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Elliott Management Capital Raise Letter

Dear Investor, As we set out in more detail in our Quarterly Report to investors for the quarter ended March 31, we believe that we are at an extraordinary juncture in markets and in the prospects for trading and investing. In the normal course, we are continuing to see, and deploy capital into, a variety of situations involving activism, mostly in equities. We also have been working our way through a number of distressed securities situations, notably in the energy area. As a result, we have gradually called the bulk of our sixth capital commitment facility (the “Sixth Commitment”),

leaving a little over $1 billion uncalled at this point.Despite the outward appearance in all major markets of low volatility, tight spreads, high and stable equity prices, and super-low (albeit off their historical extremes) interest rates, we think that eight-plus years of radical monetary easing in the developed countries has created a world of manipulated (by governments) and false prices. We believe that markets may be in a situation somewhat akin to a coiled spring.

We don’t know exactly what factor, event or combination of actions could release the possible pent-up reevaluation of markets, but we think that there has never been a larger (and more undeserved) spirit of financial market complacency in our experience.The nature of modern markets is that rich opportunity sets seem to be ephemeral, providing surprising volatility, bargains and dislocations for only brief periods of time before governments, aware of the politically destructive effects of extreme volatility, rally to take stern actions to keep the balls up in the air. Lamentably, these actions rarely take the form of real solutions to the problems of too much leverage in the financial system, unpayable governmental obligations, andinadequate policies to optimize employment, growth and freedom. Such solutions are left foranother day, decade or never, for all these government officials seem to care, so long as short-term asset-price stability is restored.As you know, the investment solution to the challenges we are describing is to have dry powderavailable for that possibly large opportunity set that could emerge when investor confidence is impaired, recent correlations and assumptions don’t work, and prices are changing rapidly (andin the “wrong” direction). 

The experience of the last couple of years also suggests that even in the absence of extreme volatility, the mix of activities that Elliott pursues is likely to provide a flow of attractive new opportunities. In our experience, it is frustrating and unproductive to go out to talk to potential investors during a financial market meltdown. This knowledge, of course, is the reason for the instituting of our capital commitment format. At the current time, we are raising a large commitment (our Seventh) because we think that the opportunity set that may emerge from a sudden change in the basic assumptions of investors could be very large indeed.