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 811-21666

Hatteras Master Fund, L.P.

(Exact name of registrant as specified in charter)

8540 Colonnade Center Drive, Suite 401

Raleigh, North Carolina 27615

(Address of principal executive offices) (Zip code)

David B. Perkins

8540 Colonnade Center Drive, Suite 401

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, 2012

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, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

ITEM 1. REPORTS TO STOCKHOLDERS.

The Report to Shareholders is attached herewith.

HATTERAS FUNDS

Hatteras Core Alternatives Fund, L.P. (a Delaware Limited Partnership)

(Formerly known as Hatteras Multi-Strategy Fund, L.P.)

Hatteras Core Alternatives TEI Fund, L.P. (a Delaware Limited Partnership)

(Formerly known as Hatteras Multi-Strategy TEI Fund, L.P.)

Hatteras Core Alternatives Institutional Fund, L.P. (a Delaware Limited Partnership)

(Formerly known as Hatteras Multi-Strategy Institutional Fund, L.P.)

Hatteras Core Alternatives TEI Institutional Fund, L.P. (a Delaware Limited Partnership)

(Formerly known as Hatteras Multi-Strategy TEI Institutional Fund, L.P.)

Financial Statements

As of and for the six months ended September 30, 2012

(Unaudited)

HATTERAS FUNDS

As of and for the six months ended September 30, 2012

(Unaudited)

Hatteras Core Alternatives Fund, L.P. (a Delaware Limited Partnership)

Hatteras Core Alternatives TEI Fund, L.P. (a Delaware Limited Partnership)

Hatteras Core Alternatives Institutional Fund, L.P. (a Delaware Limited Partnership)

Hatteras Core Alternatives TEI Institutional Fund, L.P. (a Delaware Limited Partnership)

Table of Contents

Statements of Assets, Liabilities and Partners’ Capital	1
Statements of Operations	2
Statements of Changes in Partners’ Capital	3
Statements of Cash Flows	4
Notes to Financial Statements	5-15
Board of Directors	16
Fund Management	18
Other Information	20
Financial Statements of Hatteras Master Fund, L.P.	21

HATTERAS FUNDS

(each a Delaware Limited Partnership)

STATEMENTS OF ASSETS, LIABILITIES AND PARTNERS’ CAPITAL

September 30, 2012 (Unaudited)

	Hatteras Core Alternatives Fund, L.P.			Hatteras Core Alternatives TEI Fund, L.P.*			Hatteras Core Alternatives Institutional Fund, L.P.			Hatteras Core Alternatives TEI Institutional Fund, L.P.*
Assets
Investment in Hatteras Master Fund, L.P., at fair value (cost $204,498,229; $273,185,721; $222,146,336 and $561,770,146, respectively)	$	209,557,392		$	275,830,962		$	216,000,568		$	575,766,453
Cash		337,159			405,179			199,865			304,865
Receivable for withdrawal from Hatteras Master Fund, L.P.		19,999,695			15,306,630			12,981,797			31,350,330
Investments in Hatteras Master Fund, L.P. paid in advance		—			1,122,093			1,642,848			940,297
Prepaid assets		43,249			244,647			38,489			518,062
Total assets	$	229,937,495		$	292,909,511		$	230,863,567		$	608,880,007
Liabilities and partners’ capital
Withdrawals payable	$	20,188,405		$	15,400,606		$	13,173,113		$	31,466,710
Contributions received in advance		200,000			1,368,180			1,700,000			1,030,240
Servicing fee payable		162,548			206,352			19,076			50,640
Professional fees payable		37,238			19,538			22,442			5,151
Accounting and administration fees payable		12,437			16,932			10,245			17,936
Printing fees payable		9,083			18,970			3,646			—
Custodian fees payable		3,073			3,511			2,315			3,172
Other accrued expenses		—			16,544			13,906			22,359
Total liabilities		20,612,784			17,050,633			14,944,743			32,596,208
Partners’ capital		209,324,711			275,858,878			215,918,824			576,283,799
Total liabilities and partners’ capital	$	229,937,495		$	292,909,511		$	230,863,567		$	608,880,007
Components of partners’ capital
Capital contributions (net)	$	218,661,632		$	293,366,274		$	225,261,328		$	570,444,969
Accumulated net investment loss		(17,482,429	)		(23,307,482	)		(4,083,942	)		(6,887,818	)
Accumulated net realized loss		(12,327,744	)		(14,362,204	)		(12,820,080	)		(19,252,234	)
Accumulated net unrealized appreciation on investments		20,473,252			20,162,290			7,561,518			31,978,882
Partners’ capital	$	209,324,711		$	275,858,878		$	215,918,824		$	576,283,799
Net asset value per unit	$	90.80		$	90.56		$	93.82		$	93.66
Maximum offering price per unit**	$	92.62		$	92.37		$	93.82		$	93.66
Number of authorized units		7,500,000.00			7,500,000.00			7,500,000.00			10,000,000.00
Number of outstanding units		2,305,211.45			3,045,976.69			2,301,467.43			6,152,923.13

* Consolidated Statement. See note 1.

** The maximum sales load for the Hatteras Core Alternatives Fund, L.P. and the Hatteras Core Alternatives TEI Fund, L.P. is 2.00%. The remaining funds are not subject to a sales load.

See notes to financial statements.

ONE

HATTERAS FUNDS

(each a Delaware Limited Partnership)

STATEMENTS O F OPERATIONS

For the six months ended September 30, 2012 (Unaudited)

	Hatteras Core Alternatives Fund, L.P.			Hatteras Core Alternatives TEI Fund, L.P.*			Hatteras Core Alternatives Institutional Fund, L.P.			Hatteras Core Alternatives TEI Institutional Fund, L.P.*
Net investment income allocated from Hatteras Master Fund, L.P.
Investment income	$	2,111,446		$	2,742,726		$	2,116,362		$	5,606,500
Operating expenses		(1,464,535	)		(1,903,380	)		(1,467,868	)		(3,888,221	)
Net investment income allocated from Hatteras Master Fund, L.P.		646,911			839,346			648,494			1,718,279
Feeder Fund investment income
Interest		55			61			56			93
Total fund investment income		55			61			56			93
Feeder Fund expenses
Servicing fee		984,543			1,280,076			116,108			307,657
Accounting and administration fees		72,138			102,502			61,807			110,164
Insurance fees		26,566			35,176			26,346			69,833
Professional fees		24,899			10,760			17,399			14,725
Printing fees		15,000			26,500			15,000			20,000
Directors’ fees		15,000			15,000			15,000			15,000
Custodian fees		3,900			5,400			3,900			5,100
Withholding tax		—			136,894			—			237,067
Other expenses		44,989			42,500			42,500			50,000
Total Feeder Fund expenses		1,187,035			1,654,808			298,060			829,546
Net investment income/(loss)		(540,069	)		(815,401	)		350,490			888,826
Net realized loss and change in unrealized appreciation on investments allocated from Hatteras Master Fund, L.P.
Net realized loss from investments in Adviser Funds, Exchange Traded Funds, Mutual Funds and foreign exchange transactions		(1,700,013	)		(2,198,580	)		(1,726,749	)		(4,601,257	)
Net change in unrealized appreciation on investments in Adviser Funds, Exchange Traded Funds, Mutual Funds and foreign exchange transactions		5,276,280			6,683,593			5,276,095			14,068,510
Net realized loss and change in unrealized appreciation on investments allocated from Hatteras Master Fund, L.P.		3,576,267			4,485,013			3,549,346			9,467,253
Net increase in partners’ capital resulting from operations	$	3,036,198		$	3,669,612		$	3,899,836		$	10,356,079

* Consolidated Statement. See note 1.

See notes to financial statements.

TWO

HATTERAS FUNDS

(each a Delaware Limited Partnership)

STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

For the year ended March 31, 2012 and the six months ended September 30, 2012 (Unaudited)

	Hatteras Core Alternatives Fund, L.P.			Hatteras Core Alternatives TEI Fund, L.P.*			Hatteras Core Alternatives Institutional Fund, L.P.			Hatteras Core Alternatives TEI Institutional Fund, L.P.*
	Limited Partners			Limited Partners			Limited Partners			Limited Partners
Partners’ Capital, at March 31, 2011	$	248,882,108		$	325,745,330		$	238,674,737		$	659,549,379
Capital contributions		37,627,191			45,202,873			52,807,746			55,960,615
Capital withdrawals		(42,007,165	)		(45,915,793	)		(47,422,023	)		(71,636,476	)
Withdrawal fees		57,277			5,418			36,440			16,501
Net investment income/(loss)		(724,905	)		(1,262,773	)		1,231,020			3,013,883
Net realized gain from investments in Adviser Funds, Exchange Traded Funds, Mutual Funds and foreign exchange transactions		3,080,313			3,877,391			2,883,089			7,796,071
Net change in unrealized appreciation on investments in Adviser Funds, Exchange Traded Funds, Mutual Funds and foreign exchange transactions		(12,034,318	)		(15,448,686	)		(11,319,447	)		(30,153,048	)
Partners’ Capital, at March 31, 2012**	$	234,880,501		$	312,203,760		$	236,891,562		$	624,546,925
Capital contributions		6,124,007			7,077,846			7,277,213			22,740,053
Capital withdrawals		(34,726,159	)		(47,092,340	)		(32,164,837	)		(81,362,318	)
Withdrawal fees		10,164			—			15,050			3,060
Net investment income/(loss)		(540,069	)		(815,401	)		350,490			888,826
Net realized loss from investments in Adviser Funds, Exchange Traded Funds, Mutual Funds and foreign exchange transactions		(1,700,013	)		(2,198,580	)		(1,726,749	)		(4,601,257	)
Net change in unrealized appreciation on investments in Adviser Funds, Exchange Traded Funds, Mutual Funds and foreign exchange transactions		5,276,280			6,683,593			5,276,095			14,068,510
Partners’ Capital, at September 30, 2012***	$	209,324,711		$	275,858,878		$	215,918,824		$	576,283,799

* Consolidated Statement. See note 1.

** Including accumulated net investment loss of $16,942,360; $22,492,081; $4,434,432; and $7,776,644, respectively.

*** Including accumulated net investment loss of $17,482,429; $23,307,482; $4,083,942; and $6,887,818, respectively.

See notes to financial statements.

THREE

HATTERAS FUNDS

(each a Delaware Limited Partnership)

STATEMENTS OF CASH FLOWS

For the six months ended September 30, 2012 (Unaudited)

	Hatteras Core Alternatives Fund, L.P.			Hatteras Core Alternatives TEI Fund, L.P.*			Hatteras Core Alternatives Institutional Fund, L.P.			Hatteras Core Alternatives TEI Institutional Fund, L.P.*
Cash flows from operating activities:
Net increase in partners’ capital resulting from operations	$	3,036,198		$	3,669,612		$	3,899,836		$	10,356,079
Adjustments to reconcile net increase in partners’ capital resulting from operations to net cash provided by operating activities:
Purchases of interests in Hatteras Master Fund, L.P.		(4,889,276	)		(5,462,798	)		(6,994,088	)		(22,034,834	)
Proceeds from withdrawals from Hatteras Master Fund, L.P.		34,738,494			47,447,927			32,172,287			82,040,279
Net investment income allocated from Hatteras Master Fund, L.P.		(646,911	)		(839,346	)		(648,494	)		(1,718,279	)
Net realized loss from investments in Adviser Funds, Exchange Traded Funds, Mutual Funds and foreign exchange transactions allocated from Hatteras Master Fund, L.P.		1,700,013			2,198,580			1,726,749			4,601,257
Net change in unrealized appreciation on investments in Adviser Funds, Exchange Traded Funds, Mutual Funds and foreign exchange transactions allocated from Hatteras Master Fund, L.P.		(5,276,280	)		(6,683,593	)		(5,276,095	)		(14,068,510	)
(Increase)/Decrease in receivable for withdrawals from Hatteras Master Fund, L.P.		(6,972,340	)		(3,721,008	)		948,336			(12,197,374	)
(Increase)/Decrease in investment in Hatteras Master Fund, L.P. paid in advance		—			(1,122,093	)		(1,642,848	)		(940,297	)
(Increase)/Decrease in prepaid assets		(38,702	)		(238,693	)		(34,156	)		(506,497	)
Increase/(Decrease) in servicing fee payable		(13,172	)		(23,125	)		(1,827	)		(3,006	)
Increase/(Decrease) in accounting and administration fees payable		(475	)		(476	)		(340	)		(1,055	)
Increase/(Decrease) in professional fees payable		(11,662	)		(16,959	)		(13,188	)		(12,203	)
Increase/(Decrease) in custodian fees payable		1,435			2,111			1,415			1,742
Increase/(Decrease) in printing fees payable		(948	)		5,799			1,795			(31,696	)
Increase/(Decrease) in other accrued expenses		(3,380	)		4,465			8,957			13,392
Net cash provided by operating activities		21,622,994			35,220,403			24,148,339			45,498,998
Cash flows from financing activities:
Capital contributions		6,324,007			8,446,026			8,977,213			23,770,293
Capital withdrawals, net of withdrawal fees		(27,733,497	)		(43,376,575	)		(33,067,245	)		(69,158,486	)
Net cash used in financing activities		(21,409,490	)		(34,930,549	)		(24,090,032	)		(45,388,193	)
Net change in cash		213,504			289,854			58,307			110,805
Cash at beginning of period		123,655			115,325			141,558			194,060
Cash at end of period	$	337,159		$	405,179		$	199,865		$	304,865

* Consolidated Statement. See note 1.

See notes to financial statements.

FOUR

HATTERAS FUNDS

(each a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited)

1.  ORGANIZATION

The Hatteras Funds, each a “Feeder Fund” and collectively the “Feeder Funds” are:

Hatteras Core Alternatives Fund, L.P. (Formerly known as Hatteras Multi-Strategy Fund, L.P.)

Hatteras Core Alternatives TEI Fund, L.P. (Formerly known as Hatteras Multi-Strategy TEI Fund, L.P.)

Hatteras Core Alternatives Institutional Fund, L.P. (Formerly known as Hatteras Multi-Strategy Institutional Fund, L.P.)

Hatteras Core Alternatives TEI Institutional Fund, L.P. (Formerly known as Hatteras Multi-Strategy TEI Institutional Fund, L.P.)

The Hatteras Core Alternatives TEI Fund, L.P. and the Hatteras Core Alternatives TEI Institutional Fund, L.P. each invest substantially all of their assets in the Hatteras Core Alternatives Offshore Fund, LDC (formerly known as Hatteras Multi-Strategy Offshore Fund, LDC), and Hatteras Core Alternatives Offshore Institutional Fund, LDC (formerly known as Hatteras Multi-Strategy Offshore Institutional Fund, LDC), (collectively the “Blocker Funds”), respectively. The Blocker Funds are Cayman Islands limited duration companies with the same investment objective as the Feeder Funds. The Blocker Funds serve solely as intermediate entities through which the Hatteras Core Alternatives TEI Fund, L.P. and the Hatteras Core Alternatives TEI Institutional Fund, L.P. invest in Hatteras Master Fund, L.P. (the “Master Fund” and together with the Feeder Funds, the “Funds”). The Blocker Funds enable tax-exempt Limited Partners (as defined below) to invest without receiving certain income in a form that would otherwise be taxable to such tax-exempt Limited Partners regardless of their tax-exempt status. The Hatteras Core Alternatives TEI Fund, L.P. owns 100% of the participating beneficial interests of the Hatteras Core Alternatives Offshore Fund, LDC and the Hatteras Core Alternatives TEI Institutional Fund, L.P. owns 100% of the participating beneficial interests of the Hatteras Core Alternatives Offshore Institutional Fund, LDC. Where these Notes to Financial Statements discuss the Feeder Funds’ investment in the Master Fund, for Hatteras Core Alternatives TEI Fund, L.P. and Hatteras Core Alternatives TEI Institutional Fund, L.P., it means their investment in the Master Fund through the applicable Blocker Fund.

The Feeder Funds are organized as Delaware limited partnerships, and are registered under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, (the “1940 Act”) as closed-end, non-diversified, management investment companies. The primary investment objective of the Feeder Funds is to provide capital appreciation consistent with the return characteristic of the alternative investment portfolios of larger endowments. The Feeder Funds’ secondary objective is to provide capital appreciation with less volatility than that of the equity markets. To achieve their objectives, the Feeder Funds provide their investors with access to a broad range of investment strategies, asset categories and trading advisers (“Advisers”) and by providing overall asset allocation services typically available on a collective basis to larger institutions, through an investment of substantially all of their assets into the Master Fund, which is registered under the 1940 Act. The Feeder Funds are 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. Investors who acquire units of limited partnership interest in the Feeder Funds (“Units”) are the limited partners (each, a “Limited Partner” and together, the “Limited Partners”) of the Feeder Funds.

The financial statements of the Master Fund, including the schedule of investments, are included elsewhere in this report and should be read with the Feeder Funds’ financial statements. The percentage of the Master Fund’s beneficial limited partnership interests owned by the Feeder Funds at September 30, 2012 were:

Hatteras Core Alternatives Fund, L.P.	16.10	%
Hatteras Core Alternatives TEI Fund, L.P.	21.20	%
Hatteras Core Alternatives Institutional Fund, L.P.	16.60	%
Hatteras Core Alternatives TEI Institutional Fund, L.P.	44.25	%

FIVE

HATTERAS FUNDS

(each a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited) (continued)

1.  ORGANIZATION (CONTINUED)

Hatteras Investment Management, LLC, a Delaware limited liability company, serves as the General Partner of each of the Feeder Funds and the Master Fund (the “General Partner”). The General Partner is an affiliate of the Investment Manager. The General Partner has appointed a Board of Directors for each Feeder Fund (collectively the “Boards”) 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 Feeder Funds, including the complete and exclusive authority to oversee and establish policies regarding the management, conduct and operation of the Feeder Funds’ business.

2.  SIGNIFICANT ACCOUNTING POLICIES

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and are expressed in United States dollars. The following is a summary of significant accounting and reporting policies used in preparing the financial statements.

a.  Investment Valuation

The Feeder Funds do not make direct investments in securities or financial instruments, and invest substantially all of their assets in the Master Fund. The Feeder Funds record their investment in the Master Fund at fair value. Because the full amount of investment cannot be redeemed at least quarterly, each Feeder Fund’s investment in the Master Fund would be considered level 3. Valuation of securities held by the Master Fund, including the Master Fund’s disclosure of investments under the three-tier hierarchy, is discussed in the notes to the Master Fund’s financial statements included elsewhere in this report.

b.  Allocations from the Master Fund

The Feeder Funds record their allocated portion of income, expense, realized gains and losses and unrealized appreciation and depreciation from the Master Fund.

c.  Feeder Fund Level Income and Expenses

Interest income on any cash or cash equivalents held by the Feeder Funds will be recognized on an accrual basis. Expenses that are specifically attributed to the Feeder Funds are charged to each Feeder Fund. Because the Feeder Funds bear their proportionate share of the management fees of the Master Fund, the Feeder Funds pay no direct management fee to the Investment Manager. Feeder Funds specific expenses are recorded on an accrual basis.

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 each of the Feeder Fund’s allocated earnings is established dependent upon the tax filings of the investment vehicles operated by the Adviser (“Adviser Funds”). Accordingly, the tax basis of these allocated earnings and the related balances are not available as of the reporting date.

e.  Income Taxes

For U.S. Federal income tax purposes, the Feeder Funds are treated as partnerships, and each Limited Partner in each respective Feeder Fund is treated as the owner of its proportionate share of the net assets, income, expenses, and the realized and unrealized gains (losses) of such Feeder Fund. Accordingly, no federal, state or local income taxes have been provided on profits of the Feeder Funds since the Limited Partners are individually liable for the taxes on their share of the Feeder Funds.

The Feeder Funds file tax returns as prescribed by the tax laws of the jurisdictions in which they operate. In the normal course of business, the Feeder Funds are subject to examination by federal, state, local and foreign jurisdictions, where applicable. For returns filed for the years ended December 31, 2009 through December 31, 2011, the Feeder Funds remain subject to examination by the major tax jurisdictions under the statute of limitations.

SIX

HATTERAS FUNDS

(each a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited) (continued)

2.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

e.  Income Taxes (continued)

The Feeder Funds have reviewed any potential tax positions as of September 30, 2012 and have determined that they do not have a liability for any unrecognized tax benefits. The Feeder Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period ended September 30, 2012, the Feeder Funds did not incur any material interest or penalties.

f.  Cash

Cash includes amounts held in interest bearing demand deposit accounts. Such cash, at times, may exceed federally insured limits. The Feeder Funds have not experienced any losses in such accounts and do not believe they are exposed to any significant credit risk on such accounts.

g.  Use of Estimates

The preparation of financial statements in conformity with GAAP 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 increases and decreases in Limited Partners’ capital from operations during the reporting period. Actual results could differ from those estimates.

h.  Consolidated Financial Statements

The asset, liability, and equity accounts of the Hatteras Core Alternatives TEI Fund, L.P. and the Hatteras Core Alternatives TEI Institutional Fund, L.P. are consolidated with their respective Blocker Funds as presented in the Statements of Assets, Liabilities, and Partners’ Capital. All significant intercompany accounts and transactions have been eliminated in consolidation.

i.  Recent Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-11 related to disclosures about offsetting assets and liabilities (“ASU 2011-11”). The amendments in this ASU 2011-11 require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The ASU 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The guidance requires retrospective application for all comparative periods presented. Management is currently evaluating the impact ASU 2011-11 will have on the financial statement disclosures.

3.  ALLOCATION OF LIMITED PARTNERS’ CAPITAL

Net profits or net losses of the Feeder Funds 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 Limited Partners’ capital of the Feeder Funds, including any net change in unrealized appreciation or depreciation of investments and realized income and gains or losses and expenses during an Allocation Period, adjusted to exclude any items to be allocated among the capital accounts of the Limited Partners in accordance with the Limited Partners’ respective investment percentages.

Allocation Periods generally begin on the first calendar day of each month and end at the close of business on the last day of each month.

The Feeder Funds maintain a separate capital account (“Capital Account”) on their books for each Limited Partner. Each Limited Partner’s Capital Account will have an opening balance equal to the Limited Partner’s initial purchase of the Feeder Fund (i.e., the amount of the investment less any applicable sales load of up to 2 percent of the purchased amount), and thereafter, will be (i) increased by the amount of any additional purchases by such Limited Partner; (ii) decreased for any payments upon repurchase or sale 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 Feeder Fund.

SEVEN

HATTERAS FUNDS

(each a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited) (continued)

3.  ALLOCATION OF LIMITED PARTNERS’ CAPITAL (CONTINUED)

	Hatteras Core Alternatives Fund, L.P.			Hatteras Core Alternatives TEI Fund, L.P.			Hatteras Core Alternatives Institutional Fund, L.P.			Hatteras Core Alternatives TEI Institutional Fund, L.P.
Beginning Units, April 1, 2011		2,680,763.77			3,513,215.38			2,517,400.45			6,965,196.16
Purchases		410,349.15			494,338.34			566,263.72			595,845.64
Sales		(468,946.82	)		(514,360.89	)		(514,144.55	)		(775,804.70	)
Beginning Units, April 1, 2012		2,622,166.10			3,493,192.83			2,569,519.62			6,785,237.10
Purchases		68,435.32			79,348.42			78,891.43			247,457.00
Sales		(385,389.97	)		(526,564.56	)		(346,943.62	)		(879,770.97	)
Ending units, September 30, 2012		2,305,211.45			3,045,976.69			2,301,467.43			6,152,923.13

4.  RELATED PARTY TRANSACTIONS AND OTHER

In consideration for fund services, Hatteras Core Alternatives Fund, L.P., Hatteras Core Alternatives TEI Fund, L.P., Hatteras Core Alternatives Institutional Fund, L.P. and Hatteras Core Alternatives TEI Institutional Fund, L.P. will pay the Investment Manager (in such capacity, the “Servicing Agent”) a fund servicing fee at the annual rate of 0.85%, 0.85%, 0.10% and 0.10%, respectively, of the month-end partner’s capital of the applicable Feeder Fund. The respective Feeder Fund servicing fees payable to the Servicing Agent will be borne by all Limited Partners of the respective Feeder Fund on a pro-rata basis before giving effect to any repurchase of interests in the Master Fund effective as of that date, and will decrease the net profits or increase the net losses of the Master Fund that are credited to its interest holders, including each Feeder Fund.

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 Servicing Agent did not waive any of the servicing fees for the six months ended September 30, 2012. The Investment Manager has contractually agreed to reimburse certain expenses through July 1, 2013, so that the total annual expenses (excluding taxes, interest, brokerage commissions, other transaction-related expenses, any extraordinary expenses of the Feeder Funds, any acquired fund fees and expenses, as well as any performance allocation payable by the Feeder Funds or the Master Fund) for this period will not exceed 2.35% for the Hatteras Core Alternatives Fund, L.P. and Hatteras Core Alternatives TEI Fund, L.P. and 1.75% for the Hatteras Core Alternatives Institutional Fund, L.P. and Hatteras Core Alternatives TEI Institutional Fund, L.P. (the “Expense Limitation”). The agreement automatically renews for a one-year term after the initial period until terminated by the Investment Manager or the applicable Feeder Fund. The Feeder Funds will carry forward, for a period not to exceed (3) three years from the date on which a reimbursement is made by the Investment Manager, any expenses in excess of the Expense Limitation and repay the Investment Manager such amounts, provided the Feeder Fund is able to effect such reimbursement and remain in compliance with the Expense Limitation disclosed in the applicable Feeder Fund’s then effective prospectus. There were no reimbursements from the Investment Manager, nor previous reimbursements repaid to the Investment Manager, nor expenses available for reimbursement as of and for the six months ended September 30, 2012.

The performance allocation is calculated at the Master Fund level, and allocated to the Feeder Funds based on each Feeder Fund’s ownership interest in the Master Fund. The General Partner is allocated a performance allocation payable annually equal to 10% of the amount by which net new profits of the limited partner interests of the Master Fund exceed the non-cumulative “hurdle amount”, which is calculated as of the last day of the preceding calendar year of the Master Fund at a rate equal to the yield-to-maturity of the 90 day U.S. Treasury Bill as reported by the Wall Street Journal for the last business day of the preceding calendar year (the “Performance Allocation”). The Performance Allocation is made on a “peak to peak,” or “high watermark” basis, which means that the Performance Allocation is made only with respect to new net profits. If the Master Fund has a net loss in any period followed by a net profit, no Performance Allocation will be made with respect to such subsequent appreciation until such net loss has been recovered. For the three months ended March 31, 2011 the General Partner of the Master Fund accrued a Performance Allocation which was allocated to the Hatteras Core

EIGHT

HATTERAS FUNDS

(each a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited) (continued)

4.  RELATED PARTY TRANSACTIONS AND OTHER (CONTINUED)

Alternatives TEI Institutional Fund, L.P. in the amount of $323,877. During the year ended March 31, 2012 the accrued Performance Allocation for the three months ended March 31, 2011 of $323,877 was reversed, which is disclosed on the Hatteras Core Alternatives TEI Institutional Fund, L.P. Statement of Operations. There is no accrued performance allocation for the six months ended September 30, 2012.

Hatteras Capital Distributors LLC (“HCD”), an affiliate of the Investment Manager, serves as the Feeder Funds’ distributor. HCD receives a distribution fee from the Investment Manager equal to 0.10% on an annualized basis of the net assets of the Master Fund as of the last day of the month (before giving effect to any repurchase of interests in the Master Fund).

UMB Bank, N.A. serves as custodian of the Feeder Funds’ cash balances and provides custodial services for the Feeder Funds. J.D. Clark & Company, a division of UMB Fund Services, Inc., serves as administrator and accounting agent to the Feeder Funds and provides certain accounting, record keeping and investor related services. The Feeder Funds pay a fee to the custodian and administrator based upon average Limited Partners’ capital, subject to certain minimums.

At September 30, 2012, Limited Partners, who are affiliated with the Investment Manager or the General Partner, owned $530,622 (0.23% of Partners’ Capital) of Hatteras Core Alternatives Fund, L.P., $1,535,973 (0.67% of Partners’ Capital) of Hatteras Core Alternatives Institutional Fund, L.P., and $513,939 (0.08% of Partners’ Capital) of Hatteras Core Alternatives TEI Institutional Fund, L.P.

5.  RISK FACTORS

An investment in the Feeder Funds 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 Adviser Fund holdings for extended periods, which may be several years. Limited Partners should refer to the Master Fund’s financial statements included in this report along with the applicable Feeder Fund’s prospectus, as supplemented and corresponding statement of additional information for a more complete list of risk factors. No guarantee or representation is made that the Feeder Funds’ investment objective will be met.

6.  REPURCHASE OF PARTNERS’ UNITS

The Board may, from time to time and in its sole discretion, cause the Feeder Funds to repurchase Units from Limited Partners pursuant to written tenders by Limited Partners at such times and on such terms and conditions as established by the Board. In determining whether the Feeder Funds should offer to repurchase interests, the Board will consider, among other things, the recommendation of the Investment Manager. The Feeder Funds generally expect to offer to repurchase Units from Limited Partners on a quarterly basis as of March 31, June 30, September 30 and December 31 of each year. In no event will more than 20% of the Units of a Feeder Fund be repurchased per quarter. The Feeder Funds do not intend to distribute to the Limited Partners any of the Feeder Funds’ income, but generally expect 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. Units repurchased prior to the Limited Partner’s one year anniversary of its initial investment may be subject to a maximum 5% repurchase fee.

7.  INDEMNIFICATION

In the normal course of business, the Feeder Funds enter into contracts that provide general indemnifications. The Feeder Funds’ maximum exposure under these agreements is dependent on future claims that may be made against the Feeder Funds, and therefore cannot be established; however, based on experience, the risk of loss from such claims is considered remote.

NINE

HATTERAS FUNDS

(each a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited) (continued)

8.  FINANCIAL HIGHLIGHTS

The financial highlights are intended to help an investor understand the Feeder Funds’ financial performance. The total returns in the table represent the rate that a Limited Partner would be expected to have earned or lost on an investment in each Feeder Fund.

The ratios and total return amounts are calculated based on each Limited Partner group taken as a whole. The General Partner’s interest is excluded from the calculations. An individual Limited Partner’s ratios or returns may vary from the table below based on the timing of purchases and sales and performance allocation.

The ratios are calculated by dividing total dollars of income or expenses as applicable by the average of total monthly Limited Partners’ capital. The ratios include the Feeder Funds’ proportionate share of the Master Fund’s income and expenses.

Total return amounts are calculated based on the change in unit value during each accounting period.

The portfolio turnover rate is calculated based on the Master Fund’s investment activity, as turnover occurs at the Master Fund level and the Feeder Funds are typically invested 100% in the Master Fund.

	Hatteras Core Alternatives Fund, L.P.			Hatteras Core Alternatives TEI Fund, L.P.			Hatteras Core Alternatives Institutional Fund, L.P.			Hatteras Core Alternatives TEI Institutional Fund, L.P.
Unit Value, July 1, 2008*	$	100.00		$	100.00		$	100.00		$	100.00
Income from investment operations:
Net investment loss		(1.19	)		(1.22	)		(0.79	)		(0.75	)
Net realized and unrealized loss on investment transactions		(22.52	)		(22.51	)		(22.50	)		(22.59	)
Total from investment operations		(23.71	)		(23.73	)		(23.29	)		(23.34	)
Unit Value, April 1, 2009		76.29			76.27			76.71			76.66
Income from investment operations:
Net investment loss		(1.92	)		(1.56	)		(0.86	)		(0.61	)
Net realized and unrealized gain on investment transactions		13.37			12.98			13.06			12.81
Total from investment operations		11.45			11.42			12.20			12.20
Unit Value, April 1, 2010		87.74			87.69			88.91			88.86
Income from investment operations:
Net investment income (loss)		(0.44	)		(0.48	)		(0.10	)		0.30
Net realized and unrealized gain on investment transactions		5.54			5.51			6.00			5.53
Total from investment operations		5.10			5.03			5.90			5.83
Unit Value, April 1, 2011		92.84			92.72			94.81			94.69
Income from investment operations:
Net investment income (loss)		(0.41	)		(0.40	)		0.52			0.40
Net realized and unrealized loss on investment transactions		(2.86	)		(2.95	)		(3.14	)		(3.05	)
Total from investment operations		(3.27	)		(3.35	)		(2.62	)		(2.65	)
Unit Value, April 1, 2012		89.57			89.37			92.19			92.04
Income from investment operations:
Net investment income (loss)		(1.12	)		(1.21	)		(0.05	)		0.03
Net realized and unrealized loss on investment transactions		2.35			2.40			1.68			1.59
Total from investment operations		1.23			1.19			1.63			1.62
Unit Value, September 30, 2012	$	90.80		$	90.56		$	93.82		$	93.66

* Unit value per unit information presented as of unitization on July 1, 2008.

TEN

HATTERAS FUNDS

(each a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited) (continued)

8.  FINANCIAL HIGHLIGHTS (CONTINUED)

	For the Period Ended September 30, 2012			For the Year Ended March 31,
Hatteras Core Alternatives Fund, L.P.	(Unaudited)			2012			2011			2010			2009			20081
Total return before Performance Allocation2		1.37	%4		(3.52	)%		5.81	%		15.01	%		(21.26	)%		2.91	%
Performance Allocation		0.00	%		0.00	%		0.00	%		0.00	%		(0.02	)%		(0.37	)%
Total return after Performance Allocation		1.37	%4		(3.52	)%		5.81	%		15.01	%		(21.28	)%		2.54	%
Net investment loss		(0.47	)%5		(0.29	)%		(0.60	)%		(1.90	)%		(1.92	)%		(1.66	)%
Operating expenses, excluding reimbursement from Investment Manager and Performance Allocation3,6		2.31	%5		2.33	%		2.32	%		2.35	%		2.30	%		2.30	%
Performance Allocation		0.00	%		0.00	%		0.00	%		0.00	%		0.02	%		0.26	%
Net expenses		2.31	%5		2.33	%		2.32	%		2.35	%		2.32	%		2.56	%
Limited Partners’ capital, end of year (000’s)	$	209,325		$	234,881		$	248,882		$	231,314		$	215,165		$	237,029
Portfolio Turnover Rate (Master Fund)		10.77	%4		32.68	%		25.12	%		23.12	%		22.57	%		9.54	%

¹  2008 Ratio includes repayment to Investment Manager for prior reimbursements in the amount of 0.09%.

²  Prior to 2009, total return amounts are calculated by geometrically linking returns based on the change in value during each monthly accounting period.

³  Ratios calculated based on total expenses and average partner’s capital. If the expense ratio calculation had been performed monthly, as is done for expense cap calculations, the ratios would have been different.

⁴ Not Annualized.

⁵ Annualized.

⁶ For the period ended September 30, 2012, the annualized ratio of operating expenses includes other operating expenses 2.23% and credit facility fees and interest expense 0.08%. For the years ended March 31, 2008-2012, the ratios of other operating expenses to average partner’s capital were 2.25%, 2.27%, 2.29%, 2.22%, and 2.25%, respectively, and the ratios of credit facility fees and interest expense to average partner’s capital allocated from the Master Fund were 0.05%, 0.03%, 0.06%, 0.10%, and 0.08%, respectively.

ELEVEN

HATTERAS FUNDS

(each a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited) (continued)

8.  FINANCIAL HIGHLIGHTS (CONTINUED)

	For the Period Ended September 30, 2012			For the Year Ended March 31,
Hatteras Core Alternatives TEI Fund, L.P.	(Unaudited)			2012			2011			2010			2009			20081
Total return before Performance Allocation2		1.33	%4		(3.62	)%		5.74	%		14.97	%		(21.35	)%		2.39	%
Performance Allocation		0.00	%		0.00	%		0.00	%		0.00	%		(0.01	)%		(0.26	)%
Total return after Performance Allocation		1.33	%4		(3.62	)%		5.74	%		14.97	%		(21.36	)%		2.13	%
Net investment loss		(0.54	)%5		(0.39	)%		(0.68	)%		(1.94	)%		(1.99	)%		(2.14	)%
Operating expenses, excluding reimbursement from Investment Manager and Performance Allocation3,6		2.36	%5		2.43	%		2.39	%		2.39	%		2.45	%		2.77	%
Performance Allocation		0.00	%		0.00	%		0.00	%		0.00	%		0.01	%		0.22	%
Net expenses		2.36	%5		2.43	%		2.39	%		2.39	%		2.46	%		2.99	%
Limited Partners’ capital, end of year (000’s)	$	275,859		$	312,204		$	325,745		$	300,576		$	257,504		$	304,765
Portfolio Turnover Rate (Master Fund)		10.77	%4		32.68	%		25.12	%		23.12	%		22.57	%		9.54	%

¹  2008 Ratio includes repayment to Investment Manager for prior reimbursements in the amount of 0.06%.

²  Prior to 2009, total return amounts are calculated by geometrically linking returns based on the change in value during each monthly accounting period.

³ Ratios calculated based on total expenses and average partner’s capital. If the expense ratio calculation had been performed monthly, as is done for expense cap calculations, the ratios would have been different.

⁴ Not Annualized.

⁵ Annualized.

⁶ For the period ended September 30, 2012, the annualized ratio of operating expenses includes other operating expenses 2.19%, credit facility fees and interest expense 0.08%, and withholding tax 0.09%. For the years ended March 31, 2008-2012, the ratios of other operating expenses to average partner’s capital were 2.31%, 2.22%, 2.27%, 2.20%, and 2.23%, respectively; the ratios of allocated credit facility fees and interest expense to average partner’s capital were 0.05%, 0.03%, 0.06%, 0.10%, and 0.08%, respectively; and the ratios of withholding tax to average partner’s capital were 0.41%, 0.20%, 0.06%, 0.09%, and 0.12%, respectively.

TWELVE

HATTERAS FUNDS

(each a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited) (continued)

8.  FINANCIAL HIGHLIGHTS (CONTINUED)

	For the Period Ended September 30, 2012			For the Year Ended March 31,
Hatteras Core Alternatives Institutional Fund, L.P.	(Unaudited)			2012			2011			2010			2009			20081
Total return before Performance Allocation2		1.77	%4		(2.77	)%		6.64	%		15.90	%		(20.69	)%		3.37	%
Performance Allocation		0.00	%		0.00	%		0.00	%		0.00	%		(0.03	)%		(0.15	)%
Total return after amortizing organizational expenses and Performance Allocation		1.77	%4		(2.77	)%		6.64	%		15.90	%		(20.72	)%		3.22	%
Net investment income (loss)		0.30	%5		0.50	%		0.14	%		(1.12	)%		(1.23	)%		(1.11	)%
Operating expenses, excluding reimbursement from Investment Manager and Performance Allocation3,6		1.53	%5		1.55	%		1.53	%		1.57	%		1.59	%		1.77	%
Performance Allocation		0.00	%		0.00	%		0.00	%		0.00	%		0.03	%		0.18	%
Total expenses and Performance Allocation before reimbursement from Investment Manager		1.53	%5		1.55	%		1.53	%		1.57	%		1.62	%		1.95	%
Reimbursement from Investment Manager		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		(0.02	)%
Net expenses		1.53	%5		1.55	%		1.53	%		1.57	%		1.62	%		1.93	%
Limited Partners’ capital, end of year (000’s)	$	215,919		$	236,892		$	238,675		$	249,153		$	202,898		$	149,882
Portfolio Turnover Rate (Master Fund)		10.77	%4		32.68	%		25.12	%		23.12	%		22.57	%		9.54	%

¹  2008 Ratio includes repayment to Investment Manager for prior reimbursements in the amount of 0.09%.

²  Prior to 2009, total return amounts are calculated by geometrically linking returns based on the change in value during each monthly accounting period.

³ Ratios calculated based on total expenses and average partner’s capital. If the expense ratio calculation had been performed monthly, as is done for expense cap calculations, the ratios would have been different.

⁴ Not Annualized.

⁵ Annualized.

⁶ For the period ended September 30, 2012, the annualized ratio of operating expenses includes other operating expenses 1.45% and credit facility fees and interest expense 0.08%. For the years ended March 31, 2008-2012, the ratios of other operating expenses to average partner’s capital were 1.72%, 1.56%, 1.51%, 1.43%, and 1.47%, respectively, and the ratios of credit facility fees and interest expense to average partner’s capital allocated from the Master Fund were 0.05%, 0.03%, 0.06%, 0.10%, and 0.08%, respectively.

THIRTEEN

HATTERAS FUNDS

(each a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited) (continued)

8.  FINANCIAL HIGHLIGHTS (CONTINUED)

	For the Period Ended September 30, 2012			For the Year Ended March 31,
Hatteras Core Alternatives TEI Institutional Fund, L.P.	(Unaudited)			2012			2011			2010			2009			20081
Total return before Performance Allocation2		1.76	%5		(2.85	)%		6.61	%		15.91	%		(20.79	)%		3.09	%
Performance Allocation		0.00	%		0.05	%4		(0.05	)%		0.00	%		(0.05	)%		(0.09	)%
Total return after amortizing organizational expenses and Performance Allocation		1.76	%5		(2.80	)%		6.56	%		15.91	%		(20.84	)%		3.00	%
Net investment income (loss)		0.29	%6		0.46	%		0.10	%		(1.11	)%		(1.35	)%		(1.44	)%
Operating expenses, excluding reimbursement from Investment Manager and Performance Allocation3,7		1.54	%6		1.62	%		1.56	%		1.55	%		1.72	%		2.08	%
Performance Allocation		0.00	%		(0.05	)%4		0.05	%		0.00	%		0.05	%		0.14	%
Total expenses and Performance Allocation before reimbursement from Investment Manager		1.54	%6		1.57	%		1.61	%		1.55	%		1.77	%		2.22	%
Reimbursement from Investment Manager		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		(0.03	)%
Net expenses		1.54	%6		1.57	%		1.61	%		1.55	%		1.77	%		2.19	%
Limited Partners’ capital, end of year (000’s)	$	576,284		$	624,547		$	659,549		$	561,581		$	384,901		$	209,737
Portfolio Turnover Rate (Master Fund)		10.77	%5		32.68	%		25.12	%		23.12	%		22.57	%		9.54	%

¹  2008 Ratio includes repayment to Investment Manager for prior reimbursements in the amount of 0.07%.

²  Prior to 2009, total return amounts are calculated by geometrically linking returns based on the change in value during each monthly accounting period.

³ Ratios calculated based on total expenses and average partner’s capital. If the expense ratio calculation had been performed monthly, as is done for expense cap calculations, the ratios would have been different.

⁴ Reverse accrued Performance Allocation from January 1, 2011 to March 31, 2011.

⁵ Not Annualized.

⁶ Annualized.

⁷ For the period ended September 30, 2012, the annualized ratio of operating expenses includes other operating expenses 1.38%, credit facility fees and interest expense 0.08%, and withholding tax 0.08%. For the years ended March 31, 2008-2012, the ratios of other operating expenses to average partner’s capital were 1.67%, 1.50%, 1.44%, 1.38%, and 1.42%, respectively; the ratios of allocated credit facility fees and interest expense to average partner’s capital were 0.05%, 0.03%, 0.06%, 0.10%, and 0.08%, respectively; and the ratios of withholding tax to average partner’s capital were 0.36%, 0.19%, 0.05%, 0.08%, and 0.12%, respectively.

FOURTEEN

HATTERAS FUNDS

(each a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited) (concluded)

9.  SUBSEQUENT EVENTS

Management has evaluated the events and transactions through the date the financial statements were issued and determined there were no subsequent events that required adjustment to our disclosure in the financial statements except the following: effective October 1, 2012 and November 1, 2012, there were additional purchases into the Feeder Funds of the following amounts:

October 1, 2012
Hatteras Core Alternatives Fund, L.P.	$	200,000
Hatteras Core Alternatives TEI Fund, L.P.	$	1,368,180
Hatteras Core Alternatives Institutional Fund, L.P.	$	2,838,738
Hatteras Core Alternatives TEI Institutional Fund, L.P.	$	1,216,858
November 1, 2012
Hatteras Core Alternatives Fund, L.P.	$	600,000
Hatteras Core Alternatives TEI Fund, L.P.	$	833,260
Hatteras Core Alternatives Institutional Fund, L.P.	$	580,000
Hatteras Core Alternatives TEI Institutional Fund, L.P.	$	1,557,250

In addition, since October 1, 2012, the Boards accepted the following tender requests which will be effective as of December 31, 2012:

Hatteras Core Alternatives Fund, L.P.	$	22,263,647
Hatteras Core Alternatives TEI Fund, L.P.	$	27,071,576
Hatteras Core Alternatives Institutional Fund, L.P.	$	19,610,497
Hatteras Core Alternatives TEI Institutional Fund, L.P.	$	35,957,409

*************

FIFTEEN

HATTERAS FUNDS

(each a Delaware Limited Partnership)

BOARD OF DIRECTORS

(Unaudited)

The identity of the Board members (each a “Director”) and brief biographical information, as of September 30, 2012, is set forth below. The business address of each Director is care of Hatteras Funds, 8540 Colonnade Center Drive, Suite 401, Raleigh, NC 27615. The term of office of each Director is from the time of such Director’s election and qualification until his or her successor shall have been elected and shall have qualified, or until he or she is removed, resigns or is subject to various disabling events such as death or incapacity. A Director may resign upon 90 days’ prior written notice to the Board and may be removed either by a vote of a majority of the Board not subject to the removal vote or of Limited Partners holding not less than two-thirds of the total number of votes eligible to be cast by all of the Limited Partners. The Feeder Funds’ statements of additional information include information about the Directors and may be obtained without charge by calling 1-888-363-2324.

Name & Date of Birth	Position(s) Held with the Feeder Funds	Length of Time Served	Principal Occupation(s) During Past 5 Years and Other Directorships Held by Director	Number of Portfolios in Fund Complex Overseen by Director
INTERESTED DIRECTOR
David B. Perkins* July 18, 1962	President and Chairman of the Board of Directors of each Fund in the Fund Complex	Since Inception	Mr. Perkins has been Chairman of the Board of Directors and President of the Fund since inception. Mr. Perkins is the Chief Executive Officer of Hatteras and its affiliated entities. He founded the firm in September 2003. Prior to that, he was the co-founder and Managing Partner of CapFinancial Partners, LLC.	19
INDEPENDENT DIRECTORS
H. Alexander Holmes May 4, 1942	Director; Audit Committee Member of each Fund in the Fund Complex	Since Inception	Mr. Holmes founded Holmes Advisory Services, LLC, a financial consultation firm, in 1993.	19
Steve E. Moss, CPA February 18, 1953	Director; Audit Committee Member of each Fund in the Fund Complex	Since Inception	Mr. Moss is a principal of Holden, Moss, Knott, Clark & Copley, P.A. and has been a member manager of HMKCT Properties, LLC since January 1996.	19

* Mr. Perkins is deemed to be an “interested” Director of the Feeder Funds because of his affiliations with the Investment Manager.

SIXTEEN

HATTERAS FUNDS

(each a Delaware Limited Partnership)

BOARD OF DIRECTORS

(Unaudited) (concluded)

Name & Date of Birth	Position(s) Held with the Feeder Funds	Length of Time Served	Principal Occupation(s) During Past 5 Years and Other Directorships Held by Director	Number of Portfolios in Fund Complex Overseen by Director
Gregory S. Sellers May 5, 1959	Director; Audit Committee Member of each Fund in the Fund Complex	Since Inception	Mr. Sellers has been the Chief Financial Officer of Imagemark Business Services, Inc., a strategic communications provider of marketing and print communications solutions, since June 2009. From 2003 to June 2009, Mr. Sellers was the Chief Financial Officer and a director of Kings Plush, Inc., a fabric manufacturer.	19
Daniel K. Wilson June 22, 1948	Director; Audit Committee Member of each Fund in the Fund Complex	Since June 2009	Mr. Wilson was Executive Vice President and Chief Financial Officer of Parksdale Mills, Inc. from 2004 - 2008. Mr. Wilson currently is in private practice as a Certified Public Accountant.	19

SEVENTEEN

HATTERAS FUNDS

(each a Delaware Limited Partnership)

FUND MANAGEMENT

(Unaudited)

Set forth below is the name, date of birth, position with each Feeder Fund, length of term of office, and the principal occupation for the last five years, as of September 30, 2012, of each of the persons currently serving as Executive Officers of the Feeder Funds. The business address of each officer is care of Hatteras Funds, 8540 Colonnade Center Drive, Suite 401, Raleigh, NC 27615.

Name & Date of Birth	Position(s) Held with the Feeder Funds	Length of Time Served	Principal Occupation(s) During Past 5 Years and Other Directorships Held by Officer	Number of Portfolios in Fund Complex Overseen by Officer
OFFICERS
J. Michael Fields, July 14, 1973	Secretary of each Fund in the Fund Complex	Since 2008	Prior to becoming Secretary of each of the Funds in the Fund Complex, Mr. Fields was the Treasurer of each of the Funds in the Fund Complex. Mr. Fields is Chief Operating Officer of Hatteras and its affiliates and has been employed by the Hatteras firm since its inception in September 2003.	N/A
Andrew P. Chica September 7, 1975	Chief Compliance Officer of each Fund in the Fund Complex	Since 2008	Mr. Chica joined Hatteras in November 2007 and became Chief Compliance Officer of each of the Funds in the Fund Complex and the Investment Manager as of January 2008. Prior to joining Hatteras, Mr. Chica was the Compliance Manager for UMB Fund Services, Inc. from December 2004 to November 2007.	N/A

EIGHTEEN

HATTERAS FUNDS

(each a Delaware Limited Partnership)

FUND MANAGEMENT

(Unaudited) (concluded)

Name & Date of Birth	Position(s) Held with the Feeder Funds	Length of Time Served	Principal Occupation(s) During Past 5 Years and Other Directorships Held by Officer	Number of Portfolios in Fund Complex Overseen by Officer
Robert Lance Baker September 17, 1971	Treasurer of each Fund in the Fund Complex	Since 2008	Mr. Baker joined Hatteras in March 2008 and became Treasurer of each of the Funds in the Fund Complex in December 2008. Mr. Baker serves as the Chief Financial Officer of the Investment Manager and its affiliates. Prior to joining Hatteras, Mr. Baker worked for Smith Breeden Associates, an investment advisor located in Durham, NC. At Smith Breeden, Mr. Baker served as Vice President of Portfolio Accounting, Performance Reporting, and Fund Administration.	N/A

NINETEEN

HATTERAS FUNDS

(each a Delaware Limited Partnership)

OTHER INFORMATION

(Unaudited)

PROXY VOTING

For free information regarding how the Master Fund voted proxies during the period ended June 30, 2012 or to obtain a free copy of the Master Fund’s complete proxy voting policies and procedures, call 1-800-504-9070 or visit the SEC’s website at http://www.sec.gov

AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES

The Feeder Funds file their complete schedule of portfolio holdings, which includes securities held by the Master Fund, with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Feeder Funds’ 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.

TWENTY

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

Financial Statements

As of and for the six months ended September 30, 2012

(Unaudited)

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

As of and for the six month ended September 30, 2012

(Unaudited)

Table of Contents

Schedule of Investments	1-6
Statement of Assets, Liabilities and Partners’ Capital	7
Statement of Operations	8
Statements of Changes in Partners’ Capital	9
Statement of Cash Flows	10
Notes to Financial Statements	11-21
Board of Directors	22
Fund Management	24
Other Information	26-27

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

SCHEDULE OF INVESTMENTS

September 30, 2012 (Unaudited)

INVESTMENT OBJECTIVE AS A PERCENTAGE OF TOTAL PARTNERS’ CAPITAL

Percentages are as follows:

Investments in Adviser Funds and Mutual Funds — (104.72%)	Shares		Cost		Fair Value
Absolute Return — (14.85%)
Allblue, L.P.a,b			$	20,000,000	$	21,109,238
Broad Peak Fund, L.P.a,b,d				290,930		167,568
Citadel Wellington, LLC (Class A)a,b,c				26,550,378		36,922,198
Courage Special Situations Fund, L.P.a,b				17,327,675		17,649,800
D.E. Shaw Composite Fund, LLCa,b				13,600,721		18,043,669
Dorsal Capital Partners, L.P.a,b				20,000,000		20,627,581
Eton Park Fund, L.P.a,b				12,880,050		13,520,611
JANA Partners Qualified, L.P.a,b,d				85,559		58,258
Marathon Fund, L.P.a,b,d				4,247,988		1,576,350
Millennium USA, L.P.a,b				25,000,000		25,385,030
Montrica Global Opportunities Fund, L.P.a,b,d				814,276		578,076
OZ Asia, Domestic Partners, L.P.a,b,d				961,878		1,000,291
Perry Partners, L.P.a,b,d				735,694		917,619
Pipe Equity Partnersa,b,d				12,003,541		5,425,954
Pipe Select Fund, LLCa,b,d				6,047,623		6,967,237
Standard Investment Research Hedge Equity Fund, L.P.a,b,c				18,040,323		21,336,491
Stark Investments, L.P.a, b, d				1,282,306		1,490,053
Stark Select Asset Fund, LLCa,b,d				460,771		467,877
Total Absolute Return				180,329,713		193,243,901
Enhanced Fixed Income — (15.99%)
Investment in Adviser Funds
Alternative Liquidity Solutions Limiteda		3,500,000		2,476,776		2,440,316
BDCM Partners I, L.P.a,b,d				23,639,999		26,829,294
Bell Point Credit Opportunities Fund, L.P.a,b				17,990,243		16,711,289
Contrarian Capital Fund I, L.P.a,b				7,219,629		11,020,006
CPIM Structured Credit Fund 1000, L.P.a,b,d				212,414		37,094
Drawbridge Special Opportunities Fund, L.P.a,b,d				2,272,600		3,075,447
See notes to financial statements.

ONE

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

SCHEDULE OF INVESTMENTS

September 30, 2012 (Unaudited) (continued)

Enhanced Fixed Income — (15.99%) (continued)	Shares		Cost		Fair Value
Fortress VRF Advisors I, LLCa,b,d			$	8,092,619	$	979,700
Halcyon European Structured Opportunities Fund, L.P.a,b,d				252,358		134,123
Harbinger Capital Partners Fund I, L.P.a,b,d				4,753,912		1,443,738
Harbinger Class L Holdings (U.S.), LLCa,b,d				92,617		74,741
Harbinger Class LS Holdings I (U.S.) Trust, Series 1a,b,d		7,035		6,578,505		1,268,135
Harbinger Class PE Holdings (U.S.) Trust, Series 1a,b,d		3		980,839		645,220
Harbinger Credit Distressed Blue Line Fund, L.P.a,b,c,d				12,326,927		11,030,601
Indaba Capital Partner, L.P.a,b				10,000,000		11,636,788
Marathon Special Opportunities Fund, L.P.a,b,d				1,806,002		1,759,716
Morgan Rio Capital Fund, L.P.a,b				7,000,000		9,685,098
Prospect Harbor Credit Partners, L.P.a,b,d				1,236,045		1,556,159
Providence MBS Fund, L.P.a,b				25,000,000		35,897,606
Senator Global Opportunity Fund, L.P.a,b,c				13,817,882		16,805,652
Strategic Value Restructuring Fund, L.P.a,b				5,283,134		5,454,447
TCW Special Mortgage Credits Fund II, L.P.a,b				2,081,304		15,618,792
Waterstone Market Neutral Fund, L.P.a,b				5,787,049		10,648,632
Total Investment in Adviser Funds				158,900,854		184,752,594
Investment in Mutual Funds
DoubleLine Total Return Bond Fund, Class I		2,042,707		19,234,664		23,286,863
Total Investment in Mutual Funds				19,234,664		23,286,863
Total Enhanced Fixed Income				178,135,518		208,039,457
Opportunistic Equity — (35.61%)
Artis Partners 2X (Institutional), L.P.a,b,c,d				2,584,163		1,390,725
Ashoka Fund, L.P.a,b				29,000,000		29,865,388
Balyasny Atlas Leveraged Fund, L.P.a,b				19,457,378		19,281,844
Bay Pond Partners, L.P.a,b				25,000,000		27,864,809
Biomedical Value Fund, L.P.a,b,d				136,858		164,437
Broadfin Healthcare Fund, L.P.a,b				22,000,000		25,437,193
Camcap Resources, L.P.a,b,d				491,057		502,358
CCM SPV II, LLCa,b,d				6,446		1,675
Crosslink Crossover Fund IV, L.P.a,b				2,128,241		4,575,929
Crosslink Crossover Fund V, L.P.a,b				931,110		3,635,157
Crosslink Crossover Fund VI, L.P.a,b				8,515,359		8,561,811
Empire Capital Partners Enhanced, L.P.a,b				25,000,000		24,554,633
Falcon Edge Global, L.P.a,b				25,000,000		25,098,880
Gavea Investment Fund II, L.P.a,b				95,668		1,207,502
Gavea Investment Fund III, L.P.a,b				14,208,000		24,181,497
Glade Brook Global Domestic Fund, L.P.a,b				20,000,000		21,337,752
Gracie Capital, L.P.a,b,d				194,952		111,106
HealthCor, L.P.a,b,c				4,283,212		6,530,020
HFR HE Bristol Master Trusta,b				19,000,000		14,785,353
Hound Partners, L.P.a,b				24,000,000		25,182,213
Integral Capital Partners VII, L.P.a,b				914,048		1,232,479
Integral Capital Partners VIII, L.P.a,b				2,490,153		1,912,753
J.C. Flowers III Co-Invest BTG, L.P.a,b				632,041		797,116
See notes to financial statements.

TWO

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

SCHEDULE OF INVESTMENTS

September 30, 2012 (Unaudited) (continued)

Opportunistic Equity — (35.61%) (continued)	Cost		Fair Value
Samlyn Equity, L.P.a,b,c,d	$	1,412,769	$	1,195,651
Sansar Capital Master Fund, L.P. Subsidiariesa,b,d		251,625		555,761
Security Capital-Preferred Growth, LLCb		1,028,425		412,332
Standard Investment Research Energy Opportunities Fund, L.P.a,b		20,000,000		19,967,254
The Raptor Private Holdings, L.P.a,b,d		679,899		599,679
The Russian Prosperity Funda,b		10,000,000		11,063,506
TT Mid-Cap Europe Long/Short Fund Limiteda,b,c		22,500,000		27,563,223
Tybourne Equity (US) Funda,b		20,000,000		20,711,079
Valiant Capital Partners, L.P.b,c		20,315,674		38,467,003
Value Partners Hedge Fund, LLCa,b		28,000,000		24,137,823
Viking Global Equities, L.P.a,b,c		17,166,317		22,787,300
Visium Balanced Fund, L.P.a,b,c		18,969,942		24,428,087
WCP Real Estate Strategies Fund, L.P.a,b,d		5,368,892		3,246,945
Total Opportunistic Equity		411,762,229		463,348,273
Private Investments — (31.07%)
ABRY Advanced Securities Fund, L.P.b		3,694,230		6,083,366
ABRY Partners VI, L.P.b		5,489,578		7,712,409
ABRY Partners VII, L.P.a,b		982,380		1,014,120
Accel-KKR Capital Partners III, L.P.b		4,885,474		4,198,282
Arclight Energy Partners Fund III, L.P.a,b		2,776,540		2,500,120
Arclight Energy Partners Fund IV, L.P.b		2,252,293		1,386,542
Arclight Energy Partners Fund V, L.P.a,b		1,320,202		1,134,150
Arminius Moat, L.P.a,b		5,615,015		4,565,300
Ascendent Capital Partners I, L.P.a,b		91,061		0
BDCM Opportunity Fund II, L.P.b		4,245,698		5,138,219
Benson Elliot Real Estate Partners II, L.P.a,b		5,121,388		2,358,198
Cadent Energy Partners II, L.P.b		6,178,318		6,250,000
Canaan Natural Gas Fund X, L.P.b		4,523,750		2,383,040
CDH Venture Partners II, L.P.b		3,803,555		3,392,772
CDH Venture Partners IV, L.P.b		5,286,200		4,962,843
China Special Opportunities Fund III, L.P.a,b		1,828,036		1,499,781
Claremont Creek Ventures, L.P.a,b		1,685,416		1,044,740
Claremont Creek Ventures II, L.P.a,b		2,030,625		1,931,826
Colony Investors VII, L.P.a,b		3,045,480		775,300
Colony Investors VIII, L.P.a,b		8,211,344		2,727,700
CX Partners Fund Limitedb		3,193,695		2,263,690
Dace Ventures I, L.P.b		2,140,924		1,655,261
Darwin Private Equity I, L.P.b		4,657,701		3,255,367
EMG Investments, LLCb		1,476,134		2,518,982
EnerVest Energy Institutional Fund X-A, L.P.b		2,178,934		2,270,173
EnerVest Energy Institutional Fund XI-A, L.P.b		6,998,031		19,084,127
Fairhaven Capital Partners, L.P.a,b		3,600,856		3,026,585
Florida Real Estate Value Fund, L.P.a,b		4,312,352		4,496,844
Forum European Realty Income III, L.P.a,b		5,762,903		4,820,518
Garrison Opportunity Fund, LLCa,b		6,006,062		8,898,188
Garrison Opportunity Fund II A, LLCa,b		3,745,975		4,107,525
See notes to financial statements.

THREE

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

SCHEDULE OF INVESTMENTS

September 30, 2012 (Unaudited) (continued)

Private Investments — (31.07%) (continued)	Shares		Cost		Fair Value
Glade Brook Private Investors, LLCa,b			$	1,500,000	$	1,500,000
Great Point Partners I, L.P.b				2,407,951		3,577,182
Greenfield Acquisition Partners V, L.P.b				6,866,818		6,802,721
GTIS Brazil Real Estate Fund, L.P.a,b				7,371,948		9,627,817
Halifax Capital Partners II, L.P.b				2,114,500		2,538,103
Halifax Capital Partners III, L.P.a,b				78,494		0
Hancock Park Capital III, L.P.a,b				1,940,643		3,733,931
Healthcor Partners Fund, L.P.a,b,c				3,345,803		3,963,209
Hillcrest Fund, L.P.a,b				5,924,304		4,716,576
Illumitex, Inc., Common Stocka,b		1,331,167		1,000,000		288,677
Illumitex, Inc., Series A-1 Preferred Stocka,b		2,404,160		499,369		521,366
Intervale Capital Fund, L.P.b				3,860,993		4,142,000
J.C. Flowers III, L.P.a,b				3,276,666		3,095,497
LC Fund V, L.P.a,b				1,903,655		1,885,824
Lighthouse Capital Partners VI, L.P.b				4,750,000		5,139,285
Merit Energy Partners F-II, L.P.b				1,156,832		924,525
Mid Europa Fund III, L.P.a,b				4,546,752		3,875,043
Midstream & Resources Follow-On Fund, L.P.a,b				2,213,756		7,137,070
Monomoy Capital Partners II, L.P.a,b				689,864		1,043,717
Natural Gas Partners VIII, L.P.a,b				3,908,673		5,046,003
Natural Gas Partners IX, L.P.b				7,553,433		9,492,322
Natural Gas Partners X, L.P.a,b				441,230		405,743
New Horizon Capital III, L.P.b				6,815,152		7,749,289
NGP Energy Technology Partners, L.P.b				890,065		360,224
NGP Energy Technology Partners II, L.P.a,b				3,499,867		3,452,506
NGP Midstream & Resources, L.P.b				4,601,406		5,928,900
Northstar Equity Partners III Limiteda,b				1,763,473		1,680,220
Northwood Real Estate Co-Investors, L.P.b				1,868,479		1,994,854
Northwood Real Estate Partners, L.P.b				4,427,299		4,460,720
OCM European Principal Opportunties Fund, L.P.a,b				3,073,788		5,134,277
OCM Mezzanine Fund II, L.P.a,b				880,161		1,668,824
ORBIS Real Estate Fund I, L.P.a,b				3,211,080		2,035,446
Orchid Asia IV, L.P.b				4,907,889		6,188,808
Parmenter Realty Fund IV, L.P.b				1,627,017		1,322,595
Patron Capital III, L.P.b				4,784,150		4,140,126
Pearlmark Mezzanine Realty Partners II, LLCa,b				1,555,381		62,710
Pearlmark Mezzanine Realty Partners III, LLCb				7,778,357		6,874,324
Pennybacker II, L.P.b				1,146,456		1,167,959
Phoenix Real Estate Fund PTE Limiteda,b				5,984,532		6,485,688
Phoenix Real Estate Fund (T), L.P.a,b				5,443,321		5,915,651
Pine Brook Capital Partners, L.P.b				6,460,007		6,441,780
Private Equity Investment Fund V, L.P.b				10,767,099		11,159,759
Private Equity Investors Fund IV, L.P.b				3,060,968		2,426,829
Quantum Energy Partners IV, L.P.b				4,576,210		4,959,878
Quantum Energy Partners V, L.P.a,b				4,971,039		3,537,998
Rockwood Capital Real Estate Partners Fund VII, L.P.b				5,020,459		2,514,290
Roundtable Healthcare Management III, L.P.a,b				1,823,634		1,638,019
See notes to financial statements.

FOUR

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

SCHEDULE OF INVESTMENTS

September 30, 2012 (Unaudited) (continued)

Private Investments — (31.07%) (continued)	Cost		Fair Value
Roundtable Healthcare Partners II, L.P.b	$	1,667,117	$	2,201,256
Saints Capital VI, L.P.b		7,479,416		8,126,073
Sanderling Venture Partners VI Co-Investment Fund, L.P.a,b		849,810		1,048,971
Sanderling Venture Partners VI, L.P.a,b		880,040		1,279,662
SBC Latin America Housing US Fund, L.P.b		1,931,706		1,975,758
Sentient Global Resources Fund III, L.P.a,b		12,914,151		14,377,738
Sentient Global Resources Fund IV, L.P.b		2,320,448		2,086,158
Singerman Real Estate Opportunity Fund I, L.P.a,b		77,253		25,700
Sovereign Capital III, L.P.a,b		2,793,132		2,709,470
Square Mile Lodging Opportunity Partners, L.P.a,b		1,332,280		1,698,497
Square Mile Partners III, L.P.b		8,255,885		9,581,262
Sterling Capital Partners II, L.P.a,b		1,677,570		2,023,816
Sterling Group Partners III, L.P.a,b		2,091,958		2,403,552
Strategic Value Global Opportunities Fund I-A, L.P.b		3,136,526		1,755,380
Tenaya Capital V, L.P.a,b		3,820,587		4,865,834
The Column Group, L.P.a,b		3,520,090		3,124,760
The Energy and Minerals Group Fund II, L.P.b		1,637,786		1,508,433
The Founders Fund III, L.P.a,b		4,000,000		7,210,639
The Founders Fund IV, L.P.a,b		891,000		958,746
Tiger Global Investments Partners VI, L.P.b		4,351,942		4,358,135
Tiger Global Investments Partners VII, L.P.a,b		66,600		49,980
TPF II, L.P.b		4,550,857		3,930,076
Trivest Fund IV, L.P.b		4,076,970		4,051,503
True Ventures III, L.P.a,b		725,000		655,565
Urban Oil and Gas Partners A-1, L.P.b		5,360,377		5,276,373
VCFA Private Equity Partners IV, L.P.b		1,353,674		1,165,936
VCFA Venture Partners V, L.P.b		6,368,509		6,704,729
Voyager Capital Fund III, L.P.a,b		1,956,122		2,374,269
WCP Real Estate Fund I, L.P.a,b		1,834,575		1,848,334
Westview Capital Partners II, L.P.a,b		4,109,080		4,289,116
Zero2IPO China Fund II, L.P.a,b		4,103,480		4,367,390
Total Private Investments		385,563,064		404,247,364
Tactical Trading — (7.20%)
Alphamosaic (U.S.), LLC-Series Cell No. 41 (Winton Capital Management Limited)a,b		2,500,000		12,181,393
Black River Commodity MS Fund, L.P.a,b,d		379,957		349,596
Brevan Howard Emerging Markets Strategies Fund, L.P.a,b,c		567,909		549,549
Brevan Howard, L.P.a,b,c		8,524,265		9,737,990
Capula Tail Risk Fund Limiteda,b		15,000,000		14,139,977
D.E. Shaw Oculus Fund, LLCa,b		7,154,202		13,291,923
Drawbridge Global Macro Fund, L.P.a,b,d		96,671		86,522
EDF-M1 Onshore, L.P.a,b		10,000,000		6,588,148
Ospraie Special Opportunities Fund, L.P.a,b,d		3,346,238		4,420,796
Robeco Transtrend Diversified Fund, LLCa,b		12,500,000		11,836,111
Saba Capital Tail Hedge Partners, L.P.a,b		5,000,000		4,618,209
See notes to financial statements.

FIVE

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

SCHEDULE OF INVESTMENTS

September 30, 2012 (Unaudited) (concluded)

Tactical Trading — (7.20%) (continued)	Shares		Cost		Fair Value
The Clive Fund, L.P.a,b,c			$	15,000,000	$	15,148,595
Touradji Global Resources Holdings, LLCa,b,d				1,714,396		767,014
Total Tactical Trading				91,783,638		93,715,823
Total investments in Adviser Funds and Mutual Funds (cost $1,247,574,162)						1,362,594,818
Short-Term Investments — (1.22%)
Federated Prime Obligations Fund #10, 0.14%e		15,819,364		15,819,364		15,819,364
Total Short-Term Investments (cost $15,819,364)						15,819,364
Total Investments (cost $1,263,393,526) (105.94)%						1,378,414,182
Liabilities in excess of other assets — (5.94)%						(77,241,833	)
Partners’ capital — (100.00)%					$	1,301,172,349

^a  Non-income producing.

^b  Adviser Funds are issued in private placement transactions and as such are restricted as to resale.

^c  Securities held in custody by US Bank N.A., as collateral for a credit facility. The total cost and fair value of these as of September 30, 2012 securities was $185,405,564 and $237,856,294, respectively.

^d  The Adviser Fund has imposed gates on or has restricted redemptions from Adviser Funds. The total cost and fair value of these securities as of September 30, 2012 was $105,839,326 and $80,875,516, respectively.

^e  The rate shown is the annualized 7-day yield as of September 30, 2012.

See notes to financial statements.

SIX

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

STATEMENT OF ASSETS, LIABILITIES AND PARTNERS’ CAPITAL

September 30, 2012 (Unaudited)

Assets
Investments in Adviser Funds and Mutual Funds, at fair value (cost $1,247,574,162)	$	1,362,594,818
Investments in short-term investments, at fair value (cost $15,819,364)		15,819,364
Receivable from redemption of Adviser Funds and Mutual Funds		7,633,447
Investments in Adviser Funds and Mutual Funds paid in advance		1,765,930
Dividends and interest receivable		1,854
Prepaid assets		3,956
Total assets	$	1,387,819,369
Liabilities and partners’ capital
Withdrawals payable	$	81,408,163
Contributions received in advance		3,705,238
Management fee payable		1,153,043
Risk management fees payable		109,458
Accounting and administration fees payable		84,421
Custodian fees payable		71,243
Professional fees payable		62,534
Line of credit fees payable		31,167
Printing fees payable		8,733
Other accrued expenses		13,020
Total liabilities		86,647,020
Partners’ capital		1,301,172,349
Total liabilities and partners’ capital	$	1,387,819,369
Components of Partners’ Capital
Capital contributions (net)	$	1,262,548,179
Accumulated net investment loss		(11,463,095	)
Accumulated net realized loss		(64,933,391	)
Accumulated net unrealized appreciation on investments		115,020,656
Partners’ capital	$	1,301,172,349

See notes to financial statements.

SEVEN

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

STATEMENT OF OPERATIONS

For the six months ended September 30, 2012 (Unaudited)

Investment income
Dividends	$	12,802,072
Interest		34,474
Total investment income		12,836,546
Operating expenses
Management fee		7,050,759
Accounting and administration fees		520,807
Line of credit fees		491,459
Risk management expense		425,000
Professional fees		170,951
Custodian fees		80,500
Interest expense		59,179
Printing expense		16,519
Compliance consulting fees		15,000
Insurance expense		4,186
Other expenses		70,000
Total operating expenses		8,904,360
Net investment income		3,932,186
Net realized loss and change in unrealized appreciation on investments in Adviser Funds, Exchange Traded Funds, Mutual Funds and foreign exchange transactions
Net realized loss from investments in Adviser Funds, Exchange Traded Funds, Mutual Funds and foreign exchange transactions		(10,419,484	)
Net change in unrealized appreciation on investments in Adviser Funds, Exchange Traded Funds, Mutual Funds and foreign exchange transactions		31,883,719
Net realized loss and change in unrealized appreciation on investments in Adviser Funds, Exchange Traded Funds, Mutual Funds and foreign exchange transactions		21,464,235
Net increase in partners’ capital resulting from operations	$	25,396,421

See notes to financial statements.

EIGHT

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

For the year ended March 31, 2012 and the six months ended September 30, 2012 (Unaudited)

	General Partner’s Capital			Limited Partners’ Capital			Total Partners’ Capital
Partners’ capital, at March 31, 2011	$	—		$	1,528,133,542		$	1,528,133,542
Capital contributions		323,877			183,493,918			183,817,795
Capital withdrawals		—			(229,703,817	)		(229,703,817	)
Net investment income		—			11,470,591			11,470,591
Net realized gain from investments in Adviser Funds, Exchange Traded Funds, Mutual Funds and foreign exchange transactions		—			18,063,264			18,063,264
Net change in unrealized appreciation on investments in Adviser Funds, Exchange Traded Funds, Mutual Funds and foreign exchange transactions		—			(71,083,345	)		(71,083,345	)
Reverse accrued performance allocation from January 1, 2011 to March 31, 2011		(323,877	)		323,877			—
Partners’ capital, at March 31, 2012*	$	—		$	1,440,698,030		$	1,440,698,030
Capital contributions		—			39,380,996			39,380,996
Capital withdrawals		—			(204,303,098	)		(204,303,098	)
Net investment income		—			3,932,186			3,932,186
Net realized loss from investments in Adviser Funds, Exchange Traded Funds, Mutual Funds and foreign exchange transactions		—			(10,419,484	)		(10,419,484	)
Net change in unrealized appreciation on investments in Adviser Funds, Exchange Traded Funds, Mutual Funds and foreign exchange transactions		—			31,883,719			31,883,719
Partners’ capital, at September 30, 2012**	$	—		$	1,301,172,349		$	1,301,172,349

* Including accumulated net investment loss of $15,395,281.

** Including accumulated net investment loss of $11,463,095.

See notes to financial statements.

NINE

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

STATEMENT OF CASH FLOWS

For the year ended September 30, 2012 (Unaudited)

Cash flows from operating activities:
Net increase in partners’ capital resulting from operations	$	25,396,421
Adjustments to reconcile net increase in partners’ capital resulting from operations to net cash provided by operating activities:
Purchase of Adviser Funds, Exchange Traded Funds and Mutual Funds		(187,309,955	)
Proceeds from redemptions of Adviser Funds, Exchange Traded Funds and Mutual Funds		172,254,111
Net realized loss from investments in Adviser Funds, Exchange Traded Funds, Mutual Funds and foreign exchange transactions		10,419,484
Net change in unrealized appreciation on investments in Adviser Funds, Exchange Traded Funds, Mutual Funds and foreign exchange transactions		(31,883,719	)
Net purchase of short-term investments		(6,668,521	)
Decrease in investments in Adviser Funds and Mutual Funds paid in advance		34,000,058
Decrease in receivable from redemption of Adviser Funds and Mutual Funds		143,668,419
Decrease in dividends and interest receivable		1,317
Increase in prepaid assets		(2,993	)
Decrease in management fee payable		(98,431	)
Decrease in professional fees payable		(108,634	)
Increase in risk management fees payable		9,708
Decrease in accounting and administration fees payable		(7,743	)
Decrease in line of credit fees payable		(13,222	)
Decrease in line of credit interest expense payable		(2,634	)
Decrease in printing fees payable		(1,229	)
Increase in custodian fees payable		49,061
Increase in other expenses payable		8,020
Net cash provided by operating activities		159,709,518
Cash flows from financing activities:
Capital contributions		43,086,234
Capital withdrawals		(182,795,752	)
Line of credit repayments		(20,000,000	)
Net cash used in financing activities		(159,709,518	)
Net change in cash		—
Cash at beginning of period		—
Cash at end of period	$	—
Supplemental Disclosure of Interest Expense Paid	$	61,813
Supplemental Disclosure of Line of Credit Fees Paid	$	504,681

See notes to financial statements.

TEN

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (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 and commenced operations on January 1, 2005. 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 primary objective of the Master Fund is to provide capital appreciation consistent with the return characteristic of the alternative investment portfolios of larger endowments. The Master Fund’s secondary objective is to provide capital appreciation with less volatility than that of the equity markets. To achieve its objectives, the Master Fund provides its limited partners (each, a “Limited Partner” and together, the “Limited Partners”) with access to a broad range of investment strategies, asset categories, and trading Advisers (“Advisers”) and by providing overall asset allocation services typically available on a collective basis to larger institutions. The Master Fund invests with each Adviser either by becoming a participant in an investment vehicle operated by the Adviser (an “Adviser Fund”) which includes exchange traded funds (“ETFs”), hedge funds, and investment funds or by placing assets in an account directly managed by the Adviser.

Hatteras Investment Management LLC, a Delaware limited liability company, serves as the General Partner of the Master Fund (the “General Partner”). The General Partner is an affiliate of the Investment Manager. The General Partner has appointed a Board of Directors (the “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.

2.  SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting and reporting policies used in preparing the financial statements.

a.  Basis of Accounting

The Master Fund’s accounting and reporting policies conform with accounting principles generally accepted within the United States of America (“GAAP”).

b.  Cash

Cash includes short-term interest bearing deposit accounts. At times, such deposits may be in excess of federally insured limits. The Master Fund has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk on such accounts.

c.  Valuation of Investments

The Master Fund’s valuation procedures have been approved by the Master Fund’s Board. The valuation procedures are implemented by the Master Fund’s Investment Manager and the third party administrator, which report to the Board. For third-party information, the Master Fund’s administrator monitors and reviews the methodologies of the various pricing services employed by the Fund.

Investments held by the Master Fund include:

• Investments in Adviser Funds — The Master Fund will value interests in the Adviser Funds at fair value, using the net asset value (“NAV”) as a practical expedient, as provided by the investment managers of such Adviser Funds. These Adviser Funds value their underlying investments in accordance with policies established by such Advisor Funds, which ordinarily will be the value determined by their respective investment managers, in accordance with the Master Fund’s valuation procedures. Investments in Adviser Funds are subject to the terms of the Adviser Funds’ offering documents. Valuations of the Adviser Funds may be subject to estimates and are net of management and

ELEVEN

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited) (continued)

2.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

c.  Valuation of Investments (continued)

• Investments in Adviser Funds (continued)

performance incentive fees or allocations payable to the Adviser Funds’ investment managers as required by the Adviser Funds’ offering documents. If the Investment Manager determines that the most recent value reported by any Adviser Fund does not represent fair value or if any Adviser Fund fails to report a value to the Master Fund, a fair value determination is made under the Master Fund’s valuation procedures 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.

The interests of some Adviser Funds, primarily investments in private equity funds, may be valued less frequently than the calculation of the Master Fund’s net asset value. Therefore, the reported performance of the Adviser Fund may lag the reporting period of the Master Fund. The Investment Manager has established procedures for reviewing the effect on the Master Fund’s net asset value due to this lag in reported performance of the Adviser Funds.

• Investments in Exchange Traded Funds and Mutual Funds — Securities traded on one or more of the U.S. national securities exchanges or the OTC Bulletin Board will be valued at their last sales price. Securities traded on NASDAQ will be valued at the NASDAQ Official Closing Price (“NOCP”), at the close of trading on the exchanges or markets where such securities are traded for the business day as of which such value is being determined.

• Investments in Private Companies — Investments for which observable market prices in active markets do not exist are reported at fair value, as determined in good faith by the Adviser. Fair value is based on the best information available and is determined by reference to information including, but not limited to, the following: projected sales, net earnings, earnings before interest, taxes, depreciation and amortization (“EBITDA”), balance sheets, public or private transactions, valuations for publicly traded comparable companies, recent round of financing in the company’s stock, and/or other measures, and consideration of any other pertinent information including the types of securities held and restrictions on disposition. The amount determined to be fair value may incorporate the Adviser’s own assumptions (including appropriate risk adjustments for nonperformance and lack of marketability). The methods used to estimate the fair value of private companies include: (1) the market approach (whereby fair value is derived by reference to observable valuation measures for comparable companies or assets — e.g., multiplying a key performance metric of the investee company or asset, such as projected revenue or EBITDA, by a relevant valuation multiple observed in the range of comparable companies or transactions — adjusted by the Adviser for differences between the investment and the referenced comparables and in some instances by reference to option pricing models or other similar methods), (2) the income approach (e.g., the discounted cash flow method), and (3) cost for a period of time after an acquisition (where such amount is determined by the Adviser to be the best indicator of fair value). These valuation methodologies involve a significant degree of judgment. Due to the absence of readily determinable fair values and the inherent uncertainty of valuations, the estimated fair values for private companies may differ significantly from values that would have been used had a ready market for the securities existed, and the differences could be material.

The Master Fund classifies its assets and liabilities that are reported at fair value into three levels based on the lowest level of input that is significant to the fair value measurement. Estimated values may differ from the values that would have been used if a ready market existed or if the investments were liquidated at the valuation date.

The three-tier hierarchy distinguishes between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best

TWELVE

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited) (continued)

2.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

c.  Valuation of Investments (continued)

information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Master Fund’s investments. The inputs are summarized in the three broad levels listed below:

• Level 1 — quoted prices (unadjusted) in active markets for identical assets and liabilities.

• Level 2 — other significant observable inputs or investments that can be fully redeemed at the net asset value in the “near term” (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, ability to redeem in the near term, generally within the next calendar quarter, from Adviser Funds, etc.)

• Level 3 — significant unobservable inputs (including the Master Fund’s own assumptions in determining the fair value of investments) or investments that cannot be fully redeemed at the net asset value in the “near term”, these are investments that generally have one or more of the following characteristics: gated redemptions, suspended redemptions, or have lock-up periods greater than 90 days

	Level 1		Level 2		Level 3		Total
Absolute Return	$	—	$	153,483,953	$	39,759,948	$	193,243,901
Enhanced Fixed Income		23,286,863		108,602,718		76,149,876		208,039,457
Opportunistic Equity		—		292,187,806		171,160,467		463,348,273
Private Investments		—		—		404,247,364		404,247,364
Tactical Trading		—		88,091,895		5,623,928		93,715,823
Short-Term Investment		15,819,364		—		—		15,819,364
Total	$	39,106,227	$	642,366,372	$	696,941,583	$	1,378,414,182

The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value on a recurring basis:

Level 3 Investments	Balance as of March 31, 2012		Transfers Between Investment Categories1			Net Realized Gain (Loss)			Change in Unrealized Appreciation/ (Depreciation)			Gross Purchases		Gross Sales			Balance as of September 30, 2012
Absolute Return	$	44,732,205	$	—		$	108,105		$	(1,209,349	)	$	5,039	$	(3,876,052	)	$	39,759,948
Enhanced Fixed Income		91,737,650		—			1,551,358			4,382,891			1,401,224		(22,923,247	)		76,149,876
Opportunistic Equity		182,822,021		1,834,093			(2,897,205	)		2,039,022			10,017,425		(22,654,889	)		171,160,467
Private Investments		374,331,767		(1,834,093	)		(4,723,495	)		22,217,616			42,152,590		(27,897,021	)		404,247,364
Tactical Trading		6,564,845		—			(762,742	)		556,900			224,267		(959,342	)		5,623,928
Total Level 3 Investments	$	700,188,488	$	—		$	(6,723,979	)	$	27,987,080		$	53,800,545	$	(78,310,551	)	$	696,941,583

¹ Transfers between investment categories reflect the changes in categories and are represented by their balance as of April 1, 2012.

Transfers into and out of all Levels are represented by their balances as of the beginning of the reporting period. Transfers into Level 3 usually result from Adviser Funds imposing gates or suspending redemptions; transfers out of Level 3 generally occur when lock-up periods on investments in Adviser Funds are lifted. There were no transfers into or out of level 1, Level 2 or Level 3 during the six months ended September 30, 2012.

THIRTEEN

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited) (continued)

2.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

c.  Valuation of Investments (continued)

The net realized gain (loss) and change in unrealized appreciation/(depreciation) in the table above are reflected in the accompanying Statement of Operations. The change in unrealized appreciation/(depreciation) from Level 3 investments held at September 30, 2012 is $20,749,382.

Adviser Funds categorized as Level 3 assets, with a fair value totaling $64,796,530, have imposed gates or suspended redemptions. Gates were imposed or redemptions were suspended for these Adviser Funds during a period ranging from October 2008 to September 2012. It is generally not known when these restrictions will be lifted.

ASU No. 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and International Financial Reporting Standards (“IFRS”)” includes common requirements for measurement of and disclosure about fair value between GAAP and IFRS. ASU 2011-04 requires reporting entities to disclose quantitative information about the unobservable inputs used in the fair value measurements categorized within Level 3 of the fair value hierarchy. In addition, ASU 2011-04 requires reporting entities to make disclosures about amounts and reasons for all transfers in and out of Levels 1 and 2 of the fair value hierarchy. The new and revised disclosure requirements are effective for interim and annual reporting periods beginning after December 15, 2011.

The following is a summary of quantitative information about significant unobservable valuation inputs for Level 3 Fair Value Measurements for investments held as of September 30, 2012:

Type of Level 3 Investment	Fair Value as of September 30, 2012		Valuation Techniques	Unobservable Input
Adviser Funds
Absolute Return	$	39,759,948	NAV as practical expedient*	N/A
Enhanced Fixed Income		76,149,876	NAV as practical expedient*	N/A
Opportunistic Equity		171,160,467	NAV as practical expedient*	N/A
Private Investments		403,437,321	NAV as practical expedient*	N/A
Tactical Trading		5,623,928	NAV as practical expedient*	N/A
Common Stock
Private Investments		288,677	Most recent capitalization	Private financing
Preferred Stock
Private Investments		521,366	Most recent capitalization	Private financing
Total Level 3 Investments	$	696,941,583

* Unobservable input.

No adjustments were made to the NAV provided by the investment manager or administrator of the Adviser Funds. Adjustments to the NAV provided by the investment manager or administrator of the Adviser Funds would be considered if the practical expedient NAV was not as of the Master Fund’s measurement date; it was probable that the Adviser Fund would be sold at a value materially different than the reported expedient NAV; or it was determined in accordance with the Master Fund’s valuation procedures that the Adviser Fund is not being reported at fair value.

The significant unobservable inputs used in the fair value measurement of the Master Fund’s Private Investment shares are based on the portfolio company’s most recent round of financing and the financial results of privately held entities. If the financial condition of these companies was to deteriorate, or if market comparables were to fall, the value of the stock in these private companies held by the Master Fund would be lower.

FOURTEEN

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited) (continued)

2.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

c.  Valuation of Investments (continued)

Investment Category	Investment Strategy	Fair Value (in 000’s)		Unfunded Commitments (in 000’s)		Remaining Life*	Redemption Frequency*	Notice Period (in Days)*		Redemption Restrictions Terms*
Opportunistic Equitya	Investments in global equity markets and strategies involving specific market sectors, such as financial, technology, public real estate and public energy.	$	463,348		N/A	N/A	Monthly- Annually		5-120	0-3 years; Up to 6% redemption fee
Enhanced Fixed Incomeb	Investments in non-traditional fixed income securities, including distressed debt strategies.	$	208,039		N/A	N/A	Monthly- Rolling 3 years		0-185	0-3 years; Up to 5% redemption fee
Absolute Returnc	Investments in a variety of securities with the intent of profiting from relative changes in the price of a set of securities, currencies or commodities.	$	193,244		N/A	N/A	Monthly-Annually		0-92	0-2 years; Up to 6% redemption fee
Tactical Tradingd	Investments in commodities, currencies, global bonds and international stock indices, with low correlation to the equity markets.	$	93,716		N/A	N/A	Quarterly		0-180	0-10 years; Up to 3% redemption fee
Private Investmentse	Investments in Private Equity, Private Real Estate, Private Energy and Natural Resources, generally through private partnerships or direct investments.	$	404,247	$	195,732	Up to 10 years	N/A		N/A	N/A

FIFTEEN

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited) (continued)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

c.  Valuation of Investments (continued)

* The information summarized in the table above represents the general terms for the specified asset class. Individual Adviser Funds may have terms that are more or less restrictive than those terms indicated for the asset class as a whole. In addition, most Adviser Funds have the flexibility, as provided for in their constituent documents, to modify and waive such terms.

The Master Fund’s investments reflect their estimated fair value, which for marketable securities would generally be the last sales price on the primary exchange for such security and for Adviser Funds, would generally be the net asset value as provided by the Adviser Fund or its administrator. For each of the categories below, the fair value of the Adviser Funds has been estimated using the net asset value of the Adviser Funds.

^a  This category includes Adviser Funds that predominantly invest in all global markets, including the U.S. domestic markets, and predominantly invest in equity securities. While the Opportunistic Equity investment strategy consists of Adviser Funds that trade predominantly in equity securities, certain of the Advisers chosen may additionally invest all or a portion of the Advisers Fund in debt or other instruments.

^b  This category includes Adviser Funds that invest primarily in high yield debt, distressed securities, structured credit, and opportunistic credit (including, among other things, in emerging markets).

^c  This category is defined as having a relatively low or negative correlation to the equity markets. In addition, certain strategies within the Absolute Return investment strategy may have less volatility through the use of arbitrage based strategies and hedging tools (e.g., “market” puts and calls, etc.). The Absolute Return investment strategy includes Adviser Funds that invest using Event Driven Arbitrage, Convertible Arbitrage, Merger Arbitrage, Fixed Income Arbitrage, Volatility Arbitrage and Statistical Arbitrage.

^d  This category includes Adviser Funds who engage in directional trading strategies. Some of the Tactical Trading strategies incorporate equity assets as well as currencies, commodities and debt instruments. Commodity Trading Advisors (CTAs) are included in the Tactical Trading investment strategy. Historically, the Tactical Trading investment strategy has a relatively low correlation to the equity markets. Global Macro/Managed Futures strategies are generally categorized as either discretionary or systematic in nature and may assume aggressive investment postures with respect to position concentrations, use of leverage, portfolio turnover, and the various investment instruments used.

^e  This category invests in three sub-strategies (Private Equity, Private Real Estate and Private Energy and Natural Resources). Private Equity investing seeks to generate capital appreciation through investments in private companies in need of capital. Private Equity seeks to profit from, among other things, the inefficiencies inherent in these markets though valuation and due diligence analysis of available business opportunities. Private Real Estate strategy consists generally of investing in Adviser Funds that are private partnerships that make direct investments in (i) existing or newly constructed income-producing properties, including office, industrial, retail, and multi-family residential properties, (ii) raw land, which may be held for development or for the purpose of appreciation, and/or (iii) timber (whether directly or through a REIT or other Adviser Fund). The Private Energy and Natural Resources strategy consists generally of investing in Adviser Funds that are private partnerships that make direct investments in private or (sometimes) publicly traded energy companies.

d.  Investment Income

Interest income is recorded when earned. Dividend income is recorded on the ex-dividend date, except that certain dividends from private equity investments are recorded as soon as the information is available to the Master Fund. Investments in short-term investments, mutual funds, and exchange traded funds are recorded on a trade date basis. Investments in Adviser Funds are recorded on a subscription effective date basis, which is generally the first day of the calendar month in which the investment is effective. Realized gains and losses on Adviser Fund redemptions are determined on identified cost basis.

The Adviser Funds generally do not make regular cash distributions of income and gains and are therefore considered non-income producing securities. Disbursements received from Adviser Funds are accounted for as a reduction to cost.

e.  Foreign Currency

Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The company does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the company’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise

SIXTEEN

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited) (continued)

2.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

e.  Foreign Currency (continued)

from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.

f.  Master Fund Expenses

The Master Fund will bear all expenses incurred, on an accrual basis, 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, auditing, and tax preparation fees; custodial fees; fees for data and software providers; costs of insurance; registration expenses; directors’ fees; interest expenses and commitment fees on credit facilities; and expenses of meetings of the Board.

g.  Income Taxes

The Master Fund is treated as a partnership for federal income tax purposes and therefore is not subject to U.S. 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 profit and loss.

The Master Fund files tax returns as prescribed by the tax laws of the jurisdiction in which it operates. In the normal course of business, the Master Fund is subject to examination by federal, state, local and foreign jurisdictions, where applicable. For the years ended December 31, 2009 through December 31, 2011 the Master Fund is open to examination by major tax jurisdictions under the statute of limitations.

The Master Fund has reviewed any potential tax positions as of September 30, 2012 and has determined that it does not have a liability for any unrecognized tax benefits. The Master Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period, the Master Fund did not incur any material interest or penalties. Due to the timing of tax information received from the Adviser Funds, tax basis reporting is not available as of the balance sheet date.

h.  Use of Estimates

The preparation of financial statements in conformity with GAAP requires the Master Fund 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 increases and decreases in Partner’s Capital from operations during the reporting period. Actual results could differ from those estimates.

i.  Recent Accounting Pronouncements

In December 2011, FASB issued ASU No. 2011-11 related to disclosures about offsetting assets and liabilities (“ASU 2011-11”). The amendments in this ASU 2011-11 require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The ASU 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The guidance requires retrospective application for all comparative periods presented. Management is currently evaluating the impact ASU 2011-11 will have on the financial statement disclosures.

3.  ALLOCATION OF PARTNERS’ CAPITAL

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 Limited 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; (5) the day preceding the day on which a substituted Limited Partner is admitted to the Master Fund; or (6) the day on which any amount is credited to or debited from the

SEVENTEEN

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited) (continued)

3.  ALLOCATION OF PARTNERS’ CAPITAL (CONTINUED)

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.

4.  REPURCHASE OF LIMITED PARTNERS’ INTERESTS

The Board may, from time to time and in its sole discretion, cause the Master Fund to repurchase interests from Limited Partners pursuant to written tenders by Limited 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, among other things, the recommendation of the Investment Manager. The Investment Manager generally recommends to the Board that the Master Fund offer to repurchase interests from Limited Partners on a quarterly basis as of the valuation date at the end of each calendar quarter. The Master Fund will not offer repurchases of interests of more than 20% its net asset value in any quarter. The Master Fund does not intend to distribute to the Limited Partners any of the Master Fund’s income, but generally expects to reinvest substantially all income and gains allocable to the Limited Partners.

5.  MANAGEMENT FEES, PERFORMANCE ALLOCATION, AND RELATED PARTY TRANSACTIONS

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 Master Fund’s investment program. In consideration for such services, the Master Fund pays the Investment Manager a management fee equal to 1.00% on an annualized basis of the aggregate value of its partners’ capital determined as of the last day of the month (before giving effect to any repurchase of interests in the Master Fund).

The General Partner is allocated a performance allocation payable annually equal to 10% of the amount by which net new profits of the limited partner interests of the Master Fund exceed the non-cumulative “hurdle amount,” which is calculated as of the last day of the preceding calendar year of the Master Funds at a rate equal to the yield-to-maturity of the 90-day U.S. Treasury Bill as reported by the Wall Street Journal for the last business day of the last calendar year (“the Performance Allocation”). The Performance Allocation is made on a “peak to peak”, or “high watermark” basis, which means that no Performance Allocation will be made with respect to such subsequent appreciation until such net loss has been recovered.

For the three months ended March 31, 2011, the General Partner accrued a Performance Allocation in the amount of $323,877. The accrued Performance Allocation for the three months ended March 31, 2011 of $323,877 was reversed. There is no accrued Performance Allocation for the six months ended September 30, 2012.

Hatteras Capital Distributors LLC (“HCD”), an affiliate of the Investment Manager, serves as the Master Fund’s private placement agent. HCD receives a distribution fee from the Investment Manager equal to 0.10% on an annualized basis of the partner’s capital of the Master Fund as of the last day of the month (before giving effect to any repurchase of interests in the Master Fund).

Each member of the Board who is not an “interested person” of the Master Fund (the “Independent Board”), as defined by the 1940 Act, receives an annual retainer of $30,000. All Board members are reimbursed by the Master Fund for all reasonable out-of-pocket expenses incurred by them in performing their duties.

6.  ACCOUNTING, ADMINISTRATION, AND CUSTODIAL AGREEMENT

In consideration for accounting, administrative, and recordkeeping services, the Master Fund pays J.D. Clark & Company, a division of UMB Fund Services, Inc. (the “Administrator”) an administration fee based on the month-end partners’ capital of the Master Fund. The Administrator also provides regulatory administrative

EIGHTEEN

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited) (continued)

6.  ACCOUNTING, ADMINISTRATION, AND CUSTODIAL AGREEMENT (CONTINUED)

services, transfer agency functions, and shareholder services at an additional cost. For the six months ended September 30, 2012, the total accounting and administration fees were $520,807.

UMB Bank, N.A. serves as custodian of the Master Fund’s assets and provides custodial services for the Master Fund, except for collateral held for the Master Fund’s credit facility, as described below in Note 9.

7.  INVESTMENT TRANSACTIONS

Total purchases of Adviser Funds for the six months ended September 30, 2012 amounted to $187,309,955. Total proceeds from redemptions of Adviser Funds for the six months ended September 30, 2012 amounted to $172,254,111. The cost of investments in Adviser Funds for U.S. federal income tax purposes is adjusted for items of taxable income allocated to the Master Fund from the Adviser Funds. The Master Fund relies upon actual and estimated tax information provided by the Adviser Funds as to the amounts of taxable income allocated to the Master Fund as of September 30, 2012.

The Master Fund invests 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.

8.  CREDIT FACILITY

The Master Fund maintains a credit facility (the “Facility”) with a maximum borrowing amount of $120,000,000 which is secured by certain interests in Adviser Funds. A fee of 85 basis points per annum is payable monthly in arrears on the unused portion of the facility, while the interest rate charged on borrowings is the 1-month London Interbank Offer Rate plus a spread of 190 basis points. Collateral for the new facility is held by U.S. Bank N.A. as custodian. Interest and fees incurred for the six months ended September 30, 2012 are disclosed in the accompanying Statement of Operations. At September 30, 2012, the Master Fund had $31,167 payable on the unused portion of the Facility and did not hold an interest payable balance on the borrowings. The average interest rate, the average daily balance, and the maximum balance outstanding for borrowings under the facility for the six months ended September 30, 2012 was 2.35%, $547,052, and $30,000,000, respectively.

9.  INDEMNIFICATION

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, 2012, the Master Fund had outstanding investment commitments to Adviser Funds totaling approximately $195,731,612. Five Adviser Funds in the Private Investment Strategy have commitments denominated in Euros, one Adviser Fund has commitments denominated in Pound Sterling, and one Adviser Fund has commitments denominated in Japanese Yen. At September 30, 2012, the unfunded commitments for these Adviser Funds totaled €5,918,303 EUR, £3,231,848 GBP and ¥5,756,154 JPY, respectively. At September 30, 2012, the exchange rate used for the conversion was 1.29 USD/EUR, 1.62 USD/GBP and 77.94 JPY/USD. The U.S. Dollar equivalent of these commitments is included in the Master Fund’s total unfunded commitment amount.

11.  RISK FACTORS

An investment in the Master Fund involves significant risks, including leverage risk, interest rate risk, liquidity risk and economic conditions risk, that should be carefully considered prior to investing and should only be

NINETEEN

HATTERAS FUNDS

(each a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited) (continued)

11.  RISK FACTORS (CONTINUED)

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 generally does not employ leverage. However, certain Adviser Funds may employ leverage, either synthetically or through borrowed funds, which can enhance returns or increase losses on smaller changes in the value of an underlying investment. Adviser Funds that invest in fixed income securities may be subject to interest rate risk, where changes in interest rates affect the value of the underlying fixed income 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. Investments in the Adviser Funds may be restricted from early redemptions or subject to fees for early redemptions as part of contractual obligations agreed to by the Investment Manager on behalf of the Master Fund. Adviser Funds may have initial lock-up periods, the ability to suspend redemptions, or employ the use of side pockets, all of which may affect the Master Fund’s liquidity in the respective Adviser Fund.

Adviser Funds generally require the Investment Manager to provide advanced notice of its intent to redeem the Master Fund’s total or partial interest and may delay or deny a redemption request depending on the Adviser Funds’ governing agreements. Interests in the Master Fund provide limited liquidity since Limited Partners will not be able to redeem interests on a daily basis because the Master Fund is a closed-end fund. Therefore, investment in the Master Fund is suitable only for investors who can bear the risks associated with the limited liquidity of interests and should be viewed as a long-term investment. No guarantee or representation is made that the investment objective will be met.

12.  FINANCIAL HIGHLIGHTS

The financial highlights are intended to help an investor understand the Master Fund’s financial performance. The total returns in the table represent the rate that a typical Limited Partner would be expected to 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. An individual Limited Partner’s results may vary from those shown below due to the timing of capital transactions and performance allocation.

The ratios are calculated by dividing total dollars of net investment income or expenses, as applicable, by the average of total monthly Limited Partners’ capital.

TWENTY

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

As of and for the six months ended September 30, 2012 (Unaudited) (concluded)

12.  FINANCIAL HIGHLIGHTS (CONTINUED)

Total return amounts are calculated by geometrically linking returns based on the change in value during each accounting period.

	For the Period Ended September 30, 2012			For the Year Ended March 31,
	(Unaudited)			2012			2011			2010			2009			2008
Total return before Performance Allocation		1.89	%1		(2.51	)%		6.91	%		16.24	%		(20.45	)%		3.74	%
Total return after Performance Allocation		1.89	%1		(2.49	)%		6.89	%		16.24	%		(20.45	)%		3.74	%
Partners’ capital, end of year (000’s)	$	1,301,172		$	1,440,698		$	1,528,134		$	1,411,169		$	1,149,124		$	1,050,585
Portfolio turnover		10.77	%1		32.68	%		25.12	%		23.12	%		22.57	%		9.54	%
Ratio of net investment income (loss), excluding Performance Allocation		0.56	%2		0.76	%		0.43	%		(0.84	)%		(0.90	)%		(0.72	)%
Ratio of other operating expenses to average partner’s capital		1.19	%2		1.20	%		1.17	%		1.23	%		1.22	%		1.27	%
Ratio of credit facility fees and interest expense to average partner’s capital		0.08	%2		0.08	%		0.10	%		0.06	%		0.03	%		0.05	%
Operating expenses, excluding Performance Allocation		1.27	%2		1.28	%		1.27	%		1.29	%		1.25	%		1.32	%
Performance Allocation*		0.00	%		(0.02	)%3		0.02	%		0.00	%		0.00	%		0.00	%
Total operating expenses and Performance Allocation		1.27	%2		1.26	%		1.29	%		1.29	%		1.25	%		1.32	%

* Prior to July 1, 2008 Performance Allocation was calculated at the Feeder Fund level.

¹ Not Annualized.

² Annualized.

³  Reverse accrued Performance Allocation from January 1, 2011 to March 31, 2011.

13.  SUBSEQUENT EVENTS

Management has evaluated the events and transactions through the date the financial statements were issued and determined there were no other subsequent events that required adjustment to our disclosure in the financial statements except for the following: effective October 1, 2012 and November 1, 2012, there were additional capital contributions of $3,705,238 and $3,190,117, respectively.

The Investment Manager recommended to the Board that a tender offer in an amount of up to approximately 10.00% of the partners’ capital of the Master Fund be made for the quarter ending December 31, 2012 to those partners who elect to tender their interests prior to the expiration of the tender offer period. The Board approved such recommendation and partners in the Master Fund were notified of the tender offer’s expiration date of October 31, 2012, and submitted tender requests totaling approximately $106,071,159.

*************

TWENTY-ONE

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

BOARD OF DIRECTORS

(Unaudited)

The identity of the Board members (each a “Director”) and brief biographical information, as of September 30, 2012, is set forth below. The business address of each Director is care of Hatteras Funds, 8540 Colonnade Center Drive, Suite 401, Raleigh, NC 27615. The term of office of each Director is from the time of such Director’s election and qualification until his or her successor shall have been elected and shall have qualified, or until he or she is removed, resigns or is subject to various disabling events such as death or incapacity. A Director may resign upon 90 days’ prior written notice to the Board and may be removed either by a vote of a majority of the Board not subject to the removal vote or of Limited Partners holding not less than two-thirds of the total number of votes eligible to be cast by all of the Limited Partners.

Name & Date of Birth	Position(s) Held with the Master Fund	Length of Time Served	Principal Occupation(s) During Past 5 years and Other Directorships Held by Director	Number of Portfolios in Fund Complex Overseen by Director
INTERESTED DIRECTOR
David B. Perkins* July 18, 1962	President and Chairman of the Board of Directors of Master Fund	Since Inception	Mr. Perkins has been Chairman of the Board of Directors and President of the Master Fund since inception. Mr. Perkins is the Chief Executive Officer of Hatteras and its affiliated entities. He founded the firm in September 2003. Prior to that, he was the co-founder and Managing Partner of CapFinancial Partners, LLC.	19
INDEPENDENT DIRECTORS
H. Alexander Holmes May 4, 1942	Director; Audit Committee Member of the Master Fund	Since Inception	Mr. Holmes founded Holmes Advisory Services, LLC, a financial consultation firm, in 1993.	19
Steve E. Moss, CPA February 18, 1953	Director; Audit Committee Member of the Master Fund	Since Inception	Mr. Moss is a principal of Holden, Moss, Knott, Clark & Copley, P.A. and has been a member manager of HMKCT Properties, LLC since January 1996.	19

* Mr. Perkins is deemed to be an “interested” Director of the Master Fund because of his affiliations with the Investment Manager.

TWENTY-TWO

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

BOARD OF DIRECTORS

(Unaudited) (concluded)

Name & Date of Birth	Position(s) Held with the Master Fund	Length of Time Served	Principal Occupation(s) During Past 5 years and Other Directorships Held by Director	Number of Portfolios in Fund Complex Overseen by Director
Gregory S. Sellers May 5, 1959	Director; Audit Committee Member of the Master Fund	Since Inception	Mr. Sellers has been the Chief Financial Officer of Imagemark Business Services, Inc., a strategic communications provider of marketing and print communications solutions, since June 2009. From 2003 to June 2009, Mr. Sellers was the Chief Financial Officer and a director of Kings Plush, Inc., a fabric manufacturer.	19
Daniel K. Wilson June 22, 1948	Director; Audit Committee Member of the Master Fund	Since June 2009	Mr. Wilson was Executive Vice President and Chief Financial Officer of Parksdale Mills, Inc. from 2004 - 2008. Mr. Wilson currently is in private practice as a Certified Public Accountant.	19

TWENTY-THREE

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

FUND MANAGEMENT

(Unaudited)

Set forth below is the name, date of birth, position with the Master Fund, length of term of office, and the principal occupation for the last five years, as of September 30, 2012, of each of the persons currently serving as Executive Officers of the Master Fund. The business address of each officer is care of Hatteras Funds, 8540 Colonnade Center Drive, Suite 401, Raleigh, NC 27615.

Name & Date of Birth	Position(s) Held with the Master Fund	Length of Time Served	Principal Occupation(s) During Past 5 Years and Other Directorships Held by Officer	Number of Portfolios in Fund Complex Overseen by Officer
OFFICERS
J. Michael Fields July 14, 1973	Secretary of each Fund in the Fund Complex	Since 2008	Prior to becoming Secretary of each of the Funds in the Fund Complex, Mr. Fields was Treasurer of each of the Funds in the Fund Complex. Mr. Fields is Chief Operating Officer of Hatteras and its affiliates and has been employed by the Hatteras firm since its inception in September 2003.	N/A
Andrew P. Chica September 7, 1975	Chief Compliance Officer of each Fund in the Fund Complex	Since 2008	Mr. Chica joined Hatteras in November 2007 and became Chief Compliance Officer of each of the Funds in the Fund Complex and the Investment Manager as of January 2008. Prior to joining Hatteras, Mr. Chica was the Compliance Manager for UMB Fund Services, Inc. from December 2004 to November 2007.	N/A

TWENTY-FOUR

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

FUND MANAGEMENT

(Unaudited) (concluded)

Name & Date of Birth	Position(s) Held with the Master Fund	Length of Time Served	Principal Occupation(s) During Past 5 Years and Other Directorships Held by Officer	Number of Portfolios in Fund Complex Overseen by Officer
Robert Lance Baker September 17, 1971	Treasurer of each Fund in the Fund Complex	Since 2008	Mr. Baker joined Hatteras in March 2008 and became Treasurer of each of the Funds in the Fund Complex in December 2008. Mr. Baker serves as the Chief Financial Officer of the Investment Manager and its affiliates. Prior to joining Hatteras, Mr. Baker worked for Smith Breeden Associates, an investment advisor located in Durham, NC. At Smith Breeden, Mr. Baker served as Vice President of Portfolio Accounting, Performance Reporting, and Fund Administration.	N/A

TWENTY-FIVE

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

OTHER INFORMATION

(Unaudited)

ANNUAL RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT

At a meeting of the Board of the Master Fund held on May 24, 2012, by a unanimous vote, the Board of the Master Fund, including a majority of the Directors who are not “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act, approved the continuation of the Investment Management Agreement (the “Investment Management Agreement”) for an additional year.

In advance of the May 24, 2012 meeting, the Independent Directors requested and received extensive materials from the Investment Manager to assist them in considering the renewal of the Investment Management Agreement. The Independent Directors reviewed reports from third parties and the Investment Manager relating to the below factors. The Board did not consider any single factor as controlling in determining whether or not to approve the Investment Management Agreement, nor were the items described herein all encompassing of the matters considered by the Board.

NATURE, EXTENT AND QUALITY OF SERVICES

The Board reviewed and considered the nature and extent of the investment advisory services proposed to be provided by the Investment Manager to the Master Fund under the Investment Management Agreement, including the selection of Master Fund investments, allocation of Master Fund investments by type, geography, sub-strategy, evaluation of risk exposure and risk controls, experience and training of the Investment Manager’s investment professionals, and day-to-day portfolio management and general investment selection. The Board also reviewed and considered the qualifications of the portfolio managers, and other key personnel of the Investment Manager who provide the investment advisory and administrative services to the Master Fund. The Board determined that the Investment Manager’s portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board also took into account the Investment Manager’s compliance policies and procedures, including the procedures used to determine the value of each Master Fund’s investment. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services to be provided by the Investment Manager under the Investment Management Agreement, including, among other things, providing office facilities, equipment, and personnel. The Board noted that the Master Fund’s performance during 2011 and for the first quarter of 2012 exceeded that of two of the four comparative funds selected by management.

The Board concluded that the overall quality of the advisory and administrative services was satisfactory.

FEES AND EXPENSES RELATIVE TO COMPARABLE FUNDS MANAGED BY THE INVESTMENT MANAGER AND OTHER INVESTMENT MANAGERS

The Board reviewed the advisory fee rates and expected total expense ratio of the Master Fund. The Board also reviewed the proposed annual Fund Servicing Fees to be paid to the Investment Manager or an affiliate, the proposed placement fee to be paid to the Distributor by the Hatteras Core Alternatives Fund, L.P., Hatteras Core Alternatives TEI Fund, L.P., Hatteras Core Alternatives Institutional Fund, L.P. and the Hatteras Core Alternatives TEI Institutional Fund, L.P. (the “Feeder Funds”) and the related expense limitation agreements (the “Expense Limitation Agreements”). The Board compared the advisory fee, incentive allocation fee and total expense ratio for the Master Fund and the Feeder Funds with various comparative data, including a report prepared by Lipper of other comparable registered funds-of-hedge-funds. The Board noted that the fees were within range of competitor products. Two of the four comparative funds selected by management had higher gross advisory fees as compared to the Master Fund, and three of the four comparative funds had higher total expenses. The Board also reviewed an income statement showing Investment Manager profitability with respect to the Hatteras investment companies advised by the Investment Manager, including the Funds. The Board noted that the Investment Manager had significant expenditures on servicing infrastructure. The Board did not believe that the Investment Manager received excessive revenues or profits.

The Board concluded that the advisory fees paid by the Master Fund and total expense ratio of the Feeder Funds were reasonable and satisfactory in light of the services proposed to be provided.

TWENTY-SIX

HATTERAS MASTER FUND, L.P.

(a Delaware Limited Partnership)

OTHER INFORMATION

(Unaudited) (concluded)

BREAKPOINTS AND ECONOMIES OF SCALE

The Board reviewed the structure of the investment management fees, noting that no change in fees or the Expense Limitation Agreements had been proposed. The Board did not believe that breakpoints were appropriate given the size of the Funds. The Board noted that the Funds would probably close to new investors before breakpoints would become practical.

PROFITABILITY OF INVESTMENT MANAGER AND AFFILIATES

As described above, the Board reviewed an income statement and other financial information prepared by management for the year to date period ended March 31, 2012. The income statement showed that the Investment Manager earned a small profit margin with respect to its management of the Funds. Given the services provided to the Funds and the level of expenditures for Service Fee expenses, the Board determined that the Investment Manager did not earn excessive profits.

FALL-OUT BENEFITS

The Board considered the Fund Servicing Fee and all Distribution Fees earned by the Investment Manager and its affiliates were reasonable given the services to be provided to the Funds. The Investment Manager spent more on Service Fee expenses than it earned in Service Fee income.

GENERAL CONCLUSION

Based on its consideration of all factors that it deemed material, and assisted by the advice of its counsel, the Board concluded it would be in the best interest of the Funds and their investors to approve the Investment Management Agreement for an additional one year term.

PROXY VOTING

A description of the policies and procedures that the Master Fund uses to determine how to vote proxies relating to portfolio securities and the Master Fund’s record of actual proxy votes cast during the period ended June 30, 2012 is available at www.sec.gov and by calling 1-800-504-9070 and may be obtained at no additional charge.

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 1-800-SEC-0330.

TWENTY-SEVEN

HATTERAS CORE ALTERNATIVES FUNDS

8540 Colonnade Center Drive

Suite 401

Raleigh, NC 27615

INVESTMENT ADVISOR AND FUND SERVICING AGENT

Hatteras Investment Partners, LLC

8540 Colonnade Center Drive

Suite 401

Raleigh, NC 27615

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Deloitte & Touche LLP

1700 Market Street, 24th Floor

Philadelphia, PA 19103

FUND COUNSEL

Drinker Biddle & Reath LLP

One Logan Square

Suite 2000

Philadelphia, PA 19103

ADMINISTRATOR AND FUND ACCOUNTANT

J.D. Clark & Company

223 Wilmington West Chester Pike, Suite 303

Chadds Ford, PA 19317

CUSTODIANS

UMB Bank, N.A.

1010 Grand Boulevard

Kansas City, MO 64106

U.S. Bank, N.A.

1555 North River Center Drive

Milwaukee, WI 53212

DISTRIBUTOR

Hatteras Capital Distributors, LLC

8540 Colonnade Center Drive

Suite 401

Raleigh, NC 27615

ITEM 2. CODE OF ETHICS.

Not applicable to semi-annual reports.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

Not applicable to semi-annual reports.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not applicable to semi-annual reports.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable to semi-annual reports.

ITEM 6. SCHEDULE OF INVESTMENTS.

(a) 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.

(b) The registrant did not need to divest itself of securities in accordance with Section 13(c) of the Investment Company Act of 1940, as amended (the “1940 Act”) following the filing of its last report on Form N-CSR and before filing of the current report.

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable to semi-annual reports.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable to semi-annual reports.

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 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) 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 Master Fund, L.P.
By (Signature and Title)*	/s/ David B. Perkins
	David B. Perkins, President
	(principal executive officer)

Date December 7, 2012

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
	(principal executive officer)

Date December 7, 2012

By (Signature and Title)*	/s/ R. Lance Baker
	R. Lance Baker, Treasurer
	(principal financial officer)

Date December 7, 2012

* Print the name and title of each signing officer under his or her signature.