55180 Federal Register / Vol. 70, No. 181 / Tuesday, September 20, 2005 / Notices 

7 15 U.S.C. 78s(b)(1). 

8 Id. 

9 15 U.S.C. 78s(b)(2). 

10See letter from Ira D. Hammerman, Senior Vice 

President and General Counsel, Securities Industry 

Association, to Jonathan G. Katz, Secretary, 

Commission, dated Aug. 24, 2005; letter from Julian 

Rainero, Bingham McCutchen LLP, to Jonathan G. 

Katz, Secretary, Commission, dated Aug. 24, 2005; 

letter from Shane E. Swanson, General Counsel, 

Automated Trading Desk, LLC, to Jonathan Katz, 

Secretary, Commission, dated Aug. 24, 2005. 

11 Id. 

12 15 U.S.C. 78s(b)(3)(C). 

13 15 U.S.C. 78s(b)(1). 

14 15 U.S.C. 78s(b)(2). 

15 17 CFR 200.30–3(a)(58). 

the Exchange Act,7 the Commission may 

summarily abrogate the change in the 

rules of the self-regulatory organization 

and require that the proposed rule 

change be re-filed in accordance with 

the provisions of Section 19(b)(1) of the 

Exchange Act 8 and reviewed in 

accordance with Section 19(b)(2) of the 

Exchange Act,9 if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors 

or otherwise in furtherance of the 

purposes of the Exchange Act. 

The Commission has received three 

comment letters in response to the 

proposed rule change.10 The substance 

of the comment letters calls into 

question the ‘‘non-controversial’’

designation of the proposal. 

Accordingly, the Commission believes 

that the procedures provided by Section 

19(b)(2) of the Exchange Act 11 will 

provide a more appropriate mechanism 

for determining whether the proposed 

rule change is consistent with the 

Exchange Act. Therefore, the 

Commission finds that it is appropriate 

in the public interest, for the protection 

of investors, and otherwise in 

furtherance of the purposes of the 

Exchange Act, to abrogate the proposed 

rule change. 

It is therefore ordered, pursuant to 

Section 19(b)(3)(C) of the Exchange 

Act,12 that File No. SR–NASD–2005–

093 be, and it hereby is, summarily 

abrogated. If the NASD chooses to re-file 

the proposed rule change, it must do so 

pursuant to Sections 19(b)(1) 13 and 

19(b)(2) of the Exchange Act.14

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.15

Jonathan G. Katz, 

Secretary. 

[FR Doc. 05–18667 Filed 9–19–05; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

27064; 812–12868] 

Applied Materials, Inc.; Notice of 

Application 

September 13, 2005. 

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: Applied 

Materials, Inc. (‘‘Applied’’) 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. Applied, directly and 

through its wholly-owned subsidiaries, 

develops, manufactures, markets and 

services integrated circuit fabrication 

equipment. 

FILING DATES: The application was filed 

on August 14, 2002, and amended on 

February 28, 2005, May 31, 2005 and 

September 6, 2005. 

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 October 11, 2005, 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, Securities and 

Exchange Commission, 100 F Street, 

NE., Washington, DC 20549–9303. 

Applicant, 3050 Bowers Ave., P.O. Box 

58039, Santa Clara, CA 95054. 

FOR FURTHER INFORMATION CONTACT: Julia 

Kim Gilmer, Senior Counsel, at (202) 

551–6871, or Janet M. Grossnickle, 

Branch Chief, 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. Applied, a Delaware corporation, is 

in the business of developing, 

manufacturing, marketing and servicing 

integrated circuit fabrication equipment. 

Customers for Applied’s products 

include semiconductor wafer 

manufacturers and semiconductor 

integrated circuit, or ‘‘chip’’

manufacturers such as Intel, Texas 

Instruments and IBM. Applied 

represents that these chips are key 

components in most advanced 

electronic devices and that the push to 

make these devices more powerful, 

portable and affordable spurs a rapid 

pace of technological change in the 

semiconductor industry. Applied states 

that in the past 23 years, it has 

introduced over 100 major products. 

2. Applied states that it requires 

substantial liquid capital to fund its 

global infrastructure, manufacturing and 

service activities, and to continue its 

research, development and engineering 

programs. Applied also intends to use 

its liquid capital to support other 

business and strategic objectives by 

acquiring and investing in businesses 

with complementary products, services 

and/or technologies. In addition to 

being capital intensive, Applied states 

that the integrated circuit fabrication 

equipment industry is subject to volatile 

business cycles due to the rapid pace of 

technological developments and 

changes in global and regional economic 

conditions. Applied 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’’). Applied’s board of 

directors oversees Applied’s investment 

practices and defines the parameters for 

investment activities. Applied states 

that it does not invest in securities for 

short-term speculative purposes. 

Applicant’s Legal Analysis 

1. Applied 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 

Federal Register / Vol. 70, No. 181 / Tuesday, September 20, 2005 / Notices 55181 

1Tonopah Mining Company of Nevada, 26 SEC 

426, 427 (1947). 

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. 

Applied states that as of January 30, 

2005, approximately 50% 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. Applied states that it cannot 

rely upon rule 3a–1 under the Act 

because as of January 30, 2005, such 

other securities exceeded 45% of its 

total assets. Applied 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 

semiconductor industry. The cyclical 

nature of the industry, rather than any 

change in Applied’s business or 

financial management policies, has led 

to significant variations in the ratio of 

Applied’s income from investment 

securities relative to net operating 

income. 

4. Rule 3a–8 under the Act provides 

an exemption from the definition of 

investment company if, among other 

factors, a company’s research and 

development expenses are a substantial 

percentage of its total expenses for the 

last four fiscal quarters combined. While 

Applied believes it could satisfy the 

other factors in the rule, Applied’s 

research and development expenses 

have fluctuated from year to year due to 

the cyclical nature of the industry. 

During the 2000 through 2004 fiscal 

years, Applied’s research and 

development expenses have varied, 

ranging from approximately 16% to 

22% of its total expenses, including cost 

of goods sold. Applied’s ratio of 

research and development expenses to 

total expenses thus may be deemed a 

‘‘substantial percentage’’ in certain 

years, but not others. Applied presently 

cannot rely on rule 3a–8 because its 

research and development expenses for 

the last four fiscal quarters ended on 

January 30, 2005 represented 

approximately 16% of its total expenses, 

including cost of goods sold. 

5. 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, through 

majority-owned subsidiaries. Applied 

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. 

6. 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. Applied 

states that since its inception in 1967 it 

has, directly and through its whollyowned subsidiaries, developed into the 

largest supplier of products and services 

to the global semiconductor industry. 

Applied states that it currently 

manufactures systems that perform a 

majority of the steps in the 

semiconductor integrated circuit 

fabrication process and also provides 

products and services that enhance 

manufacturing yields. Customers for 

Applied’s products include 

semiconductor wafer manufacturers and 

semiconductor integrated circuit, or 

‘‘chip’’ manufacturers such as Intel, 

Texas Instruments and IBM. Applied 

further states that in the past 23 years, 

it has introduced over 100 major 

products. Applied states that it has not 

sold any of its subsidiaries in over 20 

years and that these sales were 

conducted for reasons related to its 

business as a supplier of integrated 

circuit fabrication equipment and 

services. 

b. Public Representations of Policy. 

Applied states that it has never 

represented that it is involved in any 

business other than developing, 

manufacturing, marketing and servicing 

integrated circuit fabrication equipment. 

Applied asserts that it has consistently 

stated in its annual reports, stockholder 

letter, prospectuses, filings with the 

Commission, press releases, marketing 

materials and website that it is the 

largest supplier of products and services 

to the global semiconductor industry. 

Applied states that it generally does not 

make public representations regarding 

its investment securities except as 

required by its obligation to file periodic 

reports to comply with federal securities 

laws. Applied further states that it has 

emphasized operating results and has 

never emphasized either its investment 

income or the possibility of significant 

appreciation from its cash management 

investment strategies as a material factor 

in its business or future growth. 

c. Activities of Officers and Directors. 

Applied states that its directors and 

officers spend substantially all of their 

time managing Applied’s business of 

developing, manufacturing, marketing 

and servicing integrated circuit 

fabrication equipment. Nine out of 

Applied’s ten directors have extensive 

experience in the semiconductor or 

electronics industries. The remaining 

director is experienced in government 

and academia. Applied’s directors 

spend less than 1% of their time on 

investment-related matters. Applied’s 

chief financial officer spends less than 

10% of her time monitoring Applied’s 

cash balances and managing short-term 

investment securities in accordance 

with Applied’s investment policies. Out 

of Applied’s approximately thirty senior 

officers, only two (other than the chief 

financial officer) spend time monitoring 

cash balances and managing short-term 

investment securities; the treasurer 

spends less than 30% of his time and 

the corporate controller spends less than 

5% of her time on such activities. 

Applied has approximately 13,000 fulltime employees in approximately 80 

locations throughout the world. In 

addition to the officers discussed above, 

only three other employees spend their 

time on matters relating to the 

management of Applied’s investment 

securities; the rest of Applied’s 

employees are involved in product 

design and engineering, manufacturing, 

customer technical support, supplier 

and materials management, sales and 

marketing, finance and corporate 

services, human resources, 

environmental, health and safety issues, 

global security, information technology, 

transactional and corporate legal 

services and protection and enforcement 

of intellectual property rights. 

d. Nature of Assets. Applied states 

that as of January 30, 2005 its 

55182 Federal Register / Vol. 70, No. 181 / Tuesday, September 20, 2005 / Notices 

2Applied states that consolidation provides a 

more accurate picture of its primary business of 

developing, manufacturing, marketing and servicing 

integrated circuit fabrication equipment because 

Applied does not have any independent business 

operations separate from the activities of its whollyowned subsidiaries. Applied has not sold any 

subsidiaries in over 20 years, and those sales were 

related to its business as a supplier of integrated 

circuit fabrication equipment and services. Since 

the subsidiaries being consolidated are all whollyowned, consolidation will not result in the type of 

distortions that could result from consolidating 

other types of subsidiaries. Applied also has a 50% 

owned subsidiary that is dormant, has no 

operations and has not been consolidated for 

purposes of determining Applied’s status under the 

Act. 

3For the reasons stated above, revenues of 

Applied’s wholly-owned subsidiaries were 

consolidated for purposes of this discussion. 

Applied consolidates its wholly-owned subsidiaries 

when preparing its financial statements in 

accordance with Generally Accepted Accounting 

Principles. 

investment securities (as defined in 

Section 3(a)(2) of the Act) of $5.1 billion 

constituted approximately 48% of 

Applied’s total assets (excluding 

Government securities and cash items), 

consolidated with its wholly-owned 

subsidiaries.2 More than 99% of 

Applied’s investment securities 

consisted of Capital Preservation 

Investments. Applied’s remaining 

investment securities consisted of 

investments in businesses with 

complementary products, services and/ 

or technologies and an interest in a 

limited partnership that invests in earlystage companies involving 

nanotechnology and/or communications 

technology. Applied anticipates that its 

investment securities other than Capital 

Preservation Investments will not 

exceed 10% of Applied’s total 

consolidated assets (excluding 

Government securities and cash items) 

in the future. Applied further states that 

a significant portion of its assets consist 

of intangible assets such as internallydeveloped intellectual property that are 

not included in the value of Applied’s 

total assets for purposes of determining 

Applied’s status under the Act. Applied 

states that the asset tests used in 

connection with sections 3(a)(1)(c) and 

3(b) of the Act therefore significantly 

understate the relative value of 

Applied’s non-investment security 

assets. 

e. Sources of Income and Revenue. 

Applied states that for the four quarters 

ended January 30, 2005, its operating 

activities produced 94% of its net 

income after taxes, while its investment 

securities produced 6% of its net 

income on a tax-equivalent basis. 

However, for the fiscal year ended 

October 26, 2003, Applied had 

operating losses while deriving net 

income from its investment securities. 

Applied states that its net income does 

not always accurately reflect its 

operating activities since its net income 

fluctuates unpredictably with the cycles 

of the semiconductor industry. Applied 

thus believes that its activities as an 

operating company are more 

appropriately analyzed by looking at its 

revenues. Applied states that, for the 

four quarters ending January 30, 2005, 

its revenues from operations 3

represented approximately 99% of its 

total revenues, and its revenues from 

investments, or net investment income, 

represented approximately 1% of its 

total revenues. Applied expects that as 

its business continues in the future, the 

percentage of its total revenues derived 

from operating activities will ordinarily 

be over 90% and the percentage derived 

from investments will ordinarily be 

under 10%. 

7. Applied thus asserts that it satisfies 

the standards for an order under section 

3(b)(2) of the Act. 

Applicant’s Conditions 

1. Applied will continue to allocate 

and use its accumulated cash and 

investment securities for bona fide 

business purposes. 

2. Applied 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. 

Jonathan G. Katz, 

Secretary. 

[FR Doc. 05–18614 Filed 9–19–05; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

27066; 813–357] 

Peter Kiewit Sons’, Inc. and Kiewit 

Investment Fund LLLP; Notice of 

Application 

September 14, 2005. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of an application for an 

order under section 6(b) of the 

Investment Company Act of 1940 (the 

‘‘Act’’) granting an exemption from 

section 15(a) of the Act and the rules 

and regulations thereunder. 

SUMMARY OF THE APPLICATION: 

Applicants request an order to permit 

the board of directors of an ‘‘employees’’

securities company’’ as defined in 

section 2(a)(13) of the Act to enter into 

and materially amend investment 

advisory contracts without the approval 

of holders of the company’s outstanding 

voting securities. 

APPLICANTS: Peter Kiewit Sons’’, Inc. 

(‘‘Kiewit’’) and Kiewit Investment Fund 

LLLP (the ‘‘Fund’’). 

FILING DATES: The application was filed 

on July 25, 2005 and amended on 

August 29, 2005 and September 13, 

2005. 

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 

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 October 11, 2005, 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. Applicants, Tobin A. Schropp, 

Peter Kiewit Sons’, Inc., Kiewit Plaza, 

Omaha, Nebraska, 68131 and Robert A. 

Giles, Jr., Kiewit Investment Fund LLLP, 

73 Tremont Street, Boston 

Massachusetts 02108. 

FOR FURTHER INFORMATION CONTACT: 

Shannon Conaty, Senior Counsel, at 

(202) 551–6827 or Janet M. Grossnickle, 

Branch Chief, 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). 

Applicants’ Representations 

1. Kiewit, a Delaware corporation, is 

a large construction contractor operating 

primarily in the North American 

market. Through various subsidiaries, 

joint ventures and partnerships, Kiewit 

provides construction services to a 

broad range of public and private 

customers. It also owns and operates 

several coal mining operations. 

Pursuant to the terms of its 

organizational documents, Kiewit’s 

common stock (‘‘Kiewit Stock’’)