Equiniti ezine September 2012

EZINE > september 2012 inside this issue: Up to speed Peter Swabey runs through the latest UKLA updates and the Kay Review ESP Portal comes of age with BT maturity Equiniti and BT guide 20,000 participants through their choices Dream transfer for Imagination Technologies Assistant Company Secretary Dean Bradford hails a seamless share registration transfer Equiniti Business Performance Follow our progress in Quarter 2

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Peter Swabey

Equiniti Company Secretary runs through some important recent changes with the UKLA’s Helpdesk and Notes and introduces the Kay Review

Up to speed: An industry update with Peter Swabey Changes at the UKLA Helpdesk 1 The Financial Services Authority (FSA)

has published the third edition of Primary Market Bulletin, which is “dedicated to communicating the practical implications of forthcoming changes to the UKLA Helpdesk,” due to come into effect from Monday 1st October. Back in March, the FSA set out in the first edition of Primary Market Bulletin their proposals for providing individual guidance. They consulted on this in Quarterly Consultation paper No 32 which closed on 6th May. This latest edition of Primary Market Bulletin provides an update on these proposals, and details some of the resulting operational changes, including how they will affect the UKLA Helpdesk service. These latter changes, in particular, may be of interest to issuers.

With effect from 1st October, the FSA will: no longer accept requests for individual guidance that are made on a ‘no names’ (where the name of the issuer is withheld) basis; The consultation responses indicated that the issuers often prefer enquiries to be made on this basis, but the FSA sees no reason for this to be the case, given the requirement for issuers to be ‘open and co-operative’, which they interpret to include “informing us at appropriate times of relevant transactions on a named basis”.

Helpfully though, the FSA indicates that: “We do not consider that contacting the UKLA in this way creates a disclosure obligation under the DTRs where one would not otherwise exist.”

■■

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■■ only accept queries other than from sponsors in writing, on a named basis, which the UKLA, except in the case of simple queries, would respond to in writing within the current turnaround times;

accept queries from sponsors via a Sponsor Service Enquiry Line (SSEL) which will be established for this purpose; ■■

This represents a significant change from the initial proposal, reflecting the consultation feedback from a number of sponsors that it is helpful for them to discuss complex technical issues with the UKLA at an early stage of the process. The FSA will now “allow sponsors to submit oral queries on a named basis regarding technical issues which arise during the provision of a sponsor service on a transaction”, although continued on page 3 2

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Peter Swabey they do emphasise that, given that such requests will usually be complex and significant, “it is likely that in the majority of cases a written submission will be required before we could provide definitive individual guidance.”; ■■ receive requests orally in certain limited cases where there was exceptional urgency (the UKLA would retain a stand-alone telephone line, the Emergency Helpline, for this purpose).

With effect from Monday 1st October, the new UKLA helpdesk will operate the following telephone lines (the numbers will be published on the FSA website before that date): Line 1 – General administrative queries for non-technical questions such as how and where to obtain copies of rulebooks, forms etc.

Line 2 – Listing applications for “Documents to be submitted when applying for admission to listing, timing of listing applications, block listing applications, listing fees and other general queries in relation to LR3”.

Both these lines will be open from 8am until 6pm (Monday to Friday).

Line 3 – Emergency Helpline for “contacting the UKLA in relation to urgent live market situations, such as suspensions (including those in connection with reverse takeovers and companies in severe financial difficulty), and urgent queries relating to disclosure of inside information”. The FSA indicates that, “it is our intention to provide coverage on the Emergency Helpline where reasonable, outside of office hours”.

The SSEL mentioned before will be accessed via the General administrative queries line, and will be available from 9.30am to 5pm Monday to Friday. The FSA notes that it will reject queries made on a ‘no names’ basis; that it “expects to deal with experienced members of the sponsor firm”; that it “does not expect the SSEL to be used as the first port of call for any query, rather, the query must have been considered from within the sponsor firm before calling the UKLA Helpdesk”; and that it will not discuss matters that are already under consideration.

UKLA notes 2 The FSA has not updated the UKLA

Notes since they were introduced in 2010.

In July, it announced that it has now decided

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to create the ‘UKLA Knowledge Base’, which is intended to be a single repository of all technical guidance available from the UKLA in respect of the Listing Rules and other Part 6 rules and will be launched when the consultation exercise is complete.

The UKLA Knowledge Base will include explanations of how certain issues are to be addressed and other information that may be useful to market practitioners.

The UKLA Notes form a key element of the UKLA Knowledge Base, which the FSA intends to keep current so that it remains relevant and useful to market participants.

A comprehensive exercise of reviewing and revising the existing UKLA Notes has been undertaken in preparation for the launch of the UKLA Knowledge Base. In future, as the Notes require updating, the FSA/UKLA will consult on proposed revisions in the Primary Market Bulletin. Following a consultation period and having regard to the responses received, they will publish new or revised Notes on their website in the new format.

There are approximately 72 Notes, which have been re-formatted on this basis and can be accessed at: www.fsa.gov.uk/library/ policy/guidance_consultations/2012/1208 continued on page 4 3

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Peter Swabey In this edition of the bulletin they have introduced three new Procedural Notes and eight new Technical Notes. These are new Notes that have not been previously published. The following are likely to be of most interest to issuers:

Block listings

A Procedural Note relating to ‘Block Listings’ will be published to provide important contextual information that they hope will provide issuers and advisers with a greater understanding of the appropriate use of block listing facilities. The Procedural Note explains the current approach and some practical considerations that are relevant when submitting an application to the FSA for a block listing. The proposed Procedural Note is set out in UKLA/PN/907.1.

The UKLA decision-making and review process

A Procedural Note regarding the UKLA decisionmaking and review process will be published.

The feedback that was received from the 2010 Market User Survey made it clear that there was insufficient market understanding of the relevant procedures regarding the internal decisionmaking and review process. This Note aims

to provide market participants with a greater understanding of how decisions are made and escalated internally, as well as details on how to request a review of decisions which relate to the Listing Rules, Prospectus Rules and Disclosure and Transparency Rules. The proposed Procedural Note is set out in UKLA/PN/908.1.

Approval of circulars

There have been instances where circulars that require UKLA approval have been published

by Premium listed issuers without obtaining the necessary approval. It appears that this has resulted from a misunderstanding of what constitutes ‘unusual features’ under LR 13.2.2R(3), so a Technical Note will be issued to clarify the approach in this area, which is set out in UKLA/TN206.1.

Equality of treatment – Listing Principle 5

While enshrining the principle of equality of treatment, Listing Principle 5 also allows groups of shareholders to be treated differently where they are in a different position. However, the UKLA has become aware that the application of this principle to the treatment of small shareholders in certain

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share capital reorganisations has been poorly understood. They propose to add a Technical Note on this topic. The Note will make clear that they are concerned by transactions where a share consolidation is immediately followed by a share split with the express intention of removing small shareholdings from the share register, as it is possible that such reorganisations can be inconsistent with Listing Principle 5. The proposed Technical Note is set out in UKLA/TN207.1.

Long-term incentive schemes

The UKLA is occasionally asked whether LR 9.4.2(2) can apply to an arrangement to facilitate the retention or recruitment of a director. Through such queries they believe there may be a misunderstanding around the application of this rule, and hence are proposing to publish a Technical Note on this rule which is set out in UKLA/TN208.1.

Related party transactions – modified requirements for smaller related party transactions The UKLA frequently receives letters to address LR 11.1.10R, where issuers enter into smaller related party transactions. LR

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Peter Swabey 11.1.10R(2)(b) requires a written confirmation from an independent adviser that the terms of the proposed transaction or arrangement with the related party are fair and reasonable as far as the shareholders of the listed company are concerned. Recently, several independent advisers have sought to use language that could be interpreted as limiting the scope of the opinion provided or the use by the UKLA of such letters. They propose to publish a Technical Note to clarify how they would expect this listing rule to be addressed in UKLA/TN308.1.

Related party transactions – issuer’s undertaking

LR 11.1.10R(2)(c) requires the issuer to provide the UKLA with an undertaking to include details of the relevant related party transaction or arrangement in the listed company’s next published annual accounts. During 2011 a sample of issuers was taken, where the UKLA was aware that a smaller related party transaction had taken place, and a review of the Annual Report and Accounts was then conducted to check compliance with this rule. The review highlighted a number of areas of concern.

Some accounts stated the identity of the related party but not the fact that it was a

related party. Although consideration for the transaction was disclosed in most cases, in certain cases a figure for total consideration paid to or by the related party was not. In other cases issuers did not adequately disclose all other relevant circumstances. It was only with prior knowledge of the detail of these transactions that they were able to identify them as such. In general, there was a lack of clarity in the way that the information was disclosed and in certain cases the information was disconnected or disjointed, which made it difficult to find all the relevant detail or to identify the transaction in question, even with prior knowledge. In the light of these findings they propose to set out some basic guidelines in a Technical Note to ensure that disclosure standards improve. LR 11.1.10R does not specify the format the disclosure should take.

However, they believe clarity is essential so as not to be misleading and to enable identification as a related party transaction under the Listing Rules. A number of the disclosures reviewed failed to fully meet the relevant Listing Rule requirements. The FSA may consider disciplinary action if it became apparent that standards were not improving. The proposed Technical Note is set out in UKLA/TN/309.1.

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The Kay Review 3 Professor John Kay has published his final

report on the review of UK equity markets and long-term decision-making.

An article was published in the Equiniti David Venus bulletin on 14th August where John Heaton considered the implications for UK companies, but, given the holiday season, we thought it worth providing another link to it https://www.equiniti.com/MediaCentre/ezine/ Pages/TheKayReview.aspx

FOR MORE INFORMATION Please contact peter.swabey@equiniti.com continued on page 5 BT MAturity 6

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BT Maturity

Equiniti and BT successfully combine to keep 20,000 participants fully informed of their choices

ESP Portal comes of age with BT maturity Equiniti’s pioneering ESP Portal has been put through its paces while handling one of BT’s largest ever ESP (sharesave) maturities involving 20,000 employees.

BT launched the plan in 2009 in less than two weeks - the 10% discount to the then current share price meant that the three-year option price was 68p. In fact, the plan was so popular applications were scaled back.

The maturity date was 1st August but a huge amount of work was done by BT and Equiniti well in advance to guarantee that the whole process was easy, streamlined and – most importantly for everyone concerned – successful!

BT and Equiniti worked in partnership to formulate a communications campaign to ensure that participants were aware and fully

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BT Maturity informed of all the choices available to them.

Equiniti Creative and Xafinity Skillbase ran a number of focus groups to share and discuss various communications strategies to see what worked best. The results formed the basis for the maturity booklets and messages that were sent to participants. BT and Equiniti also ran a number of e-chats and knowledge calls on BT’s intranet, as well as providing plenty of FAQs and Helpsheet examples, to ensure that participants had all the information they needed at their fingertips.

Finally, as one of the first large-scale maturities to use Portal, the site was thoroughly tested again and again to ensure that it was user-friendly and intuitive to use.

A key feature of the Portal was that it allowed for shorter processing times, which meant that Equiniti could give participants the option to amend their instructions until just four working days before the maturity date.

With a 1st August maturity date and an ex-dividend date of 8th August (the record date was 10th August), the online facility, coupled with quick processing times, meant that transfers to spouses and ISAs were completed in time for the dividend to be paid where the participant wanted.

Everyone’s hard work paid off and the combination of the communications campaign and the use of Portal produced some spectacular results: ■■ More than 82% of participants used the Portal in the four weeks leading up to the first maturity date to give instructions over nearly 100 million shares ■■ Only 20% of shares acquired on maturity were sold immediately

I am very happy with the way the maturity process has been handled.

It was the first time we have had the facility for an online transfer to spouse, an online transfer to the Equiniti ISA and also an online transfer to the BT Retirement Saving Scheme

■■ More than 60% of shares transferred to BT’s corporate sponsored nominee, EasyShare ■■ Almost

9% transferred shares to a spouse/ civil partner ■■ More

than 3% of shares transferred to almost 800 (new and existing) Equiniti ISAs ■■ As a first, participants could transfer maturing shares to the BT pension scheme, online.

The sale on maturity took several days and during that time, employees were kept up to date with regular updates on BT’s intranet and

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Equiniti of course answered any queries when employees contacted them.

Francis O’Mahony, BT’s Head of Employee Share Plans and Share Registration said: “I am very happy with the way the maturity process has been handled. It was the first time we have had the facility for an online transfer to spouse, an online transfer to the Equiniti ISA and also an online transfer to the BT Retirement Saving Scheme.”

BT communicated with participants before the beginning of this tax year to remind them continued on page 8 7

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BT Maturity of the 2012/13 annual ISA limits and CGT exemption limit in relation to the maturity and provided information in bite-sized chunks on the intranet with working examples of what transferring to ISA and pension would mean and an explanation of how to calculate CGT exposure.

“Given the size and the potential gains in this plan, we had a large number of people who were potentially liable to Capital Gains Tax if they sold all their shares straight away.

Portal made it much easier for people to maximise the Capital Gains Tax advantages of transferring shares to an ISA and transferring shares to a spouse/civil partner,” said Francis.

Francis, who has worked at BT for more than eight years and was previously a tax inspector at HMRC, said the response from BT staff showed the maturity information provided was effective.

“The results speak for themselves. Many participants made multiple choices and, for instructions received for the first maturity date, employees sold only 20% of the shares under option. So people have considered the communications sent to them, the many choices available and have thought about the benefits of keeping shares.”

With annual saveshare maturities, and the 2009 five-year plan maturing in 2014 (61p option price), there are plenty of opportunities for Equiniti and BT to work together to ensure the process runs even smoother and to do even more.

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FOR MORE INFORMATION Please contact your relationship manager

imagination technologies page 9

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Imagination Technologies

Assistant Company Secretary at Imagination Technologies Dean Bradford hails a seamless share registration transfer

Dream transfer for Imagination Technologies With the FTSE 100 beckoning and a rapidly expanding workforce, Imagination Technologies – a global leader in multimedia and communication technologies – turned to Equiniti to ensure its shareholders a smooth ride through exciting times.

The Hertfordshire-based firm, which is best known for smart phone graphics and Pure DAB digital radios, transferred its share registration business to Equiniti in June and hasn’t looked back.

In the case of Assistant Company Secretary, Dean Bradford, as an employee of a large registrar for nearly 15 years, his experience was invaluable for the transition.

Dean started at Imagination Technologies in September 2010 and was responsible for instigating the move to Equiniti.

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Imagination Technologies Even during the tender process Dean and Company Secretary Tony Llewellyn felt they were building a strong relationship with staff at Equiniti.

“We liked what we saw,” says Dean. “The reasons we came to Equiniti were: a proven track record, several great accolades, value for money (as obviously cost is always an issue), but there were also some key functionalities that we really liked the look of, such as the share portal, which we don’t currently have for our employees. We were looking to have a one-stop shop so that an employee can log on, view their ordinary shares, view all their employee shares such as SAYE and SIP and their share awards.”

Imagination Technologies’ graphics are used in 95 per cent of smart phones.

Around 10 years ago the company employed only 50 people. This had grown to 600 two years ago and today it employs 1,100 staff worldwide from headquarters in Kings Langley with offices in San Diego, USA and Pune in India.

The company is expanding all the time and has taken over communications technology firm Caustic Professional and HelloSoft – a supplier of IP for video and voice over internet protocol and wireless LAN.

Equiniti have delivered on exactly what they promised, and we are sitting here with the benefit of hindsight feeling very comfortable and confident that we have made the right decision.

“We are making new acquisitions all the time,” says Dean.

“Our share price has reflected that as well, we were just 55p in 2008 and hit £7.34 in April of this year.”

With his experience working on the other side of the fence, Dean says he was impressed with how smooth the transition to Equiniti was.

“We didn’t have one problem, it was seamless, it really was. There could have been data issues. Having done migrations myself, I know that data migration is often a problem. File formatting data from one registrar to another can cause problems. But it was handled by Equiniti, we didn’t have to

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intervene, we were kept informed of the transfer and it was done on schedule.”

The Equiniti team had a tight timescale of just six weeks for the migration in order to get the work completed ahead of the AGM, which is to be held in a brand new multimillion pound building opening this month (September).

With an original deadline of 7th July the migration was actually delivered a week ahead of schedule over the weekend of 30th June and 1st July.

Throughout the process, Dean says he could not fault the level of service Equiniti delivered.

“We were invited to company secretary forums that they hold for FTSE 250 companies with Equiniti, which I found very, very useful.

We have attended User Group forums where we have spoken with like-minded people in the industry doing the same job as we do – which we didn’t have before. We also have a lot of interaction with Equiniti from the service delivery people to the Relationship Manager to the Senior Relationship Manager and we just feel like we’re being looked after.”

Following the success of the share registration migration, Dean says Equiniti continued on page 11 10

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Imagination Technologies are now in line to take on some of the firm’s employee scheme work.

“We don’t currently run a SIP but we went to the board of directors in July to ask for approval to put it to shareholders in September. So we will hopefully be passing a resolution in September to have a SIP. If we get that approved and in, then Equiniti will also be handling that.”

While the service offered by Equiniti was crucial, Dean says the confidence he personally had in the company and the people also helped.

“Tony trusted my judgement, and said, ‘if you think Equiniti can do a better job I trust your judgement’. And that gave me the comfort.

They’re good people, they have been in the industry since 1955, I know how they work.”

He says Imagination’s employees are starting to feel the benefits of the relationship.

“At the moment they haven’t had much exposure because it is in its infant days, but where I think they will add value is when we get the share portal live, which we are hoping to launch in the Autumn. Then the shareholders will have exposure to all of their shares and it will be a wonderful opportunity for Equiniti to showcase what they’ve got.”

Imagination Technologies claims to be the first FTSE 250 company to actively promote its ISA for SAYE employees.

With some employees making profits of more than £86,000, they were encouraged to open share ISAs to minimise Capital Gains Tax. The ISAs were originally launched through Natwest Stockbrokers. Since then the Equiniti Group has acquired the Corporate and Employee Services dealing division from NatWest Stockbrokers. Now all share dealing and investment and ISA work is being dealt with by Equiniti.

“That was extremely successful – we opened over 250 ISA accounts with £2.7m worth of funds in management, and made a Capital Gains Tax saving of £680k for our employees. A definite benefit which Equiniti were quite integral to.”

Dean says the Equiniti team’s professionalism and attention to detail won the contract and is already reaping rewards for colleagues at Imagination Technologies.

“Equiniti have delivered on exactly what they promised, and we are sitting here with the benefit of hindsight feeling very comfortable and confident that we have made the right decision.

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“We see this as a long-term relationship, and hope we have a happy relationship for many years to come.”

For more information on this TOPIC Please contact your Relationship Manager. dashboard page 12

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dashboard Service levels remained strong throughout the second quarter of 2012 with targets exceeded in cutomer contacts, transactions and complaints.

Equiniti Business Performance In the information below we give details of our Contact Centre Service Levels, Transaction Processing Service Levels, Customer Complaint Quarterly Trends and Equiniti Developments.

Contact Centre Service Level Standards – Quarterly Trends The Contact Centre achieved an overall service level of 86% against the target of 80% with 529,794 calls handled in the three month period.

98.2% of all calls presented were answered.

During Q2 the "one hit" letter of indemnity service was introduced, enabling Shareholders to pay for their replacement share certificate over the telephone. The five key call drivers can now be processed by agents rather than being "handed off" which reduces the number of “follow-up” calls.

As well as improving the customer experience it also offers our agents more ownership of the call.

Focus remains on ensuring that a high quality service is provided to our customers at all times.

Equiniti Contact Centre Service Standards Quarterly % Total Calls Answered

Average Monthly Volumes of Calls Received

Service Standard

% 100

250k

98

230k

96

210k

94

190k

92

170k

90

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150k Q2 10

Q3 10

Q4 10

Q1 11

Q2 11

Q3 11

Q4 11

Q1 12

Q2 12

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dashboard Transaction Processing Service Level Standards – Quarterly Trends Service level performance remained strong throughout the Quarter achieving 99.4% against the service standard of 95%.

Volumes increased as expected from Q1, however as a number of key tasks activities launched earlier this year volumes were significantly down when compared to the same period last year.

Volumes are expected to drop in Q3 as we move out of the peak task season. A total of 274 Dividend tasks were completed in the quarter with a combined payment value of c.ÂŁ6.4bn.

In the 2012 Capital Analytics survey we achieved a remarkable 99% satisfaction rating for our dividend service.

Customer Complaint Quarterly Trends There was an excellent reduction in incoming complaint levels compared to transaction volumes in Q2 with an average of only 0.023%. Incoming complaints are 10% lower and the number upheld as justified represents only 29.5% of all complaints - lower than the 41% upheld during Q2 2011. Chief Executive upheld complaints reduced by 25% compared to Q2 2011 and no press complaints were received. FOS referrals fell by 24% and the associated fee & compensation costs fell 33% from 2011. These trends show the effectiveness of quality improvements that have already been delivered and there will be further initiatives this year.

Quality champions are using the CAPA process to establish root cause, drive improvements and share best practice.

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Equiniti Transaction Service Standards Quarterly Average Service %

Quarterly Average Volumes processed

Service Standard

% 100

1,400,00 0

98

1,200,000

96

1,000,000

94

800,000

92

600,000

90

400,000 Q2 12

Q2 10

Q3 10

Q4 10

Q1 11

Q2 11

Q3 11

Q4 11

Q1 12

Equiniti Justified Complaints as % of Transaction Volumes Equiniti Justified Complaints as % of Transaction Volumes % 0.04 0.03 0.02 0.01 0.00 Q2 10

Q3 10

Q4 10

Q1 11

Q2 11

Q3 11

Q4 11

Q1 12

Q2 12

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Dashboard Equiniti Developments Q1-Q2 2012

Share Registration

■■ Pilot

campaigns promoting the improved International Dividend Payment Service have been launched, with further launches planned, extending the range and degree of insight into influencing shareholder responses and behaviour.

■■ Administration fee for Lost Certificates notification by debit card launched August 2012.

Employee Share Plans

■■ Almost

50% of clients successfully migrated to ESP portal, roll out continues throughout the rest of this year.

■■ A

high number of participants taking advantage of real time SIP sales, with very positive feedback on the experience. More clients planned to go live throughout the next quarter.

Investment Services

■■ System Development testing and pre-launch planning for Executive Share Dealing Services progressed for the August launch.

■■ Transfer of RDS ISA Book into Investment Services successful.

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General ■ The

results from the 2012 Capital Analytics survey show further strong improvement in our scores and we are the only registrar to have improved our overall satisfaction score compared to 2011.

■■ Dividend

Planning team have completed the testing of the new functionality required for the new £20m individual payment BACS cap limit being introduced from October 2012.