As filed with the Securities and Exchange Commission on May 31, 2000
Securities Act Registration No. 33-17224
Investment Company Act Registration No. 811-5336
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 26 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X}
AMENDMENT NO. 27 [X]
(Check appropriate box or boxes)
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PRUDENTIAL INSTITUTIONAL LIQUIDITY PORTFOLIO, INC.
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(Exact name of registrant as specified in charter)
GATEWAY CENTER THREE,
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
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(Address of Principal Executive Offices) (Zip Code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (973) 367-3028
ROBERT C. ROSSELOT, ESQ.
GATEWAY CENTER THREE,
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
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(Name and Address of Agent for Service)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of this Registration Statement
It is proposed that this filing will become effective (check appropriate box):
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new
effective date for a previously filed
post-effective amendment.
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Title of Securities Being Registered ................ Shares of Common Stock,
Par Value $.001 per Share
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<PAGE>
PROSPECTUS MAY 31, 2000
PRUDENTIAL
INSTITUTIONAL LIQUIDITY PORTFOLIO, INC.
INSTITUTIONAL MONEY MARKET SERIES
(CLASS A SHARES)
FUND TYPE Money market
OBJECTIVE High current income consistent with the preservation to principal and
liquidity
BUILD
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ON THE ROCK
As with all mutual funds, the Securities and
Exchange Commission has not approved or
disapproved the Fund's shares nor has the
SEC determined that this prospectus is
complete or accurate. It is a criminal offense
to state otherwise.
[LOGO] PRUDENTIAL
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Table of Contents
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1 RISK/RETURN SUMMARY
1 Investment Objective and Principal Strategies
1 Principal Risks
2 Evaluating Performance
3 Fees and Expenses
5 HOW THE FUND INVESTS
5 Investment Objective and Policies
7 Other Investments and Strategies
8 Rating of Fund Shares
9 Investment Risks
10 HOW THE FUND IS MANAGED
10 Board of Directors
10 Manager
10 Investment Adviser
10 Distributor
12 Fund Distributions and Tax Issues
12 Distributions
12 Tax Issues
14 HOW TO BUY AND SELL SHARES OF THE FUND
14 How to Buy Shares
17 How to Sell Your Shares
20 Financial Highlights
22 The Prudential Mutual Fund Family
For More Information (Back Cover)
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Prudential Institutional Liquidity Portfolio, Inc. (telephone)(800) 521-7466
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Risk/Return Summary
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MONEY MARKET FUNDS
Money market funds--which hold high-quality short-term debt obligations--provide
investors with a lower risk, highly liquid investment option. These funds
attempt to maintain a net asset value of $1 per share, although there can be no
guarantee that they will always be able to do so.
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This section highlights key information about PRUDENTIAL INSTITUTIONAL LIQUIDITY
PORTFOLIO, INC.-INSTITUTIONAL MONEY MARKET SERIES, which we refer to as "the
Fund." The Fund offers Class A shares and Class I shares. This prospectus
relates only to Class A shares. Additional information follows this summary.
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
Our investment objective is HIGH CURRENT INCOME CONSISTENT WITH THE PRESERVATION
OF PRINCIPAL AND LIQUIDITY. To achieve this objective we invest at least 80% of
the Fund's assets in short-term money market instruments such as obligations
issued by the U.S. Government, commercial paper, asset-backed securities,
funding agreements, variable rate demand notes, bills, notes and other
obligations issued by banks, corporations and other companies, and obligations
issued by foreign banks, foreign companies or foreign governments. The Fund will
invest only in instruments with remaining maturities of thirteen months or less
and which are denominated in U.S. dollars. The Fund may invest in longer-term
securities that are accompanied by demand features which will shorten the
effective maturity of the securities to thirteen months or less. While we make
every effort to achieve our objective and maintain a net asset value of $1 per
share, we can't guarantee success. To date, the Fund's net asset value has never
deviated from $1 per share.
PRINCIPAL RISKS
Although we try to invest wisely, all investments involve risk. Since the Fund
invests in debt obligations, there is the risk that the value of a particular
obligation could go down. Debt obligations are generally subject to CREDIT
RISK--the risk that the issuer of a particular security may be unable to make
principal and interest payments when they are due, and MARKET RISK--the risk
that the securities could lose value because interest rates change or investors
lose confidence in the ability of issuers in general to pay back their debt.
With respect to the Fund's investments in asset-backed securities, there is a
risk of prepayment, which means that if the underlying obligations are paid
before they are due, the security may discontinue paying an attractive rate of
income.
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RISK/RETURN SUMMARY
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The Fund's investment in foreign securities involves additional risks. For
example, foreign banks and companies generally are not subject to regulatory
requirements comparable to those applicable to U.S. banks and companies. In
addition, political developments and changes in currency rates may adversely
affect the value of foreign securities. In all cases, however, we invest only in
U.S. dollar-denominated securities.
There is also a risk that we will sell a security for a price that is
higher or lower than the value attributed to the security through the amortized
cost valuation procedures we follow. Such an event could affect our ability to
maintain a net asset value of $1 per share.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of an investment at $1 per
share, it is possible to lose money by investing in the Fund.
EVALUATING PERFORMANCE
A number of factors--including risk--can affect how the Fund performs. The
following bar chart shows the Fund's performance for each full calendar year of
operation for the last 10 years. The tables below compare the Fund's average
annual returns and yield for the periods indicated with those of a group of
similar funds. The bar chart and tables demonstrate the risk of investing in the
Fund by showing how returns can change. Past performance is not an indication
that the Fund will achieve similar results in the future. For current yield
information, you can call us at (800) 521-7466.
Annual Returns(1) (Class A shares)
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[REPRESENTATION OF CHART GOES HERE]
1990 8.19%
1991 6.23%
1992 3.77%
1993 2.94%
1994 4.01%
1995 5.82%
1996 5.18%
1997 5.50%
1998 5.56%
1999 5.26%
Best Quarter: 2.00% (2nd quarter of 1990)
Worst Quarter: 0.71% (3rd quarter of 1993)
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(1) The Fund's returns are after deduction of expenses. The total return of the
Class A shares from 1-1-00 to 3-31-00 was 1.33%.
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2 Prudential Institutional Liquidity Portfolio, Inc. (telephone)(800) 521-7466
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Average Annual Returns(1) (as of 12/31/99)
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1 YEAR 5 YEARS 10 YEARS
Class A shares 5.26% 5.47% 5.24%
Lipper Average (2) 4.92% 5.32% 5.15%
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7-Day Yield (1) (as of 3/31/00)
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Class A shares 5.96%
IBC Average(3) 5.65%
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(1) The Fund's returns and yield are after deduction of expenses.
(2) The Lipper Average is based upon the average return of all mutual funds in
the Institutional Money Market Funds category.
(3) The IBC Average is based upon the average yield of all mutual funds in the
International Business Communications Financial Data all taxable money
market fund category.
FEES AND EXPENSES
These tables show the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Shareholder Fees (paid directly from your investment)
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CLASS A
Maximum sales charge (load) None
imposed on purchases (as a
percentage of offering price)
Maximum deferred sales charge None
(load) (as a percentage of
the lower of original
purchase price or sale
proceeds)
Maximum sales charge (load) None
imposed on reinvested
dividends
and other distributions
Redemption fees None
Exchange fee None
COMMAND Program annual fee(1) $125(2)
BusinessEdge Program annual fee(1) $185(2)
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RISK/RETURN SUMMARY
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Annual Fund Operating Expenses (deducted from Fund assets)
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CLASS A
Management fees .20%
+ Distribution and service (12b-1) fees .12%
+ Other expenses .06%
= TOTAL ANNUAL FUND OPERATING EXPENSES .38%
- Fee waiver and expense reimbursement(3) .18%
= NET ANNUAL FUND OPERATING EXPENSES .20%
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(1) COMMAND and BusinessEdge are financial services programs available through
Prudential Securities Incorporated and/or Pruco Securities Corporation. For
more information, you should consult a Prudential Securities Financial
Advisor or a Pruco Securities Preferred Agent.
(2) The annual program fee as a percentage of average net assets is .02% and
.03% for the COMMAND and BusinessEdge Programs, respectively, and is
calculated by dividing $125 (the total fee for the COMMAND Program) or $185
(the total for the BusinessEdge Program), respectively, by the average
account size in the Fund. The annual program fee is not prorated for
purposes of this calculation to give effect to COMMAND Program or
BusinessEdge Program participants who also own shares in or subscribe to
various services offered by the respective Programs. A major portion of the
annual program fee is not attributable to the Fund, but rather to nonfund
services provided by the Program.
(3) For the fiscal year ending March 31, 2001, the Distributor of the Fund has
contractually agreed to waive a portion of its fees in the amount of .07%
of the average daily net assets of Class A shares, and the Manager has
contractually agreed to reimburse the Fund for operating expenses,
exclusive of distribution and service (12b-1) fees, in excess of .15% of
the average daily net assets of Class A shares.
EXAMPLE
This example will help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then sell all of your shares at the end of those periods.
The example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be:
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1 YR 3 YRS 5 YRS 10 Yrs
Class A shares(1) $20 $104 $195 $463
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(1) The example reflects the agreement of the Distributor to waive a portion of
its fee and the agreement of the Manager to reimburse certain operating
expenses of Class A shares for the fiscal year ending March 31, 2001. The
Manager and the Distributor have not advised the Fund of their respective
intention to discontinue the waivers and/or reimbursements for subsequent
fiscal years. The 3-year, 5-year and 10-year costs only reflect the 1-year
waiver and reimbursement.
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4 Prudential Institutional Liquidity Portfolio, Inc. (telephone)(800) 521-7466
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How the Fund Invests
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INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is HIGH CURRENT INCOME CONSISTENT WITH THE
PRESERVATION OF PRINCIPAL AND LIQUIDITY. While we make every effort to achieve
our objective, we can't guarantee success.
The Fund invests in a diversified portfolio of short-term debt obligations
which include, but are not limited to, obligations issued by the U.S.
Government, its agencies and instrumentalities, as well as commercial paper,
asset-backed securities, funding agreements, variable rate demand notes, bills,
notes and other obligations issued by banks, corporations and other companies
(including trust structures), obligations issued by foreign banks, foreign
companies or foreign governments, and municipal notes.
The Fund invests in high-quality money market instruments to try to provide
investors with current income while maintaining a stable net asset value of $1
per share. We manage the Fund to comply with specific rules designed for money
market mutual funds. This means that we manage the Fund's portfolio to comply
with the requirements of Rule 2a-7 under the Investment Company Act of 1940 (the
Investment Company Act). As such, we will not acquire any security with a
remaining maturity exceeding thirteen months, and we will maintain a
dollar-weighted average portfolio of 90 days or less. In addition, we will
comply with the diversification, quality and other requirements of Rule 2a-7.
This means, generally, that the instruments we purchase present "minimal credit
risk" and are of "eligible quality." "Eligible quality" for this purpose means a
security: (i) rated in one of the two highest short-term rating categories by at
least two nationally recognized statistical rating organizations (NRSROs) or, if
only one NRSRO has rated the security, so rated by that NRSRO; (ii) rated in one
of the three highest long-term rating categories by at least two NRSROs or, if
only one NRSRO has rated the security, so rated by that NRSRO; or (iii) if
unrated, of comparable quality as determined by the Fund's investment adviser.
All securities that we purchase will be denominated in U.S. dollars but may be
issued by a foreign issuer.
COMMERCIAL PAPER is short-term debt obligations of banks, corporations and
other borrowers. The obligations are usually issued by financially strong
businesses and often include a line of credit to protect purchasers of the
obligations. An ASSET-BACKED SECURITY is a loan or note that pays interest based
upon the cash flow of a pool of assets, such as mortgages, loans and credit card
receivables. CERTIFICATES OF DEPOSIT, TIME DEPOSITS, BANKERS' ACCEPTANCES and
BANK NOTES are obligations issued by or through a bank. These instruments depend
upon the strength of the bank involved in the borrowing to give inves-
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5
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How the Fund Invests
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tors comfort that the borrowing will be repaid when promised. FUNDING AGREEMENTS
are contracts issued by insurance companies that guarantee a return of
principal, plus some amount of interest. When purchased by money market funds,
funding agreements will typically be short-term and will provide an adjustable
rate of interest.
DEBT OBLIGATIONS in general, including those listed above and any others that
we may purchase, are basically written promises to repay a debt. Among the
various types of debt securities we may purchase, the terms of repayment may
vary, as may the commitment of other parties to honor the obligations of the
issuer of the security. We may purchase securities that include DEMAND FEATURES,
which allow us to demand repayment of a debt obligation before the obligation is
due or "matures." This means that we can purchase longer-term securities because
we can demand repayment of the obligation at an agreed-upon price within a
relatively short period of time. This procedure follows the rules applicable to
money market funds.
FOREIGN SECURITIES and foreign markets involve additional risk. Laws and
accounting standards typically are not as strict in foreign countries as they
are in the U.S. Foreign fixed income and currency markets may be less stable
than those in U.S. markets. Changes in the exchange rates of foreign currencies
can affect the value of foreign assets.
Any of the money market instruments that the Fund may purchase may be
accompanied with the right to resell the instrument prior to the instrument's
maturity. In addition, we may separately purchase rights to resell these
instruments. These rights are referred to as "PUTS" and are acquired by the Fund
to protect against a possible decline in the market value of the securities to
which the puts relate in the event of interest rate fluctuations, to shorten the
effective maturity of the security and to provide the Fund with liquidity to
meet share-holder redemption requests.
The securities that we may purchase may change over time as new types of
money market instruments are developed. We will purchase these new instruments,
however, only if their characteristics and features follow the rules governing
the operation of money market funds.
Our investment objective is a fundamental policy that cannot be changed
without shareholder approval. The Board of Directors of the Fund can change
investment policies that are not fundamental.
For more information, see "Investment Risks" below and the Statement of
Additional Information, "Description of the Fund, its Investments and Risks."
The Statement of Additional Information--which we refer to as the SAI--con-
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6 Prudential Institutional Liquidity Portfolio, Inc. (telephone)(800) 521-7466
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How the Fund Invests
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tains additional information about the Fund. To obtain a copy, see the back
cover of this prospectus.
OTHER INVESTMENTS AND STRATEGIES
While the Fund invests principally in the securities described above, it
may invest in other securities or use certain investment strategies to increase
returns or protect its assets, if market conditions warrant.
The Fund intends to participate in one or more JOINT TRADING ACCOUNTS
whereby the Fund, along with other investment companies managed by Prudential
Investments Fund Management LLC, will jointly engage in repurchase agreements
and, subject to the issuance of an order by the Securities and Exchange
Commission, jointly purchase money market instruments. The ability of the Fund
to participate in these joint trading accounts will be conditioned upon
requirements imposed by such order, which may be amended from time to time.
The Fund may also invest in other DEBT OBLIGATIONS ISSUED OR GUARANTEED BY
THE U.S. GOVERNMENT and government-related entities. Some of these debt
securities are backed by the full faith and credit of the U.S. Government, like
obligations of the Government National Mortgage Association (GNMA or "Ginnie
Mae"). Debt securities issued by other government entities, like obligations of
the Federal National Mortgage Association (FNMA or "Fannie Mae") and the Student
Loan Marketing Association (SLMA or "Sallie Mae"), are not backed by the full
faith and credit of the U.S. Government. However, these issuers have the right
to borrow from the U.S. Treasury to meet their obligations. The debt securities
of other issuers, like the Farm Credit System, depend entirely upon their own
resources to repay their debt.
The Fund may also use REPURCHASE AGREEMENTS, where a party agrees to sell a
security to the Fund and then repurchase it at an agreed-upon price at a stated
time. These transactions constitute short-term cash loans by the Fund to
financial institutions. This creates a fixed return for the Fund.
The Fund may use REVERSE REPURCHASE AGREEMENTS, where we borrow money on a
temporary basis by selling a security with an obligation to repurchase it at an
agreed-upon price and time. The Fund's use of reverse repurchase agreements is
limited to 15% of the value of its total assets.
The Fund may also purchase money market obligations on a "WHEN-ISSUED" or
"DELAYED-DELIVERY" basis. When the Fund makes this type of purchase, the price
and interest rate are fixed at the time of purchase, but delivery
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How the Fund Invests
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of and payment for the obligations take place at a later time. The Fund does not
earn interest income until the date the obligations are delivered.
The Fund may purchase FLOATING RATE and VARIABLE RATE securities. These
securities pay interest at rates that change periodically to reflect changes in
market interest rates. Because these securities adjust the interest they pay,
they may be beneficial when interest rates are rising because of the additional
return the Fund will receive, and they may be detrimental when interest rates
are falling because of the reduction in interest payments to the Fund.
The Fund also follows certain policies when it BORROWS MONEY (the Fund may
borrow up to 15% of the value of its net assets); lends its securities to others
(the Fund may lend up to 15% of its total assets, including collateral received
in the transaction); and HOLDS ILLIQUID SECURITIES (the Fund may hold up to 10%
of its net assets in illiquid securities, including securities with legal or
contractual restrictions, those without a readily available market, privately
placed commercial paper and repurchase agreements with maturities longer than
seven days). The Fund is subject to certain investment restrictions that are
fundamental policies, which means they cannot be changed without shareholder
approval. For more information about these restrictions, see the SAI.
RATING OF FUND SHARES
Duff & Phelps Credit Rating Co. or its successors (DCR) has given the Fund
an AAA rating. According to DCR, the AAA rating means the Fund's ability to meet
redemption requests in a timely manner for $1.00 per share is strong. This
rating is based on the Fund's risk management procedures, internal control
systems, limitations on market risk and experienced management team.
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8 Prudential Institutional Liquidity Portfolio, Inc. (telephone)(800) 521-7466
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How the Fund Invests
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INVESTMENT RISKS
As noted, all investments involve risk, and investing in the Fund is no
exception. This chart outlines the key risks and potential rewards of the
principal strategies and certain other investments of the Fund. See, too,
"Description of the Fund, its Investments and Risks" in the SAI.
Investment Type
% of Fund's Total Assets Risks Potential Rewards
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HIGH-QUALITY MONEY o Credit risk--the o A source of
MARKET OBLIGATIONS risk that default of regular interest
an issuer would income
leave the Fund with
unpaid interest or o May be more secure
principal than stock and other
Up to 100% equity securities
o Market risk--the since companies must
risk that bonds and pay their debts
other debt before they pay
instruments may lose dividends
value because
interest rates
change or there is a
lack of confidence
in a group of
borrowers or in an
industry
MONEY MARKET o Foreign markets, o Investors may
OBLIGATIONS OF economies and realize higher
FOREIGN ISSUERS (U.S. political systems returns based upon
DOLLAR-DENOMINATED) may not be as stable higher interest
as those in the U.S. rates paid on
foreign investments
Up to 100%
o Differences in o Increased
foreign laws, diversification by
accounting expanding the
standards, public allowable choices of
information and high- quality debt
custody and securities
settlement practices
ILLIQUID SECURITIES o May be difficult o May offer a more
to value precisely attractive yield
Up to 10% of net assets than more widely
o May be difficult to traded securities
sell at the time or
price desired
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How the Fund is Managed
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BOARD OF DIRECTORS
The Fund's Board of Directors oversees the actions of the Manager, Investment
Adviser and Distributor and decides on general policies. The Board also oversees
the Fund's officers, who conduct and supervise the daily business operations of
the Fund.
MANAGER
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC (PIFM)
GATEWAY CENTER THREE, 100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
Under a management agreement with the Fund, PIFM manages the Fund's
investment operations and administers its business affairs. For the fiscal year
ended March 31, 2000, the Fund paid PIFM management fees, net of waiver, of .15%
of the Fund's average net assets.
As of March 31, 2000, PIFM served as the Manager to all 45 of the
Prudential Mutual Funds, and as Manager or administrator to 22 closed-end
investment companies, with aggregate assets of approximately $78 billion.
INVESTMENT ADVISER
The Prudential Investment Corporation, called Prudential Investments, is the
Fund's investment adviser and has served as an investment adviser to investment
companies since 1984. Its address is Prudential Plaza, 751 Broad Street, Newark,
NJ 07102. PIFM has responsibility for all investment advisory services,
supervises Prudential Investments and pays Prudential Investments for its
services.
Prudential Investments Fixed Income Group is organized into teams that
specialize by sector. The Fixed Income Investment Policy Committee, which is
comprised of senior investment staff from each sector team, provides guidance to
the teams regarding duration risk, asset allocations and general risk
parameters. Portfolio managers contribute bottom up security selection within
those guidelines.
DISTRIBUTOR
Prudential Investment Management Services LLC (PIMS) distributes the Fund's
shares under a Distribution Agreement with the Fund. The Fund has a Distribution
and Service Plan (the Plan) under Rule 12b-1 of the Investment
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10 Prudential Institutional Liquidity Portfolio, Inc. (telephone)(800) 521-7466
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How the Fund is Managed
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Company Act with respect to Class A shares. Under the Plan and the Distribution
Agreement, PIMS pays the expenses of distributing the Fund's Class A shares and
provides certain shareholder support services. The Fund pays distribution and
other fees from the assets of Class A shares to PIMS as reimbursement to PIMS
for its services. These fees--known as 12b-1 fees--are shown in the "Fees and
Expenses" table. Because these fees are paid from the Fund's assets on a
continuous basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges. PIMS does not
receive compensation from the Fund for distributing the Fund's Class I shares.
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Fund Distributions and Tax Issues
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Investors who buy shares of the Fund should be aware of some important tax
issues. For example, the Fund distributes DIVIDENDS of ordinary income and any
realized net CAPITAL GAINS to shareholders. These distributions are subject to
taxes, unless you hold your shares in a 401(k) plan, an Individual Retirement
Account (IRA), or some other qualified or tax-deferred plan or account.
The following briefly discusses some of the important tax issues you should
be aware of, but is not meant to be tax advice. For tax advice, please speak
with your tax adviser.
DISTRIBUTIONS
The Fund distributes DIVIDENDS of any net investment income to shareholders
every month. The dividends you receive from the Fund will be taxed as ORDINARY
INCOME, whether or not they are reinvested in the Fund.
Although the Fund is not likely to realize capital gains because of the
types of securities we purchase, any realized net CAPITAL GAINS will be paid to
shareholders (typically once a year). Capital gains are generated when the Fund
sells assets for a profit.
For your convenience, Fund distributions of dividends and capital gains are
automatically reinvested in the Fund. If you ask us to pay the distributions in
cash, we will wire the distribution to your bank account instead of purchasing
more shares of the Fund. Either way, the distributions are subject to taxes,
unless your shares are held in a qualified or tax-deferred plan or account. For
more information about automatic reinvestment and other shareholder services,
see "How to Buy, Sell and Exchange Shares of the Fund--How To Buy Shares" at
Step 4: Additional Shareholder Services.
TAX ISSUES
FORM 1099
Every year, you will receive a Form 1099, which reports the amount of dividends
and capital gains we distributed to you during the prior year. If you own shares
of the Fund as part of a qualified or tax-deferred plan or account, your taxes
are deferred, so you will not receive a Form 1099. However, you will receive a
Form 1099 when you take any distributions from your qualified or tax-deferred
plan or account.
Fund distributions are generally taxable in the year they are received,
except where we declare certain dividends in December of a calendar year but
actually pay them in January of the following year. In such cases, the dividends
are treated as if they were paid on December 31 of the prior year.
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12 Prudential Institutional Liquidity Portfolio, Inc. telephone)(800) 521-7466
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[LOGO] PRUDENTIAL PRUDENTIAL INSTITUTIONAL LIQUIDITY
PORTFOLIO, INC.
NEW ACCOUNT APPLICATION
PRUDENTIAL MUTUAL FUND SERVICES LLC
Attn: Institutional Service Division
PO Box 15030
New Brunswick, NJ 08906
Contact us at (800) 521-7466
(8:00 a.m.-5:00 p.m. New York
PLEASE PRINT USING BLUE OR BLACK INK. time) or by fax (732) 482-2666.
<TABLE>
<CAPTION>
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<S> <C>
INSTRUCTIONS Use this Application to establish an account in Prudential Institutional Liquidity Portfolio, Inc. Please
complete all relevant information. Missing information could result in delays in processing your
Application. Refer to the prospectus for investment minimums and other important information about your
account.
====================================================================================================================================
1 FUND PRUDENTIAL INSTITUTIONAL LIQUIDITY PORTFOLIO, INC. (PILP) - Institutional Money Market Series
SELECTION (Fund #52, PIMMS)(Fund#597, PIMMI)
Account Number (to be assigned by the Fund)
------------------------------------------------
|__| Class A Shares ($100,000 minimum initial |__| Class I Shares ($5 million minimum initial
investment) investment)
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2 ACCOUNT Print account ownership information exactly as it should appear on your account statement.
REGISTRATION
Name of Account Line 1
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Name of Account Line 2
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Street
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
City State ZIP Code
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__| |__|__| |__|__|__|__|__| - |__|__|__|__|
Telephone Number Tax ID Number (Soc, Sec. or EIN)
(|__|__|__|) |__|__|__| - |__|__|__|__| |__|__|__|__|__|__|__|__|__|__|__|
====================================================================================================================================
3 DUPLICATE Please send a duplicate confirmation to the following:
CONFIRMATION
Name of Firm
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Attention
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Address
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
City State ZIP Code
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__| |__|__| |__|__|__|__|__| - |__|__|__|__|
====================================================================================================================================
4 YOUR This section to be completed by your Prudential professional, if applicable.
PRUDENTIAL
PROFESSIONAL Name
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Telephone Number Prudential Securities FA
Branch Ledger Number
(|__|__|__|) |__|__|__| - |__|__|__|__| |__|__|__| |__|__|
====================================================================================================================================
DEFKA70 [BAR CODE]
MF137F Ed. 6/2000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C>
5 AUTHORI- Check box if applicable: |__| We authorize the following Prudential professional to act as our agent with
ZATION respect to this account:
Representative Name
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
X
----------------------------------------------------------------------------------------------------
Shareholder's Signature
====================================================================================================================================
6 DIVIDEND If no box is checked, dividends will be automatically reinvested. |__| Pay dividends in cash
DISTRIBUTION
OPTION |__| Reinvest dividends |__| Pay via Wire (wire takes 2 to 3 business days after dividend is paid).
in additional shares You must complete the Wire Instructions in Section 7. If dividend
distribution instructions are different from Expedited Redemption
instructions, please provide separately.
====================================================================================================================================
7 EXPEDITED All redemption proceeds will be sent to either the bank or the Prudential Securities account listed below
REDEMPTIONS (not both). PILP's records of these instructions are binding on all parties and neither PILP nor Prudential
Mutual Fund Services LLC will be liable for any loss, expense or cost arising out of such transactions. All
revisions to these instructions must be signature guaranteed.
|__| COMMERCIAL BANK
Account Name
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Bank Name
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Address
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
City State ZIP Code
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__| |__|__| |__|__|__|__|__| - |__|__|__|__|
Account Number Bank Routing Number
-------------------------------------------------------------------------------------------------
|__| PRUDENTIAL SECURITIES ACCOUNT
Account Name: Prudential Securities Bank Name: Chase Manhattan Bank
Account No.: 066296390 Bank Routing No.: 021-0000-21
FOR FURTHER CREDIT TO:
Account Name
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Account Number
|__|__|__| - |__|__|__|__|__|__| - |__| - |__|__|
====================================================================================================================================
8 REQUIRED The undersigned represent and warrant that they have full right, power and authority to make the investment
SIGNATURE(S) applied for pursuant to this Application. If the persons signing are doing so on behalf of a beneficial
owner, they represent and warrant that they are duly authorized to sign this Application and to purchase or
redeem shares of the Fund on behalf of the beneficial owner. Additional authorized signatories can be
provided on an attachment with signature, name and title. The undersigned hereby affirm receipt of a
current Fund prospectus and certify under penalty of perjury that: (1) the number shown above is the
correct taxpayer identification number, and (2) there has been no notification that this account is subject
to backup withholding.
|__| Please check here if there has been notification of backup withholding.
X | | | |
------------------------------------------------------------------------ |__|__|__|__|__|__|__|__|
Signature Corporate Officer/Title (if applicable) Date (month, day, year)
X | | | |
------------------------------------------------------------------------ |__|__|__|__|__|__|__|__|
Signature Corporate Officer/Title (if applicable) Date (month, day, year)
====================================================================================================================================
PLEASE NOTE: MAIL TO: Prudential Mutual Fund Services LLC BY WIRE: State Street Bank, ABA Routing
FINANCIAL Attn: Institutional Service Division Number: 0110-0002-8
TRANSACTIONS ARE PO Box 15030 Attention: PRU 8600 GRP
ACCEPTED UNTIL New Brunswick, NJ 08906 Re: PILP
4:00 P.M. (NEW Name of Fund: Institutional Money Market
YORK TIME) OVERNIGHT: Prudential Mutual Fund Services LLC Series
Attn: PILP Unit, 3rd floor DDA Number: 99034100
194 Wood Avenue South
Iselin, NJ 08830 Account Registration
----------------------
MF137F Ed. 6/2000 Account Number
----------------------------
====================================================================================================================================
</TABLE>
<PAGE>
WITHHOLDING TAXES
If federal law requires you to provide the Fund with your tax identification
number and certifications as to your tax status, and if you fail to do so, or if
you are otherwise subject to back-up withholding, we will withhold and pay to
the U.S. Treasury 31% of your distributions. Dividends of net investment income
and short-term capital gains paid to a nonresident foreign shareholder generally
will be subject to a U.S. withholding tax of 30%. This rate may be lower,
depending on any tax treaty the U.S. may have with the shareholder's country.
--------------------------------------------------------------------------------
13
<PAGE>
How to Buy and Sell
--------------------------------------------------------------------------------
Shares of the Fund
--------------------------------------------------------------------------------
HOW TO BUY SHARES
STEP 1: OPEN AN ACCOUNT
If you don't have an account with us or a securities firm that is permitted to
buy or sell shares of the Fund for you, call Prudential Mutual Fund Services LLC
(PMFS), the Fund's Transfer Agent, at (800) 521-7466 or contact:
PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: INSTITUTIONAL SERVICE DIVISION
P.O. BOX 15030
NEW BRUNSWICK, NJ 08906
After you have established an account, all purchases of Class A shares must
be made via wire transfer of funds to State Street Bank and Trust Company,
Boston, Massachusetts, the Fund's custodian (the Custodian). We have the right
to reject any purchase order (including an exchange into the Fund) or suspend or
modify the Fund's sale of its shares.
STEP 2: CHOOSE A SHARE CLASS
The Fund offers Class A and Class I shares. Except as noted below, the minimum
initial investment for Class A shares is $100,000 and the minimum subsequent
investment is $10,000. The minimum initial investment for Class I shares is $5
million and the minimum subsequent investment is $10,000. This prospectus only
describes how you can buy and sell Class A shares of the Fund. If you qualify to
purchase Class I shares, you should contact PMFS at the telephone number or
address above to request a Class I shares Fund prospectus. Class A shareholders
of the Fund who qualify to purchase Class I shares will have their Class A
shares exchanged for Class I shares on a quarterly basis. For purposes of the
minimum initial and subsequent investment requirements, a master account and its
subaccounts, as well as related institutional accounts (that is, accounts of
shareholders with a common institutional or corporate parent), may be combined.
PURCHASES THROUGH THE COMMAND PROGRAM OR THE BUSINESSEDGE PROGRAM Class A shares
of the Fund are available to shareholders who meet the minimum investment
requirements and participate in either the corporate COMMAND(sm) Account Program
(the COMMAND Program), which is available through Prudential Securities
Incorporated (Prudential Securities), or the Prudential BusinessEdge(sm) Account
Program (the BusinessEdge Program),
--------------------------------------------------------------------------------
14 Prudential Institutional Liquidity Portfolio, Inc. (telephone)(800) 521-7466
<PAGE>
How to Buy and Sell
--------------------------------------------------------------------------------
Shares of the Fund
--------------------------------------------------------------------------------
which is available either through Prudential Securities or Pruco Securities
Corporation (Prusec). These programs offer integrated financial services that
link together various product components with the ability to invest in shares of
the Fund. If you participate in the COMMAND Program or the BusinessEdge Program,
your purchase of Class A shares must be made through your Prudential Securities
Financial Advisor or your Prusec broker, as applicable.
STEP 3: UNDERSTANDING THE PRICE YOU'LL PAY
When you invest in a mutual fund, you buy shares of the Fund. Shares of a money
market mutual fund, like the Fund, are priced differently than shares of common
stock and other securities.
The price you pay for each share of the Fund is based on the share value.
The share value of a mutual fund--known as the net asset value or NAV--is
determined by a simple calculation: it's the total value of the Fund (assets
minus liabilities) divided by the total number of shares outstanding. In
determining NAV, the Fund values its securities using the amortized cost method.
The Fund seeks to maintain an NAV of $1 per share at all times.
We determine the NAV of our shares once each business day at 4:00 p.m., New
York time, on days that the New York Stock Exchange is open for trading. We do
not determine NAV on days when we have not received any orders to purchase,
sell, or exchange or when changes in the value of the Fund's portfolio do not
affect the NAV.
If your purchase order for Class A shares is received by PMFS by calling
(800) 521-7466 before 4:00 p.m., New York time, and federal funds are received
by the Custodian by wire transfer on the same business day, your purchase order
becomes effective as of 4:00 p.m., New York time, and the shares you purchase
are entitled to dividend income earned on that day. Telephone calls to PMFS will
be recorded. In order to make investments that will generate income immediately,
the Fund must have federal funds available to it. Therefore, you are urged to
wire funds to the Custodian via the Federal Reserve Wire System as early in the
day as possible.
If you participate in the COMMAND Program or the BusinessEdge Program, you
must submit your purchase order to your Prudential Securities Financial Advisor
or Prusec broker, as applicable, by 2:00 p.m., New York time. The Prudential
Securities Financial Advisor or Prusec broker will submit your order to the Fund
for Class A shares and will arrange for the transfer of federal funds from your
Program account to the Custodian. If your purchase
--------------------------------------------------------------------------------
15
<PAGE>
How to Buy and Sell
--------------------------------------------------------------------------------
Shares of the Fund
--------------------------------------------------------------------------------
order is received by 2:00 p.m., New York time, the shares you purchase are
entitled to dividend income earned on that day.
STEP 4: ADDITIONAL SHAREHOLDER SERVICES
As a Fund shareholder, you can take advantage of the following services and
privileges:
Automatic Reinvestment. As we explained in the "Fund Distributions and Tax
Issues" section, the Fund pays out--or distributes--its net investment income
and capital gains to all shareholders. For your convenience, we will
automatically reinvest your distributions in the Fund at NAV. If you want your
distributions paid in cash (via wire transfer to your bank account), you can
indicate this preference on your application or notify the Transfer Agent in
writing (at the address below) at least five business days before the date we
determine who receives dividends.
PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: INSTITUTIONAL SERVICE DIVISION
P.O. BOX 15030
NEW BRUNSWICK, NJ 08906
Reports to Shareholders. Every year, we will send you an annual report (along
with an updated prospectus) and a semi-annual report, which contain important
financial information about the Fund. To reduce Fund expenses, we will send one
annual shareholder report, one semi-annual shareholder report and one annual
prospectus per household, unless you instruct us or your broker otherwise.
Subaccounting and Special Services. Special processing can be arranged with PMFS
for corporations, banks and other institutions that wish to open multiple
accounts (a master account and subaccounts). An institution that wishes to use
PMFS's subaccounting facilities or other special services for individual or
multiple accounts will be required to enter into a separate agreement with PMFS.
Charges for these services, if any, will be determined on the basis of the level
of services provided. Subaccounts can be opened at the time of an initial
investment or at a later date.
--------------------------------------------------------------------------------
16 Prudential Institutional Liquidity Portfolio, Inc. (telephone)(800) 521-7466
<PAGE>
How to Buy and Sell
--------------------------------------------------------------------------------
Shares of the Fund
--------------------------------------------------------------------------------
HOW TO SELL YOUR SHARES
You can sell your shares of the Fund at any time, subject to certain
restrictions.
When you sell shares of the Fund--also known as redeeming shares-- the
price you will receive will be the NAV next determined after the Transfer Agent
receives your order to sell. Redemption requests may be made by telephone by
calling PMFS at (800) 521-7466. When you call, you will be asked to provide your
name (as an authorized person on the account), account number and personal
identification number. Neither PMFS nor the Fund will be responsible for further
verification of the authenticity of instructions received by telephone.
During periods of severe market or economic conditions, telephone
redemption may be difficult. In such case, you should consider sending your
redemption request to PMFS by telecopy at telecopier number (732) 482-2666.
All redemptions are paid by wire transfer of the proceeds to the U.S.
commercial bank account or the Prudential Securities account designated on your
account application.
For Class A shares to be redeemed and the proceeds sent by wire transfer on
the same day, telephone instructions or your written redemption request must be
received by PMFS before 4:00 p.m., New York time. Although we will wire
redemption proceeds on the same day as a request received before 4:00 p.m., New
York time, you should be aware that federal wire restrictions and individual
bank hours of operation may restrict your access to the redemption proceeds
until the following business day. Class A shares redeemed before 4:00 p.m., New
York time, are not entitled to income dividends declared on the day of the
redemption.
If you participate in the COMMAND Program or the BusinessEdge Program, you
must submit your redemption request to your Prudential Securities Financial
Advisor or Prusec broker, as applicable, by 2:00 p.m., New York time, in order
to have the request processed on the same day.
RESTRICTIONS ON SALES
There are certain times when you may not be able to sell shares of the Fund or
when we may delay paying you the proceeds from a sale. This may happen during
unusual market conditions or emergencies when the Fund can't determine the value
of its assets or sell its holdings. For more information, see the SAI, "Purchase
and Redemption of Fund Shares."
--------------------------------------------------------------------------------
17
<PAGE>
How to Buy and Sell
--------------------------------------------------------------------------------
Shares of the Fund
--------------------------------------------------------------------------------
If you are selling more than $100,000 of shares and you want the redemption
proceeds wired to an institution that is not in our records, or you are a
business or trust, and if you hold your shares directly with the Transfer Agent,
you will need to have the signature on your sell order signature guaranteed by
an "eligible guarantor institution. "An "eligible guarantor institution"
includes any bank, broker-dealer or credit union. For more information, see the
SAI, "Purchase and Redemption of Fund Shares."
In addition, we may withhold wiring redemption proceeds if the Fund's
investment adviser determines that the Fund could be adversely affected by
making immediate payment, and we may take up to seven days to wire redemption
proceeds.
REDEMPTION IN KIND
If the sales of Fund shares you make during any 90-day period reach the lesser
of $250,000 or 1% of the value of the Fund's net assets, we can then give you
securities from the Fund's portfolio instead of cash. If you want to sell the
securities for cash, you would have to pay the costs charged by a broker.
INVOLUNTARY REDEMPTION
If you make a sale that reduces your account value to less than $100,000, we may
sell the rest of your shares and close your account. We would do this to
minimize the Fund's expenses paid by other shareholders. We will give you 60
days' notice, during which time you can purchase additional shares to avoid this
action.
AUTOMATIC REDEMPTION FOR THE COMMAND PROGRAM OR
THE BUSINESSEDGE PROGRAM
If you participate in the COMMAND Program or the BusinessEdge Program, your Fund
shares will be automatically redeemed to cover any deficit in your account. The
amount of the redemption will be the nearest dollar amount necessary to cover
the deficit.
The amount of the redemption will be the lesser of the total value of Fund
shares held in your account or the deficit in your account. A deficit in your
COMMAND Program account or BusinessEdge Program account may result from activity
arising under the Program, such as debit balances incurred by the use of the
Visa(R) Gold Debit Card Account (for the COMMAND Program) or the BusinessEdge
Visa(R) Debit Card Account (for the BusinessEdge Program),
--------------------------------------------------------------------------------
18 Prudential Institutional Liquidity Portfolio, Inc. (telephone)(800) 521-7466
<PAGE>
How to Buy and Sell
--------------------------------------------------------------------------------
Shares of the Fund
--------------------------------------------------------------------------------
as well as ATM transactions, cash advances and Program account checks. Your
account will be automatically scanned for deficits each day and, if there is
insufficient cash in your account, we will redeem an appropriate number of
shares of the Fund to satisfy any remaining deficit. You are entitled to any
dividends declared on the redeemed shares through the day before the redemption
is made. Dividends declared on the redemption date will be retained by
Prudential Securities or Prusec, as applicable, which has advanced monies to
satisfy deficits in your account.
Redemptions are automatically made, to the nearest dollar, on each day to
satisfy account deficits or to honor your redemption requests.
MANUAL REDEMPTION FOR THE COMMAND PROGRAM OR THE BUSINESSEDGE PROGRAM.
If you participate in the COMMAND Program or the BusinessEdge Program, you may
redeem your Fund shares by submitting a written request to your Prudential
Securities Financial Advisor or Prusec broker, as applicable. You should not
send a manual redemption request to the Fund. If you do, we will forward the
request to Prudential Securities or Prusec, as appropriate, which could delay
your requested redemption.
The proceeds from a manual redemption will immediately become a free cash
balance in your Program account and will be automatically invested in the money
market mutual fund that you selected as the "Primary Fund" for cash sweeps in
your account. Both the COMMAND Program and the BusinessEdge Program require that
your written redemption request be signed by all persons in whose name Fund
shares are registered, exactly as they appear on your Program account client
statement. In certain situations, additional documents such as trust
instruments, death certificates, appointments as executor or administrator, or
certificates of corporate authority may be required.
Under the COMMAND Program, Prudential Securities has the right to terminate
your Program account at any time for any reason. Likewise, under the
BusinessEdge Program, Prudential Securities or Prusec, as applicable, has the
right to terminate your Program account at any time for any reason. If a Program
account is terminated, all shares of the Fund held in the account will be
redeemed.
--------------------------------------------------------------------------------
19
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
The financial highlights below are intended to help you evaluate the financial
performance of Class A shares of the Fund. The total return in the chart
represents the rate that a shareholder earned on an investment in the Fund,
assuming reinvestment of all dividends and other distributions. The information
is for Class A shares of the Fund for the periods indicated.
Review this chart with the financial statements which appear in the SAI.
Additional performance information is contained in the annual report, which you
can receive at no charge, as described on the back cover of this prospectus.
The financial highlights for the four fiscal years ended March 31, 2000
were audited by PricewaterhouseCoopers LLP, independent accountants, and the
financial highlights for the year ended March 31, 1996 were audited by other
independent auditors. Their report was unqualified.
Class A Shares (fiscal years ended 3-31)
Per Share Operating Performance 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income
and net realized gains .053(2) .053(2) .055(2) .050 .056
Dividends and distributions
to shareholders (.053) (.053) (.055) (.050) (.056)
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN(1) 5.40% 5.39% 5.63% 5.16% 5.72%
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratios/Supplemental Data 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSETS, END OF YEAR (000) $371,866 $361,167 $140,813 $478,045 $440,842
AVERAGE NET ASSETS:(000) $366,127 $247,471 $217,881 $449,393 $519,946
RATIOS TO AVERAGE NET ASSETS:
Net investment income 5.27%(2) 5.20%(2) 5.42%(2) 5.03% 5.56%
Expenses, including
distribution fee .20%(2) .20%(2) .29%(2) .46% .43%
Expenses, excluding
distribution fee .15%(3) .15%(3) .21%(3) .34% .31%
-------------------------------------------------------------------------------------------
</TABLE>
(1) 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.
(2) Net of management and distribution fee waiver/expense subsidy.
(3) Net of management fee waiver/expense subsidy.
--------------------------------------------------------------------------------
20 Prudential Institutional Liquidity Portfolio, Inc. (telephone)(800) 521-7466
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
21
<PAGE>
--------------------------------------------------------------------------------
The 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 applicable prospectus carefully before you invest
or send money.
Stock Funds
PRUDENTIAL EMERGING GROWTH FUND, INC.
PRUDENTIAL EQUITY FUND, INC.
PRUDENTIAL EQUITY INCOME FUND
PRUDENTIAL INDEX SERIES FUND
Prudential Small-Cap Index Fund
Prudential Stock Index Fund
THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
Prudential Jennison Growth Fund
Prudential Jennison Growth
& Income Fund
PRUDENTIAL MID-CAP VALUE FUND
PRUDENTIAL REAL ESTATE SECURITIES FUND
PRUDENTIAL SECTOR FUNDS, INC.
Prudential Financial Services Fund
Prudential HealthServices Fund
Prudential Technology Fund
Prudential Utility Fund
PRUDENTIAL SMALL-CAP QUANTUM FUND, INC.
PRUDENTIAL SMALL COMPANY VALUE
FUND, INC.
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 INDEX SERIES FUND
Prudential Europe Index Fund
Prudential Pacific Index Fund
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.
--------------------------------------------------------------------------------
22 Prudential Institutional Liquidity Portfolio, Inc. (telephone)(800) 521-7466
<PAGE>
--------------------------------------------------------------------------------
The Prudential Mutual Fund Family
--------------------------------------------------------------------------------
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 INDEX SERIES FUND
Prudential Bond Market Index Fund
PRUDENTIAL STRUCTURED MATURITY FUND, INC.
Income Portfolio
TARGET FUNDS
Total Return Bond Fund
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
--------------------------------------------------------------------------------
23
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
24 Prudential Institutional Liquidity Portfolio, Inc. (telephone)(800) 521-7466
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
25
<PAGE>
FOR MORE INFORMATION
Please read this prospectus before you
invest in the Fund and keep it for future
reference. For information or shareholder
questions contact
PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: INSTITUTIONAL SERVICE DIVISION
P.O. BOX 15030
NEW BRUNSWICK, NJ 08906
(800) 521-7466
(732) 482-7555 (Calling from outside the U.S.)
Outside Brokers should contact
PRUDENTIAL INVESTMENT MANAGEMENT
SERVICES LLC
P.O. BOX 15035
NEW BRUNSWICK, NJ 08906
(800) 778-8769
Visit Prudential's website at
http://www.prudential.com
Additional information about the Fund can
be obtained without charge and can be
found in the following documents
STATEMENT OF ADDITIONAL INFORMATION (SAI)
(incorporated by reference into this
prospectus)
ANNUAL REPORT
SEMI-ANNUAL REPORT
MF137A
You can also obtain copies of Fund
documents from the Securities and
Exchange Commission as follows
BY MAIL
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-0102
BY ELECTRONIC REQUEST
[email protected]
(The SEC charges a fee to copy
documents.)
IN PERSON
PUblic Reference Room in Washington, DC
(For hours of operation, call
1-(202) 942-8090
VIA THE INTERNET
on the EDGAR database at
http://www.sec.gov
CUSIP Numbers NASDAQ Symbol
Class A Shares--744350-10-9 PIMXX
Investment Company Act File No. 811-5336
<PAGE>
PROSPECTUS MAY 31, 2000
PRUDENTIAL
INSTITUTIONAL LIQUIDITY PORTFOLIO, INC.
INSTITUTIONAL MONEY MARKET SERIES
(CLASS I SHARES)
FUND TYPE Money market
OBJECTIVE High current income consistent with the preservation to principal and
liquidity
BUILD
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ON THE ROCK
As with all mutual funds, the Securities and
Exchange Commission has not approved or
disapproved the Fund's shares nor has the
SEC determined that this prospectus is
complete or accurate. It is a criminal offense
to state otherwise.
[LOGO] PRUDENTIAL
<PAGE>
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TABLE OF CONTENTS
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1 Risk/Return Summary
1 Investment Objective and Principal Strategies
1 Principal Risks
2 Evaluating Performance
3 Fees and Expenses
5 How the Fund Invests
5 Investment Objective and Policies
7 Other Investments and Strategies
8 Rating of Fund Shares
9 Investment Risks
10 How the Fund is Managed
10 Board of Directors
10 Manager
10 Investment Adviser
10 Distributor
11 Fund Distributions and Tax Issues
11 Distributions
11 Tax Issues
13 How to Buy and Sell Shares of the Fund
13 How to Buy Shares
15 How to Sell Your Shares
19 Financial Highlights
20 The Prudential Mutual Fund Family
For More Information (Back Cover)
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Prudential Institutional Liquidity (Telephone)(800) 521-7466
Portfolio, Inc.
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<PAGE>
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RISK/RETURN SUMMARY
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|---------------------------------------|
|MONEY MARKET FUNDS--which hold |
|high-quality short-term debt |
|obligations--provide investors with a |
|lower risk, highly liquid investment |
|option. These funds attempt to maintain|
|a net asset value of $1 per share, |
|although there can be no guarantee that|
|they will always be able to do so. |
|---------------------------------------|
This section highlights key information about PRUDENTIAL INSTITUTIONAL LIQUIDITY
PORTFOLIO, INC.-INSTITUTIONAL MONEY MARKET SERIES, which we refer to as "the
Fund." The Fund offers Class A shares and Class I shares. This prospectus
relates only to Class I shares. Additional information follows this summary.
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
Our investment objective is HIGH CURRENT INCOME CONSISTENT WITH THE PRESERVATION
OF PRINCIPAL AND LIQUIDITY. To achieve this objective we invest at least 80% of
the Fund's assets in short-term money market instruments such as obligations
issued by the U.S. Government, commercial paper, asset-backed securities,
funding agreements, variable rate demand notes, bills, notes and other
obligations issued by banks, corporations and other companies, and obligations
issued by foreign banks, foreign companies or foreign governments. The Fund will
invest only in instruments with remaining maturities of thirteen months or less
and which are denominated in U.S. dollars. The Fund may invest in longer-term
securities that are accompanied by demand features which will shorten the
effective maturity of the securities to thirteen months or less. While we make
every effort to achieve our objective and maintain a net asset value of $1 per
share, we can't guarantee success. To date, the Fund's net asset value has never
deviated from $1 per share.
PRINCIPAL RISKS
Although we try to invest wisely, all investments involve risk. Since the Fund
invests in debt obligations, there is the risk that the value of a particular
obligation could go down. Debt obligations are generally subject to CREDIT
RISK--the risk that the issuer of a particular security may be unable to make
principal and interest payments when they are due, and MARKET RISK--the risk
that the securities could lose value because interest rates change or investors
lose confidence in the ability of issuers in general to pay back their debt.
With respect to the Fund's investments in asset-backed securities, there is a
risk of prepayment, which means that if the underlying obligations are paid
before they are due, the security may discontinue paying an attractive rate of
income.
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1
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RISK/RETURN SUMMARY
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The Fund's investment in foreign securities involves additional risks. For
example, foreign banks and companies generally are not subject to regulatory
requirements comparable to those applicable to U.S. banks and companies. In
addition, political developments and changes in currency rates may adversely
affect the value of foreign securities. In all cases, however, we invest only in
U.S. dollar-denominated securities.
There is also a risk that we will sell a security for a price that is
higher or lower than the value attributed to the security through the amortized
cost valuation procedures we follow. Such an event could affect our ability to
maintain a net asset value of $1 per share.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of an investment at $1 per
share, it is possible to lose money by investing in the Fund.
EVALUATING PERFORMANCE
A number of factors--including risk--can affect how the Fund performs. The
following bar chart shows the Fund's performance for each full calendar year of
operation. The tables below compare the Fund's average annual returns and yield
for the periods indicated with those of a group of similar funds. The bar chart
and tables demonstrate the risk of investing in the Fund by showing how returns
can change. Past performance is not an indication that the Fund will achieve
similar results in the future. For current yield information, you can call us at
(800) 521-7466.
--------------------------------
ANNUAL RETURNS(1) (CLASS I SHARES)
--------------------------------------------------------------------------------
[GRAPHICS]
Best Quarter: 1.47% Worst Quarter: 1.23%
(4th quarter of 1999) (2nd quarter of 1999)
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(1) The Fund's returns are after deduction of expenses. The total return of the
Class I shares from 1-1-00 to 3-31-00 was 1.34%.
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2 Prudential Institutional (telephone)(800) 521-7466
Liquidity Portfolio, Inc.
<PAGE>
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RISK/RETURN SUMMARY
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------------------------------------------
AVERAGE ANNUAL RETURNS(1) (AS OF 12/31/99)
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1 YEAR SINCE INCEPTION
Class I shares 5.32% 5.53% (since 7-9-97)
Lipper Average(2) 4.92% 5.19% (since 6-30-97)
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-----------------------------------------
7-DAY YIELD(1) (AS OF 3/31/00)
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Class I shares 6.01%
IBC Average(3) 5.65%
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1 The Fund's returns and yield are after deduction of expenses.
2 The Lipper Average is based upon the average return of all mutual funds in
the Institutional Money Market Funds category.
3 The IBC Average is based upon the average yield of all mutual funds in the
International Business Communications Financial Data all taxable money
market fund category.
FEES AND EXPENSES
These tables show the fees and expenses that you may pay if you buy and hold
shares of the Fund.
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SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT)
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CLASS I
Maximum sales charge (load) None
imposed on purchases (as a percentage of offering
price)
Maximum deferred sales charge (load) (as a percentage None
of the lower of original purchase price or sale
proceeds)
Maximum sales charge (load) None
imposed on reinvested dividends
and other distributions
Redemption fees None
Exchange fee None
COMMAND Program annual fee(1) $125(2)
BusinessEdge Program annual fee(1) $185(2)
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3
<PAGE>
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RISK/RETURN SUMMARY
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ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
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CLASS I
Management fees .20%
+ Distribution and service (12b-1) fees None
+ Other expenses .06%
= TOTAL ANNUAL FUND OPERATING EXPENSES .26%
- Fee waiver and expense reimbursement(3) .11%
= NET ANNUAL FUND OPERATING EXPENSES .15%
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1 COMMAND and BusinessEdge are financial services programs available through
Prudential Securities Incorporated and/or Pruco Securities Corporation. For
more information, you should contract a Prudential Securities Financial
Advisor or a Pruco Securities Preferred Agent.
2 The annual program fee as a percentage of average net assets is less than
.01% for both the COMMAND and BusinessEdge Programs and is calculated by
dividing $125 (the total fee for the COMMAND Program) or $185 (the total
for the BusinessEdge Program), respectively, by the average account size in
the Fund. The annual program fee is not prorated for purposes of this
calculation to give effect to COMMAND Program or BusinessEdge Program
participants who also own shares in or subscribe to various services
offered by the respective Programs. A major portion of the annual program
fee is not attributable to the Fund, but rather to nonfund services
provided by the Program.
3 For the fiscal year ending March 31, 2001, the Manager of the Fund has
contractually agreed to reimburse the Fund for operating expenses in excess
of .15% of the average daily net assets of Class I shares.
EXAMPLE
This example will help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then sell all of your shares at the end of those periods.
The example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be:
--------------------------------------------------------------------------------
1 YR 3 YRS 5 YRS 10 Yrs
Class I shares(1) $15 $73 $135 $320
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1 The example reflects the agreement of the Manager to reimburse certain
operating expenses of Class I shares for the fiscal year ending March 31,
2001. The Manager has not advised the Fund of its intention to discontinue
the waiver and/or reimbursement for subsequent fiscal years. The 3-year,
5-year and 10-year costs only reflect the 1-year waiver and reimbursement.
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4 Prudential Institutional (telephone)(800) 521-7466
Liquidity Portfolio, Inc.
<PAGE>
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HOW THE FUND INVESTS
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INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is HIGH CURRENT INCOME CONSISTENT WITH THE
PRESERVATION OF PRINCIPAL AND LIQUIDITY. While we make every effort to achieve
our objective, we can't guarantee success.
The Fund invests in a diversified portfolio of short-term debt obligations
which include, but are not limited to, obligations issued by the U.S.
Government, its agencies and instrumentalities, as well as commercial paper,
asset-backed securities, funding agreements, variable rate demand notes, bills,
notes and other obligations issued by banks, corporations and other companies
(including trust structures), obligations issued by foreign banks, foreign
companies or foreign governments, and municipal notes.
The Fund invests in high-quality money market instruments to try to provide
investors with current income while maintaining a stable net asset value of $1
per share. We manage the Fund to comply with specific rules designed for money
market mutual funds. This means that we manage the Fund's portfolio to comply
with the requirements of Rule 2a-7 under the Investment Company Act of 1940 (the
Investment Company Act). As such, we will not acquire any security with a
remaining maturity exceeding thirteen months, and we will maintain a
dollar-weighted average portfolio of 90 days or less. In addition, we will
comply with the diversification, quality and other requirements of Rule 2a-7.
This means, generally, that the instruments we purchase present "minimal credit
risk" and are of "eligible quality." "Eligible quality" for this purpose means a
security: (i) rated in one of the two highest short-term rating categories by at
least two nationally recognized statistical rating organizations (NRSROs) or, if
only one NRSRO has rated the security, so rated by that NRSRO; (ii) rated in one
of the three highest long-term rating categories by at least two NRSROs or, if
only one NRSRO has rated the security, so rated by that NRSRO; or (iii) if
unrated, of comparable quality as determined by the Fund's investment adviser.
All securities that we purchase will be denominated in U.S. dollars but may be
issued by a foreign issuer.
COMMERCIAL PAPER is short-term debt obligations of banks, corporations and
other borrowers. The obligations are usually issued by financially strong
businesses and often include a line of credit to protect purchasers of the
obligations. An ASSET-BACKED SECURITY is a loan or note that pays interest based
upon the cash flow of a pool of assets, such as mortgages, loans and credit card
receivables. CERTIFICATES OF DEPOSIT, TIME DEPOSITS, BANKERS' ACCEPTANCES and
BANK NOTES are obligations issued by or through a bank. These instruments depend
upon the strength of the bank involved in the borrowing to give
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5
<PAGE>
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HOW THE FUND INVESTS
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investors comfort that the borrowing will be repaid when promised. FUNDING
AGREEMENTS are contracts issued by insurance companies that guarantee a return
of principal, plus some amount of interest. When purchased by money market
funds, funding agreements will typically be short-term and will provide an
adjustable rate of interest.
DEBT OBLIGATIONS in general, including those listed above and any others that
we may purchase, are basically written promises to repay a debt. Among the
various types of debt securities that we may purchase, the terms of repayment
may vary, as may the commitment of other parties to honor the obligations of the
issuer of the security. We may purchase securities that include DEMAND FEATURES,
which allow us to DEMAND REPAYMENT of a debt obligation before the obligation is
due or "matures." This means that we can purchase longer-term securities because
we can demand repayment of the obligation at an agreed-upon price within a
relatively short period of time. This procedure follows the rules applicable to
money market funds.
FOREIGN SECURITIES and foreign markets involve additional risk. Laws and
accounting standards typically are not as strict in foreign countries as they
are in the U.S. Foreign fixed income and currency markets may be less stable
than those in U.S. markets. Changes in the exchange rates of foreign currencies
can affect the value of foreign assets.
Any of the money market instruments that the Fund may purchase may be
accompanied with the right to resell the instrument prior to the instrument's
maturity. In addition, we may separately purchase rights to resell these
instruments. These rights are referred to as "PUTS" and are acquired by the Fund
to protect against a possible decline in the market value of the securities to
which the puts relate in the event of interest rate fluctuations, to shorten the
effective maturity of the security and to provide the Fund with liquidity to
meet shareholder redemption requests.
The securities that we may purchase may change over time as new types of
money market instruments are developed. We will purchase these new instruments,
however, only if their characteristics and features follow the rules governing
the operation of money market funds.
Our investment objective is a fundamental policy that cannot be changed
without shareholder approval. The Board of Directors of the Fund can change
investment policies that are not fundamental. For more information, see
"Investment Risks" below and the Statement of Additional Information,
"Description of the Fund, its Investments and Risks." The Statement of
Additional Information--which we refer to as the SAI--contains additional
--------------------------------------------------------------------------------
6 Prudential Instituional Liquidity (Telephone) (800) 521-7466
Portfolio, Inc.
<PAGE>
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HOW THE FUND INVESTS
--------------------------------------------------------------------------------
information about the Fund. For information on how to obtain a copy, see the
back cover of this prospectus.
OTHER INVESTMENTS AND STRATEGIES
While the Fund invests principally in the securities described above, it may
invest in other securities or use certain investment strategies to increase
returns or protect its assets, if market conditions warrant.
The Fund intends to participate in one or more JOINT TRADING ACCOUNTS whereby
the Fund, along with other investment companies managed by Prudential
Investments Fund Management LLC, will jointly engage in repurchase agreements
and, subject to the issuance of an order by the Securities and Exchange
Commission, jointly purchase money market instruments. The ability of the Fund
to participate in these joint trading accounts will be conditioned upon
requirements imposed by such order, which may be amended from time to time.
The Fund may also invest in other DEBT OBLIGATIONS ISSUED OR GUARANTEED BY
THE U.S. GOVERNMENT and government-related entities. Some of these debt
securities are backed by the full faith and credit of the U.S. Government, like
obligations of the Government National Mortgage Association (GNMA or "Ginnie
Mae"). Debt securities issued by other government entities, like obligations of
the Federal National Mortgage Association (FNMA or "Fannie Mae") and the Student
Loan Marketing Association (SLMA or "Sallie Mae"), are not backed by the full
faith and credit of the U.S. Government. However, these issuers have the right
to borrow from the U.S. Treasury to meet their obligations. The debt securities
of other issuers, like the Farm Credit System, depend entirely upon their own
resources to repay their debt.
The Fund may also use REPURCHASE AGREEMENTS, where a party agrees to sell a
security to the Fund and then repurchase it at an agreed-upon price at a stated
time. These transactions constitute short-term cash loans by the Fund to
financial institutions. This creates a fixed return for the Fund.
The Fund may use REVERSE REPURCHASE AGREEMENTS, where we borrow money on a
temporary basis by selling a security with an obligation to repurchase it at an
agreed-upon price and time. The Fund's use of reverse repurchase agreements is
limited to 15% of the value of its total assets.
The Fund may also purchase money market obligations on a "WHEN-ISSUED" or
"DELAYED-DELIVERY" basis. When the Fund makes this type of purchase, the price
and interest rate are fixed at the time of purchase, but delivery
--------------------------------------------------------------------------------
7
<PAGE>
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HOW THE FUND INVESTS
--------------------------------------------------------------------------------
of and payment for the obligations take place at a later time. The Fund does not
earn interest income until the date the obligations are delivered.
The Fund may purchase FLOATING RATE and VARIABLE RATE securities. These
securities pay interest at rates that change periodically to reflect changes in
market interest rates. Because these securities adjust the interest they pay,
they may be beneficial when interest rates are rising because of the additional
return the Fund will receive, and they may be detrimental when interest rates
are falling because of the reduction in interest payments to the Fund.
The Fund also follows certain policies when it BORROWS MONEY (the Fund may
borrow up to 15% of the value of its net assets); LENDS ITS SECURITIES to others
(the Fund may lend up to 15% of its total assets, including collateral received
in the transaction); and HOLDS ILLIQUID SECURITIES (the Fund may hold up to 10%
of its net assets in illiquid securities, including securities with legal or
contractual restrictions, those without a readily available market, privately
placed commercial paper and repurchase agreements with maturities longer than
seven days). The Fund is subject to certain investment restrictions that are
fundamental policies, which means they cannot be changed without shareholder
approval. For more information about these restrictions, see the SAI.
RATING OF FUND SHARES
Duff & Phelps Credit Rating Co. or its successors (DCR) has given the Fund an
AAA Rating. According to DCR, the AAA rating means the Fund's ability to meet
redemption requests in a timely manner for $1.00 per share is strong. This
rating is based on the Fund's risk management procedures, internal control
systems, limitations on market risk and experienced management team.
--------------------------------------------------------------------------------
8 Prudential Instituional Liquidity (Telephone) (800) 521-7466
Portfolio, Inc.
<PAGE>
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HOW THE FUND INVESTS
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INVESTMENT RISKS
As noted, all investments involve risk, and investing in the Fund is no
exception. This chart outlines the key risks and potential rewards of the
principal strategies and certain other investments of the Fund. See, too,
"Description of the Fund, its Investments and Risks" in the SAI.
<TABLE>
<CAPTION>
INVESTMENT TYPE
% OF FUND'S TOTAL ASSETS RISKS POTENTIAL REWARDS
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
HIGH-QUALITY MONEY MARKET o Credit risk--the risk that o A source of regular interest
OBLIGATIONS default of an issuer would leave income
the Fund with unpaid interest or
Up to 100% principal o May be more secure than
stock and other equity
o Market risk--the risk that bonds and securities since companies must
other debt instruments may lose pay their debts before they pay
value because interest rates change dividends
or there is a lack of confidence in a
group of borrowers or in an industry o Investors may realize
higher returns based
MONEY MARKET OBLIGATIONS OF o Foreign markets, economies and upon higher interest
FOREIGN ISSUERS (U.S. political systems may not be as rates paid on foreign
DOLLAR-DENOMINATED) stable as those in the U.S. investments
Up to 100% o Differences in foreign o Increased diversification
laws, accounting standards, by expanding the allowable
public information and custody choices of high- quality debt
and settlement practices securities?
ILLIQUID SECURITIES o May be difficult to value o May offer a more
precisely attractive yield than more
Up to 10% of net assets widely traded securities
o May be difficult to sell at
the time or price desired
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9
</TABLE>
<PAGE>
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HOW THE FUND IS MANAGED
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BOARD OF DIRECTORS
The Fund's Board of Directors oversees the actions of the Manager, Investment
Adviser and Distributor and decides on general policies. The Board also oversees
the Fund's officers, who conduct and supervise the daily business operations of
the Fund.
MANAGER
Prudential Investments Fund Management LLC (PIFM)
Gateway Center Three, 100 Mulberry Street
Newark, New Jersey 07102-4077
Under a management agreement with the Fund, PIFM manages the Fund's
investment operations and administers its business affairs. For the fiscal year
ended March 31, 2000, the Fund paid PIFM management fees, net of waiver, of .15%
of the Fund's average net assets.
As of March 31, 2000, PIFM served as the Manager to all 45 of the
Prudential Mutual Funds, and as Manager or administrator to 22 closed-end
investment companies, with aggregate assets of approximately $78 billion.
INVESTMENT ADVISER
The Prudential Investment Corporation, called Prudential Investments, is the
Fund's investment adviser and has served as an investment adviser to investment
companies since 1984. Its address is Prudential Plaza, 751 Broad Street, Newark,
NJ 07102. PIFM has responsibility for all investment advisory services,
supervises Prudential Investments and pays Prudential Investments for its
services.
Prudential Investments Fixed Income Group is organized into teams that
specialize by sector. The Fixed Income Investment Policy Committee, which is
comprised of senior investment staff from each sector team, provides guidance to
the teams regarding duration risk, asset allocations and general risk
parameters. Portfolio managers contribute bottom up security selection within
those guidelines.
DISTRIBUTOR
Prudential Investment Management Services LLC (PIMS) distributes the Fund's
shares under a Distribution Agreement with the Fund.
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10 Prudential Institutional Liquidity (Telephone) (800) 521-7466
Portfolio, Inc.
<PAGE>
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FUND DISTRIBUTIONS AND TAX ISSUES
--------------------------------------------------------------------------------
Investors who buy shares of the Fund should be aware of some important tax
issues. For example, the Fund distributes DIVIDENDS of ordinary income and any
realized net CAPITAL GAINS to shareholders. These distributions are subject to
taxes, unless you hold your shares in a 401(k) plan, an Individual Retirement
Account (IRA), or some other qualified or tax-deferred plan or account.
The following briefly discusses some of the important tax issues you should
be aware of, but is not meant to be tax advice. For tax advice, please speak
with your tax adviser.
DISTRIBUTIONS
The Fund distributes DIVIDENDS of any net investment income to shareholders
every month. The dividends you receive from the Fund will be taxed as ORDINARY
INCOME, whether or not they are reinvested in the Fund.
Although the Fund is not likely to realize capital gains because of the types
of securities we purchase, any realized net CAPITAL GAINS will be paid to
shareholders (typically once a year). Capital gains are generated when the Fund
sells assets for a profit.
For your convenience, Fund distributions of dividends and capital gains are
automatically reinvested in the Fund. If you ask us to pay the distributions in
cash, we will wire the distribution to your bank account instead of purchasing
more shares of the Fund. Either way, the distributions are subject to taxes,
unless your shares are held in a qualified or tax-deferred plan or account. For
more information about automatic reinvestment and other shareholder services,
see "How to Buy, Sell and Exchange Shares of the Fund--How To Buy Shares" at
Step 4: Additional Shareholder Services.
TAX ISSUES
Form 1099
Every year, you will receive a Form 1099, which reports the amount of dividends
and capital gains we distributed to you during the prior year. If you own shares
of the Fund as part of a qualified or tax-deferred plan or account, your taxes
are deferred, so you will not receive a Form 1099. However, you will receive a
Form 1099 when you take any distributions from your qualified or tax-deferred
plan or account.
Fund distributions are generally taxable in the year they are received,
except where we declare certain dividends in December of a calendar year but
actually pay them in January of the following year. In such cases, the dividends
are treated as if they were paid on December 31 of the prior year.
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11
<PAGE>
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FUND DISTRIBUTIONS AND TAX ISSUES
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WITHHOLDING TAXES
If federal law requires you to provide the Fund with your tax identification
number and certifications as to your tax status, and if you fail to do so, or if
you are otherwise subject to back-up withholding, we will withhold and pay to
the U.S. Treasury 31% of your distributions. Dividends of net investment income
and short-term capital gains paid to a nonresident foreign shareholder generally
will be subject to a U.S. withholding tax of 30%. This rate may be lower,
depending on any tax treaty the U.S. may have with the shareholder's country.
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12 Prudential Institutional Liquidity (telephone)(800) 521-7466
Portfolio, Inc.
<PAGE>
[LOGO] PRUDENTIAL PRUDENTIAL INSTITUTIONAL LIQUIDITY
PORTFOLIO, INC.
NEW ACCOUNT APPLICATION
PRUDENTIAL MUTUAL FUND SERVICES LLC
Attn: Institutional Service Division
PO Box 15030
New Brunswick, NJ 08906
Contact us at (800) 521-7466
(8:00 a.m.-5:00 p.m. New York
PLEASE PRINT USING BLUE OR BLACK INK. time) or by fax (732) 482-2666.
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C>
INSTRUCTIONS Use this Application to establish an account in Prudential Institutional Liquidity Portfolio, Inc. Please
complete all relevant information. Missing information could result in delays in processing your
Application. Refer to the prospectus for investment minimums and other important information about your
account.
====================================================================================================================================
1 FUND PRUDENTIAL INSTITUTIONAL LIQUIDITY PORTFOLIO, INC. (PILP) - Institutional Money Market Series
SELECTION (Fund #52, PIMMS)(Fund#597, PIMMI)
Account Number (to be assigned by the Fund)
------------------------------------------------
|__| Class A Shares ($100,000 minimum initial |__| Class I Shares ($5 million minimum initial
investment) investment)
====================================================================================================================================
2 ACCOUNT Print account ownership information exactly as it should appear on your account statement.
REGISTRATION
Name of Account Line 1
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Name of Account Line 2
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Street
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
City State ZIP Code
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__| |__|__| |__|__|__|__|__| - |__|__|__|__|
Telephone Number Tax ID Number (Soc, Sec. or EIN)
(|__|__|__|) |__|__|__| - |__|__|__|__| |__|__|__|__|__|__|__|__|__|__|__|
====================================================================================================================================
3 DUPLICATE Please send a duplicate confirmation to the following:
CONFIRMATION
Name of Firm
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Attention
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Address
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
City State ZIP Code
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__| |__|__| |__|__|__|__|__| - |__|__|__|__|
====================================================================================================================================
4 YOUR This section to be completed by your Prudential professional, if applicable.
PRUDENTIAL
PROFESSIONAL Name
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Telephone Number Prudential Securities FA
Branch Ledger Number
(|__|__|__|) |__|__|__| - |__|__|__|__| |__|__|__| |__|__|
====================================================================================================================================
DEFKA70 [BAR CODE]
MF137F Ed. 6/2000
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C>
5 AUTHORI- Check box if applicable: |__| We authorize the following Prudential professional to act as our agent with
ZATION respect to this account:
Representative Name
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
X
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Shareholder's Signature
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6 DIVIDEND If no box is checked, dividends will be automatically reinvested. |__| Pay dividends in cash
DISTRIBUTION
OPTION |__| Reinvest dividends |__| Pay via Wire (wire takes 2 to 3 business days after dividend is paid).
in additional shares You must complete the Wire Instructions in Section 7. If dividend
distribution instructions are different from Expedited Redemption
instructions, please provide separately.
====================================================================================================================================
7 EXPEDITED All redemption proceeds will be sent to either the bank or the Prudential Securities account listed below
REDEMPTIONS (not both). PILP's records of these instructions are binding on all parties and neither PILP nor Prudential
Mutual Fund Services LLC will be liable for any loss, expense or cost arising out of such transactions. All
revisions to these instructions must be signature guaranteed.
|__| COMMERCIAL BANK
Account Name
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Bank Name
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Address
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
City State ZIP Code
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__| |__|__| |__|__|__|__|__| - |__|__|__|__|
Account Number Bank Routing Number
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|__| PRUDENTIAL SECURITIES ACCOUNT
Account Name: Prudential Securities Bank Name: Chase Manhattan Bank
Account No.: 066296390 Bank Routing No.: 021-0000-21
FOR FURTHER CREDIT TO:
Account Name
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Account Number
|__|__|__| - |__|__|__|__|__|__| - |__| - |__|__|
====================================================================================================================================
8 REQUIRED The undersigned represent and warrant that they have full right, power and authority to make the investment
SIGNATURE(S) applied for pursuant to this Application. If the persons signing are doing so on behalf of a beneficial
owner, they represent and warrant that they are duly authorized to sign this Application and to purchase or
redeem shares of the Fund on behalf of the beneficial owner. Additional authorized signatories can be
provided on an attachment with signature, name and title. The undersigned hereby affirm receipt of a
current Fund prospectus and certify under penalty of perjury that: (1) the number shown above is the
correct taxpayer identification number, and (2) there has been no notification that this account is subject
to backup withholding.
|__| Please check here if there has been notification of backup withholding.
X | | | |
------------------------------------------------------------------------ |__|__|__|__|__|__|__|__|
Signature Corporate Officer/Title (if applicable) Date (month, day, year)
X | | | |
------------------------------------------------------------------------ |__|__|__|__|__|__|__|__|
Signature Corporate Officer/Title (if applicable) Date (month, day, year)
====================================================================================================================================
PLEASE NOTE: MAIL TO: Prudential Mutual Fund Services LLC BY WIRE: State Street Bank, ABA Routing
FINANCIAL Attn: Institutional Service Division Number: 0110-0002-8
TRANSACTIONS ARE PO Box 15030 Attention: PRU 8600 GRP
ACCEPTED UNTIL New Brunswick, NJ 08906 Re: PILP
4:00 P.M. (NEW Name of Fund: Institutional Money Market
YORK TIME) OVERNIGHT: Prudential Mutual Fund Services LLC Series
Attn: PILP Unit, 3rd floor DDA Number: 99034100
194 Wood Avenue South
Iselin, NJ 08830 Account Registration
----------------------
MF137F Ed. 6/2000 Account Number
----------------------------
====================================================================================================================================
</TABLE>
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--------------------------------------------------------------------------------
HOW TO BUY AND SELL
--------------------------------------------------------------------------------
SHARES OF THE FUND
--------------------------------------------------------------------------------
HOW TO BUY SHARES
STEP 1: OPEN AN ACCOUNT
If you don't have an account with us or a securities firm that is permitted to
buy or sell shares of the Fund for you, call Prudential Mutual Fund Services LLC
(PMFS), the Fund's Transfer Agent, at (800) 521-7466 or contact:
Prudential Mutual Fund Services LLC
Attn: Institutional Service Division
P.O. Box 15030
New Brunswick, NJ 08906
After you have established an account, all purchases of Class I shares must
be made via wire transfer of funds to State Street Bank and Trust Company,
Boston, Massachusetts, the Fund's custodian (the Custodian). We have the right
to reject any purchase order (including an exchange into the Fund) or suspend or
modify the Fund's sale of its shares.
STEP 2: CHOOSE A SHARE CLASS
The Fund offers Class A and Class I shares. Except as noted below, the minimum
initial investment for Class I shares is $5 million and the minimum subsequent
investment is $10,000. This prospectus only describes how you can buy and sell
Class I shares of the Fund. For purposes of the minimum initial and subsequent
investment requirements, a master account and its subaccounts, as well as
related institutional accounts (that is, accounts of shareholders with a common
institutional or corporate parent), may be combined.
PURCHASES THROUGH THE COMMAND PROGRAM OR THE BUSINESSEDGE PROGRAM
Class I shares of the Fund are available to shareholders who meet the minimum
investment requirements and participate in either the corporate COMMAND (sm)
Account Program (the COMMAND Program), which is available through Prudential
Securities Incorporated (Prudential Securities), or the Prudential
BusinessEdge (sm) Account Program (the BusinessEdge Program), which is available
either through Prudential Securities or Pruco Securities Corporation (Prusec).
These programs offer intergrated financial services that link together various
product components with the ability to invest in shares of the Fund.
--------------------------------------------------------------------------------
13
<PAGE>
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HOW TO BUY AND SELL
--------------------------------------------------------------------------------
SHARES OF THE FUND
--------------------------------------------------------------------------------
If you participate in the COMMAND Program or the BusinessEdge Program, your
purchase of Class I shares must be made through your Prudential Securities
Financial Advisor or your Prusec broker, as applicable.
STEP 3: UNDERSTANDING THE PRICE YOU'LL PAY
When you invest in a mutual fund, you buy shares of the Fund. Shares of a money
market mutual fund, like the Fund, are priced differently than shares of common
stock and other securities.
The price you pay for each share of the Fund is based on the share value.
The share value of a mutual fund--known as the NET ASSET VALUE or NAV--is
determined by a simple calculation: it's the total value of the Fund (assets
minus liabilities) divided by the total number of shares outstanding. In
determining NAV, the Fund values its securities using the amortized cost method.
The Fund seeks to maintain an NAV of $1 per share at all times.
We determine the NAV of our shares once each business day at 4:00 p.m. New
York time, on days that the New York Stock Exchange is open for trading. We do
not determine NAV on days when we have not received any orders to purchase,
sell, or exchange or when changes in the value of the Fund's portfolio do not
affect the NAV.
If your purchase order for Class I shares is received by PMFS by calling
(800) 521-7466 before 4:00 p.m. New York time, and federal funds are received by
the Custodian by wire transfer on the same business day, your purchase order
becomes effective as of 4:00 p.m., New York time, and the shares you purchase
are entitled to dividend income earned on that day. Telephone calls to PMFS will
be recorded. In order to make investments that will generate income immediately,
the Fund must have federal funds available to it. Therefore, you are urged to
wire funds to the Custodian via the Federal Reserve Wire System as early in the
day as possible.
If you participate in the COMMAND Program or the BusinessEdge Program, you
must submit your purchase order to your Prudential Securities Financial Advisor
or Prusec broker, as applicable, by 2:00 p.m., New York time. The Prudential
Securities Financial Advisor or Prusec broker will submit your order to the Fund
for Class I shares and will arrange for the transfer of federal funds from your
Program account to the Custodian. If your purchase order is received by 2:00
p.m., New York time, the shares you purchase are entitled to dividend income
earned on that day.
--------------------------------------------------------------------------------
14 Prudential Institutional Liquidity (Telephone) (800) 521-7466
Portfolio, Inc.
<PAGE>
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HOW TO BUY AND SELL
--------------------------------------------------------------------------------
SHARES OF THE FUND
--------------------------------------------------------------------------------
STEP 4: ADDITIONAL SHAREHOLDER SERVICES
As a Fund shareholder, you can take advantage of the following services and
privileges:
Automatic Reinvestment. As we explained in the "Fund Distributions and Tax
Issues" section, the Fund pays out--or distributes--its net investment income
and capital gains to all shareholders. For your convenience, we will
automatically reinvest your distributions in the Fund at NAV. If you want your
distributions paid in cash (via wire transfer to your bank account), you can
indicate this preference on your application or notify the Transfer Agent in
writing (at the address below) at least five business days before the date we
determine who receives dividends.
Prudential Mutual Fund Services LLC
Attn: Institutional Service Division
P.O. Box 15030
New Brunswick, NJ 08906
Reports to Shareholders. Every year, we will send you an annual report (along
with an updated prospectus) and a semi-annual report, which contain important
financial information about the Fund. To reduce Fund expenses, we will send one
annual shareholder report, one semi-annual shareholder report and one annual
prospectus per household, unless you instruct us or your broker otherwise.
Subaccounting and Special Services. Special processing can be arranged with PMFS
for corporations, banks and other institutions that wish to open multiple
accounts (a master account and subaccounts). An institution that wishes to use
PMFS's subaccounting facilities or other special services for individual or
multiple accounts will be required to enter into a separate agreement with PMFS.
Charges for these services, if any, will be determined on the basis of the level
of services provided. Subaccounts can be opened at the time of an initial
investment or at a later date.
HOW TO SELL YOUR SHARES
You can sell your shares of the Fund at any time, subject to certain
restrictions.
When you sell shares of the Fund--also known as redeeming shares-- the
price you will receive will be the NAV next determined after the Transfer
--------------------------------------------------------------------------------
15
<PAGE>
--------------------------------------------------------------------------------
HOW TO BUY AND SELL
--------------------------------------------------------------------------------
SHARES OF THE FUND
--------------------------------------------------------------------------------
Agent receives your order to sell. Redemption requests may be made by telephone
by calling PMFS at (800) 521-7466. When you call, you will be asked to provide
your name (as an authorized person on the account), account number and personal
identification number. Neither PMFS nor the Fund will be responsible for further
verification of the authenticity of instructions received by telephone.
During periods of severe market or economic conditions, telephone
redemption may be difficult. In such case, you should consider sending your
redemption request to PMFS by telecopy at telecopier number (732) 482-2666.
All redemptions are paid by wire transfer of the proceeds to the U.S.
commercial bank account or the Prudential Securities account designated on your
account application.
For Class I shares to be redeemed and the proceeds sent by wire transfer on
the same day, telephone instructions or your written redemption request must be
received by PMFS before 4:00 p.m., New York time. Although we will wire
redemption proceeds on the same day as a request received before 4:00 p.m., New
York time, you should be aware that federal wire restrictions and individual
bank hours of operation may restrict your access to the redemption proceeds
until the following business day. Class I shares redeemed before 4:00 p.m., New
York time, are not entitled to income dividends declared on the day of the
redemption.
If you participate in the COMMAND Program or the BusinessEdge Program, you
must submit your redemption request to your Prudential Securities Financial
Advisor or Prusec broker, as applicable, by 2:00 p.m., New York time, in order
to have the request processed on the same day.
RESTRICTIONS ON SALES
There are certain times when you may not be able to sell shares of the Fund or
when we may delay paying you the proceeds from a sale. This may happen during
unusual market conditions or emergencies when the Fund can't determine the value
of its assets or sell its holdings. For more information, see the SAI, "Purchase
and Redemption of Fund Shares."
If you are selling more than $100,000 of shares and you want the redemption
proceeds wired to an institution that is not in our records, or you are a
business or trust, and if you hold your shares directly with the Transfer Agent,
you will need to have the signature on your sell order signature guaranteed by
an "eligible guarantor institution." An "eligible guarantor institution"
--------------------------------------------------------------------------------
16 Prudential Institutional Liquidity (Telephone) (800) 521-7466
Portfolio, Inc.
<PAGE>
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HOW TO BUY AND SELL
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SHARES OF THE FUND
--------------------------------------------------------------------------------
includes any bank, broker-dealer or credit union. For more information, see the
SAI, "Purchase and Redemption of Fund Shares."
In addition, we may withhold wiring redemption proceeds if the Fund's
investment adviser determines that the Fund could be adversely affected by
making immediate payment, and we may take up to seven days to wire
redemption proceeds.
REDEMPTION IN KIND
If the sales of Fund shares you make during any 90-day period reach the lesser
of $250,000 or 1% of the value of the Fund's net assets, we can then give you
securities from the Fund's portfolio instead of cash. If you want to sell the
securities for cash, you would have to pay the costs charged by a broker.
INVOLUNTARY REDEMPTION
If you make a sale that reduces your account to less than $5 million, we may
sell the rest of your shares and close your account. We do this to minimize the
Fund's expenses paid by other shareholders. We will give you 60 days' notice,
during which time you can purchase additional shares to avoid this action.
AUTOMATIC REDEMPTION FOR THE COMMAND PROGRAM OR
THE BUSINESSEDGE PROGRAM
If you participate in the COMMAND Program or the BusinessEdge Program, your Fund
shares will be automatically redeemed to cover any deficit in your account. The
amount of the redemption will be the nearest dollar amount necessary to cover
the deficit.
The amount of the redemption will be the lesser of the total value of Fund
shares held in your account or the deficit in your account. A deficit in your
COMMAND Program account or BusinessEdge Program account may result from activity
arising under the Program, such as debit balances incurred by the use of the
Visa(R) Gold Debit Card Account (for the COMMAND Program) or the BusinessEdge
Visa(R) Debit Card Account (for the BusinessEdge Program), as well as ATM
transactions, cash advances and Program account checks. Your account will be
automatically scanned for deficits each day and, if there is insufficient cash
in your account, we will redeem an appropriate number of shares of the Fund to
satisfy any remaining deficit. You are entitled to any dividends declared on the
redeemed shares through the day before the redemption is made. Dividends
declared on the redemption date will be retained by Prudential Securities or
Prusec, as applicable, which has advanced monies to satisfy deficits in your
account.
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17
<PAGE>
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HOW TO BUY AND SELL
--------------------------------------------------------------------------------
SHARES OF THE FUND
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Redemptions are automatically made, to the nearest dollar, on each day to
satisfy account deficits or to honor your redemption requests.
MANUAL REDEMPTION FOR THE COMMAND PROGRAM OR
THE BUSINESSEDGE PROGRAM
If you participate in the COMMAND Program or the BusinessEdge Program, you may
redeem your Fund shares by submitting a written request to your Prudential
Securities Financial Advisor or Prusec broker, as applicable. You should not
send a manual redemption request to the Fund. If you do, we will forward the
request to Prudential Securities or Prusec, as appropriate, which could delay
your requested redemption.
The proceeds from a manual redemption will immediately become a free cash
balance in your Program account and will be automatically invested in the money
market mutual fund that you selected as the "Primary Fund" for cash sweeps in
your account. Both the COMMAND Program and the BusinessEdge Program require that
your written redemption request be signed by all persons in whose name Fund
shares are registered, exactly as they appear on your Program account client
statement. In certain situations, additional documents such as trust
instruments, death certificates, appointments as executor or administrator, or
certificates of corporate authority may be required.
Under the COMMAND Program, Prudential Securities has the right to terminate
your Program account at any time for any reason. Likewise, under the
BusinessEdge Program, Prudential Securities or Prusec, as applicable, has the
right to terminate your Program account at any time for any reason. If a Program
account is terminated, all shares of the Fund held in the account will be
redeemed.
--------------------------------------------------------------------------------
18 Prudential Institutional Liquidity (Telephone) (800) 521-7466
Portfolio, Inc.
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
The financial highlights below are intended to help you evaluate the financial
performance of Class I shares of the Fund. The TOTAL RETURN in the chart
represents the rate that a shareholder earned on an investment in the Fund,
assuming reinvestment of all dividends and other distributions. The information
is for Class I shares of the Fund for the periods indicated.
Review each chart with the financial statements which appear in the SAI.
Additional performance information is contained in the annual report, which you
can receive at no charge, as described on the back cover of this prospectus.
The financial highlights for the two fiscal years ended March 31, 2000 and
the period from July 9, 1997 through March 31, 1998 were audited by
PricewaterhouseCoopers LLP, independent accountants, whose reports were
unqualified.
Class I Shares (fiscal years ended 3-31)
---------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE 2000 1999 1998(1)
---------------------------------------------------------------
NET ASSET VALUE, $1.00 $1.00 $1.00
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
and net realized gains .053(4) .053(4) .041(4)
Dividends and
distributions to
shareholders (.053) (.053) (.041)
Net asset value, end
of period $1.00 $1.00 $1.00
TOTAL RETURN(2) 5.46% 5.45% 4.15%
---------------------------------------------------------------
RATIOS/SUPPLEMENTAL
DATA 2000 1999 1998
---------------------------------------------------------------
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:
Net investment income 5.30%(4) 5.26%(4) 5.60%(3),(4)
Expenses .15%(4) .15%(4) .15%(3),(4)
---------------------------------------------------------------
(1) Information shown is for the period from 7-9-97, when Class I shares were
first offered, through 3-31-98.
(2) 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.
(3) Annualized.
(4) Net of management fee waiver/expense subsidy.
--------------------------------------------------------------------------------
19
<PAGE>
--------------------------------------------------------------------------------
The 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 applicable prospectus carefully before you invest
or send money.
STOCK FUNDS ASSET ALLOCATION/BALANCED FUNDS
PRUDENTIAL EMERGING GROWTH FUND, INC. PRUDENTIAL BALANCED FUND
PRUDENTIAL EQUITY FUND, INC. PRUDENTIAL DIVERSIFIED FUNDS
Conservative Growth Fund
PRUDENTIAL EQUITY INCOME FUND Moderate Growth Fund
High Growth Fund
PRUDENTIAL INDEX SERIES FUND
Prudential Small-Cap Index Fund THE PRUDENTIAL INVESTMENT PORTFOLIOS,
Prudential Stock Index Fund INC.
Prudential Active Balanced Fund
THE PRUDENTIAL INVESTMENT PORTFOLIOS,
INC. GLOBAL FUNDS
Prudential Jennison Growth Fund
Prudential Jennison Growth GLOBAL STOCK FUNDS
& Income Fund
PRUDENTIAL DEVELOPING MARKETS FUND
PRUDENTIAL MID-CAP VALUE FUND Prudential Developing Markets
Equity Fund
PRUDENTIAL REAL ESTATE SECURITIES FUND Prudential Latin America Equity Fund
PRUDENTIAL SECTOR FUNDS, INC. PRUDENTIAL EUROPE GROWTH FUND, INC.
Prudential Financial Services Fund
Prudential Health Services Fund PRUDENTIAL GLOBAL GENESIS FUND, INC.
Prudential Technology Fund
Prudential Utility Fund PRUDENTIAL INDEX SERIES FUND
Prudential Europe Index Fund
PRUDENTIAL SMALL-CAP QUANTUM FUND, INC. Prudential Pacific Index Fund
PRUDENTIAL SMALL COMPANY VALUE PRUDENTIAL NATURAL RESOURCES
FUND, INC. FUND, INC.
PRUDENTIAL TAX-MANAGED FUNDS PRUDENTIAL PACIFIC GROWTH FUND, INC.
Prudential Tax-Managed Equity Fund
PRUDENTIAL WORLD FUND, INC.
PRUDENTIAL 20/20 FOCUS FUND Prudential Global Growth Fund
NICHOLAS-APPLEGATE FUND, INC. Prudential International Value Fund
Nicholas-Applegate Growth Equity Fund Prudential Jennison International
Growth Fund
TARGET FUNDS
Large Capitalization Growth Fund GLOBAL UTILITY FUND, INC.
Large Capitalization Value Fund TARGET FUNDS
Small Capitalization Growth Fund International Equity Fund
Small Capitalization Value Fund
GLOBAL BOND FUNDS
PRUDENTIAL GLOBAL TOTAL RETURN
FUND, INC.
PRUDENTIAL INTERNATIONAL BOND
FUND, INC.
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20 Prudential Institutional Liquidity (Telephone)(800) 521-7466
Portfolio, Inc.
<PAGE>
--------------------------------------------------------------------------------
The Prudential Mutual Fund Family
--------------------------------------------------------------------------------
BOND FUNDS MONEY MARKET FUNDS
TAXABLE BOND FUNDS TAXABLE MONEY MARKET FUNDS
PRUDENTIAL DIVERSIFIED BOND FUND, INC. CASH ACCUMULATION TRUST
Liquid Assets Fund
PRUDENTIAL GOVERNMENT INCOME FUND, INC. National Money Market Fund
PRUDENTIAL GOVERNMENT SECURITIES TRUST PRUDENTIAL GOVERNMENT SECURITIES TRUST
Short-Intermediate Term Series Money Market Series
U.S. Treasury Money Market Series
PRUDENTIAL HIGH YIELD FUND, INC.
PRUDENTIAL SPECIAL MONEY MARKET
PRUDENTIAL HIGH YIELD TOTAL RETURN FUND, INC.
FUND, INC. Money Market Series
PRUDENTIAL INDEX SERIES FUND PRUDENTIAL MONEYMART ASSETS, INC.
Prudential Bond Market Index Fund
TAX-FREE MONEY MARKET FUNDS
PRUDENTIAL STRUCTURED MATURITY FUND, INC.
Income Portfolio PRUDENTIAL TAX-FREE MONEY FUND, INC.
TARGET FUNDS PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Total Return Bond Fund California Money Market Series
TAX-EXEMPT BOND FUNDS PRUDENTIAL MUNICIPAL SERIES FUND
Connecticut Money Market Series
PRUDENTIAL CALIFORNIA MUNICIPAL FUND Massachusetts Money Market Series
California Series New Jersey Money Market Series
California Income Series New York Money Market Series
PRUDENTIAL MUNICIPAL BOND FUND COMMAND FUNDS
High Income Series
Insured Series COMMAND MONEY FUND
PRUDENTIAL MUNICIPAL SERIES FUND COMMAND GOVERNMENT FUND
Florida Series
Massachusetts Series COMMAND TAX-FREE FUND
New Jersey Series
New York Series INSTITUTIONAL MONEY MARKET FUNDS
North Carolina Series
Ohio Series PRUDENTIAL INSTITUTIONAL LIQUIDITY
Pennsylvania Series PORTFOLIO, INC.
Institutional Money Market Series
PRUDENTIAL NATIONAL MUNICIPALS
FUND, INC.
--------------------------------------------------------------------------------
21
<PAGE>
FOR MORE INFORMATION
Please read this prospectus before you
invest in the Fund and keep it for future
reference. For information or shareholder
questions contact
PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: INSTITUTIONAL SERVICE DIVISION
P.O. BOX 15030
NEW BRUNSWICK, NJ 08906
(800) 521-7466
(732) 482-7555 (Calling from outside the U.S.)
Outside Brokers should contact
PRUDENTIAL INVESTMENT MANAGEMENT
SERVICES LLC
P.O. BOX 15035
NEW BRUNSWICK, NJ 08906
(800) 778-8769
Visit Prudential's website at:
http://www.prudential.com
Additional information about the Fund can
be obtained without charge and can be
found in the following documents
STATEMENT OF ADDITIONAL INFORMATION (SAI)
(incorporated by reference into this
prospectus)
ANNUAL REPORT
SEMI-ANNUAL REPORT
MF1371
You can also obtain copies of Fund
documents from the Securities and
Exchange Commission as follows:
BY MAIL
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-0102
BY ELECTRONIC REQUEST
[email protected]
(The SEC charges a fee to copy
documents.)
IN PERSON
PUblic Reference Room in Washington, DC
(For hours of operation, call
1-(202) 942-8090
VIA THE INTERNET
on the EDGAR Database at
http://www.sec.gov
CUSIP Numbers NASDAQ Symbol
Class I Shares--744350-60-4 PLPXX
Investment Company Act File No. 811-5336
[SYMBOL] Printed on Recycled Paper
<PAGE>
PRUDENTIAL INSTITUTIONAL LIQUIDITY PORTFOLIO, INC.
INSTITUTIONAL MONEY MARKET SERIES
Statement of Additional Information
Dated May 31, 2000
Prudential Institutional Liquidity Portfolio, Inc.--Institutional Money
Market Series (the Fund) is an open-end diversified management investment
company whose investment objective is high current income consistent with the
preservation of principal and liquidity. The Fund offers Class A shares and
Class I shares. The Fund pursues this objective by investing primarily in a
portfolio of short-term money market instruments maturing within thirteen months
of the date of acquisition. There can be no assurance that the Fund's investment
objective will be achieved. See "How the Fund Invests" in the Fund's Prospectus
for Class A shares or Class I shares, as applicable, and "Description of the
Fund, its Investments and Risks" in this Statement of Additional Information.
The Fund's address is Gateway Center Three, 100 Mulberry Street, Newark,
New Jersey 07102-4077, and its telephone number is (800) 521-7466.
This Statement of Additional Information sets forth information about the
Fund. This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Fund's Prospectus for Class A shares or Class I
shares, as applicable, each dated May 31, 2000, copies of which may be obtained
from the Fund upon request at the address or telephone number noted above.
TABLE OF CONTENTS
PAGE
----
Fund History ............................................................. B-2
Description of the Fund, its Investments and Risks ....................... B-2
Investment Restrictions .................................................. B-4
Management of the Fund ................................................... B-6
Control Persons and Principal Holders of Securities ...................... B-8
Investment Advisory and Other Services ................................... B-9
Brokerage Allocation and Other Practices ................................. B-11
Securities and Organization .............................................. B-12
Purchase and Redemption of Fund Shares ................................... B-12
Net Asset Value .......................................................... B-13
Taxes, Dividends and Distributions ....................................... B-14
Calculation of Yield ..................................................... B-15
Financial Statements ..................................................... B-16
Report of Independent Accountants ........................................ B-32
Appendix I--Description of Ratings ....................................... I-1
---------
MF137B
<PAGE>
FUND HISTORY
The Fund was organized as a corporation under the laws of Maryland on
September 1, 1987.
DESCRIPTION OF THE FUND, ITS INVESTMENTS AND RISKS
(a) CLASSIFICATION. The Fund is an open-end diversified management
investment company.
(b) INVESTMENT STRATEGIES AND RISKS.
The Fund's investment objective is high current income consistent with the
preservation of principal and liquidity. While the principal investment policies
and strategies for seeking to achieve this objective are described in the Fund's
Prospectuses for its Class A shares and Class I shares, the Fund may from time
to time also utilize the securities, instruments, policies and strategies
described below in seeking to achieve its objective. The Fund may not be
successful in achieving its objective and you can lose money.
OBLIGATIONS ISSUED OR GUARANTEED BY THE U.S. GOVERNMENT, ITS AGENCIES AND
INSTRUMENTALITIES
Obligations issued or guaranteed as to principal and interest by the U.S.
Government may be acquired by the Fund in the form of custodial receipts that
evidence ownership of future interest payments, principal payments or both on
certain United States Treasury notes or bonds. Such notes and bonds are held in
custody by a bank on behalf of the owners. These custodial receipts are known by
various names, including "Treasury Receipts," "Treasury Investment Growth
Receipts" (TIGRs) and "Certificates of Accrual on Treasury Securities" (CATS).
The Fund does not intend to purchase Treasury Receipts, TIGRs or CATS during the
coming year.
FLOATING RATE AND VARIABLE RATE SECURITIES
The Fund may purchase "floating rate" and "variable rate" securities.
Investments in floating or variable rate securities normally will involve
securities which provide a rate that is set as a spread to a designated base
rate, such as rates on Treasury bills, and, in some cases, that the purchaser
can demand payment of the obligation at specified intervals or after a specified
notice period (in each case a period of less than thirteen months) at par plus
accrued interest, which amount may be more or less than the amount paid for
them. Variable rate securities provide for a specified periodic adjustment in
the interest rate, while floating rate securities have an interest rate which
changes whenever there is a change in the designated base interest rate.
DEMAND FEATURES AND GUARANTEES
The Fund may purchase demand features and guarantees. A demand feature
supporting a money market fund instrument can be relied upon in a number of
respects. First, the demand feature can be relied upon to shorten the maturity
of the underlying instrument. Second, the demand feature, if unconditional, can
be used to evaluate the credit quality of the underlying security. This means
that the credit quality of the underlying security can be based solely on the
credit quality of the unconditional demand feature supporting that security.
A guarantee is a form of unconditional credit support that may include bond
insurance, a letter of credit, and an unconditional demand feature. A money
market fund holding a security subject to a guarantee may determine the credit
quality of the underlying security solely on the basis of the credit quality of
the supporting guarantee.
The Fund can invest 10% of its total assets in securities directly issued
by, or supported by, a demand feature provider or guarantor. Rule 2a-7 under the
Investment Company Act of 1940, as amended (the Investment Company Act) provides
a more stringent limit on demand features and guarantees that are "second tier
securities" under the Rule; that is, those securities that are rated in the
second highest category by a specified number of rating organizations.
Specifically, Rule 2a-7 provides that a money market fund cannot invest more
than 5% of its total assets in securities directly issued by, or supported by,
second tier demand features or guarantees that are issued by the institution
that issued such second tier securities.
LENDING OF SECURITIES
Consistent with applicable regulatory requirements, the Fund may lend its
portfolio to brokers, dealers and financial institutions, provided that
outstanding loans of the Fund do not exceed in the aggregate 15% of the value of
the Fund's total assets and, provided that such loans are callable at any time
by the Fund and are at all times secured by cash or U.S. Government securities
that are at least equal to the market value, determined daily, of the loaned
securities. The advantage of such loans is that the Fund continues to receive
payments in lieu of the interest on the loaned securities, while at the same
time earning interest either directly
B-2
<PAGE>
from the borrower or on the collateral which will be invested in short-term
obligations. Any voting rights, or rights to consent, relating to the securities
loaned pass to the borrower. However, if a material event affecting the
investment occurs, such loans will be called so that the loaned securities may
be voted by the Fund.
A loan may be terminated by the borrower on one business day's notice or by
the Fund at any time. If the borrower fails to maintain the requisite amount of
collateral, the loan automatically terminates, and the Fund could use the
collateral to replace the securities while holding the borrower liable for any
excess of replacement cost over the value of the collateral. As with any
extensions of credit, there are risks of delay in recovery and in some cases
loss of rights in the collateral should the borrower of the securities fail
financially. However, these loans of portfolio securities will only be made to
firms determined to be creditworthy pursuant to procedures approved by the Board
of Directors of the Fund. On termination of the loan, the borrower is required
to return the securities to the Fund, and any gain or loss in the market price
during the loan would inure to the Fund.
The Fund will pay reasonable finders', administrative and custodial fees in
connection with a loan of its securities or may share the interest earned on
collateral with the borrower.
ILLIQUID SECURITIES
The Fund may not hold more than 10% of its net assets in illiquid
securities. If the Fund were to exceed this limit, the investment adviser would
take prompt action to reduce the Fund's holdings in illiquid securities to no
more than 10% of its net assets, as required by applicable law. Historically,
illiquid securities have included securities subject to contractual or legal
restrictions on resale because they have not been registered under the
Securities Act of 1933, as amended (Securities Act), securities which are
otherwise not readily marketable and repurchase agreements having a maturity of
longer than seven days. Securities which have not been registered under the
Securities Act are referred to as private placements or restricted securities
and are purchased directly from the issuer or in the secondary market. Mutual
funds do not typically hold a significant amount of these restricted or other
illiquid securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an adverse effect on
the marketability of portfolio securities and a mutual fund might be unable to
dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions within
seven days. A mutual fund might also have to register such restricted securities
in order to dispose of them, resulting in additional expense and delay. Adverse
market conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
securities.
Rule 144A under the Securities Act allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers.
Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act and commercial paper for which there is a readily available
market will not be deemed to be illiquid under procedures established by the
Board of Directors. The investment adviser will monitor the liquidity of such
restricted securities subject to the supervision of the Board of Directors. In
reaching liquidity decisions, the investment adviser will consider, inter alia,
the following factors: (1) the frequency of trades and quotes for the security;
(2) the number of dealers wishing to purchase or sell the security and the
number of other potential purchasers; (3) dealer undertakings to make a market
in the security; and (4) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of the transfer). In addition, in order
for commercial paper that is issued in reliance on Section 4(2) of the
Securities Act to be considered liquid, (i) it must be rated in one of the two
highest rating categories by at least two nationally recognized statistical
rating organizations (NRSROs), or if only one NRSRO rates the securities, by
that NRSRO, or, if unrated, be of comparable quality in the view of the
investment adviser; and (ii) it must not be "traded flat" (i.e., without accrued
interest) or in default as to principal or interest. Repurchase agreements
subject to a demand right are deemed to have a maturity equal to the notice
period.
BORROWING
The Fund may borrow from banks (including through entering into reverse
repurchase agreements) up to and including 15% of the value of its net assets
taken at cost for temporary or emergency purposes. The Fund may pledge up to and
including 15% of its net assets to secure such borrowings. The Fund will not
purchase portfolio securities if its borrowings (other than permissible
securities loans) exceed 5% of its total assets.
B-3
<PAGE>
REPURCHASE AGREEMENTS
The Fund may purchase securities and concurrently enter into "repurchase
agreements" with the seller, whereby the seller agrees to repurchase such
securities at a specified price within a specified time (generally seven days or
less). The repurchase agreements provide that the Fund will sell the underlying
instruments back to the dealer or the bank at the specified price and at a fixed
time in the future, usually not more than seven days from the date of purchase.
The difference between the purchase price and the resale price represents the
interest earned by the Fund, which is unrelated to the coupon rate or maturity
of the purchased security. Repurchase agreements will at all times be fully
collateralized in an amount at least equal to the resale price. Such collateral
will be held by the Custodian, directly or through a sub-custodian, and will be
maintained physically or in a book-entry account.
The Fund will enter into repurchase transactions only with parties which
meet creditworthiness standards approved by the Fund's Board of Directors. The
Fund's investment adviser monitors the creditworthiness of such parties under
the general supervision of the Board of Directors. In the event of a default or
bankruptcy by a seller, the Fund will promptly seek to liquidate the collateral.
To the extent that the proceeds upon sale of such collateral upon a default in
the obligation to repurchase are less than the resale price, the Fund will
suffer a loss if the financial institution that is a party to the repurchase
agreement petitions for bankruptcy or becomes subject to the U.S. Bankruptcy
Code because the law regarding the rights of the trust is unsettled. As a
result, under these circumstances, there may be a restriction on the Fund's
ability to sell the collateral, and the Fund could suffer a loss.
The Fund intends to participate in a joint repurchase account with other
investment companies managed by Prudential Investments Fund Management LLC (PIFM
or the Manager) pursuant to an order of the Securities and Exchange Commission
(SEC). On a daily basis, any uninvested cash balances of the Fund may be
aggregated with those of such other investment companies and invested in one or
more repurchase agreements. The Fund participates in the income earned or
accrued in the joint account based on the percentage of its investment. In
connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian or designated
sub-custodians, as the case may be, under triparty repurchase agreements, take
possession of the underlying collateral securities, the value of which equals or
exceeds the resale price of the agreement. 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.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements have the characteristics of borrowing and
involve the sale of securities held by the Fund with an agreement to repurchase
the securities at a specified price, date and interest payment. The Fund intends
only to use the reverse repurchase technique when it will be to its advantage to
do so. These transactions are only advantageous if the Fund has an opportunity
to earn a greater rate of interest on the cash derived from the transaction than
the interest cost of obtaining that cash. The Fund may be unable to realize
earnings from the use of the proceeds equal to or greater than the interest
required to be paid. The use of reverse repurchase agreements may exaggerate any
increase or decrease in the value of the Fund's portfolio. The Fund's Custodian
will maintain in a segregated account cash or other liquid assets maturing not
later than the expiration of the reverse repurchase agreements having a value
equal to or greater than such commitments.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Fund may purchase securities on a "when-issued" or "delayed delivery"
basis. When-issued or delayed delivery transactions arise when securities are
purchased or sold by the Fund with payment and delivery taking place in the
future in order to secure what is considered to be an advantageous price and
yield to the Fund at the time of entering into the transaction. The Fund will
limit such purchases to those in which the date of delivery and payment falls
within 90 days of the date of the commitment. The Fund will make commitments to
purchase such when-issued securities only with the intention of actually
acquiring the securities. The Fund's Custodian will segregate cash or other
liquid assets having a value equal to or greater than the Fund's purchase
commitments. If the Fund chooses to dispose of the when-issued security prior to
its receipt of, and payment for, the security, it could, as with the disposition
of any other portfolio security, incur a gain or loss due to market
fluctuations. The securities so purchased are subject to market fluctuation and
no interest accrues to the purchaser during the period between purchase and
settlement.
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies. Fundamental policies
are those which cannot be changed without the approval of the holders of a
majority of the outstanding voting securities of the Fund. A "majority of the
outstanding voting securities," when used in this Statement of Additional
Information, means the lesser of (i) 67% of the voting shares represented at a
meeting at which more than 50% of the outstanding voting shares are present in
person or represented by proxy or (ii) more than 50% of the outstanding voting
shares. With respect to the submission of a change in fundamental policy or
investment objective of the Fund, such matters shall be deemed to have been
effectively acted upon with respect to the Fund if a majority of the outstanding
voting securities of the Fund votes for the approval of such matters as provided
above.
B-4
<PAGE>
The following investment restrictions are fundamental policies of the Fund
and may not be changed except as described above.
The Fund may not:
1. Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of transactions); provided that
the deposit or payment by the Fund of initial or maintenance margin in
connection with options or futures contracts is not considered the purchase of a
security on margin.
2. Make short sales of securities or maintain a short position.
3. Issue senior securities, borrow money (including through the entry into
reverse repurchase agreement transactions) or pledge its assets, except that the
Fund may borrow up to 15% of the value of its total assets (calculated when the
loan is made) from banks for temporary, extraordinary or emergency purposes and
may pledge up to 15% of the value of its total assets to secure such borrowings.
The Fund will not purchase portfolio securities if its borrowings exceed 5% of
its net assets. The purchase or sale of securities on a "when-issued" or delayed
delivery basis, the entry into reverse repurchase agreements and the purchase
and sale of financial futures contracts and collateral arrangements with respect
thereto are not deemed to be a pledge of assets and such arrangements are not
deemed to be the issuance of a senior security.
4. Purchase any security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result, with respect to 75% of the
value of the Fund's total assets, more than 5% of the value of the Fund's total
assets would be invested in the securities of a single issuer.
5. Purchase any securities (other than obligations of the U.S. Government,
its agencies and instrumentalities) if, as a result, 25% or more of the value of
the Fund's total assets (determined at the time of investment) would be invested
in the securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to money market instruments of domestic banks. For purposes of this
exception, domestic banks shall include all banks which are organized under the
laws of United States or a state (as defined in the Investment Company Act),
U.S. branches of foreign banks that are subject to the same regulations as U.S.
banks and foreign branches of domestic banks.
6. Buy or sell real estate or interests in real estate, except that the
Fund may purchase and sell securities which are secured by real estate,
securities of companies which invest or deal in real estate and publicly traded
securities of real estate investment trusts. The Fund may not purchase interests
in real estate limited partnerships which are not readily marketable.
7. Act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an underwriter under
certain federal securities laws.
8. Make investments for the purpose of exercising control or management.
9. Invest in securities of other registered investment companies, except by
purchases in the open market involving only customary brokerage commissions and
as a result of which not more than 10% of its total assets (determined at the
time of investment) would be invested in such securities, or except as part of a
merger, consolidation or other acquisition.
10. Invest in interests in oil, gas or other mineral exploration or
development programs, except that the Fund may invest in the securities of
companies which invest in or sponsor such programs.
11. Make loans, except through (i) repurchase agreements and (ii) loans of
portfolio securities (limited to 15% of the value of the Fund's total assets).
12. Purchase common stock or other voting securities, preferred stock,
warrants or other equity securities, except as may be permitted by restriction
number 9.
13. Enter into reverse repurchase agreements if, as a result thereof, the
Fund's obligations with respect to reverse repurchase agreements would exceed
15% of the value of the Fund's total assets.
14. Buy or sell commodities or commodity contracts, except that the Fund
may purchase and sell futures contracts and options thereon.
Whenever any fundamental investment policy or investment restriction states
a maximum percentage of the Fund's assets, it is intended that if the percentage
limitation is met at the time the action is taken, a later change in percentage
resulting from changing total or net asset values will not be considered a
violation of such policy. However, in the event that the Fund's asset coverage
for borrowings falls below 300%, the Fund will take action within three days to
reduce its borrowings, as required by applicable law.
B-5
<PAGE>
MANAGEMENT OF THE FUND
(A) DIRECTORS
The Fund has Directors who, in addition to overseeing the actions of the
Fund's Manager, Subadviser, and Distributor, decide upon matters of general
policy.
The Directors also review the actions of the officers of the Fund, who
conduct and supervise the daily business operations of the Fund.
(B) MANAGEMENT INFORMATION--DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITION WITH
NAME, ADDRESS AND AGE (1) THE FUND PRINCIPAL OCCUPATIONS AND OTHER AFFILIATIONS FOR THE LAST FIVE YEARS
------------------------- -------- --------------------------------------------------------------------
<S> <C> <C>
Delayne Dedrick Gold (61) Director Marketing and Management Consultant.
* Robert F. Gunia (53) Vice President Executive Vice President and Chief Administrative Officer (since
and Director June 1999) of Prudential Investments; Corporate Vice President
(since September 1997) of the Prudential Insurance Company of
America (Prudential); Executive Vice President and Treasurer
(since December 1996) of Prudential Investments Fund Management
LLC (PIFM); President (since April 1999) of Prudential
Investment Management Services LLC (PIMS); formerly Senior Vice
President (March 1987-May 1999) of Prudential Securities
Incorporated (Prudential Securities); formerly Chief
Administrative Officer (July 1990-September 1996), Director
(January 1989-September 1996), and Executive Vice President,
Treasurer and Chief Financial Officer (June 1987-September 1996)
of Prudential Mutual Fund Management, Inc. (PMF); Vice President
and Director (since May 1989) of The Asia Pacific Fund, Inc.
Robert E. LaBlanc (65) Director President (since 1981) of Robert E. LaBlanc Associates, Inc.
(telecommunications); formerly, General Partner at Salomon
Brothers and Vice-Chairman of Continental Telecom; Director of
Storage Technology Corporation, Titan Corporation, Salient 3
Communications, Inc. and Tribune Company; Trustee of Manhattan
College.
* David R. Odenath, Jr. (42) Director Officer in Charge, President, Chief Executive Officer and Chief
Operating Officer (since June 1999) of PIFM; Senior Vice
President (since June 1999) of Prudential; Senior Vice President
(August 1993-May 1999) of PaineWebber Group, Inc.
Robin B. Smith (60) Director Chairman and Chief Executive Officer (since August 1996) of
Publishers Clearing House; formerly President and Chief Executive
Officer (January 1989-August 1996) and President and Chief
Operating Officer (September 1981-December 1988) of Publishers
Clearing House; Director of BellSouth Corporation, Texaco Inc.,
Springs Industries Inc., and Kmart Corporation.
</TABLE>
B-6
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH
NAME, ADDRESS AND AGE (1) THE FUND PRINCIPAL OCCUPATIONS AND OTHER AFFILIATIONS FOR THE LAST FIVE YEARS
------------------------- -------- --------------------------------------------------------------------
<S> <C> <C>
Stephen Stoneburn (56) Director President and Chief Executive Officer (since June 1996) of Quadrant
Media Corp. (publishing); formerly President (June 1995-June
1996) of Argus Integrated Media, Inc.; Senior Vice President and
Managing Director (January 1993-1995) of Cowles Business Media;
Senior Vice President (January 1991-1992) and Publishing Vice
President (May 1989-December 1990) of Gralla Publications (a
division of United Newspapers, U.K.); and Senior Vice President
of Fairchild Publications, Inc.
* John R. Strangfeld, Jr. (46) President and Chief Executive Officer, Chairman, President and Director (since
Director January 1990) of The Prudential Investment Corporation, Executive
Vice President (since February 1998) of Prudential Global Asset
Management Group of Prudential; Chairman (since August 1989) of
Pricoa Capital Group; formerly various positions to Chief Executive
Officer (November 1994-December 1998) of Private Asset Management
Group of Prudential and Senior Vice President (January 1986-August
1989) of Prudential Capital Group, a unit of Prudential.
Nancy H. Teeters (69) Director Economist; formerly Director of Inland Steel Industries (July
1989-1999); formerly, Vice President and Chief Economist (July
1984-July 1990) of International Business Machines Corporation;
formerly, Governor of Federal Reserve System (1978-1984).
Clay T. Whitehead (61) Director President (since May 1983) of National Exchange Inc. (new business
development firm).
Robert C. Rosselot (39) Secretary Assistant General Counsel (since September 1997) of PIFM; formerly,
partner with the law firm of Howard & Howard, Bloomfield Hills,
Michigan (December 1995-September 1997) and Corporate Counsel,
Federated Investors (1990-1995).
Grace C. Torres (41) Treasurer and First Vice President (since December 1996) of PIFM; First Vice
Principal President (since March 1994) of Prudential Securities; formerly
Financial and First Vice President (March 1994-September 1996) of Prudential
Accounting Mutual Fund Management, Inc. and Vice President (July 1989-March
Officer 1994) of Bankers Trust Corporation.
Stephen M. Ungerman (46) Assistant Vice President and Tax Director (since March 1996) of Prudential
Treasurer Investments; formerly First Vice President (February
1993-September 1996) of Prudential Mutual Fund Management, Inc.
--------------------
(1) Unless otherwise noted, the address for each of the above persons is c/o
Prudential Investments Fund Management LLC, Gateway Center Three, 100
Mulberry Street, Newark, New Jersey 07102-4077.
* "Interested" Director, as defined in the Investment Company Act of 1940, by
reason of his affiliation with Prudential Securities or PIFM.
Directors and officers of the Fund are also trustees, directors and
officers of some or all of the other investment companies distributed by PIMS.
The officers conduct and supervise the daily business operations of the
Fund, while the Directors, in addition to their functions set forth under
"Manager" and "Distributor," review such actions and decide on general policy.
The Board of Directors has adopted a retirement policy which calls for the
retirement of Directors on December 31 of the year in which they reach the age
of 75.
Pursuant to the Management Agreement with the Fund, the Manager pays all
compensation of officers and employees of the Fund as well as the fees and
expenses of all Directors of the Fund who are affiliated persons of the Manager.
</TABLE>
B-7
<PAGE>
The Fund pays each of its Directors who is not an affiliated person of PIFM
annual compensation of $2,125, in addition to certain out-of-pocket expenses.
Directors who serve on Fund Committees receive additional compensation. The
amount of compensation paid to each Director may change as a result of the
introduction of additional funds upon which the Director will be asked to serve.
Directors may receive their Directors' fees pursuant to a deferred fee
agreement with the Fund. Under the terms of the agreement, the Fund accrues
daily the amount of such Director's fees in installments which accrue interest
at a rate equivalent to the prevailing rate applicable to 90-day U.S. Treasury
Bills at the beginning of each calendar quarter (the T-Bill rate) or, pursuant
to an SEC exemptive order, at the daily rate of return of the Fund (the Fund
rate). Payment of the interest so accrued is also deferred and accruals become
payable at the option of the Director. The Fund's obligation to make payments of
deferred Directors' fees, together with interest thereon, is a general
obligation of the Fund.
The following table sets forth the aggregate compensation paid by the Fund
for the fiscal year ended March 31, 2000 to the Directors who are not affiliated
with the Manager and the aggregate compensation paid to such Directors for
service on the Fund's Board and that of all other funds managed by PIFM (Fund
Complex) for the calendar year ended December 31, 1999.
COMPENSATION TABLE
TOTAL
COMPENSATION
FROM FUND
AGGREGATE AND FUND
COMPENSATION COMPLEX PAID
NAME AND POSITION FROM FUND TO DIRECTORS(2)
----------------- ------------ -----------------
Edward D. Beach--Former Director ........... $2,125 $142,500(43/70)*
Delayne D. Gold--Director .................. $2,125 $144,500(43/70)*
Robert F. Gunia (1)--Director .............. -- --
Don G. Hoff--Former Director ............... $ 750 $ 22,500(14/17)*
Robert F. LaBlanc--Director ................ $2,125 $ 61,250(20/39)*
David R. Odenath, Jr. (1)--Director ........ -- --
Robin B. Smith--Director ................... $2,200 $ 96,000(32/44)*
Stephen Stoneburn--Director ................ $2,125 $ 61,250(20/39)*
John R. Strangfeld, Jr. (1)--Director ...... -- --
Nancy H. Teeters--Director ................. $2,275 $ 97,000(25/43)*
Clay T. Whitehead--Director ................ $1,000 $ 77,000(38/66)*
----------------
* Indicates number of funds/portfolios in Fund Complex (including the Fund)
to which aggregate compensation relates.
(1) Directors who are "interested," do not receive compensation from the Fund
Complex (including the Fund).
(2) Total compensation from all of the funds in the Fund Complex for the
calendar year ended December 31, 1999, including amounts deferred at the
election of Directors under the funds' Deferred Compensation Plans.
Including accrued interest, total deferred compensation amounted to
$156,478 for Robin B. Smith. Currently, Ms. Smith has agreed to defer some
of her fees at the T-Bill rate and other fees at the Fund rate.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of May 12, 2000, the Directors and officers of the Fund, as a group,
beneficially owned less than 1% of the outstanding shares of Common Stock of the
Fund.
As of May 12, 2000, the beneficial owners, directly or indirectly, of more
than 5% of the outstanding common stock of the Fund were:
NUMBER OF SHARES
NAME ADDRESS CLASS (% OF CLASS)
---- ------- ----- ------------
Federal Agricultural 919 18th St. NW I 86,151,676
MTGE-CORP Suite 200 (5.27%)
Attn: Nancy Corsiglia Washington, DC 20006
Pericom Semiconductor 2380 Bering Dr. I 102,058,431
San Jose, CA 95131 (6.25%)
As of May 12, 2000, Prudential Securities was the record holder for other
beneficial owners of 179,310,459 Class A shares of the Fund, representing
approximately 47.7% of the Class A shares then outstanding and 267,378,941 Class
I shares of the Fund, representing approximately 16.4% of the Class I shares
then outstanding. In the event of any meetings of shareholders, Prudential
Securities will forward, or cause the forwarding of, proxy materials to the
beneficial owners for which it is the record holder.
B-8
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
(A) INVESTMENT ADVISER
The manager of the Fund is Prudential Investments Fund Management LLC (PIFM
or the Manager), Gateway Center Three, 100 Mulberry Street, Newark, New Jersey
07102-4077. PIFM serves as manager to all of the other investment companies
that, together with the Fund, comprise the Prudential Mutual Funds. See "How the
Fund is Managed--Manager" in the Prospectus of the Class A shares or the Class I
shares, as applicable. As of March 31, 2000, PIFM managed and/or administered
open-end and closed-end management investment companies with assets of
approximately $78 billion. According to the Investment Company Institute, as of
September 30, 1999, the Prudential Mutual Funds were the 20th largest family of
mutual funds in the United States.
PIFM is a subsidiary of Prudential Securities Incorporated. Prudential
Mutual Fund Services LLC (PMFS or the Transfer Agent), a wholly-owned subsidiary
of PIFM, serves as the transfer agent and dividend distribution agent for the
Prudential Mutual Funds and, in addition, provides customer service,
recordkeeping and management and administrative services to qualified plans.
Pursuant to the Management Agreement with the Fund (the Management
Agreement), PIFM, subject to the supervision of the Fund's Board of Directors
and in conformity with the stated policies of the Fund, manages both the
investment operations of the Fund and the composition of the Fund's portfolio,
including the purchase, retention, disposition and loan of securities and other
assets. In connection therewith, PIFM is obligated to keep certain books and
records of the Fund. PIFM has hired The Prudential Investment Corporation, doing
business as Prudential Investments (PI, the investment advisor or the
Subadvisor), to provide subadvisory services to the Fund. PIFM also administers
the Fund's corporate affairs and, in connection therewith, furnishes the Fund
with office facilities, together with those ordinary clerical and bookkeeping
services which are not being furnished by State Street, the Fund's custodian
(the Custodian), and PMFS. The management services of PIFM for the Fund are not
exclusive under the terms of the Management Agreement and PIFM is free to, and
does, render management services to others.
For its services, PIFM receives, pursuant the Management Agreement, a fee
at an annual rate of .20 of 1% of the Fund's average daily net assets for each
of Class A and Class I shares. The fee is computed daily and payable monthly.
The Management Agreement also provides that in the event the expenses of the
Fund (including the fees payable to PIFM, but excluding interest, taxes,
brokerage commissions, distribution fees and litigation and indemnification
expenses and other extraordinary expenses not incurred in the ordinary course of
the Fund's business) for any fiscal year exceed the lowest applicable annual
expense limitation established and enforced pursuant to the statutes or
regulations of any jurisdiction in which shares of the Fund are then qualified
for offer and sale, the compensation due to PIFM will be reduced by the amount
of such excess. Reductions in excess of the total compensation payable to PIFM
will be paid by PIFM to the Fund. Currently, the Fund believes that there are no
such expense limitations.
In connection with its management of the corporate affairs of the Fund
pursuant to the Management Agreement, PIFM bears the following expenses:
(a) the salaries and expenses of all personnel of PIFM and the Fund,
except the fees and expenses of Directors who are not affiliated persons of
PIFM or the Fund's investment adviser;
(b) all expenses incurred by PIFM or by the Fund in connection with
managing the ordinary course of the Fund's business, other than those
assumed by the Fund, as described below; and
(c) the costs and expenses payable to the investment adviser pursuant
to the subadvisory agreement between PIFM and PI (the Subadvisory
Agreement).
Under the terms of the Management Agreement, the Fund is responsible for
the payment of the following expenses: (a) the fees payable to the Manager, (b)
the fees and expenses of Directors who are not affiliated with PIFM or the
Fund's Subadvisor, (c) the fees and certain expenses of the Fund's Custodian and
Transfer Agent, including the cost of providing records to the Manager in
connection with its obligation of maintaining required records of the Fund and
of pricing the Fund's shares, (d) the charges and expenses of the Fund's legal
counsel and independent accountants, (e) brokerage commissions, if any, and any
issue or transfer taxes chargeable to the Fund in connection with its securities
and futures transactions, (f) all taxes and corporate fees payable by the Fund
to governmental agencies, (g) the fees of any trade association of which the
Fund is a member, (h) the cost of stock certificates representing shares of the
Fund, (i) the cost of fidelity and liability insurance, (j) the fees and
expenses involved in registering and maintaining registration of the Fund and of
its shares with the SEC, including the preparation and printing of the Fund's
registration statements and prospectuses for such purposes, and paying the fees
and expenses of notice filings made in accordance with state securities laws,
(k) allocable communications expenses with respect to investor services and all
expenses of shareholders' and Directors' meetings and of preparing, printing and
mailing reports, proxy statements and prospectuses to shareholders, (l)
litigation and indemnification expenses and other extraordinary expenses not
incurred in the ordinary course of the Fund's business, and (m) distribution
expenses.
B-9
<PAGE>
The Management Agreement also provides that PIFM will not be liable for any
error of judgment or for any loss suffered by the Fund in connection with the
matters to which the Management Agreement relates, except a loss resulting from
a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith, gross
negligence or reckless disregard of duty. The Management Agreement provides that
it will terminate automatically if assigned (as defined in the Investment
Company Act), and that it may be terminated without penalty by either party upon
not more than 60 days' nor less than 30 days' written notice. The Management
Agreement provides that it will continue in effect for a period of more than two
years from the date of execution only so long as such continuance is
specifically approved at least annually in accordance with the requirements of
the Investment Company Act.
For the fiscal years ended March 31, 2000, 1999 and 1998, PIFM received
management fees of $4,020,175, $3,435,107 and $1,622,396, respectively.
PIFM has entered into the Subadvisory Agreement with PI, a wholly-owned
subsidiary of Prudential. The Subadvisory Agreement provides that PI furnish
investment advisory services in connection with the management of the Fund. In
connection therewith, PI is obligated to keep certain books and records of the
Fund. PIFM continues to have responsibility for all investment advisory services
pursuant to the Management Agreement and supervises PI's performance of such
services. PI was reimbursed by PIFM for the reasonable costs and expenses
incurred by PI in furnishing services to PIFM. Effective January 1, 2000, PI is
paid by PIFM at an annual rate of .10 of 1% of the Fund's average daily net
assets (representing half of the compensation received from the Fund by PIFM).
The Subadviser maintains a corporate credit unit which provides credit
analysis and research on taxable fixed-income securities, including money market
instruments. The portfolio manager consults routinely with the credit unit in
managing the Fund's portfolio. The credit unit reviews on an ongoing basis
commercial paper issuers, commercial banks, non-bank financial institutions and
issuers of other taxable fixed-income obligations. Credit analysts have broad
access to research and financial reports, data retrieval services and industry
analysts. They maintain relationships with the management of corporate issuers
and from time to time visit companies in whose securities the Fund may invest.
The Subadvisory Agreement provides that it will terminate in the event of
its assignment (as defined in the Investment Company Act) or upon the
termination of the Management Agreement. The Subadvisory Agreement may be
terminated by the Fund, PIFM or PI upon not more than 60 days' nor less than 30
days' written notice. The Subadvisory Agreement provides that it will continue
in effect for a period of more than two years from its execution only so long as
such continuance is specifically approved by the Board of Directors at least
annually in accordance with the requirements of the Investment Company Act.
(B) PRINCIPAL UNDERWRITER, DISTRIBUTOR AND RULE 12b-1 PLAN
Prudential Investment Management Services LLC (PIMS or the Distributor),
Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, acts
as the distributor of the shares of the Fund.
Pursuant to the Distribution Agreement, the Fund has agreed to indemnify
the Distributor to the extent permitted by applicable law against certain
liabilities under the federal securities laws.
DISTRIBUTION AND SERVICE PLAN
Under the Fund's Distribution and Service Plan for the Class A shares (the
Plan) and the Distribution Agreement, the Fund pays the Distributor a
distribution and service fee of up to 0.12% of the average daily net assets of
the Class A shares of the Fund, computed daily and payable monthly. Under the
Plan, the Fund is required to pay the distribution and service fee as
reimbursement of the expenses incurred by the Distributor. The Distributor will
incur the expenses of distributing the Class I shares, none of which are
reimbursed by or paid for by the Fund.
For the fiscal year ended March 31, 2000, the Distributor received payments
of $439,353 under the Plan. This amount was spent as reimbursement to brokers
who sold Class A shares.
The Plan continues in effect from year to year, provided that each such
continuance is approved at least annually by a vote of the Board of Directors,
including a majority of the Directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the Plan or in any
agreement relating to the Plan (the Rule 12b-1 Directors), cast in person at a
meeting called for the purpose of voting on such continuance. The Plan may be
terminated at any time, without penalty, by the vote of a majority of the Rule
12b-1 Directors or by the vote of the holders of a majority of the outstanding
Class A voting securities of the
B-10
<PAGE>
Fund on not more than 30 days' written notice to any other party to the Plan.
The Plan may not be amended to increase materially the amounts to be spent for
the services described therein without shareholder approval, and all material
amendments must also be approved by the Board of Directors in the manner
described above. The Plan will automatically terminate in the event of its
assignment.
Pursuant to the Plan, the Directors will be provided with, and will review
at least quarterly, a written report of the distribution expenses incurred on
behalf of the Fund by the Distributor. The report will include an itemization of
the distribution expenses and the purpose of such expenditures. In addition, as
long as the Plan remains in effect, the selection and nomination of Directors
shall be committed to the Rule 12b-1 Directors.
Pursuant to the Distribution Agreement, the Fund has agreed to indemnify
the Distributor to the extent permitted by applicable law against certain
liabilities under the Securities Act.
NASD MAXIMUM SALES CHARGE RULE. Pursuant to rules of the NASD, the
Distributor is required to limit aggregate initial sales charges, deferred sales
charges and asset-based sales charges to 6.25% of total gross sales of the
Fund's Class A shares. Interest charges on unreimbursed distribution expenses
equal to the prime rate plus one percent per annum may be added to the 6.25%
limitation. Sales from the reinvestment of dividends and distributions are not
included in the calculation of the 6.25% limitation. The annual asset-based
sales charge on Class A shares of the Fund may not exceed .75 of 1% per class.
The 6.25% limitation applies to Class A shares rather than on a per shareholder
basis. If aggregate sales charges were to exceed 6.25% of the total gross sales
of Class A shares, all sales charges on Class A shares would be suspended.
(C) OTHER SERVICE PROVIDERS
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Fund's portfolio securities,
and in that capacity maintains cash and certain financial and accounting books
and records pursuant to an agreement with the Fund.
Prudential Mutual Fund Services LLC (PMFS), 194 Wood Ave. South, Iselin,
New Jersey 08853, serves as the Transfer Agent of the Fund. It is a wholly-owned
subsidiary of PIFM. PMFS provides customary transfer agency services to the
Fund, including the handling of shareholder communications, the processing of
shareholder transactions, the maintenance of shareholder account records,
payment of dividends and distributions and related functions. In connection with
services rendered to the Fund, PMFS receives a monthly fee plus its
out-of-pocket expenses, including but not limited to postage, stationary,
printing, allocable communications and other costs.
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036, serves as the Fund's independent accountants and in that capacity audits
the Fund's annual financial statements.
YEAR 2000 READINESS DISCLOSURE
The services provided to the Fund and the shareholders by the Manager, the
Distributor, the Transfer Agent and the Custodian depend on the smooth
functioning of their computer systems and those of outside service providers.
Although the Fund has not experienced any material problems with the services
provided by the Manager, Distributor, Transfer Agent or the Custodian as a
result of the change from 1999 to 2000, there is a possibility that computer
software systems in use might be impaired or unavailable because of the way
dates are encoded and calculated. Such an event could have a negative impact on
handling securities trades, payments of interest and dividends and pricing and
account services. Although, at this time, there can be no assurance that there
will be no adverse impact on the Fund, the Manager, the Distributor, the
Transfer Agent and the Custodian have advised the Fund that they have been
actively working on necessary changes to their computer systems to prepare for
the year 2000. The Fund and its Board receive, and have received since early
1998, satisfactory quarterly reports from the principal service providers as to
their preparations for year 2000 readiness, although there can be no assurance
that the service providers (or other securities market participants) will
successfully complete the necessary changes in a timely manner. Moreover, the
Fund at this time has not considered retaining alternative service providers or
directly undertaken efforts to achieve year 2000 readiness, the latter of which
would involve substantial expenses without an assurance of success.
Additionally, issuers of securities generally, as well as those purchased
by the Fund, may confront year 2000 compliance issues which, if material and not
resolved, could have an adverse impact on securities markets and/or a specific
issuer's performance and could result in a decline in the value of the
securities held by the Fund.
BROKERAGE ALLOCATION AND OTHER PRACTICES
The Manager is responsible for decisions to buy and sell securities for the
Fund, the selection of brokers and dealers to effect the transactions and the
negotiation of brokerage commissions, if any. For purposes of this section the
term "Manager" includes
B-11
<PAGE>
the Subadviser. The Fund does not normally incur any brokerage commission
expense on such transactions. In the market for money market instruments,
securities are generally traded on a "net" basis, with dealers acting as
principal for their own accounts without a stated commission, although the price
of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price which includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. On occasion, certain money market instruments may be
purchased directly from an issuer, in which case no commissions or discounts are
paid.
In placing orders for portfolio securities of the Fund, the Manager is
required to give primary consideration to obtaining the most favorable price and
efficient execution. This means that the Manager will seek to execute each
transaction at a price and commission, if any, which provide the most favorable
total cost or proceeds reasonably attainable under the circumstances. While the
Manager generally seeks reasonably competitive spreads or commissions, the Fund
will not necessarily be paying the lowest spread or commission available. Within
the framework of this policy, the Manager may consider research and investment
services provided by brokers or dealers who effect or are parties to portfolio
transactions of the Fund, the Manager or the Manager's other clients. Such
research and investment services are those which brokerage houses customarily
provide to institutional investors and include statistical and economic data and
research reports on particular companies and industries. Such services are used
by the Manager in connection with all of its investment activities, and some of
such services obtained in connection with the execution of transactions for the
Fund may be used in managing other investment accounts. Conversely, brokers
furnishing such services may be selected for the execution of transactions of
such other accounts, whose aggregate assets are far larger than those of the
Fund, and the services furnished by such brokers may be used by the Manager in
providing investment management for the Fund. While such services are useful and
important in supplementing its own research and facilities, the Manager believes
that the value of such services is not determinable and does not significantly
reduce expenses. The Fund does not reduce the fee it pays to the Manager by any
amount that may be attributed to the value of such services. The Fund will not
effect any securities transactions with or through Prudential Securities as
broker or dealer.
During the fiscal years ended March 31, 2000, 1999 and 1998, the Fund paid
no brokerage commissions.
SECURITIES AND ORGANIZATION
Prudential Institutional Liquidity Portfolio, Inc. is authorized to issue
15 billion shares of common stock, $.001 par value per share divided into two
series, Institutional Money Market Series (10 billion shares) and Liquid Assets
Fund (5 billion shares). Only the Institutional Money Market Series is offered
at this time, which is divided into two classes, designated Class A and Class I
common stock. Of the 10 billion authorized shares of common stock of the
Institutional Money Market Series, 5 billion shares consist of Class A shares
and 5 billion shares consist of Class I shares.
Each class represents an interest in the same assets of the Fund and is
identical in all respects except that (i) Class A shares are subject to
distribution and/or service fees, (ii) Class I shares are not subject to any
distribution and/or service fees, and (iii) each class has exclusive voting
rights on any matter submitted to shareholders that relates solely to its
arrangement and has separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the interests of
any other class. In accordance with the Fund's Articles of Incorporation, the
Board of Directors may authorize the creation of additional series and classes
within such series, with such preferences, privileges, limitations and voting
and dividend rights as the Board of Directors may determine. The Board of
Directors may increase or decrease the number of authorized shares without
approval by shareholders. Shares of the Fund, when issued, are fully paid,
nonassessable, fully transferable and redeemable at the option of the holder.
The Fund does not intend to hold annual meetings of shareholders unless
otherwise required by law. The Fund will not be required to hold meetings of
shareholders unless, for example, the election of Directors is required to be
acted on by shareholders under the Investment Company Act. Shareholders have
certain rights, including the right to call a meeting upon a vote of 10% or more
of the Fund's outstanding shares for the purpose of voting on the removal of one
or more Directors or to transact any other business.
PURCHASE AND REDEMPTION OF FUND SHARES
PURCHASE OF SHARES
The Fund reserves the right to reject any initial or subsequent purchase
order (including an exchange) and the right to limit investments in the Fund
solely to existing or past shareholders of the Fund.
B-12
<PAGE>
Shares of the Fund may be purchased and redeemed by investors through the
Distributor or directly through Prudential Mutual Fund Services LLC (PMFS).
Shares may also be purchased through the Command Program or the Business-Edge
Program available through Prudential Securities or Pruco Securities Corporation
(Prusec). The procedures for purchase and redemption of Fund shares are
described in the prospectus.
MULTIPLE ACCOUNTS
An institution may open a single master account by filing an application
with PMFS, signed by personnel authorized to act for the institution. Individual
subaccounts may be opened at the time the master account is opened by listing
them, or they may be added at a later date by written advice. Procedures will be
available to identify subaccounts by name and number within the master account
name. The foregoing procedures would also apply to related institutional
accounts (i.e., accounts of shareholders with a common institutional or
corporate parent). The investment minimums as set forth in the relevant
Prospectus under "How to Buy and Sell Shares of the Fund--How to Buy Shares" are
applicable to the aggregate amounts invested by a group, and not to the amount
credited to each subaccount.
REOPENING AN ACCOUNT
Subject to the minimum investment restrictions, an investor may reopen an
account, without filing a new application, at any time during the calendar year
the account is closed, provided that the information on that application is
still applicable.
REDEMPTION IN KIND
If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment wholly
or partly in cash, the Fund may pay the redemption price in whole or in part by
a distribution in kind of securities from the investment portfolio of the Fund,
in lieu of cash, in conformity with applicable rules of the SEC. Any such
securities will be readily marketable and will be valued in the same manner as
in a regular redemption. If your shares are redeemed in kind, you would incur
transaction costs in converting the assets into cash. The Fund, however, has
elected to be governed by Rule 18f-1 under the Investment Company Act pursuant
to which the Fund is obligated to redeem shares solely in cash up to the lesser
of $250,000 or 1% of the net asset value of the Fund during any 90-day period
for any one shareholder.
RESTRICTIONS ON SALE
The Fund may suspend the right of redemption or postpone the date of
payment for a period of up to seven days. Suspensions or postponements may not
exceed seven days except (1) for any period (a) during which the New York Stock
Exchange (the Exchange) is closed other than customary weekend and holiday
closings or (b) during which trading on the Exchange is restricted; (2) for any
period during which an emergency exists as a result of which (a) disposal by the
Fund of securities owned by it is not reasonably practicable or (b) it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets; or (3) for such other periods as the SEC may by order permit for the
protection of shareholders of the Fund. The SEC by rules and regulations
determines the conditions under which (i) trading shall be deemed to be
restricted and (ii) an emergency is deemed to exist within the meaning of clause
(2) above.
NET ASSET VALUE
The Fund's net asset value per share is determined by subtracting its
liabilities from the value of its assets and dividing the remainder by the
number of outstanding shares.
The Fund uses the amortized cost method of valuation to determine the value
of its portfolio securities. In that regard, the Fund's Board of Directors has
determined to maintain a dollar-weighted average portfolio maturity of 90 days
or less, to purchase only instruments having remaining maturities of thirteen
months or less, and to invest only in securities determined by the investment
adviser under the supervision of the Board of Directors to be of minimal credit
risk and to be of "eligible quality" in accordance with regulations of the SEC.
The remaining maturity of an instrument held by the Fund that is subject to a
put is deemed to be the period remaining until the principal amount can be
recovered through demand or, in the case of a variable rate instrument, the next
interest reset date, if longer. The value assigned to the put is zero. The Board
of Directors also has established procedures designed to stabilize, to the
extent reasonably possible, the Fund's price per share as computed for the
purpose of sales and redemptions at $1.00. Such procedures will include review
of a Fund's portfolio holdings by the Board, at such intervals as deemed
appropriate, to determine whether the Fund's net asset value calculated by using
available market quotations deviates from $1.00 per share based on amortized
cost. The extent of any deviation will be examined by the Board, and if such
deviation
B-13
<PAGE>
exceeds 1/2 of 1%, the Board will promptly consider what action, if any, will be
initiated. In the event the Board of Directors determines that a deviation
exists which may result in material dilution or other unfair results to
investors or existing shareholders, the Board will take such corrective action
as it regards necessary and appropriate, including the sale of portfolio
instruments prior to maturity to realize gains or losses, the shortening of
average portfolio maturity, the withholding of dividends or the establishment of
net asset value per share by using available market quotations.
The Fund computes its net asset value at 4:00 P.M., New York time, on each
day the Exchange is open for trading. In the event the Exchange closes early on
any business day, the net asset value of the Fund's shares shall be determined
at a time between such closing and 4:00 P.M., New York time. The Exchange is
closed on the following holidays: New Year's Day, Martin Luther King Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
TAXES, DIVIDENDS AND DISTRIBUTIONS
The Fund has elected to qualify, and the Fund intends to remain qualified,
as a regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended. This relieves a fund (but not its shareholders) from
paying federal income tax on income which is distributed to shareholders, and,
if a fund did realize long-term capital gains, permits net capital gains of the
fund (i.e., the excess of net long-term capital gains over net short-term
capital losses) to be treated as long-term capital gains of the shareholders,
regardless of how long shareholders have held their shares in that fund.
Qualification as a regulated investment company requires, among other
things, that (a) at least 90% of a fund's annual gross income (without reduction
for losses from the sale or other disposition of securities or foreign
currencies) be derived from interest, dividends, payments with respect to
securities loans, and gains from the sale or other disposition of securities or
options thereon, or other income (including, but not limited to, gains from
options) derived with respect to its business of investing in such securities;
(b) a fund must diversify its holdings so that, at the end of each quarter of
the taxable year, (i) at least 50% of the market value of a fund's assets is
represented by cash, U.S. Government obligations and other securities limited in
respect of any one issuer to an amount not greater than 5% of the market value
of the fund's assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in the
securities of any one issuer (other than U.S. Government obligations) and (c)
the fund must distribute to its shareholders at least 90% of its net investment
income and net short-term gains (i.e., the excess of net short-term capital
gains over net long-term capital losses) in each year.
Gains or losses on sales of securities by the Fund will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one year. The Fund does not anticipate realizing long-term capital
gains or losses. Other gains or losses on the sale of securities will be
short-term capital gains or losses. In addition, debt securities acquired by the
Fund may be subject to original issue discount and market discount rules.
The Fund is required to distribute 98% of its ordinary income in the same
calendar year in which it is earned. The Fund is also required to distribute
during the calendar year 98% of the capital gain net income it earned during the
twelve months ending on October 31 of such calendar year, as well as all
undistributed ordinary income and undistributed capital gain net income from the
prior year or the twelve-month period ending on October 31 of such prior year,
respectively. To the extent it does not meet these distribution requirements,
the Fund will be subject to a non-deductible 4% excise tax on the undistributed
amount. For purposes of this excise tax, income on which the Fund pays income
tax is treated as distributed. The Fund intends to make timely distributions in
order to avoid this excise tax. For this purpose, dividends declared in October,
November and December payable to shareholders of record on a specified date in
October, November and December and paid in the following January will be treated
as having been received by shareholders on December 31 of the calendar year in
which declared. Under this rule, therefore, a shareholder may be taxed in the
prior year on dividends or distributions actually received in January of the
following year.
It is anticipated that the net asset value per share of the Fund will
remain constant. However, if the net asset value per share fluctuates, a
shareholder may realize gain or loss upon the disposition of a share.
Distributions of net investment income and net short-term gains will be taxable
to the shareholder at ordinary income rates regardless of whether the
shareholder receives such distributions in additional shares or cash. Any gain
or loss realized upon a sale or redemption of shares by a shareholder who is not
a dealer in securities will generally be treated as long-term capital gain or
loss if the shares have been held for more than one year and otherwise as
short-term capital gain or loss. Any such loss, however, although otherwise
treated as short-term capital loss, will be long-term capital loss to the extent
of any capital gain distributions received by the shareholder, if the shares
have been held for six months or less. Furthermore, certain rules may apply
which would limit the ability of the shareholder to recognize any loss if, for
example, the shareholder replaced the shares, including shares purchased
pursuant to dividend reinvestment, within 30 days of the disposition of the
shares. In such cases, the basis of the shares required will be readjusted to
reflect the disallowed loss. Because none of the Fund's net income is
anticipated to arise from dividends on common or preferred stock,
B-14
<PAGE>
none of its distributions to shareholders will be eligible for the dividends
received deduction for corporations under the Internal Revenue Code.
Shareholders will be notified annually by the Fund as to the federal tax status
of distributions made by the Fund.
Under the laws of certain states, distributions of net income may be
taxable to shareholders as income even though a portion of such distributions
may be derived from interest on U.S. Government obligations which, if realized
directly, would be exempt from state income taxes. Shareholders are advised to
consult their tax advisers concerning the application of state and local taxes.
CALCULATION OF YIELD
The Fund will prepare a current quotation of yield daily. The Yield quoted
will be the simple annualized yield for an identified seven calendar day period.
The yield calculation will be based on a hypothetical account having a balance
of exactly one share at the beginning of the seven-day period. The base period
return will be the change in the value of the hypothetical account during the
seven-day period, including dividends declared on any shares purchased with
dividends on the shares, but excluding any capital changes, divided by the value
of the account at the beginning of the base period. The yield will vary as
interest rates and other conditions affecting money market instruments change.
Yield also depends on the quality, length of maturity and type of instruments in
the Fund's portfolio, and its operating expenses. The Fund also may prepare an
effective annual yield computed by compounding the unannualized seven-day period
return as follows: by adding 1 to the unannualized seven-day period return,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the
result.
Effective yield = [(base period return + 1)365/7]-1
The yield and effective yield for Class A shares of the Fund based on the 7
days ended March 31, 2000 were 5.96% and 6.12%, respectively. The yield and
effective yield for Class I shares of the Fund based on 7 days ended March 31,
2000, were 6.01% and 6.18%, respectively.
The Fund's yield fluctuates, and an annualized yield quotation is not a
representation by the Fund as to what an investment in the Fund will actually
yield for any given period. Actual yields will depend upon not only changes in
interest rates generally during the period in which the investment in a Fund is
held, but also in changes in the Fund's expenses. Yield does not take into
account any federal or state income taxes.
ADVERTISING. Advertising materials for the Fund may include biographical
information relating to its portfolio manager(s), and may include or refer to
commentary by the Fund's manager(s) concerning investment style, investment
discipline, asset growth, current or past business experience, business
capabilities, political, economic or financial conditions and other matters of
general interest to investors. Advertising materials for the Fund also may
include mention of The Prudential Insurance Company of America, its affiliates
and subsidiaries, and reference the assets, products and services of those
entities.
From time to time, advertising materials for the Fund may include
information concerning retirement and investing for retirement, may refer to the
approximate number of Fund shareholders and may refer to Lipper rankings or
Morningstar ratings, other related analysis supporting those ratings, other
industry publications, business periodicals and market indices. In addition,
advertising materials may reference studies or analyses performed by the manager
or its affiliates. Advertising materials for sector funds, funds that focus on
market capitalizations, index funds and international/global funds may discuss
the potential benefits and risks of that investment style. Advertising materials
for fixed income funds may discuss the benefits and risks of investing in the
bond market including discussions of credit quality, duration and maturity.
B-15
<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>
----------------------------------------------------------------------------------------
<CAPTION>
Bank Notes 8.5%
<C> <S> <C> <C>
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
<CAPTION>
-------------------------------------------------------------------------------------
Certificates Of Deposit - Domestic 0.6%
<C> <S> <C> <C>
Morgan Guaranty Trust Co.
12,000 5.70%, 7/19/00 12,000,000
<CAPTION>
-------------------------------------------------------------------------------------
Certificates Of Deposit - Eurodollar 2.5%
<C> <S> <C> <C>
Bank Austria
49,000 5.93%, 4/7/00 48,999,996
<CAPTION>
-------------------------------------------------------------------------------------
Certificates Of Deposit - Yankee 12.8%
<C> <S> <C> <C>
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
B-16
<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
<CAPTION>
-------------------------------------------------------------------------------------
Commercial Paper 44.9%
<C> <S> <C> <C>
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>
See Notes to Financial Statements
B-17
<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
B-18
<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
<CAPTION>
-------------------------------------------------------------------------------------
Other Corporate Obligations 27.2%
<C> <S> <C> <C>
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>
See Notes to Financial Statements
B-19
<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
B-20
<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>
$ 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>
See Notes to Financial Statements
B-21
<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 3 371,866,196 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 3 1,601,630,630 shares of $.001 par
value common stock issued and outstanding) $1.00
----------------
----------------
</TABLE>
See Notes to Financial Statements
B-22
<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>
See Notes to Financial Statements
B-23
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------
<S> <C> <C> <C>
2000 1999
<CAPTION>
---------------------------------------------------------------------------------
<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
B-24
<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.
B-25
<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
B-26
<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.
B-27
<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>
B-28
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Financial Highlights
<TABLE>
<CAPTION>
Class A
--------------------
<S> <C> <C>
Year Ended
March 31, 2000
<CAPTION>
---------------------------------------------------------------------------------------
<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.
See Notes to Financial Statements
B-29
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class A
<S> <C> <C> <C> <C>
-----------------------------------------------------
<CAPTION>
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
B-30
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class I
------------------------------------------
<S> <C> <C> <C> <C>
July 9,
Year Ended March 31, 1997(b)
------------------------ Through
2000 1999 March 31, 1998
<CAPTION>
----------------------------------------------------------------------------------
<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.
See Notes to Financial Statements
B-31
<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
B-32
<PAGE>
APPENDIX I
DESCRIPTION OF RATINGS
BOND RATINGS
Moody's Investors Service, Inc.--Bonds which are rated Aaa are judged to be
of the best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than Aaa securities. Bonds
which are rated A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future. Moody's
applies numerical modifiers "1", "2" and "3" in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier "1" indicates that the company ranks in the higher end of its generic
rating category; the modifier "2" indicates a mid-range ranking; and the
modifier "3" indicates that the company ranks in the lower end of its generic
rating category.
Standard & Poor's Ratings Group--Debt rated AAA has the highest rating
assigned by S&P. Capacity to pay interest and repay principal is extremely
strong. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree. Debt
rated A has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories.
Duff and Phelps Credit Rating Co.--The following summarizes the ratings
used by Duff & Phelps for long-term debt:
"AAA": Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
"AA+", "AA" or "AA--": High credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
"A+", "A" or "A--": Protection factors are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress. Fitch IBCA--The following summarizes the ratings used by Fitch IBCA
for long-term debt:
"AAA": Highest credit quality. "AAA" ratings denote the lowest
expectation of credit risk. They are assigned only in case of exceptionally
strong capacity for timely payment of financial commitments. This capacity
is highly unlikely to be adversely affected by foreseeable events.
"AA": Very high credit quality. "AA" ratings denote a very low
expectation of credit risk. They indicate very strong capacity for timely
payment of financial commitments. This capacity is not significantly
vulnerable to foreseeable events.
"A": High credit quality. "A" ratings denote a low expectation of
credit risk. The capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more vulnerable to
changes in circumstances or in economic conditions than is the case for
higher ratings.
"BBB": Good credit quality. "BBB" ratings indicate that there is
currently a low expectation of credit risk. The capacity for timely payment
of financial commitments is considered adequate, but adverse changes in
circumstances and in economic conditions are more likely to impair this
capacity. This is the lowest investment grade category.
"+" or "--" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the "AAA" long-term rating
category or to categories below "CCC".
COMMERCIAL PAPER RATINGS
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations which have an original maturity not
exceeding one year. Issuers rated "Prime-1" (or supporting institutions) have a
I-1
<PAGE>
superior ability for repayment of senior short-term debt obligations. Issuers
rated "Prime-2" (or supporting institutions) have a strong ability for repayment
of senior short-term debt obligations. Issuers rated "Prime-3" (or supporting
institutions) have an acceptable ability for repayment of senior short-term
obligations.
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market. The
designation A-1 indicates that the degree of safety regarding timely payment is
strong. A "+" designation is applied to those issues rated A-1 which possess
extremely strong safety characteristics. Capacity for timely payment on issues
with the designation A-2 is satisfactory. However, the relative degree of safety
is not as high as for issues designated A-1. Issues carrying the designation A-3
have adequate capacity for timely payment. They are however, somewhat more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying the higher designations.
The following summarizes the ratings used by Duff & Phelps for short-term
debt, which apply to all obligations with maturities of under one year,
including commercial paper.
D-1+: Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding and safety is just below risk-free U.S. Treasury short-term
obligations.
D-1: Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
D-1-: High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
D-2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
D-3: Satisfactory liquidity and other protection factors qualify issue as
to investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
The following summarizes the ratings used by Fitch IBCA for short-term
debt, which apply to most obligations with maturities of less than 12 months, or
up to three years for U.S. public finance securities:
"F1": Highest credit quality. Indicates the strongest capacity for
timely payment of financial commitments; may have an added "+" to denote
any exceptionally strong credit feature.
"F2": Good credit quality. A satisfactory capacity for timely payment
of financial commitments, but the margin of safety is not as great as in
the case of the higher ratings.
"F3": Fair credit quality. The capacity for timely payment of
financial commitments is adequate, however, near-term adverse changes could
result in a reduction to non-investment grade.
"B": Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in financial
and economic conditions.
"C": High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained, favorable
business and economic environment.
"D": Default. Denotes actual or imminent payment default.
"+" or "--" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to short-term ratings other than
"F1".
I-2
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) (i) Articles of Restatement, incorporated by reference to Exhibit 1(a)
to Post-Effective Amendment No. 15 to the Registration Statement on
Form N-1A (File No. 33-17224) filed via EDGAR on May 28, 1996.
(ii) Articles Supplementary, incorporated by reference to Exhibit 1(b)
to Post-Effective Amendment No. 15 to the Registration Statement on
Form N-1A (File No. 33-17224) filed via EDGAR on May 28, 1996.
(iii) Articles Supplementary, incorporated by reference to Exhibit
1(c) to Post-Effective Amendment No. 19 to the Registration Statement
on Form N-1A (File No. 33-17224) filed via EDGAR on June 9, 1997.
(iv) Articles of Amendment, incorporated by reference to Exhibit 1(d)
to Post-Effective Amendment No. 19 to the Registration Statement on
Form N-1A (File No. 33-17224) filed via EDGAR on June 9, 1997.
(b) (i) Amended By-Laws of the Registrant, incorporated by reference to
Exhibit 2(a) to Post-Effective Amendment No. 19 to the Registration
Statement on Form N-1A (File No. 33-17224) filed via EDGAR on June 9,
1997.
(ii) Amendment to Bylaws, incorporated by reference to Exhibit 2(b) to
Post-Effective Amendment No. 19 to the Registration Statement on Form
N-1A (File No. 33-17224) filed via EDGAR on June 9, 1997.
(c) (i) Specimen certificates for shares of common stock, $.001 par value
per share, of the Registrant, incorporated by reference to Exhibit
4(a) to Post-Effective Amendment No. 19 to the Registration Statement
on Form N-1A (File No. 33-17224) filed via EDGAR on June 9, 1997.
(ii) Instruments defining rights of holders of the securities being
offered, incorporated by reference to Exhibits (a) and (b) above.
(d) (i) Management Agreement between the Registrant and Prudential Mutual
Fund Management, Inc., incorporated by reference to Exhibit 5(a) to
Post-Effective Amendment No. 19 to the Registration Statement on Form
N-1A (File No. 33-17224) filed via EDGAR on June 9, 1997.
(ii) Subadvisory Agreement between Prudential Mutual Fund Management
and The Prudential Investment Corporation, incorporated by reference
to Exhibit 5(b) to Post-Effective Amendment No. 19 to the Registration
Statement on Form N-1A (File No. 33-17224) filed via EDGAR on June 9,
1997.
(iii) Management and Administrative Services Agreement between the
Fund, on behalf of the Liquid Assets Series, and Prudential
Investments Fund Management LLC, incorporated by reference to Exhibit
5(c) to Post-Effective Amendment No. 19 to the Registration Statement
on Form N-1A (File No. 33-17224) filed via EDGAR on June 9, 1997.
(iv) Amendment to Subadvisory Agreement between Prudential Investments
Fund Management LLC and The Prudential Investment Corporation.*
(e) (i) Distribution Agreement between the Registrant and Prudential
Investment Management Services LLC, incorporated by reference to
Exhibit (e)(i) to Post-Effective Amendment No. 22 to the Registration
Statement on Form N-1A (File No. 33-17224) filed via EDGAR on March
30, 1999.
(ii) Form of Dealer Agreement, incorporated by reference to Exhibit
(e)(ii) to Post-Effective Amendment No. 22 to the Registration
Statement on Form N-1A (File No. 33-17224) filed via EDGAR on March
30, 1999.
(f) Not applicable.
(g) (i) Custodian Contract between the Registrant and State Street Bank
and Trust Company, incorporated by reference to Exhibit 8(a) to
Post-Effective Amendment No. 19 to the Registration Statement on Form
N-1A (File No. 33-17224) filed via EDGAR on June 9, 1997.
(ii) Subcustodian Agreement between State Street Bank and Trust
Company and Security Pacific National Bank, incorporated by reference
to Exhibit 8(b) to Post-Effective Amendment No. 19 to the Registration
Statement on Form N-1A (File No. 33-17224) filed via EDGAR on June 9,
1997.
(iii) Subcustodian Agreement for Repurchase Transactions between State
Street Bank and Trust Company and Security Pacific National Bank,
incorporated by reference to Exhibit 8(c) to Post-Effective Amendment
No. 19 to the Registration Statement on Form N-1A (File No. 33-17224)
filed via EDGAR on June 9, 1997.
(h) (i) Transfer Agency and Service Agreement between the Registrant and
Prudential Mutual Fund Services, incorporated by reference to Exhibit
9 to Post-Effective Amendment No. 19 to the Registration Statement on
Form N-1A (File No. 33-17224) filed via EDGAR on June 9, 1997.
(ii) Amendment to Transfer Agency and Service Agreement between the
Registrant and Prudential Mutual Fund Services LLC.*
(i) Opinion of Counsel, incorporated by reference to Exhibit 10 to
Post-Effective Amendment No. 19 to the Registration Statement on Form
N-1A (File No. 33-17224) filed via EDGAR on June 9, 1997.
(j) (i) Consent of Independent Accountants.*
(ii) Appraisal of Duff and Phelps Credit Rating Co.*
(k) Not applicable.
(l) Not applicable.
(m) Amended and Restated Distribution and Service Plan, incorporated by
reference to Exhibit (m) to Post-Effective Amendment No. 22 to the
Registration Statement on Form N-1A (File No. 33-17224) filed via
EDGAR on March 30, 1999.
C-1
<PAGE>
(n) Not applicable.
(o) Rule 18 f-3 Plan, incorporated by reference to Exhibit 18 to
Post-Effective Amendment No. 19 to the Registration Statement on Form
N-1A (File No. 33-17224) filed via EDGAR on June 9, 1997.
--------------------
* Filed herewith.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 25. INDEMNIFICATION.
As permitted by Sections 17(h) and 17(i) of the Investment Company Act of
1940, as amended (the 1940 Act) and pursuant to Article X of the Registrant's
By-Laws (Exhibit (b) to the Registration Statement) and Section 2-418 of the
Maryland General Corporation Law, officers, directors, employees and agents of
the Registrant may be indemnified against certain liabilities in connection with
the Registrant except liabilities arising from misfeasance, bad faith, gross
negligence or reckless disregard in the conduct of their respective duties. As
permitted by Section 17(i) of the 1940 Act, pursuant to Section 10 of the
Distribution Agreements (Exhibit (e)(i) to the Registration Statement), the
Distributor of the Fund may be indemnified against certain liabilities it may
incur. Such Article X of the By-Laws and Section 10 of the Distribution
Agreement are hereby incorporated by reference in their entirety.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the Securities Act), may be permitted to directors,
officers and controlling persons of the Registrant and the principal underwriter
pursuant to the foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission (the
Commission) such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant and the principal underwriter in connection with the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such director, officer or controlling person or the principal
underwriter in connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
Section 8 of the Management Agreement (Exhibit (d)(i) to the Registration
Statement) limits the liability of Prudential Investments Fund Management LLC
(PIFM) to losses resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services (in which case any award of damages shall
be limited to the period and the amount set forth in Section 36(b)(3) of the
Investment Company Act) or losses resulting from willful misfeasance, bad faith
or gross negligence in the performance of its duties or from reckless disregard
by PIFM of its obligations and duties under the Management Agreement. Section 4
of the Subadvisory Agreement (Exhibit (d)(ii) to the Registration Statement)
limits the liability of The Prudential Investment Corporation (PIC) to losses
resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or from reckless disregard by PIC of its obligations
and duties under the Subadvisory Agreement.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws in a manner consistent with Release No. 11330 of the
Commission under the 1940 Act so long as the interpretation of Sections 17(h)
and 17(i) of such Act remains in effect and is consistently applied.
The Registrant maintains an insurance policy insuring its officers and
directors against certain liabilities and certain costs of defending claims
against such officers and directors, to the extent such officers and directors
are not found to have committed conduct constituting conflict of interest,
intentional non-compliance with statutes or regulations or dishonesty,
fraudulent or criminal acts or omissions. The insurance policy also insures the
Registrant against the costs of indemnification payments to officers and
directors under certain circumstances.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Prudential Investments Fund Management LLC (PIFM).
See "How the Fund is Managed--Manager" in the Prospectus constituting Part
A of this Post-Effective Amendment to the Registration Statement and "Investment
Advisory and Other Services--Investment Adviser" in the Statement of Additional
Information constituting Part B of this Post-Effective Amendment to the
Registration Statement.
The business and other connections of directors and officers of PIFM are
listed in Schedules A and D of Form ADV of PIFM as currently on file with the
Commission, the text of which is hereby incorporated by reference (File No.
801-31104).
The business and other connections of the directors and officers of PIFM
are set forth below. Except as otherwise indicated, the address of each person
is Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077.
C-2
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PIFM PRINCIPAL OCCUPATIONS
---------------- ------------------ ---------------------
<S> <C> <C>
Robert F. Gunia Executive Vice President and Executive Vice President and Chief Administrative Officer,
Chief Administrative Officer PIFM; Vice President, Prudential; President, Prudential
Investment Management Services LLC (PIMS)
William V. Healey Executive Vice President, Executive Vice President, Chief Legal Officer and
Chief Legal Officer and Secretary, PIFM; Vice President and Associate General
Secretary Counsel, Prudential; Senior Vice President, Chief Legal
Officer and Secretary, PIMS
David R. Odenath, Jr. Officer in Charge, President, Officer in Charge, President, Chief Executive Officer and
Chief Executive Officer and Chief Operating Officer, PIFM; Senior Vice President,
Chief Operating Officer The Prudential Insurance Company of America (Prudential)
Stephen Pelletier Executive Vice President Executive Vice President, PIFM
Judy A. Rice Executive Vice President Executive Vice President, PIFM
Lynn M. Waldvogel Executive Vice President Executive Vice President, PIFM
</TABLE>
(ii) The Prudential Investment Corporation (PIC).
See "How the Fund is Managed--Manager" in the Prospectus constituting Part
A of this Post-Effective Amendment to the Registration Statement and "Investment
Advisory and Other Services--Investment Adviser" in the Statement of Additional
Information constituting Part B of this Registration Statement.
The business and other connections of PIC's directors and executive
officers are as set forth below. Except as otherwise indicated, the address of
each person is Prudential Plaza, Newark, NJ 07102-4077.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PIC PRINCIPAL OCCUPATIONS
---------------- ----------------- ---------------------
<S> <C> <C>
John R. Strangfeld, Jr. Chairman of the Board, President of Prudential Global Asset Management Group of
President, Chief Executive Prudential; Senior Vice President, Prudential; Chairman
Officer and Director of the Board, President, Chief Executive Officer and
Director, PIC
Bernard Winograd Senior Vice President and Chief Executive Officer, Prudential Real Estate Investors;
Director Senior Vice President and Director, PIC
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Prudential Investment Management Series LLC.
Prudential Investment Management Series LLC is distributor for Prudential
Government Securities Trust, The Target Portfolio Trust, Cash Accumulation
Trust, COMMAND Government Fund, COMMAND Money Fund, COMMAND Tax-Free Fund,
Global Utility Fund, Inc., Nicholas-Applegate Fund, Inc. (Nicholas-Applegate
Growth Equity Fund), Prudential Balanced Fund, Prudential California Municipal
Fund, Prudential Developing Markets Fund, Prudential Diversified Bond Fund,
Inc., Prudential Diversified Funds, Prudential Emerging Growth Fund, Inc.,
Prudential Equity Fund, Inc., Prudential Equity Income Fund, Prudentia Europe
Growth Fund, Inc., Prudential Global Genesis Fund, Inc., Prudential Global Total
Return Fund, Inc., Prudential High Yield Fund, Inc., Prudential Index Series
Fund, Prudential MoneyMart Assets Inc., Prudential Natural Resources Fund, Inc.,
Prudential Government Income Fund, Inc., Prudential High Yield Total Return
Fund, Inc., Prudential International Bond Fund, Inc., Prudential Institutional
Liquidity Portfolio, Inc., The Prudential Investment Portfolios, Inc.,
Prudential Mid-Cap Value Fund, Prudential Municipal Bond Fund, Prudential
Municipal Series Fund, Prudential National Municipals Fund, Inc., Prudential
Pacific Growth Fund, Inc., Prudential Real Estate Securities Fund, Prudential
Sector Funds, Inc., Prudential Small-Cap Quantum Fund, Inc., Prudential Small
Company Value Fund, Inc., Prudential Special Money Market Fund, inc., Prudential
Structured Maturity Fund, Inc., Prudential Tax-Free Money Fund, Inc., Prudential
Tax-Managed Funds, Prudential 20/20 Focus Fund, Prudential World Fund, Inc.,
Strategic Partners Series and Target Funds.
C-3
<PAGE>
(b) Information concerning officers of Prudential Investment Management
Services LLC is set forth below.
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME(1) UNDERWRITER REGISTRANT
------- ----------- ----------
<S> <C> <C>
Margaret Deverell ............. Vice President and Chief Financial Officer None
Kevin Frawley ................. Senior Vice President and Chief Compliance Officer None
Robert F. Gunia ............... President Vice President
and Director
William V. Healey ............. Senior Vice President, Secretary and Chief Legal Officer None
John R. Strangfeld, Jr. ....... Advisory Board Member President and
Director
</TABLE>
(1) The address of each person named is Prudential Plaza, 751 Broad Street,
Newark, New Jersey 07102, unless otherwise indicated.
(c) Registrant has no principal underwriter who is not an affiliated
person of the Registrant.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules thereunder are maintained at the
offices of State Street Bank and Trust Company, One Heritage Drive, North
Quincy, Massachusetts 02171, The Prudential Investment Corporation, Prudential
Plaza, 745 Broad Street, Newark, New Jersey 07102, the Registrant, Gateway
Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, and Prudential
Mutual Fund Services LLC, Raritan Plaza One, Edison, New Jersey 08837. Documents
required by Rules 31a-1(b) (4), (5), (6), (7), (9), (10) and (11) and 31a-1 (d)
and (f) will be kept at Gateway Center Three, Newark, New Jersey 07102-4077, and
the remaining accounts, books and other documents required by such other
pertinent provisions of Section 31(a) and the Rules promulgated thereunder will
be kept by State Street Bank and Trust Company and Prudential Mutual Fund
Services LLC.
ITEM 29. MANAGEMENT SERVICES
Other than as set forth under the captions "How the Fund is
Managed--Manager" and "How the Fund is Managed--Distributor" in the Prospectus
and the caption "Investment Advisory and Other Services" in the Statement of
Additional Information, constituting Parts A and B, respectively, of this
Post-Effective Amendment to the Registration Statement, Registrant is not a
party to any management-related service contract.
ITEM 30. UNDERTAKINGS
Not applicable.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Newark, and State of New Jersey, on the 31st day of May, 2000.
PRUDENTIAL INSTITUTIONAL LIQUIDITY
PORTFOLIO, INC.
/s/ John R. Strangfeld, Jr.
----------------------------------------
(JOHN R. STRANGFELD, JR., PRESIDENT)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Delayne D. Gold Director May 31, 2000
------------------------------
DELAYNE D. GOLD
/s/ Robert F. Gunia Vice President and Director May 31, 2000
------------------------------
ROBERT F. GUNIA
/s/ Robert E. LaBlanc Director May 31, 2000
------------------------------
ROBERT E. LABLANC
/s/ David R. Odenath, Jr. Director May 31, 2000
------------------------------
DAVID R. ODENATH, JR.
/s/ Robin B. Smith Director May 31, 2000
------------------------------
ROBIN B. SMITH
/s/ Stephen Stoneburn Director May 31, 2000
------------------------------
STEPHEN STONEBURN
/s/ John R. Strangfeld, Jr. Director and President May 31, 2000
------------------------------
JOHN R. STRANGFELD, JR.
/s/ Nancy H. Teeters Director May 31, 2000
------------------------------
NANCY H. TEETERS
/s/ Clay T. Whitehead Director May 31, 2000
------------------------------
CLAY T. WHITEHEAD
/s/ Grace C. Torres Treasurer, Principal Financial May 31, 2000
------------------------------
GRACE C. TORRES and Accounting Officer
<PAGE>
EXHIBIT INDEX
(a) (i) Articles of Restatement, incorporated by reference to Exhibit 1(a) to
Post-Effective Amendment No. 15 to the Registration Statement on Form N-1A
(File No. 33-17224) filed via EDGAR on May 28, 1996.
(ii) Articles Supplementary, incorporated by reference to Exhibit 1(b) to
Post-Effective Amendment No. 15 to the Registration Statement on Form N-1A
(File No. 33-17224) filed via EDGAR on May 28, 1996.
(iii) Articles Supplementary, incorporated by reference to Exhibit 1(c) to
Post-Effective Amendment No. 19 to the Registration Statement on Form N-1A
(File No. 33-17224) filed via EDGAR on June 9, 1997.
(iv) Articles of Amendment, incorporated by reference to Exhibit 1(d) to
Post-Effective Amendment No. 19 to the Registration Statement on Form N-1A
(File No. 33-17224) filed via EDGAR on June 9, 1997.
(b) (i) Amended By-Laws of the Registrant, incorporated by reference to Exhibit
2(a) to Post-Effective Amendment No. 19 to the Registration Statement on
Form N-1A (File No. 33-17224) filed via EDGAR on June 9, 1997.
(ii) Amendment to By-laws, incorporated by reference to Exhibit 2(b) to
Post-Effective Amendment No. 19 to the Registration Statement on Form N-1A
(File No. 33-17224) filed via EDGAR on June 9, 1997.
(c) (i) Specimen certificates for shares of common stock, $.001 par value per
share, of the Registrant, incorporated by reference to Exhibit 4(a) to
Post-Effective Amendment No. 19 to the Registration Statement on Form N-1A
(File No. 33-17224) filed via EDGAR on June 9, 1997.
(ii) Instruments defining rights of holders of the securities being
offered, incorporated by reference to Exhibits (a) and (b) above.
(d) (i) Management Agreement between the Registrant and Prudential Mutual Fund
Management, Inc., incorporated by reference to Exhibit 5(a) to
Post-Effective Amendment No. 19 to the Registration Statement on Form N-1A
(File No. 33-17224) filed via EDGAR on June 9, 1997.
(ii) Subadvisory Agreement between Prudential Mutual Fund Management and
The Prudential Investment Corporation, incorporated by reference to Exhibit
5(b) to Post-Effective Amendment No. 19 to the Registration Statement on
Form N-1A (File No. 33-17224) filed via EDGAR on June 9, 1997.
(iii) Management and Administrative Services Agreement between the Fund, on
behalf of the Liquid Assets Series, and Prudential Investments Fund
Management LLC, incorporated by reference to Exhibit 5(c) to Post-Effective
Amendment No. 19 to the Registration Statement on Form N-1A (File No.
33-17224) filed via EDGAR on June 9, 1997.
(iv) Amendment to Subadvisory Agreement between Prudential Investments Fund
Management LLC and The Prudential Investment Corporation.*
(e) (i) Distribution Agreement between the Registrant and Prudential Investment
Management Services LLC, incorporated by reference to Exhibit (e)(i) to
Post-Effective Amendment No. 22 to the Registration Statement on Form N-1A
(File No. 33-17224) filed via EDGAR on March 30, 1999.
(ii) Form of Dealer Agreement, incorporated by reference to Exhibit (e)(ii)
to Post-Effective Amendment No. 22 to the Registration Statement on Form
N-1A (File No. 33-17224) filed via EDGAR on March 30, 1999.
(f) Not applicable.
(g) (i) Custodian Contract between the Registrant and State Street Bank and
Trust Company, incorporated by reference to Exhibit 8(a) to Post-Effective
Amendment No. 19 to the Registration Statement on Form N-1A (File No.
33-17224) filed via EDGAR on June 9, 1997.
(ii) Subcustodian Agreement between State Street Bank and Trust Company and
Security Pacific National Bank, incorporated by reference to Exhibit 8(b)
to Post-Effective Amendment No. 19 to the Registration Statement on Form
N-1A (File No. 33-17224) filed via EDGAR on June 9, 1997.
(iii) Subcustodian Agreement for Repurchase Transactions between State
Street Bank and Trust Company and Security Pacific National Bank,
incorporated by reference to Exhibit 8(c) to Post-Effective Amendment No.
19 to the Registration Statement on Form N-1A (File No. 33-17224) filed via
EDGAR on June 9, 1997.
(h) (i)Transfer Agency and Service Agreement between the Registrant and
Prudential Mutual Fund Services, incorporated by reference to Exhibit 9 to
Post-Effective Amendment No. 19 to the Registration Statement on Form N-1A
(File No. 33-17224) filed via EDGAR on June 9, 1997.
(ii) Amendment to Transfer Agency and Service Agreement between the
Registrant and Prudential Mutual Fund Services LLC.*
(i) Opinion of Counsel, incorporated by reference to Exhibit 10 to
Post-Effective Amendment No. 19 to the Registration Statement on Form N-1A
(File No. 33-17224) filed via EDGAR on June 9, 1997.
(j) (i) Consent of Independent Accountants.*
(ii) Appraisal of Duff and Phelps Credit Rating Co.*
(k) Not applicable.
(l)Not applicable.
(m) Amended and Restated Distribution and Service Plan, incorporated by
reference to Exhibit (m) to Post-Effective Amendment No. 22 to the
Registration Statement on Form N-1A (File No. 33-17224) filed via EDGAR on
March 30, 1999.
(n) Not applicable.
(o) Rule 18 f-3 Plan, incorporated by reference to Exhibit 18 to Post-Effective
Amendment No. 19 to the Registration Statement on Form N-1A (File No.
33-17224) filed via EDGAR on June 9, 1997.
----------------------
* Filed herewith.
