analysis of the changeover from french …analysis of the changeover from french gaap to ifrs...

ANALYSIS OF THE CHANGEOVER FROM FRENCH GAAP TO IFRS 1 –BACKGROUND 2 – PRINCIPLES ADOPTED TO PREPARE THE GROUP’S FIRST FINANCIAL STATEMENTS IN

ACCORDANCE WITH IFRS 3 – IMPACT ON THE BALANCE SHEET AT 01/01/2004 4 – IMPACT ON THE BALANCE SHEET AT 30/06/2004 5 – IMPACT ON THE INCOME STATEMENT AT 30/06/2004 AND 31/12/2004 6 – IMPACT ON THE CASH FLOW STATEMENT AT 30/06/2004 AND 31/12/2004 7 – IMPACT ON THE SHAREHOLDERS' EQUITY CHANGES STATEMENT AT 01/01/2004, 30/06/2004 AND 31/12/2004

> ANALYSIS OF THE CHANGEOVER FROM FRENCH GAAP TO IFRS

BACKGROUND In accordance with EC regulation 1606/2002 of 19 July 2002 of international accounting standards, GL events group consolidated financial statements for the period ending 31 December 2005 will be prepared according to IAS/IFRS applicable as of 31 December 2005 as approved by the European Union. The first complete financial statements to be published according to these new accounting standards will be for the 2005 financial period with a comparison for 2004 established on the basis of the same standards, including IAS 32 and IAS 39. In light of the publication of a comparison for 2004, and the recommendation of the French financial market authorities (AMF) concerning financial disclosures during the transition period, GL events has produced a financial report for 2004 for the changeover to IAS/IFRS presenting the forecasted impact of IFRS on: • The balance sheet on the transition date of 1 January 2004, on which the final impact of the

transition will be recorded under shareholders' equity when the 2005 consolidated financial statements are published;

• an analysis at 31 December 2004 of the balance sheet prepared on the basis of French GAAP vs. IFRS ;

• an analysis of the interim income statement at 30 June 2004 prepared on the basis of French GAAP vs. IFRS;

• an analysis of the 2004 income statement prepared on the basis of French GAAP vs. IFRS; • an analysis of the interim cash flow statements at 30 June 2004 prepared on the basis of French

GAAP vs. IFRS; • an analysis of the cash flow statement at 31 December 2004 prepared on the basis of French

GAAP vs. IFRS; • an analysis of the shareholders' equity changes statement at 1 January 2004 prepared on the

basis of French GAAP vs. IFRS. The IFRS financial statements prepared for the purposes of comparison have been reviewed by the Audit Committee and audited by the Statutory Auditors. PRINCIPLES RETAINED TO PREPARE THE GROUP’S FIRST FINANCIAL STATEMENTS IN ACCORDANCE WITH IFRS The preparation of IFRS 2004 financial information has been based on standards and interpretations published at 31 December 2004 and adopted by the European Union in addition to the optional provisions retained by Management of GL events. The optional provisions retained by Management and exemptions used are those GL events expects to adopt for its first consolidated annual financial statements in 2005 under IFRS. Subsequent changes of IFRS in 2005 that might be introduced could nevertheless result in modifications to the opening balance sheet of 1 January 2004 and the 2004 financial statements restated according to IFRS when the 2005 consolidated financial statements are published. For 2004 financial information, GL events has applied all IFRS / IFRIC standards and interpretations whose application is mandatory as of 1 January 2005 and in advance for standards IAS 32 and IAS 39 concerning financial instruments starting 1 January 2004. For the treatment of public service management contracts and venue concessions for exhibitions centers, the standard is still under discussion. Because the IFRIC has published draft interpretations on 3 March 2005 for the treatment of these activities, final approval by the IASB is expected in the second half of 2005. At present, the treatment of public service management and concession agreements of the Group does not fall under the scope of this standard. Pending the


publication of the final interpretations of the IFRIC, GL events has opted to maintain, at this stage, in the balance sheets prepared on a basis of IFRS at 1 January 2004 and 31 December 2004, the accounting policies it currently applies in its financial statements prepared in accordance with French GAAP, i.e. along the lines of an operating lease. Restatements in connection with the first-time application of IAS / IFRS As provided for under IFRS 1 First-time application of international financial reporting standards, for its opening balance sheet, the Group has decided to:

- continue to apply historical costs for noncurrent assets and in consequence not proceed with their remeasurement;

- apply IAS 32 and 39 on financial instruments as of the 2004 financial year; - restate business combinations occurring prior to 1 January 2004 ; - opt for the elimination of translation adjustments at 1 January 2004, relating to translation

into euros of the financial statements of subsidiaries with a another operating currency. - apply IFRS 2 share-based payment for plans implemented after 7 November 2002.

Impact of the changeover to IAS / IFRS The principal impact of the application of the new standards, beyond changes of form in the presentation of financial statements, is relatively limited and concern: - goodwill that as of 1 January 2004 will no longer be amortized; - the cancellation of deferred expenses. Presentation of principal changes made pursuant to the application of IAS / IFRS IAS 1 - Presentation of financial statements GL events has decided to apply the recommendations of the of the national French accounting body (Conseil National de la Comptabilité) 2004-R.02 of 27 October 2004 concerning the presentation of the financial statement, cash flow statement and changes in shareholders' equity statement. This recommendation is in compliance with the principles set forth in IAS 1 Presentation of Financial Statements. Income statement Given business practice and the nature of the activity, the presentation of the income statement by nature of income and expenses, considered preferable to presentation by function, was maintained. Key modifications having an impact on the income statement are:

- the notion of operating profit and current operating profit, whereby the difference between is that other operating income expenses must include only a very limited number of items, unusual and infrequent involving a significant amount, generally subject to financial disclosures;

- the elimination of extraordinary items. Balance sheet The principal changes include: - the breakdown of assets between current and noncurrent; - the inclusion of minority interests in shareholders' equity. Cash flow statement No modifications resulting from the change in accounting standards have been made to net cash as the only differences in relation to the previous presentation concerned reclassifications and the introduction of further detail.


IFRS 3 –Business combinations Goodwill recorded on consolidation under French GAAP is included with other goodwill. The revised IAS 36 eliminates the amortization of goodwill that is instead henceforth tested annually for impairment (and whenever there is evidence of impairment) for intangible assets with unspecified lifespans and for goodwill resulting from a business combination. The amortization recorded under French GAAP for 2004 was accordingly reversed under IFRS. As indicated in note 1 of the "Methods of Valuation" of the consolidated financial statements (page 64 of the 2004 annual report), impairment tests for intangible assets are carried out on the basis of the discounted cash flow method previously implemented by the Group. IAS 38 - Intangible assets Pre-opening and start up costs that do not meet the criteria under IAS 38 to be capitalized are expensed. Under French GAAP, the expenses were capitalized and amortized over a period of three to five years. The net value at 1 January 2004 of pre-opening and start up expenses were eliminated by a charge to shareholders’ equity. The treatment is identical for deferred expenses that do not meet the criteria under IAS 38 to be capitalized. IAS 16 – Property, Plant, equipment Property, plant, equipment continue to be recorded in the balance sheet at their historical acquisition cost. They are accordingly not subject to remeasurement. In light of procedures applied in prior years, the application of IAS 16 Property, Plant, Equipment has no impact on the Group financial statements. IFRS 2 – Stock-options IFRS 2 Stock-Based Payment, published in February 2004, concerns the transactions carried out with personnel or other third parties or involving shares. Its application to GL events concerns solely Stock options granted to personnel. As allowed for under this standard, only options granted starting 7 November 2002 have been taken into account. IAS 39 –Financial instruments Financial instruments are recorded at fair value. Out of the total financial instruments used by the group, a single fair value hedge qualified as speculative in respect to IAS 39 was identified. In consequence, gains or losses on remeasurement to fair value are recorded under net profit or loss for the period. The other instruments are cash flow hedges whose fluctuations in value will be recognized as changes in reserves for the effective portion and as changes in the income statement for the ineffective portion.

> IMPACT ON THE BALANCE SHEET AT 01/01/2004

ASSETS 01/01/04 Net IAS 1 IAS 38 IAS 38 IFRS 3 IAS 39 IFRS 1

01/01/04 Net

(€ thousands) French gaap

reclassification

preopening costs

start-up costs and deferred charges

goodwill amortizatio

n

financial instruments

currency translation adjustment

IFRS

Goodwill 96,596 185 96,780

Other intangible fixed assets

2,787 (320) (6) 2,461

Land and constructions 9,623 9,623

Other tangible fixed assets 9,383 9,383

Equipment for rental 52,917 52,917

Deferred taxes 2,089 1,290 181 3,560

Long term investments 3,738 3,738

NON CURRENT ASSETS 175,045 2,089 970 175 185 178,463

Inventories and work in progress

11,345 11,345

Trade receivables 84,116 84,116

Other receivables 19,119 19,119

Deferred taxes 2,089 (2,089)

Prepaid expenses 6,825 (3,365) (527) 2,933

Short term investments 43,904 43,904

Cash and cash equivalents 11,735 11,735

CURRENT ASSETS 179,133 (2,089) (3,365) (527) 173,152

TOTAL 354,178 (2,395) (353) 185 351,615


LIABILITIES & SHAREHOLDER'S

01/01/04 IAS 1 IAS 38 IAS 38 IFRS 3 IAS 39 IFRS 1 01/01/04

EQUITY (€ thousands) French gaap

reclassification

preopening costs



n



IFRS

Share Capital 54,147 54,147

Consolidated Reserves 53,373 (1,916) (350) (592) (2,789) 47,727

Currency translation adjustment

(2,789) 2,789 0

Net profit / (loss) for the period

12,759 12,759

Group Shareholder's Equity

117,491 (1,916) (350) (592) 114,633

Minority Interests 2,989 (479) (1) 185 2,694

TOTAL SHAREHOLDER’S EQUITY

120,480 (2,395) (350) 185 (592) 117,327

Commitments and contingencies

4,105 (2,723) 1,382

Deferred Taxes 2,221 (2) (309) 1,910

Borrowings and other financial debt

63,738 901 64,640

NON CURRENT LIABILITIES

6,326 61,015 (2) 592 67,931


2,723 2,723


88,411 (63,738) 24,673

Bank overdrafts 10,853 10,853

Payments received on orders in progress

4,573 4,573

Accounts payable 54,604 54,604

Tax and social charges 34,688 34,688

Other liabilities 10,016 10,016

Accrued expenses 24,226 24,226

CURRENT LIABILITIES 227,372 (61,015) 166,356

TOTAL 354,178 (2,395) (353) 185 351,615


ASSETS 31/12/04 Net IAS 1 IAS 38 IAS 38 IFRS 3 IAS 39 IFRS 1

31/12/04 Net

(€ thousands) French gaap

reclassification

preopeningcosts



n



IFRS

Goodwill 106,167 2,099 108,267

Other intangible fixed assets

3,041 (2) 3,039

Land and constructions 8,896 8,896

Other tangible fixed assets 12,238 29 12,267

Equipment for rental 57,898 57,898

Deferred taxes 2,285 1,935 22 4,243

Long term investments 4,482 (106) 4,376

NON CURRENT ASSETS 192,723 2,285 1,935 49 2,099 (106) 198,985

Inventories and work in progress

13,533 13,533

Trade receivables 92,308 92,308

Other receivables 25,238 25,238

Deferred taxes 2,285 (2,285)

Prepaid expenses 8,679 (5,375) (129) 3,175

Short term investments 58,391 58,391

Cash and cash equivalents 15,852 15,852

CURRENT ASSETS 216,284 (2,285) (5,375) (129) 208,495

TOTAL 409,008 (3,439) (81) 2,099 (106) 407,481


LIABILITIES & SHAREHOLDER'S

31/12/04 IAS 1 IAS 38 IAS 38 IFRS 3 IAS 39 IFRS 1 IFRS 2 31/12/04

EQUITY (€ thousands) French gaap

reclassification

preopeningcosts



n



stock-options

IFRS

Share Capital 54,882 54,882

Consolidated Reserves 62,428 (1,916) (350) (622) (2,789) 58 56,810

Currency translation adjustment

(3,048) (9) 2,705 (352)

Net profit / (loss) for the period

14,014 (879) 281 1,873 178 18 (58) 15,428

Group Shareholder's Equity

128,277 (2,795) (68) 1,864 (444) (65) 0 126,768

Minority Interests 3,522 (699) 236 3,058

TOTAL SHAREHOLDER’S EQUITY

131,798 (3,493) (68) 2,099 (444) (65) 129,827


4,629 (3,017) (41) 1,571

Deferred Taxes 2,335 54 (13) (227) 2,150


86,910 671 87,581

NON CURRENT LIABILITIES

6,964 83,893 54 (13) 444 (41) 91,302


3,017 3,017


114,769 (86,910) 27,859

Bank overdrafts 8,883 8,883 Payments received on

orders in progress 2,355 2,355

Accounts payable 56,361 56,361

Tax and social charges 38,734 38,734

Other liabilities 16,935 16,935

Accrued expenses 32,208 32,208

CURRENT LIABILITIES 270,245 (83,893) 186,352

TOTAL 409,008 (3,439) (81) 2,099 (106) 407,481

> IMPACT ON THE INCOME STATEMENT AT 30/06/2004

(€ thousands) 30/06/04 IAS 38 IAS 38 IFRS 3 IAS 39 IFRS 2 IAS 1 IAS 1 IAS 1 30/06/04

French gaap preopening

costs

start-up costs and deferred

charges

start-up costs anddeferred

charges

goodwill amortization


reclassification charges transfer

reclassification production in

stock and fixed prod.

reclassification exceptionnal IFRS

Sales 181,660 181,660

Change in inventories 4,723 (4,723) 0

Other income 2,980 (864) (160) (729) 396 1,623

Operating income 189,362 (864) (160) (729) (4,723) 396 183,283

Raw materials used in production (16,708) 2,327 (14,381)

External charges (92,491) (2) 574 1,738 (90,180)

Taxes and duties (3,695) (3,695)

Personnel expenses, employee profit sharing

(48,073) (16) 154 658 (47,276)

Depreciation and provisions (12,755) 105 (586) (13,235)

Other operating expenses (1,237) (573) (1,810)

Operating charges (174,958) 0 103 (16) 729 4,723 (1,159) (170,578)

INCOME FROM ORDINARYOPERATIONS

14,404 (864) (56) (16) 0 0 (763) 12,705

Other operating income and expenses

29 29

OPERATING PROFIT 14,404 (864) (56) (16) 0 0 (734) 12,734

Financial income 1,327 323 1,650

Financial charges (2,228) (2,228)

NET FINANCIAL CHARGE (901) 323 0 0 (577)

INCOME BEFORE TAX 13,503 (864) (56) 323 (16) (734) 12,156

Exceptionnal income 448 (448)

Exceptionnal charges (1,182) 1,182

EXCEPTIONAL PROFIT / (LOSS) (734) 734

Income tax (4,214) 302 19 (111) (4,003)

NET PROFIT OF FULLYCONSOLIDATED COMPANIES

8,556 (562) (38) 212 (16) 0 8,153

Goodwill amortization (895) 895 0


7,661 (562) (38) 895 212 (16) 8,153

Minority interests (419) 112 (1) (23) (331)

NET CONSOLIDATED GROUPPROFIT

7,242 (449) (38) 871 212 (16) 7,822

Average number of shares 13,536,803 13,547,845Net earnings per shares (in euros)

0.53 0.58

Diluted number of shares 14,476,996 14,444,496Fully diluted earnings per shares (in euros)

0.50 0.54

> IMPACT ON THE INCOME STATEMENT AT 31/12/2004

(€ thousands) 31/12/04 IAS 38 IAS 38 IFRS 3 IAS 39 IFRS 1 IFRS 2 IAS 1 IAS 1 IAS 1 31/12/04

French gaap preopening

costs

start-up costsand deferred

charges

start-up costsanddeferred

charges




reclassification charges transfer

reclassification production in

stock and fixed prod.

reclassification exceptionnal

IFRS

Sales 355,474 355,474

Change in inventories 7,203 ,203) (7 0

Other income 12,045 (1,883) (97) (4,337) 1,192 6,920

Operating income 374,722 (1,883) (97) (4,337) (7,203) 1,192 362,394

Raw materials used in production (39,805) (44) 4,336 (35,513)

External charges (175,563) 29 4,186 2,261 (169,087)

Taxes and duties (7,324) 34 (5) (7,294)

Personnel expenses, employee profit sharing

(96,198) (58) 160 437 (95,659)

Depreciation and provisions (25,345) 193 499 (635) (25,289)

Other operating expenses (2,234) 1 173 (1,853) (3,913)

Operating charges (346,470) 193 528 (58) 4,337 7,203 (2,489) (336,755)

INCOME FROM ORDINARYOPERATIONS

28,252 (1,690) 431 (58) 0 0 (1,296) 25,639

Other operating income and expenses

(13) (13)

OPERATING PROFIT 28,252 (1,690) 431 (58) 0 0 (1,309) 25,626

Financial income 2,187 276 2 2,464

Financial charges (4,534) 17 (4,517)

NET FINANCIAL CHARGE (2,348) 276 18 0 (2,053)

INCOME BEFORE TAX 25,904 (1,690) 431 276 18 (58) (1,309) 23,573

Exceptionnal income 3,687 (41) (3,646) 0

Exceptionnal charges (4,997) 41 4,956 0

EXCEPTIONAL PROFIT / (LOSS) (1,309) 0 1,309 0

Income tax (7,903) 591 (148) (98) (7,558)


16,692 (1,098) 282 178 18 (58) 0 0 16,015

Goodwill amortization (1,924) 1,924 0


14,768 (1,098) 282 1,924 178 18 (58) 16,015

Minority interests (754) 220 (1) (51) (586)

NET CONSOLIDATED GROUPPROFIT

14,014 (879) 281 1,873 178 18 (58) 15,428

Average number of shares 13,547,845 13,547,845Net earnings per shares (in euros)

1.03 1.14

Diluted average number of shares 14,444,496 14,444,496Fully diluted earnings per shares (in euros)

0.97 1.07

> IMPACT ON THE CASH FLOW STATEMENT AT 30/06/2004

(€ thousands) 30/06/2004 IAS 38 IAS 38 IFRS 3 IAS 39 IFRS 2 30/06/2004

French gaap preopening costs start-up costs anddeferred charges



stock options IFRS

Cash at the beginning of the year 44 786 44 786

OPERATING ACTIVITIES

Net profit 7 242 (449) (38) 871 212 (16) 7 822

Elimination of income and expenses with no cash effect or not a result on operating activities

Depreciation and provisions 12 795 (105) (895) 11 796

Unrealised gains and losses from remeasurement to fair value

(323) (323)

Expenses and incomes in connection with stock options 16 16

Charges transferred ti deferred charges (160) 160 0

Net capital gains and losses on asset disposal (356) (356)

Minority interests in net consolidated profit 419 (112) 1 23 331

Deferred tax expense / (income) (386) (302) (19) 111 (596)

Operating cash flow 19 555 (864) (2) 0 0 0 18 690

Change in inventories (2 548) (2 548)

Change in accounts receivable and deferred income (19 394) (19 394)

Change in accounts payable, deferred charges 8 759 8 759

Change in other balances 245 245

Change in working capital needs (12 938) 0 (12 938)

Net cash flow by operating activities (A) 6 617 (864) (2) 5 751

INVESTMENT ACTIVITIES

Acquisition of tangible and rental equipment (14 990) (14 990)

Acquisition of intangible fixed assets (1 637) 864 2 (771)

Disposal of tangible and intangible assets 1 250 1 250

Purchase of long term investments (320) (320)

Sale of long term investments 295 295

Net cash flow from the acq. and disposal of subsidiaries (2 513) (2 513)

Net cash used in investing activities (B) (17 915) 864 2 (17 049)

FINANCING ACTIVITIES Share capital increases 199 199 Dividends paid to shareholders (5 006) (5 006) Dividends paid to the minority shareholders 0 Proceed from new loans 17 500 17 500 Repayment of loans (12 579) (12 579)

Net cash provided by financing activities (C) 114 114

Impact of exchange rate movements (D) 99 99

Net change in cash (A+B+C+D) (11 085) (11 085)

Cash and cash equivalents at year end 33 702 33 702

> IMPACT ON THE CASH FLOW STATEMENT AT 31/12/2004

(€ thousands) 31/12/2004 IAS 38 IAS 38 IFRS 3 IAS 39 IFRS 1 IFRS 2 31/12/2004

French gaap start-up costs anddeferred charges

preopening costs




stock options IFRS

Cash at the beginning of the year 44 786 44 786

OPERATING ACTIVITIES

Net profit 14 014 (879) 281 1 873 178 18 (58) 15 428

Elimination of income and expenses with no cash effect or not a result on operating activities

Depreciation and provisions 23 882 (193) (499) (1 924) 21 266

Unrealised gains and losses from remeasurement to fair value

(276) (276)

Expenses and incomes in connection with stock options 58 58

Charges transferred ti deferred charges (97) 97 0

Net capital gains and losses on asset disposal 880 880

Minority interests in net consolidated profit 754 (220) 1 51 586

Deferred tax expense / (income) (590) (591) 148 98 (935)

Operating cash flow 38 843 (1 883) 29 0 0 18 0 37 008

Change in inventories (1 197) (1 197)

Change in accounts receivable and deferred income (3 083) (3 083)

Change in accounts payable, deferred charges 913 913

Change in other balances (699) (18) (718)

Change in working capital needs (4 066) 0 0 (18) (4 085)

Net cash flow by operating activities (A) 34 777 (1 883) 29 0 0 0 0 32 923

INVESTMENT ACTIVITIES

Acquisition of tangible and rental equipment (26 493) (29) (26 522)

Acquisition of intangible fixed assets (3 599) 1 883 (1 717)

Disposal of tangible and intangible assets 2 862 2 862

Purchase of long term investments (1 406) (1 406)

Sale of long term investments 1 032 1 032

Net cash flow from the acq. and disposal of subsidiaries (9 244) (9 244)

Net cash used in investing activities (B) (36 848) 1 883 (29) (34 994)

FINANCING ACTIVITIES

Share capital increases 2 449 2 449

Dividends paid to shareholders (5 006) (5 006) Dividends paid to the minority shareholders (193) (193)

Proceed from new loans 50 263 50 263

Repayment of loans (24 609) (24 609)

Net cash provided by financing activities (C) 22 904 22 904

Impact of exchange rate movements (D) (260) (260)

Net change in cash (A+B+C+D) 20 574 20 574

Cash and cash equivalents at year end 65 360 65 360

> IMPACT ON THE SHAREHOLDERS' EQUITY CHANGES STATEMENT AT 01/01/2004, 30/06/2004 AND 31/12/2004

Part du groupe

(thousands of € and shares) Total

Number of

shares (thousan

ds)

Share capital

Primiums

Reserves

Net profit for the period

Currency translati

on adjustement

Total Group

Minority interests

Share Capital & Reserves at 01/01/2004 French gaap 120,480 13,537 54,147 14,195 39,179 12,759 (2,789) 117,491 2,989

IAS 38 preopening costs (2,395) (1,916) (1,916) (479)

IAS 38 start-up costs and deferred charges

(350) (349) (349) (1)

IFRS 3 goodwil amortization 185 0 185

IAS 39 financial instruments (592) (592) (592)

IFRS 1 currency translation adjustment 0 (2,789) 2,789 0

Share Capital & Reserves at 01/01/2004 IFRS

117,327 1, 537 54,147 14,195 33,532 12,759 0 114,633 2,694

Share Capital & Reserves at 30/06/2004 French gaap

124,057 1, 537 54,147 14,195 46,933 7,242 (2,074) 120,444 3,613

IAS 38 preopening costs (2,957) (1,916) (449) (2,365) (591)

IAS 38 start-up costs and deferred charges (388) (350) (38) (388) (0)

IFRS 3 goodwil amortization 1,080 871 0 872 208

IAS 39 financial instruments (414) (627) 212 (414)

IFRS 2 stock-options 0 16 (16) 0

IFRS 1 currency translation adjustment

(65) (2,789) 2,724 (65)


121,312 1, 537 54,147 14,195 41,268 7,822 650 118,083 3,230

Share Capital & Reserves at 31/12/2004 French gaap

131,798 1, 721 54,882 15,508 46,920 14,014 (3,048) 128,277 3,522

IAS 38 preopening costs (3,493) (1,916) (879) (2,795) (699)

IAS 38 start-up costs and deferred charges

(68) (350) (281) (68) (0)

IFRS 3 goodwil amortization 2,099 1,873 (9) 1,864 236

IAS 39 financial instruments (444) (622) 178 (444)

IFRS 2 stock-options 0 58 (58) 0

IFRS 1 currency translation adjustment

(65) (2,789) 18 2,705 (65)


129,827 1, 721 54,882 15,508 41,302 15,428 (352) 126,768 3,058

analysis of the changeover from french …analysis of the changeover from french gaap to ifrs...

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