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CISI Wrong course > Chapter 3: Equities > Flashcards

Chapter 3: Equities Flashcards

1
Q

What 2 documents are required to form a company?

A
  • Memorandum of Association
  • Articles of Association
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2
Q

What is the Memorandum of Association?

A
  • Confirms subscriber’s intention to form a company under the Companies Act 2006.
  • Agreed to take at least 1 share each.
  • Legal statement signed by all initial shareholders agreeing to form the company.
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3
Q

What are Articles of Association?

A
  • Details relationship between company and one of its key sources of finance (owners).
  • Contains written rules concerning the running of the company.
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4
Q

What rules do the Articles of Association detail?

A
  • Shareholder rights
  • Frequency of shareholder meetings
  • Company’s borrowing powers
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5
Q

Who agrees Articles of Association?

A
  • Shareholders
  • Directors
  • Company secretary
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6
Q

Companies are established as either?

A
  • Private
  • Public
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7
Q

What is a Private company?

A

Ltd companies, where there is one shareholder.

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8
Q

What is a Public company?

A

PLCs companies, where there’s a minimum of two shareholders.

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9
Q

Which type of company can issue shares to the public?

A

Public companies (PLCs) - all listed companies are PLCs, but not all PLCs are listed.

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10
Q

What does ‘Limited’ mean?

A

Liability of shareholders for the debts of the company are limited to the amount that they agreed to pay to the company on initial subscription.

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11
Q

What are Annual General Meetings (AGMs)?

A

Public companies meetings to give shareholders the opportunity to ask questions to directors about the company’s strategy and operations.

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12
Q

When are Annual General Meetings (AGMs) held?

A

Within 6 months of the financial years end.

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13
Q

What rights does the Companies Act (2006) provide shareholders to do at AGMs?

A
  • Right to speak
  • Right to attend
  • Right to vote (or appoint a Proxy)
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14
Q

What is a Proxy?

A

When a shareholder appoints someone to vote (but not speak) on their behalf at a company meeting.

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15
Q

What matters do shareholders vote on at AGMs?

A
  • Appointment & removal of directors
  • Payment of the final dividend recommended by directors
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16
Q

How are matters put to shareholders?

A
  • Ordinary resolutions
  • Special resolutions
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17
Q

What’s the difference between Ordinary and Special resolutions?

A
  • Ordinary resolutions - require a simple majority for voting to pass.
  • Special resolutions - typically used for matters of major importance, require at least 75% vote in favour to pass.
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18
Q

What is the Capital of a company made up of?

A

Combination of borrowing and money invested by its owners.
* Long-term borrowings (debt) is referred to as bonds.
* Money invested is typically invested in equities.

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19
Q

What are Shares?

A

Equity capital of a company. They comprise of Ordinary and Preference shares.

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20
Q

What are characteristics of Ordinary Shares?

A
  • Shareholders carry the full risk and reward of investing in a company.
  • Shareholders vote in resolutions at company meetings.
  • Receive dividends half-yearly or quarterly.
  • Ratify final dividend for the end of the financial year proposed by company directors before it’s formally declared as payable.
  • If a company is ‘wound up’, ordinary shareholders are paid last. Money left after creditors and preference shareholders have been paid belongs to ordinary shareholders.
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21
Q

What are characteristics of Preference Shares?

A
  • Hybrid security as they pay a fixed dividend each year - the amount being set when they are first issued and which has to be paid before dividends on ordinary shares can be paid.
  • Shareholders have seniority over ordinary shareholders in respect of earnings and assets.
  • Non-voting
  • Cumulative/non-cumulative, and/or participating
  • Convertible/Redeemable
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22
Q

What is meant by Convertible preference shares?

A

Convert preference into ordinary shares at set intervals or pre-set terms.

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23
Q

What is meant by Redeemable preference shares?

A

Shares which have a date on which they must be redeemed (when the nominal value of the shares will be paid back to the preference shareholder and the shares are cancelled).

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24
Q

What are the Benefits of Owning Shares?

A
  • Dividends and dividend yield
  • Capital Gains
  • Shareholder Benefits
  • Shareholder Rights
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25
Q

What is a Dividend?

A
  • Return an investor gets for providing the risk capital for a business.
  • Paid out of company profits, which form part of their distributable returns.
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26
Q

What are Distributable Reserves?

A

Post-tax profits made over the life of a company, in excess of dividends paid.

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27
Q

What’s a naked/uncovered dividend?

A

When a company uses undistributed profits from previous years to cover dividend payments. This may be because the current year’s profits were insufficient to fully cover the dividend.

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28
Q

Why do companies use uncovered dividends?

A

As a fall in dividend payments can have a negative reaction amongst investors, leading to a fall in willingness to hold a companies shares or provide additional capital.

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29
Q

What is Dividend Yield?

A

Dividend as a percentage of the current share price.

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30
Q

What is the Dividend Yield formula?

A

(Total dividend / market capitalisation) x 100

OR

(Div per share / price per share) x 100

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31
Q

What is Market Capitalisation?

A

Total amount of shares x price per share

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32
Q

What is Capital Gains?

A

Realised profits between purchase and sale price for shareholder.

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33
Q

Why do some companies have a higher-than-average dividend yield?

A
  • Company continues to generate healthy levels of cash, but has limited growth potential so surplus profits are paid to shareholders.
  • Low share price (perhaps because it’s seen to be potentially unsuccessful), thus it’s comparatively high current dividend is not expected to be sustained and its share price is not expected to rise.
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34
Q

Why do some companies have lower-than-average dividend yields?

A
  • High share price, as the company is viewed by investors as having high growth prospects.
  • Large proportion of the profit being generated is being ploughed back into the business and not dividends.
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35
Q

What are Shareholder Benefits?

A

Perks to shareholders, e.g. discounts on products.

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36
Q

What are Shareholder Rights?

A
  • Right to subscribe for new shares
  • Right to vote
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37
Q

What are Rights Issues?

A

A method a company can raise additional capital, with existing shareholders having the right to subscribe for new shares.

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38
Q

Why do companies offer shares to existing shareholders?

A

So their share of ownership in the company isn’t diluted. Under UK legislation, existing shareholders are given pre-emptive rights to subscribe for new shares.

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39
Q

What is the Right to Vote?

A

Ordinary shareholders have the right to vote on matters presented at company meetings, e.g. vote on proposed dividends, appointment/reappointment of directors.

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40
Q

How are votes usually allocated?

A

One share = one vote.

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41
Q

What are the 2 ways in which votes are cast?

A
  • Individual shareholder can attend company meeting and vote.
  • Individual shareholder can use a Proxy.
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42
Q

What are the 3 main risks associated with owning shares?

A
  • Market and price risk
  • Liquidity risk
  • Issuer risk
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43
Q

What’s Market and Price Risk?

A

Risk share prices in general might fall. Despite maintaining dividend payments, investors could face a loss of capital.

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44
Q

Why does price risk vary between companies?

A

Volatile shares tend to exhibit more price risk than more defensive shares.

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45
Q

What is Liquidity Risk?

A

Risk that shares may be difficult to sell at a reasonable price or traded quickly enough in the market to prevent a loss.

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46
Q

What’s a thinly traded company?

A

Typically occurs with shares in private companies, who don’t have much trading activity.

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47
Q

Why may Liquidity risk occur?

A
  • Difficulty finding a counter-party who’s willing to trade in a share (typically in ‘thinly traded’ companies).
  • If share prices are falling in which the spread between the bid price and offer price widens.
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48
Q

What’s Issuer risk?

A

Issuing company collapses and ordinary shares become worthless.

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49
Q

Which companies have greater issuer risk?

A

Shares in new companies, who have not yet managed to report profits, may have substantial issuer risk.

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50
Q

When does a Corporate action occur?

A

When a company does something that affects its shareholders or bondholders.

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51
Q

What 3 types are Corporate actions classified into?

A
  • Mandatory corporate action
  • Mandatory corporate action with options
  • Voluntary corporate action
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52
Q

What’s a Mandatory corporate action?

A
  • Mandated by the company, not requiring any intervention from shareholders or bondholders.
  • Example is a payment of a dividend which happens automatically.
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53
Q

What’s a Mandatory corporate action with options?

A
  • Action has a default option that occurs if shareholders don’t intervene. Until the date the default option occurs, the individual shareholders are given the choice to select another option.
  • Example is a rights issue.
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54
Q

What’s a Voluntary corporate action?

A

Action that requires shareholder to make a decision. E.g. a takeover bid - if the company is being bid for, each individual shareholder will need to choose whether to accept or not.

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55
Q

How are the terms of a corporate action expressed?

A

A securities ratio

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56
Q

What’s an example of a securities ratio for a bonus issue?

A

The investor will receive X new shares for each Y existing shares.

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57
Q

What is a ‘cash call’?

A

Company calls existing shareholders to see if they’d like to buy some more. This is done as they have pre-emptive rights to ensure their proportionate holding is not diluted.

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58
Q

What’s a Rights Issue?

A

Offer of new shares to existing shareholders, pro rate to their initial holding.

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59
Q

What sort of corporate action is a Rights Issue?

A

It’s a mandatory corporate action with options has shareholders have a choice.

60
Q

What could shareholders do with a rights issue?

A
  • Take up rights
  • Sell the rights to another investor (rights entitlement often renounceable)
  • Sell a sufficient amount to raise cash and keep the rest
  • Do nothing
61
Q

What is Theoretical Ex-Rights Price (TERP)?

A

If I have 4 shares worth £4 each (£16) and get a discounted share worth £2, the new overall price for my shares is £3.60 (£18/5) - theoretical because the actual price is determined by demand and supply.

62
Q

What’s a Bonus Issue?

A
  • Gives existing shareholders extra shares without them having to subscribe to any further funds.
  • Mandatory corporate action.
63
Q

What’s the reason for bonus issues?

A
  • Increase liquidity of companies shares in the market.
  • Bring a lower share price.
64
Q

Why might a company want to lower their share price?

A

Might be seen as unattractive to investors if its too high.

65
Q

What are type of corporate action are Dividends?

A

Mandatory corporate action.

66
Q

How often are dividends paid?

A

Twice a year:
* 1st declared by directors and paid approx half way through the year (interim dividend).
* 2nd paid after approval by shareholders at the company’s AGM, held at the end of the financial year (final dividend).

67
Q

How do shareholders receive their dividends?

A
  • By cheque,
  • Money transferred straight into their bank accounts
  • Paid through CREST
68
Q

How does the LSE ensure that the right amount of dividends are received by the correct person?

A

Shares are bought and sold with the right to receive the next declared dividend up to a date shortly before the dividend payment is made:
* Up to this point, shares are cum-dividend.
* Between the declaration date and the dividend payment date, shares go ex-dividend.

69
Q

What’s meant by cum-dividend?

A
  • Purchaser receives declared dividend if shares are bought shortly before the dividend payment is made.
70
Q

What’s ex-dividend?

A
  • A point between the declaration date and the dividend payment date.
  • Buyers of ex-dividend shares are not entitled to the declared dividend.
71
Q

What’s the settlement period of dividends?

A

T+2 (2 business days after trade is executed) for equity trades in Europe.

72
Q

What’s a Merger?

A
  • 2 companies of similar size agree to merge their interests. They then become a bigger entity.
  • Usual for one company to exchange new shares for the shares of the other.
73
Q

What’s a Takeover?

A
  • Predator company acquires the target company.
  • Once acquired, they’re obliged to report their share purchases once they reach a certain percentage.
74
Q

How many shares of the target company does the predator company need to take control?

A

50%+. They look to buy all shares using a mix of their own shares and cash.

75
Q

What other terms means a company decides to seek listing for its shares?

A
  • Becoming listed or quoted
  • Floating on the stock market
  • Going public
  • IPO
76
Q

What is the Primary Market?

A

Function of a stock exchange that brings in new securities to the market and raising funds.

77
Q

What is the Secondary Market?

A

Marketplace for trading existing shares. Facilitates two-way trade in issued securities.

78
Q

What are the Advantages of listings?

A
  • Capital
  • Takeovers
  • Status
  • Employees
79
Q

Why is capital an advantage of a listing?

A
  • IPO provides opportunity to raise capital and further offers of shares are easier to make.
  • IPO provides exit route for original founders wanting to convert their holdings into cash.
80
Q

What are the pros of a takeover for listings?

A

Listed company could use shares to acquire the shares of other companies as part of a takeover or merger.

81
Q

Why is status an advantage of a listing?

A

Being listed should help the business in marketing itself to customers, suppliers and potential employees.

82
Q

Why are employees an advantage of a listing?

A
  • Stock options to key staff provide incentive and retain employees.
  • Options to buy listed company shares that are easily sold in a market makes it more attractive.
83
Q

What are the Disadvantages of a listing?

A
  • Regulation
  • Takeovers
  • Short-termism
84
Q

Why is regulation a disadvantage of a listing?

A

Listed companies must govern themselves in a more open way than private ones and provide detailed and timely info on their financial situation and progress.

85
Q

What are the cons of takeovers for listings?

A

Listed company’s could be taken over themselves.

86
Q

Why is short-termism a disadvantage for listings?

A

Shareholders of listed companies exert pressure on the company to reach short-term goals, rather than be more patient and look for longer-term investment and growth.

87
Q

What choice of markets for listing equity shares does the LSE offer?

A
  • Premium
  • Standard Main
  • High growth
88
Q

What are the main requirements for a Full Listing on premium and standard segments?

A
  • Must be a PLC
  • Expected market cap must be atleast £30m.
  • For Premium Main Market, listed for atleast 3 years and 75% of business must be supported by historic re-earning record for that period.
  • Atleast 10% of shares in public hands or available for purchase by public (‘public’ excludes shareholders who hold 5%+ shares).
  • Trading company must demonstrate it has sufficient working capital for 12 months.
89
Q

What’s the Alternative Investment Market (AIM)?

A

Established by the LSE as a junior market for younger, smaller companies.

90
Q

What are the requirements to join AIM?

A
  • No trading history required; the company could be newly established.
  • No minimum market capitalisation required.
  • No requirement for a minimum proportion of the shares to be held by the ‘public’.
91
Q

What is a Nominated Adviser (NOMAD)?

A
  • A firm that advises AIM companies on their regulatory responsibilities in complying with AIM rules.
  • Advises on content prospectus for their admissions to AIM.
92
Q

What’s the role of a nominated broker?

A
  • Make a market and facilitate trading in the company’s shares.
  • Provide ongoing information about the company to interested parties.
93
Q

What rules must AIM and Fully Listed company’s follow?

A
  • Release price-sensitive info promptly
  • Produce financial info at the half-yearly (interim) and full year (final) stage.
94
Q

What do Stock Market Indices do?

A
  • Provide snapshot of how share prices are progressing across the whole group of constituent companies.
  • Provide benchmark for investors, allowing them to assess whether their portfolios of shares are outperforming or underperforming the market in general.
  • Provide basis for derivatives contracts, e.g. FTSE futures, FTSE options.
  • Provide basis for many tracker products, e.g. ETFs.
95
Q

Generally, who are the constituents of these indices?

A
  • Large cap companies.
  • Other indicies track constituents of a market or which focus on a specific segment, e.g. small cap.
96
Q

How were earlier indices calculated?

A
  • Price weighted
97
Q

What’s meant by price weighted?

A

Only the price of each stock in the index is considered when calculating the index.

98
Q

What’s a disadvantage of price weighting as a way of tracking an index?

A
  • No account is taken of the relative size of the company in the index
  • Share price movement of one can therefore have a disproportionate effect on the index.
99
Q

How were broad-based indices calculated?

A
  • Calculated based on a greater range of shares
  • Takes into account the relative market cap of each stock to give index more accurate indication of how the market was moving.
100
Q

What is the float-adjusted calculation?

A

Excludes shareholdings from large investors and gov’ts that are not readily available for trading.

101
Q

What is the equal weighted methodology?

A

Equal investment in each stock in the index assumed - means % rise in the share price of any constituent company will have an equal impact on the index as that in any other?

102
Q

Examples of Indices?

A
  • Dow Jones Industrial Average - price weighted
  • NASDAQ - Market cap ‘’
  • S&P 500 ‘’
  • FTSE 100 ‘’
  • CAC 40 (France) ‘’
  • Xetra DAX (Germany) ‘’
  • Nikkei 225 (Japan) - price weighted
103
Q

What’s the difference between on-exchange and off-exchange?

A

On-exchange = trading conducted through recognised stock exchange.
Off-exchange = trade undertaken directly between market counterparties away from an exchange (‘over-the-counter’ trades).

104
Q

Which trading systems can stock market trading be recognised as?

A
  • Quote-driven
  • Order-driven
105
Q

What is a Quote-driven system?

A

Market makers are employed to provide continuous two-way (bid and offer) prices during the trading day in particular securities, regardless of market conditions.

106
Q

Where do market makers make their profit from QDS?

A

Through the price spread between bid and offer.

107
Q

What are the benefits of QDS?

A

Provide liquidity to the market when trading would otherwise dry up.

108
Q

Examples of QDS?

A
  • NASDAQ
  • LSE’s Stock Exchange Automated Quotation (SEAQ).
109
Q

What’s an Order-driven system?

A

Market that employs either an electronic order book, e.g. LSE’s SETS, or an auction process, e.g. like that on the NYSE floor, to match buyers and sellers.
Buyers and sellers matched in chronological order by price and quantity of shares being traded and don’t require market makers.

110
Q

How is queue priority based?

A

Based on price then time.

111
Q

What are RSPs?

A

Retail Service Providers - Firms provide RSP gateways that harvest prices from a broker-defined range of RSPs and respond to the broker with the best price available.
- Provide electronic quotation and dealing facilities for retail stockbrokers.
- Quote-driven system, operated by UK market makers.

112
Q

How does RSP work?

A
  • Client places order with stockbroker who uses system to connect to competing RSP firms, requesting most competitive quote for client’s order.
  • Broker selects price, enabling the client to benefit from competition.
113
Q

How many market makers can compete in a RSP?

A

Up to 30 for one order.

114
Q

What are some characteristics of RSP?

A
  • Price calculation used by RSP firms - price data is gathered electronically from different exchanges in order to build a consolidated view of the best bid/offer prices.
  • Highly automated system.
115
Q

What other systems does LSE have?

A
  • Stock Exchange Electronic Trading Service - Quotes and Crosses (SETSqx) for less liquid shares not traded on SETS.
  • SEAQ for fixed income securities and AIM stocks not traded on SETSqx
  • electric Order book for Retail Bonds (ORB) - offers continuous two -way pricing for trading UK gilts and retail-size corporate bonds.
116
Q

What are MFTs?

A

Multilateral Trading Facilities (or ‘alternative trading systems’) - non-exchange trading venues which bring together buyers and sellers of securities.

117
Q

How do MFTs work?

A
  • Subscribers post orders into system.
  • These are communicated (by e.g. Electronic Communication Network - ECN) for other subscribers to view.
  • Matched orders will proceed to execution.
118
Q

Examples of MFTs?

A

Cboe Europe Equities and Turquoise.

119
Q

What is Systematic Internaliser?

A

Firm executes clients trades against its own account.

120
Q

How does Systematic Internalising work?

A

Instead of sending orders to stock exchange, it matches them with other orders on its book - means it’s able to compete directly with stock exchanges and automated dealing systems.

121
Q

Does Systematic Internalising have to make dealings transparent?

A

Yes. Must show price before a trade is made and give info about transaction after the trade is made.

122
Q

What 2 ways can shares be issued?

A
  • Registered
  • Bearer
123
Q

What does Registered shares involve?

A

Involves investor’s name being recorded on the share register and the investor receiving a certificate to reflect ownership.

124
Q

What does Bearer shares involve?

A

Person who owns shares is ‘bearer’. Ownership passes by transfer of share certificate to new owner.

125
Q

What are the risks associated with Bearer shares?

A
  • Loss of cert means loss of investment.
  • Regarded unfavourably by regulatory authorities owing to the opportunities they offer for money laundering.
126
Q

Where are Bearer Certificates held?

A

Immobilised in depositories such as Euroclear or local country registries.

127
Q

What is a share register? and where’s it kept?

A
  • UK companies are required to keep one.
  • Record of all current shareholders in the company and how many shares they hold.
  • It’s kept by the company registrar (electronic register also kept by CREST).
128
Q

Who is the company registrar?

A

Might be an employee of the company itself or a specialist firm of registrars.

129
Q

What is Settlement?

A

Updating the register to reflect the buyer and change of ownership and transfer of money to the seller when shareholder sell their shareholdings. This is to settle a trade.

130
Q

What is Certificated settlement?

A
  • Each shareholder held a share certificate as evidence of shares they owned.
  • When they sold shares, seller sent cert and stock transfer form, with details of new owner, to the company registrar.
  • Registrar deletes seller’s name and inserts buyers.
  • Registrar issues new cert to buyer.
131
Q

What are the issues of Certificated settlement?

A
  • Inefficient.
    thus most markets have moved to a single central securities depository which holds records of ownership, transfer taking place electronically.
132
Q

What is dematerialised settlement?

A

Paperless (uncertificated) form of settlement through CREST.

133
Q

What’s the required settlement period for European Markets?

A

T+2 - changed to this in Oct 2014 to harmonise across Europe to help reduce risk.

134
Q

How long is the settlement period for those who hold physical certs?

A

T+10. to allow all paperwork to be completed.
As part of changes to settlement period. there are separate proposals to phase out use of paper share certs.

135
Q

What is clearing?

A

Process through which obligations held by buyer and seller to a trade are defined and legally formalised (establishes what each of the counterparts expects to receive when the trade is settled).

136
Q

What does the clearing process include?

A
  • Recording key trade info so that counterparties can agree on the trade’s terms.
  • Formalising the legal obligation between counterparties.
  • Matching and confirming trade details.
  • Agreeing procedures for settling the transaction.
  • Calculating settlement obligations and sending out settlement instructions to the brokers, custodians and central securities depository (CSD).
  • Managing margin and making margin calls (margin relates to collateral paid to the clearing agent by counterparties to guarantee their positions against default up to settlement).
137
Q

What is bilateral settlement?

A

When trades are cleared and settled directly between trading counterparties. When this happens, each trading party bears direct credit risk against each counterparty that it trades with (hence will bear direct liability for any losses incurred through counterparty default).

138
Q

What is Central Counterparty (CCP)?

A

Way of clearing trades that puts itself between counterparties to a trade, becoming the buyer to every seller and seller to every buyer. Thus, buyers and sellers interact with CCP and remain anonymous to one another (this is ‘novation’).

139
Q

What are the benefits of CCP?

A
  • Spreads risk of institutions going into default across all participants - makes risks progressively easier to monitor and regulate.
  • Risk controls extended by a CCP provides an early warning system to financial regulators of impending risks (important tool in efforts to contain these risks within manageable limits).
140
Q

Where have CCP services been introduced?

A

Introduced in a range of markets to mitigate this risk:
- LCH.Clearnet provides CCP services in UK.
- Euronext European markets for trading in equity, derivatives and energy products.

141
Q

What is Settlement?

A

Process through which legal title (i.e. ownership) of a security is transferred from seller to buyer in exchange for the equivalent value in cash. These transfer should happen simultaneously (delivery versus payment - DvP).

142
Q

What are some of the key features of CREST?

A
  • Holdings are uncertificated (share certs are not required to evidence transfer of ownership).
  • Real-time matching of trades.
  • Settlement of transactions takes place in sterling, euros and dollars.
  • Electronic transfer of title (ETT) takes place on settlement.
  • Settlement generates guaranteed obligations to pay cash outside CREST.
  • Coverage includes shares, corporate and gov’t bonds and other securities held in registered form.
  • Range of corporate actions is processed, inc dividend distributions and rights issues.
  • Provides a mechanism to facilitate the settlement of trades when the investor holds paper share certs.
143
Q

What are the 4 stages of Settlement in CREST?

A
  1. Trade matching
  2. Stock Settlement
  3. Cash Settlement
  4. Register update
144
Q

What happens at stage 1?

A
  • Buy and sell members input instructions in CREST detailing terms of agreed trade.
  • CREST authenticates instructions to check that they conform to the authentication procedures stipulated by CREST. If input data from both members match, CREST creates matching transaction.
145
Q

What happens at stage 2?

A
  • On intended settlement date, CREST checks that buying member has funds, selling member has stock in its account and buyers CREST settlement bank has sufficient liquidity at the BoE to proceed to settlement of the transaction.
  • If so, CREST moves stock from seller to buyer account.
146
Q

What happens at stage 3?

A
  • CREST credits cash memo account (CMA) of selling member and debits CMA of buying member, which simultaneously generates a settlement bank payment obligation of the buying member’s settlement bank in favour of the BoE.
  • Selling member’s settlement bank receives that payment in BoE funds immediately upon the debit of the purchase price from the buying member’s CMA.
147
Q

What happens at stage 4?

A
  • CREST automatically updates its operator register of securities to effect the transfer of shares to the buying member.
  • Legal title to the shares passes at this point - ETT.
  • This prompts simultaneous generation by CREST system of a registrar update request (RUR), requiring the issuer to amend its record of uncertificated shares.

Stages 2, 3, and 4 occur simultaneously.

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