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Schroders Annual Results 2006 Forward-Looking Statements These presentation slides contain forward-looking statements and forecasts with respect to the financial condition and results of the businesses of Schroders plc and its subsidiaries

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Schroders Annual Results 2006

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Schroders annual results 2006 l.jpg

Schroders

Annual Results 2006

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Forward looking statements l.jpg

Forward-Looking Statements

  • These presentation slides contain forward-looking statements and forecasts with respect to the financial condition and results of the businesses of Schroders plc and its subsidiaries

  • These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that may occur in the future

  • There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by those forward-looking statements and forecasts. Nothing in this announcement should be construed as a profit forecast

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2006 Results

Michael DobsonChief Executive

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Financial Results

Jonathan AsquithChief Financial Officer

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Overview

  • Profit before tax £290.0 million(2005: £250.7 million)

  • Asset Management profit before tax £219.0 million(2005: £193.9 million)

  • Private Banking profit before tax £26.9 million(2005: £6.3 million)

  • Private Equity profit before tax £34.6 million(2005: £40.3 million)

  • Funds under management £128.5 billion(31 December 2005: £122.5 billion)

  • Total dividend for the year of 25.0 pence per share (2005: 21.5 pence per share)

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Profit Before Tax

£mn

Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS

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Profit Before Tax

Asset Management

£mn

193.9

Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS

Figures 2001-2003 include Private Banking

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Profit Before Tax

Private Banking

£mn

Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS

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Profit Before Tax

Private Equity and Group

£mn

IFP

Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS

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Profit before tax10 l.jpg

290.0

Gain on discontinued

Underlying 2005 pre tax

outsourcing project

profit

Profit Before Tax

Reconciliation – 2005 to 2006

£mn

350

300

(20.4)

250

200

150

250.7

230.3

100

50

0

2005 pre tax profit

2006 pre tax profit

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Profit before tax11 l.jpg

290.0

Underlying Asset

Management net

income

Profit Before Tax

Reconciliation – 2005 to 2006

£mn

£mn

350

300

107.8

250

200

150

230.3

100

50

0

2005 pre tax profit

2006 pre tax profit

Underlying Asset Management net

income (£mn)

2005

2006

Difference

Revenue

External cost of sales

Asset Management gross profit

Net interest and other income

Underlying net income

  • 667.8

  • (128.8)

  • 539.0

  • 8.8

    • 547.8

811.1

(166.2)

644.9

10.7

655.6

143.3

(37.4)

105.9

1.9

107.8

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Profit before tax12 l.jpg

290.0

Underlying Asset

Asset Management

costs

Management net

income

Profit Before Tax

Reconciliation – 2005 to 2006

£mn

£mn

£mn

350

300

(62.6)

107.8

250

200

150

230.3

100

50

0

2005 pre tax profit

2006 pre tax profit

Asset Management costs (£mn)

2005

2006

Difference

Asset Management staff costs

Asset Management other costs

Asset Management total costs

(264.5)

(109.5)

(374.0)

(297.6)

(139.0)

(436.6)

(33.1)

(29.5)

(62.6)

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290.0

Asset Management

costs

Profit Before Tax

Reconciliation – 2005 to 2006

£mn

£mn

£mn

£mn

350

45.2

300

(62.6)

107.8

250

200

150

230.3

100

50

0

Underlying Asset

2005 pre tax profit

2006 pre tax profit

Management net

income

Underlying Asset Management profit

(£mn)

2005

2006

Difference

Underlying profit before tax

173.8

219.0

45.2

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290.0

Underlying Asset

Underlying Private

Management profit

Banking profit

Profit Before Tax

Reconciliation – 2005 to 2006

£mn

£mn

£mn

£mn

£mn

350

20.9

300

250

45.2

200

150

230.3

100

50

0

2005 pre tax profit

2006 pre tax profit

Underlying Private Banking profit(£mn)

2005

2006

Difference

Revenue

External cost of sales

Gross profit

Costs

Underlying profit before tax

74.1

(2.0)

72.1

(66.1)

6.0

98.5

(2.8)

95.7

(68.8)

26.9

24.4

(0.8)

23.6

(2.7)

20.9

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290.0

Underlying Asset

Underlying Private

Management profit

Banking profit

Profit Before Tax

Reconciliation – 2005 to 2006

£mn

£mn

£mn

£mn

£mn

£mn

350

(5.7)

20.9

300

250

45.2

200

150

230.3

100

50

0

2005 pre tax profit

Private Equity

profit

2006 pre tax profit

Private Equity (£mn)

2005

2006

Difference

Profit before tax

40.3

34.6

(5.7)

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Profit before tax16 l.jpg

290.0

Underlying Asset

Underlying Private

Management profit

Banking profit

Group

Profit Before Tax

Reconciliation – 2005 to 2006

£mn

£mn

£mn

£mn

£mn

£mn

£mn

350

(5.7)

(0.7)

20.9

300

250

45.2

200

150

230.3

100

50

0

2005 pre tax profit

Private Equity

profit

2006 pre tax profit

Group (£mn)

2005

2006

Difference

Gross profit

Surplus space

Administrative expenses

Net interest and other income

Profit before tax

30.8

(9.2)

(32.0)

20.6

10.2

31.0

(4.5)

(29.2)

12.2

9.5

0.2

4.7

2.8

(8.4)

(0.7)

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290.0

Underlying Asset

Underlying Private

Management profit

Banking profit

Group

Profit Before Tax

Reconciliation – 2005 to 2006

£mn

£mn

£mn

£mn

£mn

£mn

£mn

350

(5.7)

(0.7)

20.9

300

250

45.2

200

150

230.3

100

50

0

2005 pre tax profit

Private Equity

profit

2006 pre tax profit

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Costs

Total Group

£mn

2005

2006

309.8

154.4

9.2

10.9

484.3

345.2

185.1

4.5

7.5

542.3

Staff costs

Other costs

Surplus space provisions

Depreciation and amortisation

Total administrative expenses

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Costs

Total Group

£mn

700

542.3

600

520.0

484.3

470.1

500

408.6

406.2

400

300

200

100

0

2001

2002

2003

2004

2005

2006

Staff Costs

Non-staff Costs

Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS

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Compensation Costs: Operating Revenues

70%

57%

56%

56%

60%

51%

51%

47%

50%

40%

30%

20%

10%

0%

2001

2002

2003

2004

2005

2006

Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS

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Cost income ratio l.jpg

Cost: Income Ratio

120%

102%

96%

100%

86%

80%

66%

66%

65%

60%

40%

20%

0%

2001

2002

2003

2004

2005

2006

Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS

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Capital allocation l.jpg

Capital Allocation

31 December 2006

£mn

31 December 2005

Regulatory

Other operating

Goodwill & Intangibles

Liquid funds

Third party hedge funds

Other Schroders funds

Private Equity

Leasing

Total

230.0

208.2

24.6

411.9

134.3

165.9

160.9

7.0

1,342.8

258.6

322.3

73.5

311.8

138.4

163.7

168.2

6.9

1,443.4

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Funds Under Management

31 Dec 2006 (31 Dec 2005)

By client type

By client domicile

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Funds Under Management

31 Dec 2006 (31 Dec 2005)

By asset type

Equities

Fixed Income

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Movements in Funds Under Management

£bn

Institutional

Retail

PrivateBanking

Total

31 December 2005

Purchase of NFC

Net asset (losses)/gains

Market movement

31 December 2006

78.7

1.4

(8.0)

5.3

77.4

36.0

0.0

3.8

2.7

42.5

7.8

0.0

0.4

0.4

8.6

122.5

1.4

(3.8)

8.4

128.5

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Gross Profits and Margin

2005

2006

Gross

Profit

Margin

(bps)

Gross

Profit

Margin

(bps)

£mn

Institutional

Retail

Total Asset Management

Private Banking

254.1

284.9

539.0

72.1

35

85

51

105

295.6

349.3

644.9

95.7

38

89

55

117

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Pence per share

£mn

Pence per share

£mn

Penceper share

£mn

Dividends and Earnings Per Share

2005

2006

2004

Interim

Final

Basic earnings per share

Diluted earnings per share

6.5

13.5

20.0

18.8

39.2

58.0

53.5p

53.1p

7.0

14.5

21.5

20.3

42.0

62.3

65.7p

65.1p

7.517.525.0

21.449.7

71.1

76.9p

75.7p

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Distribution l.jpg

Distribution

Massimo TosatoGlobal Head of Distribution

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The Market Long Term Trends

Defined Contribution Schemes

Personal Savings

Demographics:

Defined Benefit Schemes

Channels

  • Growth of individual and “instividual” savings

Products

  • Outcome oriented products

  • Strategic solutions

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Schroders’ Positioning within these Trends

  • Channel

  • Product

  • Geography

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An international example l.jpg

1996

2006

1.2

12

19

48

5

39

179

107

789

37

An International Example

The Luxembourg mutual fund platform

FUM (€bn)

Headcount

Subfunds

Share Classes

Countries

Outsourced: treasury, fund accounting, fund custody, stock lending

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Gross Sales

£bn

35.3

CAGR = +35.6%

28.6

23.7

20.3

10.7

7.7

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Investment

Alan BrownGlobal Head of Investment

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Investment Performance

% of Institutional and Retail assets above and below benchmark

3 years to 31 December 2006

Retail

Institutional

Above benchmark

Below benchmark

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Our traditional business l.jpg

  • Opportunities:

  • Pacific ex-Japan

  • European Equities

  • Property – SEPUT & FoFs

  • Performance & Capacity

  • Institutional

  • Asset Allocation & Diversification

Our Traditional Business

  • Challenges:

  • UK Multi-Asset

  • Japan Equities

  • Continued Restructuring

  • Performance

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Harnessing Change

  • Catalysts

  • Accounting Rules and Regulation

  • Defined Benefit Defined Contribution

  • Two Themes

  • Diversification

  • Outcome Oriented Strategies

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Diversification l.jpg

Diversification

  • Multi-Asset team

  • Schroder Property

  • Alternative Investments Group

  • NewFinance Capital

  • DGF Equity return at lower volatility

  • Property SecuritiesGlobal diversification and liquidity

  • CommoditiesDiversification and real asset

  • Hedge Fund of FundsBest of breed diversification

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Outcome Oriented Strategies

  • LDI Liability matching portfolios

  • Structured ProductsCapital guarantees, income products

  • Absolute and Total Return Credit notes, strategic bond

  • Benchmark Unaware Global active value, improved Sharpe ratios

  • Multi-Asset team

  • Multi-Asset team

  • Fixed Income

  • Quantitative Equity

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Private Banking

Philip MallinckrodtGlobal Head of Private Banking

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Private Banking Summary

  • Considerable progress in 2006

  • Positioning for growth over next five years

  • Integrated business model for our banks in UK, Guernsey and Switzerland

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Management Priorities in 2006/7

  • Integrate back office in Zurich

  • Sharpen our client proposition

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2006 Results

Michael DobsonChief Executive

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Appendices l.jpg

Appendices

29220


Income statement progression l.jpg

Income Statement Progression

Profit before tax

£mn

Q3 2005

Q42005

Q12006

Q22006

Q32006

Q42006

Asset Management income

Asset Management cost

Asset Management profit

Private Banking profit

Private Equity

Group

Profit before tax

141.2

(95.1)

46.1

1.5

5.5

10.5

63.6

152.9

(104.9)

48.0

2.6

16.8

(3.8)

63.6

152.8

(102.9)

49.9

3.7

7.2

10.6

71.4

152.4

(105.5)

46.9

7.5

10.5

(4.0)

60.9

157.2

(108.9)

48.3

6.9

6.2

2.6

64.0

193.2

(119.3)

73.9

8.8

10.7

0.3

93.7

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2006 Business Segment Profits

£mn

9.5

290.0

34.6

26.9

219.0

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Gross Profit Margins

Asset Management gross profit £644.9 million(2005: £539.0 million)

Asset Management

2005

2006

Gross profit on average AM FUM

Of which: performance fees

Costs on average AM FUM

Net

Average AM FUM

51bps

2bps

35bps

16bps

£106.5bn

55bps

4bps

37bps

18bps

£116.6bn

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Slide47 l.jpg

Gross Profit Margins

Asset Management gross profit £644.9 million(2005: £539.0 million)

Private Bank gross profit £95.7 million(2005: £72.1 million)

Asset Management & Private Bank

2005

2006

Gross profit on average AM FUM

Gross profit on average PB FUM

Gross profit on average AM & PB FUM

Average combined FUM

51bps

104bps

54bps

£113.4bn

55bps

117bps

59bps

£124.8bn

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Comparison of Costs

Asset Management

£mn

2005

2006

Staff costs

Other costs

Depreciation and amortisation Total administrative expenses

264.5

102.8

6.7

374.0

297.6

134.0

5.0

436.6

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Comparison of Costs

Private Banking

£mn

2005

2006

Staff costs

Other costs

Depreciation and amortisation Total administrative expenses

34.0

27.9

4.2

66.1

35.8

30.5

2.5

68.8

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Headcount

No. employees

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Balance sheet l.jpg

Balance Sheet

£mn

31 Dec 2005

31 Dec 2006

80.3

701.8

2,736.7

60.1

1,532.0

5,110.9

1,443.6

338.4

1,796.9

1,532.0

5,110.9

30.2

526.9

2,760.9

23.4

0.0

3,341.4

1,343.1

210.2

1,788.1

0.0

3,341.4

Intangible assets

Other non-current assets

Current assets

Non-current assets held for sale

Assets backing insurance unit-linked liabilities

Total assets

Total equity

Non-current liabilities

Current liabilities

Insurance unit-linked liabilities

Total equity and liabilities

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Asset Management Balance Sheet

£mn

31 Dec 2005

31 Dec 2006

23.3

109.6

514.9

0.0

647.8

278.6

59.6

309.6

0.0

647.8

75.0

98.9

721.4

1,532.0

2,427.3

414.0

86.2

395.1

1,532.0

2,427.3

Intangible assets

Other non-current assets

Current assets

Assets backing insurance unit-linked liabilities

Total assets

Total equity

Non-current liabilities

Current liabilities

Insurance unit-linked liabilities

Total equity and liabilities

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Capital Allocation

Asset Management£mn

PrivateBanking£mn

PrivateEquity£mn

Group£mn

Total£mn

31 Dec 2006

Regulatory

Other operating

Goodwill

Liquid funds

Third party hedge funds

Other Schroders funds

Private equity

Leasing

31 Dec 2005

Regulatory

Other operating

Goodwill

Liquid funds

Third party hedge funds

Other Schroders funds

Private equity

Leasing

147.2

187.9

68.5

10.3

0.0

0.0

0.0

0.0

413.9

122.5

90.1

21.0

45.0

0.0

0.0

0.0

0.0

278.6

111.4

76.9

5.0

0.0

0.0

0.0

0.0

0.0

193.3

107.5

59.9

3.6

0.0

0.0

0.0

0.0

0.0

171.0

0.0

0.0

0.0

0.0

0.0

0.0

168.2

0.0

168.2

0.0

0.0

0.0

0.0

0.0

0.0

160.9

0.0

160.9

0.0

57.5

0.0

301.5

138.4

163.7

0.0

6.9

668.0

0.0

58.2

0.0

366.9

134.3

165.9

0.0

7.0

732.3

258.6

322.3

73.5

311.8

138.4

163.7

168.2

6.9

1,443.4

230.0

208.2

24.6

411.9

134.3

165.9

160.9

7.0

1,342.8

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Reconciliation of movement in capital l.jpg

£mn

Reconciliation of Movement in Capital

2006

Opening balance at 1 January 2006

Movements in respect of shares and share-based payments

Net movement in share capital

Net movement in own shares

Share-based payments net of tax

Shares to be issued

Movements in respect of current year profits and unrealised items of income and expense

Profit for the year after dividends and minority interests

Exchange differences net of hedging

Actuarial gains net of tax

Gains on investment net of amounts recycled through the income statement

Closing balance at 31 December 2006

1,342.8 (56.5)

(60.2)

35.8

15.1

(65.8)

157.9

(33.7)

3.8

38.4

166.4

1,443.4

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Private equity interests l.jpg

Private Equity Interests

Schroders plc

Investments

Carried Interest

(Total £128 mn)

(Total £40 mn)

SVG Capital plc

Permira*

£59mn

Funds I + II

Quoted Investment Trust

Other SV funds*

SVIL

£21mn

US, Canada, Japan,

Life Sciences, Asia Pacific

Co-investment vehicle

GP & LP Interests

£31mn

Permira and other funds

Fund of Funds I, II, III

£13mn

Stand-alone portfolio

Other

£4mn

*Share of carry between 7.5% and 36%

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Private Equity Results

31 Dec 2005

31 Dec 2006

16%

£40mn

£11mn

£51mn

12%

£35mn

£25mn

£60mn

Percentage of Group profit

Gains through P&L

Movement in unrealised gains

Total gains

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Gross new business 2006 l.jpg

Gross New Business 2006

£38.0 billion

2005

£bn

Clients

2005

£bn

2006

£bn

2006

£bn

Products

Institutional

8.3

9.2

Equities

18.4

24.1

Retail

20.3

26.1

Fixed income

10.5

12.2

Private Banking

2.1

2.7

Alternative investments

1.8

1.7

Total

30.7

38.0

Total

30.7

38.0

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Net change in business l.jpg

Net Change in Business

£bn

2005

2006

In

Out

Net

In

Out

Net

Institutional

Retail

Private Banking

Total

8.3

20.3

2.1

30.7

(14.2)

(20.3)

(1.5)

(36.0)

(5.9)

0.0

0.6

(5.3)

9.2

26.1

2.7

38.0

(17.2)

(22.3)

(2.3)

(41.8)

(8.0)

3.8

0.4

(3.8)

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Gross client flows l.jpg

Gross Client Flows

Current disclosures

  • Institutional

    • Flows from same client netted within the month

    • Inflows and outflows in different months not netted

    • Approximately 50% of total outflows occur within ongoing client relationships

  • Retail

    • Sub-advisory and Branded Funds – inflows and outflows from the same distributor clients in the same month are reported gross; no netting

    • Switching activity netted – but this relates to in specie switches only, which are small

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Retail Alternative Disclosures

£bn

In

Out

Net

Gross Disclosure

Retail

26.1

(22.3)

3.8

  • Sub-advisory and Branded Funds – inflows and outflows from the same distributor clients netted within month

£bn

In

Out

Net

Revised Retail Disclosure

Retail

11.4

(7.6)

3.8

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