<PAGE>
ANNUAL REPORT MARCH 31, 2000
Prudential
Institutional Liquidity Portfolio, Inc./
Institutional Money Market Series
Fund Type Money market
Objective High current income consistent with the
preservation of principal and liquidity
(GRAPHIC)
(LOGO)
<PAGE>
Build on the Rock
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
and its agencies, 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.
Institutional Money Fund Yields
(GRAPH)
<PAGE>
www.prudential.com (800) 521-7466
Performance At a Glance
Fund Facts As of 3/31/00
7-Day Net Asset Weighted Avg. Net Assets
Current Yld. Value (NAV) Mat. (WAM) (Millions)
PILP Class A 5.96% $1.00 49 Days $371.9
PILP Class I 6.01% $1.00 49 Days $1,601.6
iMoneyNet, Inc.
Non-Gov't Institutional
Only (1st & 2nd Tier) Avg.* 5.65% $1.00 47 Days N/A
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.
*_iMoneyNet, Inc. reports a seven-day current yield,
NAV, and WAM on Tuesdays. This is the data of all funds
in iMoneyNet, Inc. Non-Gov't Institutional Only (1st &
2nd Tier) Average category as of March 28, 2000, the
closest date to the end of our reporting period.
Weighted Average Maturity Compared To The Average
Institutional Fund
(GRAPH)
1
<PAGE>
Prudential
Institutional Liquidity Portfolio, Inc. Institutional Money Market Series
Message From the Fund's President May 16, 2000
DEAR SHAREHOLDER,
The Federal Reserve increased a key short-term interest
rate five times during the year that ended on March 31, 2000, to slow
U.S. economic growth and fend off higher inflation.
These changes in monetary policy, among other factors,
drove yields on money market securities sharply higher.
Prudential's Money Markets Sector Team identified and
took advantage of good investment opportunities that
emerged as money market yields climbed. The team
employed credit research, interest-rate analysis, and
relative value analysis that enabled the Prudential
Institutional Liquidity Portfolio/Institutional Money
Market Series (the Series) to maintain a $1 net asset
value per share and to provide a better-than-average
yield throughout its fiscal year.
On March 31, 2000, the seven-day current yield was
5.96% on the Series' Class A shares and 6.01% on its
Class I shares. Both were above the 5.65% yield on the
average money market fund tracked by iMoneyNet, Inc.
The following report takes a closer look at
developments in the money markets during our fiscal
year, and explains how the Series was positioned accordingly.
Thank you for your continued confidence in Prudential
mutual funds.
Sincerely,
John R. Strangfeld, President
Prudential Institutional Liquidity Portfolio, Inc./
Institutional Money Market Series
2
<PAGE>
www.prudential.com (800) 521-7466
Investment Adviser's Report
DEAR SHAREHOLDER,
Repeated changes in U.S. monetary policy and overblown
fears about potential computer problems at the
beginning of 2000 (Y2K) drove yields on money market
securities sharply higher during our fiscal year that
ended on March 31, 2000. We welcomed this trend. It
enabled us to take advantage of attractive buying
opportunities that enhanced the Series' yields.
Yields on money market securities climbed in the spring
of 1999 as investors waited for the Federal Reserve to
boost short-term interest rates to prevent a rapidly
expanding U.S. economy from igniting higher inflation.
Although inflation remained relatively tame, the Fed
still worried that wages and prices would rise because
of a tight job market in the United States, a
recovering global economy, and higher oil prices.
ADJUSTABLE-RATE SECURITIES WERE A GOOD BUY
As money market yields rose, the money market
securities of banks and
corporations cheapened relative to comparable U.S.
Treasury bills. We bought one-year corporate securities
that paid fixed interest rates, as well as securities
whose coupons adjusted periodically based on a London
Interbank Offered Rate or LIBOR. (LIBOR is a widely
quoted money market benchmark.) These adjustable-rate
securities provided some protection against further
increases in money market yields since their coupons
would reset to higher levels as yields continued to
climb. In addition, the adjustable-rate securities
outperformed the fixed-rate securities.
FED ENGINEERED BACK-TO-BACK RATE HIKES
The Fed finally took steps to curb U.S. economic growth
on June 30, 1999. It raised the federal funds rate (the rate U.S. banks
charge each other for overnight loans) by a quarter of a percentage point
to 5.00%. That was quickly followed by another move on
August 24, 1999, when the key rate was increased to
5.25%. This time the U.S. central bank also hiked the
rate it charges member banks to borrow from the Federal
Reserve system, known as the discount rate, to 4.75%
from 4.50%.
3
<PAGE>
Prudential
Institutional Liquidity Portfolio, Inc. Institutional Money Market Series
Investment Adviser's Report
As a general rule, when interest rates are rising, a
portfolio with a shorter weighted average maturity
(WAM) tends to perform better than a portfolio with a
longer WAM. The WAM takes into account the maturity of
each security held in a portfolio. It is the
measurement tool that determines a portfolio's
sensitivity to fluctuations in interest rates. Having a
shorter-than-average WAM would have given us better
access to cash to buy any higher-yielding money market
securities that became available after the Fed acted in
late August 1999. However, a one-time large redemption
from the Series in August 1999 temporarily made its WAM
longer than it would have been otherwise.
SERIES BENEFITED FROM Y2K BARGAINS
In the summer of 1999, tighter monetary policy was only
one of the concerns affecting money markets. Corporate
treasurers, among others, worried that computers might
malfunction or shut down as their internal dates
switched from 1999 to 2000. Their concern led some
banks and corporations to rush to complete their year-
end borrowing early. Accordingly, they began to issue a
large amount of LIBOR-based, adjustable-rate securities
that provided unusually wide yield spreads in order to
appeal to investors. These securities rose to roughly
40% of the Series' total investments in late 1999, up
from a normal exposure of approximately 25%.
Meanwhile, the U.S. central bank had engineered another
quarter-point rate hike on November 16, 1999, that
raised the federal funds rate to 5.50% and the discount
rate to 5.00%. There had been talk that the Fed might
refrain from tightening monetary policy out of concern
that potential Y2K computer problems might hurt the
economy. But the changeover from 1999 to 2000 went
smoothly, and yield spreads on adjustable-rate
securities narrowed to historical norms. The Series'
performance benefited from this trend because of its
overweight exposure to these securities. We also
enhanced the Series' yields by taking advantage of Y2K
bargains that emerged in early December 1999.
4
<PAGE>
www.prudential.com (800) 521-7466
TIGHTENING CREATED BUYING OPPORTUNITIES
We slightly lengthened the Series' WAM in late January
2000 by purchasing securities maturing in two to three
months. Yields on these securities had risen sharply
(and their prices fell) because some investors expected
Fed policy makers to increase short-term interest rates
by half of a percentage point at their next meeting in
early February. We believed the Fed hike would only be
a quarter-point increase. Therefore, we expected prices
of our two- and three-month securities to move higher
(and their yields lower) after the next change in
monetary policy since investors had priced into the
securities a more aggressive move by the Fed.
On February 2, 2000, the Fed announced a quarter-point
increase that raised the federal funds rate to 5.75%
and the discount rate to 5.25%. Following this move, we
allowed the Series WAM to shorten in anticipation of a
fifth change in monetary policy that resulted in a rate
increase on March 21, 2000. This left the federal funds
rate at 6.00% and the discount rate at 5.50%.
LOOKING AHEAD--WE EXPECT MORE SHORT-TERM RATE HIKES
The U.S. economy grew at an annual pace of more than
5.0% in the first three months of 2000, powered
primarily by the largest increase in consumer spending
in 17 years. While this is slower than the 7.3% annual
pace of the final quarter of 1999, the longest economic
expansion in the history of the United States remains
very strong. Moreover, labor costs rose for U.S.
businesses at the fastest pace in more than 10 years in
the first quarter of 2000. There is also evidence that
these cost pressures are being passed along to
consumers in the form of higher prices. This
combination of brisk economic growth and rising
inflation led the Fed in May to raise the federal funds
rate and its discount rate by half of a percentage
point to 6.50% and 6.00%, respectively. Unless there is
significant moderation in economic activity, the Fed
has hinted that more interest-rate increases will be
forthcoming.
Prudential Money Markets Sector Team
5
<PAGE>
Prudential
Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Financial
Statements
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Portfolio of Investments as of March 31, 2000
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C> <C>
----------------------------------------------------------------------------------------
Bank Notes 8.5%
American Express Centurion Bank
$ 7,000 5.19%, 7/10/00(b) $ 7,000,000
Bank One Corp.
17,000 5.52%, 8/21/00(b) 17,000,000
Comerica Bank of Detroit
20,000 4.80%, 6/13/00(b) 19,997,436
20,000 5.815%, 2/2/01 19,991,780
CoreStates Bank, N.A.
5,500 5.625%, 2/12/01 5,455,661
First Union (National Bank) Corp.
60,000 5.2875%, 7/21/00(b) 60,000,000
Key Bank N.A.
13,000 5.035%, 6/14/00(b) 12,998,447
3,000 5.10875%, 6/26/00(b) 2,999,654
7,000 5.05%, 7/17/00(b) 7,001,511
National City Bank of Cleveland
15,000 6.73%, 2/9/01 14,993,880
--------------
167,438,369
-------------------------------------------------------------------------------------
Certificates Of Deposit - Domestic 0.6%
Morgan Guaranty Trust Co.
12,000 5.70%, 7/19/00 12,000,000
-------------------------------------------------------------------------------------
Certificates Of Deposit - Eurodollar 2.5%
Bank Austria
49,000 5.93%, 4/7/00 48,999,996
-------------------------------------------------------------------------------------
Certificates Of Deposit - Yankee 12.8%
Bank of Nova Scotia
15,000 6.65%, 2/1/01 14,994,032
Canadian Imperial Bank of Commerce
17,100 6.12%, 5/22/00 17,100,479
30,000 6.00%, 5/25/00 30,000,000
Credit Communal De Belgique S.A.
1,269 5.97%, 9/21/00 1,265,444
Deutsche Bank
7,100 5.25%, 5/18/00 7,089,113
25,000 5.62%, 6/26/00 24,997,050
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Portfolio of Investments as of March 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
----------------------------------------------------------------------------------------
<C> <S> <C> <C>
National Westminster Bank PLC
$ 50,000 6.10%, 11/27/00 $ 49,931,831
Nordeutscheinndesbank Giro
11,000 5.35%, 5/24/00 10,985,477
Rabobank Nederland
27,000 5.66%, 7/13/00 26,997,013
UBS, AG
10,000 5.29%, 5/19/00 9,999,241
Westpac Banking Corp.
35,000 6.52%, 1/29/01 34,986,198
--------------
228,345,878
-------------------------------------------------------------------------------------
Commercial Paper 44.9%
Aon Corp.
10,000 6.10%, 4/24/00 9,961,028
BankAmerica Corp.
50,000 6.06%, 8/3/00 48,956,333
Barton Capital Corp.
7,217 6.10%, 5/12/00 7,166,862
Black Forest Funding Corp.
9,974 6.20%, 4/10/00 9,958,540
Centric Capital Corp.
12,720 6.10%, 5/22/00 12,610,078
CIT Group Holdings, Inc.
15,000 6.09%, 5/16/00 14,885,813
16,000 6.10%, 6/20/00 15,783,111
Countrywide Home Loan, Inc.
75,000 6.45%, 4/3/00 74,973,125
Den Norske Bank
21,741 5.95%, 5/16/00 21,579,301
Dexia CLF Finance Co.
5,000 5.86%, 4/14/00 4,989,420
Duke Capital Corp.
25,000 6.40%, 4/3/00 24,991,111
Enterprise Funding Corp.
4,000 6.10%, 5/5/00 3,976,956
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Portfolio of Investments as of March 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Forrestal Funding Master Trust
$ 10,000 5.96%, 5/10/00 $ 9,935,433
35,506 6.10%, 5/22/00 35,199,169
General Electric Capital Corp.
55,000 6.07%, 5/18/00 54,564,140
General Motors Acceptance Corp.
63,000 6.06%, 5/15/00 62,533,380
GTE Corp.
16,000 6.10%, 4/25/00 15,934,933
15,000 6.10%, 4/26/00 14,936,458
21,300 6.12%, 5/1/00 21,191,370
Homeside Lending, Inc.
12,000 6.08%, 5/8/00 11,925,013
Household International Inc.
16,000 6.11%, 4/26/00(c)
(cost $15,932,111, date purchased 3/22/00) 15,932,111
Invensys PLC
100,000 6.50%, 4/3/00 99,963,889
Market Street Funding Corp.
16,000 6.10%, 5/8/00 15,899,689
Morgan (J.P.) & Co., Inc.
25,000 6.25%, 4/10/00 24,960,938
Norwest Corp.
1,000 6.75%, 5/12/00 1,001,563
Norwest Financial, Inc.
10,000 6.06%, 5/22/00 9,914,150
PNC Funding Corp.
14,000 6.03%, 4/14/00 13,969,515
5,000 6.14%, 5/23/00 4,955,656
Santander Finance, Inc.
29,000 5.94%, 5/24/00 28,746,395
Sweetwater Capital
3,107 6.05%, 4/13/00 3,100,734
2,999 6.05%, 4/14/00 2,992,448
13,497 6.10%, 4/24/00 13,444,399
3,479 6.05%, 4/25/00 3,464,968
3,898 6.10%, 5/17/00 3,867,617
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Portfolio of Investments as of March 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Target Corp.
$ 19,410 6.50%, 4/3/00 $ 19,402,991
Textron Financial Corp.
6,000 5.95%, 4/24/00 5,977,192
Wells Fargo & Co.
95,000 6.05%, 5/15/00 94,297,528
Westpac Capital Corp.
12,500 5.90%, 4/7/00 12,487,708
Wood Street Funding Corp.
15,000 6.10%, 5/24/00 14,865,292
--------------
865,296,357
-------------------------------------------------------------------------------------
Other Corporate Obligations 27.2%
Abbey National Treasury Services PLC
50,000 5.23875%, 7/24/00 49,990,841
25,000 5.65%, 7/24/00 24,995,421
Associates Corporation North America
50,000 5.0965%, 6/29/00(b) 49,991,489
Centex Home Mortgage LLC
7,000 6.60875%, 10/20/00(b)/(c)
(cost $7,000,000, date purchased 12/8/99) 7,000,000
Chase Manhattan Corp.
50,000 4.8275%, 5/25/00(b) 49,995,257
Citicorp
26,000 5.21%, 8/2/00(b) 26,000,000
Citigroup, Inc.
700 6.125%, 6/15/00(b) 700,833
Commercial Credit Co.
1,000 6.00%, 4/15/00 1,000,207
Conseco Finance Vehicle Trust
12,603 6.62125%, 1/5/01(b)/(c)
(cost $12,602,722, date purchased 12/16/99) 12,602,722
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Portfolio of Investments as of March 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Daimler Chrysler North America Holdings
$ 55,000 5.06175%, 7/6/00(b) $ 54,981,195
Ford Motor Credit Co.
48,000 5.435%, 8/18/00(b) 47,985,231
20,000 5.49875%, 10/2/00(b) 19,990,180
General Electric Capital Corp.
51,000 4.95%, 5/12/00(b) 51,000,000
Goldman Sachs Group, L.P.
20,000 6.02%, 4/26/00 20,000,000
Goldman Sachs Group, L.P.
21,000 5.69531%, 5/15/00(b)/(c)
(cost $21,000,000, date purchased 6/3/96) 21,000,000
Morgan (J.P.) & Co., Inc.
24,000 5.99375%, 3/16/01(b) 24,000,000
Restructured Asset Securities
33,000 5.455%, 9/6/00(b)/(c)
(cost $33,000,000, date purchased 9/2/99) 33,000,000
Security Life Of Denver
5,000 5.07%, 4/12/00(b)/(c)
(cost $5,000,000, date purchased 4/12/99) 5,000,000
Strategic Money Market Trust
6,000 4.9825%, 4/5/00(b) 6,000,000
Short-Term Repackaged Asset Trust 1998-E
18,000 6.17125%, 8/18/00(b)/(c)
(cost $18,000,000, date purchased 9/23/98) 18,000,000
Travelers Insurance Co.
8,000 5.34%, 7/6/00(b)/(c)
(cost $8,000,000, date purchased 7/6/99) 8,000,000
25,000 6.16%, 2/23/01(b)/(c)
(cost $25,000,000, date purchased 2/24/00) 25,000,000
United States Bancorp
10,000 5.05%, 8/16/00(b) 10,001,849
United States Bank, N.A.
17,000 4.91%, 6/21/00(b) 16,997,404
--------------
583,232,629
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Portfolio of Investments as of March 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
----------------------------------------------------------------------------------------
Repurchase Agreement(d) 3.0%
<C> <S> <C> <C>
$ 59,253 Goldman, Sachs & Co., 6.2%, dated 3/31/00, due
4/3/00, in the amount of $59,283,614 (cost
$59,253,000, value of collateral including accrued
interest-$60,438,618) $ 59,253,000
Total Investments 99.5%
(amortized cost $1,964,566,229(a)) 1,964,566,229
Other assets in excess of liabilities 0.5% 8,930,597
--------------
Net Assets 100% $1,973,496,826
--------------
--------------
</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 latter 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 $145,534,833. The
aggregate value ($145,534,833) is approximately 7.4% of net assets.
(d) Repurchase Agreement collateralized by U.S. Treasury or Federal agency
obligations.
The industry classification of portfolio holdings and other assets in excess of
liabilities shown as a percentage of net assets as of March 31, 2000 was as
follows:
<TABLE>
<S> <C> <C>
Commercial Banks 48.9%
Motor Vehicle Parts 10.7
Bank Holding Companies-Domestic 9.1
Short-Term Business Credit 7.9
Asset Backed Securities 7.7
Personal Credit Institutions 4.4
Life Insurance 3.7
Phone Communications 3.0
Securities Brokers & Dealers 2.4
Mortgage Banks 0.7
Accident & Health Insurance 0.6
Aircrafts & Parts 0.3
Fire, Marine, Casualty Insurance 0.1
-----
99.5
-----
Other assets in excess of liabilities 0.5
-----
100%
-----
-----
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
March 31, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
ASSETS
Investments, at amortized cost which approximates market
value $1,964,566,229
Cash 112
Interest receivable 12,170,858
Deferred expenses and other assets 17,396
----------------
Total assets 1,976,754,595
----------------
LIABILITIES
Dividends payable 2,729,373
Accrued expenses 302,775
Management fee payable 216,980
Distribution fee payable 8,641
----------------
Total liabilities 3,257,769
----------------
NET ASSETS $1,973,496,826
----------------
----------------
Net assets were comprised of:
Common stock, at par $ 1,973,497
Paid-in capital in excess of par 1,971,523,329
----------------
Net assets, March 31, 2000 $1,973,496,826
----------------
----------------
Class A:
Net asset value, offering and redemption price per share
($371,866,196 / 371,866,196 shares of $.001 par value
common stock issued and outstanding) $1.00
----------------
----------------
Class I:
Net asset value, offering and redemption price per share
($1,601,630,630 / 1,601,630,630 shares of $.001 par
value common stock issued and outstanding) $1.00
----------------
----------------
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
March 31, 2000
<S> <C> <C>
---------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest $ 109,695,442
-----------------
Expenses
Management fee 4,020,175
Distribution fee--Class A 439,353
Transfer agent's fees and expenses 245,000
Custodian's fees and expenses 168,000
Registration fees 135,000
Reports to shareholders 30,000
Audit fee and expenses 25,000
Insurance expenses 23,000
Legal fees and expenses 20,000
Directors' fees and expenses 9,000
Miscellaneous 8,959
-----------------
Total expenses 5,123,487
Less: Expense subsidy (Note 4) (664,150)
Management fee waiver (Note 2) (1,005,044)
Distribution fee waiver (Note 2) (256,289)
-----------------
Net expenses 3,198,004
-----------------
Net investment income 106,497,438
-----------------
Net realized loss on investment transactions (2,643)
-----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 106,494,795
-----------------
-----------------
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------
2000 1999
---------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 106,497,438 $ 90,223,983
Net realized gain (loss) on investment
transactions (2,643) 33,231
---------------- ----------------
Net increase in net assets resulting
from operations 106,494,795 90,257,214
---------------- ----------------
Dividends and distributions (Note 1)
Class A (19,311,167) (12,867,746)
Class I (87,183,628) (77,389,468)
---------------- ----------------
(106,494,795) (90,257,214)
---------------- ----------------
Fund share transactions
Net proceeds from shares subscribed 16,932,830,624 14,846,339,434
Net asset value of shares issued to
shareholders in reinvestment of
dividends and distributions 90,454,251 78,273,080
Cost of shares reacquired (17,161,183,973) (13,864,423,952)
---------------- ----------------
Net increase (decrease) in net assets
from Fund share transactions (137,899,098) 1,060,188,562
---------------- ----------------
Total increase (decrease) (137,899,098) 1,060,188,562
NET ASSETS
Beginning of year 2,111,395,924 1,051,207,362
---------------- ----------------
End of year $ 1,973,496,826 $ 2,111,395,924
---------------- ----------------
---------------- ----------------
</TABLE>
See Notes to Financial Statements 15
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Notes to Financial Statements
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 commenced 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.
Repurchase Agreements: In connection with transactions in repurchase
agreements with U.S. financial institutions, it is the Fund's policy that its
custodian or designated subcustodians, as the case may be under triparty
repurchase agreements, takes possession of the underlying collateral securities,
the value of which exceeds the principal amount of the repurchase transaction,
including accrued interest. To the extent that any repurchase agreement exceeds
one business day, the value of the collateral is marked-to-market on a daily
basis to ensure the adequacy of the collateral. If the seller defaults and the
value of the collateral declines or if bankruptcy proceedings are commenced with
respect to the seller of the security, realization of the collateral by the Fund
may be delayed or limited.
Securities Transactions and 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.
16
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Notes to Financial Statements Cont'd.
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 $1,005,044 ($.0005 per share)
for the year ended March 31, 2000. The Series is not required to reimburse PIFM
for such waiver.
The Fund has a distribution agreement with Prudential Investment
Management Services LLC ('PIMS'), which acts as the distributor of the Class A
and Class I shares of the Fund. The Fund compensates 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. PIMS has agreed to waive a portion (.07 of 1% of the Series' average
daily net assets) of the distribution fee, which amounted to $256,289 ($.0001
per share) for the year ended March 31, 2000. The Series is not required to
reimburse 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.
PIMS, PIFM and PIC are wholly owned subsidiaries of The Prudential
Insurance Company of America ('Prudential').
The Fund has an uncommitted credit agreement (the 'Agreement') with an
unaffiliated lender. The maximum commitment under the Agreement is
17
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Notes to Financial Statements Cont'd.
$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, 2000. 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, 2000, the
Series incurred fees of $240,000 for the services of PMFS. As of March 31, 2000,
$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 contractually agreed to subsidize operating expenses so that total
Series operating expenses exclusive of distribution fees do not exceed .15% of
the average daily net assets of the Class A and Class I shares. For the year
ended March 31, 2000, such reimbursement amounted to $664,150 ($.0003 per share
for Class A and I shares; .03% 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, 2000, Prudential owned 2,387,637 Class I shares.
18
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Notes to Financial Statements Cont'd.
Transactions in shares of common stock (at $1 per share) were as follows:
<TABLE>
<CAPTION>
Shares and
Class A Dollar Amount
------------------------------------------------------------------- ----------------
<S> <C>
Year ended March 31, 2000:
Shares sold 895,312,228
Shares issued in reinvestment of dividends and distributions 18,549,671
Shares reacquired (804,323,779)
----------------
Net increase in shares outstanding before conversion 109,538,120
Shares reacquired upon conversion into Class I (98,839,128)
----------------
Net increase in shares outstanding 10,698,992
----------------
----------------
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
----------------
----------------
<CAPTION>
Class I
-------------------------------------------------------------------
<S> <C>
Year ended March 31, 2000:
Shares sold 16,037,518,396
Shares issued in reinvestment of dividends and
distributions 71,904,580
Shares reacquired (16,356,860,194)
----------------
Net decrease in shares outstanding before conversion (247,437,218)
Shares issued upon conversion from Class A 98,839,128
----------------
Net decrease in shares outstanding (148,598,090)
----------------
----------------
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
----------------
----------------
</TABLE>
19
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Financial Highlights
<TABLE>
<CAPTION>
Class A
--------------------
Year Ended
March 31, 2000
---------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 1.000
--------------
Net investment income and net realized gains (losses) .053(b)
Dividends and distributions to shareholders (.053)
--------------
Net asset value, end of year $ 1.000
--------------
--------------
TOTAL RETURN(a): 5.38%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $371,866
Average net assets (000) $366,127
Ratios to average net assets:
Expenses, including distribution fee .20%(b)
Expenses, excluding distribution fee .15%(c)
Net investment income 5.27%(b)
</TABLE>
---------------
(a) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each year reported and includes reinvestment
of dividends and distributions.
(b) Net of management and distribution fee waiver/expense subsidy.
(c) Net of management fee waiver/expense subsidy.
20 See Notes to Financial Statements
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------
Year Ended March 31,
-----------------------------------------------------
1999 1998 1997 1996
-----------------------------------------------------
<S> <C> <C> <C> <C>
$ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- --------
.053(b) .055(b) .050 .056
(.053) (.055) (.050) (.056)
-------- -------- -------- --------
$ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- --------
-------- -------- -------- --------
5.39% 5.63% 5.16% 5.72%
$361,167 $140,813 $478,045 $440,842
$247,471 $217,881 $449,393 $519,946
.20%(b) .29%(b) .46% .43%
.15%(c) .21%(c) .34% .31%
5.20%(b) 5.42%(b) 5.03% 5.56%
</TABLE>
See Notes to Financial Statements 21
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class I
------------------------------------------
July 9,
Year Ended March 31, 1997(b)
------------------------ Through
2000 1999 March 31, 1998
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000
---------- ---------- --------------
Net investment income and net
realized gains (losses) .053(d) .053(d) .041(d)
Dividends and distributions to
shareholders (.053) (.053) (.041)
---------- ---------- --------------
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000
---------- ---------- --------------
---------- ---------- --------------
TOTAL RETURN(a): 5.43% 5.45% 4.15%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $1,601,631 $1,750,229 $910,394
Average net assets (000) $1,643,961 $1,470,082 $814,138
Ratios to average net assets:
Expenses, including distribution
fee .15%(d) .15%(d) .15%(c /(d)
Expenses, excluding distribution
fee .15%(d) .15%(d) .15%(c /(d)
Net investment income 5.30%(d) 5.26%(d) 5.60%(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 fee waiver/expense subsidy.
22 See Notes to Financial Statements
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Report of Independent Accountants
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,
2000, 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 four years in the period then ended, in conformity
with accounting principles generally accepted in the United States. 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 auditing standards generally accepted in the United States, 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, 2000 by correspondence with the custodian, provide a
reasonable basis for the opinion expressed above. The accompanying financial
highlights for the year 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 19, 2000
See Notes to Financial Statements 23
<PAGE>
Prudential
Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Prudential Mutual Fund Family
Prudential offers a broad range of mutual funds
designed to meet your individual needs. For information
about these funds, contact your financial adviser or
call us at (800) 225-1852. Read the prospectus
carefully before you invest or send money.
STOCK FUNDS
Prudential Emerging Growth Fund, Inc.
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
Prudential Real Estate Securities Fund
Prudential Sector Funds, Inc.
Prudential Financial Services Fund
Prudential Health Sciences Fund
Prudential Technology Fund
Prudential Utility Fund
Prudential Small-Cap Quantum Fund, Inc.
Prudential Small Company Value Fund, Inc.
Prudential Stock Index Fund
Prudential Tax-Managed Funds
Prudential Tax-Managed Equity Fund
Prudential 20/20 Focus Fund
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Target Funds
Large Capitalization Growth Fund
Large Capitalization Value Fund
Small Capitalization Growth Fund
Small Capitalization Value Fund
Asset Allocation/Balanced Funds
Prudential Balanced Fund
Prudential Diversified Funds
Conservative Growth Fund
Moderate Growth Fund
High Growth Fund
The Prudential Investment Portfolios, Inc.
Prudential Active Balanced Fund
GLOBAL FUNDS
Global Stock Funds
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Prudential Latin America Equity Fund
Prudential Europe Growth Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Natural Resources Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Prudential Global Growth Fund
Prudential International Value Fund
_Prudential Jennison International Growth Fund
Global Utility Fund, Inc.
Target Funds
International Equity Fund
Global Bond Funds
Prudential Global Total Return Fund, Inc.
Prudential International Bond Fund, Inc.
<PAGE>
www.prudential.com (800) 521-7466
BOND FUNDS
Taxable Bond Funds
Prudential Diversified Bond Fund, Inc.
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Short-Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential High Yield Total Return Fund, Inc.
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Target Funds
Total Return Bond Fund
Tax-Exempt Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Income Series
Insured Series
Prudential Municipal Series Fund
Florida Series
Massachusetts Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
MONEY MARKET FUNDS
Taxable Money Market Funds
Cash Accumulation Trust
Liquid Assets Fund
National Money Market Fund
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund, Inc.
Money Market Series
Prudential MoneyMart Assets, Inc.
Tax-Free Money Market Funds
Prudential Tax-Free Money Fund, Inc.
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
Command Funds
Command Money Fund
Command Government Fund
Command Tax-Free Fund
Institutional Money Market Funds
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
<PAGE>
Prudential
Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Getting the Most From Your Prudential Mutual Fund
How many times have you read these reports--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.
<PAGE>
www.prudential.com (800) 521-7466
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 on the U.S. market and denominated in U.S.
dollars.
<PAGE>
Prudential
Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Getting the Most From Your Prudential Mutual Fund
When you invest through Prudential Mutual Funds, you
receive financial advice from a Prudential Securities
Financial Advisor or 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. Risk can be difficult to gauge--some_times
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 available mutual
funds to find the ones that fit your 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 should remind you that you're investing
for the long haul.
<PAGE>
For More Information
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Visit Prudential's web site at:
http://www.prudential.com
Directors
Delayne Dedrick Gold
Robert F. Gunia
Robert E. LaBlanc
David R. Odenath, Jr.
Robin B. Smith
Stephen Stoneburn
John R. Strangfeld
Nancy H. Teeters
Clay T. Whitehead
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
Robert C. Rosselot, Secretary
Stephen M. Ungerman, Assistant Treasurer
William V. Healey, 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 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
194 Wood Avenue South
Iselin, NJ 08830
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Cusip Numbers
Class A 744350109
Class I 744350604
MF 181E
(LOGO) Printed on Recycled Paper
