TIAA-CREF Life Insurance Company, et al., 17166-17174 [2011-7152]

Download as PDF Emcdonald on DSK2BSOYB1PROD with NOTICES 17166 Federal Register / Vol. 76, No. 59 / Monday, March 28, 2011 / Notices In addition, Rule 17a–3 contains ongoing operation and maintenance costs for broker-dealers including the cost of postage to provide customers with account information, and costs for equipment and systems development. The Commission estimates that under Rule 17a–3(a)(17), approximately 35,627,958 customers will need to be provided with information regarding their account on a yearly basis. The Commission estimates that the postage costs associated with providing those customers with copies of their account record information would be approximately $10,688,387 per year (35,627,958 × $0.30). The staff believes that the ongoing equipment and systems development costs relating to Rule 17a– 3 for the industry would be about $23,514,452 per year. Consequently, the total cost burden associated with Rule 17a–3 would be approximately $34,202,839 per year. Rule 17a–3 does not contain record retention requirements. Compliance with the rule is mandatory. The required records are available only to the staffs of the Commission, selfregulatory organizations of which the broker-dealer is a member, and the States during examination, inspections and investigations. The Commission may not conduct or sponsor a collection of information unless it displays a currently valid control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid Office of Management and Budget (OMB) control number. The public may view the background documentation for this information collection at the following Web site, https://www.reginfo.gov. Comments should be directed to (i) Desk Officer for the Securities and Exchange Commission, Office of Information and regulatory Affairs, Office of Management and Budget Room 10102, New Executive Office Building, Washington, DC 20503, or by sending an e-mail to: Shagufta_Ahmed@omb.eop.gov; and (ii) Thomas Bayer, Chief Information Officer, Securities and Exchange Commission, c/o Remi Pavlik-Simon, 6432 General Green Way, Alexandria, VA 22312 or send an e-mail to: PRA_Mailbox@sec.gov. Comments must be submitted to OMB within thirty days of this notice. Dated: March 22, 2011. Cathy H. Ahn, Deputy Secretary. BILLING CODE 8011–01–P 18:50 Mar 25, 2011 [Rel. No. IC–29600; File No. 812–13791] TIAA–CREF Life Insurance Company, et al. March 22, 2011. U.S. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of application for an order under Section 26(c) of the Investment Company Act of 1940, as amended (the ‘‘1940 Act’’). AGENCY: TIAA–CREF Life Insurance Company (‘‘TC LIFE’’), TIAA–CREF Life Separate Account VA–1 (‘‘Separate Account VA–1’’), and TIAA–CREF Life Separate Account VLI–1 (‘‘Separate Account VLI–1’’) (together with, Separate Account VA–1, the ‘‘Separate Accounts’’) (all foregoing parties collectively referred to herein as the ‘‘Applicants’’). SUMMARY OF APPLICATION: Applicants request an order of the Commission, pursuant to Section 26(c) of the Act, approving the substitution of shares of the Commodity Return Strategy Portfolio of the Credit Suisse Trust (the ‘‘Substituted Portfolio’’) for Class II shares of the Natural Resources Portfolio of The Prudential Series Fund (the ‘‘Replacement Portfolio’’) under certain variable life insurance policies and variable annuity contracts (the ‘‘Contracts’’), each issued through a Separate Account. FILING DATE: The application was filed on July 7, 2010 and amended and restated on November 3, 2010, January 20, 2011, and March 14, 2011. HEARING OR NOTIFICATION OF HEARING: An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Secretary of the Commission and serving Applicants with a copy of the request, personally or by mail. Hearing requests must be received by the Commission by 5:30 p.m. on April 20, 2011, and should be accompanied by proof of service on Applicants in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the requester’s interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Secretary of the Commission. APPLICANTS: Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. Applicants, c/o Ken Reitz, Associate ADDRESSES: [FR Doc. 2011–7151 Filed 3–25–11; 8:45 am] VerDate Mar<15>2010 SECURITIES AND EXCHANGE COMMISSION Jkt 223001 PO 00000 Frm 00064 Fmt 4703 Sfmt 4703 General Counsel, TIAA–CREF Life Insurance Company, 8500 Andrew Carnegie Boulevard, Charlotte, North Carolina 28262–8500. FOR FURTHER INFORMATION CONTACT: Michael L. Kosoff, Branch Chief, at (202) 551–6754 or Harry Eisenstein, Senior Special Counsel, Office of Insurance Products, Division of Investment Management, at (202) 551–6795. SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained via the Commission’s Web site by searching for the file number, or for an applicant using the Company name box, at https:// www.sec.gov/search/search.htm, or by calling (202) 551–8090. Applicants’ Representations: 1. TC LIFE is a stock life insurance company organized under the laws of the State of New York on November 20, 1996. TC LIFE’s executive office mailing address is 730 Third Avenue, New York, New York 10017. 2. TC LIFE established Separate Account VA–1 under New York state law on July 27, 1998. Separate Account VA–1 meets the definition of a ‘‘separate account’’ under the federal securities laws and is registered with the Commission under the Act as a unit investment trust (File No. 811–08963). Separate Account VA–1 consists of 47 subaccounts, each investing in a different investment portfolio and including subaccounts investing in both the Substituted Portfolio and Replacement Portfolio. The subaccount investing in the Substituted Portfolio was closed to additional payments and transfers of contract value on April 12, 2010. The assets of Separate Account VA–1 support Contracts (the ‘‘Separate Account VA–1 Contracts’’) that offer the Substituted Portfolio and the Replacement Portfolio as investment options, and interests in Separate Account VA–1 offered through such Contracts have been registered under the Securities Act of 1933 Act (the ‘‘1933 Act’’) on Form N–4 (File No. 333– 145064). Other than the subaccounts investing in the Substituted Portfolio and the two other Credit Suisse portfolios, all of the Separate Account VA–1 subaccounts are currently available under the Separate Account VA–1 Contracts. 3. TC LIFE is the legal owner of the assets in Separate Account VA–1. Pursuant to the Separate Account VA– 1 Contracts and prospectuses, TC LIFE reserves the right to substitute shares of one portfolio for shares of another. The terms of the Separate Account VA–1 E:\FR\FM\28MRN1.SGM 28MRN1 Federal Register / Vol. 76, No. 59 / Monday, March 28, 2011 / Notices Contracts and the prospectus for the Separate Account VA–1 Contracts also permit Contract owners to transfer contract value among the subaccounts. TC LIFE does not assess a transfer charge or limit the number of transfers permitted per year, although TC LIFE does have in place market timing policies and procedures that may operate to limit transfers. 4. TC LIFE established Separate Account VLI–1 under New York state law on May 23, 2001. Separate Account VLI–1 meets the definition of a ‘‘separate account’’ under the Federal securities laws and is registered with the Commission under the Act as a unit investment trust (File No. 811–10393). Separate Account VLI–1 consists of 47 subaccounts, each investing in a different investment portfolio and including subaccounts investing in both the Substituted Portfolio and the Replacement Portfolio. The subaccount investing in the Substituted Portfolio was closed to additional payments and transfers of contract value on April 12, 2010. The assets of Separate Account VLI–1 support Contracts (the ‘‘Separate Account VLI–1 Contracts’’) that offer the Substituted Portfolio and the Replacement Portfolio as investment options, and interests in Separate Account VLI–1 offered through such Contracts have been registered under the 1933 Act on Form N–6 (File Nos. 333–128699 and 333–151910). Other than the subaccounts investing in the Substituted Portfolio and the two other Credit Suisse portfolios, all of the Separate Account VLI–1 subaccounts are currently available under the Separate Account VLI–1 Contracts. 5. TC LIFE is the legal owner of the assets in Separate Account VLI–1. Pursuant to the Separate Account VLI– 1 Contracts and prospectuses, TC LIFE reserves the right to substitute shares of one portfolio for shares of another. The terms of the Separate Account VLI–1 Contracts and the prospectuses for the Separate Account VLI–1 Contracts also permit Contract owners to transfer contract value among the subaccounts. TC LIFE currently does not assess a transfer charge or limit the number of transfers permitted per year, although TC LIFE does reserve the right to deduct a $25 charge for the thirteenth and each additional transfer during a policy year. Transfers due to dollar cost averaging, automatic account rebalancing, loans, changes in a subaccount’s investment policy, or the initial reallocation from a money market subaccount do not count as transfers for the purpose of assessing the transfer charge. Contract owners also must transfer at least $250, or the total value in the allocation option being transferred, if less. TC LIFE also has in place market timing policies and procedures that may operate to limit transfers. TC LIFE also imposes certain restrictions on transfers from the fixed account. 6. Credit Suisse Trust was organized on March 15, 1995 under the laws of the Commonwealth of Massachusetts as a Massachusetts business trust. It is registered under the Act as a open-end management investment company (File No. 811–07261). Credit Suisse Trust currently consists of three portfolios, one of which—the Commodity Return Strategy Portfolio—is the Substituted Portfolio. The Credit Suisse Trust issues a separate series of shares of beneficial interest in connection with each portfolio and has registered such shares under the 1933 Act on Form N–1A (File No. 33–58125). Credit Suisse Asset Management, LLC (‘‘Credit Suisse Management’’) serves as the investment adviser to each portfolio of the Credit Suisse Trust. 7. Aberdeen Investment Management acquired Credit Suisse Management in December 2009. Applicants state that they are concerned that the acquisition could result in a change in investment style so that the Substituted Portfolio may no longer serve the investment purposes for which it was selected as an investment option in the Contracts. 8. The Prudential Series Fund is organized as a Delaware statutory trust and is registered under the Act as an open-end management investment company (File No. 811–03623). The Prudential Series Fund currently consists of 19 separate portfolios, one of which—the Natural Resources Portfolio—is the Replacement Portfolio. The Prudential Series Fund issues a separate series of shares of beneficial interest in connection with each portfolio and has registered such shares under the 1933 Act on Form N–1A (File No. 2–80896). Prudential Investments LLC (‘‘P.I.’’), a wholly-owned subsidiary of Prudential Financial, Inc., serves as the investment adviser to each portfolio of The Prudential Series Fund and receives an investment management fee from each portfolio it manages. 9. Prudential Mutual Fund Management, Inc. (‘‘PMFM’’), the former investment adviser to funds sponsored by Prudential Financial, Inc. and its affiliates, obtained an order from the Commission pursuant to Section 6(c) of the Act exempting it from Section 15(a) of the Act and Rule 18f–2 under the Act, with respect to subadvisory agreements (the ‘‘Manager of Managers Order’’).1 10. The Manager of Managers Order applies not only to the specific applicants but also to any future openend management investment company advised by PMFM or a person controlling, controlled by, or under common control with PMFM, provided that such investment company operates in substantially the same manner as the applicant investment company and complies with the condition of the Manager of Managers Order. More particularly, Applicants believe that the Manager of Managers Order permits P.I. to enter into and materially amend investment subadvisory agreements with respect to The Prudential Series Fund without obtaining shareholder approval. For this reason, the Applicants believe that the relief granted in the Manager of Managers Order extends to the Natural Resources Portfolio. 11. Neither the Substituted Portfolio nor the Replacement Portfolio nor their investment advisers are affiliated with the Applicants. 12. The following charts set out the investment objective of the Substituted Portfolio and the Replacement Portfolio, as stated in their respective prospectuses dated May 1, 2010. Substituted portfolio Replacement portfolio Emcdonald on DSK2BSOYB1PROD with NOTICES Credit Suisse Trust Commodity Return Strategy Portfolio Investment Objective Seeks total return relative to the performance of the Dow Jones-UBS Commodity Index Total Return (‘‘DJ–UBS Index’’). Prudential Series Fund Natural Resources Portfolio (Class II Shares) Investment Objective Seeks long-term growth of capital. 1 The Target Portfolio Trust and Prudential Mutual Fund Management, Inc., Act Rel. No. 22215 (Sept. 11, 1996) (Order), File No. 812–10208. VerDate Mar<15>2010 18:50 Mar 25, 2011 Jkt 223001 PO 00000 17167 Frm 00065 Fmt 4703 Sfmt 4703 E:\FR\FM\28MRN1.SGM 28MRN1 17168 Federal Register / Vol. 76, No. 59 / Monday, March 28, 2011 / Notices 13. The following information sets out the current principal investment strategies of the Substituted Portfolio and the Replacement Portfolio, as stated in their respective prospectuses and/or Substituted portfolio Replacement portfolio Credit Suisse Trust Commodity Return Strategy Portfolio Principal Investment Strategies The Portfolio is designed to achieve positive total return relative to the performance of the Dow Jones-UBS Commodity Index Total Return (‘‘DJ–UBS Index’’). The Portfolio intends to invest its assets in a combination of commodity-linked derivative instruments and fixed income securities. The Portfolio gains exposure to commodities markets by investing in structured notes whose principal and/or coupon payments are linked to the DJ–UBS Index and swap agreements on the DJ–UBS Index. The Portfolio may invest up to 25% of its total assets in a wholly owned subsidiary of the Portfolio formed in the Cayman Islands (the ‘‘Subsidiary’’), which has the same investment objective as the Portfolio and has a strategy of investing in commodity-linked swap agreements and other commodity-linked derivative instruments, futures contracts on individual commodities, or a subset of commodities and options on commodities. The Portfolio invests in a portfolio of fixed income securities normally having an average duration of one year or less, and emphasizes investment-grade fixed income securities. The Portfolio may invest without limit in U.S. dollar-denominated foreign securities and may invest up to 30% of its assets in non-U.S. dollar-denominated securities. The Portfolio is a non-diversified mutual fund portfolio, meaning the Portfolio may invest a relatively high percentage of its assets in a small number of issuers 2. Emcdonald on DSK2BSOYB1PROD with NOTICES 14. The following sets out the principal investment risks of the Substituted Portfolio and the Replacement Portfolio, as stated in their respective prospectuses and/or SAIs dated May 1, 2010. 2 The Commodity Return Strategy Portfolio’s investments will be limited, however, in order to qualify as a ‘‘regulated investment company’’ for purposes of the Internal Revenue Code. The Portfolio has obtained a private letter ruling from the Internal Revenue Service confirming that the income produced by certain types of commodityindex linked structured notes constitutes qualifying income for purposes of qualifying as a ‘‘regulated investment company.’’ To qualify, the Portfolio complies with certain requirements, including VerDate Mar<15>2010 18:50 Mar 25, 2011 Jkt 223001 Statements of Additional Information (‘‘SAI’’) dated May 1, 2010. Prudential Series Fund Natural Resources Portfolio (Class II Shares) Principal Investment Strategies The Portfolio normally invests at least 80% of its net assets (plus any borrowings made for investment purposes) in common stocks and convertible securities of natural resource companies and securities that are related to the market value of some natural resource. Natural resource companies are companies that primarily own, explore, mine, process or otherwise develop natural resources, or supply goods and services to such companies. Natural resources generally include agricultural commodities, precious metals, such as gold, silver and platinum, ferrous and nonferrous metals, such as iron, aluminum and copper, strategic metals such as uranium and titanium, hydrocarbons such as coal and oil, timberland and undeveloped real property. The Portfolio seeks securities with an attractive combination of valuation versus peers, organic reserve and production growth, and competitive unit cost structure. Up to 20% of the Portfolio’s total assets may be invested in securities that are not asset-indexed or natural resource-related, including common stock, convertible stock, debt securities and money market instruments. Up to 50% of the Portfolio’s total assets may be invested in foreign equity and equity-related securities. The Portfolio may also pursue the following types of investment strategies and/or invest in the following types of securities: (i) alternative investment strategies—including derivatives—to try and improve the Portfolio’s returns, to protect its assets or for short-term cash management. Derivatives includes options, futures contracts, swaps and swap options; (ii) forward foreign currency exchange contracts; (iii) purchase securities on a when-issued or delayed delivery basis; (iv) short sales against-the-box; (v) repurchase agreements. The Portfolio may participate with certain other portfolios of the Fund in a joint repurchase account under an order obtained from the SEC; and (vi) illiquid securities. Under normal circumstances, the Portfolio may invest up to 20% of its net assets in money market instruments. The Portfolio is a non-diversified mutual fund portfolio, meaning the Portfolio may invest a relatively high percentage of its assets in a small number of issuers.3 The Portfolio will concentrate its investments (i.e., will invest at least 25% of its assets under normal circumstance) in securities of companies in the natural resources group of industries. limiting its investments so that at the close of each quarter of the taxable year (i) not more than 25% of the market value of its total assets are invested in the securities of a single issuer, and (ii) with respect to 50% of the market value of its total assets, not more than 5% of the market value of its total assets are invested in the securities of a single issuer and the portfolio does not own more than 10% of the outstanding voting securities of a single issuer. 3 The Natural Resources Portfolio may not purchase any security (other than obligations of the U.S. government, its agencies or instrumentalities) if, as a result of such purchase, 25% or more of the Portfolio’s total assets (determined at the time of investment) would be invested in any one industry; provided, however, that the Portfolio will concentrate its investment in securities of PO 00000 Frm 00066 Fmt 4703 Sfmt 4703 The Commodity Return Strategy Portfolio is subject to the following principal investment risks: • Commodity Risk. The Portfolio’s investment in commodity-linked derivative instruments may subject the Portfolio to greater volatility than investments in traditional securities, particularly if the instruments involve leverage. The value of commoditylinked derivative instruments may be affected by changes in overall market movements, commodity index volatility, companies in the natural resources group of industries. E:\FR\FM\28MRN1.SGM 28MRN1 Emcdonald on DSK2BSOYB1PROD with NOTICES Federal Register / Vol. 76, No. 59 / Monday, March 28, 2011 / Notices changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs, and international economic, political, and regulatory developments. Use of leveraged commodity-linked derivatives creates an opportunity for increased return but, at the same time, creates the possibility for greater loss (including the likelihood of greater volatility of the portfolio’s net asset value), and there can be no assurance that the portfolio’s use of leverage will be successful. • Correlation Risk. Changes in the value of a hedging instrument may not match those of the investment being hedged. In addition, commodity-linked structured notes may be structured in a way that results in the portfolio’s performance diverging from the DJ–UBS Index, perhaps materially. For example, a note can be structured to limit the loss or the gain on the investment, which would result in the portfolio not participating in declines or increases in the DJ–UBS Index that exceed the limits. • Credit Risk. The issuer of a security or the counterparty to a contract, including derivatives contracts, may default or otherwise become unable to honor a financial obligation. • Derivatives Risk. Derivatives are financial contracts whose value depends on, or is derived from, the value of an underlying asset, reference rate, or index. The Portfolio typically uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate or currency risk. The Portfolio may also use derivatives for leverage. The Portfolio’s use of derivative instruments, particularly commodity-linked derivatives, involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of risks, such as commodity risk, correlation risk, liquidity risk, interest-rate risk, market risk, and credit risk. Also, suitable derivative transactions may not be available in all circumstances and there can be no assurance that the portfolio will engage in these transactions to reduce exposure to other risks that would be beneficial. • Exposure Risk. There is a risk associated with investments (such as derivatives) or practices (such as short selling) that increase the amount of money the portfolio could gain or lose on an investment. Exposure risk could multiply losses generated by a derivative or practice used for hedging VerDate Mar<15>2010 18:50 Mar 25, 2011 Jkt 223001 purposes. Such losses should be substantially offset by gains on the hedged investment. However, while hedging can reduce or eliminate losses, it can also reduce or eliminate gains. To the extent that a derivative or practice is not used as a hedge, the Portfolio is directly exposed to its risks. Gains or losses from speculative positions in a derivative may be much greater than the derivative’s original cost. For example, potential losses from writing uncovered call options and from speculative short sales are unlimited. • Extension Risk. An unexpected rise in interest rates may extend the life of a fixed income security beyond the expected payment time, typically reducing the security’s value. • Focus Risk. The Portfolio will be exposed to the performance of commodities in the DJ–UBS Index, which may from time to time have a small number of commodity sectors (e.g., energy, metals or agricultural) representing a large portion of the index. As a result, the Portfolio may be subject to greater volatility than if the index were more broadly diversified among commodity sectors. • Foreign Securities Risk. A portfolio that invests outside the United States carries additional risks. Fluctuations in exchange rates between the U.S. dollar and foreign currencies may negatively affect an investment. Adverse changes in exchange rates may erode or reverse any gains produced by foreign-currency denominated investments and may widen any losses. Although the Portfolio may seek to reduce currency risk by hedging part or all of its exposure to various foreign currencies, it is not required to do so. Key information about an issuer, security, or market may be inaccurate or unavailable. Moreover, foreign governments may expropriate assets, impose capital or currency controls, impose punitive taxes, or nationalize a company or industry. Any of these actions could have a severe effect on security prices and impair the Portfolio’s ability to bring its capital or income back to the U.S. Other political risks include: economic policy changes, social and political instability, military action and war. • Interest Rate Risk. Changes in interest rates may cause a decline in the market value of an investment. With bonds and other fixed-income securities, a rise in interest rates typically causes a fall in values, while a fall in interest rates typically causes a risk in values. • Liquidity Risk. Certain portfolio securities, such as commodity-linked notes and swaps, may be difficult or PO 00000 Frm 00067 Fmt 4703 Sfmt 4703 17169 impossible to sell at the time and the price that the Portfolio would like. The Portfolio may have to lower the price, sell other securities instead, or forgo an investment opportunity. Any of these could have a negative effect on portfolio management or performance. • Market Risk. The market value of a security may fluctuate, sometimes rapidly and unpredictably. These fluctuations, which are often referred to as ‘‘volatility,’’ may cause a security to be worth less than it was worth at an earlier time. Market risk may affect a single issuer, industry, commodity, sector of the economy, or the market as a whole. Market risk is common to most investments, including: stocks, bonds and commodities, and the mutual funds that invest in them. • Non-diversified Status. The Portfolio is considered a non-diversified investment company under the Act and is permitted to invest a greater proportion of its assets in the securities of a smaller number of issuers. As a result, the portfolio may be subject to greater volatility with respect to its portfolio securities than a fund that is diversified. • Subsidiary Risk. By investing in the Credit Suisse Cayman Commodity Fund II, Ltd. (the ‘‘Subsidiary’’), the Portfolio is indirectly exposed to the risks associated with the Subsidiary’s investments. The derivatives and other investments held by the Subsidiary are generally similar to those that are permitted to be held by the Portfolio and are subject to the same risks that apply to similar investments if held directly by the Portfolio. There can be no assurance that the investment objective of the Subsidiary will be achieved. The Subsidiary is not registered under the Act and is not subject to all the investor protections of the Act. However, the Portfolio wholly owns and controls the Subsidiary, and the Portfolio and the Subsidiary are both managed by Credit Suisse Asset Management, LLC, making it unlikely that the Subsidiary will take action contrary to the risks of the Portfolio and its shareholders. Changes in the laws of the United States and/or the Cayman Islands could result in the inability of the Portfolio and/or the Subsidiary to operate as it does currently and could adversely affect the Portfolio. • Tax Risk. Any income the Portfolio derives from direct investments in commodity-linked swaps or certain other commodity-linked derivatives must be limited to a maximum of 10% of the portfolio’s gross income in order for the portfolio to maintain its pass through tax status. The Portfolio has obtained a private letter ruling from the E:\FR\FM\28MRN1.SGM 28MRN1 17170 Federal Register / Vol. 76, No. 59 / Monday, March 28, 2011 / Notices Internal Revenue Service (the ‘‘IRS’’) confirming that the income produced by certain types of structured notes constitutes ‘‘qualifying income’’ under the Internal Revenue Code. In addition, the IRS has issued a private letter ruling to the Portfolio confirming that income derived from the Portfolio’s investment in its Subsidiary will also constitute qualifying income to the Portfolio. Based on such rulings, the Portfolio seeks to gain exposure to the commodity markets primarily through investments in commodity index-linked notes and, through investments in the Subsidiary, commodity-linked swaps and commodity futures. The Natural Resources Portfolio is subject to the following principal investment risks: • Derivatives Risk. The use of derivatives involves a variety of risks. There is a risk that the counterparty on a derivative transaction will be unable to honor its financial obligation to the Portfolio. Certain derivatives and related trading strategies create debt obligations similar to borrowings and, therefore, create leverage which can result in losses to a Portfolio that exceed the amount the Portfolio originally invested. Certain exchange-traded derivatives may be difficult or impossible to buy or sell at the time that the seller would like or at the price that the seller believes the derivative is currently worth. Privately negotiated derivatives may be difficult to terminate or otherwise offset. Derivatives used for hedging may reduce losses but also reduce or eliminate gains and cause losses if the market moves in a manner different from that anticipated by the Portfolio. Furthermore, commodity-linked derivative instruments may be more volatile than the prices of investments in traditional equity and debt securities. • Equity Securities Risk. There is a risk that the value or price of a particular stock or other equity or equity-related security owned by the Portfolio could go down. In addition to an individual stock losing value, the value of the equity markets or a sector of those markets in which the Portfolio invests could go down. • Expense Risk. The actual cost of investing in the Portfolio may be higher than the expenses shown in the Annual Portfolio Operating Expenses. • Foreign Investment Risk. Investment in foreign securities generally involves more risk than investing in securities of U.S. issuers. Changes in currency exchange rates may affect the value of foreign securities held by the Portfolio. Securities of issuers located in emerging markets tend to have volatile prices and may be less liquid than investments in more established markets. Moreover, foreign markets generally are more volatile than U.S. markets, are not subject to regulatory requirements comparable to those in the U.S., and are subject to differing custody and settlement practices. Foreign financial reporting standards usually differ from those in the U.S., and foreign exchanges are smaller and less liquid than the U.S. market. Political developments may adversely affect the value of a Portfolio’s foreign securities, and foreign holdings may be subject to special taxation and limitations on repatriating investment proceeds. • Industry/Sector Risk. A portfolio that invests in a single market sector or industry can accumulate larger positions in a single issuer or an industry sector. As a result, the Portfolio’s performance may be tied more directly to the success or failure of a small group of portfolio holdings. • Liquidity and Valuation Risk. From time to time, the Portfolio may hold one or more securities for which there are no or few buyers and sellers or which are subject to limitations on transfer. The Portfolio also may have difficulty disposing of those securities at the values determined by the Portfolio for the purpose of determining the Portfolio’s net asset value, especially during periods of significant net redemptions of Portfolio shares. • Market and Management Risk. Markets in which the Portfolio invests may experience volatility and go down in value, and possibly sharply and unpredictably. All decisions by an adviser require judgment and are based on imperfect information. Additionally, the investment techniques, risk analysis and investment strategies used by an adviser in making investment decisions for the Portfolio may not produce the desired results. • Non-diversification Risk. As a nondiversified portfolio, the Portfolio may hold larger positions in single issuers than a diversified fund. Because the Portfolio is not required to meet diversification requirements that are applicable to some funds, there is an increased risk that the Portfolio may be adversely affected by the performance of relatively few securities or the securities of a single issuer. 15. The following charts compare the investment management fees and total operating expenses (before and after any waivers and reimbursements) for the year ended December 31, 2010, expressed as an annual percentage of average daily net assets, of the Substituted Portfolio and the Replacement Portfolio. Substituted portfolio Replacement portfolio Credit Suisse Trust commodity return strategy portfolio Prudential series fund natural resources portfolio (Class II) 0.50% 4 ............................................................. 0.25% ............................................................... None ................................................................. 0.34% ............................................................... 1.09% ............................................................... 0.14% 5 ............................................................. 0.45% 0.25% None 0.20% 0.90% N/A Total Net Operating Expenses .................... Emcdonald on DSK2BSOYB1PROD with NOTICES Investment Management Fees ........................... Distribution and Service (12b–1) Fee ................ Administration Fees ............................................ Other Expenses .................................................. Total Operating Expenses .................................. Less Expense Waivers and Reimbursements ... 0.95% ............................................................... 0.90% 16. The following charts compare the average annual total returns of the 4 Management fee of the Commodity Return Strategy Portfolio and the Credit Suisse Cayman Commodity Fund II, Ltd. (the ‘‘Subsidiary’’). VerDate Mar<15>2010 19:08 Mar 25, 2011 Jkt 223001 Substituted Portfolio and the Replacement Portfolio for the one-year, five-year, and ten-year (or since inception) periods ended December 31, 2010. 5 Credit Suisse Management has voluntarily agreed to waive fees and reimburse expenses so that total operating expenses will not exceed 1.05% of the portfolio’s average daily net assets. PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 E:\FR\FM\28MRN1.SGM 28MRN1 17171 Federal Register / Vol. 76, No. 59 / Monday, March 28, 2011 / Notices Substituted portfolio Credit Suisse Trust commodity return strategy portfolio Average Annual Total Return for One Year ....... Average Annual Total Return for Five Years ..... Average Annual Total Return for Ten Years or, if less, Since Inception. 17. The following charts compare the levels of net assets (rounded to the nearest thousand) of the Substituted Portfolio and the Replacement Portfolio Replacement portfolio Prudential fund series natural resources portfolio +16.66% ........................................................... N/A ................................................................... 2.99% (Date of Inception: February 28, 2006) +27.48% 13.61% +20.28% (Date of Inception: April 28, 2005) on December 31, 2010 and the prior four calendar years, as well as the levels of net assets of the Separate Accounts invested in the Substituted Portfolio for the same time period and the percentage of the Substituted Portfolio’s total net assets represented by the investments of the Separate Accounts. Substituted portfolio Replacement portfolio Credit Suisse trust commodity return strategy portfolio Prudential fund series natural resources portfolio Total separate account assets invested in the portfolio Emcdonald on DSK2BSOYB1PROD with NOTICES On On On On On On 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 12/31/2005 ................................................ ................................................ ................................................ ................................................ ................................................ ................................................ 18. Applicants represent that the Substitution is part of an overall business goal of TC LIFE to make the Contracts more attractive to Contract owners and to assure a consistency in the range of overall investment options provided by the Contracts. Pursuant to this goal, TC LIFE has engaged in a thorough review of the efficiencies and structures of all of the investment options it offers under the Contracts. This review involved an evaluation of the investment objectives and strategies, asset sizes, expense ratios, investment performance, investment process, and investment teams responsible for the management of each investment option, with a view to past performance as well as future expectations. Based on this evaluation, TC LIFE has determined that the Substituted Portfolio warrants replacement. In particular, due to a recent change in the management of the Substituted Portfolio that resulted in changes in the investment strategies of two other Credit Suisse portfolios offered in the Contracts, TC LIFE believes there may be some question regarding the continuity of management, the application of a continuing investment process, and the dedication of resources to the Substituted Portfolio. 19. Applicants represent that TC LIFE reviewed all of the underlying fund 5 Credit Suisse Management has voluntarily agreed to waive fees and reimburse expenses so that total operating expenses will not exceed 1.05% of the portfolio’s average daily net assets. VerDate Mar<15>2010 19:02 Mar 25, 2011 Jkt 223001 % of portfolio total net assets represented by separate account investment Total net assets (in thousands) $1,671,571 ................. 1,713,589 ................... 424,299 ...................... 21,813 ........................ 287 ............................. N/A ............................. 1.34% ......................... 1.58% ......................... 0.61% ......................... 0.04% ......................... 0.0002% ..................... N/A ............................. $124,550 .................... 108,211 ...................... 69,919 ........................ 56,624 ........................ 145,907 6 .................... N/A ............................. options with the goal of ensuring that Contract owners would be provided with investment options under their Contracts following the Substitution that are similar to the investment options under their Contracts before the Substitution. Based in particular on a better performance record and lower total expenses of the Replacement Portfolio, TC LIFE believes that the adviser to the Replacement Portfolio is better positioned overall to provide exposure to the asset classes that were originally selected as well as being able to offer the potential for consistent above-average performance for the Portfolio than is the adviser to the Substituted Portfolio. The Replacement Portfolio also is considerably larger than the Substituted Portfolio, thus offering better economies of scale with a larger asset base over which to spread the various portfolio costs ultimately passed on to Contract owners. As such, TC LIFE believes that effecting the Substitution will provide Contract owners with a Replacement Portfolio that has a comparable investment objective to the Substituted Portfolio but is, overall, less expensive, consistent with the desired asset class exposure, better positioned to provide consistent above-average performance, and with greater expectations for growth. Moreover, TC LIFE maintains that the investment objective and policies of the Replacement Portfolio are sufficiently similar to those of the Substituted PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 Total net assets (in thousands) $1,360,056 1,079,600 677,400 1,669,900 1,193,000 1,016,300 Portfolio so that Contract owners will have reasonable continuity in investment expectations. 20. Applicants seek the Commission’s approval under Section 26(c) to engage in the substitution transaction described below. Pursuant to its authority under the respective Contracts and the prospectuses describing the same, and subject to the approval of the Commission under Section 26(c) of the Act, TC LIFE proposes to substitute shares of the Commodity Return Strategy Portfolio of the Credit Suisse Trust for Class II Shares of the Natural Resources Portfolio of The Prudential Series Fund. 21. Applicants represent that TC LIFE will effect the Substitution as soon as practicable following the issuance of the requested order as follows. As of the effective date of the Substitution (the ‘‘Effective Date’’), shares of the Substituted Portfolio will be redeemed for cash and that cash will be used to purchase shares of the Replacement Portfolio. Redemption requests and purchase orders will be placed simultaneously so that contract values will remain fully invested at all times. All redemptions of shares of the Substituted Portfolio and purchases of shares of the Replacement Portfolio will be effected in accordance with Section 22(c) of the Act and Rule 22c–1 thereunder. The Substitution will take place at relative net asset value as of the Effective Date with no change in the E:\FR\FM\28MRN1.SGM 28MRN1 Emcdonald on DSK2BSOYB1PROD with NOTICES 17172 Federal Register / Vol. 76, No. 59 / Monday, March 28, 2011 / Notices amount of any Contract owner’s contract value or death benefit or in the dollar value of his or her investments in any of the subaccounts. 22. Applicants represent that contract values attributable to investments in the Substituted Portfolio will be transferred to the Replacement Portfolio without charge (including sales charges or surrender charges) and without counting toward the number of transfers that may be permitted without charge. Contract owners will not incur any additional fees or charges as a result of the Substitution, nor will their rights or TC LIFE’s obligations under the Contracts be altered in any way, and the Substitution will not change Contract owners’ insurance benefits under the Contracts. All expenses incurred in connection with the Substitution, including legal, accounting, transactional, and other fees and expenses, including brokerage commissions, will be paid by TC LIFE. In addition, the Substitution will not impose any tax liability on Contract owners. The Substitution will not cause the Contract fees and charges currently paid by existing Contract owners to be greater after the Substitution than before the Substitution. TC LIFE will not exercise any right it may have under the Contracts to impose a transfer charge or restrictions on transfers under the Contracts for the period beginning on the date the initial application was filed with the Commission through at least thirty (30) days following the Effective Date for transfers of contract value from the subaccount investing in the Substituted Portfolio (before the Substitution) or the Replacement Portfolio (after the Substitution) to one or more other subaccount(s).7 23. The Applicants represent that they will not receive, for three years from the date of the Substitution, any direct or indirect benefits from the Replacement Portfolio, its advisors or underwriters (or their affiliates), in connection with assets attributable to Contracts affected by the Substitution, at a higher rate than Applicants have received from the Substituted Portfolio, its advisors or underwriters (or their affiliates), including without limitation Rule 12b– 1 fees, shareholder service, administration, or other service fees, revenue sharing, or other arrangements in connection with such assets. Applicants represent that the Substitution and the selection of the Replacement Portfolio were not 7 One exception to this would be restrictions that TIAA–CREF may impose to prevent or restrict ‘‘market timing’’ activities by Contract owners or their agents. VerDate Mar<15>2010 19:02 Mar 25, 2011 Jkt 223001 motivated by any financial consideration paid or to be paid to TC LIFE or its affiliates by the Replacement Portfolio, its advisors, underwriters, or their respective affiliates. 24. The Applicants assert that the procedures to be implemented are sufficient to assure that each Contract owner’s cash values immediately after the Substitution shall be equal to the cash value immediately before the Substitution. 25. The Applicants represent that Existing Contract owners as of the date the initial application was filed, and new Contract owners who have purchased or who will purchase a Contract subsequent to that date but prior to the Effective Date, have been or will be notified of the proposed Substitution by means of a prospectus or prospectus supplement for each of the Contracts (‘‘Pre-Substitution Notice’’). The Pre-Substitution Notice: • States that the Applicants filed the application to seek approval of the Substitution; • Sets forth the anticipated Effective Date; • Explains that contract values attributable to investments in the Substituted Portfolio would be transferred to the Replacement Portfolio on the Effective Date; and • States that, from the date the initial application was filed with the Commission through the date thirty (30) days after the Substitution, Contract owners may transfer contract value from the subaccount investing in the Substituted Portfolio (before the Substitution) or the Replacement Portfolio (after the Substitution) to one or more other subaccount(s) without a transfer charge and without that transfer counting against their contractual transfer limitations. Further, all Contract owners will have received a copy of the most recent prospectus for the Replacement Portfolio prior to the Substitution. 26. Finally, the Applicants represent that within five (5) days following the Substitution, Contract owners affected by the Substitution will be notified in writing that the Substitution was carried out. This notice will restate the information set forth in the PreSubstitution Notice, and will also explain that the contract values attributable to investments in the Substituted Portfolio were transferred to the Replacement Portfolio without charge (including sales charges or surrender charges) and without counting toward the number of transfers that may be permitted without charge. 27. Applicants represent that Section 26(c) of the Act prohibits any depositor PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 or trustee of a unit investment trust that invests exclusively in the securities of a single issuer from substituting the securities of another issuer without the approval of the Commission. Section 26(c) provides that such approval shall be granted by order of the Commission, if the evidence establishes that the substitution is consistent with the protection of investors and the purposes of the Act. Section 26(c) was intended to provide for Commission scrutiny of proposed substitutions which could, in effect, force shareholders dissatisfied with the substitute security to redeem their shares, thereby possibly incurring a loss of the sales load deducted from initial premium, an additional sales load upon reinvestment of the proceeds of redemption, or both.8 The section was designed to forestall the ability of a depositor to present holders of interest in a unit investment trust with situations in which a holder’s only choice would be to continue an investment in an unsuitable underlying security, or to elect a costly and, in effect, forced redemption. For the reasons described below, the Applicants submit that the Substitution meets the standards set forth in Section 26(c) and that, if implemented, the Substitution would not raise any of the aforementioned concerns that Congress intended to address when the Act was amended to include this provision. In addition, the Applicants submit that the proposed Substitution meets the standards that the Commission and its Staff have applied to substitutions that have been approved in the past. 28. Applicants represent that the replacement of the Substituted Portfolio with the Replacement Portfolio is consistent with the protection of Contract owners and the purposes fairly intended by the policy and provisions of the Act and, thus, meets the standards necessary to support an order pursuant to Section 26(c) of the Act. 29. The Applicants assert that the investment objective and principal investment strategies of the Replacement Portfolio are substantially similar to those of the Substituted Portfolio. The Commodity Return Strategy Portfolio seeks total return relative to the performance of the DJ– UBS Index, and the Natural Resources Portfolio seeks long-term growth of capital. Applicants submit that these are substantially similar investment objectives and, while the Portfolios’ principal investment strategies are 8 House Comm. Interstate Commerce, Report of the Securities and Exchange Commission on the Public Policy Implications of Investment Company Growth, H.R. Rep. No. 2337, 89th Cong. 2d Session 337 (1966). E:\FR\FM\28MRN1.SGM 28MRN1 Emcdonald on DSK2BSOYB1PROD with NOTICES Federal Register / Vol. 76, No. 59 / Monday, March 28, 2011 / Notices somewhat different, there is nonetheless a high correlation between the two sets of investment strategies. The Commodity Return Strategy Portfolio is designed to achieve positive total return relative to the performance of the DJ– UBS Index by investing in commoditylinked derivative instruments and fixed income securities, whereas the Natural Resources Portfolio normally invests at least 80% of its net assets in common stocks and convertible securities of natural resource companies and securities that are related to the market value of some natural resource. However, the companies in which the Natural Resources Portfolio invests derive the vast majority of their respective revenue from commodities. In other words, the valuation of the companies in which the Natural Resources Portfolio invests move directly with the underlying commodities that represent these firms’ primary businesses. As such, there is a high correlation between the Natural Resources Portfolio’s performance to the price changes in the DJ–UBS Index which underlies the Commodity Return Strategy Portfolio’s investment strategy. This high correlation is demonstrated by comparing the performance of investments in natural resources companies (as measured by the S&P North American Natural Resources Index) and commodities (as measured by DJ–UBS Index), for which the correlation (as reported by Morningstar) exceeds 80% over both the trailing three-year and five-year periods. Given the high correlation between the performance of the Natural Resources Portfolio and the Commodity Return Strategy Portfolio, the Applicants believe that the Natural Resources Portfolio is a suitable replacement for the Commodity Return Strategy Portfolio. While the holdings of companies in which the Natural Resources Portfolio invests, with their resultant capital structures, tax exposures, and idiosyncratic risks, do not provide a perfect correlation to a spot commodities index, Applicants believe the same is true with a portfolio comprised of structured notes tied to commodities futures. Accordingly, the Applicants believe that the close approximation of the Natural Resources Portfolio to the commodities sector exposure supports a determination that the Natural Resources Portfolio will provide Contract owners currently invested in the Commodity Return Strategy Portfolio an acceptable level of exposure to the commodities sector and, given the uncertainty posed by the change of control of management of the VerDate Mar<15>2010 17:14 Mar 25, 2011 Jkt 223001 Commodity Return Strategy Portfolio, is a reasonable substitution for the Commodity Return Strategy Portfolio. 30. The Applicants represent that, although not identical, the principal investment risks of the Natural Resources Portfolio are comparable to those of the Commodity Return Strategy Portfolio. Both Portfolios use derivatives, exposing each Portfolio to a number of specific derivative-related risks such as the possibility that the counterparty to the transaction is unable to honor its financial obligation; using derivatives may also subject each Portfolio to other more general risks including commodity risk, correlation risk, liquidity risk, interest-rate risk, market risk, and credit risk. Because both Portfolios may invest in foreign securities, they also are subject to increased risk relating to currency exchange rate fluctuations, price volatility, adverse political developments, etc. Both Portfolios also are subject to market risk relating to increased and/or unpredictable fluctuations in the market value of the securities in which they invest, as well as to liquidity risk. Finally, both the Natural Resources Portfolio and the Commodity Return Strategy Portfolio are non-diversified investment companies, and therefore may invest in fewer issuers and be more greatly affected by the performance of relatively few securities. Further, the Applicants do not believe that overall the Natural Resources Portfolio is exposed to greater risk than the Commodity Return Strategy Portfolio, despite the fact that certain enumerated risks of the Natural Resources Portfolio are not explicitly detailed as principal investment risks in the prospectus for the Commodity Return Strategy Portfolio. For example, the Applicants believe that the Commodity Return Strategy Portfolio, like the Natural Resources Portfolio, is subject to commodity price risk, expense risk, industry/sector risk, and valuation risk—all typical risks that are generally present for most portfolios that invest in the commodity and natural resources asset categories. Moreover, the Natural Resources Portfolio is not subject to the specific derivative, tax, and focus risks the Commodity Return Strategy Portfolio is exposed to as a result of the latter’s primary investment in commoditylinked instruments. Lastly, because the Commodity Return Strategy Portfolio invests in the Credit Suisse Cayman Commodity Fund II, Ltd., the Portfolio also is indirectly exposed to the risks associated with that portfolio’s investments. PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 17173 31. The Applicants represent that the investment management fee of the Natural Resources Portfolio is lower than that of the Commodity Return Strategy Portfolio, and each Portfolio imposes a 12b–1 fee of 0.25%. Moreover, total operating expenses of the Natural Resources Portfolio were lower than those of the Commodity Return Strategy Portfolio as of December 31, 2010. 32. The Applicants represent that the Natural Resources Portfolio outperformed the Commodity Return Strategy Portfolio for the one-year period ending December 31, 2010 and since inception. In addition, the assets of the Natural Resources Portfolio have been consistently (and significantly) higher than those of the Commodity Return Strategy Portfolio as of December 31, 2010 and for each of the prior four calendar years. 33. For purposes of the approval sought pursuant to Section 26(c) of the Act, the Applicants represent that the Substitution will not be completed unless all of the following conditions are met. • The Commission shall have issued an order approving the Substitution under Section 26(c) of the Act as necessary to carry out the transactions described in the Application. • Each Contract owner will have been sent (i) prior to the Effective Date, a copy of the effective prospectus for the Replacement Portfolio, (ii) prior to the Effective Date, a Pre-Substitution Notice describing the terms of the Substitution and the rights of the Contract owners in connection with the Substitution, and (iii) within five (5) days after the Substitution occurs, a notice informing Contract owners affected by the Substitution that the Substitution was carried out (this notice will restate the information set forth in the PreSubstitution Notice, and also explain that the contract values attributable to investments in the Substituted Portfolio were transferred to the Replacement Portfolio without charge (including sales charges or surrender charges) and without counting toward the number of transfers that may be permitted without charge). • The Applicants have satisfied themselves that (i) The Contracts allow the substitution of the Portfolios in the manner contemplated by the Substitution and related transactions described herein, (ii) the transactions can be consummated as described in the Application under applicable insurance laws, and (iii) any applicable regulatory requirements in each jurisdiction where the Contracts are qualified for sale have E:\FR\FM\28MRN1.SGM 28MRN1 17174 Federal Register / Vol. 76, No. 59 / Monday, March 28, 2011 / Notices been complied with to the extent necessary to complete the transaction. 34. The Applicants acknowledge that reliance on exemptive relief, if granted, depends upon compliance with all of the representations and conditions set forth in the Application. Conclusion: Applicants assert that, for all the reasons stated in the Applicant, the Substitution is consistent with the protection of investors and the purposes fairly intended by the policy of the Contracts and provisions of the Act and that the requested order should be granted. For the Commission, by the Division of Investment Management pursuant to delegated authority. Cathy H. Ahn, Deputy Secretary. added, deleted or postponed, please contact: The Office of the Secretary at (202) 551–5400. NASDAQOMXPHLX/Filings/, at the principal office of the Exchange, and at the Commission’s Public Reference Room. Dated: March 24, 2011. Elizabeth M. Murphy, Secretary. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change [FR Doc. 2011–7342 Filed 3–24–11; 4:15 pm] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64108; File No. SR–Phlx– 2011–35] Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC To Extend the FLEX No Minimum Value Pilot Program [FR Doc. 2011–7152 Filed 3–25–11; 8:45 am] March 22, 2011. BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Emcdonald on DSK2BSOYB1PROD with NOTICES Sunshine Act Meeting Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission will hold an Open Meeting on March 30, 2011 at 10 a.m., in the Auditorium, Room L–002. The subject matters of the Open Meeting will be: Item 1: The Commission will consider whether to propose joint rules with other Agencies to implement Section 941(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act relating to credit risk retention by securitizers of asset-backed securities. Item 2: The Commission will consider whether to propose a new rule and rule amendments to implement Section 952 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires the Commission to direct the national securities exchanges and national securities associations to adopt certain listing standards with respect to compensation committees and compensation advisers. Section 952 also requires the Commission to adopt new disclosure rules concerning the use of compensation consultants and conflicts of interest. Commissioner Casey, as duty officer, determined that no earlier notice thereof was possible. At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been VerDate Mar<15>2010 17:14 Mar 25, 2011 Jkt 223001 Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 2 thereunder, notice is hereby given that on March 15, 2011, NASDAQ OMX PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is filing with the Commission a proposal to extend a pilot program that eliminates minimum value sizes for FLEX index options and FLEX equity options (together known as ‘‘FLEX Options’’).3 The Exchange requests that the Commission waive the 30-day operative delay period contained in Exchange Act Rule 19b-4(f)(6)(iii).4 The text of the proposed rule change is available on the Exchange’s Web site at https:// nasdaqomxphlx.cchwallstreet.com/ 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 In addition to FLEX Options, FLEX currency options are also traded on the Exchange. These flexible index, equity, and currency options provide investors the ability to customize basic option features including size, expiration date, exercise style, and certain exercise prices; and may have expiration dates within five years. See Rule 1079. FLEX currency options traded on the Exchange are also known as FLEX World Currency Options (‘‘WCO’’) or Foreign Currency Options (‘‘FCO’’). The pilot program discussed herein does not encompass FLEX currency options. 4 17 CFR 240.19b–4(f)(6)(iii). 2 17 PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this proposed rule change is to amend Phlx Rule 1079 (FLEX Index, Equity and Currency Options) to extend a pilot program that eliminates minimum value sizes for FLEX Options (the ‘‘Pilot Program’’ or ‘‘Pilot’’). Rule 1079 deals with the process of listing and trading FLEX equity, index, and currency options on the Exchange. Rule 1079(a)(8)(A) currently sets the minimum opening transaction value size in the case of a FLEX Option in a newly established (opening) series if there is no open interest in the particular series when an Request-forQuote (‘‘RFQ’’) is submitted (except as provided in Commentary .01 to Rule 1079): (i) $10 million underlying equivalent value, respecting FLEX market index options, and $5 million underlying equivalent value respecting FLEX industry index options; 5 (ii) the lesser of 250 contracts or the number of contracts overlying $1 million in the underlying securities, with respect to FLEX equity options (together the ‘‘minimum value size’’).6 Presently, Commentary .01 to Rule 1079 states that by virtue of the Pilot Program ending March 28, 2011, there shall be no minimum value size requirements for FLEX Options as noted 5 Market index options and industry index options are broad-based index options and narrowbased index options, respectively. See Rule 1000A(b)(11) and (12). 6 Subsection (a)(8)(A) also provides a third alternative: (iii) 50 contracts in the case of FLEX currency options. However, this alternative is not part of the Pilot Program. E:\FR\FM\28MRN1.SGM 28MRN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 76, Number 59 (Monday, March 28, 2011)]
[Notices]
[Pages 17166-17174]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-7152]

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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-29600; File No. 812-13791]

TIAA-CREF Life Insurance Company, et al.

March 22, 2011.
AGENCY: U.S. Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under Section 26(c) of the
Investment Company Act of 1940, as amended (the ``1940 Act'').

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Applicants: TIAA-CREF Life Insurance Company (``TC LIFE''), TIAA-CREF
Life Separate Account VA-1 (``Separate Account VA-1''), and TIAA-CREF
Life Separate Account VLI-1 (``Separate Account VLI-1'') (together
with, Separate Account VA-1, the ``Separate Accounts'') (all foregoing
parties collectively referred to herein as the ``Applicants'').

Summary of Application: Applicants request an order of the Commission,
pursuant to Section 26(c) of the Act, approving the substitution of
shares of the Commodity Return Strategy Portfolio of the Credit Suisse
Trust (the ``Substituted Portfolio'') for Class II shares of the
Natural Resources Portfolio of The Prudential Series Fund (the
``Replacement Portfolio'') under certain variable life insurance
policies and variable annuity contracts (the ``Contracts''), each
issued through a Separate Account.

Filing Date: The application was filed on July 7, 2010 and amended and
restated on November 3, 2010, January 20, 2011, and March 14, 2011.

Hearing or Notification of Hearing: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Secretary of the
Commission and serving Applicants with a copy of the request,
personally or by mail. Hearing requests must be received by the
Commission by 5:30 p.m. on April 20, 2011, and should be accompanied by
proof of service on Applicants in the form of an affidavit or, for
lawyers, a certificate of service. Hearing requests should state the
nature of the requester's interest, the reason for the request, and the
issues contested. Persons who wish to be notified of a hearing may
request notification by writing to the Secretary of the Commission.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549-1090. Applicants, c/o Ken Reitz, Associate
General Counsel, TIAA-CREF Life Insurance Company, 8500 Andrew Carnegie
Boulevard, Charlotte, North Carolina 28262-8500.

FOR FURTHER INFORMATION CONTACT: Michael L. Kosoff, Branch Chief, at
(202) 551-6754 or Harry Eisenstein, Senior Special Counsel, Office of
Insurance Products, Division of Investment Management, at (202) 551-
6795.

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or for an
applicant using the Company name box, at https://www.sec.gov/search/search.htm, or by calling (202) 551-8090.

Applicants' Representations:

1. TC LIFE is a stock life insurance company organized under the
laws of the State of New York on November 20, 1996. TC LIFE's executive
office mailing address is 730 Third Avenue, New York, New York 10017.
2. TC LIFE established Separate Account VA-1 under New York state
law on July 27, 1998. Separate Account VA-1 meets the definition of a
``separate account'' under the federal securities laws and is
registered with the Commission under the Act as a unit investment trust
(File No. 811-08963). Separate Account VA-1 consists of 47 subaccounts,
each investing in a different investment portfolio and including
subaccounts investing in both the Substituted Portfolio and Replacement
Portfolio. The subaccount investing in the Substituted Portfolio was
closed to additional payments and transfers of contract value on April
12, 2010. The assets of Separate Account VA-1 support Contracts (the
``Separate Account VA-1 Contracts'') that offer the Substituted
Portfolio and the Replacement Portfolio as investment options, and
interests in Separate Account VA-1 offered through such Contracts have
been registered under the Securities Act of 1933 Act (the ``1933 Act'')
on Form N-4 (File No. 333-145064). Other than the subaccounts investing
in the Substituted Portfolio and the two other Credit Suisse
portfolios, all of the Separate Account VA-1 subaccounts are currently
available under the Separate Account VA-1 Contracts.
3. TC LIFE is the legal owner of the assets in Separate Account VA-
1. Pursuant to the Separate Account VA-1 Contracts and prospectuses, TC
LIFE reserves the right to substitute shares of one portfolio for
shares of another. The terms of the Separate Account VA-1

[[Page 17167]]

Contracts and the prospectus for the Separate Account VA-1 Contracts
also permit Contract owners to transfer contract value among the
subaccounts. TC LIFE does not assess a transfer charge or limit the
number of transfers permitted per year, although TC LIFE does have in
place market timing policies and procedures that may operate to limit
transfers.
4. TC LIFE established Separate Account VLI-1 under New York state
law on May 23, 2001. Separate Account VLI-1 meets the definition of a
``separate account'' under the Federal securities laws and is
registered with the Commission under the Act as a unit investment trust
(File No. 811-10393). Separate Account VLI-1 consists of 47
subaccounts, each investing in a different investment portfolio and
including subaccounts investing in both the Substituted Portfolio and
the Replacement Portfolio. The subaccount investing in the Substituted
Portfolio was closed to additional payments and transfers of contract
value on April 12, 2010. The assets of Separate Account VLI-1 support
Contracts (the ``Separate Account VLI-1 Contracts'') that offer the
Substituted Portfolio and the Replacement Portfolio as investment
options, and interests in Separate Account VLI-1 offered through such
Contracts have been registered under the 1933 Act on Form N-6 (File
Nos. 333-128699 and 333-151910). Other than the subaccounts investing
in the Substituted Portfolio and the two other Credit Suisse
portfolios, all of the Separate Account VLI-1 subaccounts are currently
available under the Separate Account VLI-1 Contracts.
5. TC LIFE is the legal owner of the assets in Separate Account
VLI-1. Pursuant to the Separate Account VLI-1 Contracts and
prospectuses, TC LIFE reserves the right to substitute shares of one
portfolio for shares of another. The terms of the Separate Account VLI-
1 Contracts and the prospectuses for the Separate Account VLI-1
Contracts also permit Contract owners to transfer contract value among
the subaccounts. TC LIFE currently does not assess a transfer charge or
limit the number of transfers permitted per year, although TC LIFE does
reserve the right to deduct a $25 charge for the thirteenth and each
additional transfer during a policy year. Transfers due to dollar cost
averaging, automatic account rebalancing, loans, changes in a
subaccount's investment policy, or the initial reallocation from a
money market subaccount do not count as transfers for the purpose of
assessing the transfer charge. Contract owners also must transfer at
least $250, or the total value in the allocation option being
transferred, if less. TC LIFE also has in place market timing policies
and procedures that may operate to limit transfers. TC LIFE also
imposes certain restrictions on transfers from the fixed account.
6. Credit Suisse Trust was organized on March 15, 1995 under the
laws of the Commonwealth of Massachusetts as a Massachusetts business
trust. It is registered under the Act as a open-end management
investment company (File No. 811-07261). Credit Suisse Trust currently
consists of three portfolios, one of which--the Commodity Return
Strategy Portfolio--is the Substituted Portfolio. The Credit Suisse
Trust issues a separate series of shares of beneficial interest in
connection with each portfolio and has registered such shares under the
1933 Act on Form N-1A (File No. 33-58125). Credit Suisse Asset
Management, LLC (``Credit Suisse Management'') serves as the investment
adviser to each portfolio of the Credit Suisse Trust.
7. Aberdeen Investment Management acquired Credit Suisse Management
in December 2009. Applicants state that they are concerned that the
acquisition could result in a change in investment style so that the
Substituted Portfolio may no longer serve the investment purposes for
which it was selected as an investment option in the Contracts.
8. The Prudential Series Fund is organized as a Delaware statutory
trust and is registered under the Act as an open-end management
investment company (File No. 811-03623). The Prudential Series Fund
currently consists of 19 separate portfolios, one of which--the Natural
Resources Portfolio--is the Replacement Portfolio. The Prudential
Series Fund issues a separate series of shares of beneficial interest
in connection with each portfolio and has registered such shares under
the 1933 Act on Form N-1A (File No. 2-80896). Prudential Investments
LLC (``P.I.''), a wholly-owned subsidiary of Prudential Financial,
Inc., serves as the investment adviser to each portfolio of The
Prudential Series Fund and receives an investment management fee from
each portfolio it manages.
9. Prudential Mutual Fund Management, Inc. (``PMFM''), the former
investment adviser to funds sponsored by Prudential Financial, Inc. and
its affiliates, obtained an order from the Commission pursuant to
Section 6(c) of the Act exempting it from Section 15(a) of the Act and
Rule 18f-2 under the Act, with respect to subadvisory agreements (the
``Manager of Managers Order'').\1\
---------------------------------------------------------------------------

\1\ The Target Portfolio Trust and Prudential Mutual Fund
Management, Inc., Act Rel. No. 22215 (Sept. 11, 1996) (Order), File
No. 812-10208.
---------------------------------------------------------------------------

10. The Manager of Managers Order applies not only to the specific
applicants but also to any future open-end management investment
company advised by PMFM or a person controlling, controlled by, or
under common control with PMFM, provided that such investment company
operates in substantially the same manner as the applicant investment
company and complies with the condition of the Manager of Managers
Order. More particularly, Applicants believe that the Manager of
Managers Order permits P.I. to enter into and materially amend
investment subadvisory agreements with respect to The Prudential Series
Fund without obtaining shareholder approval. For this reason, the
Applicants believe that the relief granted in the Manager of Managers
Order extends to the Natural Resources Portfolio.
11. Neither the Substituted Portfolio nor the Replacement Portfolio
nor their investment advisers are affiliated with the Applicants.
12. The following charts set out the investment objective of the
Substituted Portfolio and the Replacement Portfolio, as stated in their
respective prospectuses dated May 1, 2010.

Investment Objective Investment Objective

Seeks total return relative to the Seeks long-term growth of capital.
performance of the Dow Jones-UBS
Commodity Index Total Return (``DJ-UBS
Index'').
----------------------------------------------------------------------------------------------------------------

[[Page 17168]]

13. The following information sets out the current principal
investment strategies of the Substituted Portfolio and the Replacement
Portfolio, as stated in their respective prospectuses and/or Statements
of Additional Information (``SAI'') dated May 1, 2010.

Principal Investment Strategies Principal Investment Strategies

The Portfolio is designed to achieve positive total The Portfolio normally invests at least 80% of its net
return relative to the performance of the Dow Jones- assets (plus any borrowings made for investment
UBS Commodity Index Total Return (``DJ-UBS Index''). purposes) in common stocks and convertible securities
The Portfolio intends to invest its assets in a of natural resource companies and securities that are
combination of commodity-linked derivative instruments related to the market value of some natural resource.
and fixed income securities. The Portfolio gains
exposure to commodities markets by investing in
structured notes whose principal and/or coupon
payments are linked to the DJ-UBS Index and swap
agreements on the DJ-UBS Index.
The Portfolio may invest up to 25% of its total assets Natural resource companies are companies that primarily
in a wholly owned subsidiary of the Portfolio formed own, explore, mine, process or otherwise develop
in the Cayman Islands (the ``Subsidiary''), which has natural resources, or supply goods and services to
the same investment objective as the Portfolio and has such companies. Natural resources generally include
a strategy of investing in commodity-linked swap agricultural commodities, precious metals, such as
agreements and other commodity-linked derivative gold, silver and platinum, ferrous and nonferrous
instruments, futures contracts on individual metals, such as iron, aluminum and copper, strategic
commodities, or a subset of commodities and options on metals such as uranium and titanium, hydrocarbons such
commodities. as coal and oil, timberland and undeveloped real
property.
The Portfolio seeks securities with an attractive
combination of valuation versus peers, organic reserve
and production growth, and competitive unit cost
structure.
The Portfolio invests in a portfolio of fixed income Up to 20% of the Portfolio's total assets may be
securities normally having an average duration of one invested in securities that are not asset-indexed or
year or less, and emphasizes investment-grade fixed natural resource-related, including common stock,
income securities. The Portfolio may invest without convertible stock, debt securities and money market
limit in U.S. dollar-denominated foreign securities instruments.
and may invest up to 30% of its assets in non-U.S.
dollar-denominated securities.
The Portfolio is a non-diversified mutual fund Up to 50% of the Portfolio's total assets may be
portfolio, meaning the Portfolio may invest a invested in foreign equity and equity-related
relatively high percentage of its assets in a small securities.
number of issuers \2\. The Portfolio may also pursue the following types of
investment strategies and/or invest in the following
types of securities: (i) alternative investment
strategies--including derivatives--to try and improve
the Portfolio's returns, to protect its assets or for
short-term cash management. Derivatives includes
options, futures contracts, swaps and swap options;
(ii) forward foreign currency exchange contracts;
(iii) purchase securities on a when-issued or delayed
delivery basis; (iv) short sales against-the-box; (v)
repurchase agreements. The Portfolio may participate
with certain other portfolios of the Fund in a joint
repurchase account under an order obtained from the
SEC; and (vi) illiquid securities.
Under normal circumstances, the Portfolio may invest up
to 20% of its net assets in money market instruments.
The Portfolio is a non-diversified mutual fund
portfolio, meaning the Portfolio may invest a
relatively high percentage of its assets in a small
number of issuers.\3\ The Portfolio will concentrate
its investments (i.e., will invest at least 25% of its
assets under normal circumstance) in securities of
companies in the natural resources group of
industries.
----------------------------------------------------------------------------------------------------------------

14. The following sets out the principal investment risks of the
Substituted Portfolio and the Replacement Portfolio, as stated in their
respective prospectuses and/or SAIs dated May 1, 2010.
---------------------------------------------------------------------------

\2\ The Commodity Return Strategy Portfolio's investments will
be limited, however, in order to qualify as a ``regulated investment
company'' for purposes of the Internal Revenue Code. The Portfolio
has obtained a private letter ruling from the Internal Revenue
Service confirming that the income produced by certain types of
commodity-index linked structured notes constitutes qualifying
income for purposes of qualifying as a ``regulated investment
company.'' To qualify, the Portfolio complies with certain
requirements, including limiting its investments so that at the
close of each quarter of the taxable year (i) not more than 25% of
the market value of its total assets are invested in the securities
of a single issuer, and (ii) with respect to 50% of the market value
of its total assets, not more than 5% of the market value of its
total assets are invested in the securities of a single issuer and
the portfolio does not own more than 10% of the outstanding voting
securities of a single issuer.
\3\ The Natural Resources Portfolio may not purchase any
security (other than obligations of the U.S. government, its
agencies or instrumentalities) if, as a result of such purchase, 25%
or more of the Portfolio's total assets (determined at the time of
investment) would be invested in any one industry; provided,
however, that the Portfolio will concentrate its investment in
securities of companies in the natural resources group of
industries.
---------------------------------------------------------------------------

The Commodity Return Strategy Portfolio is subject to the following
principal investment risks:
Commodity Risk. The Portfolio's investment in commodity-
linked derivative instruments may subject the Portfolio to greater
volatility than investments in traditional securities, particularly if
the instruments involve leverage. The value of commodity-linked
derivative instruments may be affected by changes in overall market
movements, commodity index volatility,

[[Page 17169]]

changes in interest rates, or factors affecting a particular industry
or commodity, such as drought, floods, weather, livestock disease,
embargoes, tariffs, and international economic, political, and
regulatory developments. Use of leveraged commodity-linked derivatives
creates an opportunity for increased return but, at the same time,
creates the possibility for greater loss (including the likelihood of
greater volatility of the portfolio's net asset value), and there can
be no assurance that the portfolio's use of leverage will be
successful.
Correlation Risk. Changes in the value of a hedging
instrument may not match those of the investment being hedged. In
addition, commodity-linked structured notes may be structured in a way
that results in the portfolio's performance diverging from the DJ-UBS
Index, perhaps materially. For example, a note can be structured to
limit the loss or the gain on the investment, which would result in the
portfolio not participating in declines or increases in the DJ-UBS
Index that exceed the limits.
Credit Risk. The issuer of a security or the counterparty
to a contract, including derivatives contracts, may default or
otherwise become unable to honor a financial obligation.
Derivatives Risk. Derivatives are financial contracts
whose value depends on, or is derived from, the value of an underlying
asset, reference rate, or index. The Portfolio typically uses
derivatives as a substitute for taking a position in the underlying
asset and/or as part of a strategy designed to reduce exposure to other
risks, such as interest rate or currency risk. The Portfolio may also
use derivatives for leverage. The Portfolio's use of derivative
instruments, particularly commodity-linked derivatives, involves risks
different from, or possibly greater than, the risks associated with
investing directly in securities and other traditional investments.
Derivatives are subject to a number of risks, such as commodity risk,
correlation risk, liquidity risk, interest-rate risk, market risk, and
credit risk. Also, suitable derivative transactions may not be
available in all circumstances and there can be no assurance that the
portfolio will engage in these transactions to reduce exposure to other
risks that would be beneficial.
Exposure Risk. There is a risk associated with investments
(such as derivatives) or practices (such as short selling) that
increase the amount of money the portfolio could gain or lose on an
investment. Exposure risk could multiply losses generated by a
derivative or practice used for hedging purposes. Such losses should be
substantially offset by gains on the hedged investment. However, while
hedging can reduce or eliminate losses, it can also reduce or eliminate
gains. To the extent that a derivative or practice is not used as a
hedge, the Portfolio is directly exposed to its risks. Gains or losses
from speculative positions in a derivative may be much greater than the
derivative's original cost. For example, potential losses from writing
uncovered call options and from speculative short sales are unlimited.
Extension Risk. An unexpected rise in interest rates may
extend the life of a fixed income security beyond the expected payment
time, typically reducing the security's value.
Focus Risk. The Portfolio will be exposed to the
performance of commodities in the DJ-UBS Index, which may from time to
time have a small number of commodity sectors (e.g., energy, metals or
agricultural) representing a large portion of the index. As a result,
the Portfolio may be subject to greater volatility than if the index
were more broadly diversified among commodity sectors.
Foreign Securities Risk. A portfolio that invests outside
the United States carries additional risks. Fluctuations in exchange
rates between the U.S. dollar and foreign currencies may negatively
affect an investment. Adverse changes in exchange rates may erode or
reverse any gains produced by foreign-currency denominated investments
and may widen any losses. Although the Portfolio may seek to reduce
currency risk by hedging part or all of its exposure to various foreign
currencies, it is not required to do so. Key information about an
issuer, security, or market may be inaccurate or unavailable. Moreover,
foreign governments may expropriate assets, impose capital or currency
controls, impose punitive taxes, or nationalize a company or industry.
Any of these actions could have a severe effect on security prices and
impair the Portfolio's ability to bring its capital or income back to
the U.S. Other political risks include: economic policy changes, social
and political instability, military action and war.
Interest Rate Risk. Changes in interest rates may cause a
decline in the market value of an investment. With bonds and other
fixed-income securities, a rise in interest rates typically causes a
fall in values, while a fall in interest rates typically causes a risk
in values.
Liquidity Risk. Certain portfolio securities, such as
commodity-linked notes and swaps, may be difficult or impossible to
sell at the time and the price that the Portfolio would like. The
Portfolio may have to lower the price, sell other securities instead,
or forgo an investment opportunity. Any of these could have a negative
effect on portfolio management or performance.
Market Risk. The market value of a security may fluctuate,
sometimes rapidly and unpredictably. These fluctuations, which are
often referred to as ``volatility,'' may cause a security to be worth
less than it was worth at an earlier time. Market risk may affect a
single issuer, industry, commodity, sector of the economy, or the
market as a whole. Market risk is common to most investments,
including: stocks, bonds and commodities, and the mutual funds that
invest in them.
Non-diversified Status. The Portfolio is considered a non-
diversified investment company under the Act and is permitted to invest
a greater proportion of its assets in the securities of a smaller
number of issuers. As a result, the portfolio may be subject to greater
volatility with respect to its portfolio securities than a fund that is
diversified.
Subsidiary Risk. By investing in the Credit Suisse Cayman
Commodity Fund II, Ltd. (the ``Subsidiary''), the Portfolio is
indirectly exposed to the risks associated with the Subsidiary's
investments. The derivatives and other investments held by the
Subsidiary are generally similar to those that are permitted to be held
by the Portfolio and are subject to the same risks that apply to
similar investments if held directly by the Portfolio. There can be no
assurance that the investment objective of the Subsidiary will be
achieved. The Subsidiary is not registered under the Act and is not
subject to all the investor protections of the Act. However, the
Portfolio wholly owns and controls the Subsidiary, and the Portfolio
and the Subsidiary are both managed by Credit Suisse Asset Management,
LLC, making it unlikely that the Subsidiary will take action contrary
to the risks of the Portfolio and its shareholders. Changes in the laws
of the United States and/or the Cayman Islands could result in the
inability of the Portfolio and/or the Subsidiary to operate as it does
currently and could adversely affect the Portfolio.
Tax Risk. Any income the Portfolio derives from direct
investments in commodity-linked swaps or certain other commodity-linked
derivatives must be limited to a maximum of 10% of the portfolio's
gross income in order for the portfolio to maintain its pass through
tax status. The Portfolio has obtained a private letter ruling from the

[[Page 17170]]

Internal Revenue Service (the ``IRS'') confirming that the income
produced by certain types of structured notes constitutes ``qualifying
income'' under the Internal Revenue Code. In addition, the IRS has
issued a private letter ruling to the Portfolio confirming that income
derived from the Portfolio's investment in its Subsidiary will also
constitute qualifying income to the Portfolio. Based on such rulings,
the Portfolio seeks to gain exposure to the commodity markets primarily
through investments in commodity index-linked notes and, through
investments in the Subsidiary, commodity-linked swaps and commodity
futures.
The Natural Resources Portfolio is subject to the following
principal investment risks:
Derivatives Risk. The use of derivatives involves a
variety of risks. There is a risk that the counterparty on a derivative
transaction will be unable to honor its financial obligation to the
Portfolio. Certain derivatives and related trading strategies create
debt obligations similar to borrowings and, therefore, create leverage
which can result in losses to a Portfolio that exceed the amount the
Portfolio originally invested. Certain exchange-traded derivatives may
be difficult or impossible to buy or sell at the time that the seller
would like or at the price that the seller believes the derivative is
currently worth. Privately negotiated derivatives may be difficult to
terminate or otherwise offset. Derivatives used for hedging may reduce
losses but also reduce or eliminate gains and cause losses if the
market moves in a manner different from that anticipated by the
Portfolio. Furthermore, commodity-linked derivative instruments may be
more volatile than the prices of investments in traditional equity and
debt securities.
Equity Securities Risk. There is a risk that the value or
price of a particular stock or other equity or equity-related security
owned by the Portfolio could go down. In addition to an individual
stock losing value, the value of the equity markets or a sector of
those markets in which the Portfolio invests could go down.
Expense Risk. The actual cost of investing in the
Portfolio may be higher than the expenses shown in the Annual Portfolio
Operating Expenses.
Foreign Investment Risk. Investment in foreign securities
generally involves more risk than investing in securities of U.S.
issuers. Changes in currency exchange rates may affect the value of
foreign securities held by the Portfolio. Securities of issuers located
in emerging markets tend to have volatile prices and may be less liquid
than investments in more established markets. Moreover, foreign markets
generally are more volatile than U.S. markets, are not subject to
regulatory requirements comparable to those in the U.S., and are
subject to differing custody and settlement practices. Foreign
financial reporting standards usually differ from those in the U.S.,
and foreign exchanges are smaller and less liquid than the U.S. market.
Political developments may adversely affect the value of a Portfolio's
foreign securities, and foreign holdings may be subject to special
taxation and limitations on repatriating investment proceeds.
Industry/Sector Risk. A portfolio that invests in a single
market sector or industry can accumulate larger positions in a single
issuer or an industry sector. As a result, the Portfolio's performance
may be tied more directly to the success or failure of a small group of
portfolio holdings.
Liquidity and Valuation Risk. From time to time, the
Portfolio may hold one or more securities for which there are no or few
buyers and sellers or which are subject to limitations on transfer. The
Portfolio also may have difficulty disposing of those securities at the
values determined by the Portfolio for the purpose of determining the
Portfolio's net asset value, especially during periods of significant
net redemptions of Portfolio shares.
Market and Management Risk. Markets in which the Portfolio
invests may experience volatility and go down in value, and possibly
sharply and unpredictably. All decisions by an adviser require judgment
and are based on imperfect information. Additionally, the investment
techniques, risk analysis and investment strategies used by an adviser
in making investment decisions for the Portfolio may not produce the
desired results.
Non-diversification Risk. As a non-diversified portfolio,
the Portfolio may hold larger positions in single issuers than a
diversified fund. Because the Portfolio is not required to meet
diversification requirements that are applicable to some funds, there
is an increased risk that the Portfolio may be adversely affected by
the performance of relatively few securities or the securities of a
single issuer.
15. The following charts compare the investment management fees and
total operating expenses (before and after any waivers and
reimbursements) for the year ended December 31, 2010, expressed as an
annual percentage of average daily net assets, of the Substituted
Portfolio and the Replacement Portfolio.

------------------------------------------------------------------------
Substituted Replacement
portfolio portfolio
-------------------------------------------
Prudential series
Credit Suisse Trust fund natural
commodity return resources portfolio
strategy portfolio (Class II)
------------------------------------------------------------------------
Investment Management Fees.. 0.50% \4\........... 0.45%
Distribution and Service 0.25%............... 0.25%
(12b-1) Fee.
Administration Fees......... None................ None
Other Expenses.............. 0.34%............... 0.20%
Total Operating Expenses.... 1.09%............... 0.90%
Less Expense Waivers and 0.14% \5\........... N/A
Reimbursements.
-------------------------------------------
Total Net Operating 0.95%............... 0.90%
Expenses.
------------------------------------------------------------------------

16. The following charts compare the average annual total returns
of the Substituted Portfolio and the Replacement Portfolio for the one-
year, five-year, and ten-year (or since inception) periods ended
December 31, 2010.
---------------------------------------------------------------------------

\4\ Management fee of the Commodity Return Strategy Portfolio
and the Credit Suisse Cayman Commodity Fund II, Ltd. (the
``Subsidiary'').
\5\ Credit Suisse Management has voluntarily agreed to waive
fees and reimburse expenses so that total operating expenses will
not exceed 1.05% of the portfolio's average daily net assets.

[[Page 17171]]

------------------------------------------------------------------------
Substituted Replacement
portfolio portfolio
-------------------------------------------
Credit Suisse Trust Prudential fund
commodity return series natural
strategy portfolio resources portfolio
------------------------------------------------------------------------
Average Annual Total Return +16.66%............. +27.48%
for One Year.
Average Annual Total Return N/A................. 13.61%
for Five Years.
Average Annual Total Return 2.99% (Date of +20.28% (Date of
for Ten Years or, if less, Inception: February Inception: April
Since Inception. 28, 2006). 28, 2005)
------------------------------------------------------------------------

17. The following charts compare the levels of net assets (rounded
to the nearest thousand) of the Substituted Portfolio and the
Replacement Portfolio on December 31, 2010 and the prior four calendar
years, as well as the levels of net assets of the Separate Accounts
invested in the Substituted Portfolio for the same time period and the
percentage of the Substituted Portfolio's total net assets represented
by the investments of the Separate Accounts.

----------------------------------------------------------------------------------------------------------------
Substituted portfolio Replacement portfolio
----------------------------------------------------------------------------------
Credit Suisse trust commodity return strategy Prudential fund series
portfolio natural resources
------------------------------------------------------ portfolio
% of portfolio ----------------------------
Total separate total net assets
account assets represented by Total net assets Total net assets (in
invested in the separate account (in thousands) thousands)
portfolio investment
----------------------------------------------------------------------------------------------------------------
On 12/31/2010................ $1,671,571...... 1.34%........... $124,550........ $1,360,056
On 12/31/2009................ 1,713,589....... 1.58%........... 108,211......... 1,079,600
On 12/31/2008................ 424,299......... 0.61%........... 69,919.......... 677,400
On 12/31/2007................ 21,813.......... 0.04%........... 56,624.......... 1,669,900
On 12/31/2006................ 287............. 0.0002%......... 145,907 \6\..... 1,193,000
On 12/31/2005................ N/A............. N/A............. N/A............. 1,016,300
----------------------------------------------------------------------------------------------------------------

18. Applicants represent that the Substitution is part of an
overall business goal of TC LIFE to make the Contracts more attractive
to Contract owners and to assure a consistency in the range of overall
investment options provided by the Contracts. Pursuant to this goal, TC
LIFE has engaged in a thorough review of the efficiencies and
structures of all of the investment options it offers under the
Contracts. This review involved an evaluation of the investment
objectives and strategies, asset sizes, expense ratios, investment
performance, investment process, and investment teams responsible for
the management of each investment option, with a view to past
performance as well as future expectations. Based on this evaluation,
TC LIFE has determined that the Substituted Portfolio warrants
replacement. In particular, due to a recent change in the management of
the Substituted Portfolio that resulted in changes in the investment
strategies of two other Credit Suisse portfolios offered in the
Contracts, TC LIFE believes there may be some question regarding the
continuity of management, the application of a continuing investment
process, and the dedication of resources to the Substituted Portfolio.
---------------------------------------------------------------------------

\6\ For the period February 28, 2006 (commencement of
operations) through December 31, 2006.
---------------------------------------------------------------------------

19. Applicants represent that TC LIFE reviewed all of the
underlying fund options with the goal of ensuring that Contract owners
would be provided with investment options under their Contracts
following the Substitution that are similar to the investment options
under their Contracts before the Substitution. Based in particular on a
better performance record and lower total expenses of the Replacement
Portfolio, TC LIFE believes that the adviser to the Replacement
Portfolio is better positioned overall to provide exposure to the asset
classes that were originally selected as well as being able to offer
the potential for consistent above-average performance for the
Portfolio than is the adviser to the Substituted Portfolio. The
Replacement Portfolio also is considerably larger than the Substituted
Portfolio, thus offering better economies of scale with a larger asset
base over which to spread the various portfolio costs ultimately passed
on to Contract owners. As such, TC LIFE believes that effecting the
Substitution will provide Contract owners with a Replacement Portfolio
that has a comparable investment objective to the Substituted Portfolio
but is, overall, less expensive, consistent with the desired asset
class exposure, better positioned to provide consistent above-average
performance, and with greater expectations for growth. Moreover, TC
LIFE maintains that the investment objective and policies of the
Replacement Portfolio are sufficiently similar to those of the
Substituted Portfolio so that Contract owners will have reasonable
continuity in investment expectations.
20. Applicants seek the Commission's approval under Section 26(c)
to engage in the substitution transaction described below. Pursuant to
its authority under the respective Contracts and the prospectuses
describing the same, and subject to the approval of the Commission
under Section 26(c) of the Act, TC LIFE proposes to substitute shares
of the Commodity Return Strategy Portfolio of the Credit Suisse Trust
for Class II Shares of the Natural Resources Portfolio of The
Prudential Series Fund.
21. Applicants represent that TC LIFE will effect the Substitution
as soon as practicable following the issuance of the requested order as
follows. As of the effective date of the Substitution (the ``Effective
Date''), shares of the Substituted Portfolio will be redeemed for cash
and that cash will be used to purchase shares of the Replacement
Portfolio. Redemption requests and purchase orders will be placed
simultaneously so that contract values will remain fully invested at
all times. All redemptions of shares of the Substituted Portfolio and
purchases of shares of the Replacement Portfolio will be effected in
accordance with Section 22(c) of the Act and Rule 22c-1 thereunder. The
Substitution will take place at relative net asset value as of the
Effective Date with no change in the

[[Page 17172]]

amount of any Contract owner's contract value or death benefit or in
the dollar value of his or her investments in any of the subaccounts.
22. Applicants represent that contract values attributable to
investments in the Substituted Portfolio will be transferred to the
Replacement Portfolio without charge (including sales charges or
surrender charges) and without counting toward the number of transfers
that may be permitted without charge. Contract owners will not incur
any additional fees or charges as a result of the Substitution, nor
will their rights or TC LIFE's obligations under the Contracts be
altered in any way, and the Substitution will not change Contract
owners' insurance benefits under the Contracts. All expenses incurred
in connection with the Substitution, including legal, accounting,
transactional, and other fees and expenses, including brokerage
commissions, will be paid by TC LIFE. In addition, the Substitution
will not impose any tax liability on Contract owners. The Substitution
will not cause the Contract fees and charges currently paid by existing
Contract owners to be greater after the Substitution than before the
Substitution. TC LIFE will not exercise any right it may have under the
Contracts to impose a transfer charge or restrictions on transfers
under the Contracts for the period beginning on the date the initial
application was filed with the Commission through at least thirty (30)
days following the Effective Date for transfers of contract value from
the subaccount investing in the Substituted Portfolio (before the
Substitution) or the Replacement Portfolio (after the Substitution) to
one or more other subaccount(s).\7\
---------------------------------------------------------------------------

\7\ One exception to this would be restrictions that TIAA-CREF
may impose to prevent or restrict ``market timing'' activities by
Contract owners or their agents.
---------------------------------------------------------------------------

23. The Applicants represent that they will not receive, for three
years from the date of the Substitution, any direct or indirect
benefits from the Replacement Portfolio, its advisors or underwriters
(or their affiliates), in connection with assets attributable to
Contracts affected by the Substitution, at a higher rate than
Applicants have received from the Substituted Portfolio, its advisors
or underwriters (or their affiliates), including without limitation
Rule 12b-1 fees, shareholder service, administration, or other service
fees, revenue sharing, or other arrangements in connection with such
assets. Applicants represent that the Substitution and the selection of
the Replacement Portfolio were not motivated by any financial
consideration paid or to be paid to TC LIFE or its affiliates by the
Replacement Portfolio, its advisors, underwriters, or their respective
affiliates.
24. The Applicants assert that the procedures to be implemented are
sufficient to assure that each Contract owner's cash values immediately
after the Substitution shall be equal to the cash value immediately
before the Substitution.
25. The Applicants represent that Existing Contract owners as of
the date the initial application was filed, and new Contract owners who
have purchased or who will purchase a Contract subsequent to that date
but prior to the Effective Date, have been or will be notified of the
proposed Substitution by means of a prospectus or prospectus supplement
for each of the Contracts (``Pre-Substitution Notice''). The Pre-
Substitution Notice:
States that the Applicants filed the application to seek
approval of the Substitution;
Sets forth the anticipated Effective Date;
Explains that contract values attributable to investments
in the Substituted Portfolio would be transferred to the Replacement
Portfolio on the Effective Date; and
States that, from the date the initial application was
filed with the Commission through the date thirty (30) days after the
Substitution, Contract owners may transfer contract value from the
subaccount investing in the Substituted Portfolio (before the
Substitution) or the Replacement Portfolio (after the Substitution) to
one or more other subaccount(s) without a transfer charge and without
that transfer counting against their contractual transfer limitations.
Further, all Contract owners will have received a copy of the most
recent prospectus for the Replacement Portfolio prior to the
Substitution.
26. Finally, the Applicants represent that within five (5) days
following the Substitution, Contract owners affected by the
Substitution will be notified in writing that the Substitution was
carried out. This notice will restate the information set forth in the
Pre-Substitution Notice, and will also explain that the contract values
attributable to investments in the Substituted Portfolio were
transferred to the Replacement Portfolio without charge (including
sales charges or surrender charges) and without counting toward the
number of transfers that may be permitted without charge.
27. Applicants represent that Section 26(c) of the Act prohibits
any depositor or trustee of a unit investment trust that invests
exclusively in the securities of a single issuer from substituting the
securities of another issuer without the approval of the Commission.
Section 26(c) provides that such approval shall be granted by order of
the Commission, if the evidence establishes that the substitution is
consistent with the protection of investors and the purposes of the
Act. Section 26(c) was intended to provide for Commission scrutiny of
proposed substitutions which could, in effect, force shareholders
dissatisfied with the substitute security to redeem their shares,
thereby possibly incurring a loss of the sales load deducted from
initial premium, an additional sales load upon reinvestment of the
proceeds of redemption, or both.\8\ The section was designed to
forestall the ability of a depositor to present holders of interest in
a unit investment trust with situations in which a holder's only choice
would be to continue an investment in an unsuitable underlying
security, or to elect a costly and, in effect, forced redemption. For
the reasons described below, the Applicants submit that the
Substitution meets the standards set forth in Section 26(c) and that,
if implemented, the Substitution would not raise any of the
aforementioned concerns that Congress intended to address when the Act
was amended to include this provision. In addition, the Applicants
submit that the proposed Substitution meets the standards that the
Commission and its Staff have applied to substitutions that have been
approved in the past.
---------------------------------------------------------------------------

\8\ House Comm. Interstate Commerce, Report of the Securities
and Exchange Commission on the Public Policy Implications of
Investment Company Growth, H.R. Rep. No. 2337, 89th Cong. 2d Session
337 (1966).
---------------------------------------------------------------------------

28. Applicants represent that the replacement of the Substituted
Portfolio with the Replacement Portfolio is consistent with the
protection of Contract owners and the purposes fairly intended by the
policy and provisions of the Act and, thus, meets the standards
necessary to support an order pursuant to Section 26(c) of the Act.
29. The Applicants assert that the investment objective and
principal investment strategies of the Replacement Portfolio are
substantially similar to those of the Substituted Portfolio. The
Commodity Return Strategy Portfolio seeks total return relative to the
performance of the DJ-UBS Index, and the Natural Resources Portfolio
seeks long-term growth of capital. Applicants submit that these are
substantially similar investment objectives and, while the Portfolios'
principal investment strategies are

[[Page 17173]]

somewhat different, there is nonetheless a high correlation between the
two sets of investment strategies. The Commodity Return Strategy
Portfolio is designed to achieve positive total return relative to the
performance of the DJ-UBS Index by investing in commodity-linked
derivative instruments and fixed income securities, whereas the Natural
Resources Portfolio normally invests at least 80% of its net assets in
common stocks and convertible securities of natural resource companies
and securities that are related to the market value of some natural
resource. However, the companies in which the Natural Resources
Portfolio invests derive the vast majority of their respective revenue
from commodities. In other words, the valuation of the companies in
which the Natural Resources Portfolio invests move directly with the
underlying commodities that represent these firms' primary businesses.
As such, there is a high correlation between the Natural Resources
Portfolio's performance to the price changes in the DJ-UBS Index which
underlies the Commodity Return Strategy Portfolio's investment
strategy. This high correlation is demonstrated by comparing the
performance of investments in natural resources companies (as measured
by the S&P North American Natural Resources Index) and commodities (as
measured by DJ-UBS Index), for which the correlation (as reported by
Morningstar) exceeds 80% over both the trailing three-year and five-
year periods. Given the high correlation between the performance of the
Natural Resources Portfolio and the Commodity Return Strategy
Portfolio, the Applicants believe that the Natural Resources Portfolio
is a suitable replacement for the Commodity Return Strategy Portfolio.
While the holdings of companies in which the Natural Resources
Portfolio invests, with their resultant capital structures, tax
exposures, and idiosyncratic risks, do not provide a perfect
correlation to a spot commodities index, Applicants believe the same is
true with a portfolio comprised of structured notes tied to commodities
futures. Accordingly, the Applicants believe that the close
approximation of the Natural Resources Portfolio to the commodities
sector exposure supports a determination that the Natural Resources
Portfolio will provide Contract owners currently invested in the
Commodity Return Strategy Portfolio an acceptable level of exposure to
the commodities sector and, given the uncertainty posed by the change
of control of management of the Commodity Return Strategy Portfolio, is
a reasonable substitution for the Commodity Return Strategy Portfolio.
30. The Applicants represent that, although not identical, the
principal investment risks of the Natural Resources Portfolio are
comparable to those of the Commodity Return Strategy Portfolio. Both
Portfolios use derivatives, exposing each Portfolio to a number of
specific derivative-related risks such as the possibility that the
counterparty to the transaction is unable to honor its financial
obligation; using derivatives may also subject each Portfolio to other
more general risks including commodity risk, correlation risk,
liquidity risk, interest-rate risk, market risk, and credit risk.
Because both Portfolios may invest in foreign securities, they also are
subject to increased risk relating to currency exchange rate
fluctuations, price volatility, adverse political developments, etc.
Both Portfolios also are subject to market risk relating to increased
and/or unpredictable fluctuations in the market value of the securities
in which they invest, as well as to liquidity risk. Finally, both the
Natural Resources Portfolio and the Commodity Return Strategy Portfolio
are non-diversified investment companies, and therefore may invest in
fewer issuers and be more greatly affected by the performance of
relatively few securities. Further, the Applicants do not believe that
overall the Natural Resources Portfolio is exposed to greater risk than
the Commodity Return Strategy Portfolio, despite the fact that certain
enumerated risks of the Natural Resources Portfolio are not explicitly
detailed as principal investment risks in the prospectus for the
Commodity Return Strategy Portfolio. For example, the Applicants
believe that the Commodity Return Strategy Portfolio, like the Natural
Resources Portfolio, is subject to commodity price risk, expense risk,
industry/sector risk, and valuation risk--all typical risks that are
generally present for most portfolios that invest in the commodity and
natural resources asset categories. Moreover, the Natural Resources
Portfolio is not subject to the specific derivative, tax, and focus
risks the Commodity Return Strategy Portfolio is exposed to as a result
of the latter's primary investment in commodity-linked instruments.
Lastly, because the Commodity Return Strategy Portfolio invests in the
Credit Suisse Cayman Commodity Fund II, Ltd., the Portfolio also is
indirectly exposed to the risks associated with that portfolio's
investments.
31. The Applicants represent that the investment management fee of
the Natural Resources Portfolio is lower than that of the Commodity
Return Strategy Portfolio, and each Portfolio imposes a 12b-1 fee of
0.25%. Moreover, total operating expenses of the Natural Resources
Portfolio were lower than those of the Commodity Return Strategy
Portfolio as of December 31, 2010.
32. The Applicants represent that the Natural Resources Portfolio
outperformed the Commodity Return Strategy Portfolio for the one-year
period ending December 31, 2010 and since inception. In addition, the
assets of the Natural Resources Portfolio have been consistently (and
significantly) higher than those of the Commodity Return Strategy
Portfolio as of December 31, 2010 and for each of the prior four
calendar years.
33. For purposes of the approval sought pursuant to Section 26(c)
of the Act, the Applicants represent that the Substitution will not be
completed unless all of the following conditions are met.
The Commission shall have issued an order approving the
Substitution under Section 26(c) of the Act as necessary to carry out
the transactions described in the Application.
Each Contract owner will have been sent (i) prior to the
Effective Date, a copy of the effective prospectus for the Replacement
Portfolio, (ii) prior to the Effective Date, a Pre-Substitution Notice
describing the terms of the Substitution and the rights of the Contract
owners in connection with the Substitution, and (iii) within five (5)
days after the Substitution occurs, a notice informing Contract owners
affected by the Substitution that the Substitution was carried out
(this notice will restate the information set forth in the Pre-
Substitution Notice, and also explain that the contract values
attributable to investments in the Substituted Portfolio were
transferred to the Replacement Portfolio without charge (including
sales charges or surrender charges) and without counting toward the
number of transfers that may be permitted without charge).
The Applicants have satisfied themselves that (i) The
Contracts allow the substitution of the Portfolios in the manner
contemplated by the Substitution and related transactions described
herein, (ii) the transactions can be consummated as described in the
Application under applicable insurance laws, and (iii) any applicable
regulatory requirements in each jurisdiction where the Contracts are
qualified for sale have

[[Page 17174]]

been complied with to the extent necessary to complete the transaction.
34. The Applicants acknowledge that reliance on exemptive relief,
if granted, depends upon compliance with all of the representations and
conditions set forth in the Application.
Conclusion:
Applicants assert that, for all the reasons stated in the
Applicant, the Substitution is consistent with the protection of
investors and the purposes fairly intended by the policy of the
Contracts and provisions of the Act and that the requested order should
be granted.

For the Commission, by the Division of Investment Management
pursuant to delegated authority.
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-7152 Filed 3-25-11; 8:45 am]
BILLING CODE 8011-01-P

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