UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2008
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 002-26821
A. Full Title of Plan:
Brown-Forman Winery Operations Savings Plan
B. Name of Issuer of the Securities held Pursuant to the Plan and
the Address of its Principal Executive Office:
Brown-Forman Corporation
850 Dixie Highway
Louisville, Kentucky 40210
INDEX
Pages
Report of Independent Registered Public Accounting Firm 2
Financial Statements
Statement of Net Assets Available for Benefits,
December 31, 2008 and 2007 3
Statement of Changes in Net Assets Available for Benefits,
Year Ended December 31, 2008 4
Notes to Financial Statements 5-12
Supplemental Schedule
Form 5500 Schedule H, Line 4i -
Schedule of Assets (Held at End of Year), December 31, 2008 13
Note: Other schedules required by Section 2520.103-10 of the
Department of Labor's Rules and Regulations for Reporting
and Disclosure under ERISA have been omitted because they
are not applicable.
Signatures 14
Exhibit 23 Consent of Independent Registered Public Accounting Firm 15
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Report of Independent Registered Public Accounting Firm
To the Participants and Administrator of the
Brown-Forman Winery Operations Savings Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Brown-Forman Winery Operations Savings Plan (the Plan) at December 31,
2008 and 2007, and the changes in net assets available for benefits for the year
ended December 31, 2008 in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule of Assets (Held
at End of Year) at December 31, 2008 is presented for the purpose of additional
analysis and is not a required part of the basic financial statements but is
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/PricewaterhouseCoopers LLP
Louisville, Kentucky
June 26, 2009
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2
Brown-Forman Winery Operations Savings Plan
Statements of Net Assets Available for Benefits
December 31, 2008 and 2007
2008 2007
------------ -------------
Investments, at fair value $ 12,395,959 $ 15,129,515
Profit sharing contributions receivable - 100,000
Employers' contributions receivable 52,128 34,574
Employees' contributions receivable 26,855 12,526
------------- -------------
Net assets available for benefits
at fair value 12,474,942 15,276,615
------------- -------------
Adjustment from fair value to contract
value for interest in collective
trust relating to fully benefit-
responsive investment contracts 140,355 24,956
------------- -------------
Net assets available for benefits $ 12,615,297 $ 15,301,571
============ ============
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The accompanying notes are an integral part of the financial statements.
3
Brown-Forman Winery Operations Savings Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2008
Additions
Contributions
Employer $ 560,235
Employee 951,795
-------------
1,512,030
-------------
Interest income 212,608
Dividend income 155,428
-------------
Total additions 1,880,066
-------------
Deductions
Withdrawals by participants 831,310
Net depreciation in investments 3,700,896
Administrative expenses 1,839
Transfers to other plans 32,295
-------------
Total deductions 4,566,340
-------------
Net decrease (2,686,274)
-------------
Net assets available for benefits
Beginning of year 15,301,571
-------------
End of year $ 12,615,297
============
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The accompanying notes are an integral part of the financial statements.
4
Brown-Forman Winery Operations Savings Plan
Notes to Financial Statements
December 31, 2008 and 2007
1. Description of Plan
The sponsor of the Brown-Forman Winery Operations Savings Plan (the Plan),
Brown-Forman Corporation (the Company or the Sponsor), is a diversified
producer and marketer of fine quality consumer products in domestic and
international markets. The Sponsor's operations include the production,
importing, and marketing of wines and distilled spirits.
The following brief description of the Plan is provided for general
information purposes only. Participants should refer to the plan agreement
for more complete information.
General
The Plan is a defined contribution plan covering all eligible employees of
Fetzer Vineyards, all eligible employees of Jekel Vineyards, and all
eligible employees of Sonoma Cutrer Vineyards (collectively, the Companies)
who are not members of a collective bargaining unit. An employee becomes
eligible to participate in the Plan on their employment commencement date.
The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
Contributions
Non-highly compensated employees may contribute to the Plan an amount of
not less than 1% nor more than 50% of their annual compensation. For the
years ended December 31, 2008 and 2007, highly compensated employees could
contribute between 1% and 16% of their annual compensation. Employee
contributions are not to exceed the Section 402(g) Internal Revenue Code
(the IRC) limitation for the calendar year of $15,500 for both 2008 and
2007. Effective March 1, 2008, newly hired employees and employees who have
not completed a salary reduction form will be automatically enrolled in the
plan at a 3% effective deferral of their compensation unless they indicate
a desire not to make contributions or elect to enroll at a different
percentage. New employees may transfer assets from their former employers'
qualified plans to the Plan.
Eligible participants who have attained age 50 before the close of the plan
year may make catch-up contributions in an amount from 1% to 50% of the
employee's compensation, subject to the limitations of the IRC.
Participants are eligible to receive the Companies' matching contributions
on the employee's employment commencement date. The Companies' matching
contribution is equal to 100% of the participant's elective contribution up
to 5% of the participant's annual compensation. The Companies may also make
a profit sharing contribution to the Plan, as determined by the Companies.
5
Each participant's account is credited with the participant's contribution
on a semi-monthly basis and an allocation of (i) the Companies' matching
contribution on a monthly basis, (ii) plan earnings on a daily basis, and
(iii) the Companies' profit sharing contribution and forfeited balances of
terminated participants' non-vested accounts on an annual basis.
Participants that are paid bi-weekly shall have their accounts credited
with the participants' contributions on a bi-weekly basis. The total annual
contributions, as defined by the Plan, credited to a participant's account
in a plan year may not exceed the lesser of (i) $46,000, or (ii) 100% of
the participant's compensation in the plan year.
Participants can allocate contributions among various investment options in
1% increments. The Plan currently offers participants several different
investment choices, including mutual funds, a common collective trust fund,
an asset allocation fund, and a Brown-Forman Corporation Class B common
stock fund.
Vesting
Participants are immediately vested in their employee contributions plus
actual earnings thereon. Vesting in the Companies' contributions and
earnings thereon is 25% per year of continuous service with the Company.
Participants will become 100% vested in their Company contributions account
in case of death, normal retirement, or total and permanent disability.
Withdrawals
Upon termination of service, a participant can elect to transfer his vested
interest in the Plan to the qualified plan of his new employer, roll over
his funds into an Individual Retirement Account (IRA), or receive his
vested interest in the Plan in a lump-sum amount or in the form of
installment payments over a period of time not to exceed his life
expectancy. If the vested account balance is $1,000 or less, an automatic
lump sum distribution will be made. If the vested account balance is
greater than $1,000 up to $5,000, and the participant does not direct
otherwise, it will be rolled over into an IRA with Fidelity Management
Trust Company (Fidelity), the trustee and recordkeeper as described in the
Plan. In the event of death, the participant's beneficiary will receive the
vested interest in a lump-sum payment or in the form of an installment
payment. A participant may also withdraw their vested interest in the case
of financial hardship under guidelines promulgated by the Internal Revenue
Service. The participant's contributions shall be suspended for six months
after the receipt of a hardship distribution.
Participant Loans
A participant may request permission from the plan administrator to borrow
a portion of such participant's vested accrued benefit under the Plan.
Loans shall be limited to the lesser of $50,000 or 50% of the vested
account balance. Loans must bear a reasonable rate of interest, be
collateralized, and be repaid within five years. Participants do not share
in the earnings from the Plan's investments to the extent of any
outstanding loans, except that the interest paid on such loans is allocated
directly to the applicable participant's account.
6
Forfeited Accounts
Forfeited balances of terminated participants' non-vested accounts are used
first to reinstate previously forfeited account balances of re-employed
participants, if any, and the remaining amounts are added to the Companies'
contribution and allocated to eligible participants as defined by the Plan
agreement. The forfeited balances totaled $1,841 and $1,788 at December 31,
2008 and 2007, respectively. No forfeited balances were used in 2008 or
2007 to reinstate previously forfeited account balances of re-employed
participants or allocated to eligible participants.
2. Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan are prepared under the accrual method
of accounting.
Investment Valuation and Income Recognition
The Plan's investments are stated at fair value. Shares of mutual funds are
valued at the net asset value of shares held by the Plan at year end based
on the unadjusted quoted market value of the underlying assets. The
Brown-Forman Corporation Stock Fund, a unitized employer stock fund, is
comprised of Brown-Forman Corporation Class B shares, which are valued at
the quoted closing market price, and a cash component. The value of a unit
reflects the combined market value of the underlying Sponsor stock and
market value of the short-term cash position. The Plan's interest in the
Fidelity Managed Income Portfolio (a common collective trust) and the
Fidelity Retirement Money Market Portfolio (money market fund) are valued
based on information reported by the investment advisor using the audited
financial statements of the common collective trust and money market fund
at year-end. Loans to participants are value at amortized cost, which
approximate fair value.
As described in Financial Accounting Standards Board Staff Position, FSP
AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment
Contracts Held by Certain Investment Companies Subject to the AICPA
Investment Company Guide and Defined-Contribution Health and Welfare and
Pension Plans (the FSP), investment contracts held by a
defined-contribution plan are required to be reported at fair value.
However, contract value is the relevant measurement attribute for that
portion of the net assets available for benefits of a defined-contribution
plan attributable to fully benefit-responsive investment contracts because
contract value is the amount participants would receive if they were to
initiate permitted transactions under the terms of the Plan. The Plan
invests in investment contracts through a collective trust. As required by
the FSP, the statement of net assets available for benefits presents the
fair value of the investment in the collective trust as well as the
adjustment of the investment in the collective trust from fair value to
contract value relating to the investment contracts. The statement of
changes in net assets available for benefits is prepared on a contract
value basis.
The Plan presents in the accompanying statement of changes in net assets
available for benefits the net appreciation or depreciation in the value of
its investments which consists of the realized gains or losses, the
unrealized appreciation or depreciation on those investments, and capital
gains distributions.
Purchases and sales of securities are recorded on a trade-date basis.
Dividends are recorded on the ex-dividend date. Interest income is recorded
on the accrual basis.
7
Recent Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 157 "Fair Value Measurement"
(SFAS 157). The standard defines fair value, outlines a framework for
measuring fair value, and details the required disclosures about fair value
measurements. The adoption of SFAS 157 in 2008 did not have a material
impact on the statement of net assets available for benefits or statement
of changes in net assets available for benefits. Refer to Note 7 of the
Notes to Financial Statements for the Plan's SFAS 157 disclosures.
Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of net assets available for
benefits and disclosure of contingent assets and liabilities at the dates
of the financial statements and the reported amounts of additions to and
deductions from net assets during the reporting period. Actual results
could differ from those estimates.
Risks and Uncertainties
The Plan invests in various investment securities. Investment securities
are exposed to various risks such as interest rate, market and credit
risks. Due to the level of risk associated with certain investment
securities, it is at least reasonably possible that changes in the values
of investment securities will occur in the near term and that such changes
could materially affect participants' account balances and the amounts
reported in the statement of net assets available for benefits.
Payment of Benefits
Benefits are recorded when paid.
8
3. Investments
The Plan's investments are held by a custodian trust company. The following
table presents the fair value of investments with investments that
represent 5% or more of Plan net assets at one or both year ends separately
identified.
December 31
--------------------------------------------------------------
2008 2007
---------------------------- ----------------------------
Number of Number of
Shares, Units Shares, Units
or Principal or Principal
Amount Fair Value Amount Fair Value
------------- ------------ ------------- ------------
Investments at fair value:
Fidelity Money Market Trust
Retirement Money Market Portfolio 2,784,280 $ 2,784,280 2,482,837 $ 2,482,837
Fidelity Managed Income Portfolio 2,742,310 2,601,955 2,321,342 2,296,386
Fidelity Growth Company Fund 9,849 482,220 10,932 907,163
Brown-Forman Corporation Class B
common stock 13,639 702,268 10,745 796,313
PIMCO Total Return Fund 71,404 724,039 - -
Fidelity Equity-Income
Fund K 38,536 1,189,229 - -
Fidelity Magellan Fund K 13,762 630,580 - -
Fidelity Magellan Fund - - 13,890 1,304,760
Fidelity Equity-Income Fund - - 40,689 2,244,420
Fidelity Diversified
International Fund - - 29,166 1,163,731
Other investments
individually less than 5% 269,044 3,281,388 219,007 3,933,905
------------- -------------
$ 12,395,959 $ 15,129,515
============= =============
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During 2008, the Plan's investments, including gains and losses on
investments bought and sold, as well as held during the year, depreciated
in value as follows:
2008
-----------
Mutual funds $(3,589,435)
Brown-Forman Corporation
Class B Common Stock (111,461)
----------
$(3,700,896)
===========
|
9
4 Tax Status
The Internal Revenue Service has determined, and informed the Companies by
a letter dated April 16, 2003, that the Plan and related trust are designed
in accordance with the applicable sections of the IRC. The Plan has been
amended since receiving the determination letter. However, the Plan
administrator believes that the Plan is designed and is currently being
operated in compliance with the applicable provisions of the IRC.
5 Plan Termination
Although they have not expressed any intent to do so, the Companies have
the right under the Plan to discontinue their contributions at any time and
to terminate the Plan subject to the provisions of ERISA. In the event of
plan termination, participants will become 100% vested in their accounts.
6. Related Party Transactions
Certain Plan investments are shares of mutual funds managed by Fidelity.
Fidelity is the trustee as described in the Plan and, therefore, these
transactions qualify as party-in-interest transactions.
Certain administrative costs incurred by the Plan are paid by the Sponsor.
Participant recordkeeping fees were waived by Fidelity. In addition, other
administrative services are provided by the Sponsor but not charged to the
Plan. Administrative expenses totaled $1,839 in 2008.
Certain participants of the Plan transferred to and from their
participation to other defined contribution plans sponsored by the Company.
As a result, $32,295 of net related plan assets were transferred from the
Plan during 2008.
The Brown-Forman Corporation Class B Common Stock Fund is a unitized
employer stock fund comprised of Brown-Forman Corporation Class B shares
and a cash component. The participants of the Plan, as well as participants
in other Sponsor plans, may invest in this employer stock fund. The total
fund was comprised of $23,012,050 of Brown-Forman Corporation Class B
Common Stock and a $469,631 cash component as of December 31, 2008. During
2008, purchases and sales of 275,233 and 206,334 shares of Brown-Forman
Corporation Class B stock, respectively, were made by the employer stock
fund.
7. Fair Value Measurements
Statement of Financial Accounting Standards No. 157, Fair Value
Measurements (SFAS 157), defines fair value, establishes a framework for
measuring fair value in accordance with accounting principles generally
accepted in the United States, and expands disclosures regarding fair value
measurements. Fair value is defined under SFAS 157 as the exit price
associated with the sale of an asset or transfer of a liability in an
orderly transaction between market participants at the measurement date.
The Plan has adopted the provisions of SFAS 157 as of January 1, 2008.
Valuation techniques used to measure fair value under SFAS 157 must
maximize the use of observable inputs and minimize the use of unobservable
inputs. A description of the valuation methodologies used for assets
measured at fair value is included in Note 2. SFAS 157 establishes a
three-tier fair value hierarchy, which prioritizes the inputs used in
measuring fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or
liabilities (level 1 measurements) and the lowest priority to unobservable
inputs (level 3 measurements). The three levels of the fair value hierarchy
under SFAS 157 are described below:
10
Level 1 - Unadjusted quoted prices in active markets for identical assets.
The Plan's investments with active markets include its investment in the
Brown-Forman Corporation Class B common stock as well as its investments in
mutual funds which are reported at fair value utilizing Level 1 inputs. For
these investments, quoted current market prices are readily available.
Level 2 - Inputs other than Level 1 that are observable, either directly or
indirectly, such as quoted prices for similar assets in active markets;
quoted prices for identical or similar assets in markets that are not
active; or inputs other than quoted prices that are observable, or that are
derived principally from or corroborated by observable market data by
correlation or other means for substantially the full term of the assets.
The Plan has concluded that the investments in the common collective trust
and money market funds represent a Level 2 valuation.
Level 3 - Unobservable inputs (i.e. projections, estimates,
interpretations, etc.) that are supported by little or no market activity
and that are significant to the fair value of the assets. The Plan has
concluded that the investments in participant loans represent a level 3
valuation.
In accordance with SFAS 157, the following table represents the Plan's fair
value hierarchy for its financial assets measured at fair value on a
recurring basis as of December 31, 2008:
Fair Value Measurements at December 31, 2008
------------------------------------------------------------------------------------
Quoted Market Significant
Prices in Active Other Significant
Markets for Observable Unobservable
Identical Assets Inputs Inputs
Total (Level 1) (Level 2) (Level 3)
------------- ------------- ------------ -----------
------------- ------------- ------------ -----------
Mutual funds $ 5,763,440 $ 5,763,440 $ - $ -
Brown-Forman Corporation
Class B common stock 702,268 702,268 - -
Money market fund 2,798,500 - 2,798,500 -
Common collective trust fund 2,601,955 - 2,601,955 -
Participant loans 529,796 - - 529,796
------------- ------------- ------------ -----------
Total Investments $ 12,395,959 $ 6,465,708 $ 5,400,455 $ 529,796
============= ============= ============ ===========
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11
Level 3 Gains and Lossess
The table below sets forth a summary of changes in the fair value of the
Plan's level 3 assets for the year ended December 31, 2008:
Level 3 Assets
--------------------
Participant loans
---------------------
Balance, beginning of year $ 398,590
Realized gains/(losses) -
Unrealized gains/(losses) relating to -
instruments still held at the reporting date -
Purchases, sales, issuances and settlements, (net) 131,206
---------------------
Balance, end of year $ 529,796
=====================
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12
Brown-Forman Winery Operations Savings Plan
Plan #020 EIN #61-0143150
Schedule H, Line 4i --
Schedule of Assets (Held at End of Year)
December 31, 2008
Description of Investment Including
Identity of Issue, Borrower, Maturity Date, Rate of Interest, Current
Lessor or Similar Party Collateral, Par or Maturity Value Value
---------------------------- ----------------------------------- -------------
Janus Enterprise Fund 4,659 Mutual Fund Shares $ 153,153
PIMCO Total Return Fund 71,404 Mutual Fund Shares 724,039
Royce Low Priced Stock Fund 11,045 Mutual Fund Shares 101,392
Hartford Capital
Appreciation Fund 2,101 Mutual Fund Shares 53,229
Fidelity Magellan Fund K* 13,672 Mutual Fund Shares 630,580
Fidelity Equity-Income Fund K* 38,536 Mutual Fund Shares 1,189,229
Fidelity Growth Company Fund* 9,849 Mutual Fund Shares 482,220
Fidelity Low Priced Stock Fund K* 4,611 Mutual Fund Shares 106,555
Fidelity Diversified
International Fund K* 22,942 Mutual Fund Shares 493,034
Fidelity Freedom Income* 3,386 Mutual Fund Shares 32,367
Fidelity Freedom 2000* 26 Mutual Fund Shares 260
Fidelity Freedom 2010* 27,164 Mutual Fund Shares 281,414
Fidelity Freedom 2020* 34,602 Mutual Fund Shares 347,747
Fidelity Freedom 2030* 20,286 Mutual Fund Shares 197,993
Fidelity Freedom 2040* 46,420 Mutual Fund Shares 259,488
Fidelity Freedom 2005* 951 Mutual Fund Shares 7,979
Fidelity Freedom 2015* 16,658 Mutual Fund Shares 142,594
Fidelity Freedom 2025* 20,287 Mutual Fund Shares 165,315
Fidelity Freedom 2035* 13,489 Mutual Fund Shares 108,313
Fidelity Freedom 2045* 8,432 Mutual Fund Shares 55,480
Fidelity Freedom 2050* 4,771 Mutual Fund Shares 30,820
Fidelity Money Market Trust
Retirement Money Market Portfolio* 2,784,280 Money Market Shares 2,784,280
Fidelity Managed Income Portfolio* 2,742,310 Common collective trust
fund units 2,742,310**
Spartan U.S. Equity Index
Fund* 5,513 Mutual Fund Shares 175,877
Allegiant Mid Cap Value I* 1,848 Mutual Fund Shares 15,247
Spartan International Index Fund* 111 Mutual Fund Shares 2,977
Spartan Extended Market Index Fund* 272 Mutual Fund Shares 6,138
Brown-Forman Corporation
Stock Fund:
Brown-Forman Corporation* 13,639 shares Class B common stock 702,268
Institutional Money Market Money market deposit account,
Portfolio - Class 1* interest rate 2.37% 14,220
Participant Loans* Loans, interest rates ranging from
5.25% to 9.5%, with variable
maturites through 2014. 529,796
--------------
$ 12,536,314
==============
* Party-in-interest to the Plan
** This represents contract value for the Fidelity Managed Income Portfolio
At Fair Value this investment is $2,601,955.
|
13
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Brown-Forman Winery Operations Savings Plan has duly caused this report to be
signed by the undersigned thereunto duly authorized.
BROWN-FORMAN WINERY OPERATIONS SAVINGS PLAN
BY:
/s/ Lisa Steiner
Lisa Steiner
Member, Employee Benefits Committee
(Plan Administrator)
Brown-Forman Corporation
June 26, 2009
|
14
EXHIBIT 23
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-74567) of Brown-Forman Corporation of our report
dated June 26, 2009 relating to the financial statements and supplemental
schedule of the Brown-Forman Winery Operations Savings Plan, which appears in
this Form 11-K.
/s/ PricewaterhouseCoopers LLP
Louisville, Kentucky
June 26, 2009
|
15
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