ABSTRACT
Convertible bonds, which are security and pecuniary claim bonds, can be defined as debt securities issued by joint stock companies to borrow money in order to meet their funding needs. They have a maturity of at least one year. In the issuance phase, the issuing institution, investors, and authorized institution parties play a role. In order for the issuance process of convertible bonds to take place, the issuer must provide a resolution for the general assembly or the board of directors, prepare the issuance document and submit it to the Capital Markets Board for approval, and then notify the Central Registry Agency. After these steps, the convertible bonds can be sold on announcement of the issuance document. After the convertible bonds have been sold, the owners of the bonds will have the right to convert their bonds into shares and become shareholders of the issuing company, or they may simply take their principal and interest.
I. INTRODUCTION
After many years of discussion in the doctrine, convertible bonds (“CB”) have become important with the regulation in the Turkish Commercial Code1 numbered 6102 (“TCC”). CBs are especially important for companies in the early stages of formation. Because these companies are just starting out, investors are likely to be unsure about the future course of the company. Since conversion occurs at a later date, CBs clarify how many shares an investor will have in the company according to their valuation on the conversion date. This article evaluates the legal nature of CBs, something currently unfamiliar in Turkey, the decision-making processes for issuance, the application and issuance process, use of the right of conversion, and the advantages and disadvantages CBs.
II. CONVERTIBLE BONDS IN GENERAL
A. Definition and Legal Nature
A bond is defined in the Communiqué on Debt Securities (VII-128.8)2 (“Communiqué”) as “the debt instrument issued and sold by issuers in the capacity of obligor in accordance with the provisions of this Communiqué, and which contains the undertaking that its nominal value will be repaid to the investor on or until maturity date, by instalments, and maturity period of which is 365 days or longer”. Considering this definition and the definition in the Former Commercial Code, CBs can be defined as “debt securities issued by joint stock companies to borrow money in order to meet their funding needs with a maturity of at least one year”.
CBs can be qualified as securities since they are (a) counted as fungible goods (b) used as investment tools and (c) provide periodic income, all of which define securities3. It is a debatable issue whether CBs are negotiable instruments or not. However, pursuant to TCC Article 645, a negotiable instrument is defined as “any instrument to which a right attaches in such a manner that it may not be exercised or transferred to another without the instrument”. According to this definition, it is not possible to define CBs as negotiable documents. Another legal characteristic of CBs is that they are pecuniary claim bonds. CBs offer the holder the right to acquire shares. A CB holder can exercise this conversion right at the conversion date or receive a fixed-ratio interest4.
Furthermore, since CBs are issued in order to provide funding for joint stock companies, the bonds can only be issued for pecuniary claims and rights.5 The legal relationship between Issuer and CB holder can be evaluated as that of a mixed contract since it has elements of both loan and sales agreement and mixed contracts are those created by merging the elements of two or more contracts into one in a way not foreseen in the law6.
B. Parties to Convertible Bonds
The issuing institution, investors, and an authorized institution are parties to the issuance of a CB. Kılıç defines the issuer as “... sectors with a fund deficit who obtain resources from a segment with excess funds by issuing capital market instruments and converting them into investments”7. Issuing institutions are defined in the Communiqué as “legal entities who issue debt securities, or who file an application to the Board for issuance, or whose debt securities are offered to the public”. It is possible to say that the issuance of convertible bonds is a right granted only to joint stock companies, since it is stated in the TCC’s definition of CBs and the Communiqué that the said debt instruments are issued by the “issuer corporation”8.
Another feature of CBs is that it is possible to sell them without making a public offering. The term “issue”, in this context, is defined in the Communiqué and former communiqué numbered II-31.1 as “the issue of debt securities by issuers and the sale of them through or without public offering”. Therefore, we can conclude that CBs can be sold with or without a public offering, and the issuance of CBs can be made by both publicly-held joint stock companies and non-public companies9.
Karababa defines investors as “persons, institutions, and businesses that invest their savings in capital market instruments offered by various institutions and corporations, who need funding in order to generate more income”10. An authorized institution is defined in Article 3 of the Communiqué as “investment institutions authorized by the Board for rendering investment services and activities set forth in this Communiqué in accordance with Article 37 of the Law”. Among the services and activities of the authorized institution are collecting requests for conversions to be realized before maturity or, based on a corporation request preparing a CB conversion rate report, and being the addressee of the notifications to be made by the CB holde.
III. THE ISSUANCE DECISION-MAKING PROCESS
A. General Assembly Resolution
Pursuant to Article 504 of the TCC, a general assembly resolution is necessary for the issuance of securities. Due to the reference of Article 504 to Article 421 of the TCC, a general assembly resolution can only be made upon the affirmative vote of shareholders whose shares make up seventy five percent (75%) of the capital. However, a special provision regarding the issuance of bonds in the articles of association of the joint stock company is not necessary in order to pass the said resolution11.
B. Board of Directors’ Decision
Pursuant to Article 505 of the TCC, the authority of the general assembly to issue securities and to determine the conditions of the securities to be issued may be granted to the board of directors up to fifteen months. Likewise, pursuant to Article 31 of the Capital Market Law12 (“CML”), the authority to issue capital market instruments can be granted to the board of directors with or without a time limit. Since the provision in CML refers to capital market instruments that are debt instruments, the provision only applies to capital market instruments within the scope of the CML. For CBs, the Communiqué referred to Article 505 of the TCC. Therefore, this authorization can only be made for fifteen months with the general assembly resolution in terms of CBs. However, it is possible to authorize the board of directors without a time limit by stating it in the articles of association on the basis of Article 31/3 of the CML13.
Considering whether it is necessary to register and announce the decisions, since there is no provision regarding the registration requirements in the legislation, regardless of whether the decision to issue the bond was taken by the general assembly, the board of directors authorized by the general assembly, or the board of directors authorized by the articles of association, registration and announcement of the decision is not obligatory14.
IV. APPLICATION AND ISSUANCE PROCESS
Regardless of whether the issuance is made with or without a public offering, it must be submitted to the Capital Markets Board (“CMB”) for approval accompanied by an issuance document or a prospectus. The registration and monitoring of debt instruments within the scope of the Central Registry Agency (“CRA”) is regulated in Article 8 of the Communiqué.
A. Prospectus
Pursuant to Article 4 of the Communiqué numbered II-5.1, a prospectus is defined as “a public disclosure document containing all information required for a conscious assessment and choice of investors, with respect to the issuer’s or, if any, the guarantor’s financial situation and performance, prospects and activities, and characteristics of and rights and risks associated to capital market instruments to be issued or admitted to trading on the exchange”.
The data in the prospectus enables investors to foresee the investment risks15. In the document in question, it is necessary to provide information about the company's financial status, assets, financial statements, future investment plans, and similar issues. The document should also include the conditions of the sale to be made and the shares subject to sale16. It is important that the prospectus include the minimum information that may affect an investment decision, and such information should be insightful. If there is any change in the information in the prospectus that will affect an investor’s decision, this situation must be notified to the CMB by the issuer. It must be announced on the issuer’s website and on the Public Disclosure Platform (“PDP”) if they are a member within fifteen business days following the Board’s approval of the prospectus. Once the prospectus is approved, it must be registered with the relevant trade registry and announced in the Trade Registry Gazette.
B. Issuance Document
Where CBs are issued without a public offering, the issuance document must be prepared by the issuer and submitted to the CMB for approval. Pursuant to Communiqué numbered II-5.1, an issuance document is defined as “a document containing information about the description and sales condition of capital market instruments to be issued in the case of issuance of capital market instruments without a public offering, or in the case of issues abroad, or in the case of issuance of all types of capital market instruments by issuers without a prospectus, except for the issuance of capital market instruments with an announcement text prepared within the context of provisions of this Communiqué”.
The issuance document and a tenorissue document are also submitted to the CMB for approval. Communiqué numbered II-5.1 defines a “tenorissue” document as “a document containing information about characteristics and sales conditions of capital market instruments with respect to their portion offered for sale at different times under an issue document approved by the Board”. As in the prospectus, the issuance document should contain general information on the qualifications and sales principles of the capital instruments to be issued.,
V. RESTRICTIONS TO THE ISSUANCE PROCESS
Article 506 of the TCC states that the to - tal amount of debt instruments cannot ex - ceed the sum of capital and reserve funds on the balance sheet, thereby capping the issue limit. In the following statement in the Article, capital market regulations are reserved. There are two different market regulations. Pursuant to Article 31 of the CML, the total amount of debt instruments that issuers can issue cannot exceed the limit set by the CMB. The CMB has the authority to set different limits with respect to the qualification of the issuers. Article 9 of the Communiqué restricts the authority of the CMB and sets forth the provision that the issue limit cannot exceed five times the amount of equity for publicly held companies and three times the amount of equity for non-public companies.
VI. CONVERTIBLE BONDS SALES PROCESS
After completing the steps explained above, CBs can be sold with or without a public offering. The costs of the debt instruments to be issued must be paid in full and in cash. Within the scope of the Communiqué number II-5.2, a sales made by public offering may occur by gathering requests, without gathering requests, or on the stock exchange. The sales to be made without a public offering can be made on a designation basis or in the form of sales to qualified investors. For both sales methods, the CB sales can be made on the first business day following the day that the issuance document is announced. A qualified investor is defined in the Communiqué number II-5.2 as “persons defined in the regulations of the Board pertaining to sales of capital market instruments”. In this sales method, qualified investors who do not have CRA registration must sign a statement whose content is determined by the CMB. Unlike a sale made to a qualified investor, in designated sales CBs are sold to investors who do not possess a special qualification. Investors also need to sign a statement document in designated sales17.
VII. REDEMPTION OF CONVERTIBLE BONDS AND THE CONVERSION PROCESS
Within the scope of Article 17/1 of the Communiqué, the due date of CBs cannot be less than 365 days, and conversion can be carried out within 365 days of the due date. Within the context of the third sub-clause of Article 17, the conversion must be done at nominal value and, when it is specified in the prospectus or issuance document, the amount of interest payable on the conversion date can also be subject to conversion by means of addition to the nominal value. With the addition of interest to the conversion process, a CB holder is able to obtain more shares.
In the event that the CB sale is made by going public, Article 17/5 of Communiqué has provided some mandatory steps, as follows: “In cases where the CBs will be sold through public offering, it is mandatory that the shares of the issuer trade on the exchange and the issuer is in registered capital system and the board of directors of the corporation shall be granted authorization in accordance with the articles of association in respect of limitation of the rights of share owners on purchasing new share.” The conversion request is generally fulfilled by increasing capital and this issue is examined in further detail below.
A. Evaluation on Conversion Price and Rate
In Article 18/1 of the Communiqué, the conversion price is defined as “the price to be taken as a basis for the shares to be granted to CB owners in consideration for the bonds they own”. For the conversion rate, the expression “the number of shares to be delivered in consideration for the nominal value of Convertible Bonds at the time of conversion” has been used. The next part of the same sub-clause stipulates that the report on the conversion rate must be sent to the CMB by the authorized institution for approval of the prospectus.
Article 467/2 of the TCC under the sub-title “Protection of the ones having the rights to exchange or purchase” provides that “Rights to exchange or purchase can’t be lost by increasing capital, giving new rights to exchange or purchase or in another way unless the exchange price is decreased or appropriate equalization is provided to right holders or the rights of shareholders are lost also in same way”, which aims to protect all the rights of CB holders that arise from holding a CB. Considering the legal nature of CBs and the benefits the parties expect from this debt instrument, it can be concluded, in accordance with the provision “Every person must act in good faith when exercising his/ her rights and performing his/her obligations” in Article 2 of the TCC numbered 4721, that the issuing company cannot abuse its power and determine the conversion price18.
B. Redemption on or before Due Date
The redemption on or before the due date is regulated by Article 19 of Communiqué. Redemption without gathering prior requests means not waiting for CB holders’ requests and increasing capital as much as the stock that will be given in return for the CB. Where redemption is made by gathering requests in advance, the determined period for gathering requests will be notified via the PDP and the required capital increase will be met for the shares to be given in response to the PDT holders who make the request.
Redemption requested by a corporation before the due date is regulated under Article 21 of Communiqué. The method of redemption made by gathering requests applies here, and CB holders who do not request redemption are deemed to be demanding cash payment. In CB holders’ requests in redemption before the due date, a CB holder has to make a request at the earliest one month before the due date. The authorized institution will be in charge in each of the procedures explained above. Conditions where increasing capital is not necessary are determined in the Communiqué with the provisions “The corporation may decide not to increase capital in the event that the number of shares to be given in return for the total CBs requested to use the right of conversion is below 5 percent of the ratio of the corporation to the total number of shares.” and “The public issuers may decide not to increase capital in the event that the number of shares to be given in return for the total CBs requested to use the right of conversion is below 5 percent of the ratio of the corporation to the total number of shares”. This right allows the corporation to not increase the capital when redemption is done at the request of the corporation, while it entitles public issuers in the case of CB holders’ requests.
C. Evaluation of Conversion Rights
The use of conversion rights in terms of convertible bonds is not certain due to the nature of the convertible bonds19. Conversion rights can be used under certain conditions and the company is obliged to provide for this request in numerous ways when it is used. However, this method can be determined by explaining in the prospectus or issuance document how to convert during this procedure. The company must provide sufficient capital for the conversion process. This can be achieved through various ways determined below.
D. Procuring Conversion Demand Through Capital Increase
The increase of capital by shareholders can be divided into three different sections:
a. The increase of contingent capital
In the increase of contingent capital, capital is increased after a conversion of bonds is requested. In this case, the capital increase does not depend on a general assembly resolution, and the capital will increase on its own motion20 as stated in Article 46321of the TCC. Unlike other ways of increasing capital, it is the beneficiaries who control the increase of capital to increase contingent capital, and the capital increase is not contingent on the amount of CBs issued at once21. This method, which is not included in the Former Commercial Code that was replaced by the TCC, is regulated in more detail in the Share Communiqué numbered VII-128.123 of the CMB. Within the context of Article 464 of the TCC, the increase of contingent capital cannot exceed half the company’s capital24. In accordance with Article 464/2 of the TCC and Article 12 of the CML, the prices of the shares issued cannot be partially paid25. Furthermore, the number of elements must be stated in the article of association to make a contingent capital increase in accordance with article 465 of the TCC. Those entitled to CB usage will utilize their rights through a written statement, in accordance with Article 468 of the TCC, together with references to the prospectus. The increase of contingent capital is regulated in the provisions of the TCC and also Article 17 of the Share Communiqué.
b. The increase of capital through capital stipulation
b.a. The increase of principal capital through capital stipulation
A principal capital is used by stating the capital in the articles of association and the capital can be amended by amending the articles of association26. For this reason, the general assembly decides the capital increase. Since the articles of association are amended pursuant to Article 421, the quorum requirement must be followed27. Any pre-emptive offer of shares may be an obstacle for a CB and limiting a pre-emptive offer of shares may be considered due to the nature of CBs. In addition, pursuant to Article 456 of TCC, the pecuniary worth of shares must be paid, therefore requiring a balance between the commitments payable of the shareholders and the exercise of CB holders’ rights28.
b.b. The increase of authorized capital through capital stipulation
This mechanism is regulated under Article 460 of the TCC for non-public companies, and the seventh sub-clause of the same Article indicates that the provisions of the CML will be reserved for publicly-held companies. The authorized capital is regulated under Article 18 of the CML. Pursuant to Article 456/2 of the TCC and Article 18/2 of the CML, the board of directors will decide on the increase of capital. Since a general assembly resolution is not required for the authorized capital system, it is more appropriate for CBs than an increase in principal capital. What is more, the pre-emptive offer of shares mentioned in the principal capital increase and the requirement that the available capital must be fully paid apply here too, pursuant to Article 460/4 of the TCC and, in the reflection of this provision, in Article 18/5 of the CML, the board of directors must be authorized by articles of association to limit the pre-emptive offer of shares and create a share on nominal value29. Compared to the increase of contingent capital, as in the principal capital increase explained above, a CB holder is not able to directly interfere in the capital increase: a company body must take that decision.
c. A company's acquisition of its own shares
Pursuant to Article 379/1 of the TCC, a restriction of 10% is imposed on a company's acquisition of its own shares, stating that “A company may not acquire and accept as pledge its own shares in return for consideration at an amount which exceeds or will exceed as a result of a transaction one tenth of its basic or issued capital”. Article 379/2 says how this process will proceed and that the board of directors should be authorized by the general assembly for a maximum of five years. Within the scope of Article 379/3 of the TCC, it is emphasized that after the price of shares to be acquired is deducted, the company’s remaining net assets must be at least equal to the sum of the reserves that may not be distributed according to the law and articles of association and of principal or issued capital. Article 19/3 of the Communiqué is significant. This Article states that CBs must be converted by an increase of capital and the request of the corporation before maturity (Art. 21), and the request of a CB holder before the maturity (Art. 22) as an exception to this. Accordingly, a company’s acquisition of its own shares is not accordant with CBs. Significantly, there is also an argument that the 10% rate stipulated by Article 379 of the TCC is low30.
E. Corporation Contradicting the Conversion Request
According to an argument in the doctrine, if the CB holder does not get a response to a conversion request, the liability incurred by the information on the prospectus or issuance document will be at issue if the information stated in these documents is not correct or is inaccurate and, consequently, a violation of a conversion request will not amount to liability in terms of those documents31. If a lawsuit is filed with the claim of performance of conversion (and consequently possession of a corporation’s share in accordance with CBs) request, which is the primary goal of a CB holder, the corporation will have to issue new shares, because of the lawsuit, and those shares will also be transferred to the CB holder32.
F. Failure To Use Conversion Right
The feature that distinguishes CBs from ordinary bonds is their ability to be converted into shares. Through this, they provide an opportunity for the CB holder to join the corporation as a sharholder. If this right is not utilized, there would be no difference between a CB and an ordinary bond. Accordingly, the mechanisms to which the bonds are subject (interest etc.) could also be used here. In addition, pursuant to Article 14 of the Communiqué, the interest and payment terms are determined by the issuers
VIII. EVALUATION ON BENEFITS AND DISADVANTAGES OF CONVERTIBLE BONDS
CBs are issued in order to provide the capital needed by joint stock companies. It is a solution for joint stock companies to fund their needs without having to sell their shares, to take out bank loans, which come with high interest rates, or to increase capital from other external sources. The optional33 rights offered by CBs is advantageous for investors, who may choose to become shareholders on the due date or to not be shareholders by taking the principal and interest. CBs are especially beneficial to companies in their establishment phase for providing financing and therefore benefiting the development of the company34. There are also advantages for investors in these newly established companies. An investor may become a shareholder in a company they previously invested in and whose value has increased on the conversion date, and has the right to reclaim the debt receivable with interest. Through CBs, investors avoid risks arising from the shares of a company at its first stages of establishment losing value or failing to gain enough value. Investors also have the choice of becoming shareholders in the company when the company becomes profitably attractive. Alternatively, CB holders have the right to transfer their CBs to a third party without waiting for the due date35.
CBs do come with some risks for the issuer and holder as well as benefits. There is a risk that the capital provided by an investor can lose value against inflation. However, the investors can avoid this by using their conversion right and becoming shareholders of the company. Another risk for investors is where they decide not to use their right of conversion, in events such as bankruptcy, investors may not be able to receive their receivables from the company. The risk in terms of shareholders is that if investors use their conversion right, the dividend rate may decrease due to the increase in the number of shares the company issues. With regards to the company, if investors use their conversion right, the structure of the company may change as the number of shareholders increases36.
IX. CONCLUSION
CBs are such bonds that give the bond holder the right to convert their CBs into shares of the issuing company or to receive the principal and interest. As this article has explained, in order for this process to begin, the general assembly of the issuing company must take a decision on the issue or the board of directors must be authorized. After this process and the compulsory CMB application process and approval, CBs can be sold. The sales process may be started with the announcement of the issuance document. CBs can be converted into shares with or without collecting requests in advance. As pointed out, CB holders are not obliged to use their conversion right. They may choose to receive payments of principal and interest. This provides an assurance to investors, encouraging them to purchase the CBs of newly established companies. In the event that shares of a newly established company or a company going through a risky investments process do not increased in value, the CB holder has a choice not to be a shareholder in such an unprofitable company, but rather to take its principal and interest. With regards to issuing companies, the significant benefit of CBs is that they are less costly than the traditional method of financing. This mechanism, which has recently risen in demand in Turkey, is expected to become a more preferred option in the years ahead.
BIBLIOGRAPHY
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AHRI ÖZSUNGUR, Rüçhan Hakkının Kullanılmaması ve Sermaye Artırımında Pay Taahhütlerinin Kısmen Yerine Getirilmesi Sorunu,
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FOOTNOTE
1 Official Gazette dated 14/2/2011, numbered 27846 (OG).
2 Amended by OG dated 07.6.2013, numbered 28670 and OG dated 18.02.2017, numbered 29983 “Communiqué on Amending the Communiqué on Debt Securities (II- 31.1)” and OG dated 08.03.2017, numbered 30001 “Communiqué on Amending (VII-128.7c) the Communiqué on Debt Securities (VII-128.7)” and OG dated 13/6/2020, numbered 31154 “Communiqué on Amending (VII-128.8.a) the Communiqué on Debt Securities (VII-128.8).
3 Reha Poroy, Ünal Tekinalp, Ersin Çamoğlu, Ortaklıklar Hukuku II, 13. Basım, Vedat Yayıncılık, İstanbul, 2017, p. 102.
4 Nihan Zeynep Aksan, “Paya Dönüştürülebilir Tahviller”, İstanbul Bilgi Üniversitesi 2018, p.19
5 Oğuz Kürşat Ünal, SPK. ve TK.’nda Tahviller, Gazi Üniversitesi, Hukuk Fakültesi Dergisi, Vol. VII, issue. 1-2, 2003, p. 3
6 Aydın Zevkliler, K. Emre Gökyayla, Borçlar Hukuku: Özel Borç İlişkileri, 12. Bası, Turhan Kitabevi Yayınları, Ankara, 2013, p. 16-17.
7 Saim Kılıç, “Sermaye Piyasasında Yatırımcının Korunması: Güvence Fonları”, Sermaye Piyasası Kurulu, Yayın No: 95, 1997, p. 7.
8 Aksan, p. 10-11.
9 Aksan, p.12
10 Serdar Karababa, Hisse Senedi Yatırımcısının Korunması, Seçkin, Ankara 2001, p. 40.
11 Tekinalp /Poroy /Çamoğlu, Ortaklıklar II, p. 187.
12 OG dated 30/12/2012, numbered 28513
13 Tekinalp /Poroy /Çamoğlu, Ortaklıklar II, p. 189.
14 Tekinalp /Poroy /Çamoğlu, Ortaklıklar II, p.729.
15 Mustafa İhtiyar, Sermaye Piyasası Hukukunda Kamuyu Aydınlatma İlkesi, Beta, İstanbul, 2006, p. 121.
16 Gökçen Turan, Türk Hukukunda İzahnameden Doğan Hukuki Sorumluluğun Esasları, Gazi Üniversitesi Hukuk Fakültesi Dergisi, Vol.XX, 2016, issue. 1, p. 193.
17 Aksan, p.86, 87
18 OG dated 8/12/2001, numbered 24607.
19 Aksan, p. 140.
20 From Aksan, p. 104; Mustafa İsmail Kaya, Şartlı Sermaye Artırımı, Yetkin, Ankara, 2009, p. 32.
21 “Article 463- (1) General assembly, because of the newly issued bonds or similar debt instruments, decides that capital be conditioned by providing the right to take new shares to company’s or group of companies’ creditors or workers by using the right of Exchange or purchase stipulated in articles of association. (2) Capital increases automatically to what extent and when the right to Exchange or the right to purchase is used and capital obligation is fulfilled by setoff or payment.”
22 Aksan, p. 105.
23 OG dated 22.06.2013, numbered 28865
24 For further information: Draft Turkish Commercial Code, Intents of the Law (In Turkish), p. 168, https://www2. tbmm.gov.tr/d23/1/1-0324.pdf (Access Date: 13.07.2020).
25 Aksan, p.107.
26 For a more detailed explanation: Aksan, p. 122-123.
27 Fahri ÖZSUNGUR, Rüçhan Hakkının Kullanılmaması ve Sermaye Artırımında Pay Taahhütlerinin Kısmen Yerine Getirilmesi Sorunu, Hacettepe Hukuk Fakültesi Dergisi, Vol. 4, Issue 2, 2014, p. 148.
28 Aksan, p. 127.
29 Aksan, p. 133-134.
30 Aksan, p. 139.
31 Aksan, p. 143.
32 Aksan, p. 144.
33 Huriye Kubilay, Hisse Senetleriyle Değiştirilebilir Tahviller, Dokuz Eylül Üniversitesi Yayınları, Ankara, 1986. p.14.
34 Aksan, p.47.
35 Aksan, p.47.
36 H. Ercüment Erdem, Pay Senetleri ile Değiştirilebilir Tahviller, Ankara, 1988, p. 708
