Hutchinson Technology Incorporated; Notice of Application, 5388-5390 [E6-1226]
Download as PDF
<![CDATA[
cchase on PROD1PC60 with NOTICES
5388
Federal Register / Vol. 71, No. 21 / Wednesday, February 1, 2006 / Notices
provide investors with a ‘‘profile’’ that
contains a summary of key information
about a fund, including the fund’s
investment objectives, strategies, risks
and performance, and fees, in a
standardized format. The profile
provides investors the option of buying
fund shares based on the information in
the profile or reviewing the fund’s
prospectus before making an investment
decision. Investors purchasing shares
based on a profile receive the fund’s
prospectus prior to or with confirmation
of their investment in the fund.
Consistent with the filing requirement
of a fund’s prospectus, a profile must be
filed with the Commission thirty days
before first use. Such a filing allows the
Commission to review the profile for
compliance with Rule 498. Compliance
with the rule’s standardized format
assists investors in evaluating and
comparing funds.
It is estimated that approximately 1
initial profile and 252 updated profiles
are filed with the Commission annually.
The Commission estimates that each
profile contains on average 1.25
portfolios, resulting in 1.25 portfolios
filed annually on initial profiles and 315
portfolios filed annually on updated
profiles. The number of burden hours
for preparing and filing an initial profile
per portfolio is 25. The number of
burden hours for preparing and filing an
updated profile per portfolio is 10. The
total burden hours for preparing and
filing initial and updated profiles under
Rule 498 is 3,181, representing a
decrease of 1,269 hours from the prior
estimate of 4,450. The reduction in
burden hours is attributable to the lower
number of profiles actually prepared
and filed as compared to the previous
estimates.
The estimates of average burden hours
are made solely for the purposes of the
Act and are not derived from a
comprehensive or even representative
survey or study of the cost of
Commission rules and forms.
The collection of information under
Rule 498 is voluntary. The information
provided by Rule 498 is not kept
confidential. An agency may not
conduct or sponsor, and a person is not
required to respond to, a collection of
information unless it displays a
currently valid control number.
General comments regarding the
above information should be directed to
the following persons: (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 e-mail to:
David_Rostker@omb.eop.gov; and (ii) R.
VerDate Aug<31>2005
17:49 Jan 31, 2006
Jkt 208001
Corey Booth, Director/Chief Information
Officer, Office of Information
Technology, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549. Comments must
be submitted to OMB within 30 days of
this notice.
Dated: January 24, 2006.
Nancy M. Morris,
Secretary.
[FR Doc. E6–1323 Filed 1–31–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
27215; 812–13008]
Vice President and Chief Financial
Officer, 40 W. Highland Park Dr. NE.,
Hutchinson, Minnesota 55350.
FOR FURTHER INFORMATION CONTACT:
Marilyn Mann, Senior Counsel, at (202)
551–6813, or Nadya B. Roytblat,
Assistant Director, at (202) 551–6821
(Division of Investment Management,
Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained for a fee at the
Commission’s Public Reference Desk,
100 F Street, NE., Washington, DC
20549–0102 (tel. 202–551–5850).
Applicant’s Representations
1. HTI, a Minnesota corporation, is in
Hutchinson Technology Incorporated;
the business of developing,
Notice of Application
manufacturing, marketing and servicing
suspension assemblies for hard disk
January 25, 2006.
drives. HTI estimates that it produces a
AGENCY: Securities and Exchange
majority of all suspension assemblies
Commission (‘‘Commission’’).
sold to disk drive manufacturers and
ACTION: Notice of application under
their suppliers, including recording
section 3(b)(2) of the Investment
head manufacturers, worldwide. HTI
Company Act of 1940 (the ‘‘Act’’).
represents that suspension assemblies
Summary of Application: Hutchinson are critical components of disk drives
Technology Incorporated (‘‘HTI’’) seeks
that hold the recording heads in
an order under section 3(b)(2) of the Act position above the spinning magnetic
declaring it to be primarily engaged in
disks. In addition to HTI’s suspension
a business other than that of investing,
assembly products, HTI has developed a
reinvesting, owning, holding or trading
medical device that uses an optical
in securities. HTI, directly and through
technology to measure local oxygen
its wholly-owned subsidiaries,
saturation of hemoglobin in tissue.
develops, manufactures, markets and
2. HTI states that it requires
services suspension assemblies for hard substantial liquid capital to fund its
disk drives.
global operations, including research
Filing Dates: The application was
and development activities and capital
filed on August 18, 2003, and amended
expenditures. HTI states that the disk
on October 23, 2003 and January 23,
drive industry is subject to rapid
2006.
technological change, and HTI’s ability
Hearing or Notification of Hearing: An to remain competitive depends on,
order granting the requested relief will
among other things, its ability to
be issued unless the Commission orders anticipate and respond to these changes.
a hearing. Interested persons may
As a result, HTI has devoted and will
request a hearing by writing to the
continue to devote substantial resources
Commission’s Secretary and serving
to product development and process
applicants with a copy of the request,
engineering efforts. HTI also requires
personally or by mail. Hearing requests
substantial liquid capital for capital
should be received by the Commission
expenditures. HTI expects that it will
by 5:30 p.m. on February 21, 2006, and
need to make substantial capital
should be accompanied by proof of
expenditures over the next several years
service on applicants, in the form of an
to remain at the forefront of industry
affidavit or, for lawyers, a certificate of
technology transitions. In particular,
service. Hearing requests should state
technology transitions in the disk drive
the nature of the writer’s interest, the
industry require HTI to dramatically
reason for the request, and the issues
increase its level of capital
contested. Persons who wish to be
expenditures. HTI also states that
notified of a hearing may request
demand for disk drives is subject to
notification by writing to the
rapid or unforeseen changes resulting
Commission’s Secretary.
from, among other things, changes in
disk drive inventory levels,
ADDRESSES: Secretary, U.S. Securities
technological advances, responses to
and Exchange Commission, 100 F
competitive price changes and
Street, NE., Washington, DC 20549–
unpredicted high or low market
9303. Applicant, c/o John A. Ingleman,
PO 00000
Frm 00157
Fmt 4703
Sfmt 4703
E:\FR\FM\01FEN1.SGM
01FEN1
Federal Register / Vol. 71, No. 21 / Wednesday, February 1, 2006 / Notices
cchase on PROD1PC60 with NOTICES
acceptance of new drive models. HTI
seeks to preserve its capital and
maintain liquidity, pending the use of
such capital for its current and future
operations, by investing in short-term
investment grade and liquid fixed
income and money market investments
that earn competitive market returns
and provide a low level of credit risk
(‘‘Capital Preservation Investments’’).
HTI’s board of directors (‘‘Board of
Directors’’) oversees HTI’s investment
practices and defines the parameters for
investment activities. HTI states that it
does not invest in securities for shortterm speculative purposes.
Applicant’s Legal Analysis
1. HTI seeks an order under section
3(b)(2) of the Act declaring that it is
primarily engaged in a business other
than that of investing, reinvesting,
owning, holding or trading in securities,
and therefore not an investment
company as defined in the Act.
2. Under section 3(a)(1)(C) of the Act,
an issuer is an investment company if
it is engaged or proposes to engage in
the business of investing, reinvesting,
owning, holding, or trading in
securities, and owns or proposes to
acquire investment securities having a
value in excess of 40 percent of the
value of the issuer’s total assets
(exclusive of government securities and
cash items) on an unconsolidated basis.
Section 3(a)(2) of the Act defines
‘‘investment securities’’ to include all
securities except government securities,
securities issued by employees’
securities companies, and securities
issued by majority-owned subsidiaries
of the owner which (a) are not
investment companies, and (b) are not
relying on the exclusions from the
definition of investment company in
section 3(c)(1) or 3(c)(7) of the Act. HTI
states that as of September 25, 2005,
approximately 15.8% of its total assets
(exclusive of government securities and
cash items), on an unconsolidated basis,
consisted of investment securities as
defined in section 3(a)(2) of the Act.
3. Rule 3a–1 provides an exemption
from the definition of investment
company if no more than 45% of a
company’s total assets consist of, and
not more than 45% of its net income
over the last four quarters is derived
from, securities other than government
securities, securities of majority-owned
subsidiaries and primarily controlled
companies. HTI states that it cannot rely
upon rule 3a–1 under the Act because
such other securities frequently exceed
45% of its total assets. For example, in
the second and third quarters of fiscal
2004, had all HTI’s available liquid
capital other than cash required for
VerDate Aug<31>2005
17:49 Jan 31, 2006
Jkt 208001
immediate use been invested in such
other securities, the percentage of HTI’s
total assets represented by such
securities would have been 46.3% and
46.6%, respectively. HTI further states
that it cannot rely on rule 3a–1 because
the percentage of its net income derived
from investment securities fluctuates
unpredictably with the cycles of the
disk drive industry. HTI states that the
cyclical nature of the industry, rather
than any change in HTI’s business or
financial management policies, has led
to significant variations in the ratio of
HTI’s income from investment securities
relative to net operating income.
4. Section 3(b)(2) of the Act provides
that, notwithstanding section 3(a)(1)(C)
of the Act, the Commission may issue
an order declaring an issuer to be
primarily engaged in a business or
businesses other than that of investing,
reinvesting, owning, holding, or trading
in securities either directly or through
majority-owned subsidiaries or through
controlled companies conducting
similar types of businesses. HTI requests
an order under section 3(b)(2) of the Act
declaring that it is primarily engaged in
a business other than that of investing,
reinvesting, owning, holding or trading
in securities, and therefore not an
investment company as defined in the
Act.
5. In determining whether a company
is primarily engaged in a noninvestment company business under
section 3(b)(2), the Commission
considers: (a) The issuer’s historical
development; (b) its public
representations of policy; (c) the
activities of its officers and directors; (d)
the nature of its present assets; and (e)
the sources of its present income.1
a. Historical Development. HTI was
incorporated in 1965 in Minnesota, and
conducted its initial public offering in
1985. Until 1976, HTI derived a
substantial portion of its revenues from
photoetching and from laminating
precision components primarily for use
by original equipment manufacturers in
the computer peripheral industry. In
1976, HTI began adding laser welding
steps to the production of some
components, and by 1979 had
developed significant abilities in
precision forming as well. In 1982, HTI
began to use its forming and welding
processes, in combination with
proprietary cleaning processes, to
manufacture suspension assemblies for
both Winchester and the newer ThinFilm technology disk drives. In the late
1980s, HTI’s revenue began to come
almost exclusively from the sale of
1 Tonopah Mining Company of Nevada, 26 SEC
426, 427 (1947).
PO 00000
Frm 00158
Fmt 4703
Sfmt 4703
5389
suspension assemblies, and HTI has
continued to focus on suspension
assembly sales and development ever
since.
b. Public Representations of Policy.
HTI states that it has consistently
represented itself as a company that
manufactures and sells products for the
disk drive industry, rather than a
company focused on investments.
c. Activities of Officers and Directors.
HTI states that its Board of Directors has
eight members who focus on
maintaining HTI’s position as a leading
supplier of suspension assemblies.
HTI’s Investment Goals and Guidelines
require the Board of Directors to review
them at least annually. Historically, the
Board has approved the guidelines on
an annual basis. Aside from these
activities, none of HTI’s directors is
involved with HTI’s investments for any
significant amount of time. HTI’s
treasurer and chief financial officer are
the only officers who devote time to
HTI’s investments. An estimated 5% of
the treasurer’s time and 1% of the chief
financial officer’s time is spent on
investment-related work, and HTI
expects that this will continue to be the
case if the requested order is granted.
HTI currently has approximately 5,300
regular employees working in its four
domestic manufacturing plants and
overseas.
d. Nature of Assets. As of September
25, 2005, approximately 15.8% of the
value (as defined in section 2(a)(41)(A)
of the Act) of HTI’s total assets
(excluding government securities and
cash items), on an unconsolidated basis
consisted of investment securities.
e. Sources of Income and Revenue.
Applicant states that since the late
1980s, it has derived virtually all of its
revenue, and net income after taxes,
from the sale of suspension assemblies.
For fiscal 2005, net income after taxes
from investments was 10.3% of HTI’s
total net income after taxes. Net income
after taxes from investments (including
government securities, money market
fund shares and interest on cash
balances) was 9.5%, 6.8% and 35.4% of
HTI’s total net income after taxes in
fiscal 2004, 2003 and 2002, respectively.
In addition, for fiscal 2005, revenue
from investments was only 1.2% of
HTI’s total revenue. In fiscal 2004, 2003
and 2002, revenue from investments
was only 1.0%, 1.2%, and 1.8% of total
revenue. HTI submits that an analysis of
the sources of its revenue (especially in
periods where HTI reported net losses)
provides a more meaningful, and even
more compelling, picture of the nature
and extent of HTI’s primary business
operations. In the future, HTI expects
substantially all of its revenues to come
E:\FR\FM\01FEN1.SGM
01FEN1
5390
Federal Register / Vol. 71, No. 21 / Wednesday, February 1, 2006 / Notices
from operations and less than 2% from
investment securities.
6. HTI thus asserts that it satisfies the
standards for an order under section
3(b)(2) of the Act.
Applicant’s Conditions
1. HTI will continue to allocate and
utilize its accumulated cash and
investments for bona fide business
purposes.
2. HTI will refrain from investing or
trading in securities for short-term
speculative purposes.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Nancy M. Morris,
Secretary.
[FR Doc. E6–1226 Filed 1–31–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53181; File No. SR–CHX–
2005–40]
Self-Regulatory Organizations;
Chicago Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change Relating to
a Session Fee Increase for the
Regulatory Element of the Continuing
Education Program
January 26, 2006.
cchase on PROD1PC60 with NOTICES
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
30, 2005, the Chicago Stock Exchange,
Inc. (‘‘CHX’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II and III below, which Items
have been prepared by the CHX. The
Exchange has designated this proposal
as one establishing or changing a due,
fee, or other charge imposed by CHX
under section 19(b)(3)(A)(ii) of the Act,3
and Rule 19b–4(f)(2) thereunder,4 which
renders the proposal effective upon
filing with the Commission. 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 CHX proposes to amend its
Participant Fee Schedule (the ‘‘Fee
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
2 17
VerDate Aug<31>2005
17:49 Jan 31, 2006
Schedule’’) to incorporate the session
fee for the Regulatory Element of the
continuing education requirements set
out in CHX rules. The text of this
proposed rule change is available on the
Exchange’s Web site at https://
www.chx.com/rules/
proposed_rules.htm, at the CHX, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
CHX included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received regarding the
proposal. The text of these statements
may be examined at the places specified
in Item IV below. The CHX 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
Changes
1. Purpose
The Exchange is proposing to
incorporate, in its Fee Schedule, the
session fee paid by Exchange
participants for the Regulatory Element
of the continuing education program
required by CHX Rules. Under Exchange
rules, registered persons associated with
CHX participant firms are required to
complete the Regulatory Element of the
continuing education program on the
second anniversary of their registration
and every three years after that date, or
as otherwise prescribed by the
Exchange.5 The Regulatory Element is a
computer-based education program
administered by the National
Association of Securities Dealers
(‘‘NASD’’) that is designed to help
ensure that registered persons are kept
up-to-date on regulatory, compliance
and sales practice matters in the
industry. The Regulatory Element is a
component of the Securities Industry
Continuing Education Program (the
‘‘Program’’). The Securities Industry/
Regulatory Council on Continuing
Education (the ‘‘Council’’) was
organized in 1995 to facilitate
cooperative industry and regulatory
coordination of the administration and
future development of the Program in
keeping with applicable industry
regulations and changing industry
needs. Its roles include recommending
5 See
Jkt 208001
PO 00000
CHX Article VI, Rule 9.
Frm 00159
Fmt 4703
Sfmt 4703
and helping develop specific content
and questions for the Regulatory
Element, defining minimum core
curricula for the Firm Element
component of the Program and
developing and updating information
about the Program for industry-wide
dissemination.
The Exchange understands that it is
the Council’s responsibility to maintain
the Program on a revenue neutral basis
while maintaining adequate reserves for
unanticipated future expenditures.6 In
December 2003, the Council voted to
reduce the Regulatory Element session
fee from $65 to $60, effective January 1,
2004. Although there was no change to
the fee for 2005, the Council has
decided to increase the Regulatory
Element session fee from $60 to $75,
effective January 1, 2006, in order to
meet costs and maintain an adequate
reserve in 2006.7 Through this filing, the
Exchange proposes to incorporate the
$75 fee into its Fee Schedule.
2. Statutory Basis
The Exchange believes this proposed
rule change is consistent with section
6(b)(4) of the Act 8 in that it provides for
the equitable allocation of reasonable
dues, fees and other charges among its
members.
B. Self-Regulatory Organization’s
Statement of Burden on Competition
The Exchange does not believe that
the proposed rule changes will impose
any burden on competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Changes Received From
Members, Participants or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Changes and Timing for
Commission Action
The foregoing proposed rule change
has been designated as a fee change
pursuant to section 19(b)(3)(A)(ii) of the
Act 9 and Rule 19b–4(f)(2) thereunder,10
because it establishes or changes a due,
fee or other charge imposed by the
6 The Council currently consists of 20
individuals, including six representatives of selfregulatory organizations and 14 persons who are
associated with NASD member firms. The
Commission and the North American Securities
Administrators Association have liaisons to the
Council. The Exchange does not have a
representative serving on the Council.
7 See Securities Exchange Act Release No. 52947
(December 13, 2005), 70 FR 75517 (December 20,
2005) (SR–NASD–2005–132).
8 15 U.S.C. 78(f)(b)(4).
9 15 U.S.C. 78s(b)(3)(A)(ii).
10 17 CFR 240.19b–4(f)(2).
E:\FR\FM\01FEN1.SGM
01FEN1
]]>Agencies
[Federal Register Volume 71, Number 21 (Wednesday, February 1, 2006)]
[Notices]
[Pages 5388-5390]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-1226]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 27215; 812-13008]
Hutchinson Technology Incorporated; Notice of Application
January 25, 2006.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application under section 3(b)(2) of the Investment
Company Act of 1940 (the ``Act'').
-----------------------------------------------------------------------.
Summary of Application: Hutchinson Technology Incorporated
(``HTI'') seeks an order under section 3(b)(2) of the Act declaring it
to be primarily engaged in a business other than that of investing,
reinvesting, owning, holding or trading in securities. HTI, directly
and through its wholly-owned subsidiaries, develops, manufactures,
markets and services suspension assemblies for hard disk drives.
Filing Dates: The application was filed on August 18, 2003, and
amended on October 23, 2003 and January 23, 2006.
Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on February 21, 2006, 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
writer'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 Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-9303. Applicant, c/o John A.
Ingleman, Vice President and Chief Financial Officer, 40 W. Highland
Park Dr. NE., Hutchinson, Minnesota 55350.
FOR FURTHER INFORMATION CONTACT: Marilyn Mann, Senior Counsel, at (202)
551-6813, or Nadya B. Roytblat, Assistant Director, at (202) 551-6821
(Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Commission's Public Reference Desk, 100 F Street, NE., Washington, DC
20549-0102 (tel. 202-551-5850).
Applicant's Representations
1. HTI, a Minnesota corporation, is in the business of developing,
manufacturing, marketing and servicing suspension assemblies for hard
disk drives. HTI estimates that it produces a majority of all
suspension assemblies sold to disk drive manufacturers and their
suppliers, including recording head manufacturers, worldwide. HTI
represents that suspension assemblies are critical components of disk
drives that hold the recording heads in position above the spinning
magnetic disks. In addition to HTI's suspension assembly products, HTI
has developed a medical device that uses an optical technology to
measure local oxygen saturation of hemoglobin in tissue.
2. HTI states that it requires substantial liquid capital to fund
its global operations, including research and development activities
and capital expenditures. HTI states that the disk drive industry is
subject to rapid technological change, and HTI's ability to remain
competitive depends on, among other things, its ability to anticipate
and respond to these changes. As a result, HTI has devoted and will
continue to devote substantial resources to product development and
process engineering efforts. HTI also requires substantial liquid
capital for capital expenditures. HTI expects that it will need to make
substantial capital expenditures over the next several years to remain
at the forefront of industry technology transitions. In particular,
technology transitions in the disk drive industry require HTI to
dramatically increase its level of capital expenditures. HTI also
states that demand for disk drives is subject to rapid or unforeseen
changes resulting from, among other things, changes in disk drive
inventory levels, technological advances, responses to competitive
price changes and unpredicted high or low market
[[Page 5389]]
acceptance of new drive models. HTI seeks to preserve its capital and
maintain liquidity, pending the use of such capital for its current and
future operations, by investing in short-term investment grade and
liquid fixed income and money market investments that earn competitive
market returns and provide a low level of credit risk (``Capital
Preservation Investments''). HTI's board of directors (``Board of
Directors'') oversees HTI's investment practices and defines the
parameters for investment activities. HTI states that it does not
invest in securities for short-term speculative purposes.
Applicant's Legal Analysis
1. HTI seeks an order under section 3(b)(2) of the Act declaring
that it is primarily engaged in a business other than that of
investing, reinvesting, owning, holding or trading in securities, and
therefore not an investment company as defined in the Act.
2. Under section 3(a)(1)(C) of the Act, an issuer is an investment
company if it is engaged or proposes to engage in the business of
investing, reinvesting, owning, holding, or trading in securities, and
owns or proposes to acquire investment securities having a value in
excess of 40 percent of the value of the issuer's total assets
(exclusive of government securities and cash items) on an
unconsolidated basis. Section 3(a)(2) of the Act defines ``investment
securities'' to include all securities except government securities,
securities issued by employees' securities companies, and securities
issued by majority-owned subsidiaries of the owner which (a) are not
investment companies, and (b) are not relying on the exclusions from
the definition of investment company in section 3(c)(1) or 3(c)(7) of
the Act. HTI states that as of September 25, 2005, approximately 15.8%
of its total assets (exclusive of government securities and cash
items), on an unconsolidated basis, consisted of investment securities
as defined in section 3(a)(2) of the Act.
3. Rule 3a-1 provides an exemption from the definition of
investment company if no more than 45% of a company's total assets
consist of, and not more than 45% of its net income over the last four
quarters is derived from, securities other than government securities,
securities of majority-owned subsidiaries and primarily controlled
companies. HTI states that it cannot rely upon rule 3a-1 under the Act
because such other securities frequently exceed 45% of its total
assets. For example, in the second and third quarters of fiscal 2004,
had all HTI's available liquid capital other than cash required for
immediate use been invested in such other securities, the percentage of
HTI's total assets represented by such securities would have been 46.3%
and 46.6%, respectively. HTI further states that it cannot rely on rule
3a-1 because the percentage of its net income derived from investment
securities fluctuates unpredictably with the cycles of the disk drive
industry. HTI states that the cyclical nature of the industry, rather
than any change in HTI's business or financial management policies, has
led to significant variations in the ratio of HTI's income from
investment securities relative to net operating income.
4. Section 3(b)(2) of the Act provides that, notwithstanding
section 3(a)(1)(C) of the Act, the Commission may issue an order
declaring an issuer to be primarily engaged in a business or businesses
other than that of investing, reinvesting, owning, holding, or trading
in securities either directly or through majority-owned subsidiaries or
through controlled companies conducting similar types of businesses.
HTI requests an order under section 3(b)(2) of the Act declaring that
it is primarily engaged in a business other than that of investing,
reinvesting, owning, holding or trading in securities, and therefore
not an investment company as defined in the Act.
5. In determining whether a company is primarily engaged in a non-
investment company business under section 3(b)(2), the Commission
considers: (a) The issuer's historical development; (b) its public
representations of policy; (c) the activities of its officers and
directors; (d) the nature of its present assets; and (e) the sources of
its present income.\1\
---------------------------------------------------------------------------
\1\ Tonopah Mining Company of Nevada, 26 SEC 426, 427 (1947).
---------------------------------------------------------------------------
a. Historical Development. HTI was incorporated in 1965 in
Minnesota, and conducted its initial public offering in 1985. Until
1976, HTI derived a substantial portion of its revenues from
photoetching and from laminating precision components primarily for use
by original equipment manufacturers in the computer peripheral
industry. In 1976, HTI began adding laser welding steps to the
production of some components, and by 1979 had developed significant
abilities in precision forming as well. In 1982, HTI began to use its
forming and welding processes, in combination with proprietary cleaning
processes, to manufacture suspension assemblies for both Winchester and
the newer Thin-Film technology disk drives. In the late 1980s, HTI's
revenue began to come almost exclusively from the sale of suspension
assemblies, and HTI has continued to focus on suspension assembly sales
and development ever since.
b. Public Representations of Policy. HTI states that it has
consistently represented itself as a company that manufactures and
sells products for the disk drive industry, rather than a company
focused on investments.
c. Activities of Officers and Directors. HTI states that its Board
of Directors has eight members who focus on maintaining HTI's position
as a leading supplier of suspension assemblies. HTI's Investment Goals
and Guidelines require the Board of Directors to review them at least
annually. Historically, the Board has approved the guidelines on an
annual basis. Aside from these activities, none of HTI's directors is
involved with HTI's investments for any significant amount of time.
HTI's treasurer and chief financial officer are the only officers who
devote time to HTI's investments. An estimated 5% of the treasurer's
time and 1% of the chief financial officer's time is spent on
investment-related work, and HTI expects that this will continue to be
the case if the requested order is granted. HTI currently has
approximately 5,300 regular employees working in its four domestic
manufacturing plants and overseas.
d. Nature of Assets. As of September 25, 2005, approximately 15.8%
of the value (as defined in section 2(a)(41)(A) of the Act) of HTI's
total assets (excluding government securities and cash items), on an
unconsolidated basis consisted of investment securities.
e. Sources of Income and Revenue. Applicant states that since the
late 1980s, it has derived virtually all of its revenue, and net income
after taxes, from the sale of suspension assemblies. For fiscal 2005,
net income after taxes from investments was 10.3% of HTI's total net
income after taxes. Net income after taxes from investments (including
government securities, money market fund shares and interest on cash
balances) was 9.5%, 6.8% and 35.4% of HTI's total net income after
taxes in fiscal 2004, 2003 and 2002, respectively. In addition, for
fiscal 2005, revenue from investments was only 1.2% of HTI's total
revenue. In fiscal 2004, 2003 and 2002, revenue from investments was
only 1.0%, 1.2%, and 1.8% of total revenue. HTI submits that an
analysis of the sources of its revenue (especially in periods where HTI
reported net losses) provides a more meaningful, and even more
compelling, picture of the nature and extent of HTI's primary business
operations. In the future, HTI expects substantially all of its
revenues to come
[[Page 5390]]
from operations and less than 2% from investment securities.
6. HTI thus asserts that it satisfies the standards for an order
under section 3(b)(2) of the Act.
Applicant's Conditions
1. HTI will continue to allocate and utilize its accumulated cash
and investments for bona fide business purposes.
2. HTI will refrain from investing or trading in securities for
short-term speculative purposes.
For the Commission, by the Division of Investment Management,
under delegated authority.
Nancy M. Morris,
Secretary.
[FR Doc. E6-1226 Filed 1-31-06; 8:45 am]
BILLING CODE 8010-01-P
