UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811- 5336
Exact name of registrant as specified in charter: Prudential Institutional
Liquidity Portfolio, Inc.
Address of principal executive offices: Gateway Center 3
100 Mulberry Street
Newark, New Jersey 07102
Name and address of agent for service: Jonathan D. Shain
Gateway Center 3
100 Mulberry Street
Newark, New Jersey 07102
Registrant's telephone number, including area code: 973-802-6469
Date of fiscal year end: March 31, 2004
Date of reporting period: September 30, 2003
Item 1 -- Reports to Stockholders
SEMIANNUAL REPORT
SEPTEMBER 30, 2003
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
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 Series' portfolio
holdings are for the period covered by this
report and are subject to change thereafter.
Prudential Financial and the Rock logo are
registered service marks of The Prudential
Insurance Company of America, Newark, NJ,
and its affiliates. (LOGO)
Prudential
Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Performance at a Glance
SERIES OBJECTIVE
The investment objective of the Prudential
Institutional Liquidity Portfolio, Inc.
(PILP)/Institutional Money Market Series (the
Series) is high current income consistent with
the preservation of principal and liquidity.
There can be no assurance that the Series will
meet its investment objective.
Institutional Money Fund Yield Comparison
(GRAPH)
Past performance is not indicative of future
results. The graph portrays weekly 7-day
current yields for PILP/Institutional Money
Market Series and the iMoneyNet, Inc. Prime
Institutional Universe Average every Tuesday
from April 1, 2003 to September 30, 2003.
www.prudential.com (800) 521-7466
Semiannual Report September 30, 2003
Series Facts As of 9/30/03
7-Day Net Asset Weighted Avg. Net Assets
Current Yield Value (NAV) Maturity (WAM) (Millions)
PILP Class A 1.01% $1.00 81 Days $ 367
PILP Class I* 1.06% $1.00 81 Days $1,705
iMoneyNet, Inc. Prime
Institutional Universe Average** 0.72% N/A 56 Days N/A
Note: Yields will fluctuate from time to time,
and past performance is not indicative of
future results. An investment in PILP is not
insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government
agency. Although PILP seeks to preserve the
value of your investment at $1.00 per share, it
is possible to lose money by investing in PILP.
*Class I shares are not subject to distribution
and service (12b-1) fees.
**The iMoneyNet, Inc. Prime Institutional
Universe Average is based on the average yield
and WAM of all funds in the iMoneyNet, Inc.
Prime Institutional Universe category.
iMoneyNet, Inc. reports a 7-day
current yield and WAM on Tuesdays. This is the
data of all funds in the iMoneyNet, Inc. Prime
Institutional Universe category as of September 30, 2003.
Weighted Average Maturity Comparison
(GRAPH)
Past performance is not indicative of future
results. The graph portrays weekly WAMs for
PILP/Institutional Money Market Series and the
iMoneyNet, Inc. Prime Institutional Universe
Average every Tuesday from April 1, 2003 to
September 30, 2003.
1
(LOGO) November 21, 2003
DEAR SHAREHOLDER,
Recent stories in the media have painted an
unflattering portrait of the mutual fund
industry. There has also been press coverage of
Prudential, almost all of which has been
focused on former brokers of Prudential
Securities.* As the manager of the Prudential
Institutional Liquidity Portfolio,
Inc./Institutional Money Market Series, we at
Prudential Investments share your concern over
these investigations.
State and federal authorities have requested
information regarding trading practices from
many mutual fund companies from across the
nation. Prudential Investments has been
cooperating with those inquiries and, at
the same time, participating in an internal
review. This review includes activity by the
investment professionals of Prudential-managed
funds, as well as the policies, systems, and
procedures of Prudential Financial's
investment units and its proprietary
distribution channels, including the
former Prudential Securities.
MARKET TIMING
While market timing is not illegal, Prudential
Investments has actively discouraged disruptive
market timing, and for years, our mutual fund
prospectuses have identified and addressed this
issue. Our mutual fund business has established
operating policies and procedures that are designed
to detect and deter frequent trading activities
deemed disruptive to the management of Prudential-managed
mutual fund portfolios, and we have rejected numerous
orders placed by market timers in the past.
* Prudential Investments LLC, the manager of
the Prudential Institutional Liquidity
Portfolio, Inc./Institutional Money Market
Series, and Prudential Investment Management
Services, the distributor of the Series, are
part of the Investment Management segment of
Prudential Financial, Inc. and are separate
legal entities from Prudential Securities, a
retail brokerage firm formerly owned by
Prudential Financial. In February 2003,
Prudential Financial and Wachovia Corporation
announced they were combining their retail
brokerage forces. The transaction was
completed in July 2003. Wachovia Corporation
has a 62% interest in the new firm, which is
now known as Wachovia Securities, and
Prudential Financial owns the remaining 38%.
2
LATE TRADING
SEC rules require that orders to purchase or
redeem fund shares be received either by the
fund or by an intermediary (such as a broker,
financial adviser, or 401(k) record keeper)
before the time at which the fund calculates
its net asset value (normally 4:00 p.m.,
Eastern time) if they are to receive that day's
price. While we can't be absolutely certain
that no intermediary has accepted a
late trade, our contracts with intermediaries
require that they adhere to our prohibition on
late trading.
For more than 40 years Prudential has offered
investors quality investment products,
financial guidance, and responsive customer
service. Today, as the manager of the
Prudential Institutional Liquidity Portfolio,
Inc./Institutional Money Market Series, we
remain committed to this heritage and to the
highest ethical principles in our investment
practices.
Sincerely,
Judy A. Rice, President,
Prudential Institutional Liquidity Portfolio, Inc./
Institutional Money Market Series
3
SEMIANNUAL REPORT
SEPTEMBER 30, 2003
PRUDENTIAL
INSTITUTIONAL LIQUIDITY PORTFOLIO, INC.
- -------------------------------------------------------------------------------
FINANCIAL STATEMENTS
<Page>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Portfolio of Investments as of September 30, 2003 (Unaudited)
<Table>
<Caption>
Principal
Amount
(000) Description Value (Note 1)
- --------------------------------------------------------------------------------------
Certificates of Deposit - Canadian 5.6%
Canadian Imperial Bank of Commerce
$ 42,000 1.075%, 12/15/03 $ 42,000,000
Toronto Dominion Bank
50,000 1.15%, 12/30/03 50,006,150
25,000 1.38%, 8/27/04 24,995,406
--------------
117,001,556
- -------------------------------------------------------------------------------------
Certificates of Deposit - Eurodollar 1.2%
HBOS Treasury Services PLC
24,000 1.07%, 11/12/03 23,999,116
- -------------------------------------------------------------------------------------
Certificates of Deposit - Yankee 20.4%
Banco Bilbao Vizcaya Argentaria
20,000 1.20%, 8/27/04 20,000,000
Bayerische Landesbank
32,000 1.28%, 12/1/03 32,000,000
BNP Paribas
50,000 1.60%, 11/21/03 50,000,000
20,000 1.33%, 4/13/04 20,000,000
20,000 1.15%, 7/22/04 19,998,380
Credit Agricole Indosuez
20,000 1.23%, 8/4/04 19,998,310
30,000 1.38%, 8/5/04 30,007,608
Danske Bank
100,000 1.32%, 10/23/03 100,000,000
Dexia Bank
88,000 1.08%, 10/27/03 88,000,000
Landesbank Hessen - Thuringren
22,000 1.10%, 12/8/03 22,000,000
Royal Bank of Scotland PLC
20,000 1.35%, 4/19/04 20,000,000
--------------
422,004,298
- -------------------------------------------------------------------------------------
Commercial Paper 22.0%
Alliance & Leicester PLC
35,000 1.10%, 10/31/03 34,967,917
</Table>
See Notes to Financial Statements 5
<Page>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Portfolio of Investments as of September 30, 2003 (Unaudited)
Cont'd.
<Table>
<Caption>
Principal
Amount
(000) Description Value (Note 1)
- --------------------------------------------------------------------------------------
CXC LLC
$ 22,200 1.10%, 12/5/03 $ 22,155,908
Danske Corp.
11,800 1.08%, 11/12/03 11,785,132
Den Norske Bank
18,000 1.105%, 12/29/03 17,950,828
Hamburgische Landesbank
25,000 1.28%, 10/8/03 24,993,778
35,000 1.32%, 10/17/03 34,979,466
New Center Asset Trust
38,097 1.09%, 12/9/03 38,017,409
Nordea North America, Inc.
26,000 1.07%, 10/27/03 25,979,908
53,000 1.09%, 11/3/03 52,947,044
Santander Central Hispano Finance, Inc.
38,000 1.12%, 3/15/04 37,803,751
Societe Generale
40,000 1.09%, 11/6/03 39,956,400
Sony Global Treasury Services
25,000 1.085%, 12/17/03 24,941,983
Stadshypotek Delaware, Inc.
30,000 1.08%, 11/17/03 29,957,700
SwedBank, Inc.
40,000 1.08%, 10/10/03 39,989,200
Tulip Funding Corp.
19,000 1.09%, 10/29/03 18,983,892
--------------
455,410,316
- -------------------------------------------------------------------------------------
Other Corporate Obligations 28.9%
American Express Centurion Bank
25,000 1.09%, 10/29/03(b) 24,998,559
American Express Credit Corp., MTN
23,000 1.15%, 10/6/03(b) 23,000,000
Cargill, Inc.
47,872 1.08%, 10/14/03 47,872,000
</Table>
6 See Notes to Financial Statements
<Page>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Portfolio of Investments as of September 30, 2003 (Unaudited)
Cont'd.
<Table>
<Caption>
Principal
Amount
(000) Description Value (Note 1)
- --------------------------------------------------------------------------------------
GE Capital Assurance Co.
$ 26,000 1.20%, 10/22/03(b)(c)
(cost $26,000,000, date purchased 7/22/03) $ 26,000,000
GE Capital Corp., MTN
70,000 1.15%, 10/9/03(b) 70,000,000
Goldman Sachs Group, Inc., MTN
78,000 1.29%, 12/15/03(b) 78,000,000
JP Morgan Chase & Co., MTN
15,000 1.23%, 11/24/03(b) 15,001,736
Merrill Lynch & Co., Inc., MTN
101,000 1.265%, 10/13/03(b) 101,000,000
MetLife Insurance Co.
12,000 1.22%, 10/24/03(b)(c)
(cost $12,000,000, date purchased 10/24/02) 12,000,000
10,000 1.21875%, 11/7/03(b)(c)
(cost $10,000,000, date purchased 2/07/03) 10,000,000
23,000 1.22%, 10/3/03(b)(c)
(cost $23,000,000, date purchased 10/03/02) 23,000,000
Morgan Stanley, MTN
46,000 1.22%, 10/15/03(b) 46,000,000
Nyala Funding LLC
8,000 1.12%, 11/18/03 7,988,053
Pacific Life Insurance Co.
11,000 1.26%, 12/15/03(b)(c)
(cost $11,000,000, date purchased 7/8/03) 11,000,000
Park Granada LLC
10,000 1.10%, 11/3/03 9,989,916
24,746 1.10%, 11/17/03 24,710,462
30,000 1.11%, 11/21/03 29,952,825
3,000 1.10%, 12/17/03 2,992,942
Travelers Insurance Co.
25,000 1.23%, 11/25/03(b)(c)
(cost $25,000,000, date purchased 2/25/03) 25,000,000
United of Omaha Life Insurance Co.
10,000 1.31563%, 12/5/03(b)(c)
(cost $10,000,000, date purchased 12/05/02) 10,000,000
--------------
598,506,493
</Table>
See Notes to Financial Statements 7
<Page>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Portfolio of Investments as of September 30, 2003 (Unaudited)
Cont'd.
<Table>
<Caption>
Principal
Amount
(000) Description Value (Note 1)
- --------------------------------------------------------------------------------------
U.S. Government Agency 11.0%
Federal Home Loan Bank
$ 20,000 1.25%, 7/2/04 $ 20,000,000
Federal Home Loan Mortgage Corp.
23,232 1.03%, 12/5/03 23,188,795
25,000 1.04%, 12/24/03 24,939,333
10,000 1.295%, 4/22/04 9,926,617
35,000 1.43%, 9/3/04 35,000,000
25,000 1.40%, 9/10/04 25,000,000
Federal National Mortgage Association
15,000 5.625%, 5/14/04 15,390,665
9,000 6.50%, 8/15/04 9,411,904
20,000 1.47%, 9/22/04 20,000,000
25,000 1.50%, 9/24/04 24,997,687
20,000 1.35%, 10/22/04 20,000,000
--------------
227,855,001
<Caption>
Shares
- --------------------------------------------------------------------------------
Mutual Fund 10.8%
224,000,273 Dryden Core Investment Fund - Taxable Money
Market Series (Note 3) 224,000,273
--------------
Total Investments 99.9%
(amortized cost $2,068,777,053(a)) 2,068,777,053
Other assets in excess of liabilities 0.1% 3,024,057
--------------
Net Assets 100% $2,071,801,110
--------------
--------------
</Table>
- ------------------------------
(a) Federal income tax basis is the same as for financial reporting purposes.
(b) Variable rate instrument. The maturity date presented for these instruments
is 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 $117,000,000.
The aggregate value of $117,000,000 is 5.6% of net assets.
MTN--Medium Term Note.
8 See Notes to Financial Statements
<Page>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Portfolio of Investments as of September 30, 2003 (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, 2003 was as
follows:
Commercial Banks.................................................... 48.6%
Federal Credit Agencies............................................. 11.0
Securities Brokers & Dealers........................................ 10.9
Mutual Fund......................................................... 10.8
Life Insurance...................................................... 5.6
Short-Term Business Credit.......................................... 3.4
Asset Backed Securities............................................. 3.2
Grain Mills Products................................................ 2.3
Phone Records, Tape, Disk........................................... 1.2
Financial Services.................................................. 1.1
Railroads........................................................... 1.1
Bank Holding Companies - Domestic................................... 0.7
-----
99.9
Other assets in excess of liabilities............................... 0.1
-----
100.0%
-----
-----
See Notes to Financial Statements 9
<Page>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Statement of Assets and Liabilities (Unaudited)
<Table>
<Caption>
September 30, 2003
- ----------------------------------------------------------------------------------------
ASSETS
Investments, at amortized cost which approximates market
value $ 2,068,777,053
Cash 2,170
Dividends and interest receivable 3,837,997
Prepaid expenses 27,554
-------------------
Total assets 2,072,644,774
-------------------
LIABILITIES
Dividends payable 387,741
Management fee payable 217,537
Accrued expenses 201,425
Deferred directors' fees 20,992
Distribution fee payable 15,969
-------------------
Total liabilities 843,664
-------------------
NET ASSETS $ 2,071,801,110
-------------------
-------------------
Net assets were comprised of:
Common stock, at par $ 2,071,801
Paid-in capital in excess of par 2,069,729,309
-------------------
Net assets, September 30, 2003 $ 2,071,801,110
-------------------
-------------------
Class A:
Net asset value, offering and redemption price per
share ($366,923,587 / 366,923,587 shares of $.001
par value common stock issued and outstanding) $1.00
-------------------
-------------------
Class I:
Net asset value, offering and redemption price per
share ($1,704,877,523 / 1,704,877,523 shares of
$.001 par value common stock issued and outstanding) $1.00
-------------------
-------------------
</Table>
10 See Notes to Financial Statements
<Page>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Statement of Operations (Unaudited)
<Table>
<Caption>
Six Months
Ended
September 30, 2003
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest $11,618,215
Dividends 1,687,978
-------------------
13,306,193
-------------------
Expenses
Management fee 2,119,065
Distribution fee--Class A 253,127
Transfer agent's fees and expenses 123,000
Custodian's fees and expenses 101,000
Registration fees 43,000
Insurance expenses 28,000
Reports to shareholders 27,000
Legal fees and expenses 13,000
Audit fee 12,000
Directors' fees 12,000
Miscellaneous 8,044
-------------------
Total expenses 2,739,236
Less: Expense subsidy (Note 4) (367,044)
Management fee waiver (Note 2) (529,766)
Distribution fee waiver (Note 2) (147,658)
-------------------
Net expenses 1,694,768
-------------------
Net investment income 11,611,425
-------------------
REALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 2,902
-------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $11,614,327
-------------------
-------------------
</Table>
See Notes to Financial Statements 11
<Page>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Statement of Changes in Net Assets (Unaudited)
<Table>
<Caption>
Six Months Year
Ended Ended
September 30, 2003 March 31, 2003
- -----------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 11,611,425 $ 56,631,927
Net realized gain on investment
transactions 2,902 84,021
------------------ ----------------
Net increase in net assets resulting
from operations 11,614,327 56,715,948
------------------ ----------------
Dividends and distributions (Note 1)
Class A (2,235,642) (6,374,377)
Class I (9,378,685) (50,341,571)
------------------ ----------------
(11,614,327) (56,715,948)
------------------ ----------------
Fund share transactions (net of
conversions)
(Note 5)
Net proceeds from shares sold 7,012,782,837 19,835,004,263
Net asset value of shares issued in
reinvestment of dividends and
distributions 9,680,605 38,853,711
Cost of shares reacquired (7,104,349,820) (21,857,842,335)
------------------ ----------------
Net decrease in net assets from Fund
share transactions (81,886,378) (1,983,984,361)
------------------ ----------------
Total decrease (81,886,378) (1,983,984,361)
NET ASSETS
Beginning of period 2,153,687,488 4,137,671,849
------------------ ----------------
End of period $ 2,071,801,110 $ 2,153,687,488
------------------ ----------------
------------------ ----------------
</Table>
12 See Notes to Financial Statements
<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, 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 of the Series 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. If the
amortized cost method is determined not to represent fair value, the fair value
shall be determined by or under the direction of the Board of Directors.
Investments in mutual funds are valued at their net asset value as of the close
of the New York Stock Exchange on the date of valuation.
The Series held illiquid securities, including those which are restricted
as to disposition under securities law ('restricted securities'). The restricted
securities held by the Series at September 30, 2003 include registration rights
under which the Series may demand registration by the issuer. Restricted
securities, sometimes referred to as private placements, are valued pursuant to
the valuation procedures noted above.
Securities Transactions and Net Investment Income: Securities
transactions are recorded on the trade date. Realized gains (losses) on sales of
securities are calculated on the identified cost basis. Interest income
including amortization of premium and accretion of discount on debt securities,
as required, 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 (loss) (other than distribution fees, which are
charged directly to the respective class) and realized gains (losses) are
allocated daily to each
13
<Page>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Notes to Financial Statements (Unaudited) Cont'd.
class of shares based upon the relative proportion of net assets of each class
at the beginning of the day.
Federal Income Taxes: For federal income tax purposes, each series in
the Fund is treated as a separate taxpaying entity. It is the Series' policy 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
and capital gains, if any, to its shareholders. Therefore, no federal income tax
provision is required.
Dividends and Distributions: The Series declares daily dividends from
net investment income and net realized short-term capital gains. Payment of
dividends is made monthly. Income distributions and capital gain distributions
are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles.
Note 2. Agreements
The Fund has a management agreement with Prudential Investments LLC ('PI').
Pursuant to this agreement, PI has responsibility for all investment advisory
services and supervises the subadvisor's performance of such services. PI has
entered into a subadvisory agreement with Prudential Investment Management, Inc.
('PIM'). The subadvisory agreement provides that PIM will furnish investment
advisory services in connection with the management of the Series. In connection
therewith, PIM is obligated to keep certain books and records of the Series. PI
pays for the services of PIM, the cost of compensation of officers of the
Series, occupancy and certain clerical and bookkeeping costs of the Series. The
Series bears all other costs and expenses.
The management fee paid to PI is computed daily and payable monthly, at an
annual rate of .20 of 1% of the average daily net assets of the Series. PI has
agreed to waive a portion (.05 of 1% of the Series' average daily net assets) of
its management fee, which amounted to $529,766 ($.0003 per share) for the six
months ended September 30, 2003. The Series is not required to reimburse PI for
such waiver.
The Series has a distribution agreement with Prudential Investment
Management Services LLC ('PIMS'), which acts as the distributor of the Series'
Class A and Class I shares. The Series compensates PIMS for distributing and
servicing the Series' Class A shares, pursuant to the plan of distribution at an
annual rate of .12 of 1% of the Series' average daily net assets of the Class A
shares. PIMS has agreed to waive a portion (.07 of 1% of the Series' average
daily net assets of the Class A shares) of the distribution fee, which amounted
to $147,658 ($.0004 per Class A share) for the six months ended September 30,
2003. The Series is not required to reimburse PIMS for such waiver. The Class A
distribution fee is accrued daily and payable monthly. No
14
<Page>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Notes to Financial Statements (Unaudited) Cont'd.
distribution or service fees are paid to PIMS as distributor of the Class I
shares of the Series.
PI, PIM and PIMS are indirect, wholly-owned subsidiaries of Prudential
Financial, Inc. ('Prudential').
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), an affiliate of PI and an
indirect, wholly-owned subsidiary of Prudential, serves as the Fund's transfer
agent. During the six months ended September 30, 2003, the Series incurred fees
of $120,000 for the services of PMFS. As of September 30, 2003, $20,000 of such
fees were due to PMFS. Transfer agent's fees and expenses in the Statement of
Operations include certain out-of-pocket expenses paid to nonaffiliates, where
applicable.
The Series invests in the Taxable Money Market Series (the 'Portfolio'), a
portfolio of the Dryden Core Investment Fund, pursuant to an exemptive order
received from the Securities and Exchange Commission. The Portfolio is a money
market mutual fund registered under the Investment Company Act of 1940, as
amended, and managed by PI. During the six months ended September 30, 2003, the
Series earned income of $1,687,978 from the Portfolio.
Note 4. Expense Subsidy
PI has contractually agreed to subsidize operating expenses so that total Series
operating expenses do not exceed .20% and .15% of the average daily net assets
of the Class A and Class I shares, respectively. For the six months ended
September 30, 2003, such reimbursement amounted to $367,044 ($.0002 per share
for Class A and I shares; 0.02% of the Series' average daily net assets).
Note 5. Capital
The Series offers Class A and Class I shares. Class A shareholders of the Series
who satisfy the minimum purchase requirements 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, 2003 Prudential owned 15,833,084 Class A shares and
329,247,614 Class I shares.
15
<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
- ------------------------------------------------------------------- ----------------
Six months ended September 30, 2003:
Shares sold 491,819,451
Shares issued in reinvestment of dividends and distributions 2,171,575
Shares reacquired (479,857,815)
----------------
Net increase (decrease) in shares outstanding before conversion 14,133,211
Shares reacquired upon conversion into Class I (86,992,408)
----------------
Net increase (decrease) in shares outstanding (72,859,197)
----------------
----------------
Year ended March 31, 2003:
Shares sold 735,565,310
Shares issued in reinvestment of dividends and distributions 6,255,879
Shares reacquired (678,945,845)
----------------
Net increase (decrease) in shares outstanding before conversion 62,875,344
Shares reacquired upon conversion into Class I (56,094,014)
----------------
Net increase (decrease) in shares outstanding 6,781,330
----------------
----------------
<Caption>
Class I
- -------------------------------------------------------------------
Six months ended September 30, 2003:
Shares sold 6,520,963,386
Shares issued in reinvestment of dividends and distributions 7,509,030
Shares reacquired (6,624,492,005)
----------------
Net increase (decrease) in shares outstanding before conversion (96,019,589)
Shares issued upon conversion from Class A 86,992,408
----------------
Net increase (decrease) in shares outstanding (9,027,181)
----------------
----------------
Year ended March 31, 2003:
Shares sold 19,099,438,953
Shares issued in reinvestment of dividends and distributions 32,597,832
Shares reacquired (21,178,896,490)
----------------
Net increase (decrease) in shares outstanding before conversion (2,046,859,705)
Shares issued upon conversion from Class A 56,094,014
----------------
Net increase (decrease) in shares outstanding (1,990,765,691)
----------------
----------------
</Table>
16
<Page>
SEMIANNUAL REPORT
SEPTEMBER 30, 2003
PRUDENTIAL
INSTITUTIONAL LIQUIDITY PORTFOLIO, INC.
- ----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<Page>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Financial Highlights (Unaudited)
<Table>
<Caption>
Class A
-------------------------
Six Months Ended
September 30, 2003
- ----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 1.00
----------
Net investment income and net realized gains(b) .005
Dividends and distributions to shareholders (.005)
----------
Net asset value, end of period $ 1.00
----------
----------
TOTAL RETURN(a): .54%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 366,924
Average net assets (000) $ 421,878
Ratios to average net assets:
Expenses, including distribution fee(b) .20%(d)
Expenses, excluding distribution fee(c) .15%(d)
Net investment income(b) 1.06%(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) Net of management and distribution fee waiver/expense subsidy (Notes 2 and
4).
(c) Net of management fee waiver/expense subsidy (Notes 2 and 4).
(d) Annualized.
18 See Notes to Financial Statements
<Page>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Financial Highlights (Unaudited) Cont'd.
<Table>
<Caption>
Class A
- ------------------------------------------------------------------
Year Ended March 31,
- ------------------------------------------------------------------
2003 2002 2001 2000 1999
- ------------------------------------------------------------------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------- -------- -------- -------- --------
.016 .031 .062 .053 .053
(.016) (.031) (.062) (.053) (.053)
- -------- -------- -------- -------- --------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------- -------- -------- -------- --------
- -------- -------- -------- -------- --------
1.61% 3.34% 6.43% 5.38% 5.39%
$439,783 $433,001 $468,287 $371,866 $361,167
$402,953 $468,805 $417,250 $366,127 $247,471
.20% .20% .20% .20% .20%
.15% .15% .15% .15% .15%
1.58% 3.23% 6.23% 5.27% 5.20%
</Table>
See Notes to Financial Statements 19
<Page>
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Financial Highlights (Unaudited) Cont'd.
<Table>
<Caption>
Class I
-------------------------
Six Months Ended
September 30, 2003
- ----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 1.00
-------------------
Net investment income and net realized gains(b) .006
Dividends and distributions to shareholders (.006)
-------------------
Net asset value, end of period $ 1.00
-------------------
-------------------
TOTAL RETURN(a): .56%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 1,704,878
Average net assets (000) $ 1,697,186
Ratios to average net assets:
Expenses, including distribution fee(b) .15%(c)
Expenses, excluding distribution fee(b) .15%(c)
Net investment income(b) 1.10%(c)
</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 fee waiver/expense subsidy (Notes 2 and 4).
(c) 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 I
- ----------------------------------------------------------------------------
Year Ended March 31,
- ----------------------------------------------------------------------------
2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------- ---------- ---------- ---------- ----------
.016 .032 .062 .053 .053
(.016) (.032) (.062) (.053) (.053)
- ---------- ---------- ---------- ---------- ----------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
1.66% 3.39% 6.48% 5.43% 5.45%
$1,713,905 $3,704,670 $2,092,210 $1,601,631 $1,750,229
$2,982,413 $3,729,340 $2,130,657 $1,643,961 $1,470,082
.15% .15% .15% .15% .15%
.15% .15% .15% .15% .15%
1.69% 3.05% 6.28% 5.30% 5.26%
</Table>
See Notes to Financial Statements 21
www.prudential.com (800) 521-7466
FOR MORE INFORMATION
Prudential Institutional Liquidity
Portfolio, Inc.
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102
(800) 521-7466
Directors
David E.A. Carson
Robert F. Gunia
Robert E. La Blanc
Douglas H. McCorkindale
Stephen P. Munn
Richard A. Redeker
Judy A. Rice
Robin B. Smith
Stephen D. Stoneburn
Clay T. Whitehead
Officers
Judy A. Rice, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer and Principal
Financial and Accounting Officer
Marguerite E.H. Morrison, Chief Legal Officer
and Assistant Secretary
Jonathan D. Shain, Secretary
Maryanne Ryan, Anti-Money Laundering
Compliance Officer
Manager
Prudential Investments LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102
Investment Adviser
Prudential Investment Management, Inc.
Gateway Center Two
100 Mulberry Street
Newark, NJ 07102
Distributor
Prudential Investment Management Services LLC
Gateway Center Three, 14th Floor
100 Mulberry Street
Newark, NJ 07102
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
PO Box 8098
Philadelphia, PA 19101
Independent Accountants
KPMG LLP
757 Third Avenue
New York, NY 10017
Legal Counsel
Sullivan & Cromwell LLP
125 Broad Street
New York, NY 10004
Fund Symbols Nasdaq CUSIP
Class A PIMXX 744350109
Class I PLPXX 744350604
The views expressed in this report and
information about the Series' portfolio
holdings are for the period covered by this
report and are subject to change thereafter.
The accompanying financial statements as
of September 30, 2003, were not audited, and
accordingly, no opinion is expressed on them.
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY
FEDERAL GOVERNMENT AGENCY
MAY LOSE VALUE
ARE NOT A DEPOSIT OF OR GUARANTEED BY
ANY BANK OR ANY BANK AFFILIATE
(LOGO)
Fund Symbols Nasdaq CUSIP
Class A PIMXX 744350109
Class I PLPXX 744350604
MF137E2 IFS-A085722
Item 2 -- Code of Ethics--Not required as this is not an annual filing.
Item 3 -- Audit Committee Financial Expert --
The registrant's Board has determined that Mr. Stephen Munn, member of
the Board's Audit Committee is an "audit committee financial expert," and
that he is "independent," for purposes of this Item.
Item 4 -- Principal Accountant Fees and Services--Not required in
this filing
Item 5 -- Reserved
Item 6 -- Reserved
Item 7 -- Disclosure of Proxy Voting Policies and Procedures for Closed-
End Management Investment Companies -- Not required in this filing
Item 8 -- Reserved
Item 9 -- Controls and Procedures
(a) It is the conclusion of the registrant's principal executive officer
and principal financial officer that the effectiveness of the
registrant's current disclosure controls and procedures (such
disclosure controls and procedures having been evaluated within 90
days of the date of this filing) provide reasonable assurance that
the information required to be disclosed by the registrant has been
recorded, processed, summarized and reported within the time period
specified in the Commission's rules and forms and that the information
required to be disclosed by the registrant has been accumulated and
communicated to the registrant's principal executive officer and
principal financial officer in order to allow timely decisions
regarding required disclosure.
(b) There have been no significant changes in the registrant's internal
controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Item 10 -- Exhibits
(a) Code of Ethics -- Not applicable with semi-annual filing
(b) Certifications pursuant to Sections 302 and 906 of the
Sarbanes-Oxley Act -- Attached hereto
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Prudential Institutional Liquidity Portfolio, Inc.
By (Signature and Title)* /s/Jonathan D. Shain
--------------------
Jonathan D. Shain
Secretary
Date November 24, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By (Signature and Title)* /s/Judy A. Rice
--------------------
Judy A. Rice
President and Principal Executive Officer
Date November 24, 2003
By (Signature and Title)* /s/Grace C. Torres
------------------
Grace C. Torres
Treasurer and Principal Financial Officer
Date November 24, 2003
* Print the name and title of each signing officer under
his or her signature.