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One American Lane

Greenwich, CT 06831T 203 742 7900F 203 742 7911

August 12, 2009Dear Investor:We are pleased to announce that, after two years of litigation, we have concluded an amicablesettlement of the regulatory proceedings brought by both the U.S. Commodity Futures TradingCommission (“CFTC”) and the U.S. Federal Energy Regulatory Commission (“FERC”) against certainof the Amaranth advisor entities and the Amaranth multi-strategy funds (the “Funds”), as well as oneformer trader, Matthew Donohoe (“Donohoe”). We provide further details below, but first we wouldlike to highlight the following facts:

None of the settling parties has admitted any wrongdoing as part of the settlement agreements, and neither the FERC nor the CFTC has made any adverse findings of fact inconnection with the settlements.

Although the terms of the settlements require the settling parties not to deny any of theallegations made by the CFTC or the FERC, each of the Amaranth parties remains free todeny any similar allegations made by persons other than the CFTC or the FERC (e.g., plaintiffs in a civil class action case alleging manipulation of the natural gas futuresmarket).

None of the settling parties has been banned or suspended from trading or censured.

The aggregate cash payment required to be made to the FERC and the CFTC as part of the settlement is materially less than the estimated legal defense costs that would have beenrequired to defend the settling parties through trial and appeal.

Neither of these regulatory proceedings arose out of the circumstances surrounding thelosses experienced by the Funds in September 2006.

Background

The CFTC Action

As we have reported previously, on July 25, 2007, the CFTC brought an action againstAmaranth Advisors L.L.C., Amaranth Advisors (Calgary) ULC (together, “Amaranth Advisors”) andBrian Hunter (“Hunter”) in the U.S. District Court for the Southern District of New York, alleging thatthese parties

attempted

to manipulate the settlement price of expiring NYMEX natural gas futurescontracts on February 24 and April 26, 2006 and for making allegedly false statements related totrading on April 26, 2006. The CFTC was seeking over $20 million in penalties. Discovery in thiscase was scheduled to conclude on July 24, 2009, and the court was due to set a trial schedule.

The FERC Action

On July 26, 2007, the FERC brought an administrative proceeding against Amaranth Advisors,Amaranth Management Limited Partnership (a holding entity), Amaranth Group Inc. (an administrative

services provider), Hunter, Matthew Donohoe (an execution trader) and, significantly, AmaranthCapital Partners LLC, Amaranth Partners LLC, Amaranth International Limited, and Amaranth LLC(the multi-strategy fund entities), alleging that these respondents

actually

manipulated the sameexpiring NYMEX natural gas futures contracts on the same dates alleged in the CFTC’s complaint, plus the additional date of March 29, 2006. The FERC proposed penalties totaling nearly $300 millionagainst the various respondents, including the Funds. The discovery process was scheduled toconclude on July 31, 2009, and a “trial-type” proceeding before an administrative law judge employed by the FERC was scheduled to commence on August 4, 2009.

Appellate Court Review of the FERC’s Jurisdiction

On December 6, 2007, Amaranth Advisors filed a notice of appeal in the U.S. Court of Appealsfor the District of Columbia Circuit seeking review of the FERC’s determination that it has jurisdictionover alleged manipulation of the NYMEX natural gas futures market (the “Jurisdictional Appeal”).The NYMEX, as well as a number of futures industry trade associations, filed amicus briefs in that casesupporting Amaranth Advisors’ position. In addition, the CFTC itself intervened in the case to opposeFERC’s jurisdiction over the matter, arguing that Congress granted the CFTC exclusive jurisdictionover trading on futures exchanges such as the NYMEX. The Jurisdictional Appeal had been fully briefed in 2008 and was scheduled for oral argument before a three-judge panel on September 23,2009.

The Settlements

On July 20, 2009, the FERC Enforcement Staff and Amaranth Advisors, the Funds, AmaranthManagement Limited Partnership, Amaranth Group Inc. and Donohoe entered into a SettlementAgreement resolving all claims against the settling respondents arising from allegations made in theFERC’s July 26, 2007 Order to Show Cause (the “FERC Settlement”), and the FERC Commissionersvoted on August 12, 2009 to approve the FERC Settlement. Brian Hunter is not a party to the FERCSettlement.On August 10, 2009, the CFTC Commissioners voted to approve a Consent Order resolving theCFTC Action against Amaranth Advisors (the “CFTC Settlement,” together with the FERC Settlement,the “Settlements”), and the Court approved it on August 12, 2009. Brian Hunter is not a party to theCFTC Settlement.The Settlements were closely coordinated with both regulatory agencies as to both timing andterms. As a result, a

single

civil monetary penalty in the amount of $7.5 million will be paid to resolve

both

cases against all defendants/respondents (except Hunter).

Impact on the Funds

The Settlements provide several benefits to the Funds. First, the Settlements eliminate thelitigation risk posed by the FERC Action, in which the FERC sought to hold

the Funds

(not just thetraders and their employer) liable for penalties approaching $300 million. Second, the Settlements willallow the Funds to avoid significant legal defense costs for themselves and various parties they arerequired to indemnify under the governing documents of the Funds, estimated to exceed $10 million for the FERC Action alone. Third, the Settlements remove a significant source of legal and financialuncertainty. In exchange for these benefits, the Funds are contributing $5 million as part of theSettlements. Amaranth Advisors has agreed to contribute the balance and will not seek indemnificationfrom the Funds for this amount.We believe that the Settlements are in the best interests of the Funds, but we would also notethat both the master fund, Amaranth LLC, and the off-shore feeder fund, Amaranth International