-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QxLrqoyEXfAlEMLNR3yrLcI73GKUgs6dCkhtnXhCAxoJLse2M4XSqzjx8/1nIHQE mLz0gFrzZRyVCzc/EWwEkw== 0000898733-00-000873.txt : 20001211 0000898733-00-000873.hdr.sgml : 20001211 ACCESSION NUMBER: 0000898733-00-000873 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRUDENTIAL INSTITUTIONAL LIQUIDITY PORTFOLIO INC CENTRAL INDEX KEY: 0000822337 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 133454426 STATE OF INCORPORATION: MD FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05336 FILM NUMBER: 785531 BUSINESS ADDRESS: STREET 1: 100 MULBERRY ST GWC 3 STREET 2: 9TH FL CITY: NEWARK STATE: NJ ZIP: 07102 BUSINESS PHONE: 2122141225 MAIL ADDRESS: STREET 1: ONE SEAPORT PLZ STREET 2: ONE SEAPORT PLZ CITY: NEW YORK STATE: NY ZIP: 10292 N-30D 1 0001.txt PRUDENTIAL INSTITUTIONAL LIQUIDITY PORTFOLIO, INC. 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) Build on the Rock Investment Goals and Style The Prudential Institutional Liquidity Portfolio/Institutional Money Market Series seeks high current income consistent with the preservation of principal and liquidity. The Series is a diversified portfolio of high-quality, U.S. dollar-denominated money market securities issued by the U.S. government and its agencies, major corporations, and commercial banks of the United States and foreign countries. Maturities can range from one day to a maximum of 13 months. We typically purchase securities rated in one of the two highest-rating categories by at least two major independent rating agencies, or if not rated, deemed to be of equivalent quality by our credit research staff. There can be no assurance that the Series will achieve its investment objective. Institutional Money Fund Yields (GRAPH) www.prudential.com (800) 225-1852 Performance at a Glance Fund Facts As of 9/30/00
7-Day Net Asset Weighted Avg. Net Assets Current Yld. Value (NAV) Mat. (WAM) (Millions) 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
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 (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 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 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 Prudential Institutional Liquidity Portfolio, Inc. Institutional Money Market Series Portfolio of Investments as of September 30, 2000 (Unaudited)
Principal Amount (000) Description Value (Note 1) - ---------------------------------------------------------------------------------------- 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
See Notes to Financial Statements 5 Prudential Institutional Liquidity Portfolio, Inc. Institutional Money Market Series Portfolio of Investments as of September 30, 2000 (Unaudited) Cont'd.
Principal Amount (000) Description Value (Note 1) - ---------------------------------------------------------------------------------------- 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
6 See Notes to Financial Statements Prudential Institutional Liquidity Portfolio, Inc. Institutional Money Market Series Portfolio of Investments as of September 30, 2000 (Unaudited) Cont'd.
Principal Amount (000) Description Value (Note 1) - ---------------------------------------------------------------------------------------- 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
See Notes to Financial Statements 7 Prudential Institutional Liquidity Portfolio, Inc. Institutional Money Market Series Portfolio of Investments as of September 30, 2000 (Unaudited) Cont'd.
Principal Amount (000) Description Value (Note 1) - ---------------------------------------------------------------------------------------- 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
8 See Notes to Financial Statements Prudential Institutional Liquidity Portfolio, Inc. Institutional Money Market Series Portfolio of Investments as of September 30, 2000 (Unaudited) Cont'd.
Principal Amount (000) Description Value (Note 1) - ---------------------------------------------------------------------------------------- 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
See Notes to Financial Statements 9 Prudential Institutional Liquidity Portfolio, Inc. Institutional Money Market Series Portfolio of Investments as of September 30, 2000 (Unaudited) Cont'd.
Principal Amount (000) Description Value (Note 1) - ---------------------------------------------------------------------------------------- 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
10 See Notes to Financial Statements Prudential Institutional Liquidity Portfolio, Inc. Institutional Money Market Series Portfolio of Investments as of September 30, 2000 (Unaudited) Cont'd.
Principal Amount (000) Description Value (Note 1) - ---------------------------------------------------------------------------------------- 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 -------------- --------------
- ------------------------------ (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 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: 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% ---- ----
12 See Notes to Financial Statements Prudential Institutional Liquidity Portfolio, Inc. Institutional Money Market Series Statement of Assets and Liabilities (Unaudited)
September 30, 2000 - ---------------------------------------------------------------------------------------- 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 ------------------ ------------------
See Notes to Financial Statements 13 Prudential Institutional Liquidity Portfolio, Inc. Institutional Money Market Series Statement of Operations (Unaudited)
Six Months Ended September 30, 2000 - ---------------------------------------------------------------------------------------- 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 ------------------ ------------------
14 See Notes to Financial Statements Prudential Institutional Liquidity Portfolio, Inc. Institutional Money Market Series Statement of Changes in Net Assets (Unaudited)
Six Months Ended Year Ended September 30, 2000 March 31, 2000 - ----------------------------------------------------------------------------------- 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 ------------------ ---------------- ------------------ ----------------
See Notes to Financial Statements 15 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 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 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 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:
Shares and Class A Dollar Amount - ------------------------------------------------------------------- ---------------- 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 ---------------- ---------------- Class I - ------------------------------------------------------------------- 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) ---------------- ----------------
19 Prudential Institutional Liquidity Portfolio, Inc. Institutional Money Market Series Financial Highlights (Unaudited)
Class A ------------------------------------------ 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)
- ------------------------------ (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 Prudential Institutional Liquidity Portfolio, Inc. Institutional Money Market Series Financial Highlights (Unaudited) Cont'd.
Class A - ----------------------------------------------------- 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%
See Notes to Financial Statements 21 Prudential Institutional Liquidity Portfolio, Inc. Institutional Money Market Series Financial Highlights (Unaudited) Cont'd.
Class I ------------------------------------------------------------ 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)
- ------------------------------ (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 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. 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. 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. 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. 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. 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. 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. -----END PRIVACY-ENHANCED MESSAGE-----