01-13080. Tremont Corporation; Notice of Application

May 17, 2001.

AGENCY:

Securities and Exchange Commission (“SEC” or “Commission”).

ACTION:

Notice of application for an order under sections 2(a)(9) and 3(b)(2) of the Investment Company Act of 1940 (the “Act”).

Summary of Application: Tremont Corporation (“Applicant” or “Tremont”) requests an order declaring that it controls NL Industries, Inc. (“NL”) and that applicant is primarily engaged in a business other than that of investing, reinvesting, owning, holding or trading in securities.

Filing Dates: The application was filed on August 30, 1996, and amended on May 14, 1997, and April 27, 2001.

Hearing or Notification of Hearing: An order granting the application will be issued unless the SEC orders a hearing. Interested persons may request a hearing by writing to the SEC's Secretary and serving applicant with a copy of the request, personally or by mail. Hearing requests should be received by the SEC by 5:30 p.m. on June 11, 2001, and should be accompanied by proof of service on applicant, 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 may request notification of a hearing by writing to the SEC's Secretary.

ADDRESSES:

Secretary, SEC, 450 5th Street, NW., Washington, DC 20549-0609. Applicant, 1999 Broadway, Suite 4300, Denver, CO 80202.

FOR FURTHER INFORMATION CONTACT:

Christine Y. Greenless, Branch Chief, or Nadya B. Roytblat, Assistant Director, at [phone] (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 SEC's Public Reference Branch, 450 5th Street, N.W., Washington, D.C. 20549-0102 (tel. [phone]).

Applicant's Representations

1. Applicant, a Delaware corporation formed in 1987 as a wholly-owned subsidiary of NL, is primarily engaged in the business of producing and selling titanium metals and titanium dioxide. Applicant's shares are listed and traded on the New York and Pacific Stock Exchanges. Applicant conducts its operations through Titanium Metals Corporation (“TIMET”) and NL. Applicant states that TIMET is one of the world's leading integrated producers of titanium metal products. Applicant further states that it owns approximately 39% of TIMET's outstanding voting securities and primarily controls TIMET. Applicant also states that NL is an international producer and marketer of titanium dioxide pigments to customers worldwide. Applicant owns approximately 20.4% of NL's outstanding voting securities.^[1] Applicant states that, as of December 31, 2000, its interests in TIMET and NL represented approximately 23% and 68%, respectively, of applicant's total assests (exclusive of Government securities and cash items) on an unconsolidated basis. Applicant also has wholly-owned subsidiaries TRECO L.L.C. that is engaged in the real estate business and relies on section 3(c)(1) of the Act, and NL Insurance Limited of Vermont (“NLIV”), an insurance company that is exempt pursuant to section 3(c)(3) of the Act.

Applicant's Legal Analysis

1. 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, 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. Under section 3(a)(2) of the Act, investment securities iclude all securities except Government securities, securities issued by employee securities companies, and securities issued by majority-owned subsidiaries of the owner which (i) are not investment companies, and (ii) are not relying on the exclusions from the definition of investment company in section #3(c)(1) or 3(c)(7) of the Act.

2. Section 3(b)(2) of the Act provides that, notwithstanding section 3(a)(1)(C) of the Act, the SEC may issue an order declaring an issuer to be primarily engaged in a business other than that of investing, reinvesting, owning, holding, or trading in securities either directly, through majority-owned subsidiaries, or through controlled companies conducting similar types of businesses. Section 2(a)(9) of the Act defines “control” as the power to exercise a controlling influence over the management or policies of a company. That section creates a presumption that an owner of more than 25% of a company's outstanding voting securities controls the company, and that an owner of 25% or less of a company's outstanding voting securities does not control the company. Section 2(a)(9) further provides that any such presumption may be rebutted by evidence.

3. Applicant requests an order under section 2(a)(9) of the Act declaring that it controls NL and under section 3(b)(2) declaring that applicant is primarily engaged, through TIMET and NL as controlled companies, in a business other than that of investing, reinvesting, owning, holding or trading in securities.

4. Applicants states that it controls NL within the meaning of section 2(a)(9) of the Act, notwithstanding that it owns less than 25% of NL's outstanding voting securities, through significant and active participation in the management of NL. Five of the members of the board of directors of Tremont (“Tremont board”) are also members of NL's seven member board of directors. Mr. J. Landis Martin, Chairman of the Board, Chief Executive Officer and President of Tremont also serves as the Chief Executive Officer and President of NL. Ms. Susan E. Alderton, a member of the Tremont board, also serves as Chief Financial Officer, Vice President and Treasurer of NL. Mr. Harold C. Simmons, a member of the Tremont board, also serves as Chairman of the Board of NL. Applicant states that the directors and officers of Tremont play an active role in setting NL's general policies and provide support to NL's management, and that a finding of control under section 2(a)(9) therefore is appropriate.

5. Under section 3(b)(2) of the Act, in determining whether an applicant is primarily engaged in a non-investment company business, the SEC considers the following factors: (a) Applicant's historical development; (b) applicant's public representations of policy; (c) the activities of applicant's officers and directors; (d) the nature of applicant's present assets; and (e) the sources of applicant's present income.^[2]

a. Historical Development: Applicant states that since its formation in 1987, it has been engaged primarily in the businesses of petroleum services and bentonite mining, as well as the production and sale of titanium metals and titanium dioxide.

b. Public Representations of Policy: Applicant states that it has consistently held itself out as a holding company conducting its business operations through TIMET, NL, and TRECO. Applicant states that it does not hold and has never held itself out as an investment company within the meaning of the Act.

c. Activities of Officers and Directors: Applicant states that the primary activities of its officers and directors are participating in the governing and operational activities of TIMET and NL.

d. Nature of Assets: Applicant states that, as of December 31, 2000, its interest in TIMET represented 23%, and its interest in NL represented 68%, of applicant's total assets on an unconsolidated basis (exclusive of Government securities and cash items).

e. Sources of Income: Applicant states that, for the four quarters ended December 31, 2000, it had net income after taxes of $9.2 million, of which 91.5% was attributable to TIMET, NL and NLIV.

6. Applicant thus asserts that it meets the requirements for an order under section 3(b)(2) of the Act.

For the Commission, by the Division of Investment Management, under delegated authority.

Jonathan G. Katz,

Secretary.

Footnotes

1.  Applicant states that approximately 60.2% of NL's outstanding voting securities is held by Valhi, Inc. (“Valhi”). Applicant also states that 80.02% of its outstanding voting securities is held by Tremont Group, Inc. (“TGI”), a company that is 80.01% held by Valhi and 19.99% held by Tremont Holdings LLC (“Tremont Holdings”), a single member limited liability company owned by NL. Tremont Holdings holds directly an additional 0.13% of applicant's outstanding voting securities. Applicant further states that TGI may be deemed to control applicant and Mr. Harold C. Simmons may be deemed to control Valhi.

2.  See Tonopah Mining Company of Nevada, 26 S.E.C. 426 (1946).