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Amaranth Letter to Shareholders from WSJ.com

From wsj.com. What happened remains a mystery to me. The factors pointed to by Amaranth seem to me to be inadequate to account for the scale of the losses:

Amaranth Letter to Shareholders - WSJ.com: Sept. 29 letter from Amaranth Advisors LLC to its investors.

To Investors in Amaranth's Multi-Strategy Funds:

In light of the events experienced by Amaranth's multi-strategy funds over the last two weeks, we would like to respond to our investors' queries regarding the status of redemptions and the future of Amaranth's business.

Temporary Suspension of Redemptions

As you know, the Amaranth multi-strategy funds have recently received substantial redemption requests. In light of the volume of these requests, as well as informal feedback from a number of investors, Amaranth has determined that it is in the best interests of the funds and their investors to temporarily suspend redemptions for September 30 and October 31, 2006. This temporary suspension of redemptions will enable the Amaranth funds to generate liquidity for investors in an orderly fashion, with the goal of maximizing the proceeds of asset dispositions, while seeking to treat all investors equitably through pro rata distributions.

Under the funds' current circumstances, Amaranth believes that temporarily suspending redemptions and making pro rata distributions is a more appropriate approach to managing investors' desire for liquidity than invoking the Gate. The cash distributions contemplated in connection with suspended redemptions would not, when paid, be subject to the Gate, the 25-month initial lock-up or any redemption fees or charges.

All investors in Amaranth's multi-strategy funds will receive written notice of the suspension under separate cover.

We note that redemptions and capital withdrawals that were validly requested for August 31, 2006 have been timely paid by the funds.

Current Plans

While we continue to evaluate the situation in light of the liquidity of the funds' portfolios and investors' desires, our current intention is to dispose of the remaining positions in the funds' portfolios in an orderly fashion over time, seeking to maximize sales proceeds and to make periodic cash distributions to investors on a pro rata basis, subject to anticipated reserves. During this period, we intend to reduce our operating expenses to the extent that we are reasonably able to do so while also seeking to retain the key staff required to manage the process going forward. We will be contacting you with further details of this process in the near future.

Strategic Partnership Discussions

Amaranth has previously announced that it is pursuing negotiations with other firms regarding potential strategic alliances that would enable the continued operation of the Amaranth platform. We continue to pursue negotiations but have no announcement at this time.

Transfers to Third Parties

Several of you have inquired about Amaranth's policy toward transfers of shares and LLC interests to third parties. As reflected in the funds' governing documents, Amaranth or the Board of Directors of Amaranth International Limited must consent to any transfers. While reserving its rights to consent to transfers in its sole discretion, Amaranth currently intends to provide this consent (and to recommend to the Amaranth International Limited Board that it consent) where the following conditions are met: (1) the transferor timely notifies Amaranth or the Board of the proposed transfer, (2) the transferee satisfies all of the eligibility criteria for investing in the Amaranth funds (these criteria are set forth in the funds' subscription agreements), (3) the transfer would not result in any of the funds becoming "plan assets" under ERISA, (4) the transferee acknowledges that it is making the investment on an "as-is" basis, not relying on any information provided by Amaranth in making its investment decision and (5) the transfer is not made in violation of applicable law -- together with such other requirements as are set forth in Amaranth's form of transfer agreement.

Performance Update

We estimate that, as of Friday, September 29, 2006, the Net Asset Value of the multi-strategy funds had declined approximately 65% to 70% month-to-date and approximately 55% to 60% year-to-date. We are providing a range given the significant number of trades executed during the month and the limited time available to calculate the estimate. We expect that the monthly estimate, which will be calculated in accordance with our normal month-end closing procedures, will be within this range. We will work diligently to provide you with a monthly estimate within as close to our normal timeframe (Wednesday, October 4, 2006) as possible.

Amaranth is committed to acting in the best interests of the funds' investors and to keeping investors informed of decisions made in furtherance of this objective. We sincerely appreciate your patience and understanding during this challenging period.

Nick Maounis