1 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION 2 3 TRANSCRIPT OF RECORDED TELEPHONE CONVERSATIONS 4 FILE NAME: OSNATO Decl Ex 31 Ledford9-15 218PM1 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 2 1 [INITIAL 0:11:03 OF RECORDING TIME ARE BLANK] 2 [DIAL TONE] 3 MR. LEDFORD: Hey. 4 HENRY: Hey, Patrick, how are -- how are the 5 redemptions going? 6 MR. LEDFORD: Fine. They seem to have stopped. 7 It looks like we probably lost a total of about 15 today. 8 HENRY: Fifteen? 9 MR. LEDFORD: Um hmm. 10 HENRY: And how were you able to satisfy them? 11 MR. LEDFORD: Well, we had the money market 12 fund. We sold product in the Street, and we have overnight 13 -- 14 HENRY: Because I understood that there was very 15 little kind of movement, in terms of paper. 16 MR. LEDFORD: Yeah, the things traded like on 17 appointment only, but -- 18 HENRY: Okay. 19 MR. LEDFORD: -- yeah, but, yeah, it's not a 20 liquid market, by any stretch. But, we were able to, you 21 know, get it done. 22 And hopefully, I just talked to John -- John 23 Drahzal, who heads up our sales -- heads up sales here, and 24 the -- the Bents were in discussion with the SEC. 25 Apparently, the SEC has to be involved in any -- any type 3 1 of capital support, -- 2 HENRY: Support? 3 MR. LEDFORD: -- yeah, so -- 4 HENRY: Right. 5 MR. LEDFORD: -- that's getting done. In fact, 6 I believe they've been going out to the Street. I believe 7 -- I believe it is [inaudible] -- 8 HENRY: Communicating. 9 MR. LEDFORD: -- yeah, communicating that, yeah, 10 yeah. 11 HENRY: So, you think that that's -- that's 12 having -- that's going to have an impact? 13 MR. LEDFORD: Oh, yeah. 14 HENRY: I did speak to them a few -- you know, 15 maybe an hour ago. 16 MR. LEDFORD: Oh, the Bents? 17 HENRY: Yeah. 18 MR. LEDFORD: Yeah, yeah. 19 HENRY: And, I don't have the details yet on 20 what it looks like, but I have the outline. 21 MR. LEDFORD: What is the outline, Henry? 22 HENRY: Well, it's a very sketchy outline. It 23 covers the three portfolios. 24 MR. LEDFORD: Um hmm. 25 HENRY: Prime, the -- 4 1 MR. LEDFORD: Offshore. 2 HENRY: -- Offshore, and the -- 3 MR. LEDFORD: Yield Plus. 4 HENRY: -- Yield Plus. 5 MR. LEDFORD: Yeah. 6 HENRY: They said that they had access to the 7 public documents that have been filed by other firms, and 8 -- and, basically, those capital support agreements are 9 structured around a particular recovery level, -- 10 MR. LEDFORD: Um hmm. 11 HENRY: -- a dollar amount, a timetable, and a 12 mark to market N.A.V. level. 13 MR. LEDFORD: Um hmm. 14 HENRY: And so, those details, they could not 15 share with me. 16 MR. LEDFORD: Um hmm. Hmm. But, it will be 17 public record, though, right? 18 HENRY: It -- it -- well, it may not have to be, 19 because it's not a public company. 20 MR. LEDFORD: Um hmm. 21 HENRY: So, it may actually not be a matter of 22 public record. I am scheduled to talk to them again at 23 5:00 o'clock, to get the details. 24 MR. LEDFORD: Okay. 25 HENRY: But, that's a fairly significant drop in 5 1 assets. I mean, that's over 20 percent, right? 2 MR. LEDFORD: Yeah, yeah, yeah. 3 HENRY: Yeah. 4 MR. LEDFORD: Yeah. Well, I wish we had had 5 this thing in place early this morning. We could have -- 6 we could -- 7 HENRY: Avoid that. 8 MR. LEDFORD: Yeah. It would have made a big 9 difference. But -- 10 HENRY: Do you think any of that comes back in? 11 MR. LEDFORD: That's what we're planning on. 12 We're planning on some of it coming back. 13 HENRY: What -- what sort of realized losses did 14 you incur, in connection with [inaudible] -- 15 MR. LEDFORD: Really, it was pretty much even, 16 because the market -- the market, you know, rates are 17 significantly lower -- 18 HENRY: Yeah. 19 MR. LEDFORD: -- here with the selective 20 quality, so I think it was pretty -- it was pretty much a 21 wash. 22 HENRY: Oh, well, that's good. 23 MR. LEDFORD: Yeah. Yeah, yeah, I guess there's 24 a silver lining in this thing. 25 HENRY: Yeah. And, what about the current 6 1 liquidity profile of the -- the Primary Fund? 2 MR. LEDFORD: We've got -- well, the next three 3 days has got about 5 billion rolling off, total. So -- and 4 also what I'm thinking is as we get through this week, I -- 5 I fully expect that, you know, that we'll get a little more 6 liquidity in the marketplace, and we can -- you know, if we 7 have to, we'll sell more paper. 8 HENRY: Right. 9 MR. LEDFORD: But, right now, there is just -- 10 there's [inaudible] that we -- you know, I spoke earlier, 11 there's just not a lot of liquidity. 12 HENRY: Um hmm. 13 MR. LEDFORD: And, it was difficult to get the 14 things done, but we did. 15 HENRY: Right. 16 MR. LEDFORD: We're actually in the -- we don't 17 have it set -- hang on, one second. Hang on, one second. 18 HENRY: Um hmm. 19 [inaudible speaker in background] 20 MR. LEDFORD: I'm sorry, Henry. 21 HENRY: Um hmm. 22 MR. LEDFORD: But, that's kind of where it is 23 now. You've got to hand it to Senior, though. He's doing 24 all this from -- 25 HENRY: Italy. 7 1 MR. LEDFORD: -- Italy, yeah. 2 HENRY: Was this the -- was this the worst day 3 of your portfolio management life? 4 MR. LEDFORD: It's the worst day in my 30 years 5 in the industry. 6 HENRY: Isn't that incredible? 7 MR. LEDFORD: Yeah, it's -- it's like this is 8 probably worse than the Great Depression. 9 HENRY: Um hmm. 10 MR. LEDFORD: I've heard people say that. This 11 is just unbelievable, Henry, totally and completely 12 unbelievable. It's never -- never thought that it would 13 get to this point, never. I'm still scratching my head why 14 -- you know, I -- I just wonder if the -- the Fed and the 15 Treasury understand, you know, the ramifications here and 16 the rippling effects throughout the industry, -- 17 HENRY: Um hmm. 18 MR. LEDFORD: -- the financial market. I mean, 19 obviously, the stock market is -- is just one -- it's just 20 one -- 21 HENRY: Yeah, aspect of it. 22 MR. LEDFORD: Oh, it -- but, you know, it's like 23 every asset class, every mutual fund. It's 24 [unintelligible] you know, I was looking at some exposure 25 numbers. PIMCO's got a huge exposure. 8 1 HENRY: Yeah. 2 MR. LEDFORD: I don't know what the hell they're 3 going to do. Just like everybody else, probably. They're 4 just going to, you know, wait until this thing settles -- 5 settles -- settles down, you know? 6 HENRY: Um hmm. 7 MR. LEDFORD: Well, -- 8 HENRY: Did you experience similar run offs in 9 the Offshore Fund, and in Yield Plus? 10 MR. LEDFORD: No, no, much smaller, much 11 smaller. I don't know, well, they're much smaller 12 mandates. So, obviously, Offshore is -- 13 HENRY: Right. 14 MR. LEDFORD: -- is only a 3.5, and then Yield 15 Plus is only a 1.1. 16 HENRY: Right. 17 MR. LEDFORD: So, no, it did not -- and those, 18 neither one of those, of course, are 287 funds, you know, 19 being Offshore. And then, Yield Plus is not a registered 20 fund. 21 HENRY: Um hmm. 22 MR. LEDFORD: So, I -- but no, to answer your 23 question, no. 24 HENRY: Um hmm. 25 MR. LEDFORD: This is too -- it's just -- I 9 1 mean, this -- this is just ugly, ugly, ugly. 2 HENRY: Yeah. 3 MR. LEDFORD: And, I -- I just -- I'm just 4 kicking myself. I'm -- you know, the -- the way that, you 5 know, the Fed and the Treasury, they -- I think they could 6 have mitigated a lot of this, if they had just -- if they 7 had worked harder and, you know, to find a strategic 8 partner and -- and provide some type -- some backstop. 9 They didn't have to be, you know, as generous as what they 10 did at Bear, but something. And, I think they could have 11 pulled a deal off with somebody, you know, Barclay's, Bank 12 of America, somebody, HSBC, maybe, -- 13 HENRY: Yeah. 14 MR. LEDFORD: -- and it would have saved, you 15 know, all this anguish. 16 HENRY: But, you know, is it clear to you what 17 exactly happened? Because, I mean, they seem to be -- they 18 seem to be showing up there the sense of -- the senses as a 19 -- as a firm, but suddenly it's as if, you know, just all 20 confidence had been drained away. 21 MR. LEDFORD: Well, I think it was -- 22 HENRY: Yeah. 23 MR. LEDFORD: -- they just didn't have enough 24 time. I mean, I think if they had had more time, I think 25 they would have eventually -- if they -- I think part of 10 1 the problem, too, is I think they were concerned, just 2 talking to the [unintelligible] group but one of the things 3 that they were concerned about, and you -- I'm sure you've 4 read or heard this, too, Henry, is that, you know, if they 5 sold off their asset management business, I think the 6 rating agencies were going to take action -- 7 HENRY: Um hmm. 8 MR. LEDFORD: -- and that would have been -- 9 that would not have been a good thing, obviously, for their 10 funding. And, I -- you know, and I think, honestly, I 11 think Fuld was -- was -- I think he was fooling himself, 12 thinking that, you know, he had more time and this was 13 going to be turned around. I mean, I remember Moody's, 14 just a week ago, said that, you know, they have -- they 15 have -- 16 HENRY: They have a -- 17 MR. LEDFORD: -- a matter of days -- 18 HENRY: -- a matter of days -- 19 MR. LEDFORD: -- yeah, yeah, yeah. I think if 20 they got through something like, you know, the next two to 21 three months, you know, they've got to find a strategic 22 partner, and -- or otherwise, you know, this is not going 23 to work. And, you know, it's -- so, I -- you know, I mean, 24 who knows? I mean, it's -- the whole thing is just about 25 the most depressing day of my life. 11 1 HENRY: Yeah. I feel the same way. 2 MR. LEDFORD: Yeah. Well, you know, the -- it 3 -- you know, not to by Pollyanna, Henry, but this is -- 4 this, too, will -- 5 [END OF RECORDING] 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 12 1 C E R T I F I C A T E 2 3 I, June Accornero, hereby certify that the 4 foregoing transcript consisting of 12 pages is a complete, 5 true and accurate transcript of the recorded conversations 6 contained in the recording labeled "OSNATO Decl Ex 31 7 Ledford9-15 218PM1." 8 The foregoing transcript has been typed and 9 proofread by me. 10 11 _____________________________ ________________ 12 Typist/Proofreader Date 13 14 15 16 17 18 19 20 21 22 23 24 25