Company Name:General Electric Co.
Public Availability Date: January 15, 2008
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
December 7, 2007
VIA HAND DELIVERY
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: Shareowner Proposal of the Free Enterprise Action Fund Securities Exchange
Act of 1934Rule 14a-8
Dear Ladies and Gentlemen:
This letter is to inform you that our client, General Electric Company ("GE"),
intends to omit from its proxy statement and form of proxy for its 2008 Annual
Shareowners Meeting (collectively, the "2008 Proxy Materials") a shareowner
proposal and statements in support thereof (the "Proposal") received from the
Free Enterprise Action Fund (the "Proponent").
Pursuant to Rule 14a-8(j), we have:
enclosed herewith six (6) copies of this letter and its attachments;
filed this letter with the Securities and Exchange Commission (the
"Commission") no later than eighty (80) calendar days before GE intends to file
its definitive 2008 Proxy Materials with the Commission; and
concurrently sent copies of this correspondence to the Proponent.
Rule 14a-8(k) provides that shareowner proponents are required to send companies
a copy of any correspondence that the proponents elect to submit to the
Commission or the staff of the Division of Corporation Finance (the "Staff").
Accordingly, we are taking this opportunity to inform the Proponent that if the
Proponent elects to submit additional correspondence to the Commission or the
Staff with respect to this Proposal, a copy of that correspondence should
concurrently be furnished to the undersigned on behalf of GE pursuant to Rule
14a-8(k).
THE PROPOSAL
The Proposal asks GE's Board of Directors to prepare a global warming report.
The Proposal further suggests that such report may discuss the "[s]pecific
scientific data and studies relied on to formulate GE's climate policy," the "[e]xtent
to which GE believes human activity will significantly alter global climate,
whether such change is necessarily undesirable and whether a cost-effective
strategy for mitigating any undesirable change is practical" and "[e]stimates of
costs and benefits to GE of its climate policy." The Proposal includes a
supporting statement that alleges that GE's activities in this regard will
adversely impact "GE's customers and shareowners" and others. A copy of the
Proposal, as well as related correspondence from the Proponent, is attached to
this letter as Exhibit A.
ANALYSIS
Rule 14a-8(i)(7) permits the omission of a shareowner proposal dealing with
matters relating to a company's "ordinary business" operations. According to the
Commission's Release accompanying the 1998 amendments to Rule 14a-8, the
underlying policy of the ordinary business exclusion is "to confine the
resolution of ordinary business problems to management and the board of
directors, since it is impracticable for shareholders to decide how to solve
such problems at an annual shareholders meeting." Release No. 34-40018 (May 21,
1998) (the "1998 Release").
In the 1998 Release, the Commission described the two "central considerations"
for the ordinary business exclusion. The first was that certain tasks were "so
fundamental to management's ability to run a company on a day to day basis" that
they could not be subject to direct stockholder oversight. Examples of such
tasks cited by the Commission were "management of the workforce, such as the
hiring, promotion, and termination of employees, decisions on production quality
and quantity, and the retention of suppliers." The second consideration related
to "the degree to which the proposal seeks to `micro-manage' the company by
probing too deeply into matters of a complex nature upon which shareholders, as
a group, would not be in a position to make an informed judgment."
The Staff has also stated that a proposal requesting the dissemination of a
report may be excludable under Rule 14a-8(i)(7) if the substance of the report
is within the ordinary business of the issuer. See Release No. 34-20091 (Aug.
16, 1983). In addition, the Staff has indicated, "[where] the subject matter of
the additional disclosure sought in a particular proposal involves a matter of
ordinary business ... it may be excluded under rule 14a-8(i)(7)." Johnson
Controls, Inc. (avail. Oct. 26, 1999).
We believe that the Proposal is excludable under the ordinary business exclusion
in Rule 14a-8(i)(7) because it requests an internal assessment of the "costs and
benefits to GE of its climate policy" and the risks to GE as a result of
lobbying activities related to its ordinary business operations. Thus, under
established Staff precedent, the Proposal is excludable as it relates to GE's
evaluation of the risks and benefits of aspects of GE's business operations.
A. The Proposal Focuses on GE Engaging in an Internal Assessment of the Risks or
Liabilities That GE Faces as a Result of Its Operations.
The Proposal is clearly and directly focused on GE's internal risk review
process: it requests a report on the "costs and benefits" to GE of what the
Proposal describes as its "climate policy" and focuses on whether GE has
assessed the possible "advers[e] impacts" that the Proponent suggests may arise
from GE's policy and activities related to its policy. More specifically, the
Proposal suggests that GE faces financial and business risks in connection with
lobbying activities related to its climate policy and "Ecomagination" marketing
initiative.
A long and well-established line of no-action letters demonstrates that
shareowner proposals seeking detailed information on a company's assessment of
the risks and benefits of aspects of its business operations do not raise
significant policy issues and instead delve into the minutiae and details of the
ordinary conduct of business. For example, in The Dow Chemical Co. (Church of
the Brethren Benefit Trust) (avail. Feb. 23, 2005), the Staff concurred that the
company could exclude a proposal requesting a report describing the reputational
and financial impact of an environmental policy on Rule 14a-8(i)(7) grounds
because it related to the company's ordinary business operations (i.e.,
evaluation of risks and liabilities). In The Dow Chemical Co. (avail. Feb. 13,
2004), the Staff concurred that the company could exclude under Rule 14a-8(i)(7)
a proposal requesting a report related to certain toxic substances, including
"the reasonable range of projected costs of remediation or liability." In
concurring with the exclusion of the proposal, the Staff noted that it related
to an evaluation of risks and liabilities. See also Hewlett-Packard Co. (avail.
Dec. 12, 2006); (concurring with the exclusion of a shareowner proposal
requesting a report on the development of the company's policy on greenhouse gas
emissions because it related to an "evaluation of risk"); Willamette Industries,
Inc. (avail. Mar. 20, 2001) (excluding a proposal related to a request for a
report on environmental problems, including "an estimate of worst case financial
exposure due to environmental issues for the next ten years"); Boeing Co.
(avail. Feb. 25, 2005) (excluding a proposal related to a request for estimated
or anticipated cost savings associated with job elimination or relocation
actions taken by the company over the past five years); Potlatch Corp. (avail.
Feb. 13, 2001) (excluding a proposal related to a request for a report that was
to include an assessment of environmental risks).
While the Proposal does not specifically use the word "risk," other no-action
letters make it clear that the Staff looks beyond whether the shareowner
proposal refers specifically to an assessment of risk and instead looks to the
underlying focus of the proposal. For example, in Pulie Homes Inc. (avail. Mar.
1, 2007), the Staff concurred that the company could exclude as relating to
"evaluation of risk" a proposal requesting that the company "assess its
response" to rising regulatory, competitive, and public pressure to increase
energy efficiency. See also Great Plains Energy Inc. (avail. Feb. 27, 2007)
(proposal demanding a "financial analysis of the impact" of a carbon dioxide
emissions tax excludable as calling for an evaluation of risk); Wells Fargo &
Co. (avail. Feb. 16, 2006) (proposal requesting a report on the effect on Wells
Fargo's business strategy of the challenges created by global climate change
called for an evaluation of risk); The Dow Chemical Co. (avail. Feb. 23, 2005)
(concurring with the exclusion under Rule 14a-8(i)(7) of a shareowner proposal
requesting a report describing the reputational and financial impact of the
company's response to pending litigation because it related to an evaluation of
risks and liabilities); American International Group, Inc. (avail. Feb. 19,
2004) (concurring that the company could exclude a proposal that requested the
board of directors to report on "the economic effects of HIV/AIDS, tuberculosis
and malaria pandemics on the company's business strategy," because it called for
an evaluation of risks and benefits) (emphasis supplied).
Like the proposals at issue in the letters cited above, the Proposal questions
possible economic consequences of GE's ordinary business activities and asks for
an internal assessment of the "[c]osts and benefits to GE of its climate change
policy." From the supporting statement it is clear that among the risks and
costs that the Proponent is asking GE to assess are various asserted financial
and business risks in connection with GE's lobbying activities related to GE's
"climate policy," including risks to GE's "business prospects." Thus, the
Proposal is excludable because it focuses on GE engaging in an internal
assessment of the financial risks of its lobbying activities related to its
"climate policy."
We recognize that the last two years the Staff denied no-action requests with
respect to shareowner proposals on climate change submitted to GE; however, the
Proposal presents new issues for the Staff's consideration. The Proposal is
different from the shareowner proposal considered in General Electric Co.
(avail. Jan. 17, 2006) (the "2006 Proposal") because the 2006 Proposal focused
on disclosure of scientific information relating to GE's climate change policy.
In that regard, the 2006 Proposal was more similar to the proposals at issue in
Exxon Mobil Corp. (avail. Mar. 19, 2004) and Exxon Mobil Corp. (avail. Mar. 15,
2005), which requested research data relevant to Exxon Mobil's stated position
on the science of climate change, including the related costs.
Last year, on behalf of GE we challenged a shareowner proposal and supporting
statement that were substantially similar to this year's proposal, asserting
that it sought a report on GE's legislative and political activities and thereby
sought to restrict or interfere with specific ordinary business activities. See
General Electric Co. (avail. Jan. 31, 2007) (the "2007 Proposal"). We believe
that the Proposal, as with the 2007 Proposal, instead is excludable under Rule
14a-8(i)(7) as seeking an evaluation of risk. This conclusion is supported by
the intervening decision by the Staff in Hewlett-Packard Co. (avail. Dec. 12,
2006). In Hewlett-Packard, the Staff concurred with the exclusion of a
shareowner proposal requesting a report on the development of the company's
policy on greenhouse gas emissions, including the "costs and benefits" to
Hewlett-Packard of its greenhouse gas policy, and the supporting statement
focused on an assessment of litigation risk arising from the company's policies.
Here, the Proposal seeks "a global warming report," including specifically the
"costs and benefits to GE of its climate policy," and the supporting statement
focuses on an assessment of risks that the Proponent asserts may arise out of
GE's lobbying activities related to its climate policy. Thus, the Proposal is
very similar to the proposal in Hewlett-Packard. Moreover, In fact, the
Proponent's representative in a letter to the Staff addressing the
Hewlett-Packard proposal stated that the shareowner proposal in Hewlett-Packard
"is substantially the same as" the 2007 Proposal that had been submitted to GE
(and, as noted above, the 2007 Proposal is substantially similar to the
Proposal).
Moreover, the Proposal should be excludable consistent with the guidance in
Staff Legal Bulletin 14C (June 28, 2005). There, the Staff stated, "To the
extent that a proposal and supporting statement focus on the company engaging in
an internal assessment of the risks or liabilities that the company faces as a
result of its operations that may adversely affect the environment or the
public's health, we concur with the company's view that there is a basis for it
to exclude the proposal under Rule 14a-8(i)(7) as relating to an evaluation of
risk." Here, the Proposal seeks a report on GE's internal assessment of the
risks to GE as a result of lobbying activities related to its ordinary business
operations, and thus is excludable under the foregoing precedent. Although the
Proposal discusses climate change, it does not request that GE "minimiz[e] or
eliminat[e] operations that may adversely affect the environment or the public's
health." In fact, the Proposal proclaims support for GE's operations in this
regard, noting "[w]e support GE's efforts to sell cost-effective, fuel-efficient
technology that benefits customers and the economy, and meets regulatory
requirements."
For the reasons discussed above, the Proposal seeks an analysis of "[c]osts and
benefits" - which necessarily involves management conducting an internal
assessment. Therefore, because the Proposal seeks an internal assessment of risk
(namely the cost-benefit analysis and financial risks of GE's climate change
policy), it is excludable under Rule 14a-8(i)(7).
B. Regardless of Whether the Proposal Touches Upon Significant Social Policy
Issues, the Entire Proposal Is Excludable Due to the Fact That It Distinctly
Addresses Ordinary Business Matters.
The precedents set forth above support our conclusion that the Proposal
addresses ordinary business matters and therefore is excludable under Rule
14a-8(i)(7). The Staff has consistently concurred that a proposal may be
excluded in its entirety when it addresses ordinary business matters, even if it
also touches upon a significant social policy issue. For example, in Wal-Mart
Stores, Inc. (avail. Mar. 15, 1999), the Staff concurred that a company could
exclude a proposal requesting a report to ensure that the company did not
purchase goods from suppliers using forced labor, convict labor and child labor,
because the proposal also requested that the report address ordinary business
matters. In General Electric Co. (avail. Feb. 10, 2000), the Staff concurred
that the entire proposal was excludable under Rule 14a-8(i)(7) because a portion
of the proposal related to ordinary business matters (i.e., the choice of
accounting methods). Similarly, in Medallion Financial Corp. (avail. May 11,
2004), in reviewing a proposal requesting that the company engage an investment
bank to evaluate alternatives to enhance shareowner value, the Staff stated, "[w]e
note that the proposal appears to relate to both extraordinary transactions and
non-extraordinary transactions. Accordingly, we will not recommend enforcement
action to the Commission if Medallion omits the proposal from its proxy
materials in reliance on 14a-8(i)(7)." We also note that the Staff has
previously concurred that shareowner proposals relating to greenhouse gas
emissions do not involve a significant social policy. See, e.g., Wachovia Corp.
(avail. Jan. 28, 2005), the Staff concurred that a proposal requesting a report
"on the effect on Wachovia's business strategy of the risks created by global
climate change" was within Wachovia's ordinary business operations as an
evaluation of risk and was excludable. In Chubb Corp (avail. Jan. 25, 2004), the
Staff concurred that a proposal requesting a report "providing a comprehensive
assessment of Chubb's strategies to address the impacts of climate change on its
business" was within Chubb's ordinary business operations as it would require an
evaluation of risks and benefits and therefore was excludable. In both Xcel
Energy Inc. (avail. Apr. 1, 2003) and Cinergy Corp. (avail. Feb. 5, 2003), the
Staff concurred with the exclusion of proposals that requested a report
disclosing "the economic risks associated with the [c]ompany's past, present and
future emissions" of various greenhouse gases, and "the economic benefits of
committing to a substantial reduction of those errissions related to its current
business activities."
The Proposal focuses the risks to GE's business in connection with GE's ordinary
business operations. As noted above, a proposal may be excluded in its entirety
when it addresses ordinary business matters even if it also touches upon a
policy matter. The fact that the proposal mentions climate change policy does
not remove it from the scope of Rule 14a-8(i)(7) because the Proposal
fundamentally addresses the financial and business risks GE faces as a result of
its ordinary business operations. Accordingly, based on the precedents described
above, we believe that the Proposal properly may be excluded from the 2007 Proxy
Materials under Rule 14a-8(i)(7), and request that the Staff concur in our
conclusion.
CONCLUSION
Based upon the foregoing analysis, we respectfully request that the Staff concur
that it will take no action if GE excludes the Proposal from its 2008 Proxy
Materials. We would be happy to provide you with any additional information and
answer any questions that you may have regarding this subject. Moreover, GE
agrees to promptly forward to the Proponent's representative any response from
the Staff to this no-action request that the Staff transmits by facsimile to GE
only.
If we can be of any further assistance in this matter, please do not hesitate to
call me at (202) 955-8671, my colleague Elizabeth A. Ising at (202) 955-8287 or
David M. Stuart, GE's Senior Counsel, at (203) 373-2243.
Sincerely,
/s/
Ronald O. Mueller
ROM/eaj
Enclosure
cc: David M. Stuart, General Electric Company
Steven J. Milloy, Action Fund Management, LLC
[INQUIRY LETTER]
BY FAX
October 30, 2007
Mr. Brackett B. Denniston, III
Secretary
General Electric Company.
3135 Easton Turnpike
Fairfield, CT 06828-0001
Dear Mr. Denniston:
I hereby submit the enclosed shareholder proposal ("Proposal") for inclusion in
the General Electric Company (the "Company") proxy statement to be circulated to
Company shareholders in conjunction with the next annual meeting of
shareholders. The Proposal is submitted under Rule 14(a)-8 (Proposals of
Security Holders) of the U.S. Securities and Exchange Commission's proxy
regulations.
The Free Enterprise Action Fund ("FEAOX") is the beneficial owner of
approximately 8914 shares of the Company's common stock, 5449 shares of which
have been held continuously for more than a year prior to this date of
submission. The FEAOX intends to hold the shares through the date of the
Company's next annual meeting of shareholders. The record holder's appropriate
verification of the FEAOX's beneficial ownership will follow.
The FEAOX's designated representarives on this matter are Mr. Steven J. Milloy
and Dr. Thomas J. Borelli, both of Action Fund Management, LLC, 12309 Briarbush
Lane, Potomae, MD 20854, Action Fund Management, LLC is the investment adviser
to the FEAOX, Either Mr. Milloy or Dr. Borelli will present the Proposal for
consideration at the annual meeting of shareholders.
If you have any questions or wish to discuss the Proposal, please contact Mr.
Milloy at 301-258-2852. Copies of correspondence or a request for a "no-action"
letter should be forwarded to Mr. Milloy c/o Action Fund Management, LLC, 12309
Briarbush Lane, Potomac, MD 20854.
Sincerely,
/s/
Steven J. Milley
Managing Partner
Investment Advisor to the FEAOX, Owner of GE Common Stock
Attachment: Shareholder Proposal: Global Warming Report
[APPENDIX]
Global Warming Report
Resolved: The shareholders request that the Board of Directors prepare by
October 2008, at reasonable expense and omitting propriatary information, a
global warming report. The report may discuss the:
1. Specific scientific data and studies relied on to formulate GE's climate
policy.
2. Extant to which GE believes human activity will significantly alter global
climate, whether such change is necessarily undesirable and whether a
cost-effective strategy for mitigating any undesirable change is practical.
3. Estimates of costs and benefits to GE of its olimate policy.
Supporting Statement:
In May 2005, GE announced its "Ecomagination" marketing initiative - a "strategy
to respond to the needs of GE customers for technological solutions to
environmental regulatory requirements." We support GE's effort to sell
cost-effective, fuel-efficient technology that benefits customers and the
economy, and meets regulatory requirements. That is good business.
But we believe GE has gone beyond the bounds of eimply helping customers to meet
existing regulatory requirements, GE is working to impose new, more stringent
government regulations that will raise energy costs and reduce energy
availability without providing significant, or even measurable, environmental
benefits, In particular, GE is lobbying lawmakers, and even supporting
politicized activists in hopes of enacting greenhouse gas laws similar to the
Kyoto Protocol.
We are concerned that GE's lobbying for stringent global warming regulation will
adversely impact: (1) GE's customers and shareowners; (2) the customers and
shareowners of other businesses: (3) consumers, particularly GE retirees and
others on fixed incomes; and (4) the economy.
GE's business prospects ought not depend on government-mandated interest in
certain of its products. Rather, GE's success depends on free markets and a
healthy, growing global economy. Stitled economic growth or a downturn - which
could be brought on or exacerbated by global warming regulation - will likely
adversely impact GE, as the company acknowledged in its 2005 annual report.
So-called "regulatory certainty" - the notion that business planning is
faoilitated by a certain regulatory environment - is an invalid argument for
seeking costly global warming regulation since the only certainty is that the
regulations will likely only become more stringent and expensive. GE will not be
able to dictate events once the regulatory regime it advocates is enacted.
We are simply asking GE to disclose to shareholders whether its lobbying for
global warming restrictions is based on a due diligence-type review and analysis
of pertinent facts or perhaps has its roots in appeasement of anti-business
environmental activists or public relations.
If GE can find willing buyers for Ecomagination products, that's good business,
But GE's lobbying to enact laws and regulations that would potentially raise
energy prices, harm the economy and adversely impact GE - without conducting the
appropriate due diligence - is bad business.
GE founder Thomas Edison once said, "I find out what the world needs, then I
proceed to invent," Is junk science-based global warming regulation what the
world needs?
[INQUIRY LETTER]
December 17, 2007
VIA OVERNIGHT DELIVERY
Office of the Chief Counsel
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, N.W.
Washington, DC 20549
Re: Shareowner Proposal of the Free Enterprise Action Fund to the General
Electric Company under Exchange Act Rule 14a-8
Dear Ladies and Gentlemen:
This letter is submitted on behalf of the Free Enterprise Action Fund ("FEAOX")
in response to a December 7, 2007 request from the General Electric Company
("GE") to the Division of Corporation Finance ("Staff") for a no-action letter
concerning the above-captioned shareowner proposal.
Action Fund Management, LLC is the investment advisor to the FEAOX and is
authorized to act on its behalf in this matter.
We believe that GE's request is utterly without merit and so there is no legal
or factual basis for GE to exclude the Proposal from its 2008 Proxy Materials.
Moreover, we believe that GE's request is misleading, if not deceptive.
Accordingly, we urge the Staff to request an explanation from GE for its
questionable assertions.
Finally, we request that Mr. Thomas J. Kim, chief counsel of the Division of
Corporation Finance and a former attorney for the General Electric Company,
formally recuse himself from this matter.
I. The Staff has twice refused GE requests for a no-action letter on this
proposal.
In General Electric Co. (avail. Jan. 17, 2006) and General Electric Co. (avail.
Jan. 31, 2007) (the "2007 Proposal"), the Staff refused GE's request for a
no-action letter. Not only is the current Proposal substantially similar to both
of the earlier proposals, it is virtually identical to the 2007 proposal. We are
not aware of any new interpretive guidance from the Staff or intervening Staff
decisions that provide a legal basis for excluding the Proposal.
II. The 2007 proposal attracted sufficient shareowner support to satisfy Rule
14a-8.
According to GE's Form 10-Q filing for the period ending June 30, 2007, the 2007
Proposal attracted approximately 6.4 percent of the shareowner vote, more than
enough votes to satisfy the requirements of Rule 14a-8 for resubmitting a
proposal.
III. Part of GE's argument is misleading, if not deceptive.
GE's request states in relevant part,
... We recognize that the last two years the Staff denied no-action requests
with respect to shareowner proposals on climate change submitted to GE; however
the Proposal presents new issue for the Staff's consideration... We believe that
the Proposal, as with the 2007 Proposal, instead is excludable under Rule
14a-8(i)(7) as seeking an evaluation of risk. This conclusion is supported by
the intervening decision by the Staff in Hewlett-Packard Co. (avail. Dec, 12,
2006)...
The simple chronology is, however, that the Staff's decision concerning the 2007
Proposal is dated more than six weeks after the Staff's decision in
Hewlett-Packard Co. Although the Staff granted the Hewlett-Packard Co.'s request
for a no-action letter on Dec. 12, 2006, the Staff nevertheless refused to grant
GE's request concerning the 2007 Proposal on January 31, 2007. Hewlett-Packard
Co. is not an "intervening" decision. It is a prior decision that, regardless of
the grounds it was decided on, apparently was of no controlling relevance to the
2007 Proposal.
Perhaps GE's argument is simply a bad one. But it is so glibly presented that it
almost seems as if GE is trying to deceive the Staff into believing that the
decision in General Electric Co. (January 31, 2007) either never happened or
happened before Hewlett-Packard Co.
IV. Conclusion
Based upon the forgoing analysis, we respectfully request that the Staff reject
GE's request for a "no-action" letter concerning the Proposal. If the Staff does
not concur with our position, we would appreciate the opportunity to confer with
the Staff concerning these matters prior to the issuance of its response. Also,
we request to be party to any and all communications between the Staff and GE
and its representatives concerning the Proposal.
A copy of this correspondence has been timely provided to GE and its counsel. In
the interest of a fair and balanced process, we request that the Staff notify
the undersigned if it receives any correspondence on the Proposal from GE or
other persons, unless that correspondence has specifically confirmed to the
Staff that the Proponent or the undersigned have timely been provided with a
copy of the correspondence, If we can provide additional correspondence to
address any questions that the Staff may have with respect to this
correspondence or GE's no-action request, please do not hesitate to call me at
301-258-2852.
Sincerely,
/s/
Steven J. Milloy
Managing Partner & General Counsel
Cc: David M. Stuart, General Electric Company
Ronald O. Mueller, Gibson, Dunn & Crutcher LLP
[STAFF REPLY LETTER]
January 15, 2008
Response of the Office of Chief Counsel Division of Corporation Finance
Re: General Electric Company Incoming letter dated December 7, 2007
The proposal requests the board of directors to prepare a global warming report.
We are unable to concur in your view that GE may exclude the proposal under rule
14a-8(i)(7). Accordingly, we do not believe that GE may omit the proposal from
its proxy materials in reliance on rule 14a-8(i)(7).
Sincerely,
/s/
John R. Fieldsend
Attorney-Adviser
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