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20. Postretirement Healthcare Benefit Plans
Certain U.S. and Brazil based subsidiaries of Bunge have benefit plans to provide certain postretirement healthcare benefits to eligible retired employees of those subsidiaries. The plans require minimum retiree contributions and define the maximum amount the subsidiaries will be obligated to pay under the plans. Bunge's policy is to fund these costs as they become payable.
Plan Settlements—In 2010, Bunge divested its Brazilian fertilizer nutrients assets (see Notes 3 and 19), which resulted in a settlement of approximately $32 million.
The following table sets forth a reconciliation of the changes in the postretirement healthcare benefit plans' benefit obligations and funded status at December 31, 2011 and 2010. A measurement date of December 31 was used for all plans.
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U.S. Postretirement
Healthcare Benefits
December 31, |
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Foreign Postretirement
Healthcare Benefits
December 31, |
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(US$ in millions) |
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2011 |
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2010 |
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2011 |
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2010 |
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Change in benefit obligations: |
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Benefit obligation as of beginning of year |
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$ |
20 |
|
$ |
26 |
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$ |
100 |
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$ |
111 |
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Service cost |
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|
— |
|
|
— |
|
|
1 |
|
|
1 |
|
|
Interest cost |
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|
1 |
|
|
2 |
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|
10 |
|
|
10 |
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Actuarial (gain) loss, net |
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(3 |
) |
|
(6 |
) |
|
8 |
|
|
12 |
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Employee contributions |
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|
1 |
|
|
1 |
|
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— |
|
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— |
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Plan settlements/divestitures |
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— |
|
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— |
|
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— |
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(32 |
) |
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Effect of acquisitions |
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|
— |
|
|
— |
|
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— |
|
|
1 |
|
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Benefits paid |
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|
(2 |
) |
|
(3 |
) |
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(10 |
) |
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(8 |
) |
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Impact of foreign exchange rates |
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— |
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— |
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(12 |
) |
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5 |
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| |
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Benefit obligation as of end of year |
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$ |
17 |
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$ |
20 |
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$ |
97 |
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$ |
100 |
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| |
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Change in plan assets: |
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Employer contributions |
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$ |
1 |
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$ |
2 |
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$ |
10 |
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$ |
8 |
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Employee contributions |
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1 |
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1 |
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— |
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— |
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Benefits paid |
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(2 |
) |
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(3 |
) |
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(10 |
) |
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(8 |
) |
| |
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Fair value of plan assets as of end of year |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
— |
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| |
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Funded status and net amounts recognized: |
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Plan assets less than benefit obligation |
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$ |
(17 |
) |
$ |
(20 |
) |
$ |
(97 |
) |
$ |
(100 |
) |
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Net liability recognized in the balance sheet |
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$ |
(17 |
) |
$ |
(20 |
) |
$ |
(97 |
) |
$ |
(100 |
) |
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Amounts recognized in the balance sheet consist of: |
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Current liabilities |
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$ |
(2 |
) |
$ |
(2 |
) |
$ |
(7 |
) |
$ |
(8 |
) |
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Non-current liabilities |
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(15 |
) |
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(18 |
) |
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(90 |
) |
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(92 |
) |
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Net liability recognized |
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$ |
(17 |
) |
$ |
(20 |
) |
$ |
(97 |
) |
$ |
(100 |
) |
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Included in accumulated other comprehensive income at December 31, 2011 are the following amounts for U.S. and foreign postretirement healthcare benefit plans that have not yet been recognized in net periodic benefit costs: unrecognized prior service credit of $1 million ($1 million, net of tax) and $4 million ($3 million, net of tax), respectively, and unrecognized actuarial gain (loss) of $4 million ($3 million, net of tax) and $(17) million (($11) million, net of tax), respectively. Bunge expects to recognize unrecognized prior service credits in 2012 of $1 million ($1 million, net of tax) and unrecognized actuarial losses of $1 million ($1 million, net of tax) as components of net periodic pension cost for its postretirement healthcare benefit plans.
The components of net periodic benefit costs for U.S. and foreign postretirement healthcare benefit plans are as follows:
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U.S. Postretirement Healthcare Benefits
Year Ended December 31, |
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Foreign Postretirement Healthcare
Benefits Year Ended December 31, |
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(US$ in millions) |
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2011 |
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2010 |
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2009 |
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2011 |
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2010 |
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2009 |
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Service cost |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
1 |
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$ |
1 |
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$ |
2 |
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Interest cost |
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1 |
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2 |
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2 |
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10 |
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10 |
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10 |
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Amortization of prior service cost |
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— |
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— |
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— |
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(1 |
) |
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(1 |
) |
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— |
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Amortization of net loss |
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— |
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— |
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— |
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1 |
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2 |
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— |
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Settlement gain recognized |
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— |
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— |
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— |
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— |
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(26 |
) |
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— |
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| |
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Net periodic benefit costs |
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$ |
1 |
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$ |
2 |
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$ |
2 |
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$ |
11 |
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$ |
(14 |
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$ |
12 |
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The weighted-average discount rates used in determining the actuarial present value of the accumulated benefit obligations under the U.S. and foreign postretirement healthcare benefit plans are as follows:
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U.S. Postretirement
Healthcare Benefits
December 31, |
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Foreign Postretirement
Healthcare Benefits
December 31, |
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2011 |
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2010 |
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2011 |
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2010 |
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Discount rate |
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4.8 |
% |
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5.3 |
% |
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10.3 |
% |
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10.8 |
% |
The weighted-average discount rate assumptions used in determining the net periodic benefit costs under the U.S. and foreign postretirement healthcare benefit plans are as follows:
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U.S. Postretirement
Healthcare Benefits
Year Ended
December 31, |
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Foreign Postretirement
Healthcare Benefits
Year Ended
December 31, |
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2011 |
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2010 |
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2009 |
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2011 |
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2010 |
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2009 |
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Discount rate |
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5.3 |
% |
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5.8 |
% |
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6.5 |
% |
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10.8 |
% |
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11.3 |
% |
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12.4 |
% |
At December 31, 2011, for measurement purposes related to U.S. plans, a 10.42% annual rate of increase in the per capita cost of covered healthcare benefits was assumed for 2012, decreasing to 4.50% by 2029, remaining at that level thereafter. At December 31, 2010, for measurement purposes related to U.S. plans, an 11.18% annual rate of increase in the per capita cost of covered healthcare benefits was assumed for 2011. For foreign plans, the assumed annual rate of increase in the per capita cost of covered healthcare benefits averaged 7.63% and 8.07% for 2011 and 2010, respectively.
A one-percentage point change in assumed healthcare cost trend rates would have the following effects:
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(US$ in millions) |
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One percentage
point increase |
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One percentage
point decrease |
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Effect on total service and interest cost—U.S. plans |
|
$ |
— |
|
$ |
— |
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Effect on total service and interest cost—Foreign plans |
|
$ |
2 |
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$ |
(1 |
) |
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Effect on postretirement benefit obligation—U.S. plans |
|
$ |
1 |
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$ |
(1 |
) |
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Effect on postretirement benefit obligation—Foreign plans |
|
$ |
15 |
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$ |
(11 |
) |
Bunge expects to contribute $2 million to its U.S. postretirement healthcare benefit plan and $6 million to its foreign postretirement healthcare benefit plans in 2012.
The following benefit payments, which reflect expected future service as appropriate, are expected to be paid:
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(US$ in millions) |
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U.S. Postretirement
Healthcare Benefit
Expected Payments |
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Foreign Postretirement
Healthcare Benefit
Expected Payments |
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2012 |
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$ |
2 |
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$ |
6 |
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2013 |
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2 |
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7 |
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2014 |
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2 |
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7 |
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2015 |
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2 |
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7 |
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2016 |
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2 |
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8 |
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2017-2021 |
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6 |
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42 |
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