Enterprises Business Plan

Business Plan:

2009

You harvest what you sow 28 Feb 2009

Reported By:

Shahzad Azam

Reported To: Wittenborg University of Applied Sciences The Netherlands

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Business Plan:

2009

Foreword (Personal):

This business plan demonstrates the complexity and costs of managing Seeds Enterprises in these times to meet diverse public expectations. Innovation and creativity are essential to craft strategic management options for the future. Our congressionally appropriated budget must be influenced with a variety of community resources, grants and other funding sources. ABS Enterprises could not begin to fulfill its mission today without the help of the thousands of volunteers who generously dedicate their time and energy to the betterment of the Enterprises. Their help with everything from maintaining trails, staffing visitor centers, collecting resource data and leading nature hikes is absolutely essential and greatly appreciated. Through this business plan, I hope to encourage even greater interest in collaborative efforts to sustain the remarkable values this ABS Enterprises offers to the people of Gujranwala and the nation. Because our goals can only be reached through a vehicle of a plan, in which we must fervently believe, upon which we must vigorously act. There is no other route to success.

S. Azam Chief Executive Officer, Shahzadbajwa

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PRELIMINARIES Contact us

For further information please contact




Shahzad Azam Faiz Alam Town near BISE Gujranwala, Pakistan Tel:+31641631796 Mob: +31641631796 Email:[email protected] or [email protected]


Professional Advisers Business planner: Dick Boss Email: [email protected]


Marketing adviser: Peter Van Oosten Email: [email protected]

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Table of Contents Executive Summary ..................................................................................... 6 1 Introduction ............................................................................................... 6 1.1 Project Brief ............................................................................................................................ 6 1.2 The Main Components .......................................................................................................... 7 1.3 Types of Seed processing Plants ............................................................................................ 7 1.3.1 Mobile .............................................................................................................................. 7 1.3.2 Fixed ............................................................................................................................... 7 1.4 Opportunity Rationale .......................................................................................................... 7 1.5 Proposed Capacity ................................................................................................................. 8 1.6 Total Project cast .................................................................................................................... 8

2 Mission ....................................................................................................... 9 3 Current Industry Structure ..................................................................... 10 4Vission ........................................................................................................ 11 5 Organization ............................................................................................. 11 6Management Plan ...................................................................................... 12 7 Operational Plan ....................................................................................... 12 8 Raw Materials........................................................................................... 13 8.1 Raw Material ............................................................................................................................ 13 8.2Process Flow ............................................................................................................................... 13 8.3 Seed Processing .......................................................................................................................... 14 8.3.1 Drying ............................................................................................................................................... 14 8.3.2 Cleaning ............................................................................................................................................ 15 8.3.3 Grading .............................................................................................................................................. 15 8.3.4 Packing............................................................................................................................................... 15

8.3.5 Final Products ..................................................................................... 15 9 Competitors Analysis ................................................................................ 17 10SWOT Analysis .........................................................................................18 11 Marketing.................................................................................................19 12 Human Resource Requirements..............................................................19 13 Machinery And Equipment Details ........................................................ 20 14 Land & Building ...................................................................................... 20 15 Project Economics ................................................................................... 21

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16 Financial Analysis ................................................................................... 21 16.1 Projected Income Statement................................................................................................ 21 16.2 Projected Cash Flow Statement .......................................................................................... 22 16.3 Projected Balance Sheet ...................................................................................................... 22

17 Key Assumptions .................................................................................... 24 Table 17.1 Production Assumptions ............................................................................................ 24 Table 17.2Operation Assumptions .............................................................................................. 25 Table 17.3Economy/ Agriculture Related Assumptions ........................................................... 25 Table 17.4 Cash Flow Assumptions ............................................................................................. 25 Table 17.5 Revenue Assumptions ................................................................................................ 26 Table 17.6 Expense Assumptions ................................................................................................. 22 Table 17.7 Financial Assumptions ............................................................................................... 22

Conclusion................................................................................................... 27 List Agri Business Development Services Provider.................................... 28

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The purpose and scope of this information business plan is to introduce the subject matter and provide a general idea and information on the said area. All the material included in this document is based on data/information gathered from various sources and is based on certain assumptions. Although, due care and diligence has been taken to compile this document, the contained information may vary due to any change in any of the concerned factors, and the actual results may differ substantially from the presented information. The prospective user of this memorandum is encouraged to carry out his/her own due diligence and gather any information he/she considers necessary for making an informed decision. ABS Seed Enterprise & Processing Ltd is a pilot seed enterprise that will be established with the technical assistance of UOA (Faisalabad) as part of its Seed Industry Commercialization Programme. Ten leading farmers with long years of seed production experience as contract growers will pool their resources together including land and money to establish the enterprise. ABS Seed Enterprise will differentiate itself from other suppliers through lower pricing and unique promotional techniques. By specializing in just a few of the most popular varieties, ABS Seed Enterprise will gain access to the largest segment of a growing seed market for wheat and rice.

1 INTRODUCTION 1.1 Project Brief Seed processing unit is a project in agriculture sector in which Approved/Certified seeds of wheat and rice will be produced through the multiplication1 of Basic Seed (Breeder seed), which will be acquired from seed research institutes & Seed Corporations. This business can be started in the rural and pre-urban areas. Under the proposed project, the approved seed will be processed and marketed in the local market. The processing of the seed involves cleaning, grading, treating, packing, and storing operations. Currently, there is a shortage of the approved seed, due to which its price has spiraled up. Hence, it has become difficult for a farmer to purchase seed at a higher price. The proposed project will facilitate in fulfilling this gap and will provide wheat and rice seed suitable for sowing. Moreover, this project in the long-run can be considered as a lucrative investment because the potential for quality seed is quite high in the agriculture market. Processing is a value addition activity which improves the physical purity and health of seed stock by removing various contaminants including undersized and shriveled grains, inert matter and seeds of other crops.

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1.2 The Main Components of Undesirable Materials in Seed Lots The harvested seeds from a Sheller or thresher or a combine harvester machine contain many types of undesirable materials. a) Plant parts and inert matter (stem, leave, stone, soil etc.) b) Weed seeds (Noxious and obnoxious). c) Other crop seeds (other cultivars). d) Seeds of the variety which is immature, broken, damaged and deteriorated. Therefore, unclean seed has to be processed to remove the above mentioned Contaminants to upgrade the quality of seed and to apply seed treatment with chemicals. 1.3 Types of Seed Processing Plants There are two types of seed processing plants. 1.3.1 Mobile It consists of one or two combined machines. Generally, it is an air screen cleaner above or combined with an indented cylinder. A separate treater may accompany the processing machine. 1 Multiplication is the growth of certified seeds through supplying basic seed to the selected registered growers, from whom the output of their crops of wheat and rice will be purchased. 1.3.2 Fixed. It has two types of layout which are used for processing of large quantity of seed:

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a) Vertical-Processing machines are put in different floors in a multistoried building. The Incoming seeds are first elevated to bins from machine on one floor to the other machine for the next operation. The ground floor is used for seed packaging and storage. b) Horizontal-In this type of lay out, seeds are elevated in to surge bins and pass on through machine by gravity and then re-elevated for the next cleaning operation. The construction and supervision of this type of arrangement is economical than fixed type of lay out. 1.4 Opportunity Rationale Seeds are the foundation of human and animal life on earth-the foods we eat, the fiber we wear, and most of the products we use in our daily life, are created from a seed. There is no substitute for a quality seed as quality seed is essential for growing quality crops, which ultimately results in a better quality of life. Since the evolution of civilization, mankind has been involved in a plethora of agriculture activities but this practice has reduced with the passage of time. Today, approximately three percent of the world’s population is engaged in crop production in most of the industrialized countries, yet more food is produced now than ever in history of mankind. Agriculture sector contributes 24% of the total GDP for Pakistan. However, the massive population influx in Pakistan, has greatly burdened the agriculture sector as its productivity is not able to meet the current food requirements. Furthermore, the lands are underutilized, due to conventional farming practices i.e. use of conventional seeds, improper usage of fertilizer and pesticides, etc. One can say that the current agricultural production system has reached the ‘point of diminishing returns’. Further infusion of physical inputs without basic structural and technological reforms is not going to bring a response from the agricultural sector. If the current trend is allowed to persist, not only will it put severe strain on food supplies with unimaginable social and political ramifications, but bring down the whole edifice of national economic viability because agricultural production forms the bedrock of Pakistan’s industrial production. The solution lies in concurrent and integrated approach towards re-planning the agricultural production systems in Pakistan, a part of which is also the development of better seed. The idea revolves around increasing the crop yield by developing high yielding crop seeds having disease resistance and high germination Percentage. The Government of Pakistan has also declared this sector as an industry, to meet the rising demand in the agriculture sector, especially in wheat and rice, as these two crops are considered to be the staple crops. Wheat fulfils the basic need of food of majority of the populace, whereas the rice is capable of generating great profits as it has a huge export potential. In this context, Small & Medium Enterprise Development Authority (SMEDA) has commissioned to undertake a Pre-Feasibility study for finding the underlying potential in the seed processing industry. 1.5 Proposed Capacity The proposed Seed Processing Unit has a maximum capacity of processing 3 tons of seed per hour. This production capacity is estimated to be economically viable and justifies the capital as well as operational costs of the project.

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1.6 Total Project Cost The proposed Seed Processing Unit needs a capital investment of about Rs.12.840 million which includes machinery and equipment. In addition to this, a sum of Rs.0.901 million is required as working capital, which will be used for purchasing raw seeds as well as for meeting the initial expenses of the first year.

2 Mission

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ABS Seed Enterprise will be created for the primary purpose of providing high quality seed of the best wheat, rice, sunflower, cornflower, and many more varieties to farmers in the Eastern and Central regions of Punjab, Pakistan, which are considered the bread basket of the country. The enterprise has a potential to gain reputation for offering quality seeds that provides great value to farmers in irrigated land. It will take advantage of the growing demand for quality seed of new wheat and rice varieties with outstanding flour and cooking qualities respectively.

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3 CURRENT INDUSTRY STRUCTURE Till the seventies, there was no proper mechanism for the seed processing in Pakistan. In 1976, the Government established Provincial Seed Corporations; Punjab Seed Corporation & Sindh Seed Corporation. Currently, these two Corporations are supplying Pre-Feasibility Study Seed Processing Unit (Wheat & Rice) PREF-44/April, 2008/27 only ten percent of the cereal seeds and 30% of the cotton seed of the country’s requirement. Apart from this, a few multinationals and some local processing concerns have embarked on the opportunity of realizing the potential existent in this market. However, the practice currently in vogue among the general farming community is that they still are using the part of their crop produce as seed instead of using the quality seed. The reason for the low adoption rate of the quality seed is that the corporations and agencies are supplying only 19% of the wheat seed’s requirement and 7.8 % of the rice seed’s requirement. The seed market in Pakistan values to approximately US$ 468 million. The average seed requirement in Pakistan of wheat is 846,000 tons and that of rice is 625,000 tons. Currently, the availability of certified seeds is very low i.e. 19% availability against the total demand for wheat, and 7.8% availability against the total demand for rice. Furthermore, there is a vast network of seed distributors consisting of nearly 1,200 seed dealers across the country. There are approximately 300 seed companies registered with the Government, out of which nearly ten percent are active.

4 Vision: Other existing suppliers in Punjab province produce seed of either traditional varieties, or old improved varieties that no longer perform well. ABS enterprise will therefore be in a good position to capture a significant portion of the local market for wheat and raise seed, since it will introduce new and better performing varieties. This tightly focused approach will also make it easier for ABS Seed Enterprise to establish and attain the position of a seed industry leader. This enterprise is projected to return a profit margin of 46% in its very first year of operations, due in a large part to the size of the market, a competitive price for seed, and the relatively low

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investment required beginning operations. The first year (2009) sales revenue is projected to exceed $47, 000. The profit that is generated will be used for reinvestment in the enterprise.

5 Organization ABS Seed Enterprise will rely on the proven knowledge, skills and experience of its Leader (Owner) Mr.Azam, who brings over decades related to the forming in the lands because he is a landlord and have enough experience to the handling enterprises and knowledge of seeds. Assisting Mr.Bilal will be Mr. Mohammad Zohaib, who has considerable technical experience in seed production and can meet the high quality standards that ABS Enterprise has set for its seed.

ABS Enterprises Organization chart

Azam C O E/ D i r ec t o r

Bilal

Zohaib

G ene ral Manag er

O perat ion Man age r

Finance Department

Marketing/ Sales

Technical Department

Assistances /Mechanics

6 Management Plan ABS Enterprise plans to keep wage and salary expenses low, at least initially. To achieve this objective, all management positions will be occupied by the group enterprise members who fortunately possess the relevant qualifications and experience. The remaining staff will be daily waged workers, and casual labourers who will be hired during the busy periods. Mr. Azam's long experience and good personal skills will be vital in leading ABS in the right direction. Another member of the group enterprise, Mr. Mazhar, a retired certified accountant with valid financial management experience will handle the enterprise's finances. This position

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will be vital to continued financial viability of the business. With a small number of employees, ABS will encourage dynamic teamwork and open access with no bureaucratic barrier. The business will use its profit to provide attractive working conditions and appropriate motivate that will keep its dedicated staff in the enterprise.

7 Operational plan Based on a survey of farmers in Central Punjab in Pakistan, it has been determined that the current total annual requirement for wheat seed is about 125,000 tones and 10,000 tones for rice seed. Most farmers use older varieties and use their own farm-saved seed. This own seed is of poor quality and the varieties are mixed. There is therefore a persistent high demand for quality seed of new varieties, for which the farmers are prepared to pay higher prices. ABS plans to enter the market and sell a total of 10,500 seers and 14,300 seers (1 seer = 7 kg seed) of certified seed respectively of new wheat and rice varieties in the first two seasons of operation and increasing this gradually to a combined total of about 50,000 seers by the fifth year. For this, the owners will contribute some land each and the enterprise will also sign contract with growers and produce most of the seed on their own lands. The enterprise will need initial capital to construct a store with sufficient office space, and buy furniture, a seed cleaning plant, a transport van, three motor cycles, ten bicycles, two computers and one printer, and five mobile telephones. In addition, the business will require sufficient working capital to buy necessary inputs (foundation seed, fertilizer, herbicides, packaging material and seed treatment chemical), to purchase raw seed from contract growers, to undertake post-harvest operations and to meet other day-to-day expenses. The owners will contribute 20% of the funds required, and the enterprise will need to raise a long-term bank loan for the rest of the amount required at 15% service charge. In the first year, ABS enterprise will select key farmers who are already knowledgeable in seed production to grow foundation seed of new irrigated wheat varieties on contract. One of the enterprise members is an experienced agronomist who will closely supervise the field operations and Coordinate raw seed purchases at harvest time. The owner of ABS has long-term relationships with the area’s best farmers and is confident that each will provide quality service. An intensive training programme will be organized for all selected growers prior to their involvement in the programme. A dynamic campaign will also be mounted to promote the quality of ABS seed in the farming communities so as to capture a good proportion of the seed market and maintain a core of loyal clients. ABS Enterprise will carry out the following key operations:
Purchasing raw certified seed from its contract growers
Cleaning, packaging, treatment and storage of the seed
Seed distribution, marketing and sale The various components of each operation and the estimated costs are outlined in the financial plan.

8 RAW MATERIAL/ OPERATIONAL PROCUDRE 8.1 Raw Material The raw-material for the said project will follow the following mode:

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Basic Seed: The Basic Seed which is the basic raw material for the production of approved seed,

can be obtained from the seed corporations. Approved Seed: The Basic seed will be cultivated under the controlled environment at various seed farms, which will result in multiplying it and producing approved seed through processing. The approved seed is the final product of the project, which will then be distributed and sold through marketing for growing crops with higher yields. 8.2 Process Flow

8.3 Seed Processing In the process of seed processing for wheat and rice, Basic Seed will be acquired by the entrepreneur from the seed corporations like Punjab Seed Corporation. This Basic Seed will then be distributed among the selected growers/farmers, who will sow this seed and grow it in a controlled environment. Subsequently, the output produce from these farms of wheat and rice i.e. their crop, will be purchased by the entrepreneur for further processing. After purchasing, the processing of wheat and rice seed will be as follows:

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8.3.1 Drying

At the time of harvest, the seed normally contains very high moisture content i.e. above 16% on average. In order to avoid any negative effects of high moisture, the seed has to be dried and the moisture content has to be reduced to 8-12%. If the seed is stored at high moisture content, it loses germination quickly and is infested with pest and diseases. 8.3.2 Cleaning

In order to make the seed suitable for cultivation, impurities like weeds, immature seeds, inert matters, infected seeds, other crop seeds have to be removed. 8.3.3 Grading

After cleaning, the seed requires grading. The grading is of the following types: a) Length grading

The clean seed is further graded in this process from the point of view of its length and the immature/infected seeds or any foreign matter that may not have been removed in the cleaning process are removed in the length grading process. b) Gravity Separating

Gravity separating is followed after length grading and is helpful in removing light and immature seeds having low germination. c) Treating

This process is followed after gravity separating. In the process, a suitable fungicide and color is used to protect the seed from fungus and various soil related diseases. The color also gives a suitable appearance to the seed and proving that a check has been performed, confirming that all seeds have been uniformly treated. 8.3.4 Packing

To avoid any moisture contents the processed seed is stored in bags which are stored properly. 8.3.5 Final Products

We are especially focusing the Wheat and Rice seeds because farmers in the Central regions of Punjab, which are considered the bread basket of the country, They are specialize for Wheat and Rice, but there is some area which is suitable for the growing the sunflower, cornflower, and others.

Good Verity and new experienced seeds of the Wheat. According to one survey by using an acre will be able to produce more than 3400KG.

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Second Verity of seed.

This is seed of Rice.

Some other seed we are dealing in our enterprise.

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Corn Seeds.

This is sunflower seed and mostly used in eastern and western part of Punjab. By using this famers can produce the Cooking Oil.

9 Competitors Analysis There are many Seeds dealer in that city because of the city is totally agricultural. But they are providing the some traditional seeds verities, and we shall introduce new and good verities of seeds specially Wheat and Rice.

10 SWOT ANALYSIS Strengths Our professionals have good skill. We believe in their skill. And they were trained and had chosen carefully. All of them have good license. Our operation manager had been trained for a long time with all skill about seeds, dealing with formers, and marketing. The place where we hired is a busy and formers market area. The quantity of customers will be large. The products we use are high quality. All the seeds will be available with good varieties.

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Weakness The expenditure we invested for equipment, products, landing and training for staff is so high. We need long time to refund the investment. It is a risk for my plan. The competitors also are a big risk. There is a wide variety of seeds enterprises over the city. If we want to have reputation in the city, we need to compete with all of them. Opportunity We will advertise our brand name for everyone. We have some discount price for the customer on grand opening. Then we will have some promotion and small gifts for frequent customers. And then we will prepare the VIP card for them and have special price for them such as discount 10%. Create a website for the Enterprises to advertise. In the website, we will introduce about our Enterprises. The ability to develop long-term commercial contracts which should lower costs associated with production. The maintenance and breeding of these varieties by the

farmer communities and determination of scientific supports for legislative adaptations and implementation for their seed marketing. Threats a) Various government regulations such as price regulations and red-tapism in the process of seed certification can result in delaying the intended project plan. b) Inadequate supply of agriculture inputs such as fertilizer, irrigation water, pesticides, etc. can result in hampering the intended project benefits. c) Improper identification of varieties, which are not suitable for the Pakistani climatic and agriculture conditions, or varieties prone to diseases, or requiring high inputs (having low returns on investment) can be a major threat to the project. d) Since this project is dependent on the contract growers, therefore, if the entrepreneur is not able to maintain a controlled environment through constant monitoring mechanism, it may result in the altered seed variety, hence resulting in disturbing the production chain. e) Weak or improper marketing strategies can result in failure of the project.

11 MARKETING The marketing of approved seed will follow the existing distribution network of the seed dealers, along with the dealers of the agriculture inputs. Furthermore, the farming community has to be sensitized about the usage of the approved seed, which will not only result in enhanced productivity of crop but also lead to increased revenues for the industry. The sensitization can be achieved through a tailored campaign for achieving the desired objective- to increase the sales of the seed. The success of the industry is dependent on the timely availability of the quality seeds at the appropriate places at competitive prices and in proper packaging. Moreover, due to a massive demand of the quality seeds in the reconstruction and development of the agriculture sector of Pakistan, this project also has the export potential, if able to meet the international standards required for seed production.

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12 HUMAN RESOURCE REQUIREMENTS The proposed Seed Processing Unit requires the following human resources/staff.

13 Machinery and Equipment Details

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Office equipment

Furniture and fixture

14 LAND & BUILDING Recommended Mode for Acquiring Land It is recommended that the proposed project should be started in an acquired land, which is approximately 8 kanals (one acre). The land should be somewhere near the major cities of Punjab in a rural or a peri-urban location, preferably near Lahore, but outside the municipal limits. Land Requirement

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Infrastructure Requirements The project will have the following infrastructure components:

15 PROJECT ECONOMICS Project Cost The cost of the project will be as follows

Project Return

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Financing Plan

Estimated Time Frame for Project Completion The estimated time frame for the completion of the project will be one year.

16 FINANCIAL ANALYSES 16.1 Projected Income Statement

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16.2 Projected Cash flow Statement

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16.3 Projected Balance Sheet

17 KEY ASSUMPTIONS Table 17-1 Production Assumptions

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Table 17-2 Operating Assumptions

Table 17-3 Economy/Agriculture Related Assumptions

Table 17-4 Cash flow Assumptions

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Table 17-5 Revenue Assumptions

Table 17-6 Expense Assumptions

Table 17-7 Financial Assumptions

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Conclusions: ABS Enterprise will Attempt to attain leadership in the supply of improved wheat and rice seed in Punjab. The pursuit of high quality will be the driving force in the business. To achieve this, the enterprise will use the dedication, experience and skill of its members in key technical and management positions. Extensive promotional activity will help to ensure that ABS's customers perceive that they are receiving the best quality seed, on time, and at a reasonable price. The future of the improved wheat and rice seed industry in Punjab looks bright, and ABS is poised and positioned to take advantage of this commercial opportunity.

Contingency Planning: Difficulties and risks: • • •

Problems generating visibility. An already established competitor that chooses to compete on quality and flexibility. Poor weather which could hamper crop yields.

Worst case risks may include: •

Determining that the business cannot support itself on an ongoing basis.

•

Having to liquidate equipment to cover liabilities.

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