[Federal Register Volume 76, Number 59 (Monday, March 28, 2011)]
[Notices]
[Pages 17166-17174]
From the Federal Register Online via the Government Publishing 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 http://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\
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    \1\ The Target Portfolio Trust and Prudential Mutual Fund 
Management, Inc., Act Rel. No. 22215 (Sept. 11, 1996) (Order), File 
No. 812-10208.
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    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.

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           Substituted portfolio                                    Replacement portfolio
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Credit Suisse Trust Commodity Return        Prudential Series Fund Natural Resources Portfolio (Class II Shares)
 Strategy Portfolio
 
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'').
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[[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.

----------------------------------------------------------------------------------------------------------------
                 Substituted portfolio                                    Replacement portfolio
----------------------------------------------------------------------------------------------------------------
Credit Suisse Trust Commodity Return Strategy Portfolio  Prudential Series Fund Natural Resources Portfolio
                                                          (Class II Shares)
 
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.
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    The Commodity Return Strategy Portfolio is subject to the following 
principal investment risks:
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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:
    <bullet> 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.
    <bullet> 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.
    <bullet> Expense Risk. The actual cost of investing in the 
Portfolio may be higher than the expenses shown in the Annual Portfolio 
Operating Expenses.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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:
    <bullet> States that the Applicants filed the application to seek 
approval of the Substitution;
    <bullet> Sets forth the anticipated Effective Date;
    <bullet> Explains that contract values attributable to investments 
in the Substituted Portfolio would be transferred to the Replacement 
Portfolio on the Effective Date; and
    <bullet> 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.
    <bullet> 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.
    <bullet> 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).
    <bullet> 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