! "!"#$%&%'()! !

! ! ! One American Lane!

Greenwich, CT 06831
T 203 742 7900
F 203 742 7911
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August 12, 2009

Dear Investor:

We are pleased to announce that, after two years of litigation, we have concluded an amicable
settlement of the regulatory proceedings brought by both the U.S. Commodity Futures Trading
Commission (“CFTC”) and the U.S. Federal Energy Regulatory Commission (“FERC”) against certain
of the Amaranth advisor entities and the Amaranth multi-strategy funds (the “Funds”), as well as one
former trader, Matthew Donohoe (“Donohoe”). We provide further details below, but first we would
like 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 in
connection with the settlements.

" Although the terms of the settlements require the settling parties not to deny any of the
allegations made by the CFTC or the FERC, each of the Amaranth parties remains free to
deny 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 futures
market).

" 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 been
required to defend the settling parties through trial and appeal.

" Neither of these regulatory proceedings arose out of the circumstances surrounding the
losses 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 against
Amaranth Advisors L.L.C., Amaranth Advisors (Calgary) ULC (together, “Amaranth Advisors”) and
Brian Hunter (“Hunter”) in the U.S. District Court for the Southern District of New York, alleging that
these parties attempted to manipulate the settlement price of expiring NYMEX natural gas futures
contracts on February 24 and April 26, 2006 and for making allegedly false statements related to
trading on April 26, 2006. The CFTC was seeking over $20 million in penalties. Discovery in this
case 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
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services provider), Hunter, Matthew Donohoe (an execution trader) and, significantly, Amaranth
Capital Partners LLC, Amaranth Partners LLC, Amaranth International Limited, and Amaranth LLC
(the multi-strategy fund entities), alleging that these respondents actually manipulated the same
expiring 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 million
against the various respondents, including the Funds. The discovery process was scheduled to
conclude 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 Appeals
for the District of Columbia Circuit seeking review of the FERC’s determination that it has jurisdiction
over 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 case
supporting Amaranth Advisors’ position. In addition, the CFTC itself intervened in the case to oppose
FERC’s jurisdiction over the matter, arguing that Congress granted the CFTC exclusive jurisdiction
over 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, Amaranth
Management Limited Partnership, Amaranth Group Inc. and Donohoe entered into a Settlement
Agreement resolving all claims against the settling respondents arising from allegations made in the
FERC’s July 26, 2007 Order to Show Cause (the “FERC Settlement”), and the FERC Commissioners
voted on August 12, 2009 to approve the FERC Settlement. Brian Hunter is not a party to the FERC
Settlement.

On August 10, 2009, the CFTC Commissioners voted to approve a Consent Order resolving the
CFTC 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 the
CFTC Settlement.

The Settlements were closely coordinated with both regulatory agencies as to both timing and
terms. 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 the
litigation risk posed by the FERC Action, in which the FERC sought to hold the Funds (not just the
traders and their employer) liable for penalties approaching $300 million. Second, the Settlements will
allow the Funds to avoid significant legal defense costs for themselves and various parties they are
required 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 financial
uncertainty. In exchange for these benefits, the Funds are contributing $5 million as part of the
Settlements. Amaranth Advisors has agreed to contribute the balance and will not seek indemnification
from the Funds for this amount.

We believe that the Settlements are in the best interests of the Funds, but we would also note
that both the master fund, Amaranth LLC, and the off-shore feeder fund, Amaranth International
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Limited, were represented in these matters by their own independent boards of directors, as well as
separate outside counsel.

* * *

As always, if you need to speak to me, please feel free to call my assistant, Megan Austin, to
setup a conference call at 203-742-7900.

Very truly yours,

Nick Maounis