UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21665
HATTERAS MULTI-STRATEGY TEI FUND, L.P.
(Exact name of registrant as specified in charter)
8816 SIX FORKS ROAD, SUITE 107
RALEIGH, NORTH CAROLINA 27615
(Address of principal executive offices) (Zip code)
DAVID B. PERKINS
8816 SIX FORKS ROAD, SUITE 107
RALEIGH, NORTH CAROLINA 27615
(Name and address of agent for service)
registrant's telephone number, including area code: (919) 846-2324
Date of fiscal year end: MARCH 31
Date of reporting period: SEPTEMBER 30, 2005
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Stockholders is attached herewith.
HATTERAS MULTI-STRATEGY TEI FUND, L.P.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD APRIL 1, 2005
(COMMENCEMENT OF OPERATIONS) THROUGH SEPTEMBER 30, 2005
UNAUDITED
HATTERAS MULTI-STRATEGY TEI FUND, L.P.
FOR THE PERIOD APRIL 1, 2005
(COMMENCEMENT OF OPERATIONS) THROUGH SEPTEMBER 30, 2005
UNAUDITED
TABLE OF CONTENTS
Consolidated Statement of Financial Condition.............................. 1
Consolidated Statement of Operations....................................... 2
Consolidated Statement of Changes in Partners' Capital..................... 3
Consolidated Statement of Cash Flows....................................... 4
Consolidated Notes to Financial Statements................................. 5
Other Information.......................................................... 11
Financial Statements of Hatteras Master Fund, L.P.......................... I
HATTERAS MULTI-STRATEGY TEI FUND, L.P.
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in Hatteras Master Fund, L.P., at fair value (cost $7,845,627) $ 8,248,601
Cash and cash equivalents 128,178
Interest receivables 729
Investment in Hatteras Master Fund, L.P. paid in advance 3,245,918
Receivable from management reimbursement 11,620
Prepaid insurance 18,000
------------
TOTAL ASSETS 11,653,046
------------
LIABILITIES AND PARTNERS' CAPITAL
Contributions received in advance 3,055,844
Organization fees payable 28,634
Professional fees payable 19,409
Accounting and administration fees payable 7,200
Servicing fees payable 5,402
Custodian fees payable 2,930
Investor servicing fees payable 2,858
Other accrued expenses 9,321
------------
TOTAL LIABILITIES 3,131,598
PARTNERS' CAPITAL $ 8,521,448
------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 11,653,046
============
See Consolidated Notes to Financial Statements
1
HATTERAS MULTI-STRATEGY TEI FUND, L.P.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD APRIL 1, 2005 (COMMENCEMENT OF OPERATIONS)
THROUGH SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS ALLOCATED FROM HATTERAS MASTER FUND, L.P.
Dividends $ 6,652
Interest 1,314
Expenses (44,095)
----------
NET INVESTMENT LOSS ALLOCATED FROM HATTERAS MASTER FUND, L.P. (36,129)
----------
FUND INVESTMENT INCOME
Interest 4,909
----------
FUND EXPENSES -OPERATING EXPENSES:
Organization expense 143,279
Professional fees 27,718
Service fees 23,527
Registration fees 18,000
Accounting and administration fees 10,800
Investor servicing fees 3,950
Custody fees 4,448
Other expenses 4,520
----------
TOTAL OPERATING EXPENSES 236,242
Reimbursement from investment manager (42,807)
----------
NET OPERATING EXPENSES 193,435
----------
NET INVESTMENT LOSS (224,655)
----------
UNREALIZED GAIN ON INVESTMENTS ALLOCATED FROM
HATTERAS MASTER FUND, L.P.
Net change in unrealized appreciation on investments 439,103
----------
NET INCREASE IN PARTNERS' CAPITAL RESULTING FROM OPERATIONS $ 214,448
==========
See Consolidated Notes to Financial Statements
2
HATTERAS MULTI-STRATEGY TEI FUND, L.P.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD APRIL 1, 2005 (COMMENCEMENT OF OPERATIONS)
THROUGH SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
GENERAL LIMITED TOTAL
PARTNERS' PARTNERS' PARTNERS'
CAPITAL CAPITAL CAPITAL
------------------------------------------
PARTNERS' CAPITAL, BEGINNING OF PERIOD $ -- $ --
Capital contributions -- 8,307,000 8,307,000
Capital withdrawals -- -- --
Net investment loss -- (224,655) (224,655)
Net change in unrealized appreciation on investments
in Underlying Funds -- 439,103 439,103
Accrued incentive allocation from April 1, 2005
to September 30,2005 27,538 (27,538) --
------------------------------------------
PARTNERS' CAPITAL, END OF PERIOD $ 27,538 $ 8,493,910 $ 8,521,448
==========================================
See Consolidated Notes to Financial Statements
3
HATTERAS MULTI-STRATEGY TEI FUND, L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD APRIL 1, 2005 (COMMENCEMENT OF OPERATIONS)
THROUGH SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in partners' capital resulting from operations $ 214,448
Adjustments to reconcile net increase in partners' capital from
investment operations to net cash used for operating activites:
Increase in investment in Hatteras Master Fund, L.P. (7,845,627)
Unrealized appreciation on investments in Hatteras Master Fund, L.P. (402,974)
Interest receivable (729)
Investment in Hatteras Master Fund, L.P. paid in advance (3,245,918)
Receivable from management reimbursement (11,620)
Prepaid insurance (18,000)
Organization fees payable 28,634
Professional fees payable 19,409
Accounting and administration fees payable 7,200
Servicing fees payable 5,402
Custodian fees payable 2,930
Investor servicing fees payable 2,858
Other accrued expenses 9,321
-------------
NET CASH USED IN OPERATING ACTIVITIES (11,234,666)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions 11,362,844
Capital withdrawals --
-------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 11,362,844
-------------
Net change in cash and cash equivalents 128,178
Cash and cash equivalents at beginning of period --
-------------
Cash and cash equivalents at end of period $ 128,178
=============
See Consolidated Notes to Financial Statements
4
HATTERAS MULTI-STRATEGY TEI FUND, L.P.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Hatteras Multi-Strategy TEI Fund, L.P (the "Fund") was organized as a
limited partnership under the laws of the State of Delaware on October 29,
2004. The Fund is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as a closed-end, non-diversified, management
investment company. The Fund is designed for investment primarily by
tax-exempt and tax-deferred investors. The Fund's investment objective is
to generate consistent long-term appreciation and returns across all
market cycles. Investors who acquire interests in the Fund ("Interests")
are the limited partners (each, a "Limited Partner" and together, the
"Limited Partners") of the Fund. To achieve its objective, the Fund will
provide its limited partners with access to a broad range of investment
strategies and asset categories, trading advisors ("Advisors") and overall
asset allocation services typically available on a collective basis to
larger institutions through an investment of substantially all of its
assets in the Hatteras Multi-Strategy Offshore Fund, LDC, a Cayman Islands
limited duration company with the same investment objective as the Fund
(the "Offshore Fund"). The Offshore Fund will in turn invest substantially
all of its assets in the Hatteras Master Fund, L.P., a Delaware limited
partnership (the "Master Fund"), which is also registered under the 1940
Act.
The Master Fund is managed by Hatteras Investment Partners, LLC (the
"Investment Manager"), a Delaware limited liability company registered as
an investment adviser under the Investment Advisers Act of 1940, as
amended. The Offshore Fund will serve solely as an intermediate entity
through which the Fund will invest in the Master Fund. The Offshore Fund
will make no independent investment decisions and has no investment or
other discretion over the investable assets. The Fund and the Offshore
Fund both commenced operations on April 1, 2005.
The Fund owns 100% of the beneficial interests of the Offshore Fund, and
the Offshore Fund owns 5.55% of the beneficial interests in the Master
Fund. These financials statements are the consolidation of the Fund and
the Offshore Fund. Inter company balances have been eliminated through
consolidation.
Hatteras Investment Management, LLC, a Delaware limited liability company,
serves as the General Partner of the Fund ("General Partner"). The General
Partner has appointed a Board of Directors ("Board") and, to the fullest
extent permitted by applicable law, has irrevocably delegated to the Board
its rights and powers to monitor and oversee the business affairs of the
Fund, including the complete and exclusive authority to oversee and
establish policies regarding the management, conduct and operation of the
Fund's business.
2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America
and are expressed in United States dollars. The following is a summary of
significant accounting and reporting policies used in preparing the
financial statements.
5
HATTERAS MULTI-STRATEGY TEI FUND, L.P.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2005 (UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A. VALUATION
Valuation of the Fund's interest in the Master Fund is based on the
investment in underlying securities held by the Master Fund. The Master
Fund will value interests in the Underlying Funds (as defined in attached
Master Fund financial statements) at fair value, which ordinarily will be
the value determined by their respective investment managers, in
accordance with procedures established by the Board. Investments in
Underlying Funds are subject to the terms of the Underlying Funds'
offering documents. Valuations of the Underlying Funds may be subject to
estimates and are net of management and performance incentive fees or
allocations payable to the Underlying Funds' managers as required by the
Underlying Funds' offering documents. Because of the inherent uncertainty
in valuation, the estimated values may differ from the values that would
have been used had a ready market for the securities existed and the
differences could be material. The accounting policies of the Master Fund,
including the valuation of securities held by the Master Fund, will
directly affect the Fund and are discussed in the Notes to Financial
Statements of the Master Fund which are attached to this report.
B. ALLOCATION FROM MASTER FUND
As required by accounting principles generally accepted in the United
States of America, the Fund records its allocated portion of income,
expense, realized gains and losses and unrealized gains and losses from
the Master Fund.
C. FUND LEVEL INCOME AND EXPENSES
Interest income on any cash or cash equivalents held by a Fund and not
invested into the Master Fund will be recognized on the accrual basis.
Expenses that are specifically attributed to the Fund are charged to the
Fund. The Fund will also bear, as an investor in the Master Fund, through
its investment in the Offshore Fund, its allocable portion of the fees and
expenses of the Master Fund and the Offshore Fund. Because the Fund bears
its proportionate share of the management fees of the Master Fund, the
Fund does not pay any additional compensation directly to the Investment
Manager.
In accordance with the Private Placement Memorandum, the Fund is
amortizing organizational expenses over a sixty-month period. For
financial statement purposes, in order to comply with accounting
principles generally accepted in the United States of America, the Fund
expensed the unamortized amount of organizational expenses during the
current period.
D. TAX BASIS REPORTING
Because the Master Fund invests primarily in investment funds that are
treated as partnerships for U.S. Federal tax purposes, the tax character
of the Fund's allocated earnings is established dependent upon the tax
filings of the investor partnerships. Accordingly, the tax basis of these
allocated earnings and the related balances are not available as of the
reporting date.
6
HATTERAS MULTI-STRATEGY TEI FUND, L.P.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2005 (UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes amounts held in interest bearing
overnight accounts. At September 30, 2005, the Fund held $128,178 in an
interest bearing cash account at PNC Bank.
F. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported
amounts of income and expenses during the reported period. Actual results
could differ from those estimates.
3. ALLOCATION OF LIMITED PARTNERS' CAPITAL ACCOUNT
Net profits or net losses of the Fund for each Allocation Period
("Allocation Period") will be allocated among and credited to or debited
against the capital accounts of the Limited Partners. Net profits or net
losses will be measured as the net change in the value of the net assets
of the Fund, including any net change in unrealized appreciation or
depreciation of investments and realized income and gains or losses and
expenses (including private placement and organizational expenses) during
an allocation period, adjusted to exclude any items to be allocated among
the capital accounts of the Limited Partners other than in accordance with
the Limited Partners' respective investment percentages.
Allocation Periods begin on the day after the last day of the preceding
Allocation Period and end at the close of business on (1) the last day of
each month; (2) the last day of each taxable year; (3) the day preceding
each day on which interests are purchased; (4) the day on which interests
are repurchased; or (5) the day on which any amount is credited to or
debited from the capital account of any Limited Partner other than an
amount to be credited to or debited from the capital accounts of all
limited partners in accordance with their respective investment
percentages in the Master Fund.
The Fund will maintain a separate capital account ("Capital Account") on
its books for each Limited Partner. Each Limited Partner's capital account
will have an opening balance equal to the Limited Partner's initial
contribution to the capital of the Fund (i.e., the amount of the
investment less any applicable sales load), and thereafter, will be (i)
increased by the amount of any additional capital contributions by such
Limited Partner; (ii) decreased for any payments upon repurchase or in
redemption of such Limited Partner's Interest or any distributions in
respect of such Limited Partner; and (iii) increased or decreased as of
the close of each Allocation Period by such Limited Partner's allocable
share of the net profits or net losses of the Fund.
7
HATTERAS MULTI-STRATEGY TEI FUND, L.P.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2005 (UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
4. RELATED PARTY TRANSACTIONS AND OTHER
In consideration for investor services, the Fund will pay Hatteras
Investment Partners, LLC (in such capacity, the "Servicing Agent") an
investor servicing fee at the annual rate of 0.75% of the net asset value
of the Interests beneficially owned by customers of the Servicing Agent or
any service provider who has entered into a service provider agreement
with the Servicing Agent. The investor servicing fees payable to the
Servicing Agent will be borne by all Partners of the Fund pro rata. The
Servicing Agent may waive (to all investors on a pro-rata basis) or pay to
third parties all or a portion of any such fees in its sole discretion.
The Fund paid a Servicing Fee for the period April 1, 2005 through June
30, 2005, based on the net asset value of all Partners' Capital Accounts
as of the first business day of each fiscal quarter. Effective July 1,
2005, the Servicing Fee computation has been changed to the aggregate
value of outstanding Interests held by Limited Partners of the Fund on the
last day of the month (before repurchase of Interests or performance
allocation).
The General Partner generally receives an annual performance based
allocation (the "Performance Allocation") with respect to the Capital
Account of each Limited Partner. The Performance Allocation is calculated
generally as of the end of each calendar year. The Performance Allocation
with respect to a Limited Partner's Capital Account is equal to 10% of the
amount by which the excess, if any, of net profit over net loss allocated
to such Limited Partner for the calendar year exceeds (a) any Loss
Carryforward Amount (as defined below) for such Limited Partner plus (b)
the non-cumulative "hurdle amount" (an annualized return on the Capital
Account balance of such Limited Partner as of the last day of the
preceding calendar year at a rate equal to the yield to maturity of the
90-day United States Treasury Bill as reported by the Wall Street Journal
on the last day of the preceding calendar year). The Performance
Allocation with respect to each applicable Limited Partner's Capital
Account shall be deducted from such Capital Account and allocated to the
Capital Account of the General Partner. If at the end of any calendar
year, the Net Losses allocated to a Limited Partner's Capital Account
exceed the Net Profits so allocated, then a Loss Carryforward Amount shall
be established for that Limited Partner. No Performance Allocation shall
be deducted from the Capital Account of any Limited Partner unless the
excess of Net Profits over Net Losses subsequently allocated exceeds any
Loss Carryforward Amount for that Limited Partner. If a Limited Partner
withdraws completely from the Fund other than at the end of a calendar
year, a Performance Allocation shall be made with respect to such Limited
Partner's Capital Account as of the date of complete withdrawal as if such
date were the end of a calendar year and the hurdle amount will be pro
rated.
PFPC Inc. serves as administrator, accounting and investor servicing agent
to the Fund and provides certain accounting, recordkeeping and investor
related services. PFPC Trust Co. provides custodial services to the Fund.
5. FEDERAL INCOME TAXES
For federal income tax purposes, the Fund is treated as a partnership, and
each limited partner in the Fund is treated as the owner of its
proportionate share of the net assets, income, expenses, and the realized
and unrealized gains (losses) of the Fund. Accordingly, no federal, state
or local income
8
HATTERAS MULTI-STRATEGY TEI FUND, L.P.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2005 (UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
5. FEDERAL INCOME TAXES (CONTINUED)
taxes have been provided on profits of the Fund since the partners are
individually liable for the taxes on their share of the Fund's income.
6. RISK FACTORS
An investment in the Fund involves significant risks that should be
carefully considered prior to investment and should only be considered by
persons financially able to maintain their investment and who can afford a
loss of a substantial part or all of such investment. The Master Fund
intends to invest substantially all of its available capital in securities
of private investment companies. These investments will generally be
restricted securities that are subject to substantial holding periods or
are not traded in public markets at all, so that the Master Fund may not
be able to resell some of its securities holdings for extended periods,
which may be several years. No guarantee or representation is made that
the investment objective will be met.
7. REPURCHASE OF PARTNERS' INTERESTS
The Fund intends to conduct quarterly repurchase offers for the redemption
of the Interests at their net asset value determined as of approximately
March 31, June 30, September 30 and December 31 of each year beginning on
March 31, 2006 (each such date, a "Valuation Date"). A Limited Partner may
participate in a repurchase offer only after 12 consecutive months as
Limited Partner in the Fund. However, the General Partner retains the
discretion to approve such redemption offers and, therefore, there are no
assurances that the General Partner will, in fact, decide to undertake any
repurchase offer. The General Partner may also permit repurchases at other
times, in its sole discretion. A Limited Partner may participate in a
repurchase offer only after 12 consecutive months as Limited Partner in
the Fund. The Fund's assets consist primarily of its interest in the
Master Fund (held through its investment in the Offshore Fund).
Accordingly, the Fund will be required to liquidate a portion of its
interest in the Master Fund in order to fund repurchases. In order to
liquidate its interest in the Master Fund, the Offshore Fund (which is
effectively controlled by the Fund's Board) must accept repurchase offers
made by the Master Fund and distribute the proceeds of such repurchases to
the Fund.
The Fund does not intend to distribute to the Limited Partners any of the
Fund's income, but intends to reinvest substantially all income and gains
allocable to the Limited Partners. A Limited Partner may therefore be
allocated taxable income and gains and not receive any cash distribution.
8. GUARANTEES
In the normal course of business, the Fund enters into contracts that
provide general indemnifications. The Fund's maximum exposure under these
agreements is dependent on future claims that may be made against the
Fund, and therefore cannot be established; however, based on experience,
the risk of loss from such claims is considered remote.
9
HATTERAS MULTI-STRATEGY TEI FUND, L.P.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2005 (UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
9. CONSOLIDATED FINANCIAL HIGHLIGHTS
The financial highlights are intended to help you understand the Fund's
financial performance for the past period. The total returns in the table
represent the rate that a Limited Partner would have earned or lost on an
investment in the Fund.
The ratios and total return amounts are calculated based on the Limited
Partner group taken as a whole. The General Partner interest is excluded
from the calculations. Individual Limited Partner's ratios or returns may
vary from the table below based on incentive arrangements and the timing
of capital transactions.
The ratios are calculated by dividing total dollars of income or expenses
as applicable by the average of total monthly Limited Partner capital. The
ratios include the Fund's proportionate share of the Master Fund's income
and expenses.
Total return amounts are calculated by geometrically linking returns based
on the change in value during each accounting period. The total return
amounts have not been annualized.
PERIOD FROM
APRIL 1, 2005
(COMMENCEMENT OF
OPERATIONS) TO
SEPTEMBER 30, 2005
------------------
Total return amortizing organization expenses
and before Incentive Allocation* 4.62%
Organization expense (1.52)%
Incentive Allocation (0.50)%
------
Total net return after amortizing organization expense and Incentive Allocation 2.60%
======
Net assets, end of period (000) $8,521
Portfolio Turnover 0%
Annualized ratios:
Net investment loss before Incentive Allocation (7.44)%
Operating expenses, excluding expenses reimbursement 9.28%
Incentive Allocation** 0.46%
------
Total expenses and Incentive Allocation before expense reimbursement 9.74%
Expenses reimbursement (1.42)%
------
Net expenses 8.32%
======
* RETURN IS INDICATIVE OF AMORTIZING ORGANIZATIONAL EXPENSES OVER 60 MONTHS.
** INCENTIVE ALLOCATION RATIO IS NOT ANNUALIZED.
10
HATTERAS MULTI-STRATEGY TEI FUND, L.P.
OTHER INFORMATION -SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
PROXY VOTING
For free information regarding how the Fund voted proxies during the period
ended June 30, 2005, or to obtain a free copy of the Fund's complete proxy
voting policies and procedures, call 1-800-348-1824 or visit the SEC's website
at http://www.sec.gov.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Q is
available, without charge and upon request, on the SEC's website at
http://www.sec.gov or may be reviewed and copied at the SEC's Public Reference
Room in Washington, DC. Information on the Public Reference Room may be obtained
by calling 1-800-SEC-0330.
11
HATTERAS MASTER FUND, L.P.
FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2005
UNAUDITED
HATTERAS MASTER FUND, L.P.
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2005
UNAUDITED
TABLE OF CONTENTS
Schedule of Investments ................................................... 1
Statement of Financial Condition .......................................... 3
Statement of Operations ................................................... 4
Statement of Changes in Partners' Capital ................................. 5
Statement of Cash Flows ................................................... 6
Notes to Financial Statements ............................................. 7
Other Information ......................................................... 14
HATTERAS MASTER FUND FUND, L.P.
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
COST FAIR VALUE
------------- -------------
INVESTMENTS IN UNDERLYING FUNDS (99.71%)
ABSOLUTE RETURN (a), (b) (17.95%)
AQR Global Asset Institutional Fund II, L.P. $ 4,289,864 $ 4,390,577
Courage Special Situations Fund, L.P. 4,827,675 4,978,406
M&M Arbitrage, LLC 4,646,299 4,645,642
Silverback Partners, L.P. 4,397,274 3,773,803
Smith Breeden Mortgage Partners L.P. 4,413,258 4,505,365
Titan Global Return Fund, LLC 2,393,908 2,169,536
Wellington Partners, LLC 1,785,759 1,840,395
-------------
26,303,724
-------------
ENERGY AND NATURAL RESOURCES (a), (b) (11.14%)
BlackRock All-Cap Global Resources Fund 2,000,000 2,693,148
Cambridge Energy, L.P. 4,566,534 5,575,482
EnerVest Energy Institutional Fund X-A, L.P. 1,036,326 1,009,434
Southport Energy Plus Partners, L.P. 5,083,819 7,044,684
-------------
16,322,748
-------------
ENHANCED FIXED INCOME (a), (b) (20.33%)
BDC Partners I, L.P. 5,000,000 5,249,438
Contrarian Capital Fund I, L.P. 6,880,064 7,530,090
GMO Global Bond Fund, L.P. 4,619,587 4,303,125
Greylock Global Opportunity Fund, L.P. 4,922,405 5,110,251
Lazard Emerging Income, L.P. 3,000,000 3,044,322
Ore Hill Fund L.P. 4,221,928 4,543,267
-------------
29,780,493
-------------
OPPORTUNISTIC EQUITY (a), (b) (33.05%)
CCM International Small Cap Value Fund, L.P. 2,029,762 2,077,065
CCM Small Cap Value Qualified Fund, L.P. 2,500,000 2,644,784
CRM Windridge Partners, L.P. 3,022,017 3,071,968
GMO Mean Reversion Fund A 5,770,065 6,092,032
GMO US Aggressive Long/Short Fund 4,247,757 4,351,663
Gradient Europe Fund LP 1,000,000 1,381,280
Healthcor, L.P. 3,000,000 3,009,000
Sci-Tech Investment Partners, L.P. 2,295,782 2,349,762
SCP Domestic Fund, L.P. 4,002,947 4,540,757
SR Global Fund LP (Class C) International 3,457,674 4,434,173
SR Global Fund LP (Class G) Emerging 4,281,970 5,258,850
SR Global Fund LP (Class H) Japan 3,665,240 4,405,925
The Platinum Fund Ltd. 2,535,461 2,672,961
Witches Rock Fund, L.P. 2,003,000 2,133,771
-------------
48,423,991
-------------
See Notes to Financial Statements
1
HATTERAS MASTER FUND FUND, L.P.
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
COST FAIR VALUE
------------- -------------
INVESTMENTS IN UNDERLYING FUNDS (99.71%) (CONTINUED)
PRIVATE EQUITY COMPOSITE (a), (b) (7.53%) (CONTINUED)
Crosslink Crossover Fund IV, L.P. $ 4,883,399 $ 5,180,996
Pipe Equity Partners LLC 2,324,693 2,496,868
Protege Partners, L.P. 2,031,000 2,150,418
Roundtable Healthcare Partners II, L.P. 376,318 376,318
Sanderling Venture Partners VI Co-Investment
Fund, L.P. 150,000 150,000
Sanderling Venture Partners VI, L.P. 150,000 150,000
Sterling Capital Partners II, L.P. 231,336 231,336
VCFA Private Equity Partners IV, L.P. 349,750 291,657
-------------
11,027,593
-------------
REAL ESTATE COMPOSITE (9.71%)
ING Clarion CRA Hedge Fund, L.P. (a), (b) 5,356,915 5,620,359
Mercury Special Situations Fund, LP (a), (b 3,000,000 2,927,003
Security Capital Preferred Growth, Inc. (b) 1,714,043 1,814,328
Transwestern Mezzanine Realty Partner II, LLC (b) 710,281 737,840
Wells Street Partners, LLC (a), (b) 2,886,675 3,129,041
-------------
14,228,571
-------------
INVESTMENTS IN UNDERLYING FUNDS (COST $136,060,785) 146,087,120
OTHER ASSETS IN EXCESS OF LIABILITIES (0.29%) 431,224
-------------
PARTNERS' CAPITAL - 100.00% $ 146,518,344
=============
(a) - Non-income producing securities
(b) - Securities are issued in private placement transactions and as such are
restricted as to resale. Total cost and value of restricted securities as
of September 30, 2005 was $136,060,785 and $146,087,120, respectively.
See Notes to Financial Statements
2
HATTERAS MASTER FUND, L.P.
STATEMENT OF FINANCIAL CONDITION - SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in Underlying Funds, at fair value (cost $136,060,785) $146,087,120
Cash and cash equivalents 2,084,325
Dividends and interest receivables 24,440
Investment in Underlying Funds paid in advance 3,000,000
Prepaid insurance 31,500
Other assets 5,923
------------
TOTAL ASSETS 151,233,308
------------
LIABILITIES AND PARTNERS' CAPITAL
Contributions received in advance 4,370,221
Management fees payable 123,738
Professional fees payable 66,379
Organizational fees payable 54,393
Accounting and administration fees payable 52,829
Custodian fees payable 3,291
Investor servicing fees payable 200
Other accrued expenses 43,913
TOTAL LIABILITIES 4,714,964
------------
PARTNERS' CAPITAL $146,518,344
------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $151,233,308
============
See Notes to Financial Statements
3
HATTERAS MASTER FUND, L.P.
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 147,100
Interest 32,223
-----------
TOTAL INVESTMENT INCOME 179,323
-----------
OPERATING EXPENSES:
Management fees 673,978
Professional fees 77,834
Accounting and administration fees 77,576
Insurance 63,000
Risk management expense 57,450
Board of directors' fees 20,000
Custody fees 5,489
Investor servicing fees 300
Other expenses 33,799
-----------
TOTAL OPERATING EXPENSES 1,009,426
-----------
NET INVESTMENT LOSS (830,103)
-----------
UNREALIZED GAIN ON INVESTMENTS IN UNDERLYING FUNDS
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS 9,241,690
-----------
NET INCREASE IN PARTNERS' CAPITAL RESULTING FROM OPERATIONS $ 8,411,587
===========
See Notes to Financial Statements
4
HATTERAS MASTER FUND, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL - PERIOD ENDED MARCH 31, 2005 AND
SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
GENERAL LIMITED TOTAL
PARTNERS' PARTNERS' PARTNERS'
CAPITAL CAPITAL CAPITAL
-------------------------------------------------
PARTNERS' CAPITAL AT JANUARY 1, 2005 $ -- $ 100,000 $ 100,000
(COMMENCEMENT OF OPERATIONS)
Capital contributions -- 35,596,058 35,596,058
Transfer in-kind subscriptions (Note 1) -- 89,006,951 89,006,951
Capital withdrawals -- (8,000,000) (8,000,000)
Net investment loss -- (528,428) (528,428)
Net realized loss on investments in Underlying Funds -- (132,580) (132,580)
Net increase in unrealized appreciation on investments
in Underlying Funds -- 784,645 784,645
-------------------------------------------------
PARTNERS' CAPITAL AT MARCH 31, 2005 $ -- $ 116,826,646 $ 116,826,646
Capital contributions -- 23,330,111 23,330,111
Capital withdrawals -- (2,050,000) (2,050,000)
Net investment loss -- (830,103) (830,103)
Net increase in unrealized appreciation on investments
in Underlying Funds -- 9,241,690 9,241,690
-------------------------------------------------
PARTNERS' CAPITAL AT SEPTEMBER 30, 2005 $ -- $ 146,518,344 $ 146,518,344
=================================================
See Notes to Financial Statements
5
HATTERAS MASTER FUND, L.P.
STATEMENT OF CASH FLOWS - FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in partners' capital resulting from operations $ 8,411,587
Adjustments to reconcile net increase in partners' capital from
investment operations to net cash used for operating activities:
Puchases of Underlying Funds (25,198,536)
Proceeds from redemption of Underlying Funds 4,225,920
Increase in unrealized appreciation on investments in Underlying Funds (9,241,690)
Decrease in prepaid insurance 63,000
Increase in dividends and interest receivables (24,440)
Increase in investment in Underlying Funds paid in advance (3,000,000)
Increase in other assets (5,923)
Decrease in organization fees payable (25,246)
Increase in management fees payable 123,738
Increase in professional fees payable 26,129
Increase in accounting and administration fees payable 8,167
Increase in custodian fees payable 1,506
Decrease in board of managers' fees payable (2,500)
Increase in investor servicing fees payable 125
Increase in other accrued expenses 40,382
-------------
NET CASH USED IN OPERATING ACTIVITIES (24,597,781)
-------------
CASH FLOWS FROM FINANCING ACTVITIES:
Capital contributions 27,700,332
Capital withdrawals (2,050,000)
-------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 25,650,332
-------------
Net change in cash and cash equivalents 1,052,551
Cash and cash equivalents at beginning of period 1,031,774
-------------
Cash and cash equivalents at end of period $ 2,084,325
=============
See Notes to Financial Statements
6
HATTERAS MASTER FUND, L.P.
NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Hatteras Master Fund, L.P. (the "Master Fund") was organized as a limited
partnership under the laws of the State of Delaware on October 29, 2004.
The Master Fund is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as a closed-end, non-diversified management
investment company. The Master Fund is managed by Hatteras Investment
Partners LLC (the "Investment Manager"), a Delaware limited liability
company registered as an investment adviser under the Investment Advisers
Act of 1940, as amended. The objective of the Master Fund is to generate
consistent long-term appreciation and returns across all market cycles. To
achieve its objective, the Master Fund will provide its limited partners
(each, a "Partner" and together, the "Partners") with access to a broad
range of investment strategies and asset categories, trading advisors
("Advisors") and overall asset allocation services typically available on
a collective basis to larger institutions. Generally, the Investment
Manager intends to select Advisors that collectively employ widely
diversified investment strategies and engage in such techniques as
Opportunistic Equity, Enhanced Fixed Income, Absolute Return, Private
Equity, Real Estate and Energy/Natural Resources. However, the Investment
Manager may also retain Advisors who utilize other strategies. The Master
Fund invests with each Advisor either by becoming a participant in an
investment vehicle operated by the Advisor (an "Underlying Fund") or by
placing asset in an account directly managed by the Advisor. The Master
Fund commenced operations on January 3, 2005. Prior to January 3, 2005,
the Master Fund engaged in no transactions other than those related to
organizational matters and the sale of a $100,000 interest to Hatteras
Diversified Strategies Fund, LP.
Hatteras Investment Management LLC, a Delaware limited liability company,
serves as the General Partner of the Master Fund ("General Partner"). The
General Partner has initially appointed a Board of Directors ("Board")
and, to the fullest extent permitted by applicable law, has irrevocably
delegated to the Board its rights and powers to monitor and oversee the
business affairs of the Master Fund, including the complete and exclusive
authority to oversee and establish policies regarding the management,
conduct and operation of the Master Fund's business.
On January 1, 2005, the Fund received capital contributions totaling
$116,269,458, including contributions in the form of transfer-in-kind from
Hatteras Diversified Strategies Fund, LP and Hatteras Diversified
Strategies Offshore Fund, Ltd. for $72,386,769 and $16,620,182,
respectively. In addition, the Hatteras Diversified Strategies Offshore
Fund, Ltd. transferred receivables in the amount of $17,242,388 and
liquidated $10,020,119 of the Fund's securities at December 31, 2004 and
reinvested the proceeds in the Master Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America
and are expressed in United States dollars. The following is a summary of
significant accounting and reporting policies used in preparing the
financial statements.
7
HATTERAS MASTER FUND, L.P.
NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A. INVESTMENT VALUATION - INVESTMENTS IN UNDERLYING FUNDS
The Master Fund will value interests in the Underlying Funds at fair
value, which ordinarily will be the value determined by their respective
investment managers, in accordance with procedures established by the
Board. Investments in Underlying Funds are subject to the terms of the
Underlying Funds'offering documents. Valuations of the Underlying Funds
may be subject to estimates and are net of management and performance
incentive fees or allocations payable to the Underlying Funds' Advisors as
required by the Underlying Funds' offering documents. If the Investment
Manager determines that the most recent value reported by the Underlying
Fund does not represent fair value or if the Underlying Fund fails to
report a value to the Master Fund, a fair value determination is made
under procedures established by and under the general supervision of the
Board. Because of the inherent uncertainty in valuation, the estimated
values may differ from the values that would have been used had a ready
market for the securities existed, and the differences could be material.
B. INVESTMENT INCOME
Interest income is recorded on the accrual basis. The Underlying Funds
generally do not make regular cash distributions of income and gains and
so are generally considered non-income producing securities, however the
Master Fund owns two securities that are income producing and disburse
regular cash distributions.
C. FUND EXPENSES
The Master Fund will bear all expenses incurred in the business of the
Master Fund, including, but not limited to, the following: all costs and
expenses related to portfolio transactions and positions for the Master
Fund's account; legal fees; accounting and auditing fees; costs of
insurance; registration expenses; certain offering and organization costs;
and expenses of meetings of the Board.
In accordance with the Private Placement Memorandum, the Master Fund is
amortizing organizational expenses over a sixty-month period. For
financial statement purposes, in order to comply with accounting
principles generally accepted in the United States of America, the Fund
expensed the unamortized amount of organizational expenses during the
current period.
D. INCOME TAXES
The Master Fund is treated as a partnership for federal income tax
purposes and therefore not subject to federal income tax. For income tax
purposes, the individual partners will be taxed upon their distributive
share of each item of the Master Fund's income, gain, loss, deductions and
credits.
8
HATTERAS MASTER FUND, L.P.
NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes amounts held in interest bearing
overnight accounts. At September 30, 2005, the Master Fund held $2,084,325
in an interest bearing cash account at PNC Bank.
F. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires the
Master Fund to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements
and the reported amounts of income and expense during the reporting
period. Actual results could differ from these estimates.
3. ALLOCATION OF PARTNERS' CAPITAL ACCOUNT
Net profits or net losses of the Master Fund for each Allocation Period
(as defined below) will be allocated among and credited to or debited
against the capital accounts of the Partners. Allocation Periods begin on
the day after the last day of the preceding Allocation Period and end at
the close of business on (1) the last day of each month, (2) the last day
of each taxable year; (3) the day preceding each day on which interests
are purchased, (4) the day on which interests are repurchased, or (5) the
day on which any amount is credited to or debited from the capital account
of any Partner other than an amount to be credited to or debited from the
capital accounts of all Partners in accordance with their respective
investment percentages.
4. MANAGEMENT FEE, RELATED PARTY TRANSACTIONS AND OTHER
The Investment Manager is responsible for providing day-to-day investment
management services to the Master Fund, subject to the ultimate
supervision of and subject to any policies established by the Board,
pursuant to the terms of an investment management agreement with the
Master Fund (the "Investment Management Agreement"). Under the Investment
Management Agreement, the Investment Manager is responsible for
developing, implementing and supervising the Fund's investment program.
In consideration for such services, the Master Fund pays the Investment
Manager a monthly management fee equal to 1/12th of 1.00% (1.00% on an
annualized basis) of the aggregate value of its net assets determined as
of the last day of the month (before repurchase of interests). Prior to
July 1, 2005, the Master Fund paid a management fee based on the net asset
value as of the first business day of each fiscal quarter.
9
HATTERAS MASTER FUND, L.P.
NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
4. MANAGEMENT FEE, RELATED PARTY TRANSACTIONS AND OTHER (CONTINUED)
Each member of the Board who is not an "interested person" of the Master
Fund, as defined by the 1940 Act ("Independent Board"), receives an annual
retainer of $10,000. All Board members are reimbursed by the Master Fund
for all reasonable out-of-pocket expenses incurred by them in performing
their duties.
PFPC Trust Company serves as custodian of the Master Fund's assets and
provides custodial services for the Master Fund. PFPC Inc. serves as
administrator and accounting agent to the Master Fund and provides certain
accounting, record keeping and investor related services. The Master Fund
pays a monthly fee to the administrator based upon average partners'
capital, subject to certain minimums.
5. INVESTMENT TRANSACTIONS
Total purchases of Underlying Funds for the six months ended September 30,
2005, amounted to $25,198,536. Total proceeds from sales of Underlying
Funds for the six months ended September 30, 2005, amounted to $4,225,920.
The cost of investments in Underlying Funds for Federal income tax
purposes is adjusted for items of taxable income allocated to the Master
Fund from the Underlying Funds. The Master Fund has not received
information from the Underlying Funds as to the amounts of taxable income
allocated to the Master Fund as of September 30, 2005.
6. UNDERLYING FUNDS
The following is a summary of the investment objective and liquidity
provisions of the Underlying Funds that exceeded 5% of the Master Fund's
net assets at September 30, 2005.
Contrarian Capital Fund I, L.P. seeks to maximize total return through
investment in a broad based distressed securities portfolio of
predominantly U.S. corporate obligations and, to a lesser extent, real
estate and non-U.S. restructurings. The Uunderlying Fund may also invest
up to 20% of its assets in securities for which there is no ready market.
The Underlying Fund allows for redemptions as of the last business day of
any fiscal year on a 90 day written notice, after one fiscal year has
elapsed.
7. RISK FACTORS
An investment in the Master Fund involves significant risks that should be
carefully considered prior to investing and should only be considered by
persons financially able to maintain their investment and who can afford a
loss of a substantial part or all of such investment. The Master Fund
intends to invest substantially all of its available capital in securities
of private investment companies. These investments will generally be
restricted securities that are subject to substantial holding periods or
are not traded in public markets at all, so that the Master Fund may not
be able to resell some of its securities holdings for extended periods,
which may be several years. No guarantee or representation is made that
the investment objective will be met.
10
HATTERAS MASTER FUND, L.P.
NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
8. REPURCHASE OF PARTNERS' INTERESTS
The Board may, from time to time and in its sole discretion, cause the
Master Fund to repurchase interests from Partners pursuant to written
tenders by Partners at such times and on such terms and conditions as
established by the Board. In determining whether the Master Fund should
offer to repurchase interests, the Board will consider the recommendation
of the Investment Manager. The Investment Manager expects that it will
generally recommend to the Board that the Master Fund offer to repurchase
interests from Partners quarterly as of approximately March 31, June 30,
September 30 and December 31 of each year beginning on March 31, 2006.
The Master Fund does not intend to distribute to the Partners any of the
Master Fund's income, but intends to reinvest substantially all income and
gains allocable to the Partners. A Partner may therefore be allocated
taxable income and gains and not receive any cash distribution.
9. GUARANTEES
In the normal course of business, the Master Fund enters into contracts
that provide general indemnifications. The Master Fund's maximum exposure
under these agreements is dependent on future claims that may be made
against the Master Fund, and therefore cannot be established; however,
based on experience, the risk of loss from such claims is considered
remote.
10. COMMITMENTS
As of September 30, 2005, the Master Fund had outstanding investment
commitments to Underlying Funds totaling $11,292,891.
11. FINANCIAL HIGHLIGHT INFORMATION
The financial highlights are intended to help you understand the Master
Fund's financial performance for the past period. The total returns in the
table represent the rate that limited partner would have earned or lost on
an investment in the Master Fund.
The ratios and total return amounts are calculated based on the limited
partner group taken as a whole. The General Partner interest is excluded
from the calculations. An individual limited partner's results may vary
from those shown below due to the timing of capital transactions.
The ratios are calculated by dividing total dollars of income or expenses
as applicable by the average of total monthly limited partner capital. The
ratios do not reflect the Master Fund's proportionate share of income and
expenses from Underlying Funds.
Total return amounts are calculated by geometrically linking returns based
on the change in value during each accounting period. The total return
amounts have not been annualized.
11
HATTERAS MASTER FUND, L.P.
NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
11. FINANCIAL HIGHLIGHT INFORMATION (CONTINUED)
FOR THE SIX PERIOD FROM
MONTHS ENDED JANUARY 1, 2005
SEPTEMBER 30, (COMMENCEMENT OF
2005 OPERATIONS) TO
(UNAUDITED): MARCH 31, 2005:
-------------- ------------------
Total return amortizing organizational expenses* 6.17% 0.23%
Total return after expensing organizational expenses 6.17% 0.17%
Portfolio turnover 3.22% 3.72%
ANNUALIZED RATIOS:
Total expenses 1.51% 1.50%
Net investment loss (1.24)% (1.43)%
- ----------
* Return is indicative of amortizing organizational expenses over 60 months.
12
HATTERAS MASTER FUND, L.P.
NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
12. PARTNER VOTING RESULTS
On May 27, 2005, the Partners of the Master Fund approved (i) the election of
the Board of Directors of the Fund ("Proposal 1") and (ii) the approval of a new
investment management agreement between the Master Fund and Hatteras Investment
Partners LLC ("Proposal 2"). The results of the voting on the proposals were as
follows:
PROPOSAL 1
% OF
DOLLARS % OF TOTAL
VOTED VOTED OUTSTANDING DOLLARS
-------------- ------------ ---------------------
For............................... 124,905,152.90 100.00% 100.00%
Withhold.......................... 0.00 0.00% 0.00%
PROPOSAL 2
% OF
DOLLARS % OF TOTAL
VOTED VOTED OUTSTANDING DOLLARS
-------------- ------------ ---------------------
For............................... 121,450,047.54 97.23% 97.23%
Against........................... 3,455,105.36 2.77% 2.77%
Abstain........................... 0.00 0.00% 0.00%
13
HATTERAS MASTER FUND, L.P.
OTHER INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
PROXY VOTING
For free information regarding how the Master Fund voted proxies during the
period ended June 30, 2005, or to obtain a free copy of the Master Fund's
complete proxy voting policies and procedures, call 1-800-348-1824 or visit the
SEC's website at http://www.sec.gov.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES
The Master Fund files its complete schedule of portfolio holdings with the SEC
for the first and third quarters of each fiscal year on Form N-Q. The Master
Fund's Form N-Q is available, without charge and upon request, on the SEC's
website at http://www.sec.gov or may be reviewed and copied at the SEC's Public
Reference Room in Washington, DC. Information on the Public Reference Room may
be obtained by calling (800) SEC-0330.
14
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments in securities of unaffiliated issuers as of the close of
the reporting period is included as part of the report to shareholders filed
under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR
240.14a-101), or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial
officers, or persons performing similar functions, have concluded
that the registrant's disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940, as
amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of
a date within 90 days of the filing date of the report that includes
the disclosure required by this paragraph, based on their evaluation
of these controls and procedures required by Rule 30a-3(b) under the
1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b)
under the Securities Exchange Act of 1934, as amended (17 CFR
240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the registrant's second
fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act
and Section 302 of the Sarbanes-Oxley Act of 2002 are attached
hereto.
(a)(3) Not applicable.
(b) Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) HATTERAS MULTI-STRATEGY TEI FUND, L.P.
--------------------------------------------------------------------
By (Signature and Title)* /s/ DAVID B. PERKINS
-------------------------------------------------------
David B. Perkins, President & Chief Executive Officer
(principal executive officer)
Date DECEMBER 5, 2005
----------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ DAVID B. PERKINS
-------------------------------------------------------
David B. Perkins, President & Chief Executive Officer
(principal executive officer)
Date DECEMBER 5, 2005
----------------------------------------------------------------------------
By (Signature and Title)* /s/ J. MICHAEL FIELDS
-------------------------------------------------------
J. Michael Fields, Chief Financial Officer
(principal financial officer)
Date DECEMBER 5, 2005
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.