risk for
higher inflation, and lends credence to the view that the
Federal Reserve might increase the Federal funds rate to
keep the economy from overheating. The U.S. central bank
recently announced it is considering raising short-term
interest rates. Consequently, we believe investors will
push up money market yields in response to any new data
indicating the economy remains robust. We stand ready
to take advantage of any attractive buying opportunities.
1
<PAGE>
A Message to Our Shareholders May 19,
1999
(PHOTO)
Dear Shareholder:
As 1999 began, major index advances have been driven by
the stocks of a handful of very large companies. These
stocks were getting more and more expensive--out of
proportion to their earnings expectations. As a result,
there was a substantial disparity in value between large
and small companies, and between growth and value stocks.
In recent months, however, that gap has started to narrow
amid news of strong economic growth.
Our current economic environment has prompted many investors
to turn to value stocks that typically fare better in a
growing economy, and have been selling at a significant
discount to the market.
Many sectors of the bond market have also begun to rebound
from last year's global financial crisis. Furthermore, while
bonds have not generated higher returns than stocks in
recent
years, they have demonstrated that they hold up better
during market
downturns. That's a thought to keep in mind going forward.
Diversification is critical
History shows that the markets generally bring prices in
line
with earnings performance, sooner or later. It also shows
that
two investment styles--value and growth--typically alternate
in
periods of superior performance.
What does this suggest? Instead of chasing popular market
winners,
investors should have a well-diversified asset allocation
strategy
in place and keep to it. It is also a good practice to
rebalance
your holdings, when necessary, to keep your asset allocation
consistent with your long-term objectives and risk
tolerance.
A properly diversified portfolio of value- and growth-
oriented
equity funds, bond funds, and money market funds could help
you
weather inevitable market turbulence and receive more
consistent
returns over time. Prudential offers a wide range of mutual
funds
to help our shareholders diversify. We have also designed
several
balanced and diversified funds to allow one-decision
diversification.
Thank you for your continued confidence in Prudential mutual
funds.
Sincerely,
John R. Strangfeld
Chief Investment Officer
Prudential Investments
2
<PAGE>
Portfolio of Investments PRUDENTIAL INSTITUTIONAL
LIQUIDITY PORTFOLIO, INC.
as of March 31, 1999 INSTITUTIONAL MONEY MARKET
SERIES
- ------------------------------------------------------------
- -------------------
- ------------------------------------------------------------
- -------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Bank Notes--7.1%
American Express Centurion Bank
$ 14,000 4.935%, 4/8/99(b) $
14,000,000
Comerica Bank of Detroit
10,000 4.8175%, 4/19/99(b)
9,998,236
FCC National Bank
25,000 5.12%, 2/23/00
24,992,428
17,000 5.14%, 3/22/00
16,994,431
First Union National Bank
30,000 4.945%, 5/19/99(b)
30,000,000
Harris Trust & Savings of Chicago
40,101 5.05%, 2/14/00
40,090,867
Nationsbank, N.A.
13,000 5.03609%, 4/1/99(b)
12,997,889
----------
- ----
149,073,851
- ------------------------------------------------------------
Certificates Of Deposit - Domestic--0.5%
Morgan Guaranty Trust Co.
10,900 4.63%, 10/22/99
10,872,477
- ------------------------------------------------------------
Certificates Of Deposit - Eurodollar--1.6%
Abbey National Treasury Services
PLC
33,000 4.90%, 6/29/99
33,000,000
- ------------------------------------------------------------
Certificates Of Deposit - Yankee--12.8%
Banque Nationale de Paris
25,000 4.89%, 5/3/99
25,000,000
Barclays Bank PLC
18,000 4.8275%, 4/2/99(b)
17,997,584
Bayerische Landesbank Girozentrale
5,000 4.8125%, 4/12/99(b)
4,999,441
23,000 4.80438%, 4/30/99(b)
22,995,463
3,000 5.645%, 7/22/99
3,004,242
Canadian Imperial Bank of Commerce
5,000 5.73%, 4/27/99
5,001,993
Commerzbank AG
20,000 5.14%, 9/15/99
20,005,979
Deutsche Bank
15,000 5.01%, 1/24/00
14,995,276
Deutsche Bank
$ 5,000 4.97%, 2/2/00 $
4,994,671
25,000 4.98%, 2/2/00
24,993,913
10,000 5.10%, 2/18/00
9,997,015
Royal Bank of Canada
23,000 4.84%, 4/6/99(b)
22,994,568
50,000 4.99%, 1/31/00
49,987,944
Svenska Handelsbanken, Inc.
4,000 5.79%, 5/7/99
4,002,342
Swiss Bank Corp.
2,000 5.68%, 6/4/99
2,001,613
20,000 5.74%, 6/11/99
19,997,765
Toronto Dominion Bank
10,000 5.02%, 2/4/00
9,997,551
8,000 5.06%, 2/10/00
7,997,338
----------
- ----
270,964,698
- ------------------------------------------------------------
Commercial Paper--39.4%
Aon Corp.
21,091 4.85%, 4/20/99
21,037,013
10,000 4.90%, 4/27/99
9,964,611
24,055 4.93%, 5/6/99
23,939,703
Associates First Capital Corp.
35,000 4.85%, 5/17/99
34,783,097
10,000 4.88%, 5/24/99
9,928,156
Bank One Corp.
27,200 4.81%, 6/28/99
26,880,188
BankAmerica Corp.
10,000 4.84%, 8/25/99
9,803,711
Barton Capital Corp.
8,955 4.90%, 4/27/99
8,923,309
BBL North America, Inc.
22,000 4.80%, 5/3/99
21,906,133
Bradford & Bingley Building
Society
5,000 4.84%, 5/24/99
4,964,372
Chrysler Financial Co. LLC
6,700 4.83%, 5/28/99
6,648,762
CIT Group Holdings, Inc.
15,000 4.80%, 5/14/99
14,914,000
Clipper Receivables Corp.
1,374 5.00%, 4/16/99
1,371,138
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments PRUDENTIAL INSTITUTIONAL
LIQUIDITY PORTFOLIO, INC.
as of March 31, 1999 INSTITUTIONAL MONEY MARKET
SERIES
- ------------------------------------------------------------
- -------------------
- ------------------------------------------------------------
- -------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Commercial Paper (cont'd.)
Countrywide Home Loan, Inc.
$ 13,089 4.90%, 4/28/99 $
13,040,898
11,000 4.89%, 5/20/99
10,926,786
12,666 4.90%, 5/24/99
12,574,629
25,000 4.92%, 5/24/99
24,818,917
Daimler Chrysler North America
Hldgs.
32,000 4.85%, 6/29/99
31,616,311
20,000 4.85%, 6/29/99
19,760,194
General Electric Capital Corp.
40,000 5.12%, 4/1/99
40,000,000
4,300 5.05%, 4/7/99
4,296,381
15,000 4.85%, 4/26/99
14,949,479
GTE Corp.
32,000 4.93%, 5/10/99
31,829,093
Hertz Corp.
20,008 5.05%, 4/5/99
19,996,773
ING America Insurance Holdings,
Inc.
18,780 4.925%, 6/24/99
18,564,186
1,580 4.87%, 9/15/99
1,544,306
Merrill Lynch & Co., Inc.
14,274 4.90%, 4/13/99
14,250,686
Mont Blanc Capital Corp.
21,583 4.95%, 4/12/99
21,550,356
17,000 4.88%, 5/21/99
16,884,778
Monte Rosa Capital Corp.
59,000 4.95%, 4/28/99
58,780,962
Morgan Stanley Dean Witter
50,000 4.85%, 5/20/99
49,669,931
Nordbanken North America, Inc.
50,000 4.87%, 5/18/99
49,682,097
Novartis Finance Corp.
15,813 4.90%, 4/21/99
15,769,954
30,000 4.90%, 4/26/99
29,897,917
Preferred Receivables Funding
Corp.
12,000 4.92%, 4/22/99
11,965,560
Receivables Capital Corp.
7,631 4.88%, 5/10/99
7,590,657
Toronto Dominion Hldgs.
23,343 4.90%, 6/4/99
23,139,657
20,000 4.90%, 6/8/99
19,814,889
UBS Finance, Inc.
3,450 4.80%, 5/24/99
3,425,620
Variable Funding Capital Corp.
$ 5,956 5.00%, 4/15/99 $
5,944,419
Wells Fargo & Co.
13,180 5.04%, 4/30/99
13,126,489
13,000 4.82%, 5/28/99
12,900,788
Windmill Funding Corp.
18,000 4.86%, 6/3/99
17,846,910
21,524 4.85%, 6/23/99
21,283,320
----------
- ----
832,507,136
- ------------------------------------------------------------
Loan Participations--0.6%
John Hancock Capital Corp.
13,000 5.14031%, 4/14/99(b)/(c)
(cost $13,000,000, date
purchased 1/14/99)
13,000,000
- ------------------------------------------------------------
Other Corporate Obligations--19.5%
Abbey National Treasury Services
PLC
33,000 5.72%, 6/11/99
32,995,082
Associates Corp. of North America
30,000 4.78%, 4/23/99(b)
29,998,275
6,500 8.25%, 6/1/99(b)
6,632,857
Bishops Gate Residental Mortgage
Trust 1998-2A
13,000 5.16344%, 4/1/99(b)
13,000,000
Chrysler Financial Co. LLC
13,000 9.50%, 6/15/99
13,394,293
32,000 6.375%, 7/28/99
32,338,868
CIT Group Holdings, Inc.
8,750 5.875%, 6/9/99
8,795,922
Ford Motor Credit Co.
5,000 5.83%, 9/15/99
5,032,688
General Electric Capital Corp.
9,000 4.905%, 6/9/99(b)
8,999,214
36,000 4.98%, 6/9/99(b)
36,000,000
Goldman Sachs Group, L.P.
21,000 5.0675%, 4/19/99(b)/(c)
(cost $21,000,000, date
purchased 6/3/96)
21,000,000
IBM Credit Corp.
25,000 4.87%, 4/5/99(b)
24,999,819
International Lease Finance Corp.
3,000 5.22625%, 6/2/99(b)
3,001,288
12,055 5.75%, 6/15/99
12,109,583
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments PRUDENTIAL INSTITUTIONAL
LIQUIDITY PORTFOLIO, INC.
as of March 31, 1999 INSTITUTIONAL MONEY MARKET
SERIES
- ------------------------------------------------------------
- -------------------
- ------------------------------------------------------------
- -------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Other Corporate Obligations (cont'd.)
Restructured Asset Securities
$ 31,000 4.9525%, 4/2/99(b)/(c)
(cost $31,000,000, date
purchased 8/28/98) $
31,000,000
37,000 5.0525%, 4/12/99(b)/(c)
(cost $37,000,000, date
purchased 12/23/98)
37,000,000
Short-Term Repackaged Asset Trust
1998-E
18,000 4.93625%, 4/19/99(b)/(c)
(cost $18,000,000, date
purchased 9/23/98)
18,000,000
Strategic Money Market Trust
24,974 1999-B, 5.10052%, 6/15/99(b)/(c)
(cost $24,974,000, date
purchased 3/5/99)
24,974,000
52,000 1998-A, 5.10%, 6/16/99(b)/(c)
(cost $52,000,000, date
purchased 12/16/98)
52,000,000
----------
- ----
411,271,889
- ------------------------------------------------------------
Repurchase Agreement(d)--0.7%
15,000 J.P. Morgan Securities, 5.0%,
dated 3/31/99, due 4/5/99, in
the amount of $15,010,417 (cost
$15,000,000, value of
collateral including accrued
interest-$15,300,001)
15,000,000
- ------------------------------------------------------------
Time Deposit - Eurodollar--17.5%
Banque Nationale de Paris
70,000 5.25%, 4/1/99
70,000,000
Deutsche Bank
49,000 5.125%, 4/1/99
49,000,000
Societe Generale
95,000 5.125%, 4/1/99
95,000,000
State Street Bank & Trust Co.
55,041 5.00%, 4/1/99
55,041,000
Suntrust Bank
100,000 5.25%, 4/1/99
100,000,000
----------
- ----
369,041,000
- ------------------------------------------------------------
Total Investments--99.7%
(amortized cost $2,104,731,051(a))
2,104,731,051
Other assets in excess of
liabilities--0.3%
6,664,873
----------
- ----
Net Assets--100%
$2,111,395,924
----------
- ----
----------
- ----
</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 $196,974,000.
The aggregate value ($196,974,000) is approximately 9.3%
of net assets.
(d) Repurchase Agreement collateralized by U.S. Treasury or
Federal agency
obliations.
The industry classification of portfolio holdings and other
assets in excess of
liabilities shown as a percentage of net assets as of March
31, 1999 was as
follows:
<TABLE>
<S> <C>
Commercial Banks................................... 54.3%
Asset Backed Securities............................ 9.6
Short-Term Business Credit......................... 6.1
Motor Vehicle Parts................................ 5.2
Securities Brokers & Dealers....................... 4.0
Personal Credit Institutions....................... 3.9
Mortgage Banks..................................... 2.9
Accident & Health Insurance........................ 2.6
Pharmaceuticals.................................... 2.1
Insurance Agent.................................... 1.7
Phone Communications............................... 1.5
Office Machines.................................... 1.2
Fire, Marine, Casualty Insurance................... 1.0
Auto Rental & Leasing.............................. 0.9
Equipment Rental & Leasing......................... 0.7
Finance Services................................... 0.7
Repurchase Agreement............................... 0.7
Insurance.......................................... 0.6
-----
99.7
Other assets in excess of liabilities.............. 0.3
-----
100.0%
-----
-----
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 5
<PAGE>
Statement of Assets and PRUDENTIAL INSTITUTIONAL
LIQUIDITY PORTFOLIO, INC.
Liabilities INSTITUTIONAL MONEY MARKET
SERIES
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Assets
March 31, 1999
<S>
<C>
Investments, at amortized cost which approximates market
value.............................................
$2,104,731,051
Interest
receivable..................................................
...................................... 9,249,514
Due from
manager.....................................................
...................................... 197,872
Deferred expenses and other
assets......................................................
................... 11,160
- --------------
Total
assets......................................................
...................................... 2,114,189,597
- --------------
Liabilities
Dividends
payable.....................................................
..................................... 2,190,993
Accrued expenses and other
liabilities.................................................
.................... 594,556
Distribution fee
payable.....................................................
.............................. 8,124
- --------------
Total
liabilities.................................................
...................................... 2,793,673
- --------------
Net
Assets......................................................
...........................................
$2,111,395,924
- --------------
- --------------
Net assets were comprised of:
Common stock, at
par.........................................................
........................... $ 2,111,396
Paid-in capital in excess of
par.........................................................
............... 2,109,284,528
- --------------
Net assets, March 31,
1999........................................................
......................... $2,111,395,924
- --------------
- --------------
Class A:
Net asset value, offering and redemption price per share
($361,167,204 / 361,167,204 shares of common stock issued
and outstanding)..............................
$1.00
- --------------
- --------------
Class I:
Net asset value, offering and redemption price per share
($1,750,228,720 / 1,750,228,720 shares of common stock
issued and outstanding)..........................
$1.00
- --------------
- --------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 6
<PAGE>
PRUDENTIAL INSTITUTIONAL LIQUIDITY PORTFOLIO, INC.
INSTITUTIONAL MONEY MARKET SERIES
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year
Ended
Net Investment Income March 31,
1999
<S> <C>
Income
Interest.................................... $
92,925,412
----------
- ----
Expenses
Management fee..............................
3,435,107
Distribution fee--Class A...................
296,966
Registration fees...........................
531,000
Transfer agent's fees and expenses..........
250,000
Custodian's fees and expenses...............
146,000
Reports to shareholders.....................
60,000
Legal fees and expenses.....................
50,000
Audit fee and expenses......................
25,000
Insurance expenses..........................
22,000
Directors' fees.............................
12,000
Miscellaneous...............................
9,738
----------
- ----
Total expenses...........................
4,837,811
Less: Expense subsidy (Note 4)..............
(1,104,375)
Management fee waiver (Note 2)...........
(858,777)
Distribution fee waiver (Note 2).........
(173,230)
----------
- ----
Net expenses
2,701,429
----------
- ----
Net investment income..........................
90,223,983
----------
- ----
Net Realized Gain on Investments
Net realized gain on investment transactions...
33,231
----------
- ----
Net Increase in Net Assets
Resulting from Operations...................... $
90,257,214
----------
- ----
----------
- ----
</TABLE>
PRUDENTIAL INSTITUTIONAL LIQUIDITY PORTFOLIO, INC.
INSTITUTIONAL MONEY MARKET SERIES
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended March 31,
in Net Assets 1999 1998
<S> <C> <C>
Operations
Net investment income.... $ 90,223,983 $
45,040,087
Net realized gain on
investment
transactions.......... 33,231
5,299
---------------- ----------
- -----
Net increase in net
assets resulting from
operations............ 90,257,214
45,045,386
---------------- ----------
- -----
Dividends and distributions (Note 1)
Class A............... (12,867,746)
(11,814,111)
Class I............... (77,389,468)
(33,231,275)
---------------- ----------
- -----
(90,257,214)
(45,045,386)
---------------- ----------
- -----
Fund share transactions (net
of conversions) (Note 5)
Net proceeds from shares
sold.................. 14,846,339,434
8,138,663,244
Net asset value of shares
issued in reinvestment
of dividends and
distributions......... 78,273,080
41,968,951
Cost of shares
reacquired............ (13,864,423,952)
(7,607,469,838)
---------------- ----------
- -----
Net increase in net
assets from Fund share
transactions.......... 1,060,188,562
573,162,357
---------------- ----------
- -----
Total increase.............. 1,060,188,562
573,162,357
Net Assets
Beginning of year........... 1,051,207,362
478,045,005
---------------- ----------
- -----
End of year................. $ 2,111,395,924 $
1,051,207,362
---------------- ----------
- -----
---------------- ----------
- -----
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 7
<PAGE>
PRUDENTIAL INSTITUTIONAL
LIQUIDITY PORTFOLIO, INC.
Notes to Financial Statements 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 Assets Series.
The Liquid Assets
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 13 months
or less whose ratings are within the 2 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 Valuation: 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.
Net investment income (other than distribution fees) and
unrealized and realized
gains or losses are allocated daily to each class of shares
based upon the
relative proportion of net assets of each class at the
beginning of the day.
Federal Income Taxes: For federal income tax purposes, each
Series in the Fund
is treated as a separate taxpaying entity. It is the intent
of the Series 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 Series declares all of its
net investment
income and net realized short-term capital gains or losses,
if any, as dividends
daily to its shareholders of record at the time of such
declaration. Payment of
dividends is made monthly. 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 to 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 $858,777 ($.0004 per
share) for the year
ended March 31, 1999. The Series is not required to
reimburse PIFM for such
waiver.
The Fund had a distribution agreement with Prudential
Securities Incorporated
('PSI'), which acted as the distributor of the Class A and
Class I shares of the
Fund through May 31, 1998. Prudential Investment Management
Services LLC
('PIMS') became the distributor of the Fund effective June
1, 1998 and is
serving the Fund under the same terms and conditions as
under the arrangement
with PSI. The Fund compensated PSI and PIMS 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 and
PIMS have agreed to waive a portion (.07 of 1% of the
Series' average daily net
assets) of the distribution fee, which amounted to $173,230
($.0005 per share)
for the year ended March 31, 1999. The Series is not
required to reimburse PSI
and PIMS for such waiver. The Class A distribution fee is
accrued daily and
payable monthly. No distribution or service fees are paid to
PIMS as distributor
of the Class I shares of the Fund.
PSI, PIMS, PIFM and PIC are indirect, wholly owned
subsidiaries of The
Prudential Insurance Company of America.
The Fund has an uncommitted credit agreement (the
'Agreement') with an
unaffiliated lender. The maximum commitment under the
Agreement
- ------------------------------------------------------------
- --------------------
8
<PAGE>
PRUDENTIAL INSTITUTIONAL
LIQUIDITY PORTFOLIO, INC.
Notes to Financial Statements INSTITUTIONAL MONEY MARKET
SERIES
- ------------------------------------------------------------
- --------------------
is $100,000,000. Interest on any such borrowings outstanding
will be at market
rates. The purpose of the Agreement is to serve as an
alternative source of
funding for capital share redemptions. The Fund has not
borrowed any amounts
pursuant to the Agreement during the year ended March 31,
1999. The Fund does
not pay a fee for the credit facility.
- ------------------------------------------------------------
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 year ended
March 31, 1999, the
Series incurred fees of $240,000 for the services of PMFS.
As of March 31, 1999,
$20,000 of such fees were due to PMFS. Transfer agent fees
and expenses in the
Statement of Operations also include certain out-of-pocket
expenses paid to
nonaffiliates.
- ------------------------------------------------------------
Note 4. Expense Subsidy
PIFM has 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
year ended March 31,
1999, such reimbursement amounted to $1,104,375 ($.0005 per
share for Class A
and I shares; .06% of average net assets).
- ------------------------------------------------------------
Note 5. Capital
The Series offers Class A and Class I shares. Class A
shareholders of the Series
who qualify to purchase Class I shares will have their Class
A shares exchanged
for Class I shares on a quarterly basis.
There are 10 billion authorized shares of common stock,
$.001 par value per
share, divided into 5 billion authorized Class A shares and
5 billion authorized
Class I shares.
As of March 31, 1999, Prudential owned 2,219,340 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>
Year ended March 31, 1999:
Shares sold.................................
912,064,251
Shares issued in reinvestment of dividends
and distributions.........................
11,977,599
Shares reacquired...........................
(588,928,339)
-------------
- --
Net increase in shares outstanding before
conversion................................
335,113,511
Shares reacquired upon conversion into Class
I.........................................
(114,759,453)
-------------
- --
Net increase in shares outstanding..........
220,354,058
-------------
- --
-------------
- --
Year ended March 31, 1998:
Shares sold.................................
1,563,160,572
Shares issued in reinvestment of dividends
and distributions.........................
12,370,105
Shares reacquired...........................
(1,279,737,241)
-------------
- --
Net increase in shares outstanding before
conversion................................
295,793,436
Shares reacquired upon conversion into Class
I.........................................
(633,025,295)
-------------
- --
Net decrease in shares outstanding..........
(337,231,859)
-------------
- --
-------------
- --
<CAPTION>
Class I
- --------------------------------------------
<S> <C>
Year ended March 31, 1999:
Shares sold.................................
13,934,275,183
Shares issued in reinvestment of dividends
and
distributions.............................
66,295,481
Shares reacquired...........................
(13,275,495,613)
-------------
- --
Net increase in shares outstanding before
conversion................................
725,075,051
Shares issued upon conversion from Class
A.........................................
114,759,453
-------------
- --
Net increase in shares outstanding..........
839,834,504
-------------
- --
-------------
- --
July 9, 1997(a) through March 31, 1998:
Shares sold.................................
6,575,502,672
Shares issued in reinvestment of dividends
and distributions.........................
29,598,846
Shares reacquired...........................
(6,327,732,597)
-------------
- --
Net increase in shares outstanding before
conversion................................
277,368,921
Shares issued upon conversion from Class
A.........................................
633,025,295
-------------
- --
Net increase in shares outstanding..........
910,394,216
-------------
- --
-------------
- --
</TABLE>
- ---------------
(a) Commencement of offering of Class I shares.
- ------------------------------------------------------------
- --------------------
9
<PAGE>
PRUDENTIAL INSTITUTIONAL
LIQUIDITY PORTFOLIO, INC.
Financial Highlights INSTITUTIONAL MONEY MARKET
SERIES
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class A Class I
----------------
- ------------------------------------------------- ------
- ----
Year Ended March 31, Year Ended
----------------
- ------------------------------------------------- March
31,
1999
1998 1997 1996 1995 1999
-------------
- -------- -------- -------- -------- --------
- --
<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................................ .053(d)
.055(d) .050 .056 .046
.053(e)
Dividends and distributions to
shareholders......................... (.053)
(.055) (.050) (.056) (.046) (.053)
-------------
- -------- -------- -------- -------- --------
- --
Net asset value, end of period.......... $ 1.000
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $
1.000
-------------
- -------- -------- -------- -------- --------
- --
-------------
- -------- -------- -------- -------- --------
- --
TOTAL RETURN(a):........................ 5.39%
5.63% 5.16% 5.72% 4.69% 5.45%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......... $ 361,167
$140,813 $478,045 $440,842 $476,229
$1,750,229
Average net assets (000)................ $ 247,471
$217,881 $449,393 $519,946 $402,678
$1,470,082
Ratios to average net assets:
Expenses, including distribution
fee............................... .20%(d)
.29%(d) .46% .43% .46%
.15%(e)
Expenses, excluding distribution
fee............................... .15%(e)
.21%(e) .34% .31% .34%
.15%(e)
Net investment income................ 5.20%(d)
5.42%(d) 5.03% 5.56% 4.67%
5.26%(e)
<CAPTION>
<S> <C>
July 9,
1997(b)
Through
March 31,
1998
---------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 1.000
Net investment income and net realized
gains................................ .041(e)
Dividends and distributions to
shareholders......................... (.041)
---------
Net asset value, end of period.......... $ 1.000
---------
---------
TOTAL RETURN(a):........................ 4.15%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......... $910,394
Average net assets (000)................ $814,138
Ratios to average net assets:
Expenses, including distribution
fee............................... .15(c)/(e)
Expenses, excluding distribution
fee............................... .15(c)/(e)
Net investment income................ 5.60(c)/(e)
</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/expense
subsidy.
(e) Net of management fee waiver/expense subsidy.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 10
<PAGE>
Report of Independent PRUDENTIAL INSTITUTIONAL
LIQUIDITY PORTFOLIO, INC.
Accountants INSTITUTIONAL MONEY MARKET
SERIES
- ------------------------------------------------------------
- --------------------
To the Shareholders and Board of Directors of
Prudential Institutional Liquidity Portfolio, Inc.--
Institutional Money Market
Series
In our opinion, the accompanying statement of assets and
liabilities, including
the portfolio of investments, and the related statements of
operations and of
changes in net assets and the financial highlights present
fairly, in all
material respects, the financial position of Prudential
Institutional Liquidity
Portfolio, Inc.--Institutional Money Market Series (the
'Fund') at March 31,
1999, the results of its operations for the year then ended,
the changes in its
net assets for each of the two years in the period then
ended and the financial
highlights for each of the three years in the period then
ended, in conformity
with generally accepted accounting principles. These
financial statements and
financial highlights (hereafter referred to as 'financial
statements') are the
responsibility of the Fund's management; our responsibility
is to express an
opinion on these financial statements based on our audits.
We conducted our
audits of these financial statements in accordance with
generally accepted
auditing standards which require that we plan and perform
the audit to obtain
reasonable assurance about whether the financial statements
are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting
the amounts and disclosures in the financial statements,
assessing the
accounting principles used and significant estimates made by
management, and
evaluating the overall financial statement presentation. We
believe that our
audits, which included confirmation of securities at March
31, 1999 by
correspondence with the custodian and brokers, provide a
reasonable basis for
the opinion expressed above. The accompanying financial
highlights for each of
the two years in the period ended March 31, 1996 were
audited by other
independent accountants, whose opinion dated May 9, 1996 was
unqualified.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
May 20, 1999
- ------------------------------------------------------------
- --------------------
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: 1/100th of 1%. For example, one-half of one
percent is 50 basis points.
Collateralized Mortgage Obligations (CMOs): Mortgage-backed
bonds that separate mortgage pools into different maturity
classes, called tranches. 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 other
securities. The rate of return of these financial
instruments
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 member banks.
Federal Funds Rate: The interest rate charged by one bank to
another on overnight loans.
Futures Contract: An agreement to purchase or sell a
specific
amount of a commodity or financial instrument at a set price
at a specified date in the future.
Leverage: The use of borrowed assets to enhance return. The
expectation is that the interest rate charged on borrowed
funds 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
product)
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 purchase or 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; often used to
describe the difference between "bid" and "asked" prices
of a security, or between the yields of two
similar maturity bonds.
Yankee Bond: A bond sold by a foreign company or
government in the U.S. market and denominated in U.S.
dollars.
<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 advisor 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 advisor 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 advisor 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>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Directors
Edward D. Beach
Delayne Dedrick Gold
Robert F. Gunia
Don G. Hoff
Robert E. LaBlanc
Robin B. Smith
Stephen Stoneburn
Nancy H. Teeters
Officers
Robert F. Gunia, President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Robert C. Rosselot, 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 Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
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
PricewaterhouseCoopers 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
Fund's portfolio holdings, are for the period covered by
this
report, and are subject to change thereafter.
This report is not authorized for distribution to
prospective
investors unless preceded or accompanied by a current
prospectus.
744350109 MF137E
744350604
