<PAGE>
SEMIANNUAL REPORT SEPTEMBER 30, 2000
Prudential
Institutional Liquidity Portfolio, Inc./
Institutional Money Market Series
Fund Type Money market
Objective High current income consistent with the
preservation of principal and liquidity
(GRAPHIC)
This report is not authorized for distribution to
prospective investors unless preceded or
accompanied by a current prospectus.
The views expressed in this report and information
about the Fund's portfolio holdings are for the
period covered by this report and are subject to
change thereafter.
(LOGO)
<PAGE>
Build on the Rock
<PAGE>
Investment Goals and Style
The Prudential Institutional Liquidity
Portfolio/Institutional Money Market Series seeks
high current income consistent with the
preservation of principal and liquidity. The Series
is a diversified portfolio of high-quality, U.S.
dollar-denominated money market securities issued
by the U.S. government and its agencies, major
corporations, and commercial banks of the United
States and foreign countries. Maturities can range
from one day to a maximum of 13 months. We
typically purchase securities rated in one of the
two highest-rating categories by at least two major
independent rating agencies, or if not rated,
deemed to be of equivalent quality by our credit
research staff. There can be no assurance that the
Series will achieve its investment objective.
Institutional Money Fund Yields
(GRAPH)
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
Fund Facts As of 9/30/00
<TABLE>
<CAPTION>
7-Day Net Asset Weighted Avg. Net Assets
Current Yld. Value (NAV) Mat. (WAM) (Millions)
<S> <C> <C> <C> <C>
PILP Class A 6.52% $1.00 59 $ 412
PILP Class I 6.57% $1.00 59 $2,216
iMoneyNet, Inc. Non-Gov't
Institutional
Only (1st & 2nd Tier) Avg.* 6.25% $1.00 51 N/A
</TABLE>
Note: Yields will fluctuate from time to time, and
past performance is not indicative of future
results. An investment in PILP is not insured or
guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Although PILP seeks to preserve the value of your
investment at $1.00 per share, it is possible to
lose money by investing in PILP.
* iMoneyNet, Inc. reports a seven-day current
yield, NAV, and WAM on Tuesdays. This is the data
of all funds in iMoneyNet, Inc. Non-Gov't
Institutional Only (1st & 2nd Tier) Average
category as of September 26, 2000, the closest date
to the end of our reporting period.
Weighted Average Maturity Compared to the Average
Institutional Fund
(GRAPH)
1
<PAGE>
(LOGO) November 15, 2000
DEAR SHAREHOLDER,
Money market yields initially rose then turned
lower during our six-month reporting period that
began on April 1, 2000. The trend toward lower
yields emerged amid belief that the Federal
Reserve's mid-May move to tighten monetary policy
probably marked the end of its latest round of
short-term rate hikes. Indeed U.S. economic growth
slowed appreciably in the third quarter of 2000,
and inflation was subdued, lending credence to this
view.
Despite these shifting market conditions, the Class
A and Class I shares of the Prudential Institutional
Liquidity Portfolio/Institutional Money Market Series
(the Series) provided better-than-average yields, and
maintained a $1 net asset value per share. On
September 30, 2000, the seven-day current yield was
6.52% on the Series' Class A shares and 6.57% on
its Class I shares. Both were above the 6.25% yield
on the average money market fund tracked by iMoneyNet,
Inc.
The following report discusses developments in the
money markets during our six-month reporting
period, and explains the Series' investments. Thank
you for your continued confidence in Prudential
mutual funds.
Sincerely,
David R. Odenath, Jr., President
Prudential Institutional Liquidity Portfolio, Inc./
Institutional Money Market Series
2
<PAGE>
Prudential
Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Semiannual Report September 30, 2000
INVESTMENT ADVISER'S REPORT
Early in our six-month reporting period that began
on April 1, 2000, we started to prepare the Series
for the Federal Reserve's (the Fed) next increase
in short-term interest rates. The central bank had
tightened monetary policy repeatedly in 1999 and
early in 2000, hoping that higher borrowing costs
for consumers and businesses would curb U.S.
economic growth and prevent higher inflation.
However, the Fed indicated that it might continue
to raise short-term rates because the threat of
mounting inflationary pressures remained.
With this in mind, we allowed the Series' weighted
average maturity (WAM) to decline until it was
shorter than that of the average comparable fund as
measured by iMoneyNet. Positioning the Series in
this way would give us better access to cash to buy
any higher-yielding money market securities that
were available around the time that the Fed was
expected to increase short-term rates.
FED TOUGHENED STANCE AGAINST INFLATION
We did not have to wait long. The central bank
boosted short-term rates by half of a percentage
point in mid-May 2000, its largest increase in more
than five years. In anticipation of this move,
investors had pushed money market yields sharply
higher. We took advantage of this trend by
purchasing three-month corporate securities that
lengthened the Series' WAM in May until it was once
again longer than that of the average comparable
fund. The statement announcing the mid-May rate
hike hinted that the Fed might continue to tighten
monetary policy. Because of its hawkish tone, we
tempered our purchases of longer-term money market
securities, expecting to buy them at even higher
yields if the Fed resumed raising short-term rates.
As it turned out, some of the data released in early
June suggested that economic growth was beginning to
slow. Because this development fueled hope that the
Fed would leave short-term interest rates unchanged
for the remainder of the year, money market yields
declined. In order to lock in
3
<PAGE>
Prudential
Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Semiannual Report September 30, 2000
yields before they moved even lower, in July we
aggressively bought securities maturing in six
months and one year. These purchases significantly
lengthened the Series' WAM.
Heightened volatility in the stock market during
August sent many investors fleeing to the relative
safety of one-year money market securities, driving
their prices higher and yields lower. This
development caused the money market yield curve to
flatten until there was little difference between
yields on six-month and one-year securities. We
took profits on some of our one-year securities and
bought more six-month issues. We thought the
decline in yields on one-year securities would
prove temporary. However, the stock market
volatility continued into September, and yields on
one-year securities fell even further.
LOOKING AHEAD: SHORT-tERM RATE CUT EYED IN 2001
The economy appears to be headed for a "soft
landing." The U.S. economic expansion lost
considerable steam in the third quarter of 2000 as
government spending declined, business investment
fell, and the construction of new homes slowed. In
addition, inflationary pressures were relatively
tame during that period. Should this economic
scenario persist, there is a greater chance that
the Fed's next move may be a cut in short-term
interest rates in 2001.
Prudential Institutional Liquidity Portfolio Management Team
4
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Portfolio of Investments as of September 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C> <C>
----------------------------------------------------------------------------------------
Bank Notes 10.9%
Bank of America N.A.
$ 50,000 6.82%, 2/5/01 $ 50,000,000
Bank One Corp.
25,000 6.94%, 12/5/00 25,005,799
11,000 6.72%, 11/15/00(b) 11,001,900
Comerica Bank of Detroit
20,000 6.56%, 10/2/00(b) 19,996,680
7,000 6.573%, 10/10/00(b) 6,998,567
74,000 6.583%, 10/19/00(b) 73,984,485
First Union Corp.
5,500 5.625%, 2/12/01 5,481,258
Lasalle Bank N.A.
80,000 6.71%, 2/1/01 79,987,400
National City Bank of Cleveland
15,000 6.73%, 2/9/01 14,997,447
--------------
287,453,536
-------------------------------------------------------------------------------------
Certificates of Deposit - Domestic 2.0%
First Union National Bank
28,000 7.09%, 12/22/00 28,000,000
Southtrust Bank N.A.
25,000 6.72%, 2/28/01 25,000,882
--------------
53,000,882
-------------------------------------------------------------------------------------
Certificates of Deposit - Eurodollar 0.2%
ING Bank, NV
4000 6.83%, 1/29/01 3,999,625
-------------------------------------------------------------------------------------
Certificates of Deposit - Yankee 7.9%
Bank of Nova Scotia
15,000 6.65%, 2/1/01 14,997,601
BNP Paribas
25,000 6.70%, 2/8/01 24,976,118
</TABLE>
See Notes to Financial Statements 5
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Portfolio of Investments as of September 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Bayerische Hypo-und Vereinsbank AG
$ 7,000 6.72%, 2/14/01 $ 6,999,168
Canadian Imperial Bank of Commerce
2,000 6.63%, 10/2/00 1,999,999
National Westminster Bank PLC
50,000 6.10%, 11/27/00 49,983,810
Societe Generale Institutional
25,000 6.75%, 1/16/01 25,000,000
Svenska Handelsbanken
50,000 6.73%, 12/29/00 49,999,849
Westpac Banking Corp.
35,000 6.52%, 1/29/01 34,994,534
--------------
208,951,079
-------------------------------------------------------------------------------------
Commercial Paper 52.6%
ALCOA, Inc.
2,900 6.50%, 12/14/00 2,861,253
Allianz Of America Finance Corp.
8,628 6.48%, 12/14/00 8,513,075
Aon Corp.
4,000 6.53%, 11/27/00 3,958,643
Associates Corp.of North America
2,000 6.50%, 12/19/00 1,971,472
B - One Australia Ltd.
4,000 6.58%, 10/3/00 3,998,538
4,000 6.53%, 10/31/00 3,978,233
2,450 6.53%, 11/15/00 2,430,002
4,500 6.55%, 11/15/00 4,463,156
Banc One Financial Corp.
50,000 6.79%, 11/27/00 49,462,458
BankAmerica Corp.
35,000 6.51%, 2/27/01 34,056,954
Barton Capital Corp.
4,535 6.60%, 10/11/00 4,526,686
5,440 6.55%, 10/17/00 5,424,164
7,375 6.56%, 10/23/00 7,345,434
6,500 6.58%, 10/23/00 6,473,863
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Portfolio of Investments as of September 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Baus Funding LLC
$ 15,000 6.60%, 11/7/00 $ 14,898,250
BCI Funding Corp.
10,903 6.60%, 10/18/00 10,869,019
BHF Finance, Inc.
10,000 6.60%, 10/20/00 9,965,167
Bradford & Bingley Building Society
16,000 6.58%, 10/5/00 15,988,302
3,000 6.51%, 10/30/00 2,984,268
Brahms Funding Corp.
25,000 6.605%, 10/26/00 24,885,330
21,000 6.60%, 11/9/00 20,849,850
British Telecommunications PLC
14,000 6.54%, 12/12/00 13,816,880
CIT Group Holdings, Inc.
28,000 6.50%, 10/30/00 27,853,389
Citicorp
22,735 6.53%, 10/27/00 22,627,779
Clipper Receivables Corp.
50,000 6.53%, 10/20/00 49,827,681
Cregem North America, Inc.
3,000 6.54%, 2/6/01 2,930,240
25,000 6.54%, 2/8/01 24,409,583
CXC, Inc.
9,000 6.60%, 10/19/00 8,970,300
5,500 6.60%, 10/20/00 5,480,842
14,000 6.73%, 11/15/00 13,882,225
14,028 6.52%, 11/27/00 13,883,184
DaimlerChrysler North America Holdings Inc.
9,200 6.53%, 11/15/00 9,124,905
46,047 6.50%, 2/14/01 44,916,290
Delaware Funding Corp.
30,000 6.58%, 10/20/00 29,895,817
Eaton Corp.
5,638 6.53%, 11/6/00 5,601,184
Edison Asset Securitization LLC
5,000 6.65%, 10/23/00 4,979,681
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Portfolio of Investments as of September 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Enterprise Funding Corp.
$ 3,196 6.60%, 10/11/00 $ 3,190,141
Fortis Funding LLC
50,000 6.53%, 2/1/01 48,884,458
General Electric Capital Corp.
3,334 6.50%, 12/6/00 3,294,270
20,000 6.49%, 12/8/00 19,754,822
2,800 6.51%, 12/20/00 2,759,493
15,000 6.52%, 1/26/01 14,682,150
73,500 6.58%, 2/13/01 71,686,387
Hartford Financial Service Group, Inc.
17,000 6.54%, 11/9/00 16,879,555
Homeside Lending, Inc.
18,100 6.51%, 11/16/00 17,949,438
50,000 6.49%, 11/28/00 49,477,194
Intrepid Funding Master Trust
7,369 6.54%, 1/24/01 7,215,049
18,405 6.54%, 1/26/01 18,013,802
National Rural Utilities Cooperative Finance
10,000 6.57%, 10/10/00 9,983,575
Nordbanken North America, Inc.
2,175 6.60%, 10/17/00 2,168,620
Old Line Funding Corp.
1,625 6.54%, 11/17/00 1,611,125
PNC Funding Corp.
7,573 6.56%, 10/31/00 7,531,601
23,000 6.56%, 12/7/00 22,719,196
6,000 6.54%, 12/11/00 5,922,610
Receivables Capital Corp.
3,500 6.60%, 10/16/00 3,490,375
Robert Bosch Finance Corp.
6,000 6.51%, 12/15/00 5,918,625
Santander Finance, Inc.
17,000 6.71%, 11/14/00 16,860,581
50,000 6.71%, 11/15/00 49,580,625
Societe Generale North America, Inc.
45,000 6.53%, 2/1/01 43,996,012
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Portfolio of Investments as of September 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Southern Co.
$ 5,000 6.60%, 10/16/00 $ 4,986,250
1,900 6.60%, 10/18/00 1,894,078
1,303 6.65%, 10/27/00 1,296,742
8,719 6.60%, 10/30/00 8,672,644
2,825 6.65%, 11/2/00 2,808,301
Swedbank, Inc
2,300 6.65%, 10/18/00 2,292,777
6,500 6.55%, 10/31/00 6,464,521
3,800 6.60%, 10/31/00 3,779,100
10,000 6.58%, 11/6/00 9,934,200
8,000 6.58%, 11/20/00 7,926,889
Sweetwater Capital
3,197 6.58%, 10/27/00 3,181,807
2,301 6.54%, 11/28/00 2,276,755
29,763 6.55%, 11/29/00 29,443,502
6,924 6.52%, 12/26/00 6,816,155
5,415 6.54%, 12/28/00 5,328,697
Textron Financial Corp.
31,000 6.54%, 10/16/00 30,915,525
Unilever Capital Corp.
51,000 6.683%, 12/7/00(b) 51,000,000
Variable Funding Capital Corp.
38,000 6.51%, 11/21/00 37,649,545
40,000 6.51%, 11/22/00 39,623,867
14,200 6.51%, 11/28/00 14,051,066
Ventures Business Trust
40,000 6.52%, 12/15/00 39,456,667
Wells Fargo & Co.
49,983 6.50%, 11/20/00 49,531,765
Windmill Funding Corp.
5,000 6.75%, 10/10/00 4,991,563
Woolwich PLC
40,000 6.49%, 11/22/00 39,625,022
13,000 6.55%, 11/22/00 12,877,006
3,000 6.60%, 1/18/01 2,940,050
--------------
1,381,438,295
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Portfolio of Investments as of September 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Federal Agency 0.8%
Federal Home Loan Bank
$ 20,000 6.528%, 10/19/00(b) $ 19,994,630
-------------------------------------------------------------------------------------
Loan Participations 5.1%
AXA Financial Inc.
56,000 6.70%, 10/23/00(c)
(cost $56,000,000, date purchased 9/22/00) 56,000,000
Cargill Global Funding PLC
50,000 6.57%, 10/13/00(c)
(cost $50,000,000, date purchased 9/15/00) 50,000,000
International Leasing Finance
10,000 6.60%, 10/5/00 10,000,000
Southern California Edison.
18,000 6.67%, 10/31/00(c)
(cost $18,000,000, date purchased 9/28/00 and
9/29/00) 18,000,000
--------------
134,000,000
-------------------------------------------------------------------------------------
Other Corporate Obligations 15.3%
Centex Home Mortgage LLC
7,000 6.764%, 10/20/00(b)/(c)
(cost $7,000,000, date purchased 12/8/99) 7,000,000
CIT Group Holdings, Inc.
22,000 6.676%, 10/16/00(b) 21,975,973
Ford Motor Credit Co.
20,000 6.77%, 10/2/00(b) 19,999,947
General Electric Capital Corp.
13,000 6.674%, 10/20/00(b)/(c)
(cost $13,000,000, date purchased 7/20/00) 13,000,000
Goldman Sachs Group, L.P.
34,000 6.78%, 1/31/01(c)
(cost $34,000,000, date purchased 9/29/00) 34,000,000
70,000 6.81%, 12/15/00(b) 70,000,000
Morgan (J.P.) & Co., Inc.
24,000 6.613%, 10/16/00(b) 24,000,000
Morgan Stanley Dean Witter & Co.
46,000 6.646%, 10/16/00(b) 46,000,000
Restructured Asset Securities
35,000 6.64%, 10/13/00(b) 35,000,000
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Portfolio of Investments as of September 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Security Life Of Denver
$ 26,000 6.80%, 10/12/00(b)/(c)
(cost $26,000,000, date purchased 4/12/00) $ 26,000,000
Short Term Repackaged Asset Trust 1998-E
18,000 6.65%, 10/18/00(b)/(c)
(cost $18,000,000, date purchased 8/18/00) 18,000,000
Strategic Money Market Trust
50,000 6.64%, 10/13/00(b) 50,000,000
Travelers Insurance Co.
25,000 6.74%, 11/24/00(b)/(c)
(cost $25,000,000, date purchased 2/24/00) 25,000,000
12,000 6.79%, 10/6/00(b)/(c)
(cost $12,000,000, date purchased 7/6/00) 12,000,000
--------------
401,975,920
-------------------------------------------------------------------------------------
Time Deposit - Eurodollar 4.8%
Bank of Montreal
51,097 6.56%, 10/2/00 51,097,000
SunTrust Bank
75,000 6.56%, 10/2/00 75,000,000
--------------
126,097,000
Total Investments 99.6%
(amortized cost $2,616,910,967(a)) 2,616,910,967
Other assets in excess of liabilities 0.4% 10,374,614
--------------
Net Assets 100% $2,627,285,581
--------------
--------------
</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 $259,000,000. The
aggregate value ($259,000,000) is approximately 9.9% of net assets.
See Notes to Financial Statements 11
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Portfolio of Investments as of September 30, 2000 (Unaudited) Cont'd.
The industry classification of portfolio holdings and other assets in excess of
liabilities shown as a percentage of net assets as of September 30, 2000 was as
follows:
<TABLE>
<S> <C>
Commercial Banks 47.1%
Asset Backed Securities 12.2
Securities Brokers & Dealers 7.8
Bank Holding Companies-Domestic 7.6
Short-Term Business Credit 7.0
Life Insurance 4.7
Motor Vehicle Parts 2.8
Mortgage Banks 2.8
Grain Mill Products 1.9
Electrical Services 1.4
Aircrafts & Parts 1.2
Federal Credit Agencies 0.8
Fire, Marine, Casualty Insurance 0.6
Phone Communications 0.5
Electric, Equipment & Computers 0.4
Equipment Rental & Leasing 0.4
Accident & Health Insurance 0.2
Petroleum Refining 0.1
Personal Credit Institutions 0.1
----
99.6
Other assets in excess of liabilities 0.4
----
100%
----
----
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Statement of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
September 30, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
ASSETS
Investments, at amortized cost which approximates market
value $2,616,910,967
Cash 1,721
Interest receivable 13,895,492
Other assets 19,119
------------------
Total assets 2,630,827,299
------------------
LIABILITIES
Dividends payable 2,842,972
Accrued expenses 420,011
Management fee payable 261,538
Distribution fee payable 17,197
------------------
Total liabilities 3,541,718
------------------
NET ASSETS $2,627,285,581
------------------
------------------
Net assets were comprised of:
Common stock, at par $ 2,627,286
Paid-in capital in excess of par 2,624,658,295
------------------
Net assets at September 30, 2000 $2,627,285,581
------------------
------------------
Class A:
Net asset value, offering and redemption price per share
($411,537,271 / 411,537,271 shares of $.001 par value
common stock issued and outstanding) $1.00
------------------
------------------
Class I:
Net asset value, offering and redemption price per share
($2,215,748,310 / 2,215,748,310 shares of $.001 par
value common stock issued and outstanding) $1.00
------------------
------------------
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
September 30, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest $ 70,824,062
------------------
Expenses
Management fee 2,157,072
Distribution fee--Class A 234,265
Transfer agent's fees and expenses 123,000
Registration fees 104,000
Custodian's fees and expenses 85,000
Reports to shareholders 15,000
Legal fees and expenses 14,000
Insurance expenses 13,000
Audit fee 13,000
Directors' fees and expenses 10,000
Miscellaneous 5,106
------------------
Total expenses 2,773,443
Less: Subsidy expense (Note 4) (382,074)
Management fee waiver (Note 2) (539,268)
Distribution fee waiver (Note 2) (136,655)
------------------
Net expenses 1,715,446
------------------
Net investment income 69,108,616
------------------
Net realized gain on investment transactions 19,519
------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 69,128,135
------------------
------------------
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
September 30, 2000 March 31, 2000
<S> <C> <C> <C>
-----------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 69,108,616 $ 106,497,438
Net realized gain (loss) on investment
transactions 19,519 (2,643)
------------------ ----------------
Net increase in net assets resulting
from operations 69,128,135 106,494,795
------------------ ----------------
Dividends and distributions (Note 1)
Class A (12,422,600) (19,311,167)
Class I (56,705,535) (87,183,628)
------------------ ----------------
(69,128,135) (106,494,795)
------------------ ----------------
Fund share transactions
Net proceeds from shares subscribed 5,668,390,723 16,932,830,624
Net asset value of shares issued in
reinvestment of dividends and
distributions 61,589,481 90,454,251
Cost of shares reacquired (5,076,191,449) (17,161,183,973)
------------------ ----------------
Net increase (decrease) in net assets
from Fund share transactions 653,788,755 (137,899,098)
------------------ ----------------
Total increase (decrease) 653,788,755 (137,899,098)
NET ASSETS
Beginning of period 1,973,496,826 2,111,395,924
------------------ ----------------
End of period $ 2,627,285,581 $ 1,973,496,826
------------------ ----------------
------------------ ----------------
</TABLE>
See Notes to Financial Statements 15
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Notes to Financial Statements (Unaudited)
Prudential Institutional Liquidity Portfolio, Inc. (the 'Fund') is
registered under the Investment Company Act of 1940 as an open-end, diversified
management investment company. The Fund consists of two series--the
Institutional Money Market Series (the 'Series') and the Liquid Assets Series.
The Liquid Assets Series has not yet commenced operations. The investment
objective of the Series is high current income consistent with the preservation
of principal and liquidity. The Series invests primarily in money market
instruments maturing in 13 months or less whose ratings are within the 2 highest
ratings categories by a nationally recognized statistical rating organization
or, if not rated, are of comparable quality. The ability of the issuers of the
securities held by the Series to meet their obligations may be affected by
economic developments in a specific industry or region.
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the
Fund, and the Series, in the preparation of its financial statements.
Securities Valuation: Portfolio securities are valued at amortized
cost, which approximates market value. The amortized cost method involves
valuing a security at its cost on the date of purchase and thereafter assuming a
constant amortization to maturity of any discount or premium.
Repurchase Agreements: In connection with transactions in repurchase
agreements with U.S. financial institutions, it is the Fund's policy that its
custodian or designated subcustodians, as the case may be under triparty
repurchase agreements, takes possession of the underlying collateral securities,
the value of which exceeds the principal amount of the repurchase transaction,
including accrued interest. To the extent that any repurchase agreement exceeds
one business day, the value of the collateral is marked-to-market on a daily
basis to ensure the adequacy of the collateral. If the seller defaults and the
value of the collateral declines or if bankruptcy proceedings are commenced with
respect to the seller of the security, realization of the collateral by the Fund
may be delayed or limited.
Securities Transactions and Net Investment Income: Securities
transactions are recorded on the trade date. Realized gains and losses on sales
of investments are calculated on the identified cost basis. Interest income is
recorded on the accrual basis. Expenses are recorded on the accrual basis which
may require the use of certain estimates by management.
Net investment income (other than distribution fees) and unrealized and
realized gains or losses are allocated daily to each class of shares based upon
the relative proportion of net assets of each class at the beginning of the day.
16
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Notes to Financial Statements (Unaudited) 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 services of PIC,
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 $539,268 ($.0002 per share) for
the six months ended September 30, 2000. The Series is not required to reimburse
PIFM for such waiver.
Effective January 1, 2000, the subadvisory fee paid to PIC by PIFM is
computed daily and payable monthly at an annual rate of .10 of 1% of the average
daily net assets of the Fund. Prior to January 1, 2000, PIC was reimbursed by
PIFM for reasonable costs and expenses incurred in furnishing investment
advisory services. The change in the subadvisors fee structure has no impact on
the management fee charged to the Fund or its shareholders.
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 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 $136,655 ($.0001 per share)
for the six months ended September 30,
17
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Notes to Financial Statements (Unaudited) Cont'd.
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 $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 did not borrow any amounts pursuant to the Agreement
during the six months ended September 30, 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 six months ended September 30,
2000, the Series incurred fees of $120,000 for the services of PMFS. As of
September 30, 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 six
months ended September 30, 2000, such reimbursement amounted to $382,074 ($.0001
per share for Class A and I shares; .02% 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 September 30, 2000, Prudential owned 13,226,749 Class I shares.
18
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Notes to Financial Statements (Unaudited) 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>
Six months ended September 30, 2000:
Shares sold 454,375,428
Shares issued in reinvestment of dividends and distributions 12,024,600
Shares reacquired (406,137,818)
----------------
Net increase in shares outstanding before conversion 60,262,210
Shares reacquired upon conversion into Class I (20,591,135)
----------------
Net increase in shares outstanding 39,671,075
----------------
----------------
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
----------------
----------------
<CAPTION>
Class I
-------------------------------------------------------------------
<S> <C>
Six months ended September 30, 2000:
Shares sold 5,214,015,295
Shares issued in reinvestment of dividends and distributions 49,564,881
Shares reacquired (4,670,053,631)
----------------
Net increase in shares outstanding before conversion 593,526,545
Shares issued upon conversion from Class A 20,591,135
----------------
Net increase in shares outstanding 614,117,680
----------------
----------------
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)
----------------
----------------
</TABLE>
19
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
Class A
------------------------------------------
<S> <C> <C> <C>
Six Months Ended Year Ended
September 30, 2000 March 31, 2000
-----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 1.00 $ 1.000
---------- --------------
Net investment income and net realized gains
(losses) .032(b) .053(b)
Dividends and distributions to shareholders (.032) (.053)
---------- --------------
Net asset value, end of period $ 1.00 $ 1.000
---------- --------------
---------- --------------
TOTAL RETURN(a): 3.25% 5.38%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $411,537 $371,866
Average net assets (000) $389,376 $366,127
Ratios to average net assets:
Expenses, including distribution fee .20%(b)/(d) .20%(b)
Expenses, excluding distribution fee .15%(c)/(d) .15%(c)
Net investment income 6.36%(b)/(d) 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 period reported and includes reinvestment
of dividends and distributions. Total returns for less than a full year are
not annualized.
(b) Net of management and distribution fee waiver/expense subsidy.
(c) Net of management fee waiver/expense subsidy.
(d) Annualized.
20 See Notes to Financial Statements
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class A
<S> <C> <C> <C> <C>
-----------------------------------------------------
Year Ended March 31,
-----------------------------------------------------
1999 1998 1997 1996
-----------------------------------------------------
$ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- --------
.053(b) .055(b) .050 .056
(.053) (.055) (.050) (.056)
-------- -------- -------- --------
$ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- --------
-------- -------- -------- --------
5.39% 5.63% 5.16% 5.72%
$361,167 $140,813 $478,045 $440,842
$247,471 $217,881 $449,393 $519,946
.20%(b) .29%(b) .46% .43%
.15%(c) .21%(c) .34% .31%
5.20%(b) 5.42%(b) 5.03% 5.56%
</TABLE>
See Notes to Financial Statements 21
<PAGE>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class I
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
July 9,
Six Months 1997(b)
Ended Year Ended March 31, Through
September 30, ------------------------- March 31,
2000 2000 1999 1998
-------------------------------------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period $ 1.00 $ 1.000 $ 1.000 $ 1.000
------------- ---------- ---------- ------------
Net investment income and
net realized gains
(losses) .032(d) .053(d) .053(d) .041(d)
Dividends and
distributions to
shareholders (.032) (.053) (.053) (.041)
------------- ---------- ---------- ------------
Net asset value, end of
period $ 1.00 $ 1.000 $ 1.000 $ 1.000
------------- ---------- ---------- ------------
------------- ---------- ---------- ------------
TOTAL RETURN(a): 3.28% 5.43% 5.45% 4.15%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $ 2,215,748 $1,601,631 $1,750,229 $910,394
Average net assets (000) $ 1,761,802 $1,643,961 $1,470,082 $814,138
Ratios to average net
assets:
Expenses, including
distribution fee .15%(c)/(d) .15%(d) .15%(d) .15%(c)/(d)
Expenses, excluding
distribution fee .15%(c)/(d) .15%(d) .15%(d) .15%(c)/(d)
Net investment income 6.42%(c)/(d) 5.30%(d) 5.26%(d) 5.60%(c)/(d)
</TABLE>
------------------------------
(a) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each period reported and includes reinvestment
of dividends and distributions. Total returns for less than a full year are
not annualized.
(b) Commencement of offering of Class I shares.
(c) Annualized.
(d) Net of management fee waiver/expense subsidy.
22 See Notes to Financial Statements
<PAGE>
Prudential
Institutional Liquidity Portfolio, Inc. Institutional Money Market Series
Getting the Most From Your Prudential Mutual Fund
Some mutual fund shareholders won't ever read this--
they don't read annual and semiannual reports. It's
quite understandable. These annual and semiannual
reports are prepared to comply with federal
regulations, and are often written in language that
is difficult to understand. So when most people run
into those particularly daunting sections of these
reports, they don't read them.
We think that's a mistake
At Prudential Mutual Funds, we've made some changes
to our report to make it easier to understand and
more pleasant to read. We hope you'll find it
profitable to spend a few minutes familiarizing
yourself with your investment. Here's what you'll
find in the report:
Performance at a Glance
Since an investment's performance is often a
shareholder's primary concern, we present
performance information in two different formats.
You'll find it first on the "Performance at a
Glance" page where we compare the Fund and the
comparable average calculated by Lipper, Inc., a
nationally recognized mutual fund rating agency. We
report both the cumulative total returns and the
average annual total returns. The cumulative total
return is the total amount of income and
appreciation the Fund has achieved in various time
periods. The average annual total return is an
annualized representation of the Fund's
performance. It gives you an idea of how much the
Fund has earned in an average year for a given time
period. Under the performance box, you'll see
legends that explain the performance information,
whether fees and sales charges have been included
in returns, and the inception dates for the Fund's
share classes.
See the performance comparison charts at the back
of the report for more performance information.
Please keep in mind that past performance is not
indicative of future results.
<PAGE>
Prudential
Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Getting the Most From Your Prudential Mutual Fund
investment adviser's report
The portfolio manager, who invests your money for
you, reports on successful--and not-so-successful--
strategies in this section of your report. Look for
recent purchases and sales here, as well as information
about the sectors the portfolio manager favors, and any
changes that are on the drawing board.
Portfolio of Investments
This is where the report begins to appear
technical, but it's really just a
listing of each security held at the end of the
reporting period, along with valuations and other
information. Please note that sometimes we discuss
a security in the "Investment Adviser's Report"
section that doesn't appear in this listing because
it was sold before the close of the reporting
period.
Statement of Assets and Liabilities
The balance sheet shows the assets (the value of
the Fund's holdings), liabilities (how much the Fund
owes), and net assets (the Fund's equity, or holdings
after the Fund pays its debts) as of the end of the
reporting period. It also shows how we calculate the
net asset value per share for each class of shares.
The net asset value is reduced by payment of your
dividend, capital gain, or other distribution, but
remember that the money or new shares are being
paid or issued to you. The net asset value
fluctuates daily, along with the value of every
security in the portfolio.
Statement of Operations
This is the income statement, which details income
(mostly interest and dividends earned) and expenses
(including what you pay us to manage your money).
You'll also see capital gains here--both realized
and unrealized.
<PAGE>
www.prudential.com (800) 225-1852
Statement of Changes in Net Assets
This schedule shows how income and expenses
translate into changes in net assets. The Fund
is required to pay out the bulk of its income to
shareholders every year, and this statement shows
you how we do it (through dividends and distributions)
and how that affects the net assets. This statement
also shows how money from investors flowed into
and out of the Fund.
Notes to Financial Statements
This is the kind of technical material that can
intimidate readers, but it does contain useful
information. The Notes provide a brief history and
explanation of your Fund's objectives. In addition,
they outline how Prudential Mutual Funds prices
securities. The Notes also explain who manages and
distributes the Fund's shares and, more
importantly, how much they are paid for doing so.
Finally, the Notes explain how many shares are
outstanding and the number issued and redeemed over
the period.
Financial Highlights
This information contains many elements from prior
pages, but on a per-share basis. It is designed to help you
understand how the Fund performed, and to compare this
year's performance and expenses to those of prior years.
Independent accountant's Report
Once a year, an outside auditor looks over our
books and certifies that the financial statements
are fairly presented and comply with generally
accepted accounting principles.
Tax Information
This is information that we report annually about
how much of your total return is taxable. Should
you have any questions, you may want to consult a
tax adviser.
<PAGE>
Prudential
Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Getting the Most From Your Prudential Mutual Fund
Performance Comparison
These charts are included in the annual report and
are required by the Securities Exchange Commission.
Performance is presented here as a hypothetical
$10,000 investment in the Fund since its inception
or for 10 years (whichever is shorter). To help you
put that return in context, we are required to
include the performance of an unmanaged, broad-based
securities index as well. The index does not reflect
the cost of buying the securities it contains or the
cost of managing a mutual fund. Of course, the index
holdings do not mirror those of the Fund--the index
is a broad-based reference point commonly used by
investors to measure how well they are doing. A
definition of the selected index is also provided.
Investors cannot invest directly in an index.
<PAGE>
www.prudential.com (800) 225-1852
How many times have you read these reports--or other
financial materials--and stumbled across a word that
you don't understand?
Many shareholders have run into the same problem.
We'd like to help. So we'll use this space from
time to time to explain some of the words you might
have read, but not understood. And if you have a
favorite word that no one can explain to your
satisfaction, please write to us.
Basis Point: 1/100th of 1%. For example, one-half
of one percent is 50 basis points.
Collateralized Mortgage Obligations (CMOs):
Mortgage-backed bonds that separate mortgage pools
into different maturity classes called tranches.
These instruments are sensitive to changes in
interest rates and homeowner refinancing activity.
They are subject to prepayment and maturity
extension risk.
Derivatives: Securities that derive their value
from other securities. The rate of return of these
financial instruments rises and falls--sometimes
very suddenly--in response to changes in some
specific interest rate, currency, stock, or other
variable.
Discount Rate: The interest rate charged by the
Federal Reserve on loans to member banks.
Federal Funds Rate: The interest rate charged by
one bank to another on overnight loans.
Futures Contract: An agreement to purchase or sell
a specific amount of a commodity or financial instrument
at a set price at a specified date in the future.
<PAGE>
Prudential
Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Getting the Most From Your Prudential Mutual Fund
Leverage: The use of borrowed assets to enhance
return. The expectation is that the interest rate
charged on borrowed funds will be lower than the
return on the investment. While leverage can
increase profits, it can also magnify losses.
Liquidity: The ease with which a financial
instrument (or product) can be bought or sold
(converted into cash) in the financial markets.
Price/Earnings Ratio: The price of a share of stock
divided by the earnings per share for a 12-month
period.
Option: An agreement to purchase or sell something,
such as shares of stock, by a certain time for a
specified price. An option need not be exercised.
Spread: The difference between two values; often
used to describe the difference between "bid" and
"asked" prices of a security, or between the yields
of two similar maturity bonds.
Yankee Bond: A bond sold by a foreign company or
government on the U.S. market and denominated in
U.S. dollars.
<PAGE>
www.prudential.com (800) 225-1852
FOR MORE INFORMATION
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
------------------------------
Directors
Delayne Dedrick Gold
Robert F. Gunia
Robert E. LaBlanc
David R. Odenath, Jr.
Judy A. Rice
Robin B. Smith
Stephen Stoneburn
Nancy H. Teeters
Clay T. Whitehead
Officers
David R. Odenath, Jr., President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Robert C. Rosselot, Secretary
William V. Healey, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 8098
Philadelphia, PA 19101
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Fund Symbols CUSIP
Class A 744350109
Class I 744350604
The views expressed in this report and information
about the Fund's portfolio holdings are for the
period covered by this report and
are subject to change thereafter.
The accompanying financial statements as
of September 30, 2000, were not audited and,
accordingly, no opinion is expressed on them.
