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You're correct, the message does mention highlights will be lost, but that is not correct, well, it certainly isn't correct for 3.8.0 as I've just tested it. If I add a note or highlight to a book, then sign out and sign back in, the highlight and note is there (you will need to wait until the sync has performed the "synching annotations" step though). This makes sense as this information is synced to the cloud and has been for a while.
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