Amaranth Letter to Shareholders
September 29, 2006 7:24 p.m.
Full text of 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
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