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Public Notice
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Ottawa, 8 April 1992
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Public Notice CRTC 1992-28
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New Flexibility With Regard to Canadian Program Expenditures by Canadian Television Stations
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In the spring of 1989, the Commission renewed the licences for a large number of English-language television stations across Canada. Public Notice CRTC 1989-27, which accompanied the renewal decisions, announced that, in the case of those stations whose annual total advertising revenues exceeded $10 million in the broadcast year ending 31 August 1988, the Commission would impose a condition of licence requiring a minimum level of Canadian program expenditures. The Commission stated that the minimum required level of spending would be calculated yearly in accordance with a formula tied to each station's financial performance, as measured by its total advertising revenues in previous years. The same formula was made an expectation for television licensees whose advertising revenues were less than $10 million in the broadcast year ending 31 August 1988.
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At the Public Hearing held in the National Capital Region beginning on 5 November 1991, the Commission considered, among other things, applications for licence renewal by Nation's Capital Television Incorporated (CJOH-TV Ottawa), and by Global Communications Limited (Global) (CIII-TV). The Canadian Association of Broadcasters (CAB), representing the majority of Canada's privately-owned television stations and networks, appeared before the Commission at this hearing to support these licence renewals.
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At the hearing, both Global and the CAB raised concerns regarding the Canadian program expenditure formula. Among other concerns, the CAB noted that the "formula does not allow broadcasters to carry forward expenditures from year to year because it requires compliance on an annual basis". The CAB proposed, as one option, that the Commission permit a licensee "to meet its Canadian programming expenditure target over the life of the licence, not on an annual basis".
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The Commission has carefully considered the views expressed on this matter and the various suggestions for modifying the formula. It is satisfied that certain adjustments could be made that will not compromise achievement of the objectives for which the formula was designed. Accordingly, and consistent with its desire to afford licensees as much flexibility as possible, the Commission has developed revisions to the condition of licence regarding expenditures on Canadian programming.
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For the balance of the licence term, and beginning with the current year, the Commission will consider compliance as follows. The Commission will permit a licensee to underspend with respect to Canadian programming, in each year of the licence term other than the final year, by an amount representing no more than 5% of the minimum amount otherwise established for that year by condition of licence. If a licensee utilizes this flexibility to underspend in a given year, the amount by which the licensee has underspent must be added to the amount required to be spent, by condition of licence, for the following year.
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Notwithstanding the additional flexibility outlined above, the Commission will require each licensee to spend on Canadian programming, over the full licence term, the sum of the minimum amounts required by condition of licence for each year of the licence term. In Public Notice CRTC 1989-27, the Commission pointed out that there would be no penalty to those licensees spending more on Canadian programming than the minimum amount that the condition of licence requires in any given year. With a view to encouraging increased spending on Canadian programming and to enhancing licensees' ability to plan their operations, the Commission has decided that licensees may credit against required expenditures in future years of the licence term, the amount that exceeds the minimum required. Thus, if a licensee spends more in any given year, the amount of the overexpenditure may be deducted from the amount required to be spent, by condition of licence, for the following year. Alternatively, the amount of overexpenditure can be applied to the condition of licence expenditure requirements for future years, as shown in the example of the application of the revised formula set out in Appendix II.
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For purposes of interpreting the condition of licence, repayments of a previous year's underspending are not to be regarded as overexpenditures relative to the minimum amount required by condition of licence in the year of the repayment.
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Licensees should continue to report their Canadian program expenditures in their annual returns, along with a reconciliation of any underspending or spending that exceeds the minimum required by condition of licence.
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Aside from the revisions to the formula described above, there are no changes to the Canadian programming expenditure requirements set out on page 26 of Public Notice CRTC 1989-27.
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The precise wording of the revised condition of licence is set out in Appendix I to this Public Notice. As noted, an example of the application of the revised formula is set out in Appendix II. The added flexibility discussed in this Public Notice has been incorporated in the conditions of licence imposed on CJOH-TV and Global in Decisions CRTC 92-219 and 92-220, respectively, of today's date. All other television licensees who are subject to a condition of licence or an expectation related to Canadian programming expenditures may immediately take advantage of the flexibility described in this public notice. These conditions of licence and expectations will be amended at the time of licence renewal.
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Allan J. Darling
Secretary General
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APPENDIX I
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The following is an example of the text of the condition of licence related to Canadian programming expenditures including the flexibility outlined in this public notice.
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1. For purposes of conditions 2 to 5 inclusive, all terms are to be interpreted and all calculations are to be made in accordance with the explanations set out in Public Notice CRTC 1992-28, dated 8 April 1992.
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2. Subject to conditions 3 and 4, the licensee shall expend on Canadian programming, at a minimum:
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(a) for the year ending 31 August 199_ (year 1), the amount of _____;
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(b) for the year ending 31 August 199_ (year 2), the amount set out in paragraph (a) above, increased (or decreased) by the year-over-year percentage change for the year ending 31 August 199_ (year 1), in the total of the station's revenues from local time sales, national times sales and payments (if any) received from networks, as reported in the relevant Annual Return;
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(c) for the year ending 31 August 199__ (year 3), the minimum required expenditure calculated in accordance with paragraph (b) above, increased (or decreased) by the average of the year-over-year percentage changes for the years ending 31 August 199_ (year 1) and 31 August 199_ (year 2), in the total of the station's revenues from local time sales, national times sales and payments (if any) received from networks, as reported in the relevant Annual Returns; and (d) in each subsequent year, an amount calculated in accordance with the following formula: the amount of the previous year's minimum required expenditures increased (or decreased) by the average of the year-over-year percentage changes for the years ending on 31 August of the three previous years, in the total of the station's revenues from local time sales, national times sales and payments (if any) received from networks, as reported in the relevant Annual Returns.
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3. In any year of the licence term, excluding the final year, the licensee may spend an amount on Canadian programming that is up to five percent (5%) less than the minimum required expenditure for that year set out in or calculated in accordance with condition 2; in such case, the licensee shall expend in the next year of the licence term, in addition to the minimum required expenditure for that year, the full amount of the previous year's underspending.
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4. In any year of the licence term, including the final year, the licensee may spend an amount on Canadian programming that is greater than the minimum required expenditure for that year set out in or calculated in accordance with condition 2; in such case, the licensee may deduct
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(a) from the minimum required expenditure for the next year of the licence term, an amount not exceeding the amount of the previous year's overspending; and (b) from the minimum required expenditure for any subsequent year of the licence term, an amount not exceeding the difference between the overspending and any amount deducted under paragraph (a) above.
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5. Notwithstanding conditions 3 and 4 above, during the licence term, the licensee shall spend on Canadian programming, at a minimum, the total of the minimum required expenditures set out in or calculated in accordance with paragraphs (a) to (d) of condition 2.
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APPENDIX II
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The following example is set out in order to clarify how licensees should calculate the annual minimum expenditures on Canadian programming, taking into account the added flexibility permitted by the revisions to the formula outlined in this Public Notice. The actual amounts used in this example are for illustrative purposes only.
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(DOLLARS)
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YEAR 1 BASE EXPENDITURE REQUIREMENT 10,000,000
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LESS - 5% UNDER-EXPENDITURE (500,000)
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YEAR 1 ACTUAL EXPENDITURE 9,500,000
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YEAR 2 MINIMUM EXPENDITURE AS PER CONDITION OF
LICENCE (COL)
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(ASSUMES 4.5% REVENUE GROWTH IN
YEAR 1) 10,450,000
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PLUS - YEAR 1 REPAYMENT 500,000
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LESS - 5% UNDER-EXPENDITURE
(BASED ON YEAR 2 COL MINIMUM) (522,500)
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YEAR 2 ACTUAL EXPENDITURE 10,472,500
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YEAR 3 MINIMUM EXPENDITURE AS PER COL
(ASSUMES AVERAGE OF 7% REVENUE GROWTH
IN YEARS 1 & 2) 11,181,500
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PLUS - YEAR 2 REPAYMENT 522,500
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PLUS - $1 MILLION OVER-EXPENDITURE 1,000,000
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YEAR 3 ACTUAL EXPENDITURE 12,704,000
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YEAR 4 MINIMUM EXPENDITURE AS PER COL
(ASSUMES AVERAGE OF 6.5% REVENUE
GROWTH IN YEARS 1, 2 & 3) 11,908,297
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LESS - YEAR 3 OVER-EXPENDITURE PARTIAL CREDIT APPLIED (500,000) *
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YEAR 4 ACTUAL EXPENDITURE 11,408,297
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*LICENSEE ELECTS TO APPLY ONLY $500,000 OF THE PREVIOUS YEAR'S $1,000,000 OVEREXPENDITURE AND TO CARRY FORWARD THE REMAINING $500,000.
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YEAR 5 MINIMUM EXPENDITURE AS PER COL
(ASSUMES AVERAGE OF 5.0% REVENUE GROWTH
IN YEARS 2, 3 & 4) 12,503,711
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LESS - 5% UNDER-EXPENDITURE
(BASED ON YEAR 5 COL MINIMUM) (625,185)
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YEAR 5 ACTUAL EXPENDITURE 11,878,526
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(DOLLARS)
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YEAR 6 MINIMUM EXPENDITURE AS PER COL
(ASSUMES AVERAGE OF 4.5% REVENUE GROWTH
IN YEARS 3, 4 & 5) 13,066,377
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PLUS - YEAR 5 REPAYMENT 625,185
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LESS - YEAR 3 OVER-EXPENDITURE PARTIAL CREDIT (500,000)
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LESS - 5% UNDER-EXPENDITURE
(BASED ON YEAR 6 COL MINIMUM) (653,319)
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YEAR 6 ACTUAL EXPENDITURE 12,538,243
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YEAR 7 MINIMUM EXPENDITURE AS PER COL
(ASSUMES AVERAGE OF 6.0% REVENUE GROWTH
IN YEARS 4, 5 & 6) 13,850,359
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PLUS - YEAR 6 REPAYMENT 653,319
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YEAR 7 ACTUAL EXPENDITURE 14,503,678
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NOTE:Regardless of the extent to which the added flexibility is used, the licensee is required to spend, over the licence term, the sum of the minimum amounts required by the condition of licence for each year of the licence term.
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COL REQUIREMENT ACTUAL EXPENDITURE
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(DOLLARS) (DOLLARS)
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YEAR 1 10,000,000 9,500,000
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YEAR 2 10,450,000 10,427,500
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YEAR 3 11,181,500 12,704,000
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YEAR 4 11,908,297 11,408,297
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YEAR 5 12,503,711 11,878,526
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YEAR 6 13,066,377 12,538,243
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YEAR 7 13,850,359 14,503,678
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TOTAL 82,960,244 82,960,244
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ANNEXE II
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L'exemple suivant vise à clarifier la façon dont les titulaires devraient calculer les dépenses minimales consacrées annuellement aux émissions canadiennes, compte tenu de la souplesse accrue qu'offrent les révisions apportées à la formule exposée dans le présent avis public. Les montants ne sont donnés qu'à titre indicatif seulement.
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(DOLLARS)
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1re ANNÉE EXIGENCE DE DÉPENSES DE BASE 10 000 000
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MOINS - 5 % SOMMES NON DÉPENSÉES (500 000)
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DÉPENSES RÉELLES - 1re ANNÉE 9 500 000
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2e ANNÉE DÉPENSES MINIMALES SELON LA CONDITION DE LICENCE (CDL) (SUPPOSE UN TAUX D'AUGMENTATION DES RECETTES DE 4,5 % LA 1re ANNÉE) 10 450 000
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PLUS - REMBOURSEMENT - 1re ANNÉE 500 000
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MOINS - 5 % SOMMES NON DÉPENSÉES
(SELON LE MINIMUM DE LA CDL - 2e ANNÉE (522 500)
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DÉPENSES RÉELLES - 2e ANNÉE 10 472 500
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3e ANNÉE DÉPENSES MINIMALES SELON LA CDL
(SUPPOSE UN TAUX MOYEN D'AUGMENTATION
DES RECETTES DE 7 % LES 1re ET
2e ANNÉES) 11 181 500
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PLUS - REMBOURSEMENT - 2e ANNÉE 522 500
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PLUS - DÉPASSEMENT DE CRÉDIT DE 1 MILLION DE DOLLARS 1 000 000
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DÉPENSES RÉELLES - 3e ANNÉE 12 704 000
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4e ANNÉE DÉPENSES MINIMALES SELON LA CDL
(SUPPOSE UN TAUX MOYEN D'AUGMENTATION
DES RECETTES DE 6,5 % LES 1re, 2e
ET 3e ANNÉES) 11 908 297
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MOINS - APPLICATION D'UN CRÉDIT PARTIEL POUR
DÉPASSEMENT DE CRÉDIT LA 3e ANNÉE (500 000) *
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DÉPENSES RÉELLES - 4e ANNÉE 11,408,297
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*LA TITULAIRE DÉCIDE DE N'APPLIQUER QUE 500 000 $ DU DÉPASSEMENT DE CRÉDIT DE 1 MILLION DE DOLLARS DE L'ANNÉE PRÉCÉDENTE ET DE REPORTER LES 500 000 $ RESTANTS.
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5e ANNÉE DÉPENSES MINIMALES SELON LA CDL
(SUPPOSE UN TAUX MOYEN D'AUGMENTATION
DES RECETTES DE 5,0 % LES 2e,
3e ET 4e ANNÉES)12 503 711
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MOINS - 5 % SOMMES NON DÉPENSÉES
(SELON LE MINIMUM DE LA CDL -
5e ANNÉE) (625 185)
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DÉPENSES RÉELLES - 5e ANNÉE 11 878 526
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6e ANNÉE DÉPENSES MINIMALES SELON LA CDL
(SUPPOSE UN TAUX MOYEN D'AUGMENTATION
DES RECETTES DE 4,5 % LES 3e,
4e ET 5e ANNÉES) 13 066 377
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PLUS - REMBOURSEMENT - 5e ANNÉE 625 185
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MOINS - CRÉDIT PARTIEL POUR DÉPASSEMENT DE
CRÉDIT LA 3e ANNÉE (500 000)
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MOINS - 5 % SOMMES NON DÉPENSÉES
(SELON LE MINIMUM DE LA CDL - 6e ANNÉE) (653 319)
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DÉPENSES RÉELLES - 6e ANNÉE 12 538 243
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7e ANNÉE DÉPENSES MINIMALES SELON LA CDL
(SUPPOSE UN TAUX MOYEN D'AUGMENTATION
DES RECETTES DE 6,0 % LES 4e,
5e ET 6e ANNÉES) 13 850 359
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PLUS - REMBOURSEMENT - 6e ANNÉE 653 319
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DÉPENSES RÉELLES - 7e ANNÉE 14 503 678
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NOTE :Qu'elle se prévale ou non de la souplesse accrue, la titulaire est tenue de dépenser, au cours de la période d'application de la licence, la somme des montants minimaux requis par la condition de licence pour chacune des années de la période d'application de sa licence.
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EXIGENCE CDL DÉPENSES RÉELLES
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(DOLLARS) (DOLLARS)
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1re ANNÉE 10 000 000 9 500 000
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2e ANNÉE 10 450 000 10 427 500
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3e ANNÉE 11 181 500 12 704 000
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4e ANNÉE 11 908 297 11 408 297
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5e ANNÉE 12 503 711 11 878 526
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6e ANNÉE 13 066 377 12 538 243
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7e ANNÉE 13 850 359 14 503 678
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TOTAL 82 960 244 82 960 244
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