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FYI

Devon Archer
+646 436 3745

Please excuse typos as this message was sent from my handheld device.

Begin forwarded message:

From: Emiliano Machado <emachado@aconinvestments.com<mailto:emachado@aconinvestments.com>>
Date: July 21, 2011 5:29:27 PM EDT
To: Jonathan Kelly <jkelly@rosemontcapital.com<mailto:jkelly@rosemontcapital.com>>, Devon Archer <darcher@rosemontcapital.com<mailto:darcher@rosemontcapital.com>>, Andre Bhatia <abhatia@aconinvestments.com<mailto:abhatia@aconinvestments.com>>
Subject: LTN


Dear Jonathan and Devon,

I looked at the document you sent and have a few thoughts:

- This is a Bearer Bond that apparently is legitimate as stated by the forensic appraiser in the report. What is also stated in the report is that the appraiser does not know whether there is any monetary value associated with the bond

- At some point in the past, upon due date of each bond or series of bonds, the federal government would announce that any holder of such bonds would have to redeem the bond for cash or exchange the bond for another bond within a 5-10 year period; if the holder did not redeem or exchange the bond within that timeframe, the bond would expire/cease to be valid. If the holder of this bond missed that period for some reason and did not redeem or exchange the bond for another instrument, this document has no value. If the holder did go through that process, there is probably another document to support the case, but this is not included in the pdf you sent.

- Having said that, there is a secondary market for several different types of bonds that are under litigation for the government recognize them. Those are generally used by companies to pay tax debt or any kind of debt with the government. Companies would buy these for cents on the real and put as collateral for tax debt or offer to pay the tax debt with face value of these bonds

- If I recall correctly from my fixed income trading days, bonds that are still worth something for institutional investors, were renegotiated/exchanged and then registered with SELIC, or CETIP (for a few federal government bonds and private companies’s bonds)

My conclusion is that this is business for lawyers who deal with bankruptcies, tax debt, etc… If the case is under litigation there is no certainty as to when and how much you will be able to redeem the bond. Litigation in Brazil involving only appraisals and confirmation of monetary correction (particularly after a long period of hyperinflation and several economic recovery plans) could easily take 10-15 years and cost a lot of money in attorney fees. You rarely seem wealthy individuals or institutional investors negotiating these even in Brazil…

Finally, I am waiting for more formal feedback from one of my contacts in Brazil who trades fixed income and has a good relationship with the Central Bank; he was going to briefly discuss the issue and get back to me


Emiliano Bochnia Machado
ACON INVESTMENTS LLC
1133 Connecticut Avenue NW | Suite 700
Washington, DC 20036
+1 (202) 386 9767 (direct)
+1 (917) 573 4933 (mobile)
+1 (202) 454 1101 (fax)
emachado@aconinvestments.com<mailto:emachado@aconinvestments.com>