<PAGE>
As filed with the Securities and Exchange Commission on May 20, 1997
Registration No. 333-25133
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 1 /X/
(Check appropriate box or boxes)
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PRUDENTIAL ALLOCATION FUND
(Exact name of registrant as specified in charter)
GATEWAY CENTER THREE
NEWARK, NEW JERSEY 07102
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201) 367-7530
S. JANE ROSE, ESQ.
GATEWAY CENTER THREE
NEWARK, NEW JERSEY 07102
(NAME AND ADDRESS OF AGENT FOR SERVICE)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE
DATE OF THE REGISTRATION STATEMENT.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE ON JUNE 19, 1997
PURSUANT TO RULE 488 UNDER THE SECURITIES ACT OF 1933 AS AMENDED.
NO FILING FEE IS REQUIRED BECAUSE, PURSUANT TO RULE 24f-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940, REGISTRANT HAS PREVIOUSLY REGISTERED AN
INDEFINITE NUMBER OF SHARES OF BENEFICIAL INTEREST, PAR VALUE $.01 PER SHARE,
PURSUANT TO A REGISTRATION STATEMENT ON FORM N-1A (FILE NO. 33-12531). PURSUANT
TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUS AND PROXY STATEMENT
RELATE TO SHARES PREVIOUSLY REGISTERED ON FORM N-1A (FILE NO. 33-12531). THE
REGISTRANT WILL FILE A NOTICE UNDER RULE 24f-2 FOR ITS FISCAL YEAR ENDING JULY
31, 1997 ON OR BEFORE SEPTEMBER 30, 1997.
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<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(a) UNDER THE SECURITIES ACT OF 1933)
<TABLE>
<CAPTION>
N-14 ITEM NO. PROSPECTUS/PROXY
AND CAPTION STATEMENT CAPTION
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<S> <C> <C> <C>
PART A
Item 1. Beginning of Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Cover Page
Item 2. Beginning and Outside Back Cover Page of
Prospectus.............................. Table of Contents
Item 3. Fee Table, Synopsis Information and Risk
Factors................................. Synopsis; Principal Risk Factors
Item 4. Information about the Transaction....... Synopsis; The Proposed Transaction
Item 5. Information about the Registrant........ Synopsis; Information about the Balanced
Portfolio; Miscellaneous
Item 6. Information about the Company Being
Acquired................................ Synopsis; Information about the Strategy
Portfolio; Miscellaneous
Item 7. Voting Information...................... Synopsis; Voting Information
Item 8. Interest of Certain Persons and
Experts................................. Not Applicable
Item 9. Additional Information Required for
Reoffering by Persons Deemed to be
Underwriters............................ Not Applicable
PART B
STATEMENT OF ADDITIONAL
INFORMATION CAPTION
----------------------------------------
Item 10. Cover Page.............................. Cover Page
Item 11. Table of Contents....................... Cover Page
Item 12. Additional Information about the
Registrant.............................. Statement of Additional Information of
Prudential Allocation Fund dated
September 27, 1996; Semi-Annual Report
to Shareholders of Prudential Allocation
Fund (Strategy Portfolio) for the six
months ended January 31, 1997
Item 13. Additional Information about the Company
Being Acquired.......................... Not Applicable
Item 14. Financial Statements.................... Financial statements as noted in the
Statement of Additional Information
PART C
Information required to be included in Part C is set forth under the appropriate item,
so numbered, in Part C of this Registration Statement.
</TABLE>
<PAGE>
This Post-Effective Amendment No. 1 is not intended to amend Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-14 of Prudential
Allocation Fund filed on April 17, 1997 (File No. 333-25133). The
Prospectus/Proxy Statement and Statement of Additional Information contained in
the filing under Rule 497 under the Securities Act of 1933 of Prudential
Allocation Fund filed on May 14, 1997 (File No. 333-25133) are incorporated by
reference herein.
<PAGE>
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION.
As permitted by Section 17(h) and (i) of the Investment Company Act of 1940
(the 1940 Act) and pursuant to Article VI of the Registrant's By-Laws (Exhibit 2
to the Registration Statement), officers, Trustees, employees and agents of the
Registrant will not be liable to the Registrant, any shareholder, officer,
director, employee, agent or other person for any action or failure to act,
except for bad faith, willful misfeasance, gross negligence or reckless
disregard of duties, and those individuals may be indemnified against
liabilities in connection with the Registrant, subject to the same exceptions.
As permitted by Section 17(i) of the 1940 Act, pursuant to Section 10 of each
Distribution Agreement (Exhibit 7 to the Registration Statement), the
Distributor of the Registrant may be indemnified against liabilities which it
may incur, except liabilities arising from bad faith, gross negligence, willful
misfeasance or reckless disregard of duties.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (Securities Act) may be permitted to Trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1940 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer, or controlling
person of the Registrant in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such Trustee,
officer or controlling person in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1940 Act and will be governed by the final adjudication of such
issue.
The Registrant maintains an insurance policy insuring its officers and
Trustees against liabilities, and certain costs of defending claims against such
officers and Trustees, to the extent such officers and Trustees are not found to
have committed conduct constituting willful misfeasance, bad faith, gross
negligence or reckless disregard in the performance of their duties. The
insurance policy also insures the Registrant against the cost of indemnification
payments to officers and Trustees under certain circumstances.
Section 9 of the Management Agreement (Exhibit 6(a) to the Registration
Statement) and Section 4 of the Subadvisory Agreement (Exhibit 6(b) to the
Registration Statement) limit the liability of Prudential Mutual Fund
Management, Inc. (PMF) and The Prudential Investment Corporation (PIC),
respectively, to liabilities arising from willful misfeasance, bad faith or
gross negligence in the performance of their respective duties or from reckless
disregard by them of their respective obligations and duties under the
agreements.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws and the Distribution Agreement in a manner consistent
with Release No. 11330 of the Securities and Exchange Commission under the 1940
Act so long as the interpretation of Section 17(h) and 17(i) of such Act remain
in effect and are consistently applied.
ITEM 16. EXHIBITS.
1. (a) Amended and Restated Declaration of Trust of the Registrant.
Incorporated by reference to Exhibit No. 1(a) to Post-Effective Amendment
No. 13 to the Registration Statement on Form N-1A filed via EDGAR on
September 29, 1994 (File No. 33-12531).
(b) Amended Certificate of Designation. Incorporated by reference to Exhibit
No. 1(b) to Post-Effective Amendment No. 18 to the Registration Statement on
Form N-1A filed via EDGAR on September 27, 1996 (File No. 33-12531).
2. By-Laws of the Registrant. Incorporated by reference to Exhibit No. 2 to
Post-Effective Amendment No. 13 to the Registration Statement on Form N-1A
filed via EDGAR on September 29, 1994 (File No. 33-12531).
4. Plan of Reorganization, filed as Appendix A to the Prospectus and Proxy
Statement.
5. Instruments defining rights of shareholders. Incorporated by reference to
Exhibits 1 and 2.
6. (a) Management Agreement between the Registrant and Prudential Mutual Fund
Management. Incorporated by reference to Exhibit No. 6(a) to the
Registration Statement on Form N-14 filed via EDGAR on April 14, 1997 (File
No. 333-25133).
(b) Subadvisory Agreement between Prudential Mutual Fund Management, Inc.
and The Prudential Investment Corporation. Incorporated by reference to
Exhibit No. 6(b) to the Registration Statement on Form N-14 filed via EDGAR
on April 14, 1997 (File No. 333-25133).
C-1
<PAGE>
7. Restated Distribution Agreement for Class A, Class B, Class C and Class Z
shares. Incorporated by reference to Exhibit No. 6 to Post-Effective
Amendment No. 18 to the Registration Statement on Form N-1A filed via EDGAR
on September 27, 1996 (File No. 33-12531).
9. (a) Custodian Contract between the Registrant and State Street Bank and
Trust Company. Incorporated by reference to Exhibit No. 9(a) to the
Registration Statement on Form N-14 filed via EDGAR on April 14, 1997 (File
No. 333-25133).
(b) Amendment to Custodian Contract. Incorporated by reference to Exhibit
No. 9(b) to the Registration Statement on Form N-14 filed via EDGAR on April
14, 1997 (File No. 333-25133).
10. (a) Distribution and Service Plan for Class A shares. Incorporated by
reference to Exhibit No. 15(a) to Post-Effective Amendment No. 13 to the
Registration Statement on Form N-1A filed via EDGAR on September 29, 1994
(File No. 33-12531).
(b) Distribution and Service Plan for Class B shares. Incorporated by
reference to Exhibit No. 15(b) to Post-Effective Amendment No. 13 to the
Registration Statement on Form N-1A filed via EDGAR on September 29, 1994
(File No. 33-12531).
(c) Distribution and Service Plan for Class C shares. Incorporated by
reference to Exhibit No. 15(c) to Post-Effective Amendment No. 13 to the
Registration Statement on Form N-1A filed via EDGAR on September 29, 1994
(File No. 33-12531).
(d) Rule 18f-3 Plan. Incorporated by reference to Exhibit No. 18 to
Post-Effective Amendment No. 18 to the Registration Statement on Form N-1A
filed via EDGAR on September 27, 1996 (File No. 33-12531).
11. Opinion and Consent of Counsel. Incorporated by reference to Exhibit No. 11
to the Registration Statement on Form N-14 filed via EDGAR on April 14, 1997
(File No. 333-25133).
12. Tax Opinion of Counsel.*
14. Consent of Independent Accountants.*
17. (a) Proxy. Incorporated by reference to Exhibit No. 17(a) to the
Registration Statement on Form N-14 filed via EDGAR on April 14, 1997 (File
No. 333-25133).
(b) Copy of Registrant's declaration pursuant to Rule 24f-2 under the 1940
Act. Incorporated by reference to Exhibit No. 17(b) to the Registration
Statement on Form N-14 filed via EDGAR on April 14, 1997 (File No.
333-25133).
(c) Prospectus of the Registrant dated September 27, 1996. Incorporated by
reference to Exhibit No. 17(c) to the Registration Statement on Form N-14
filed via EDGAR on April 14, 1997 (File No. 333-25133).
(d) Statement of Additional Information of the Registrant dated September
27, 1996, filed in the Registrant's Statement of Additional Information.
(e) Semi-annual report to shareholders of the Registrant as relates to the
Strategy Portfolio for the six months ended January 31, 1997, filed in the
Registrant's Statement of Additional Information.
(f) Financial Data Schedules for the six months ended January 31, 1997.
Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-14 filed via EDGAR on April 17, 1997 (File
No. 333-25133).
(g) President's Letter.*
- --------------
* Filed herewith.
ITEM 17. UNDERTAKINGS.
(1) The undersigned registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act, the
reoffering prospectus will contain the information called for by the applicable
registration form for reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
C-2
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Post-Effective Amendment to
the Registration Statement has been signed on behalf of the Registrant, in the
City of Newark and State of New Jersey, on the 19th day of May, 1997.
PRUDENTIAL ALLOCATION FUND
By: /s/ Richard A. Redeker
------------------------------------------------------
(RICHARD A. REDEKER, PRESIDENT)
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ ---------------------------------------- ------------------
<S> <C> <C>
/s/ Susan C. Cote Treasurer and Principal Financial and May 19, 1997
- ------------------------------ Accounting Officer
SUSAN C. COTE
/s/ Richard A. Redeker President and Trustee May 19, 1997
- ------------------------------
RICHARD A. REDEKER
/s/ Edward D. Beach Trustee May 19, 1997
- ------------------------------
EDWARD D. BEACH
/s/ Delayne Dedrick Gold Trustee May 19, 1997
- ------------------------------
DELAYNE DEDRICK GOLD
/s/ Robert F. Gunia Trustee May 19, 1997
- ------------------------------
ROBERT F. GUNIA
/s/ Donald D. Lennox Trustee May 19, 1997
- ------------------------------
DONALD D. LENNOX
/s/ Douglas H. McCorkindale Trustee May 19, 1997
- ------------------------------
DOUGLAS H. MCCORKINDALE
/s/ Mendel A. Melzer Trustee May 19, 1997
- ------------------------------
MENDEL A. MELZER
/s/ Thomas T. Mooney Trustee May 19, 1997
- ------------------------------
THOMAS T. MOONEY
/s/ Stephen P. Munn Trustee May 19, 1997
- ------------------------------
STEPHEN P. MUNN
/s/ Robin B. Smith Trustee May 19, 1997
- ------------------------------
ROBIN B. SMITH
/s/ Louis A. Weil, III Trustee May 19, 1997
- ------------------------------
LOUIS A. WEIL, III
/s/ Clay T. Whitehead Trustee May 19, 1997
- ------------------------------
CLAY T. WHITEHEAD
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBIT PAGE NO.
NUMBER -------
- ------
1. (a) Amended and Restated Declaration of Trust of the Registrant.
Incorporated by reference to Exhibit No. 1(a) to Post-Effective
Amendment No. 13 to the Registration Statement on Form N-1A filed via
EDGAR on September 29, 1994 (File No. 33-12531).
(b) Amended Certificate of Designation. Incorporated by reference to
Exhibit No. 1(b) to Post-Effective Amendment No. 18 to the
Registration Statement on Form N-1A filed via EDGAR on September 27,
1996 (File No. 33-12531).
2. By-Laws of the Registrant. Incorporated by reference to Exhibit No.
2 to Post-Effective Amendment No. 13 to the Registration Statement on
Form N-1A filed via EDGAR on September 29, 1994 (File No. 33-12531).
4. Plan of Reorganization, filed as Appendix A to the Prospectus and
Proxy Statement.
5. Instruments defining rights of shareholders. Incorporated by
reference to Exhibits 1 and 2.
6. (a) Management Agreement between the Registrant and Prudential
Mutual Fund Management. Incorporated by reference to Exhibit No. 6(a)
to the Registration Statement on Form N-14 filed via EDGAR on April
14, 1997 (File No. 333-25133).
(b) Subadvisory Agreement between Prudential Mutual Fund Management,
Inc. and The Prudential Investment Corporation. Incorporated by
reference to Exhibit No. 6(b) to the Registration Statement on Form
N-14 filed via EDGAR on April 14, 1997 (File No. 333-25133).
7. Restated Distribution Agreement for Class A, Class B, Class C and
Class Z shares. Incorporated by reference to Exhibit No. 6 to
Post-Effective Amendment No. 18 to the Registration Statement on Form
N-1A filed via EDGAR on September 27, 1996 (File No. 33-12531).
9. (a) Custodian Contract between the Registrant and State Street Bank
and Trust Company. Incorporated by reference to Exhibit No. 9(a) to
the Registration Statement on Form N-14 filed via EDGAR on April 14,
1997 (File No. 333-25133).
(b) Amendment to Custodian Contract. Incorporated by reference to
Exhibit No. 9(b) to the Registration Statement on Form N-14 filed via
EDGAR on April 14, 1997 (File No. 333-25133).
10. (a) Distribution and Service Plan for Class A shares. Incorporated
by reference to Exhibit No. 15(a) to Post-Effective Amendment No. 13
to the Registration Statement on Form N-1A filed via EDGAR on
September 29, 1994 (File No. 33-12531).
(b) Distribution and Service Plan for Class B shares. Incorporated
by reference to Exhibit No. 15(b) to Post-Effective Amendment No. 13
to the Registration Statement on Form N-1A filed via EDGAR on
September 29, 1994 (File No. 33-12531).
(c) Distribution and Service Plan for Class C shares. Incorporated
by reference to Exhibit No. 15(c) to Post-Effective Amendment No. 13
to the Registration Statement on Form N-1A filed via EDGAR on
September 29, 1994 (File No. 33-12531).
(d) Rule 18f-3 Plan. Incorporated by reference to Exhibit No. 18 to
Post-Effective Amendment No. 18 to the Registration Statement on Form
N-1A filed via EDGAR on September 27, 1996 (File No. 33-12531).
11. Opinion and Consent of Counsel. Incorporated by reference to Exhibit
No. 11 to the Registration Statement on Form N-14 filed via EDGAR on
April 14, 1997 (File No. 333-25133).
12. Tax Opinion of Counsel.*
14. Consent of Independent Accountants.*
17. (a) Proxy. Incorporated by reference to Exhibit No. 17(a) to the
Registration Statement on Form N-14 filed via EDGAR on April 14, 1997
(File No. 333-25133).
(b) Copy of Registrant's declaration pursuant to Rule 24f-2 under
the 1940 Act. Incorporated by reference to Exhibit No. 17(b) to the
Registration Statement on Form N-14 filed via EDGAR on April 14, 1997
(File No. 333-25133).
(c) Prospectus of the Registrant dated September 27, 1996.
Incorporated by reference to Exhibit No. 17(c) to the Registration
Statement on Form N-14 filed via EDGAR on April 14, 1997 (File No.
333-25133).
(d) Statement of Additional Information of the Registrant dated
September 27, 1996, filed in the Registrant's Statement of Additional
Information.
<PAGE>
(e) Semi-annual report to shareholders of the Registrant as it
relates to the Strategy Portfolio for the six months ended January
31, 1997, filed in the Registrant's Statement of Additional
Information.
(f) Financial Data Schedules for the six months ended January 31,
1997. Incorporated by reference to Pre-Effective Amendment No. 1 to
the Registration Statement on Form N-14 filed via EDGAR on April 17,
1997 (File No. 333-25133).
(g) President's Letter.*
----------------------
* Filed herewith.
<PAGE>
GARDNER, CARTON & DOUGLAS
SUITE 3400 - QUAKER TOWER
321 NORTH CLARK STREET
CHICAGO, ILLINOIS 60610-4795
(312) 644-3000
TELECOPIER: (312) 644-3381
May 14, 1997
Prudential Allocation Fund Prudential Allocation Fund
Strategy Portfolio Balanced Portfolio
Gateway Center Three Gateway Center Three
100 Mulberry Street 100 Mulberry Street
Newark, New Jersey 07102 Newark, New Jersey 07102
Re: Reorganization of Prudential Allocation Fund (Strategy Portfolio) and
Prudential Allocation Fund (Balanced Portfolio)
---------------------------------------------------------------------
Ladies and Gentlemen:
We are outside counsel to Prudential Allocation Fund ("Allocation
Fund"). Shares of Allocation Fund are divided into two portfolios, the
Strategy Portfolio (the "Strategy Portfolio") and the Balanced Portfolio (the
"Balanced Portfolio"). An Agreement and Plan of Reorganization (the
"Agreement") has been proposed pursuant to which the Strategy Portfolio will
transfer to the Balanced Portfolio all of the assets of the Strategy
Portfolio in exchange solely for Class A, Class B, Class C and Class Z shares
of the Balanced Portfolio and the assumption by the Balanced Portfolio of the
liabilities, if any, of the Strategy Portfolio incurred in the ordinary
course of business followed by the constructive distribution of each such
class of shares of the Balanced Portfolio to the holders of each respective
class of shares of beneficial interest (Class A, Class B, Class C and Class
Z) of the Strategy Portfolio in liquidation by terminating the Strategy
Portfolio (the "Reorganization"). You have requested our opinion as to
certain federal income tax consequences of the Reorganization. The opinion
that follows is based on the Internal Revenue Code of 1986 as amended through
the date hereof (the "Code"), judicial decisions, administrative rulings and
regulations and such other sources of legal authority as we deemed necessary
to consult in rendering this opinion. The opinion is also based on factual
representations including those set forth herein and on our understanding
that the Reorganization will take place substantially as set out in the
Agreement and as described in the Proxy Statement (the "Proxy Statement")
included in the Registration Statement on Form N-14, as amended, filed by
Allocation Fund with the Securities and Exchange Commission (the
"Registration Statement") for the meeting of shareholders of the Strategy
Portfolio to be held on June 25, 1997.
<PAGE>
May 14, 1997
Page 2
SUMMARY OF THE TRANSACTION
In the Reorganization, the Strategy Portfolio will transfer all of its
assets and liabilities to the Balanced Portfolio in exchange for Class A,
Class B, Class C and Class Z shares of the Balanced Portfolio. The Strategy
Portfolio will then liquidate and distribute to its shareholders as a
liquidating distribution all of such Class A, Class B, Class C and Class Z
shares of the Balanced Portfolio in exchange for and in cancellation of each
respective class of the Strategy Portfolio Class A, Class B, Class C and
Class Z shares of beneficial interest.
BUSINESS PURPOSE
Our opinion is based in part upon our understanding that the primary
business purpose of this transaction is to achieve certain cost savings by
combining the assets of the Strategy Portfolio and the Balanced Portfolio as
is represented below. A full description of the business purposes of the
Reorganization is set out in the Proxy Statement.
REPRESENTATIONS
In rendering our opinion we are, with your permission, assuming that the
transaction will occur substantially as described in the Agreement and the
Proxy Statement. We are also relying on the following additional
representations which have been certified to us by either the Strategy
Portfolio, the Balanced Portfolio or both:
1. The primary business purpose of this transaction is to achieve
certain cost savings by combining the assets of the Strategy Portfolio and
the Balanced Portfolio. The Strategy Portfolio has experienced high expense
ratios and an inability to attract new assets. Furthermore, the Strategy
Portfolio does not enjoy the economies of scale enjoyed by a larger fund.
2. The fair market value of the Class A, Class B, Class C and Class Z
shares of the Balanced Portfolio received by each of the Strategy Portfolio
shareholders will be approximately equal to the fair market value of the
respective Class A, Class B, Class C and Class Z shares of beneficial
interest of the Strategy Portfolio surrendered in exchange therefor.
3. No cash or property, other than the Balanced Portfolio shares, will
be transferred to the Strategy Portfolio or distributed to the Strategy
Portfolio shareholders pursuant to the Reorganization.
4. There is no plan or intention on the part of any shareholder of the
Strategy Portfolio who owns 5 percent or more of the shares of beneficial
interest of the Strategy Portfolio and to the best of the knowledge of
management of the Strategy Portfolio, there is no plan or intention on the
part of the remaining shareholders of the Strategy Portfolio to sell,
exchange, or otherwise dispose of a number of shares of the Balanced
Portfolio received in the transaction that
<PAGE>
May 14, 1997
Page 3
would reduce the Strategy Portfolio shareholders' ownership of the Balanced
Portfolio to a number of shares having a value, as of the date of the
transaction, of less than 50 percent of the value of all of the formerly
outstanding shares of beneficial interest of the Strategy Portfolio as of the
same date. For purposes of this representation, shares of beneficial
interest of the Strategy Portfolio surrendered by the dissenters, if any,
will be treated as outstanding shares on the date of the transaction. No
cash will be exchanged for the shares of beneficial interest of the Strategy
Portfolio in lieu of fractional shares of the Balanced Portfolio. Moreover,
shares of beneficial interest of the Strategy Portfolio and shares of the
Balanced Portfolio held by the Strategy Portfolio shareholders, and otherwise
sold, redeemed, or disposed of prior or subsequent to the transaction will be
taken into account for purposes of this representation, except for shares of
beneficial interest of the Strategy Portfolio and the Balanced Portfolio
redeemed by the Strategy Portfolio or the Balanced Portfolio in the ordinary
course of their respective businesses as open-end investment companies.
5. The Balanced Portfolio will acquire at least 90 percent of the fair
market value of the net assets and at least 70 percent of the fair market
value of the gross assets held by the Strategy Portfolio immediately prior to
the Reorganization. For purposes of this representation, amounts used by the
Strategy Portfolio to pay its Reorganization expenses, and all redemptions
and distributions (except for distributions and redemptions occurring in the
ordinary course of the Strategy Portfolio's business as an open-end
investment company) made by the Strategy Portfolio immediately preceding the
transfer will be included as assets of the Strategy Portfolio held
immediately prior to the Reorganization.
6. The Balanced Portfolio has no plan or intention to reacquire any of
its shares issued in the transaction, except for shares redeemed in the
ordinary course of its business as an open-end investment company.
7. The Balanced Portfolio has no plan or intention to sell or
otherwise dispose of any of the assets of the Strategy Portfolio acquired in
the transaction, except for dispositions made in the ordinary course of
business. Following the Reorganization, the Balanced Portfolio will continue
the historic business of the Strategy Portfolio of investing in a diversified
portfolio of equity securities, debt obligations and money market instruments
with the objective of achieving a high total investment return consistent
with moderate to higher risk.
8. As soon as practicable after the closing date, and in any event
within 30 days thereafter, the Strategy Portfolio will, in pursuance of the
Agreement, distribute the shares it receives in the Reorganization, and its
other properties, and will then be liquidated for federal income tax purposes.
9. In no event will the Strategy Portfolio dispose of to third parties
(other than in the ordinary course of business) and/or retain after the
Reorganization assets which in the aggregate,
<PAGE>
May 14, 1997
Page 4
will result in less than 33 1/3 percent of the historic business assets
(other than liquidity positions) of the Strategy Portfolio being transferred
to the Balanced Portfolio in the Reorganization.
10. Neither the Strategy Portfolio nor persons who were shareholders of
the Strategy Portfolio immediately before the closing date of the
Reorganization will own, immediately after the closing date of the
Reorganization Balanced Portfolio shares constituting "control" of the
Balanced Portfolio within the meaning of Section 304(c) or Section 368(c) of
the Code.
11. All expenses incurred in connection with the Reorganization will be
borne pro rata by the Strategy Portfolio and the Balanced Portfolio in
proportion to their assets.
12. There is no intercorporate indebtedness existing between the
Balanced Portfolio and the Strategy Portfolio that was issued, acquired, or
will be settled at a discount.
13. The Balanced Portfolio and the Strategy Portfolio are investment
companies as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code, and
are both regulated investment companies within the meaning of Section 851 of
the Code.
14. The Balanced Portfolio does not own, directly or indirectly, nor
has it owned during the past five years, directly or indirectly, any Class A,
Class B, Class C or Class Z shares of beneficial interest of the Strategy
Portfolio.
15. The liabilities, if any, and the unreimbursed distribution expenses
of the Strategy Portfolio to be assumed by the Balanced Portfolio in the
Reorganization plus the liabilities, if any, to which the transferred assets
are subject were incurred by the Strategy Portfolio in the ordinary course of
business and are associated with the assets to be transferred.
16. The fair market value and the adjusted basis of the Strategy
Portfolio's assets transferred to the Balanced Portfolio will equal or exceed
the sum of the liabilities, if any, assumed by the Balanced Portfolio plus
the liabilities, if any, to which the transferred assets are subject.
17. The amount of cash, if any, retained by the Strategy Portfolio to
meet expenses, plus liabilities, if any, of the Strategy Portfolio to be
assumed by the Balanced Portfolio in the Reorganization, plus the
liabilities, if any, to which the transferred assets are subject, will not
equal or exceed 20 percent of the fair market value of all property held by
the Strategy Portfolio immediately prior to the Reorganization.
18. The Strategy Portfolio is not under the jurisdiction of a court in
a title 11 or similar case within the meaning of Section 368(a)(3)(A) of the
Code.
<PAGE>
May 14, 1997
Page 5
19. In connection with the Reorganization, the Strategy Portfolio has
not and will not distribute to its creditors any of the Strategy Portfolio's
Class A, Class B, Class C or Class Z shares of beneficial interest, the
Balanced Portfolio's Class A, Class B, Class C or Class Z shares of
beneficial interest or rights to acquire the Strategy Portfolio's Class A,
Class B, Class C or Class Z shares of beneficial interest or the Balanced
Portfolio's Class A, Class B, Class C or Class Z shares of beneficial
interest.
20. It is anticipated that there will be no amount remaining in the
hands of the Strategy Portfolio after the payment of the liabilities of the
Strategy Portfolio.
OPINION
Based upon the foregoing, and based upon our review of the relevant
legal authorities, it is our opinion that:
1. For federal income tax purposes the Reorganization will constitute
a "reorganization" within the meaning of Code Section 368(a)(1)(C). The
Strategy Portfolio and the Balanced Portfolio will each be "a party to a
reorganization" within the meaning of Code Section 368(b).
2. No gain or loss will be recognized by the shareholders of the
Strategy Portfolio upon receipt of the Balanced Portfolio shares solely in
exchange for and in cancellation of the Strategy Portfolio shares of
beneficial interest, as described above and in the Agreement. Code Section
354(a)(1).
3. No gain or loss will be recognized to the Strategy Portfolio on the
transfer of all of its assets to the Balanced Portfolio solely in exchange
for Class A, Class B, Class C or Class Z shares of the Balanced Portfolio and
the assumption by the Balanced Portfolio of the liabilities, if any, of the
Strategy Portfolio. Code Sections 361(a) and 357(a). In addition, no gain
or loss will be recognized to the Strategy Portfolio on the distribution of
such shares to the Strategy Portfolio's shareholders in liquidation by
terminating the Strategy Portfolio. Code Section 361(c)(1).
4. No gain or loss will be recognized to the Balanced Portfolio upon
the receipt of the assets of the Strategy Portfolio solely in exchange for
shares of the Balanced Portfolio and the assumption of the Strategy
Portfolio's liabilities, if any. Code Section 1032(a).
5. The basis of the Strategy Portfolio assets in the hands of the
Balanced Portfolio will be the same as the basis of such assets in the hands
of the Strategy Portfolio immediately prior to the Reorganization. Code
Section 362(b).
<PAGE>
May 14, 1997
Page 6
6. The holding period of the Strategy Portfolio assets in the hands of
the Balanced Portfolio will include the period during which such assets were
held by the Strategy Portfolio immediately prior to the Reorganization. Code
Section 1223(2).
7. The basis of the Balanced Portfolio Class A, Class B, Class C and
Class Z shares to be received by shareholders of the Strategy Portfolio will,
in each instance, be the same as the basis of the Class A, Class B, Class C
and Class Z shares of beneficial interest of the Strategy Portfolio held by
such shareholders and cancelled in the Reorganization. Code Section
358(a)(1).
8. The holding period of the Balanced Portfolio shares to be received
by the shareholders of the Strategy Portfolio will include the holding period
of the shares of beneficial interest of the Strategy Portfolio cancelled
pursuant to the Reorganization, provided that the Balanced Portfolio shares
were held as capital assets on the date of the Reorganization. Code Section
1223(1).
You should be aware that this opinion is not binding on the Internal
Revenue Service or the courts and that no ruling of the Internal Revenue
Service has been requested. No opinion is expressed concerning the state,
local or foreign tax consequences of the Reorganization.
This opinion is being delivered to you pursuant to paragraph 8.6 of the
Agreement.
We hereby give you our consent to your inclusion of this opinion as an
exhibit to the Registration Statement on Form N-14 filed by Allocation Fund
with the Securities and Exchange Commission. In giving such consent, we do
not thereby admit that we come within the category of persons whose consent
is required under Section 7 of the Securities Act of 1933, as amended, or the
Rules and Regulations of the Securities and Exchange Commission promulgated
thereunder.
Very truly yours,
/s/ Gardner, Carton & Douglas
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Post-Effective Amendment No. 1 to the
Registration Statement No. 333-25133 on Form N-14 of Prudential Allocation
Fund of our reports on the financial statements of Prudential Allocation
Fund-Balanced Portfolio and Prudential Allocation Fund-Strategy Portfolio
dated September 16, 1996, which are incorporated by reference in and are a
part of such Registration Statement, and to the reference to us under the
heading "Custodian, Transfer and Dividend Disbursing Agent and Independent
Accountants" in the Statement of Additional Information, which is a part
of such Registration Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
New York, New York
May 19, 1997
<PAGE>
[LOGO]
PRUDENTIAL ALLOCATION FUND/STRATEGY PORTFOLIO
May 12, 1997
Dear Shareholder:
The Trustees of Prudential Allocation Fund have recently approved a proposal to
exchange the assets and liabilities of the Strategy Portfolio for Class A, Class
B, Class C and Class Z shares, respectively, of the Prudential Allocation
Fund/Balanced Portfolio. The enclosed proxy materials describe this proposal in
detail. If the proposal is approved by the shareholders and implemented, your
shares of the Strategy Portfolio will automatically be exchanged for shares
(Class A, Class B, Class C or Class Z) of the Balanced Portfolio.
The Trustees and I strongly recommend that you vote FOR the proposal. We believe
that this transaction serves your interests in the following ways:
- - SIMILAR STRATEGIES. The Portfolios' investment objectives and strategies,
while not identical, are similar. Each Portfolio invests primarily in stocks,
bonds and money market instruments.
- - EXPENSE LEVELS. The Strategy Portfolio has relatively smaller assets and has
not been able to attract new assets. Additionally, recently it has operated
with relatively high expense ratios. Shareholders should realize lower total
operating expenses resulting from the combination of the Portfolios.
Please read the enclosed materials carefully for more complete information. Your
vote is important, no matter how many shares you own. Voting your shares early
may permit your Portfolio to avoid costly follow-up mail and telephone
solicitation. After you have reviewed the enclosed materials, please complete,
date and sign your proxy card and mail it in the enclosed postage-paid return
envelope today.
We value your investment and thank you for the confidence you've placed in
Prudential Mutual Funds.
Sincerely,
/s/ Brian M. Storms
Brian M. Storms
PRESIDENT, Prudential Mutual Funds and Annuities
Prudential Allocation Fund, Gateway Center Three, 100 Mulberry Street, Newark,
New Jersey 07102-4077
