0001193125-15-085566.txt : 20150310 0001193125-15-085566.hdr.sgml : 20150310 20150310172821 ACCESSION NUMBER: 0001193125-15-085566 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20141231 FILED AS OF DATE: 20150310 DATE AS OF CHANGE: 20150310 EFFECTIVENESS DATE: 20150310 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Endowment Institutional TEI Fund W, L.P. CENTRAL INDEX KEY: 0001493234 IRS NUMBER: 980671530 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-22465 FILM NUMBER: 15690210 BUSINESS ADDRESS: STREET 1: 4265 SAN FELIPE STREET 2: 8TH FLOOR CITY: HOUSTON STATE: TX ZIP: 77027 BUSINESS PHONE: 713-993-4675 MAIL ADDRESS: STREET 1: 4265 SAN FELIPE STREET 2: 8TH FLOOR CITY: HOUSTON STATE: TX ZIP: 77027 N-CSR 1 d857064dncsr.htm THE ENDOWMENT INSTITUTIONAL TEI FUND W, L.P. The Endowment Institutional TEI Fund W, L.P.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-22465

 

 

The Endowment Institutional TEI Fund W, L.P.

(Exact name of registrant as specified in charter)

 

 

4265 SAN FELIPE, 8TH FLOOR, HOUSTON, TX 77027

(Address of principal executive offices)                    (Zip code)

 

With a copy to:
George J. Zornada
John A. Blaisdell K & L Gates LLP
The Endowment Institutional TEI Fund W, L.P. State Street Financial Center
4265 San Felipe, 8th Floor One Lincoln St.
Houston, TX 77027 Boston, MA 02111-2950
(Name and address of agent for service) (617) 261-3231

 

 

Registrant’s telephone number, including area code: 800-725-9456

Date of fiscal year end: 12/31/14

Date of reporting period: 12/31/14

 

 

 


Item 1. Reports to Stockholders.


LOGO


TABLE OF CONTENTS

 

The Endowment Institutional TEI Fund W, L.P.

  

Management Discussion of Fund Performance (Unaudited)

     1   

Report of Independent Registered Public Accounting Firm

     4   

Statement of Assets, Liabilities and Partners’ Capital

     5   

Statement of Operations

     6   

Statements of Changes in Partners’ Capital

     7   

Statement of Cash Flows

     8   

Notes to Financial Statements

     9   

Supplemental Information (Unaudited)

     16   

Privacy Policy (Unaudited)

     22   

The Endowment Master Fund, L.P.

  

Report of Independent Registered Public Accounting Firm

     24   

Statement of Assets, Liabilities and Partners’ Capital

     25   

Schedule of Investments

     26   

Statement of Operations

     33   

Statements of Changes in Partners’ Capital

     34   

Statement of Cash Flows

     35   

Notes to Financial Statements

     36   

Supplemental Information (Unaudited)

     56   

Privacy Policy (Unaudited)

     63   


 

LOGO

Dear TEF Partners:

It has been an eventful year for The Endowment Fund (the “Fund”)1 and for the core alternative strategies it accesses on behalf of investors. We hope to achieve a couple objectives with this letter. First, we will provide an update on the performance of the Fund. Second, we will provide an update on our views of the environment for the Fund and its strategies in 2015 and beyond.

Recall that the goal of The Endowment Fund is to generate a high-quality return stream that targets approximately half the historical volatility of equities (8% target standard deviation) with very low correlation to traditional stocks and bonds.

 

LOGO

Investment Performance in 2014

The Endowment Registered Fund returned 4.91% in 2014, which outpaced the HFRI FOF Composite Index by 1.53%. The year’s performance was driven by the second and third quarters with marks of 2.30% and 3.24%, respectively. The performance was an appreciated bounce after a slow start in Q1 by being down -1.22%.^

The mid-year success is attributed to the Energy and Private Equity asset classes that did well during the summer months surrounding a few successful oil and gas exploration and production IPOs and corresponding asset write-ups. The Private Equity and Energy Portfolios added 3.69% and 0.73%, respectively, to the overall portfolio (as a reminder, performance contribution is calculated by multiplying the return of the asset class by its allocation within the portfolio).^

Global Macro and Trading got a boost late in the year to finish at 0.46% when commodities volatility presented opportunities for some of our underlying funds. Real Estate and Relative Value had modest positive performance in 2014. Real Estate continues to edge higher after 2008 with many property types nearing or exceeding their pre-crisis values.^

The Event-Driven asset class was the only detractor for the year largely due to a single manager that had exposure to a wireless broadband company that went bankrupt in 2012. The markdown followed a proposed

 

 

1 The Endowment Fund has a variety of feeders, which all feed into a single “master” fund called The Endowment Master Fund, L.P. Each “feeder” fund has different expense ratios, which provide for slightly different returns from one “feeder” fund to the next. Accordingly, unless otherwise specified, the returns outlined herein are those of The Endowment Registered Fund, L.P., which is the largest “feeder” fund in The Endowment Fund complex. Your returns may vary, based on the feeder in which you invest and the timing of your investment. Please consult your capital account statement for the exact returns of your investment.

^ Portfolio composition is subject to change.

 

 

1


restructuring plan that would essentially wipe out the manager’s ownership in the company. We still believe there is a possibility to reclaim value out of this situation, but the events in 2014 were a medium-term setback, and we don’t believe this situation will be resolved soon.^

 

LOGO

Source: Endowment Advisers, L.P., December 2014.

Private Equity includes performance from prior periods received after the prior month end. Past performance is not indicative of future results. Performance is based on total return.

Economic Overview

Following 2013 and the significant sell-off in the U.S. Treasury market as a result of the taper tantrum, most market strategists were predicting a further sell-off in rates for 2014. Instead, January 2014 saw the high in the U.S. 10-year yield as the 10-year Treasury rallied over the course of the year to finish 2014 close to 2%. Further, at the beginning of 2014, few market strategists were forecasting a nearly 50% drop in oil prices.

Our point is that following market prognostications as an investment strategy often leads to poor results, and we believe that starting from a foundation of true diversification among the drivers of investment returns remains key. As such, we have built a diversified portfolio of alternative strategies across private markets and public markets, which we believe can be complementary and diversifying to portfolios that are built on traditional market exposures. Once a diversified portfolio has been built, we can then focus on what has transpired across asset classes and analyze those changes for future opportunities where there are significant reasons to change our positioning. Here is what we know:

 

   

U.S. Equity Dominance: The U.S. led developed markets in 2014 with a 12.7% return while emerging markets lagged considerably, posting a -2.2% return for the year.

 

   

Low Rates Anchored: 10-year rates in German and Japan are around 50 basis points and the US 10-year Treasury rate fell 100 bps during 2014.

 

 

^ Portfolio Composition is subject to change.

 

2


   

Dollar Strength: The U.S. Dollar strengthened significantly during 2014 against major currencies like the Euro and Japanese Yen, commodity currencies like the Australian Dollar and Canadian Dollar, and emerging market currencies generally.

Based on what we know, here is what we think:

 

   

Divergence between Emerging Market Equities and Developed Equities: Expectations for domestic equity returns are extremely high while the negative outlook for emerging market equities (inflation, geopolitical risk, falling commodity prices, etc.) appears to be priced in. As such, there is a significant divergence in valuation levels when analyzing price to earnings ratios, which suggests a margin of safety in emerging market equities versus developed equities.

 

   

Dollar strength is reflective of divergence of U.S. economy from the rest of the world: We believe the dollar rally reflects the view that with strong growth the U.S. is approaching a more normal inflationary environment while other economies are struggling with low/no growth or deflation. As central bank behaviors diverge to accommodate their different needs, we would expect a pick-up in the volatility of asset prices, particularly in currencies and rates markets.

 

   

Pullback in oil will create opportunities: The pullback in oil has occurred quickly and violently, and companies will need to react quickly as the oil market remains over-supplied nearly nine months after oil peaked in price. With significant leverage on company balance sheets combined with declining revenues, our expectation is that the energy sector will experience significant stress where investments can be made that buy good companies and assets at attractive valuations due to poor capital structures.

We believe that The Endowment Fund is particularly well-positioned to benefit from three main characteristics going forward. First, we believe that emphasizing results that are driven by skill, diversification and premia like illiquidity are important to generating full cycle results that are not as sensitive to capital market returns, for which we have more limited potential return expectations on a going-forward basis. Second, we believe that maintaining investment in a mature private investments portfolio, which The Endowment Fund allows, may avoid many of the risks and pitfalls of new investments in multi-asset private portfolios. Finally, we believe that providing access to exclusive top-tier hedge funds, early stage hedge funds and co-investment opportunities allows the delivery of focused, diversifying exposures to core alternatives that are not as dependent on the rising and falling waves of the market.

We thank you for your continued support. If you have any questions, please do not hesitate to call our service desk at 1-800-725-9456.

Kindest Regards,

Endowment Advisers, L.P.2

 

 

2 This letter is provided solely for informational purposes and is exclusively intended for use by existing Fund investors and/or pre-qualified prospective Fund investors with whom the Fund or an authorized intermediary acting on behalf of the Fund has a pre-existing substantive relationship. No other distribution or use of this newsletter has been authorized. Neither this letter nor the information contained therein constitutes an offer to sell or a solicitation of any offer to buy any securities. Any offering or solicitation will be made only to eligible investors and pursuant to the current version of the applicable Private Placement Memorandum and other governing documents, all of which must be read in their entirety.

 

3


Report of Independent Registered Public Accounting Firm

The Partners and Board of Directors

The Endowment Institutional TEI Fund W, L.P.:

We have audited the accompanying statement of assets, liabilities and partners’ capital of The Endowment Institutional TEI Fund W, L.P. (the “Institutional TEI W Fund”) as of December 31, 2014, and the related statements of operations and cash flows for the year then ended, the statements of changes in partners’ capital for each of the years in the two-year period then ended, and the financial highlights for each of the years in the four-year period then ended. These financial statements and financial highlights are the responsibility of the Institutional TEI Fund W’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Institutional TEI W Fund as of December 31, 2014, the results of its operations and its cash flows for the year then ended, the changes in its partners’ capital for each of the years in the two-year period then ended, and the financial highlights for each of the years in the four-year period then ended in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

Columbus, Ohio

March 2, 2015

 

4


THE ENDOWMENT INSTITUTIONAL TEI FUND W, L.P.

(A Limited Partnership)

Statement of Assets, Liabilities and Partners’ Capital

December 31, 2014

 

Assets

  

Investment in the Offshore Institutional W Fund, at fair value

   $ 3,832,839   

Receivable from the Offshore Institutional W Fund

     141,025   
  

 

 

 

Total assets

     3,973,864   
  

 

 

 

Liabilities and Partners’ Capital

  

Withdrawals payable

     141,025   

Accounts payable and accrued expenses

     30,133   
  

 

 

 

Total liabilities

     171,158   
  

 

 

 

Partners’ capital

     3,802,706   
  

 

 

 

Total liabilities and partners’ capital

   $ 3,973,864   
  

 

 

 

 

 

See accompanying notes to financial statements.

 

5


THE ENDOWMENT INSTITUTIONAL TEI FUND W, L.P.

(A Limited Partnership)

Statement of Operations

Year Ended December 31, 2014

 

Net investment loss allocated from the Offshore Institutional W Fund:

  

Dividend income (net of foreign tax withholding of $261)

   $ 38,547   

Interest income

     14,541   

Dividend income from affiliated investments

     87   

Expenses

     (166,451
  

 

 

 

Net investment loss allocated from the Offshore Institutional W Fund

     (113,276
  

 

 

 

Expenses of the Institutional TEI W Fund:

  

Printing fees

     11,252   

Professional fees

     13,911   

Regulatory filing fees

     20,280   
  

 

 

 

Total expenses of the Institutional TEI W Fund

     45,443   
  

 

 

 

Net investment loss of the Institutional TEI W Fund

     (158,719
  

 

 

 

Net realized and unrealized gain (loss) from investments allocated from the
Offshore Institutional W Fund:

  

Net realized gain from investments

     378,241   

Change in unrealized appreciation/depreciation from investments

     (162,757
  

 

 

 

Net realized and unrealized gain from investments allocated from the
Offshore Institutional W Fund

     215,484   
  

 

 

 

Net increase in partners’ capital resulting from operations

   $ 56,765   
  

 

 

 

 

See accompanying notes to financial statements.

 

6


THE ENDOWMENT INSTITUTIONAL TEI FUND W, L.P.

(A Limited Partnership)

Statements of Changes in Partners’ Capital

Years Ended December 31, 2013 and December 31, 2014

 

Partners’ capital at December 31, 2012

   $ 22,610,583   

Contributions

     239,501   

Withdrawals

     (8,226,057

Net increase in partners’ capital resulting from operations:

  

Net investment loss

     (280,541

Net realized gain from investments

     897,918   

Change in unrealized appreciation/depreciation from investments

     166,166   
  

 

 

 

Net increase in partners’ capital resulting from operations

     783,543   
  

 

 

 

Partners’ capital at December 31, 2013

     15,407,570   
  

 

 

 

Withdrawals

     (141,025

Transfer of Interests to PMF TEI Fund, L.P.

     (11,520,604

Net decrease in partners’ capital resulting from operations:

  

Net investment loss

     (158,719

Net realized gain from investments

     378,241   

Change in unrealized appreciation/depreciation from investments

     (162,757
  

 

 

 

Net increase in partners’ capital resulting from operations

     56,765   
  

 

 

 

Partners’ capital at December 31, 2014

   $ 3,802,706   
  

 

 

 

 

See accompanying notes to financial statements.

 

7


THE ENDOWMENT INSTITUTIONAL TEI FUND W, L.P.

(A Limited Partnership)

Statement of Cash Flows

Year Ended December 31, 2014

 

Cash flows from operating activities:

  

Net increase in partners’ capital resulting from operations

   $ 56,765   

Adjustments to reconcile net increase in partners’ capital resulting from operations to net cash provided by operating activities:

  

Net realized and unrealized gain from investments allocated from the
Offshore Institutional W Fund

     (215,484

Net investment loss allocated from the Offshore Institutional W Fund

     113,276   

Contributions to the Offshore Institutional W Fund

     (18,108

Redemptions from the Offshore Institutional W Fund

     221,436   

Change in operating assets and liabilities:

  

Receivable from the Offshore Institutional W Fund

     4,731,615   

Prepaids and other assets

     4,249   

Payable to Adviser

     (25,355

Accounts payable and accrued expenses

     4,246   
  

 

 

 

Net cash provided by operating activities

     4,872,640   
  

 

 

 

Cash flows from financing activities:

  

Withdrawals

     (4,872,640
  

 

 

 

Net cash used in financing activities

     (4,872,640
  

 

 

 

Net change in cash and cash equivalents

     —     

Cash and cash equivalents at beginning of year

     —     
  

 

 

 

Cash and cash equivalents at end of year

   $ —     
  

 

 

 

Supplemental schedule of noncash activity:

  

Transfer of Interests to PMF TEI Fund, L.P.

   $ (11,520,604

 

See accompanying notes to financial statements.

 

8


THE ENDOWMENT INSTITUTIONAL TEI FUND W, L.P.

(A Limited Partnership)

Notes to Financial Statements

December 31, 2014

(1) ORGANIZATION

The Endowment Institutional TEI Fund W, L.P. (the “Institutional TEI W Fund”), a Delaware limited partnership registered under the Investment Company Act of 1940, as amended (the “1940 Act”), commenced operations on January 1, 2011, as a non-diversified, closed-end management investment company. The Institutional TEI W Fund was created to serve as a feeder fund for The Endowment Institutional TEI Fund W, Ltd. (the “Offshore Institutional W Fund”), which in turn is a feeder fund for The Endowment Master Fund, L.P. (the “Master Fund”). For convenience, reference to the Institutional TEI W Fund may include the Offshore Institutional W Fund and Master Fund, as the context requires.

The Institutional TEI W Fund’s investment objective is to preserve capital and to generate consistent long-term appreciation and returns across a market cycle (which is estimated to be five to seven years). The Institutional TEI W Fund pursues its investment objective by investing substantially all of its assets in the Offshore Institutional W Fund, which in turn invests substantially all of its assets in the Master Fund, which has the same investment objectives as the Offshore Institutional W Fund and the Institutional TEI W Fund. The Master Fund invests its assets in a variety of investment vehicles including but not limited to limited partnerships, limited liability companies, offshore corporations and other foreign investment vehicles (collectively, the “Investment Funds”), registered investment companies (including exchange-traded funds) and direct investments in marketable securities and derivative instruments. The Master Fund’s financial statements, Schedule of Investments and notes to financial statements, included elsewhere in this report, should be read in conjunction with this report. The Offshore Institutional W Fund serves solely as an intermediary for the Institutional TEI W Fund’s investment in the Master Fund. The percentage of the Master Fund’s partnership interests indirectly owned by the Institutional TEI W Fund on December 31, 2014, was 1.22%.

The Endowment Fund GP, L.P., a Delaware limited partnership, serves as the general partner of the Institutional TEI W Fund (the “General Partner”). To the fullest extent permitted by applicable law, the General Partner has irrevocably delegated to a board of directors (the “Board” and each member a “Director”) its rights and powers to monitor and oversee the business affairs of the Institutional TEI W Fund, including the complete and exclusive authority to oversee and establish policies regarding the management, conduct, and operation of the Institutional TEI W Fund’s business. A majority of the members of the Board are independent of the General Partner and its management. To the extent permitted by applicable law, the Board may delegate any of its rights, powers and authority to, among others, the officers of the Institutional TEI W Fund, the Adviser, or any committee of the Board.

The Board is authorized to engage an investment adviser and it has selected Endowment Advisers, L.P. (the “Adviser”), to manage the Institutional TEI W Fund’s portfolio and operations, pursuant to an investment management agreement (the “Investment Management Agreement”). The Adviser is a Delaware limited partnership that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended. Under the Investment Management Agreement, the Adviser is responsible for the establishment of an investment committee, which is responsible for developing, implementing, and supervising the Institutional TEI W Fund’s investment program subject to the ultimate supervision of the Board. In addition to investment advisory services, the Adviser also functions as the servicing agent of the Institutional TEI W Fund (the “Servicing Agent”) and as such provides or procures investor services and administrative assistance for the Institutional TEI W Fund. The Adviser can delegate all or a portion of its duties as Servicing Agent to other parties, who would in turn act as sub-servicing agents.

 

 

9


THE ENDOWMENT INSTITUTIONAL TEI FUND W, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

Under the Institutional TEI W Fund’s organizational documents, the Institutional TEI W Fund’s officers and Directors are indemnified against certain liabilities arising out of the performance of their duties to the Institutional TEI W Fund. In the normal course of business, the Institutional TEI W Fund enters into contracts with service providers, which also provide for indemnifications by the Institutional TEI W Fund. The Institutional TEI W Fund’s maximum exposure under these arrangements is unknown, as this would involve any future potential claims that may be made against the Institutional TEI W Fund. However, based on experience, the General Partner expects that risk of loss to be remote.

On March 31, 2014 the Master Fund transferred in-kind a portfolio of Investment Funds to The Endowment PMF Master Fund, L.P. (the “PMF Master Fund”), in exchange for limited partnership interests (the “Interests”) of the PMF Master Fund totaling $1,723,272,229. The transfer was accounted for as a tax-free transaction resulting in Investment Funds transferring to the PMF Master Fund with a total market value of $1,490,836,309, consisting of total cost and accumulated appreciation of $1,317,376,887 and $173,459,422, respectively, and cash and other assets of $232,135,920. Partners in the Institutional TEI W Fund elected to transfer $11,520,604 of Interests from the Institutional TEI W Fund to PMF TEI Fund L.P., a feeder fund of the PMF Master Fund, in exchange for Interests in such feeder fund.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

(a) BASIS OF ACCOUNTING

The accounting and reporting policies of the Institutional TEI W Fund conform with U.S. generally accepted accounting principles (“U.S. GAAP”). The accompanying financial statements reflect the financial position of the Institutional TEI W Fund and the results of its operations. The Institutional TEI W Fund is an investment company and follows the investment company accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, “Financial Services—Investment Companies”.

(b) CASH EQUIVALENTS

The Institutional TEI W Fund considers all unpledged temporary cash investments with a maturity date at the time of purchase of three months or less to be cash equivalents.

(c) INVESTMENT SECURITIES TRANSACTIONS

The Institutional TEI W Fund records monthly, its pro-rata share of income, expenses, changes in unrealized appreciation and depreciation, and realized gains and losses derived from the Offshore Institutional W Fund.

The Institutional TEI W Fund records investment transactions on a trade-date basis.

Investments that are held by the Institutional TEI W Fund are marked to fair value at the date of the financial statements, and the corresponding change in unrealized appreciation/depreciation is included in the Statement of Operations.

(d) INVESTMENT VALUATION

The valuation of the Institutional TEI W Fund’s investments is determined as of the close of business at the end of each reporting period, generally monthly. The valuation of the Institutional TEI W Fund’s investments is

 

10


THE ENDOWMENT INSTITUTIONAL TEI FUND W, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

calculated by Citi Fund Services Ohio, Inc., the Institutional TEI W Fund’s independent administrator (the “Administrator”).

The Board has formed a valuation committee (the “Board Valuation Committee”) that is responsible for overseeing the Institutional TEI W Fund’s valuation policies, making recommendations to the Board on valuation-related matters, and overseeing implementation by the Adviser of such valuation policies.

The Board has authorized the Adviser to establish a valuation committee of the Adviser (the “Adviser Valuation Committee”). The Adviser Valuation Committee’s function, subject to the oversight of the Board Valuation Committee and the Board, is generally to review valuation methodologies, valuation determinations, and any information provided to the Adviser Valuation Committee by the Adviser or the Administrator.

The Institutional TEI W Fund invests substantially all of its assets in the Offshore Institutional W Fund, which in turn invests substantially all of its assets in the Master Fund. Investments in the Master Fund are recorded at fair value based on the Institutional TEI W Fund’s proportional share of the Master Fund’s partners’ capital, through the Offshore Institutional W Fund. Valuation of the investments held by the Master Fund is discussed in the Master Fund’s notes to financial statements, included elsewhere in this report.

(e) INVESTMENT INCOME

For investments in securities, dividend income is recorded on the ex-dividend date, net of withholding taxes. Interest income is recorded as earned on the accrual basis and includes amortization of premiums or accretion of discounts.

(f) FUND EXPENSES

Unless otherwise voluntarily or contractually assumed by the Adviser or another party, the Institutional TEI W Fund bears all expenses incurred in its business, directly or indirectly through its investment in the Master Fund (through the Offshore Institutional W Fund), including but not limited to, the following: all costs and expenses related to investment transactions and positions for the Institutional TEI W Fund’s account; legal fees; accounting, auditing and tax preparation fees; recordkeeping and custodial fees; costs of computing the Institutional TEI W Fund’s net asset value; fees for data and software providers; research expenses; costs of insurance; registration expenses; offering costs; expenses of meetings of the partners; directors fees; all costs with respect to communications to partners; offshore withholding taxes; and other types of expenses as may be approved from time to time by the Board.

(g) INCOME TAXES

The Institutional TEI W Fund is organized and operates as a limited partnership and is not subject to income taxes as a separate entity. Such taxes are the responsibility of the individual partners. Accordingly, no provision for income taxes has been made in the Institutional TEI W Fund’s financial statements. Investments in foreign securities may result in foreign taxes being withheld by the issuer of such securities.

For the tax years ended December 31, 2012 through December 31, 2014, and for all major jurisdictions, management of the Institutional TEI W Fund has evaluated the tax positions taken or expected to be taken in the course of preparing the Institutional TEI W Fund’s tax returns to determine whether the tax positions will

 

11


THE ENDOWMENT INSTITUTIONAL TEI FUND W, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

“more-likely-than-not” be sustained by the Institutional TEI W Fund upon challenge by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold and that would result in a tax benefit or expense to the Institutional TEI W Fund would be recorded as a tax benefit or expense in the current period. For the year ended December 31, 2014, the Institutional TEI W Fund did not recognize any amounts for unrecognized tax benefit/expense. A reconciliation of unrecognized tax benefit/expense is not provided herein, as the beginning and ending amounts of unrecognized tax benefit/expense are zero, with no interim additions, reductions or settlements. Tax positions taken in tax years ended December 31, 2012 through December 31, 2014 remain open under the statute of limitations (generally three years for federal income tax purposes) are subject to examination by federal and state tax jurisdictions.

(h) USE OF ESTIMATES

The financial statements have been prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results may differ from those estimates and such differences may be significant.

(i) ORGANIZATIONAL EXPENSES

The Institutional TEI W Fund’s organizational expenses (the “Organizational Expenses”) were initially borne by the Adviser or an affiliate thereof and for capital account allocation purposes assumed to be reimbursed, over not more than a 60 month period of time, notwithstanding that such Organizational Expenses were expensed in accordance with U.S. GAAP for Institutional TEI W Fund financial reporting purposes upon commencement of operations.

(3) FAIR VALUE MEASUREMENTS

The Institutional TEI W Fund records its investment in the Offshore Institutional W Fund, which in turn invests substantially all of its assets in the Master Fund, at fair value. Investments of the Master Fund are recorded at fair value as more fully discussed in the Master Fund’s notes to financial statements, included elsewhere in this report.

(4) PARTNERS’ CAPITAL ACCOUNTS

(a) ISSUANCE OF INTERESTS

Upon receipt from an eligible investor of an initial or additional application for interests (the “Interests”), which will generally be accepted as of the first day of each month, the Institutional TEI W Fund will issue new Interests. The Interests have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state. The Institutional TEI W Fund issues Interests only in private placement transactions in accordance with Regulation D or other applicable exemptions under the Securities Act. No public market exists for the Interests, and none is expected to develop. The Institutional TEI W Fund is not required, and does not intend, to hold annual meetings of its partners. The Interests are subject to substantial restrictions on transferability and resale and may not be transferred or resold except as permitted under the Institutional TEI W Fund’s limited partnership agreement. The Institutional TEI W Fund reserves the right to reject any applications for subscription of Interests.

 

12


THE ENDOWMENT INSTITUTIONAL TEI FUND W, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

(b) ALLOCATION OF PROFITS AND LOSSES

For each fiscal period, generally monthly, net profits or net losses of the Institutional TEI W Fund, including allocations from the Master Fund (through the Offshore Institutional W Fund), are allocated among and credited to or debited against the capital accounts of all partners as of the last day of each fiscal period in accordance with the partners’ respective capital account ownership percentage for the fiscal period. Net profits or net losses are measured as the net change in the value of the partners’ capital of the Institutional TEI W Fund, including any change in unrealized appreciation or depreciation of investments and income, net of expenses, and realized gains or losses during a fiscal period. Net profits or net losses are allocated after giving effect for any initial or additional applications for Interests, which generally occur at the beginning of the month, or any repurchases of Interests.

(c) REPURCHASE OF INTERESTS

A partner will not be eligible to have the Institutional TEI W Fund repurchase all or any portion of an Interest at the partner’s discretion at any time. The Adviser, which also serves as the investment adviser of the Master Fund and Offshore Institutional W Fund, generally recommends to the Board that the Institutional TEI W Fund offer to repurchase such Interests each calendar quarter, pursuant to written tenders by partners.

The Board retains the sole discretion to accept or reject the recommendation of the Adviser and to determine the amount of Interests, if any, that will be purchased in any tender offer that it does approve. Since the Institutional TEI W Fund’s assets are invested in the Master Fund (through the Offshore Institutional W Fund), the ability of the Institutional TEI W Fund to have its Interests in the Master Fund be repurchased would be subject to the Master Fund’s and Offshore Institutional W Fund’s repurchase policies. The Master Fund’s and Offshore Institutional W Fund’s repurchase policies are substantially similar to the Institutional TEI W Fund’s repurchase policy as any tender offer by the Master Fund (through the Offshore Institutional W Fund) is subject to the sole discretion of the Board. In addition, the Institutional TEI W Fund may determine not to conduct a repurchase offer each time the Master Fund and Offshore Institutional W Fund conduct a repurchase offer. In the event Interests are repurchased, there will be a substantial period of time between the date as of which partners must tender their Interests for repurchase and the date they can expect to receive payment for their Interests from the Institutional TEI W Fund.

(5) INVESTMENTS IN PORTFOLIO SECURITIES

As of December 31, 2014, all of the investments made by the Institutional TEI W Fund were in the Master Fund (through the Offshore Institutional W Fund).

(6) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

In the normal course of business, the Investment Funds in which the Institutional TEI W Fund may invest either directly or through the Offshore Institutional W Fund and Master Fund may trade various derivative securities and other financial instruments, and enter into various investment activities with off-balance sheet risk both as an investor and as a principal. The Institutional TEI W Fund’s risk of loss in these Investment Funds is limited to the Institutional TEI W Fund’s pro rata share of the value of its investment in or commitment to such Investment Funds as held directly or through the Offshore Institutional W Fund and Master Fund. In addition, the Master Fund may invest directly in derivative securities or other financial instruments to gain greater or lesser exposure to a particular asset class.

 

13


THE ENDOWMENT INSTITUTIONAL TEI FUND W, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

(7) ADMINISTRATION AGREEMENT

In consideration for administrative, accounting, and recordkeeping services, the Master Fund pays the Administrator a monthly administration fee based on the month-end partners’ capital of the Master Fund. The Administrator also provides the Institutional TEI W Fund, the Offshore Institutional W Fund and the Master Fund with legal, compliance, transfer agency, and other investor related services at an additional cost.

The fees for Institutional TEI W Fund administration are paid out of the Master Fund’s assets, which decreases the net profits or increases the net losses of the partners in the Institutional TEI W Fund.

(8) RELATED PARTY TRANSACTIONS

(a) INVESTMENT MANAGEMENT FEE

In consideration of the advisory and other services provided by the Adviser to the Master Fund and the Institutional TEI W Fund, the Master Fund pays the Adviser an investment management fee (the “Investment Management Fee”) equal to 1.00% on an annualized basis of the Master Fund’s partners’ capital calculated based on the Master Fund’s partners’ capital at the end of each month, payable quarterly in arrears. So long as the Institutional TEI W Fund invests all of its investable assets in the Offshore Institutional W Fund, which in turn invests all of its investable assets in the Master Fund, the Institutional TEI W Fund will not pay the Adviser directly any Investment Management Fee; however, should the Institutional TEI W Fund not have all of its investments in the Offshore Institutional W Fund, it may be charged the 1.00% Investment Management Fee directly. The Institutional TEI W Fund’s partners bear an indirect portion of the Investment Management Fee paid by the Master Fund. The Investment Management Fee decreases the net profits or increases the net losses of the Master Fund and indirectly the Institutional TEI W Fund as the fees reduce the capital accounts of the Master Fund’s partners.

(b) PLACEMENT AGENTS

The Institutional TEI W Fund may engage one or more placement agents (each, a “Placement Agent”) to solicit investments in the Institutional TEI W Fund. Salient Capital, L.P., an affiliate of the Adviser, is a broker-dealer who has been engaged by the Institutional TEI W Fund to serve as a Placement Agent. A Placement Agent may engage one or more sub-placement agents. The Adviser or its affiliates may pay a fee out of their own resources to Placement Agents and sub-placement agents.

 

14


THE ENDOWMENT INSTITUTIONAL TEI FUND W, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

(9) FINANCIAL HIGHLIGHTS

 

     Year ended
December 31,
2014
     Year ended
December 31,
2013
     Year ended
December 31,

2012
     Year ended
December  31,
20111
 

Net investment loss to average partners’ capital2

     (2.76)%         (1.36)%         (1.51)%         (1.58)%   

Gross expenses to average partners’ capital2

     3.69%         2.00%         2.19%         2.35%   

Net expenses to average partners capital2

     3.69%         2.00%         2.19%         2.19%3   

Portfolio turnover4

     16.96%         16.95%         20.88%         26.72%   

Total return5,6,7

     5.09%         4.07%         1.93%         (6.23)%   

Partners’ capital, end of period (000s)

   $ 3,803         $ 15,408        $ 22,611        $ 26,364   

An investor’s return (and operating ratios) may vary from those reflected based on the timing of capital transactions.

 

1

The Institutional TEI W Fund commenced operations on January 1, 2011.

2

Ratios are calculated by dividing the indicated amount by average partners’ capital measured at the end of each month during the period. Ratios include allocations of net investment loss and expenses from the Offshore Institutional W Fund and Master Fund. These ratios have been annualized for periods less than twelve months.

3

Ratio includes expenses reimbursed by the Adviser. Had the Organizational Expenses not been included as an expense at Inception and were instead amortized over 60 months as they are being handled for capital allocation purposes, the ratio of net expenses to average partners’ capital would have been 1.75% for the year ended December 31, 2011. (see Note 2)

4

The Institutional TEI W Fund is invested exclusively in the Offshore Institutional W Fund, which in turn is invested solely in the Master Fund, therefore this ratio reflects the portfolio turnover of the Master Fund, which is for the period indicated.

5

Calculated as geometrically linked monthly returns for each month in the period. Total returns are not annualized for periods less than twelve months.

6

Calculated including benefit of early repurchase fees in each applicable year. Had these early repurchase fees not been included as income for the purposes of the total return calculation, the total return for 2012 would have been 1.80%.

7

The reported total return amount for the year ended December 31, 2011, is negatively impacted by the write off of the Institutional TEI W and the Offshore Institutional W Funds’ Organizational Expenses, which occurred at Inception of the Institutional TEI W and Offshore Institutional W Funds’ operations in accordance with U.S. GAAP. Had these costs not been included as an expense at Inception for the purposes of the total return calculation and were instead amortized over 60 months as they are being handled for capital allocation purposes, the total return would have been (3.99)% for the year ended December 31, 2011.

(10) SUBSEQUENT EVENTS

Management of the Institutional TEI W Fund has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued. Based on this evaluation, no adjustments were required to the financial statements as of December 31, 2014.

 

15


THE ENDOWMENT INSTITUTIONAL TEI FUND W, L.P.

(A Limited Partnership)

Supplemental Information

December 31, 2014

(Unaudited)

Directors and Officers

The Institutional TEI W Fund’s operations are managed under the direction and oversight of the Board. Each Director serves for an indefinite term or until he or she reaches mandatory retirement, if any, as established by the Board. The Board appoints the officers of the Institutional TEI W Fund who are responsible for the Institutional TEI W Fund’s day-to-day business decisions based on policies set by the Board. The officers serve at the pleasure of the Board.

Compensation for Directors

The Master Fund, The Endowment Registered Fund, L.P., The Endowment Institutional Fund, L.P, The Endowment TEI Fund, L.P. and The Endowment Institutional TEI Fund W, L.P., together pay each of the Directors who is not an “interested person” of the Adviser, as defined in the 1940 Act (the “Independent Directors”) an annual retainer of $15,000, paid quarterly, an annual Board meeting fee of $3,000, a fee of $1,000 per informal Board meeting, a fee of $1,000 per telephonic Board meeting, an annual fee of $833 for each Compliance committee member and $625 for each Audit and Valuation committee member, an annual fee of $5,000 for the valuation committee chairman and $3,000 for each other committee chair, each of which is paid quarterly, and an annual fee of $5,000, paid quarterly, to the Lead Independent Director. There are currently six Independent Directors. In the interest of retaining Independent Directors of the highest quality, the Board intends to periodically review such compensation and may modify it as the Board deems appropriate.

Interested Directors

 

Name, Address and Age   Position(s)
Held
  Principal
Occupation(s) During
the Past 5 Years
  Number of Portfolios
in Fund Complex
Overseen by Director
  Other Directorships
Held by Director

John A. Blaisdell(1)

 

Age: 54

 

Address: c/o The Endowment Fund

4265 San Felipe, Suite 800,

Houston, TX 77027

  Director, Co-Principal Executive Officer (Since 2004)   Member, Investment Committee of the Adviser, since 2002; Managing Director of Salient, since 2002.   The Endowment Funds (5); The Endowment PMF Funds (3)   Salient Alternative Strategies Funds (investment companies) (two funds) since 2010; Salient MF Trust (investment company) (seven funds) since 2012; Salient Midstream & MLP Fund (investment company) since 2012.

Andrew Linbeck(1)

 

Age: 50

 

Address: c/o The Endowment Fund

4265 San Felipe, Suite 800,

Houston, TX 77027

  Director, Co-Principal Executive Officer (Since 2004)   Member, Investment Committee of the Adviser, since 2002; Managing Director of Salient, since 2002.   The Endowment Funds (5); The Endowment PMF Funds (3)   Salient Alternative Strategies Funds (investment companies) (two funds) 2010-2012; Salient Midstream & MLP Fund (investment company) since 2012.

 

(1)

This person’s status as an “interested” director arises from his affiliation with Salient Partners, L.P., which itself is an affiliate of the Master Fund, The Endowment Registered Fund, L.P., The Endowment Institutional Fund, L.P., The Endowment TEI Fund, L.P., The Endowment Institutional TEI Fund W, L.P., and the Adviser.

 

16


THE ENDOWMENT INSTITUTIONAL TEI FUND W, L.P.

(A Limited Partnership)

Supplemental Information, continued

December 31, 2014

(Unaudited)

 

Independent Directors

 

Name, Address and Age   Position(s)
Held
  Principal
Occupation(s) During
the Past 5 Years
  Number of Portfolios
in Fund Complex
Overseen by Director
  Other Directorships
Held  by Director

Karin B. Bonding, CFA

 

Age: 75

 

Address: c/o The Endowment Fund

4265 San Felipe, Suite 800,

Houston, TX 77027

 

Director

(Since 2010)

  Lecturer, University of Virginia, since 1996; President of Capital Markets Institute, Inc. (fee-only financial planner and investment advisor) since 1996.   The Endowment Funds (5)   Salient Alternative Strategies Funds (investment companies) (two funds) since 2010; Salient MF Trust (investment company) (seven funds) since 2012; Salient Midstream & MLP Fund (investment company) since 2012; Brandes Investment Trust (investment companies) (four funds) 2006-2012; Credit Suisse Alternative Capital Funds (investment companies) (six funds) 2005-2010.

Jonathan P. Carroll

 

Age: 53

 

Address: c/o The Endowment Fund

4265 San Felipe, Suite 800,

Houston, TX 77027

 

Director

(Since 2004)

  President of Lazarus Financial LLC (holding company) since 2006; private investor for the past six years.   The Endowment Funds (5); The Endowment PMF Funds (3)   Salient Alternative Strategies Funds (investment companies) (two funds) since 2010; Salient MF Trust (investment company) (seven funds) since 2012; Salient Midstream & MLP Fund (investment company) since 2012; LRR Energy, L.P. (energy company) since 2014.

 

17


THE ENDOWMENT INSTITUTIONAL TEI FUND W, L.P.

(A Limited Partnership)

Supplemental Information, continued

December 31, 2014

(Unaudited)

 

Name, Address and Age   Position(s)
Held
  Principal
Occupation(s) During
the Past 5 Years
  Number of Portfolios
in Fund Complex
Overseen by Director
  Other Directorships
Held  by Director

Dr. Bernard Harris

 

Age: 58

 

Address: c/o The Endowment Fund

4265 San Felipe, Suite 800,

Houston, TX 77027

 

Director

(Since 2009)

  Chief Executive Officer and Managing Partner, Vesalius Ventures, Inc (venture investing), since 2002; President of The Space Agency (marketing), since 1999; President of The Harris Foundation (non-profit), since 1998; clinical scientist, flight surgeon and astronaut for NASA, 1986 to 1996.   The Endowment Funds (5)   Salient Alternative Strategies Funds (investment companies) (two funds) since 2010; Salient MF Trust (investment company) (seven funds) since 2012; Salient Midstream & MLP Fund (investment company) since 2012; Babson funds (three) since 2011; Greater Houston Community Foundation, 2004-2009; Monebo Technologies Inc., since 2009; The National Math and Science Initiative, and Space Agency, since 2008; Communities in Schools, since 2007; American Telemedicine Association, since 2007; U.S. Physical Therapy, Inc., since 2005; Houston Technology Center, since 2004; Houston Angel Network, since 2004; The Harris Foundation, Inc., since 1998.

Richard C. Johnson

 

Age: 77

 

Address: c/o The Endowment Fund

4265 San Felipe, Suite 800,

Houston, TX 77027

 

Director

(Since 2004)

  Senior Counsel (retired) for Baker Botts LLP (law firm) since 2002; Managing Partner, Baker Botts, 1998 to 2002; practiced law at Baker Botts, 1966 to 2002 (1972 to 2002 as a partner).   The Endowment Funds (5); The Endowment PMF Funds (3)   Salient Alternative Strategies Funds (investment companies) (two funds) since 2010; Salient MF Trust (investment company) (seven funds) since 2012; Salient Midstream & MLP Fund (investment company) since 2012.

 

18


THE ENDOWMENT INSTITUTIONAL TEI FUND W, L.P.

(A Limited Partnership)

Supplemental Information, continued

December 31, 2014

(Unaudited)

 

Name, Address and Age   Position(s)
Held
  Principal
Occupation(s) During
the Past 5 Years
  Number of Portfolios
in Fund Complex
Overseen by Director
  Other Directorships
Held  by Director

G. Edward Powell

 

Age: 78

 

Address: c/o The Endowment Fund

4265 San Felipe, Suite 800,

Houston, TX 77027

 

Director

(Since 2004)

  Principal of Mills & Stowell (private equity) since 2002. Principal, Innovation Growth Partners (consulting), since 2002; Consultant to emerging and middle market businesses, 1994-2002; Managing Partner, PriceWaterhouse & Co. (Houston Office, 1982 to 1994).   The Endowment Funds (5); The Endowment PMF Funds (3)   Salient Alternative Strategies Funds (investment companies) (two funds) since 2010; Salient MF Trust (investment company) (seven funds) since 2012; Salient Midstream & MLP Fund (investment company) since 2012; Energy Services International, Inc., since 2004; Therapy Track, LLC, since 2009; Global Water Technologies, Inc.; Datavox Holdings, Inc.; Energy Services International, Inc., 2004 to 2013.

Scott E. Schwinger

 

Age: 49

 

Address: c/o The Endowment Fund

4265 San Felipe, Suite 800,

Houston, TX 77027

 

Director

(Since 2004)

  President, The McNair Group (management), since 2006; Senior Vice President and Chief Financial Officer, the Houston Texans (professional football team) (1999).   The Endowment Funds (5); The Endowment PMF Funds (3)   Salient Alternative Strategies Funds (investment companies) (two funds) since 2010; Salient MF Trust (investment company) (seven funds) since 2012; Salient Midstream & MLP Fund (investment company) since 2012; The Make-A-Wish Foundation, since 2008; YES Prep Public Schools, since 2001.

 

19


THE ENDOWMENT INSTITUTIONAL TEI FUND W, L.P.

(A Limited Partnership)

Supplemental Information, continued

December 31, 2014

(Unaudited)

 

Officers of the Fund Who Are Not Directors

 

Name, Address and Age   Position(s) Held with the Fund   Principal Occupation(s)
During the Past 5 Years

Paul Bachtold

 

Age: 41

 

Address: c/o The Endowment Fund

4265 San Felipe, Suite 800,

Houston, TX 77027

  Chief Compliance Officer (“CCO”) (Since 2010)   CCO, Salient (since 2010); Consultant, Chicago Investment Group (compliance consulting), 2009-2010; US Compliance Manager, Barclays Global Investors, 2005-2008; Consultant, Wells Fargo Bank, 2000-2005.

John E. Price

 

Age: 47

 

Address: c/o The Endowment Fund

4265 San Felipe, Suite 800,

Houston, TX 77027

  Treasurer; Principal Financial Officer (Since 2004)   Partner, Managing Director and Chief Financial Officer of Salient since 2003.

Jeremy Radcliffe

 

Age: 40

 

Address: c/o The Endowment Fund

4265 San Felipe, Suite 800,

Houston, TX 77027

  Secretary (Since 2013)   Managing Director of Salient, since 2002.

Allocation of Investments

The following chart indicates the allocation of investments among the asset classes in the Master Fund as of December 31, 2014.

 

Asset Class1

   Fair Value      %  

Consumer Products

   $ 148,925         0.04   

Energy

     38,614,678         11.64   

Event-Driven

     13,253,755         4.00   

Financials

     1,836,320         0.55   

Global Macro and Trading

     72,437,244         21.84   

Healthcare

     11,152         —   2 

Private Equity

     134,467,965         40.55   

Real Estate

     26,956,577         8.13   

Relative Value

     43,663,157         13.16   

Technology

     298,413         0.09   
  

 

 

    

 

 

 

Total Investments

   $ 331,688,186         100.00   
  

 

 

    

 

 

 

 

1

The complete list of investments is included in the Schedule of Investments of the Master Fund, which is included elsewhere in this report.

2

Amount rounds to less than 0.005%.

 

20


THE ENDOWMENT INSTITUTIONAL TEI FUND W, L.P.

(A Limited Partnership)

Supplemental Information, continued

December 31, 2014

(Unaudited)

 

Form N-Q Filings

The Institutional TEI W Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Institutional TEI W Fund’s Form N-Q is available on the Securities and Exchange Commission website at http://www.sec.gov. The Institutional TEI W Fund’s Form N-Q may be reviewed and copied at the Securities and Exchange Commission Public Reference Room in Washington, DC and information regarding operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Proxy Voting Policies

A description of the policies and procedures that the Institutional TEI W Fund uses to determine how to vote proxies relating to portfolio securities is available (i) without charge, upon request, by calling 1-800-725-9456; and (ii) on the Securities and Exchange Commission website at http://www.sec.gov.

Information regarding how the Institutional TEI W Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (i) without charge, upon request, by calling 1-800-725-9456; and (ii) on the Securities and Exchange Commission website at http://www.sec.gov.

Additional Information

The Institutional TEI W Fund’s private placement memorandum (the “PPM”) includes additional information about Directors of the Institutional TEI W Fund. The PPM is available, without charge, upon request by calling 1-800-725-9456.

 

21


THE ENDOWMENT INSTITUTIONAL TEI FUND W, L.P.

(A Limited Partnership)

Privacy Policy (Unaudited)

The Institutional TEI W Fund recognizes the importance of securing personal financial information. It is our policy to safeguard any personal and financial information that may be entrusted to us. The following is a description of the Institutional TEI W Fund’s policy regarding disclosure of nonpublic personal information.

We collect nonpublic personal information as follows:

We collect information about our investors, including, but not limited to, the investor’s name, address, telephone number, e-mail address, social security number and date of birth. We collect that information from subscription agreements, other forms of correspondence that we receive from investors, from personal conversations and from affiliated entities as permitted by law.

We receive information about investor transactions with us, including, but not limited to, account number, account balance, investment amounts, withdrawal amounts and other financial information.

We are permitted by law to disclose nonpublic information we collect, as described above, to the Institutional TEI W Fund’s service providers, including the Institutional TEI W Fund’s investment adviser, sub-advisers, servicing agent, independent administrator, custodian, legal counsel, accountant and auditor. We do not disclose any nonpublic information about our current or former investors to nonaffiliated third parties, except as required or permitted by law. We restrict access to investor nonpublic personal information to those persons who require such information to provide products or services to investors. We maintain physical, electronic and procedural safeguards that comply with federal standards to guard investors’ nonpublic personal information.

If an investor’s investment relationship with the Institutional TEI W Fund involves a financial intermediary, including, but not limited to, a broker-dealer, bank or trust company, the privacy policy of such investor’s financial intermediary would govern how any nonpublic personal information would be shared by them with nonaffiliated third parties.

 

22


the

ENDOWMENT FUND

 

The Endowment Master Fund, L.P.

Shareholder Report

December 31, 2014


Report of Independent Registered Public Accounting Firm

The Partners and Board of Directors

The Endowment Master Fund, L.P.:

We have audited the accompanying statement of assets, liabilities and partners’ capital of The Endowment Master Fund, L.P. (the “Master Fund”), including the schedule of investments, as of December 31, 2014, and the related statements of operations and cash flows for the year then ended, the statements of changes in partners’ capital for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Master Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2014, by correspondence with custodians and investees; or other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Master Fund as of December 31, 2014, the results of its operations and its cash flows for the year then ended, the changes in its partners’ capital for each of the years in the two-year period then ended and the financial highlights for each of the years in the five-year period then ended in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

Columbus, Ohio

March 2, 2015

 

24


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Statement of Assets, Liabilities and Partners’ Capital

December 31, 2014

 

Assets

  

Investments in Investment Funds, at fair value (Cost $239,600,209)

   $ 284,516,060   

Investments in affiliated Investment Funds, at fair value (Cost $57,663,386)

     44,877,316   

Investments in securities, at fair value (Cost $2,638,080)

     2,294,810   
  

 

 

 

Total investments

     331,688,186   

Cash and cash equivalents

     14,498,126   

Interest and dividends receivable

     2,481   

Foreign currency, at value (Cost $825,746)

     773,727   

Advanced contributions to Investment Funds

     6,000,000   

Receivable from investments sold

     13,120,821   

Receivable from affiliated investments sold

     6,716   

Offshore withholding tax receivable

     1,565,885   

Prepaids and other assets

     30,732   
  

 

 

 

Total assets

     367,686,674   
  

 

 

 

Liabilities and Partners’ Capital

  

Withdrawals payable

     9,847,036   

Credit facility

     36,000,000   

Investment Management Fees payable

     817,268   

Payable to affiliate

     422,005   

Administration fees payable

     70,681   

Payable to Adviser

     134,709   

Payable to Directors

     35,877   

Accounts payable and accrued expenses

     1,198,901   
  

 

 

 

Total liabilities

     48,526,477   
  

 

 

 

Partners’ capital

     319,160,197   
  

 

 

 

Total liabilities and partners’ capital

   $ 367,686,674   
  

 

 

 

 

See accompanying notes to financial statements.

 

25


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Schedule of Investments

December 31, 2014

 

     Shares      Fair
Value
     % of
Partners’
Capital
        

Investments in Investment Funds

        

Limited Partnerships, Exempted Limited Partnerships and Limited Liability Companies

        

Cayman Islands

        

Energy (1.50% of Partners’ Capital)

        

Sentient Global Resources Fund III, L.P.

      $ 3,340,777      

Sentient Global Resources Fund IV, L.P.

        1,450,470      

Private Equity (15.91% of Partners’ Capital)

        

ABRY Advanced Securities Fund, L.P.

        87,790      

CX Partners Fund Ltd(1)

        3,956,709      

Gavea Investment Fund II A, L.P.

        234,868      

Gavea Investment Fund III A, L.P.

        3,437,682      

Hillcrest Fund, L.P.

        1,884,190      

India Asset Recovery Fund L.P.

        39,672      

J.C. Flowers III L.P.(1)

        2,278,954      

LC Fund IV, L.P.(1)

        3,657,123      

New Horizon Capital III, L.P.(1)

        4,743,819      

Northstar Equity Partners III

        1,177,866      

Orchid Asia IV, L.P.(1)

        1,352,071      

Reservoir Capital Partners (Cayman), L.P.

        2,203,444      

Tiger Global Private Investment Partners IV, L.P.

        1,927,302      

Tiger Global Private Investment Partners V, L.P.(1)

        8,676,096      

Tiger Global Private Investment Partners VI, L.P.

        2,258,662      

Trustbridge Partners II, L.P.(1)

        3,100,000      

Trustbridge Partners III, L.P.

        7,055,350      

Trustbridge Partners IV, L.P.(1)

        2,707,738      

Real Estate (1.13% of Partners’ Capital)

        

Forum European Realty Income III, L.P.(1)

        1,809,195      

Phoenix Asia Real Estate Investments II, L.P.

        1,550,395      

Phoenix Real Estate Fund (T) L.P.

        253,922      

Relative Value (0.00% of Partners’ Capital)

        

Montrica Global Opportunities Fund L.P.

     200         2,309      
     

 

 

    

Total Cayman Islands

        59,186,404      
     

 

 

    

Guernsey

        

Private Equity (0.32% of Partners’ Capital)

        

Mid Europa Fund III LP(1)

        1,007,568      
     

 

 

    

Total Guernsey

        1,007,568      
     

 

 

    

Republic of Mauritius

        

Real Estate (0.74% of Partners’ Capital)

        

ORBIS Real Estate Fund I(2)

        2,361,326      
     

 

 

    

Total Republic of Mauritius

        2,361,326      
     

 

 

    

 

See accompanying notes to financial statements.

 

26


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Schedule of Investments, continued

December 31, 2014

 

     Shares      Fair
Value
     % of
Partners’
Capital
        

Limited Partnerships, Exempted Limited Partnerships and Limited Liability Companies (continued)

        

United Kingdom

        

Private Equity (1.26% of Partners’ Capital)

        

Darwin Private Equity I L.P.(1)

      $ 856,964      

Sovereign Capital Limited Partnership III

        3,157,353      

Real Estate (0.31% of Partners’ Capital)

        

Benson Elliot Real Estate Partners II, L.P.(1)

        193,585      

Patron Capital, L.P. II(1)

        55,898      

Patron Capital, L.P. III

        729,588      
     

 

 

    

Total United Kingdom

        4,993,388      
     

 

 

    

United States

        

Energy (10.53% of Partners’ Capital)

        

ArcLight Energy Partners Fund IV, L.P.(1)

        567,295      

ArcLight Energy Partners Fund V, L.P.(1)

        960,102      

CamCap Resources, L.P.

        18,769      

EIV Capital Fund II, LP

        616,536      

EMG AE Permian Co-Investment, LP

        2,995,970      

EnCap Energy Capital Fund VII-B LP(1)

        582,651      

EnCap Energy Infrastructure TE Feeder, L.P.(1)

        691,024      

Energy & Minerals Group Fund II, L.P.(1)

        2,735,496      

Intervale Capital Fund, L.P.(1)

        951,690      

Merit Energy Partners G, L.P.

        2,797,219      

Midstream & Resources Follow-On Fund, L.P.(1)

        5,814,943      

NGP Energy Technology Partners II, L.P.

        1,050,946      

NGP IX Offshore Fund, L.P.(1)

        2,417,818      

NGP Midstream & Resources, L.P.(1)

        3,318,074      

Quantum Parallel Partners V, LP

        6,544,496      

Tenaska Power Fund II-A, L.P.(1)

        1,526,661      

Tocqueville Gold Partners, L.P.

        24,281      

Event-Driven (4.15% of Partners’ Capital)

        

BDCM Partners I, L.P.

        4,055,329      

Credit Distressed Blue Line Fund, L.P.(2)

        1,626,518      

Fortelus Special Situations Fund LP

        542,209      

Halcyon European Structured Opportunities Fund L.P.(2)

        10,042      

Harbinger Capital Partners Fund I, L.P.(2)

        2,659,886      

Harbinger Capital Partners Fund II, L.P.

        182,574      

Harbinger Capital Partners Special Situations Fund, L.P.

        138,286      

Harbinger Class L Holdings (U.S.), LLC

        17,171      

Harbinger Class LS Holdings I (U.S.) Trust

     592         —        

Harbinger Class PE Holdings (U.S.) Trust

     1         197,258      

 

See accompanying notes to financial statements.

 

27


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Schedule of Investments, continued

December 31, 2014

 

     Shares      Fair
Value
     % of
Partners’
Capital
        

Limited Partnerships, Exempted Limited Partnerships and Limited Liability Companies (continued)

        

United States (continued)

        

Event-Driven (4.15% of Partners’ Capital) (continued)

        

Prospect Harbor Credit Partners LP

      $ 199,836      

Providence MBS Fund, LP

        3,624,646      

Global Macro and Trading (22.70% of Partners’ Capital)

        

Blueshift Energy Fund, LP(2)

        20,211,256      

Cumulus Energy Fund, LP

        8,553,691      

D.E. Shaw Heliant Fund, LLC

        13,459,028      

Kepos Alpha Fund LP

        17,038,407      

Mirarc Domestic Fund, LP(3)

        13,140,235      

Passport Global Strategies III Ltd.

     348         34,627      

Private Equity (24.53% of Partners’ Capital)

        

Accel-KKR Capital Partners III, LP

        1,941,812      

Advent Latin American Private Equity Fund IV-F L.P.

        639,968      

Advent Latin American Private Equity Fund V-F L.P.

        1,758,063      

Artis Juicy SPV, L.P.

        299,500      

Artis Ventures II, L.P.

        2,030,166      

Audax Mezzanine Fund II, L.P.(1)

        786,810      

Audax Mezzanine Fund III, L.P.(1)

        10,059,428      

BDCM Opportunity Fund II, L.P.(1)

        1,561,648      

Black River Commodity Multi-Strategy Fund LLC

        89,129      

Capital Royalty Partners LP(1)

        147,749      

Catterton Growth Partners, L.P.

        2,669,427      

CCM Small Cap Value Qualified Fund, L.P.(2)

        293,162      

Chrysalis Ventures III, L.P.

        364,210      

Column Group II, LP

        663,691      

Crosslink Crossover Fund IV, L.P.

        122,182      

Crosslink Crossover Fund V, L.P.

        731,050      

Crosslink Crossover Fund VI, L.P.

        2,959,274      

Dace Ventures I, LP

        218,586      

Fairhaven Capital Partners, L.P.

        1,346,838      

Founders Fund III, LP

        3,622,783      

Founders Fund IV, LP

        3,209,369      

Garrison Opportunity Fund II A LLC

        2,115,558      

Garrison Opportunity Fund LLC

        2,315,439      

HealthCor Partners Fund, L.P.

        1,477,212      

Highland Credit Strategies Liquidation Vehicle Onshore

        307,204      

ILS Property & Casualty Master Fund Ltd.

        786,193      

Ithan Creek Partners, L.P.

        1,767,160      

Kior Shares Liquidating Capital Account

        —        

 

See accompanying notes to financial statements.

 

28


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Schedule of Investments, continued

December 31, 2014

 

     Shares      Fair
Value
     % of
Partners’
Capital
        

Limited Partnerships, Exempted Limited Partnerships and Limited Liability Companies (continued)

        

United States (continued)

        

Private Equity (24.53% of Partners’ Capital) (continued)

        

L-R Global Partners, L.P.

      $ 62,759      

MatlinPatterson Global Opportunities Partners III L.P.(1)

        1,524,132      

Middle East North Africa Opportunities Fund, L.P.(1)(2)

     728         123,897      

Monomoy Capital Partners II, L.P.

        1,006,772      

Monomoy Capital Partners, L.P.

        357,098      

Monsoon India Select Equity Fund 2, L.P.

        46,312      

Monsoon India Select Equity Fund, L.P.

        25,809      

Penta Asia Domestic Partners, L.P.

        192,568      

Pine Brook Capital Partners, L.P.(1)

        2,982,247      

Pinto America Growth Fund, L.P.

        396,065      

Private Equity Investment Fund V, L.P.(1)

        7,560,049      

Saints Capital VI, L.P.

        1,983,835      

Samlyn Onshore Fund, LP

        61,247      

Sanderling Venture Partners VI Co-Investment Fund, L.P.

        265,899      

Sanderling Venture Partners VI, L.P.

        198,113      

Sterling Capital Partners II, L.P.(1)

        205,427      

Sterling Group Partners II, L.P.

        151,224      

Sterling Group Partners III, L.P.

        2,185,188      

Strategic Value Global Opportunities Fund I-A, L.P.

        208,687      

TAEF Fund, LLC

        519,455      

Tenaya Capital V, LP

        886,658      

Tenaya Capital VI, LP

        1,003,415      

The Column Group, LP

        2,340,000      

The Raptor Global Fund L.P.

     222         108,926      

Trivest Fund IV, L.P.(1)

        2,647,447      

Tuckerbrook SB Global Distressed Fund I, L.P.

        738,100      

Valiant Capital Partners LP

        741,345      

VCFA Private Equity Partners IV, L.P.(1)

        133,402      

VCFA Venture Partners V, L.P.

        643,749      

Voyager Capital Fund III, L.P.

        662,275      

WestView Capital Partners II, L.P.(1)

        4,030,528      

Real Estate (5.73% of Partners’ Capital)

        

Aslan Realty Partners III, L.L.C.(1)

        66,246      

Cypress Realty VI Limited Partnership

        745,387      

Florida Real Estate Value Fund, L.P.

        1,476,725      

GTIS Brazil Real Estate Fund (Brazilian Real) LP(1)

        3,067,793      

Lone Star Real Estate Fund II (U.S.), L.P.

        499,892      

Monsoon Infrastructure & Realty Co-Invest, L.P.(1)

        2,654,106      

 

See accompanying notes to financial statements.

 

29


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Schedule of Investments, continued

December 31, 2014

 

     Shares      Fair
Value
     % of
Partners’
Capital
 
        

Limited Partnerships, Exempted Limited Partnerships and Limited Liability Companies (continued)

        

United States (continued)

        

Real Estate (5.73% of Partners’ Capital) (continued)

        

Northwood Real Estate Co-Investors LP(1)

      $ 1,183,659      

Northwood Real Estate Partners LP(1)

        1,786,885      

Parmenter Realty Fund III, L.P.(1)

        450,481      

Parmenter Realty Fund IV, L.P.(1)

        1,069,838      

Pearlmark Mezzanine Realty Partners III, L.L.C.(1)

        1,442,413      

Pennybacker II, LP(1)

        940,000      

SBC Latin America Housing US Fund, LP

        1,684,370      

Square Mile Partners III LP(1)

        1,229,381      

Relative Value (12.99% of Partners’ Capital)

        

Blue Mountain Credit Alternatives Fund L.P.

        4,202,430      

Citadel Wellington LLC

        19,606,393      

Eton Park Fund, L.P.

        372,846      

Kenmont Onshore Fund, L.P.(2)

        2,897      

King Street Capital, L.P.

        174,618      

Magnetar Capital Fund LP

        567,870      

Magnetar SPV LLC

        265,562      

Millennium USA LP

        11,377,862      

OZ Asia Domestic Partners, LP(1)

        285,246      

PIPE Equity Partners, LLC(2)

        1,334,510      

PIPE Select Fund, LLC(2)

        3,113,587      

Stark Investments Ltd Partnership(1)

        10,265      

Stark Select Asset Fund, LLC

        154,835      
     

 

 

    

Total United States

        257,347,306      
     

 

 

    

Total Limited Partnerships, Exempted Limited Partnerships and Limited Liability Companies

        324,895,992         101.80%   
     

 

 

    

Passive Foreign Investment Companies

        

Cayman Companies Limited by Shares, Exempted Companies and Limited Liability Companies

        

Energy (0.07% of Partners’ Capital)

        

Ospraie Special Opportunities (Offshore) Ltd.

        209,460      

Private Equity (0.12% of Partners’ Capital)

        

Q China Holdings Ltd.

     1,052         111,506      

Q India Holdings Ltd.

     2,429         185,505      

Quorum Fund Ltd

     1,608         93,494      

 

See accompanying notes to financial statements.

 

30


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Schedule of Investments, continued

December 31, 2014

 

     Shares      Fair
Value
     % of
Partners’
Capital
 
        

Passive Foreign Investment Companies (continued)

        

Cayman Companies Limited by Shares, Exempted Companies and Limited Liability Companies (continued)

        

Relative Value (0.69% of Partners’ Capital)

        

CRC Credit Fund Ltd.

     9,585       $ 2,074,787      

Overseas CAP Partners, Inc.

     14         117,140      
     

 

 

    

Total Cayman Companies Limited by Shares, Exempted Companies and Limited Liability Companies

        2,791,892      
     

 

 

    

Total Passive Foreign Investment Companies

        2,791,892         0.88%   
     

 

 

    

Private Corporations

        

United States

        

Real Estate (0.53% of Partners’ Capital)

        

Legacy Partners Realty Fund II, Inc.

        243,273      

Legacy Partners Realty Fund III, Inc.

        1,203,588      

Net Lease Private REIT V, Inc.

        2,367      

Net Lease Private REIT VI, Inc.

        66,204      

Net Lease Private REIT VII, Inc.

        95,030      

Net Lease Private REIT VII-A, Inc.

        95,030      
     

 

 

    

Total Private Corporations

        1,705,492         0.53%   
     

 

 

    

Total Investments in Investment Funds (Cost $297,263,595)

        329,393,376         103.21%   
     

 

 

    

Investments in Securities

        

Common Stocks

        

China

        

Technology (0.09% of Partners’ Capital)

        

JD.com, Inc.

     12,896         298,413      

Japan

        

Consumer Products (0.05% of Partners’ Capital)

        

Aderans Co., Ltd.

     15,700         148,925      

United States

        

Financials (0.58% of Partners’ Capital)

        

Ellington Financial LLC(1)

     92,000         1,836,320      

Healthcare (0.00% of Partners’ Capital)

        

Chimerix, Inc.

     277         11,152      
     

 

 

    

Total Common Stocks

        2,294,810         0.72%   
     

 

 

    

Total Investments in Securities (Cost $2,638,080)

        2,294,810         0.72%   
     

 

 

    

Total Investments (Cost $299,901,675)

      $ 331,688,186         103.93%   
     

 

 

    

 

See accompanying notes to financial statements.

 

31


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Schedule of Investments, continued

December 31, 2014

 

The Master Fund’s total outstanding capital commitments to Investment Funds as of December 31, 2014 were $48,443,873. For certain Investment Funds for which the Master Fund has a capital commitment, the Master Fund may be allocated its pro-rata share of expenses prior to having to fund a capital call for such expenses.

All Investment Funds and securities are non-income producing unless noted otherwise.

 

(1)

Income producing investment

(2)

Affiliated investments (See note 5b)

(3)

Affiliated investments for which ownership exceeds 25% of Partners’ Capital

 

See accompanying notes to financial statements.

 

32


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Statement of Operations

Year Ended December 31, 2014

 

Investment income:

  

Dividend income (net of foreign tax withholding of $21,252)

   $ 3,955,439   

Interest income

     1,293,797   

Dividend income from affiliated investments

     7,120   
  

 

 

 

Total investment income

     5,256,356   
  

 

 

 

Expenses:

  

Investment Management Fees

     7,581,994   

Administration fees

     482,682   

Professional fees

     4,865,339   

Consulting fees

     1,600,000   

Custodian fees

     168,309   

Directors fees

     107,133   

Interest expense

     151,109   

Offshore withholding tax expense

     384,037   

Other expenses

     1,028,325   
  

 

 

 

Total expenses

     16,368,928   
  

 

 

 

Net investment loss

     (11,112,572
  

 

 

 

Net realized and unrealized gain (loss):

  

Net realized gain from investments and foreign currency translations

     42,983,607   

Net realized gain from futures contracts

     7,029,230   

Net realized loss from purchased options

     (9,921,550

Net realized gain from swap agreements

     1,557,910   

Net realized gain from redemptions in-kind

     535,395   

Net realized loss from affiliated Investment Funds

     (3,987,385

Change in unrealized appreciation/depreciation

     (24,361,486
  

 

 

 

Net realized and unrealized gain

     13,835,721   
  

 

 

 

Net increase in partners’ capital resulting from operations

   $ 2,723,149   
  

 

 

 

 

See accompanying notes to financial statements.

 

33


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Statements of Changes in Partners’ Capital

Years Ended December 31, 2013 and December 31, 2014

 

Partners’ capital at December 31, 2012

   $ 3,071,734,183   

Contributions

     468,913   

Withdrawals

     (1,130,957,698

Net increase in partners’ capital resulting from operations:

  

Net investment loss

     (20,454,781

Net realized gain from investments and foreign currency translations

     199,189,193   

Net realized loss from futures contracts

     (30,196,456

Net realized loss from swap agreements

     (59,469,633

Net realized loss from forward foreign currency exchange contracts

     (8,860,029

Net realized loss from redemptions in-kind

     170,632   

Net realized gain from affiliated Investment Funds

     19,603,727   

Change in unrealized appreciation/depreciation

     22,813,375   
  

 

 

 

Net increase in partners’ capital resulting from operations

     122,796,028   
  

 

 

 

Partners’ capital at December 31, 2013

     2,064,041,426   
  

 

 

 

Contributions

     352,657   

Withdrawals

     (24,684,806

Transfer of Interests to The Endowment PMF Master Fund, L.P.

     (1,723,272,229

Net increase in partners’ capital resulting from operations:

  

Net investment loss

     (11,112,572

Net realized gain from investments and foreign currency translations

     42,983,607   

Net realized gain from futures contracts

     7,029,230   

Net realized loss from purchased options

     (9,921,550

Net realized gain from swap agreements

     1,557,910   

Net realized gain from redemptions in-kind

     535,395   

Net realized loss from affiliated Investment Funds

     (3,987,385

Change in unrealized appreciation/depreciation

     (24,361,486
  

 

 

 

Net increase in partners’ capital resulting from operations

     2,723,149   
  

 

 

 

Partners’ capital at December 31, 2014

   $ 319,160,197   
  

 

 

 

 

See accompanying notes to financial statements.

 

34


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Statement of Cash Flows

Year Ended December 31, 2014

 

Cash flows from operating activities:

  

Net increase in partners’ capital resulting from operations

   $ 2,723,149   

Adjustments to reconcile net increase in partners’ capital resulting from operations to net cash provided by operating activities:

  

Purchases of investments

     (287,572,670

Proceeds from disposition of investments

     572,196,447   

Premiums paid on credit default swap agreements

     2,907,059   

Net realized gain from investments

     (33,477,189

Net realized gain from redemptions in-kind

     (535,395

Net realized loss from affiliated Investment Funds

     3,987,385   

Change in unrealized appreciation/depreciation from investments

     15,025,640   

Change in unrealized appreciation/depreciation from swap agreements

     1,608,926   

Cash and other assets paid in transfer (Note 1)

     (232,435,920

Change in operating assets and liabilities:

  

Deposits with brokers for futures contracts

     21,305,867   

Deposits with brokers for swap agreements

     15,534,304   

Advanced contributions to Investment Funds

     (6,000,000

Interest and dividends receivable

     (2,481

Foreign currency, at value

     (773,727

Receivable from investments sold

     72,260,004   

Receivable from affiliated investments sold

     35,235,562   

Offshore withholding tax receivable

     (1,565,885

Prepaids and other assets

     392,108   

Investment Management Fees payable

     (5,814,064

Payable to affiliate

     422,005   

Offshore withholding tax payable

     (910,683

Administration fees payable

     (185,103

Payable to Adviser

     34,709   

Payable to Directors

     (105,873

Accounts payable and accrued expenses

     168,380   
  

 

 

 

Net cash provided by operating activities

     174,422,555   
  

 

 

 

Cash flows from financing activities:

  

Borrowings on credit facility

     36,000,000   

Contributions

     352,657   

Withdrawals

     (665,708,447
  

 

 

 

Net cash used in financing activities

     (629,355,790
  

 

 

 

Net change in cash and cash equivalents

     (454,933,235

Cash and cash equivalents at beginning of year

     469,431,361   
  

 

 

 

Cash and cash equivalents at end of year

   $ 14,498,126   
  

 

 

 

Supplemental schedule of cash activity:

  

Cash paid for offshore withholding taxes

   $ 2,860,605   

Cash paid for interest

     158,495   

Supplemental schedule of noncash activity:

  

Redemptions in-kind (Cost $1,162,094)

   $ 1,524,972   

Transfer of Interests to The Endowment PMF Master Fund, L.P. (Note 1)

     (1,490,836,309

 

See accompanying notes to financial statements.

 

35


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Notes to Financial Statements

December 31, 2014

 

(1) ORGANIZATION

The Endowment Master Fund, L.P. (the “Master Fund”) a Delaware limited partnership, commenced operations on April 1, 2003. The Master Fund operated as an unregistered investment vehicle until March 10, 2004, at which time it registered as a non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Master Fund is the master fund in a master-feeder structure in which there are currently eight feeder funds.

The Master Fund’s investment objective is to preserve capital and to generate consistent long-term appreciation and returns across a market cycle (which is estimated to be five to seven years). The Master Fund is primarily a “fund of funds” which pursues its investment objective by investing its assets in a variety of investment vehicles including, but not limited to, limited partnerships, limited liability companies, offshore corporations and other foreign investment vehicles (collectively, the “Investment Funds”), registered investment companies (including exchange-traded funds) and direct investments in marketable securities and derivative instruments. The Investment Funds are managed by a carefully selected group of investment managers, identified by the Adviser, as hereinafter defined. The various styles and strategies employed by the Investment Funds and supplemented by the Master Fund’s direct investments, serve to achieve a portfolio that is broadly allocated.

The Endowment Fund GP, L.P., a Delaware limited partnership, serves as the general partner of the Master Fund (the “General Partner”). To the fullest extent permitted by applicable law, the General Partner has irrevocably delegated to a board of directors (the “Board” and each member a “Director”) 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. A majority of the members of the Board are independent of the General Partner and its management. To the extent permitted by applicable law, the Board may delegate any of its rights, powers and authority to, among others, the officers of the Master Fund, the Adviser, as hereinafter defined, or any committee of the Board.

The Board is authorized to engage an investment adviser, and pursuant to an investment management agreement, (the “Investment Management Agreement”), it has selected Endowment Advisers, L.P. (the “Adviser”), to manage the Master Fund’s portfolio and operations. The Adviser is a Delaware limited partnership that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended. Under the Investment Management Agreement, the Adviser is responsible for the establishment of an investment committee (the “Investment Committee”), which is responsible for developing, implementing, and supervising the Master Fund’s investment program subject to the ultimate supervision of the Board.

Under the Master Fund’s organizational documents, the Master Fund’s Directors and officers are indemnified against certain liabilities arising out of the performance of their duties to the Master Fund. In the normal course of business, the Master Fund enters into contracts with service providers, which also provide for indemnifications by the Master Fund. The Master Fund’s maximum exposure under these arrangements is unknown, as this would involve any future potential claims that may be made against the Master Fund. However, based on experience, the General Partner expects that risk of loss to be remote.

On March 31, 2014 the Master Fund transferred in-kind a portfolio of Investment Funds to The Endowment PMF Master Fund, L.P. (the “PMF Master Fund”), in exchange for limited partnership interests (the “Interests”) of the PMF Master Fund totaling $1,723,272,229. The transfer was accounted for as a tax-free transaction resulting in Investment Funds transferring to the PMF Master Fund with a total market value of $1,490,836,309, consisting of total cost and accumulated appreciation of $1,317,376,887 and $173,459,422, respectively, and cash and other assets of $232,435,920.

 

36


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

(a) BASIS OF ACCOUNTING

The accounting and reporting policies of the Master Fund conform with U.S. generally accepted accounting principles (“U.S. GAAP”). The accompanying financial statements reflect the financial position of the Master Fund and the results of its operations. The Master Fund is an investment company that follows the investment company accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, “Financial Services-Investment Companies”.

(b) CASH EQUIVALENTS

The Master Fund considers all unpledged temporary cash investments with a maturity date at the time of purchase of three months or less to be cash equivalents.

(c) INVESTMENT SECURITIES TRANSACTIONS

The Master Fund records investment transactions on a trade-date basis.

Investments that are held by the Master Fund, including those that have been sold short, are marked to fair value at the date of the financial statements, and the corresponding change in unrealized appreciation/depreciation is included in the Statement of Operations.

Dividend income is recorded on the ex-dividend date. Other investment fund distributions are recorded based on the detail provided with the distribution notice, as applicable. Realized gains or losses on the disposition of investments are accounted for based on the first in first out method.

(d) INVESTMENT VALUATION

The valuation of the Master Fund’s investments is determined as of the close of business at the end of each reporting period, generally monthly. The valuation of the Master Fund’s investments is calculated by Citi Fund Services Ohio, Inc., the Master Fund’s independent administrator (the “Administrator”).

The Board has formed a valuation committee (the “Board Valuation Committee”) that is responsible for overseeing the Master Fund’s valuation policies, making recommendations to the Board on valuation-related matters, and overseeing implementation by the Adviser of such valuation policies.

The Board has authorized the Adviser to establish a valuation committee of the Adviser (the “Adviser Valuation Committee”). The Adviser Valuation Committee’s function, subject to the oversight of the Board Valuation Committee and the Board, is generally to review valuation methodologies, valuation determinations, and any information provided to the Adviser Valuation Committee by the Adviser or the Administrator.

The Master Fund is not able to obtain complete underlying investment holding details on each of the Investment Funds in order to determine if the Master Fund’s proportional, aggregated, indirect share of any investments held by the Investment Funds exceeds 5% of partners’ capital of the Master Fund as of December 31, 2014.

 

37


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

Investments held by the Master Fund are valued as follows:

 

   

INVESTMENT FUNDS—Investments in Investment Funds are carried at fair value, using the net asset value (the “NAV”) as a practical expedient, as provided to the Administrator by the investment managers of such Investment Funds or the administrators of such Investment Funds. These Investment Funds value their underlying investments in accordance with policies established by such Investment Funds. Prior to investing in any Investment Fund, the Adviser Valuation Committee, as part of the due diligence process, conducts a review of the valuation methodologies employed by the Investment Fund to determine whether such methods are appropriate for the asset types. All of the Master Fund’s valuations utilize financial information supplied by each Investment Fund and are net of management and estimated performance incentive fees or allocations payable to the Investment Funds’ managers pursuant to the Investment Funds’ agreements. Generally, Investment Funds in which the Master Fund invests will use market value when available, and otherwise will use principles of fair value applied in good faith. The Adviser Valuation Committee will consider whether it is appropriate, in light of the relevant circumstances, to value shares at NAV as reported by an Investment Fund for valuation purposes, or whether to adjust such reported value to reflect an adjusted fair value. Because of the inherent uncertainty of valuation, fair value may differ significantly from the value that would have been used had readily available markets for the investments in Investment Funds existed. The Master Fund’s investments in Investment Funds are subject to the terms and conditions of the respective operating agreements and offering memoranda of such Investment Funds. Investment Funds are typically categorized as Level 2 or Level 3 in the fair value hierarchy based upon liquidity.

 

   

SECURITIES LISTED ON A SECURITIES EXCHANGE OR OVER-THE-COUNTER EXCHANGES— In general, the Master Fund values these securities at their last sales price on the exchange or over-the-counter market on the valuation date. If the security is listed on more than one exchange, the Master Fund uses the price from the exchange that it considers to be the principal exchange on which the security is traded. If there have been no sales for that day on the exchange where the security is principally traded, then the price of the security will be valued at the mean between the closing bid and ask prices on the valuation date. In these situations, valuations are typically categorized as Level 1 in the fair value hierarchy. Securities traded on a foreign securities exchange will generally be valued at their closing prices on the exchange where such securities are primarily traded, and translated into U.S. dollars at the current exchange rate. If an event occurred between the close of the foreign exchange and the valuation date of the Master Fund’s NAV that would materially affect the value of the security and the NAV of the Master Fund, the value of such security and the NAV of the Master Fund will be adjusted to reflect the change in the estimated value of the security. Such fair valued securities are typically categorized as Level 2 in the fair value hierarchy, based upon the inputs used to value the securities.

 

   

DERIVATIVES—Exchange traded futures contracts are valued using quoted final settlement prices from the national exchange on which they are principally traded and are typically categorized as Level 1 in the fair value hierarchy. If no such sales price is reported by such exchange on the valuation date, the Adviser Valuation Committee will determine the fair value in good faith using information that is available at such time. Such fair valued investments are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based upon the inputs used to value the investments.

Options that are listed on a securities exchange are generally valued at the midpoint of closing “bid” and “ask” prices for options held long and short, respectively on the valuation date and are typically categorized as Level 1 in the fair value hierarchy. If no such bid or ask price is reported, the positions

 

38


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

are valued at the last sales price on the valuation date. If no such sales price is reported by such exchange on the valuation date, the Adviser Valuation Committee in conjunction with the Administrator will determine the fair value of such investments in good faith using information that is available at such time. Such fair valued options are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based upon the inputs used to value the investments.

Non exchange-traded derivatives, such as swap agreements, are valued based on procedures approved by the Board and are typically categorized as Level 2 in the fair value hierarchy. Credit default swaps and total return swaps are generally fair valued using evaluated quotes provided by an independent pricing service. If a quotation is not available from the independent pricing service, the price is obtained from a broker (typically the counterparty to the swap agreement) on the valuation date.

Forward foreign currency exchange contracts are valued at the current day’s interpolated foreign exchange rate, which is calculated using the current day’s spot rate and the 30 day forward rate, or the 30 to 720 day forward rates converted to U.S. dollars at the exchange rate of such currencies on the valuation date. Such valuations are provided by a pricing service approved by the Board, and are typically categorized as Level 2 in the fair value hierarchy.

 

   

OTHER—Investments in open-end registered investment companies (“RICs”) that do not trade on an exchange are valued at the end of day NAV per share and are categorized as Level 1 in the fair value hierarchy. Where no value is readily available from a RIC or other security, or where a value supplied by a RIC is deemed not to be indicative of the RIC’s value, the Adviser Valuation Committee and/or the Board Valuation Committee, in consultation with the Administrator or the Adviser, will determine, in good faith, the fair value of the RIC or other security. Such fair valued investments are typically categorized as Level 1 or Level 2 in the fair value hierarchy, based upon the inputs used to value the investments.

Fixed-income securities are valued according to prices as furnished by an independent pricing service or broker/dealer quotes and are typically categorized as Level 2 in the fair value hierarchy. Fixed-income securities maturing within a relatively short time frame may be valued at amortized cost, which approximates market value, and are typically categorized as Level 2 in the fair value hierarchy.

 

   

SECURITIES NOT ACTIVELY TRADED—The value of securities, derivatives or synthetic securities that are not actively traded on an exchange shall be determined by obtaining quotes from brokers that normally deal in such securities or by an unaffiliated pricing service that may use actual trade data or procedures using market indices, matrices, yield curves, specific trading characteristics of certain groups of securities, pricing models or a combination of these procedures pursuant to the valuation procedures approved by the Board. In each of these situations, valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based upon the inputs used to value the investments.

(e) FOREIGN CURRENCY

The accounting records of the Master Fund are maintained in U.S. dollars. Foreign currency amounts and investments denominated in a foreign currency, if any, are translated into U.S. dollar amounts at current exchange rates on the valuation date. Purchases and sales of investments denominated in foreign currencies are translated into U.S. dollar amounts at the exchange rate on the respective dates of such transactions. The Master Fund does not segregate the results of operations resulting from changes in foreign exchange rates on

 

39


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

investments from 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 and foreign currency translations reported in the accompanying Statement of Operations and Statement of Changes in Partners’ Capital.

(f) DERIVATIVE INSTRUMENTS

All open derivative positions at period-end, if any, are presented in the Master Fund’s Schedules of Investments. In addition to the derivatives held by the Master Fund, the Investment Funds may have directly engaged in derivative transactions during the period. The following is a description of the derivative instruments the Master Fund utilizes as part of its investment strategy, including the primary underlying risk exposures related to each instrument type.

OPTIONS CONTRACTS—The Master Fund may invest in options contracts to speculate on the price movements of a financial instrument or for use as an economic hedge against certain positions held in the Master Fund’s portfolio. Options contracts purchased give the Master Fund the right, but not the obligation, to buy or sell the underlying instrument for a specified price upon exercise at any time during the option period. Options contracts written obligate the Master Fund to buy or sell the underlying instrument for a specified price upon exercise at any time during the option period. When the Master Fund writes an options contract, an amount equal to the premium received by the Master Fund is recorded as a liability and is subsequently adjusted to the current fair value of the option contract written.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS—The Master Fund may enter into forward foreign currency exchange contracts in connection with its investment objective in order to gain more or less exposure to foreign currencies. The forward foreign currency exchange contracts are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized gains or losses until the contract settlement date. The Master Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. The Master Fund remains subject to credit risk with respect to the amount it expects to receive from counterparties. However, the Master Fund has sought to mitigate these risks by generally requiring the posting of collateral at prearranged exposure levels to cover its exposure to the counterparty.

FUTURES CONTRACTS—The Master Fund may invest in futures contracts as part of its hedging strategy to manage exposure to interest rate, equity and market price movements, and commodity prices. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date. The underlying asset is not physically delivered. Futures contracts are valued at their quoted daily settlement prices. Upon entering into a futures contract, the Master Fund is required to segregate liquid assets in accordance with the initial margin requirements of the clearinghouse to secure the Master Fund’s performance. The clearinghouse also requires daily settlement of variation margin representing changes in the value of each contract. Fluctuations in the value of the contracts are recorded as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as net realized gain (loss) from futures contracts. The primary risks associated with the use of futures contracts are imperfect correlation between changes in fair values of the underlying assets and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty.

 

40


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

SWAP AGREEMENTS—The Master Fund may invest in swap agreements, primarily credit default and total return swap agreements, as a part of its hedging strategy to manage credit and market risks.

A credit default swap agreement gives one party (the buyer) the right to recoup the economic value of a decline in the value of debt securities of the reference issuer if a credit event (a downgrade, bankruptcy or default) occurs. This value is obtained by delivering a debt security of the reference issuer to the party in return for a previously agreed upon payment from the other party (frequently, the par value of the debt security) or receipt of a net amount equal to the par value of the defaulted reference entity less its recovery value. The Master Fund is usually a net seller of credit default swap agreements.

The Master Fund as a seller of a credit default swap agreement would have the right to pay the par (or other agreed-upon) value of a referenced debt obligation to the counterparty in the event of a default or other credit event by the reference issuer with respect to its debt obligations. In return, the Master Fund would receive from the counterparty a periodic stream of payments over the term of the agreement provided that no event of default or other credit event has occurred. If no default or other credit event occurs, the Master Fund would keep the stream of payments and would have no further obligations to the counterparty. As a seller, the Master Fund is subject to investment exposure on the notional amount of the swap agreement.

A total return swap agreement is a bilateral financial contract agreement where one party (the payer) agrees to pay the other (the receiver) the total return on a specified asset or index in exchange for a fixed or floating rate of return. A total return swap agreement allows the receiver or payer to derive the economic benefit of owning or having short exposure to an asset without owning or shorting the underlying asset directly. The receiver is entitled to the amount, if any, by which the notional amount of the total return swap agreement would have increased in value had it been invested in the particular instruments, plus an amount equal to any dividends or interest that would have been received on those instruments. In return, the payer is entitled to an amount equal to a fixed or floating rate of interest (e.g., a LIBOR based rate) on the notional amount of the swap agreement plus the amount, if any, by which the notional amount would have decreased in value had it been invested in such instruments, less any dividends or interest. The amounts to which each party is entitled are normally netted against each other, at periodic settlement dates, resulting in a single amount that is either due to or from each party.

In addition to being exposed to the credit risk of the underlying reference entity, swap agreements are subject to counterparty risk, market risk and interest rate risk. Swap agreements utilized by the Master Fund may not perform as expected. Risks may arise as a result of the failure of the counterparty to perform under the agreement. The loss incurred by the failure of a counterparty is generally limited to the market value and premium amounts recorded. The Master Fund considers the creditworthiness of each counterparty to a swap agreement in evaluating potential credit risk, and will not enter into any swap agreement unless the Adviser believes the counterparty to the transaction is creditworthy. Additionally, risks may arise from the unanticipated movements in interest rates or in the value of the underlying reference assets. The Master Fund may use various techniques to minimize credit risk including early termination or reset and payment. Collateral, in the form of cash, is held in broker segregated accounts for swap agreements.

During the year ended December 31, 2014, the Master Fund’s direct investments in derivatives consisted of the purchase and sale of call options contracts, the purchase and sale of futures contracts, and the purchase and sale of total return and credit default swap agreements. Investment Funds in which the Master Fund invests may also purchase and sell derivative instruments and other financial instruments.

 

41


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

As of December 31, 2014, the Master Fund held no direct investments in derivative instruments.

The following is a summary of the effect of derivative instruments on the Statements of Operations for the year ended December 31, 2014:

 

      Realized
Gain
(Loss) from
Derivative
Instruments
    Change  in
Unrealized
Appreciation/
Depreciation
from
Derivative
Instruments
 

Equity Risk Exposure:

    

Futures Contracts

   $ 8,523,419      $ (9,206,091

Total Return Swap Agreements

     320,224        (268,006

Interest Rate Risk Exposure:

    

Futures Contracts

     (1,494,189     1,212,498   

Call Options Purchased

     (9,921,550     4,241,080   

Credit Risk Exposure:

    

Credit Default Swap Agreements

     1,237,686        (1,340,920

As described above, the Master Fund utilized derivative instruments to achieve its investment objective during the year ended December 31, 2014. The Master Fund may enter into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) or similar agreements with its derivative contract counterparties whereby the Master Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. Under the ISDA Master Agreements in place at December 31, 2014, the Master Funds is subject to master netting agreements that allow for amounts owed between the Master Fund and its counterparty to be netted. The party that has the larger payable pays the excess of the larger amount over the smaller amount to the other party. The master netting agreements do not apply to amounts owed to or from different counterparties. At December 31, 2014, the Master Fund had one ISDA Master Agreement in place with Goldman Sachs for which master netting agreements (“MNA”) apply only to amounts owed in the same currency and in respect of the same transaction.

As of December 31, 2014, the Master Fund held no investments subject to a MNA.

(g) CFTC REGULATION

The Master Fund is deemed to be a commodity pool under the Commodity Exchange Act, as amended (the “CEA”). In 2013, the CFTC adopted final regulations designed to harmonize the obligations of registered commodity pool operators (“CPOs”) for commodity pools that are also registered as investment companies under the 1940 Act (the “Harmonization Rules”). Under the Harmonization Rules, the CFTC generally will accept the SEC’s disclosure, reporting, and recordkeeping regime as “substituted compliance” for substantially all of the CFTC’s regulations as long as the CPO complies with applicable requirements under the SEC’s statutory and regulatory compliance regime to which it or the pool is already subject. The Adviser intends to operate the Master Fund in compliance with the CFTC’s Harmonization Rules.

 

42


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

(h) INVESTMENT INCOME

For investments in securities, dividend income is recorded on the ex-dividend date, net of withholding taxes. Interest income is recorded as earned on the accrual basis and includes amortization of premiums or accretion of discounts.

(i) FUND EXPENSES

Unless otherwise voluntarily or contractually assumed by the Adviser or another party, the Master Fund bears all expenses incurred in its business including, but not limited to, the following: all costs and expenses related to investment transactions and positions for the Master Fund’s account; legal fees; accounting, auditing and tax preparation fees; recordkeeping and custodial fees; costs of computing the Master Fund’s net asset value; fees for data and software providers; research expenses; costs of insurance; registration expenses; offering costs; expenses of meetings of partners; directors fees; all costs with respect to communications to partners; transfer taxes; offshore withholding taxes and taxes withheld on non-U.S. dividends; interest and commitment fees on loans and debit balances; and other types of expenses as may be approved from time to time by the Board.

(j) INCOME TAXES

The Master Fund is organized and operates as a limited partnership and is not subject to income taxes as a separate entity. Such taxes are the responsibility of the individual partners. Accordingly, no provision for income taxes has been made in the Master Fund’s financial statements. Investments in foreign securities may result in foreign taxes being withheld by the issuer of such securities. For U.S. offshore withholding tax, the Master Fund may serve as withholding agent for its offshore feeder funds.

For the tax years ended December 31, 2012 through December 31, 2014, and for all major jurisdictions, management of the Master Fund has evaluated the tax positions taken or expected to be taken in the course of preparing the Master Fund’s tax returns to determine whether the tax positions will “more-likely-than-not” be sustained by the Master Fund upon challenge by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold and that would result in a tax benefit or expense to the Master Fund would be recorded as a tax benefit or expense in the current period. For the year ended December 31, 2014, the Master Fund did not recognize any amounts for unrecognized tax benefit/expense. A reconciliation of unrecognized tax benefit/expense is not provided herein, as the beginning and ending amounts of unrecognized tax benefit/expense are zero, with no interim additions, reductions or settlements. Tax positions taken in tax years ended December 31, 2012 through December 31, 2014 remain open under the statute of limitations (generally three years for federal income tax purposes) are subject to examination by federal and state tax jurisdictions.

(k) USE OF ESTIMATES

The financial statements have been prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results may differ from those estimates and such differences may be significant.

 

43


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

(3) FAIR VALUE MEASUREMENTS

The Master Fund defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions.

The inputs used to determine the fair value of the Master Fund’s investments are summarized in the three broad levels listed below:

 

   

Level 1—unadjusted quoted prices in active markets for identical investments and registered investment companies where the value per share (unit) is determined and published and is the basis for current transactions for identical assets or liabilities at the valuation date

 

   

Level 2—investments with other significant observable inputs or investments that can be fully redeemed at the NAV in the “near term”

 

   

Level 3—investments with significant unobservable inputs (which may include the Master Fund’s own assumptions in determining the fair value of investments) or investments that cannot be fully redeemed at the NAV in the “near term”; these are investments that generally have one or more of the following characteristics: gated redemptions, suspended redemptions, or lock-up periods greater than quarterly

Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The Master Fund discloses transfers between levels based on valuations at the end of the reporting period. The inputs or methodology used for valuing investments are not necessarily an indication of the risk associated with investing in those investments.

The Master Fund establishes valuation processes and procedures to ensure that the valuation techniques for investments categorized within Level 3 of the fair value hierarchy are fair, consistent, and appropriate. The Adviser is responsible for developing the Master Fund’s written valuation processes and procedures, conducting periodic reviews of the valuation policies, and evaluating the overall fairness and consistent application of the valuation policies. The Board Valuation Committee has authorized the Adviser to oversee the implementation of the Board approved valuation procedures by the Administrator. The Adviser Valuation Committee is comprised of various Master Fund personnel, which include members from the Master Fund’s portfolio management and operations groups. The Adviser Valuation Committee meets monthly or as needed, to determine the valuations of the Master Fund’s Level 3 investments. The valuations are supported by methodologies employed by the Investment Funds’ market data, industry accepted third party valuation models, or other methods the Adviser Valuation Committee deems to be appropriate, including the use of internal proprietary valuation models.

 

44


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

The following is a summary categorization of the Master Fund’s investments based on the level of inputs utilized in determining the value of such investments as of December 31, 2014:

 

     LEVEL 1      LEVEL 2      LEVEL 3      Total
Investments
 
     Investments      Investments      Investments     

Investment Funds

           

Limited Partnerships, Exempted Limited Partnerships and Limited Liability Companies

           

Energy

   $ —         $ —         $ 38,405,218       $ 38,405,218   

Event-Driven

     —           3,624,646         9,629,109         13,253,755   

Global Macro and Trading

     —           25,592,098         46,845,146         72,437,244   

Private Equity

     —           —           134,077,460         134,077,460   

Real Estate

     —           —           25,251,085         25,251,085   

Relative Value

     —           —           41,471,230         41,471,230   

Passive Foreign Investment Companies

           

Energy

     —           —           209,460         209,460   

Private Equity

     —           —           390,505         390,505   

Relative Value

     —           —           2,191,927         2,191,927   

Private Corporations

           

Real Estate

     —           —           1,705,492         1,705,492   

Investment Securities

           

Common Stocks

           

Consumer Products

     148,925         —           —           148,925   

Financials

     1,836,320         —           —           1,836,320   

Healthcare

     11,152         —           —           11,152   

Technology

     298,413         —           —           298,413   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,294,810       $ 29,216,744       $ 300,176,632       $ 331,688,186   
  

 

 

    

 

 

    

 

 

    

 

 

 

The categorization of investments amongst Levels 1 through 3 does not reflect the fact that many of the underlying investments held by the Investment Funds included in Level 3, if owned directly by the Master Fund, may be classified as Level 1 or Level 2 investments.

 

45


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

The following table is a summary of quantitative information about significant unobservable valuation inputs approved by the Adviser Valuation Committee for Level 3 fair value measurements for investments held as of December 31, 2014:

 

     Fair Value as of
December 31, 2014
    Valuation Technique     Liquidity of
Investments
     Adjustments
To NAV**
 

Investments

         

Limited Partnerships, Exempted Limited Partnerships and Limited Liability Companies

         

Energy

   $ 38,405,218        NAV as Practical Expedient     Non-redeemable         None   

Event-Driven

     9,629,109        NAV as Practical Expedient     Quarterly or Greater         None   

Global Macro and Trading

     46,845,146        NAV as Practical Expedient     Monthly or Greater         None   

Private Equity

     134,077,460        NAV as Practical Expedient     Non-redeemable         None   

Real Estate

     25,251,085        NAV as Practical Expedient     Non-redeemable         None   

Relative Value

     41,471,230        NAV as Practical Expedient     Quarterly or Greater         None   

Passive Foreign Investment Companies

         

Energy

     209,460        NAV as Practical Expedient     Non-redeemable         None   

Private Equity

     390,505        NAV as Practical Expedient     Non-redeemable         None   

Relative Value

     2,191,927        NAV as Practical Expedient     Non-redeemable         None   

Private Corporations

         

Real Estate

     1,705,492        NAV as Practical Expedient     Non-redeemable         None   
  

 

 

        

Total Investments

   $ 300,176,632          
  

 

 

        

 

*

Unobservable valuation input.

 

**

Amounts represent adjustments, if any, made to NAV provided by the investment manager or administrator of the Investment Funds. Adjustments to the practical expedient NAV may be made under certain circumstances including, but not limited to, the following: the practical expedient NAV received is not as of the Master Fund’s measurement date; it is probable that the Investment Fund will be sold at a value significantly different than the reported expedient NAV; it is determined by the Board Valuation Committee that the Investment Fund is not being valued at fair value by the Investment Fund manager.

 

46


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

Transfers that occurred between Levels 2 and 3 during the year ended December 31, 2014, based on levels assigned to Investments on December 31, 2013, are included in the table below. The following is a reconciliation of Level 3 investments based on the inputs used to determine fair value:

 

     Investments  
     Balance as of
December 31,
2013
    Redemptions
In-Kind
    Transfers
In1
    Transfers
Out2
    Transfers
In-Kind3
    Gross
Purchases
    Gross Sales4     Net
Realized
Gain
(Loss)
    Change in
Unrealized
Appreciation/
Depreciation
    Balance as of
December 31,
2014
 

Investments

                    

Limited Partnerships, Exempted Limited Partnerships and Limited Liability Companies

                    

Energy

   $ 227,684,804      $ —        $ —        $ —        $ (192,104,381   $ 12,846,723      $ (13,126,633   $ 6,487,820      $ (3,383,115   $ 38,405,218   

Event-Driven

     92,523,536        —          —          —          (69,150,029     —          (8,605,553     478,186        (5,617,031     9,629,109   

Global Macro and Trading

     140,888,664        —          34,627        (17,038,407     (90,538,577     47,000,000        (31,755,125     6,913,857        (8,659,893     46,845,146   

Private Equity

     804,709,299        —          —          —          (626,822,061     27,003,894        (86,061,939     18,832,261        (3,583,994     134,077,460   

Real Estate

     182,601,579        —          —          —          (149,145,780     3,517,154        (11,376,042     2,090,052        (2,435,878     25,251,085   

Relative Value

     163,547,560        —          19,979,239        —          (134,027,638     6,008,234        (15,609,299     (1,364,173     2,937,307        41,471,230   

Passive Foreign Investment Companies

                    

Energy

     4,000,974        —          —          —          (1,455,515     —          (2,329,930     533,764        (539,833     209,460   

Private Equity

     615,629        364,940            (517,238     —          —          —          (72,826     390,505   

Relative Value

     22,127,566        —          —          —          (18,379,864     14,381,001        (16,865,712     436,706        492,230        2,191,927   

Private Corporations

                    

Real Estate

     13,216,244        —          —          —          (10,202,859     —          (1,070,927     —          (236,966     1,705,492   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Investments

   $ 1,651,915,855      $ 364,940      $ 20,013,866      $ (17,038,407   $ (1,292,343,942   $ 110,757,006      $ (186,801,160   $ 34,408,473      $ (21,099,999   $ 300,176,632   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1

Transfers from Level 2 to Level 3 in the fair value hierarchy generally relate to changes in liquidity provisions of the Investment Funds.

2

Transfers from Level 3 to Level 2 in the fair value hierarchy generally relate to changes in liquidity provisions of the Investment Funds.

3

Transfers In-Kind were a tax free transfer that resulted from the March 31, 2014 tender offer of the Master Fund. Investment Funds were received by the PMF Master Fund at original cost and accumulated unrealized appreciation/depreciation.

4

Includes Return of Capital and Capital Gain Distributions.

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 December 31, 2014 is $(4,884,975).

The Master Fund is permitted to invest in alternative investments that may not have a readily determinable fair value. For an investment that does not have a readily determinable fair value, the Master Fund uses the NAV reported by the Investment Fund as a practical expedient, without further adjustment, unless it is probable that the investment will be sold at a value significantly different than the reported NAV. If the practical expedient NAV is not as of the reporting entity’s measurement date, then the NAV is adjusted to reflect any significant events that would materially affect the value of the investment and the NAV of the Master Fund as of the valuation date.

Certain Investment Funds in which the Master Fund invests have limitations on liquidity which may result in limitations on redemptions including, but not limited to, early redemption fees. Other than Investment Funds that are self-liquidating, such as Private Equity and some Energy, Natural Resources and Real Estate Funds, the

 

47


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

Investment Funds in which the Master Fund invests have withdrawal rights ranging from monthly to annually, after a notice period, usually for a period of up to two years from the date of the initial investment or an additional investment. A listing of the investments held by the Master Fund and their attributes as of December 31, 2014, that qualify for this valuation approach is shown in the table below.

 

Investment Category   Investment
Strategy
  Fair
Value (in 000s)
    Unfunded
Commitments
(in 000s)
 

Remaining

Life*

    Redemption
Frequency*
  Notice
Period
(in Days)*
  Redemption
Restrictions and
Terms*
Energy (a)   Private investments in securities issued by companies in the energy and natural resources sectors.   $ 38,615      $10,021    
 
up to
15 years
  
  
  N/A   N/A   0-15 years
Event-Driven(b)   Strategies designed to profit from changes in the prices of securities of companies facing a major corporate event.     13,254      N/A     N/A      Quarterly   45-90   0-5 years; up to 2.5% early withdrawal fee; possible 25% investor level gate; illiquid side pocket capital
Global Macro and Trading(c)   Investments across global markets and security types seeking to profit from macroeconomic opportunities. Strategies can be discretionary or systematic. Includes commodity trading advisors.     72,437      N/A     N/A      Quarterly   30-90   0-5 years; up to 6% early redemption fee; possible hard lock within first 12 months; illiquid side pocket capital

 

48


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

Investment Category   Investment
Strategy
  Fair
Value (in 000s)
    Unfunded
Commitments
(in 000s)
 

Remaining

Life*

    Redemption
Frequency*
  Notice
Period
(in Days)*
  Redemption
Restrictions and
Terms*
Private Equity(d)   Investments in nonpublic companies.   $ 134,468      $31,774    
 
up to
10 years
  
  
  N/A   N/A   0-10 years
Real Estate(e)   Investments in REITs, private partnerships, and various real estate related mortgage securities.     26,957      6,649    
 
up to
10 years
  
  
  N/A   N/A   0-10 years
Relative Value(f)   Strategies seeking to profit from inefficiencies existing within capital structures, within markets, and across markets.     43,663      N/A     N/A      Quarterly   30-120   0-5 years; up to 7% early redemption fee; possible 5% fund level gate; illiquid side pocket capital
    $ 329,393      $48,444        
   

 

 

   

 

       

 

*

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

(a)

This category includes Investment Funds that invest primarily in privately issued securities by companies in the energy and natural resources sectors and private investments in energy-related assets or companies. The Investment Funds include private funds and private partnerships with private investments in their portfolios.

(b)

This category includes Investment Funds that invest primarily in the following securities: common stock, preferred stock, and many types of debt. Events include mergers, acquisitions, restructurings, spin-offs, and litigation.

(c)

This category includes Investment Funds that invest in global markets and across all security types including equities, fixed income, derivatives, commodities, currencies, futures, and exchange-traded funds. Investment Funds in this category are typically private funds and may include global macro funds, and commodity trading advisors.

(d)

This category includes private equity funds that invest primarily in non-publicly traded companies in need of capital. These Investment Funds may vary widely as to sector, size, stage, duration, and liquidity. Certain of these Investment Funds may also focus on the secondary market, buying interests in existing private equity funds, often at a discount.

 

49


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

(e)

This category includes Investment Funds that invest in registered investment companies or managers that invest in real estate trusts (commonly known as “REITs”) and private partnerships that make investments in income producing properties, raw land held for development or appreciation, and various types of mortgage loans and common or preferred stock whose operations involve real estate.

(f)

This category includes Investment Funds with low net exposure to most financial markets. Underlying strategies include Equity Market Neutral or Statistical Arbitrage, Capital Structure Arbitrage, Convertible Arbitrage, Volatility Arbitrage, and Credit Arbitrage.

The following is a summary of the fair value as percentage of partners’ capital, and liquidity provisions for Investment Funds constituting greater than 5% of the Master Fund’s partners’ capital as of December 31, 2014:

 

Passive Foreign Investment
Companies

   Fair Value as
% of Partners’
Capital
 

Investment
Strategy

   Redemption
Frequency
  

Redemption
Restrictions and
Terms

Blueshift Energy Fund, L.P.

   6.33%  

Blueshift Energy Fund, L.P. invests substantially all of its assets in Blueshift Energy Master Fund, LP. Blueshift Energy Master Fund, LP was organized for the purpose of seeking capital appreciation of its assets through the speculative trading of commodity interests, including commodity options and futures contracts.

   Monthly    0-3 months; 2% early repurchase fee

Citadel Wellington LLC

   6.14%  

Citadel Wellington LLC seeks to achieve consistently high risk-adjusted rates of return in connection with the strategies employed. Citadel Advisors LLC generally employs, for the benefit of Citadel Wellington LLC, complex proprietary investment strategies, based on quantitative analysis as well as fundamental research, taking both long and short positions in a broad range of investment instruments, including securities, options, futures, currencies, derivatives and other assets.

   Quarterly    5% fund level gate subject to quarterly withdrawal allowances

Kepos Alpha Fund LP

   5.34%  

Kepos Alpha Fund LP invests substantially all of its assets in Kepos Alpha Master Fund L.P., which seeks to provide investors with an attractive total return on invested capital over an entire three to five year market cycle while maintaining a low correlation with global equity markets.

   Quarterly    N/A

(4) PARTNERS’ CAPITAL ACCOUNTS

(a) ISSUANCE OF INTERESTS

Upon receipt from an eligible investor of an initial or additional application for interests (the “Interests”), which will generally be accepted as of the first day of each month, the Master Fund will issue new Interests. The Interests have not been registered under the Securities Act, or the securities laws of any state. The Master Fund issues Interests only in private placement transactions in accordance with Regulation D or other applicable exemptions under the Securities Act. No public market exists for the Interests, and none is expected to develop. The Master Fund is not required, and does not intend, to hold annual meetings of its partners. The Interests are subject to substantial restrictions on transferability and resale and may not be transferred or resold except as permitted under the Master Fund’s limited partnership agreement. The Master Fund reserves the right to reject any applications for subscription of Interests.

 

50


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

(b) ALLOCATION OF PROFITS AND LOSSES

For each fiscal period, generally monthly, net profits or net losses of the Master Fund are allocated among and credited to or debited against the capital accounts of all partners as of the last day of each fiscal period in accordance with the partners’ respective capital account ownership percentage for the fiscal period. Net profits or net losses are measured as the net change in the value of the partners’ capital of the Master Fund, including any change in unrealized appreciation or depreciation of investments and income, net of expenses, and realized gains or losses during a fiscal period. Net profits or net losses are allocated after giving effect for any initial or additional applications for Interests, which generally occur at the beginning of the month, or any repurchases of Interests.

(c) REPURCHASE OF INTERESTS

A partner will not be eligible to have the Master Fund repurchase all or any portion of an Interest at the partner’s discretion at any time. Periodically, the Adviser recommends to the Board that the Master Fund offer to repurchase Interests during the year, pursuant to written tenders by partners.

The Board retains the sole discretion to accept or reject the recommendation of the Adviser and to determine the amount of Interests, if any, that will be purchased in any tender offer that it does approve. In the event Interests are repurchased, there will be a substantial period of time between the date as of which partners must accept the Master Fund’s offer to repurchase their Interests and the date they can expect to receive payment for their Interests from the Master Fund.

(5) INVESTMENTS IN PORTFOLIO SECURITIES

(a) INVESTMENT ACTIVITY

As of December 31, 2014 the Master Fund held investments in Investment Funds and securities. The agreements related to investments in Investment Funds provide for compensation to the Investment Funds’ managers/general partners or advisers in the form of management fees of up to 3.0% annually of monthly average net assets. In addition, many Investment Funds also provide for performance incentive fees/ allocations of up to 30% of an Investment Fund’s net profits, although it is possible that such ranges may be exceeded for certain investment managers. These management fees and incentive fees are in addition to the management fees charged by the Master Fund.

For the year ended December 31, 2014, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) were $113,347,825 and $123,675,083, respectively.

The cost of the Master Fund’s underlying investments for Federal income tax purposes is adjusted for items of taxable income allocated to the Master Fund from such investments. The allocated taxable income is generally reported to the Master Fund by its underlying investments on Schedules K-1, Forms 1099 or PFIC statements, or a combination thereof.

The underlying investments generally do not provide the Master Fund with tax reporting information until well after year end, and as a result, the Master Fund is unable to calculate the year end tax cost of its investments until such time. The Master Fund’s book cost as of December 31, 2014, was $299,901,675, resulting in accumulated net unrealized appreciation of $31,786,511 consisting of $66,525,158 in gross unrealized appreciation and $34,738,647 in gross unrealized depreciation.

 

 

51


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

During the year ended December 31, 2014, certain investments were received through a transfer in-kind in connection with the redemption of certain investments. The fair value of these investments transferred-in-kind, related cost and realized gain (loss) were as follows:

 

Investments Redeemed

  Fair Value     Cost     Realized Gain (Loss) on
Transfers  In-Kind
    Unrealized Gain (Loss) on
Transfers In-Kind
    Investments Received

Q Funding III, L.P.

  $ 531,086      $ 393,670      $ 137,416      $ —        Houghton Mifflin Harcourt Co.

Q Funding III, L.P.

    86,682        64,253        22,429        —        Q China Holdings, Ltd.

Q Funding III, L.P.

    190,338        141,089        49,249        —        Q India Holdings, Ltd.

Q4 Funding, L.P.

    168,582        140,425        28,157        —        Houghton Mifflin Harcourt Co.

Q4 Funding, L.P.

    27,510        22,915        4,595        —        Q China Holdings, Ltd.

Q4 Funding, L.P.

    60,410        50,320        10,090        —        Q India Holdings, Ltd.

Sanderling Ventury Partners VI Co-Investment Fund, L.P.

    7,881        2,011        —          5,870      Chimerix, Inc.

Steel Partners Japan Strategic Fund, L.P.

    152,522        330,909        —          (178,387   Aderans Co., Ltd.

Tiger Global Private Investment Partners V, L.P.

    299,961        16,502        283,459        —        JD.com, Inc.
 

 

 

   

 

 

   

 

 

   

 

 

   
  $ 1,524,972      $ 1,162,094      $ 535,395      $ (172,517  
 

 

 

   

 

 

   

 

 

   

 

 

   

(b) AFFILIATED INVESTMENT FUNDS

At December 31, 2014, the Master Fund’s investments in certain Investment Funds were deemed to be investments in affiliated issuers under the 1940 Act, primarily because the Master Fund owns 5% or more of the Investment Funds’ total net assets. The activity resulting from investments in these Investment Funds, including interest and dividend income as well as realized gains and losses, is identified in the Statement of Operations as transactions with affiliated investments. A listing of these affiliated Investment Funds (including activity during the year ended December 31, 2014) is shown below:

 

Investment Funds

  Shares
12/31/2013
    Shares
12/31/2014
    Fair
Value
12/31/2013
    Redemptions
In-Kind
    Transfers
In-Kind
    Cost of
Purchases
    Cost of
Sales*
    Realized
Gain (Loss)
on
Investments
    Change In
Unrealized
Appreciation/
Depreciation
    Fair
Value
12/31/2014
    Interest/
Dividend
Income
 

Blueshift Energy Fund, LP

      $ 33,372,298      $ —        $ (29,055,673   $ 14,000,000      $ (7,124   $ 7,124      $ 1,894,631      $ 20,211,256      $ —     

CCM Small Cap Value Qualified Fund, L.P.

        5,210,242        —          (3,364,576     —          (1,171,539     (1,357,922     976,957        293,162        —     

Credit Distressed Blue Line Fund, L.P.

        13,190,943        —          (10,477,931     —          —          —          (1,086,494     1,626,518        —     

Halcyon European Structured Opportunities Fund L.P.

        89,380        —          (56,154     —          —          —          (23,184     10,042        —     

Harbinger Capital Partners Fund I, L.P.

        25,240,685        —          (20,191,722     —          —          —          (2,389,077     2,659,886        —     

Kenmont Onshore Fund, L.P.

        18,684        —          (15,787     —          —          —          —          2,897        —     

Middle East North Africa Opportunities Fund, L.P.

    5,089        728        1,315,734        —          (1,323,478     —          (6,716     (53,962     192,319        123,897        7,120   

Mirarc Domestic Fund, LP

        —          —          —          15,000,000        —          —          (1,859,765     13,140,235        —     

ORBIS Real Estate Fund I

        2,180,645        —          —          49,961        (212,687     7,429        335,978        2,361,326        —     

PIPE Equity Partners, LLC

        12,411,446        —          (8,854,351     —          (1,909,663     (2,620,951     2,308,029        1,334,510        —     

PIPE Select Fund LLC

        27,883,086        —          (21,397,958     —          (3,246,347     30,897        (156,091     3,113,587        —     
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
      $ 120,913,143      $ —        $ (94,737,630   $ 29,049,961      $ (6,554,076   $ (3,987,385   $ 193,303      $ 44,877,316      $ 7,120   
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*

Sales include return of capital.

 

52


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

(6) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

In the normal course of business, the Investment Funds in which the Master Fund invests may trade various derivative securities and other financial instruments, and may enter into various investment activities with off-balance sheet risk both as an investor and as a principal. The Master Fund’s risk of loss in these Investment Funds is limited to the value of its investment in such Investment Funds. In addition, by investing directly in derivative instruments, the Master Fund is subject to credit risk with respect to the net amount expected to be received from the other party. The Master Fund may be negatively impacted if the other party defaults or fails to perform its obligations under such agreement.

(7) ADMINISTRATION AGREEMENT

In consideration for administrative, accounting, and recordkeeping services, the Master Fund pays the Administrator a monthly administration fee based on the month-end partners’ capital of the Master Fund. The Master Fund is charged, on an annual basis, 6 basis points on partners’ capital of up to $2 billion, 5 basis points on partners’ capital between the amounts of $2 billion and $5 billion, 2 basis points on partners’ capital between the amounts of $5 billion and $15 billion, and 1.25 basis points for amounts over $15 billion. The administration fee is payable monthly in arrears. The Administrator also provides the Master Fund with legal, compliance, transfer agency, and other investor related services at an additional cost.

The administration fees are paid out of the Master Fund’s assets, which decreases the net profits or increases the net losses of the partners in the Master Fund. As of December 31, 2014, the Master Fund had $319,160,197 in partners’ capital. The total administration fee incurred for the year ended December 31, 2014, was $482,682.

(8) RELATED PARTY TRANSACTIONS

(a) INVESTMENT MANAGEMENT FEE

In consideration of the advisory and other services provided by the Adviser to the Master Fund pursuant to the Investment Management Agreement, the Master Fund pays the Adviser an investment management fee (the “Investment Management Fee”), equal to 1.00% on an annualized basis of the Master Fund’s partners’ capital calculated based on the Master Fund’s partners’ capital at the end of each month, payable quarterly in arrears. The Investment Management Fee decreases the net profits or increases the net losses of the Master Fund that are credited to or debited against the capital accounts of its partners. For the year ended December 31, 2014, $7,581,994 was incurred for Investment Management Fees.

(b) PLACEMENT AGENTS

The Master Fund may engage one or more placement agents (each, a “Placement Agent”) to solicit investments in the Master Fund. Salient Capital, L.P., an affiliate of the Adviser, is a broker-dealer who has been engaged by the Master Fund to serve as a Placement Agent. A Placement Agent may engage one or more sub-placement agents. The Adviser or its affiliates may pay a fee out of their own resources to Placement Agents and sub-placement agents. As of December 31, 2014, the two largest non-affiliated sub-placement agents service approximately 55.67% of the feeder funds assets which are invested in the Master Fund. To the extent that substantial numbers of investors have a relationship with a particular sub-placement agent, such sub-placement agent may have the ability to influence investor behavior, which may affect the Master Fund.

 

53


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

(9) FUND BORROWING

As a fundamental policy, the Master Fund may borrow up to, but not more than, 25% of the partners’ capital of the Master Fund (at the time such borrowings were made and after taking into account the investment and/or deployment of such proceeds) for the purpose of making investments, funding redemptions and for other working capital and general Master Fund purposes. For purposes of the Master Fund’s investment restrictions and certain investment limitations under the 1940 Act, including for example, the Master Fund’s leverage limitations, the Master Fund will not “look through” Investment Funds in which the Master Fund invests. Investment Funds may also use leverage, whether through borrowings, futures, or other derivative products and are not subject to the Master Fund’s investment restrictions. However, such borrowings by Investment Funds are without recourse to the Master Fund and the Master Fund’s risk of loss is limited to its investment in such Investment Funds, other than for some Investment Funds in which the Master Fund has made a capital commitment, for which the risk of loss is limited to the Master Fund’s total capital commitment. For some Investment Funds in which the Master Fund has made a capital commitment that will be funded over a period of time, such as private equity, private energy and real estate funds, the Master Fund, in certain instances, may commit to fund more than its initial capital commitment. The rights of any lenders to the Master Fund to receive payments of interest or repayments of principal will be senior to those of the partners, and the terms of any borrowings may contain provisions that limit certain activities of the Master Fund.

The Master Fund entered into a line of credit agreement (the “Credit Agreement”) with Credit Suisse AG on October 29, 2014. The terms of the Credit Agreement provide a $60,000,000 secured revolving credit facility. Borrowings under the Credit Agreement are secured by the Master Fund’s investments. The Credit Agreement provides for a commitment fee of 1.50% per annum on unused capacity above a certain threshold plus interest accruing on any borrowed amounts at the three month London Interbank Offered Rate (LIBOR) plus 2.24% per annum as defined in the Credit Agreement. The average principal balance and weighted average interest rate for the period from October 29, 2014 through December 31, 2014, was approximately $36,032,750 and 2.36% respectively. At December 31, 2014, the principal balance outstanding was $36,000,000 at an interest rate of 2.24%. The Credit Agreement expires on October 29, 2018.

(10) FINANCIAL HIGHLIGHTS

 

    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    Year ended
December 31,
2011
    Year ended
December 31,
2010
 

Net investment loss to average partners’ capital1

    (1.79)%        (0.74)%        (0.81)%        (0.75)%        (0.84)%   

Expenses to average partners’capital1,2

    2.68%        1.37%        1.49%        1.27%        1.19%   

Portfolio turnover

    16.96%        16.95%        20.88%        26.72%        26.71%   

Total return3

    6.43%        4.67%        2.50%        (3.18)%        9.52%   

Partners’ capital, end of period (000s)

  $ 319,160      $ 2,064,041      $ 3,071,734      $ 4,301,279      $ 5,355,785   

An investor’s return (and operating ratios) may vary from those reflected based on the timing of capital transactions.

 

1

Ratios are calculated by dividing the indicated amount by average partners’ capital measured at the end of each month during the year.

 

54


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Notes to Financial Statements, continued

December 31, 2014

 

2

Expense ratios do not include expenses of acquired funds that are paid indirectly by the Master Fund as a result of its ownership in the underlying funds. Expenses include U.S. offshore withholding tax, which is only allocable to investors investing through the offshore feeder funds.

3

Calculated as geometrically linked monthly returns for each month in the period.

(11) SUBSEQUENT EVENTS

Management of the Master Fund has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued. Based on this evaluation, no adjustments were required to the financial statements as of December 31, 2014.

 

55


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Supplemental Information

December 31, 2014

(Unaudited)

 

Directors and Officers

The Master Fund’s operations are managed under the direction and oversight of the Board. Each Director serves for an indefinite term or until he or she reaches mandatory retirement, if any, as established by the Board. The Board appoints the officers of the Master Fund who are responsible for the Master Fund’s day-to-day business decisions based on policies set by the Board. The officers serve at the pleasure of the Board.

Compensation for Directors

The Master Fund, The Endowment Registered Fund, L.P., The Endowment Institutional Fund, L.P, The Endowment TEI Fund, L.P. and The Endowment Institutional TEI Fund W, L.P., together pay each of the Directors who is not an “interested person” of the Adviser, as defined in the 1940 Act (the “Independent Directors”) an annual retainer of $15,000, paid quarterly, an annual Board meeting fee of $3,000, a fee of $1,000 per informal Board meeting, a fee of $1,000 per telephonic Board meeting, an annual fee of $833 for each Compliance committee member and $625 for each Audit and Valuation committee member, an annual fee of $5,000 for the valuation committee chairman and $3,000 for each other committee chair, each of which is paid quarterly, and an annual fee of $5,000, paid quarterly, to the Lead Independent Director. There are currently six Independent Directors. In the interest of retaining Independent Directors of the highest quality, the Board intends to periodically review such compensation and may modify it as the Board deems appropriate.

Interested Directors

 

Name, Address and Age

  Position(s)
Held
  Principal
Occupation(s) During
the Past 5 Years
  Number of Portfolios in
Fund Complex Overseen by
Director
  Other Directorships Held  by
Director

John A. Blaisdell1

 

Age: 54

 

Address: c/o The Endowment Fund
4265 San Felipe, Suite 800,
Houston, TX 77027

  Director,
Co-
Principal
Executive
Officer
(Since
2004)
  Member, Investment Committee of the Adviser, since 2002; Managing Director of Salient, since 2002.   The Endowment Funds (5); The Endowment PMF Funds (3)   Salient Alternative Strategies Funds (investment companies) (two funds) since 2010; Salient MF Trust (investment company) (seven funds) since 2012; Salient Midstream & MLP Fund (investment company) since 2012.

 

56


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Supplemental Information, continued

December 31, 2014

(Unaudited)

 

Name, Address and Age

  Position(s)
Held
  Principal
Occupation(s) During
the Past 5 Years
  Number of Portfolios in
Fund Complex Overseen by
Director
  Other Directorships Held  by
Director

Andrew Linbeck1

 

Age: 50

 

Address: c/o The Endowment Fund 4265
San Felipe, Suite 800,
Houston, TX 77027

  Director,
Co-
Principal
Executive
Officer
(Since
2004)
  Member, Investment Committee of the Adviser, since 2002; Managing Director of Salient, since 2002.   The Endowment Funds (5); The Endowment PMF Funds (3)   Salient Alternative Strategies Funds (investment companies) (two funds) 2010-2012; Salient Midstream & MLP Fund (investment company) since 2012.

 

1

This person’s status as an “interested” director arises from his affiliation with Salient Partners, L.P., which itself is an affiliate of the Master Fund, The Endowment Registered Fund, L.P., The Endowment Institutional Fund, L.P., The Endowment TEI Fund, L.P., The Endowment Institutional TEI Fund W, L.P., and the Adviser.

Independent Directors

 

Name, Address and Age

  Position(s)
Held
  Principal
Occupation(s) During
the Past 5 Years
  Number of Portfolios in
Fund Complex Overseen
by Director
  Other Directorships Held
by Director

Karin B. Bonding, CFA

 

Age: 75

 

Address: c/o The Endowment Fund 4265 San Felipe, Suite 800,
Houston, TX 77027

  Director
(Since
2010)
  Lecturer, University of Virginia, since 1996; President of Capital Markets Institute, Inc. (fee-only financial planner and investment advisor) since 1996.   The Endowment Funds (5)   Salient Alternative Strategies Funds (investment companies) (two funds) since 2010; Salient MF Trust (investment company) (seven funds) since 2012; Salient Midstream & MLP Fund (investment company) since 2012; Brandes Investment Trust (investment companies) (four funds) 2006-2012; Credit Suisse Alternative Capital Funds (investment companies) (six funds) 2005-2010.

 

57


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Supplemental Information, continued

December 31, 2014

(Unaudited)

 

Name, Address and Age

  Position(s)
Held
  Principal
Occupation(s) During
the Past 5 Years
  Number of Portfolios in
Fund Complex Overseen
by Director
  Other Directorships Held
by Director

Jonathan P. Carroll

 

Age: 53

 

Address: c/o The Endowment Fund 4265 San Felipe, Suite 800,
Houston, TX 77027

  Director
(Since
2004)
  President of Lazarus Financial LLC (holding company) since 2006; private investor for the past six years.   The Endowment Funds (5); The Endowment PMF Funds (3)   Salient Alternative Strategies Funds (investment companies) (two funds) since 2010; Salient MF Trust (investment company) (seven funds) since 2012; Salient Midstream & MLP Fund (investment company) since 2012; LRR Energy, L.P. (energy company) since 2014.

 

58


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Supplemental Information, continued

December 31, 2014

(Unaudited)

 

Name, Address and Age

  Position(s)
Held
  Principal
Occupation(s) During
the Past 5 Years
  Number of Portfolios in
Fund Complex Overseen
by Director
  Other Directorships Held
by Director

Dr. Bernard Harris

 

Age: 58

 

Address: c/o The Endowment Fund 4265 San Felipe, Suite 800,
Houston, TX 77027

  Director
(Since
2009)
  Chief Executive Officer and Managing Partner, Vesalius Ventures, Inc (venture investing), since 2002; President of The Space Agency (marketing), since 1999; President of The Harris Foundation (non-profit), since 1998; clinical scientist, flight surgeon and astronaut for NASA, 1986 to 1996.   The Endowment Funds (5)   Salient Alternative Strategies Funds (investment companies) (two funds) since 2010; Salient MF Trust (investment company) (seven funds) since 2012; Salient Midstream & MLP Fund (investment company) since 2012; Babson funds (three) since 2011; Greater Houston Community Foundation, 2004- 2009; Monebo Technologies Inc., since 2009; The National Math and Science Initiative, and Space Agency, since 2008; Communities in Schools, since 2007; American Telemedicine Association, since 2007; U.S. Physical Therapy, Inc., since 2005; Houston Technology Center, since 2004; Houston Angel Network, since 2004; The Harris Foundation, Inc., since 1998.

 

59


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Supplemental Information, continued

December 31, 2014

(Unaudited)

 

Name, Address and Age

  Position(s)
Held
  Principal
Occupation(s) During
the Past 5 Years
  Number of Portfolios in
Fund Complex Overseen
by Director
  Other Directorships Held
by Director

Richard C. Johnson

 

Age: 77

 

Address: c/o The Endowment Fund 4265 San Felipe, Suite 800,
Houston, TX 77027

  Director
(Since
2004)
  Senior Counsel (retired) for Baker Botts LLP (law firm) since 2002; Managing Partner, Baker Botts, 1998 to 2002; practiced law at Baker Botts, 1966 to 2002 (1972 to 2002 as a partner).   The Endowment Funds (5); The Endowment PMF Funds (3)   Salient Alternative Strategies Funds (investment companies) (two funds) since 2010; Salient MF Trust (investment company) (seven funds) since 2012; Salient Midstream & MLP Fund (investment company) since 2012.

G. Edward Powell

 

Age: 78

 

Address: c/o The Endowment Fund 4265 San Felipe, Suite 800,
Houston, TX 77027

  Director
(Since
2004)
  Principal of Mills & Stowell (private equity) since 2002. Principal, Innovation Growth Partners (consulting), since 2002; Consultant to emerging and middle market businesses, 1994-2002; Managing Partner, PriceWaterhouse & Co. (Houston Office, 1982 to 1994).  

The Endowment Funds (5);

The Endowment PMF Funds (3)

  Salient Alternative Strategies Funds (investment companies) (two funds) since 2010; Salient MF Trust (investment company) (seven funds) since 2012; Salient Midstream & MLP Fund (investment company) since 2012; Energy Services International, Inc., since 2004; Therapy Track, LLC, since 2009; Global Water Technologies, Inc.; Datavox Holdings, Inc.; Energy Services International, Inc., 2004 to 2013.

 

60


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Supplemental Information, continued

December 31, 2014

(Unaudited)

 

Name, Address and Age

  Position(s)
Held
  Principal
Occupation(s) During
the Past 5 Years
  Number of Portfolios in
Fund Complex Overseen
by Director
  Other Directorships Held
by Director

Scott E. Schwinger

 

Age: 49

 

Address: c/o The Endowment Fund 4265 San Felipe, Suite 800,
Houston, TX 77027

  Director
(Since
2004)
  President, The McNair Group (management), since 2006; Senior Vice President and Chief Financial Officer, the Houston Texans (professional football team) (1999).  

The Endowment Funds (5);

The Endowment PMF Funds (3)

  Salient Alternative Strategies Funds (investment companies) (two funds) since 2010; Salient MF Trust (investment company) (seven funds) since 2012; Salient Midstream & MLP Fund (investment company) since 2012; The Make-A-Wish Foundation, since 2008; YES Prep Public Schools, since 2001.

Officers of the Fund Who Are Not Directors

 

Name, Address and Age

   Position(s) Held with the Fund    Principal Occupation(s) During the
Past 5 Years

Paul Bachtold

 

Age: 41

 

Address: c/o The Endowment Fund 4265 San Felipe, Suite 800,
Houston, TX 77027

   Chief Compliance Officer (“CCO”) (Since 2010)    CCO, Salient (since 2010); Consultant, Chicago Investment Group (compliance consulting), 2009-2010; US Compliance Manager, Barclays Global Investors, 2005-2008; Consultant, Wells Fargo Bank, 2000-2005.

John E. Price

 

Age: 47

 

Address: c/o The Endowment Fund 4265 San Felipe, Suite 800,
Houston, TX 77027

   Treasurer; Principal Financial Officer (Since 2004)    Partner, Managing Director and Chief Financial Officer of Salient since 2003.

Jeremy Radcliffe

 

Age: 40

 

Address: c/o The Endowment Fund 4265 San Felipe, Suite 800,
Houston, TX 77027

   Secretary (Since 2013)    Managing Director of Salient, since 2002.

 

61


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

Supplemental Information, continued

December 31, 2014

(Unaudited)

 

Allocation of Investments

The following chart indicates the allocation of investments among the asset classes in the Master Fund as of December 31, 2014.

 

Asset Class1

   Fair Value      %  

Consumer Products

   $ 148,925         0.04   

Energy

     38,614,678         11.64   

Event-Driven

     13,253,755         4.00   

Financials

     1,836,320         0.55   

Global Macro and Trading

     72,437,244         21.84   

Healthcare

     11,152         2 

Private Equity

     134,467,965         40.55   

Real Estate

     26,956,577         8.13   

Relative Value

     43,663,157         13.16   

Technology

     298,413         0.09   
  

 

 

    

 

 

 

Total Investments

   $ 331,688,186         100.00   
  

 

 

    

 

 

 

 

1

The complete list of investments included in the following asset class categories is included in the Schedule of Investments of the Master Fund.

2

Amount rounds to less than 0.005%.

Form N-Q Filings

The Master Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Master Fund’s Form N-Q is available on the Securities and Exchange Commission website at http://www.sec.gov. The Master Fund’s Form N-Q may be reviewed and copied at the Securities and Exchange Commission Public Reference Room in Washington, DC and information regarding operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Proxy Voting Policies

A description of the policies and procedures that the Master Fund uses to determine how to vote proxies relating to portfolio securities is available (i) without charge, upon request, by calling 1-800-725-9456; and (ii) on the Securities and Exchange Commission website at http://www.sec.gov.

Information regarding how the Master Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (i) without charge, upon request, by calling 1-800-725-9456; and (ii) on the Securities and Exchange Commission website at http://www.sec.gov.

Additional Information

The Master Fund’s private placement memorandum (the “PPM”) includes additional information about Directors of the Master Fund. The PPM is available, without charge, upon request by calling 1-800-725-9456.

 

62


THE ENDOWMENT MASTER FUND, L.P.

(A Limited Partnership)

 

Privacy Policy (Unaudited)

The Master Fund recognizes the importance of securing personal financial information. It is our policy to safeguard any personal and financial information that may be entrusted to us. The following is a description of the Master Fund’s policy regarding disclosure of nonpublic personal information.

We collect nonpublic personal information as follows:

We collect information about our investors, including, but not limited to, the investor’s name, address, telephone number, e-mail address, social security number and date of birth. We collect that information from subscription agreements, other forms of correspondence that we receive from investors, from personal conversations and from affiliated entities as permitted by law.

We receive information about investor transactions with us, including, but not limited to, account number, account balance, investment amounts, withdrawal amounts and other financial information.

We are permitted by law to disclose nonpublic information we collect, as described above, to the Master Fund’s service providers, including the Master Fund’s investment adviser, sub-advisers, servicing agent, independent administrator, custodian, legal counsel, accountant and auditor. We do not disclose any nonpublic information about our current or former investors to nonaffiliated third parties, except as required or permitted by law. We restrict access to investor nonpublic personal information to those persons who require such information to provide products or services to investors. We maintain physical, electronic and procedural safeguards that comply with federal standards to guard investors’ nonpublic personal information.

If an investor’s investment relationship with the Master Fund involves a financial intermediary, including, but not limited to, a broker-dealer, bank or trust company, the privacy policy of such investor’s financial intermediary would govern how any nonpublic personal information would be shared by them with nonaffiliated third parties.

 

63


Independent Directors

Jonathan P. Carroll

Dr. Bernard Harris

Richard C. Johnson

G. Edward Powell

Scott E. Schwinger

Karin B. Bonding

Interested Directors and Officers

John A. Blaisdell, Director and Co-Principal Executive Officer

Andrew B. Linbeck, Director and Co-Principal Executive Officer

John E. Price, Treasurer and Principal Financial Officer

Jeremy Radcliffe, Secretary

Paul A. Bachtold, Chief Compliance Officer

Investment Adviser

Endowment Advisers, L.P.

Houston, TX

Fund Administrator and Transfer Agent

Citi Fund Services Ohio, Inc.

Columbus, OH

Custodian

Citibank, N.A.

New York, NY

Independent Registered Public Accounting Firm

KPMG LLP

Columbus, OH

Legal Counsel

K&L Gates LLP

Boston, MA


LOGO


Item 2. Code of Ethics.

(a) The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. This code of ethics is included as Exhibit 12(a)(1).

(b) During the period covered by the report, with respect to the registrant’s code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions; there have been no amendments to, nor any waivers granted from, a provision that relates to any element of the code of ethics definition enumerated in paragraph (b) of this Item 2.

Item 3. Audit Committee Financial Expert.

3(a)(1) The registrant’s board of directors has determined that the registrant has at least one audit committee financial expert serving on its audit committee.

3(a)(2) The audit committee financial expert is G. Edward Powell, who is “independent” for purposes of this Item 3 of Form N-CSR.

Item 4. Principal Accountant Fees and Services.

 

     Current Year      Previous Year  

Audit Fees

   $ 11,500       $ 10,400   

Audit-Related Fees

   $ 0       $ 0   

Tax Fees

   $ 0       $ 0   

All Other Fees

   $ 0       $ 0   

(e)(1) Disclose the audit committee’s pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.

The audit committee may delegate its authority to pre-approve audit and permissible non-audit services to one or more members of the committee. Any decision of such members to pre-approve services shall be presented to the full audit committee at its next regularly scheduled meeting.

(2) Disclose the percentage of services described in each of paragraphs (b) through (d) of this item that were approved by the audit committee pursuant to paragraph (c) (7)(i)(c) of Rule 2-01 of Regulation S-X.

 

    

Current Year

    Previous Year  
     0     0

(f) Not applicable.

(g) Disclose the aggregate non-audit fees billed by the registrant’s accountant for services rendered to registrant, and rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant.

 

    

Current Year

     Previous Year  
   $                 0       $                 0   

(h) Not applicable.

Item 5. Audit Committee of Listed Registrants.

Not applicable.


Item 6. Investments.

(a) Schedule of Investments as of the close of the reporting period is included in the report to the shareholders filed under item 1 of this form.

(b) Not applicable.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

A closed-end management investment company that is filing an annual report on this Form N-CSR must, unless it invests exclusively in non-voting securities, describe the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities, including the procedures that the company uses when a vote presents a conflict between the interests of its shareholders, on the one hand, and those of the company’s investment adviser; principal underwriter; or any affiliated person (as defined in section 2(a)(3) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules thereunder) of the company, its investment adviser, or its principal underwriter, on the other. Include any policies and procedures of the company’s investment adviser, or any other third party, that the company uses, or that are used on the company’s behalf, to determine how to vote proxies relating to portfolio securities.

These policies are included as Exhibit 12(a)(4).

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

The Adviser’s Investment Committee Members

As of the date of the filing, the Investment Committee is responsible for the day-to-day management of the Fund’s portfolio. The Endowment Master Fund, L.P. (the “Master Fund”), The Endowment Institutional Fund, L.P. (the “Institutional Fund”), The Endowment Registered Fund, L.P. (the “Registered Fund”), The Endowment TEI Fund, L.P. (the “TEI Fund”) and The Endowment Institutional TEI Fund W, L.P. (the “Institutional TEI W Fund”) are registered investment companies (collectively, the “Fund Complex” and each individually the “Fund”). The members of the Investment Committee (each an “Investment Committee Member”) are: Messrs. Lee G. Partridge, Jeremy L. Radcliffe, William K. Enszer, William B. Hunt and William R. Guinn.

Mr. Partridge has served as an Investment Committee Member since January 15, 2013, and has served as Chief Investment Officer of Salient Partners, L.P. (“Salient”), which owns Salient Trust Co., LTA, a trust company chartered under the laws of the State of Texas, since January 15, 2013. Mr. Radcliffe has served as an Investment Committee Member since 2014 and Managing Director of Salient since 2002. Previously, he held the position of Partner of The Redstone Companies, L.P. and certain affiliates thereof (from 1998-2002 (collectively, “Redstone”)). Mr. Enszer has served as an Investment Committee Member since 2014 and Director of Salient since 2010. Previously, he held the position of Vice President of Redstone Asset Management (from 2005-2010). Mr. Hunt has served as an Investment Committee Member since 2014 and as Chief Risk Officer of Salient since 2014. He previously held positions as a Senior Analyst and Portfolio Manager of Iridian Asset Management (from 1996-2011) and Professor at Southern Methodist University (from 1991-2000). Mr. Guinn has served as an Investment Committee Member since 2014 and Director of Salient since 2013. Previously, he held the position of Director of Strategic Partnerships and Opportunistic Investments at the Teacher Retirement System of Texas (2009-2013). Each member of the Investment Committee reviews asset allocation recommendations made by the Adviser’s representatives, manager due diligence and recommendations and, by a majority vote of the Investment Committee, determines asset allocation and manager selection.

The Adviser and certain other entities controlled by the Principals manage investment programs which are similar to that of the Fund, and the Adviser and/or the Principals may in the future serve as an investment adviser or otherwise manage or direct the investment activities of other registered and/or private investment vehicles with investment programs similar to the Funds.


Other Accounts Managed by the Investment Adviser

Certain Investment Committee Members, who are primarily responsible for the day-to-day management of the Fund, also manage other registered investment companies, other pooled investment vehicles and other accounts, as indicated below. The following tables identify, as of December 31, 2014: (i) the number of registered investment companies, other pooled investment vehicles and other accounts managed by the Investment Committee Member and the total assets of such companies, vehicles and accounts; and (ii) the number and total assets of such companies, vehicles and accounts with respect to which the advisory fee is based on performance.

 

Name

   Number of Other
Accounts
     Total Assets of Other
Accounts
     Number of Other Accounts
Subject to a Performance
Fee
     Total Assets of Other
Accounts Subject to
a Performance Fee
 

Jeremy Radcliffe

           

Registered investment companies (1)

     13       $ 3.73 billion         0       $ —     

Other pooled investment companies (1)

     18       $ 1.79 billion         3       $ 477.55 million   

Other accounts

     4301       $ 16.40 billion         3       $ 10.59 billion   

Lee Partridge

           

Registered investment companies (1)

     13       $ 3.73 billion         0       $ —     

Other pooled investment companies (1)

     16       $ 1.43 billion         3       $ 477.55 million   

Other accounts

     4301       $ 15.13 billion         3       $ 10.59 billion   

William K. Enszer

           

Registered investment companies (1)

     3       $ 1.25 billion         0       $ —     

Other pooled investment companies (1)

     2       $ —           0       $ —     

Other accounts

     0       $ —           0       $ —     

William B. Hunt

           

Registered investment companies (1)

     3       $ 1.25 billion         0       $ —     

Other pooled investment companies (1)

     2       $ —           0       $ —     

Other accounts

     0       $ —           0       $ —     

William R. Guinn

           

Registered investment companies (1)

     6       $ 3.44 billion         0       $ —     

Other pooled investment companies (1)

     5       $ 1.06 billion         2       $ 426.78 million   

Other accounts

     4300       $ 5.90 billion         2       $ 87.82 million   

 

(1) For registered investment companies and pooled investment vehicles managed, the number of vehicles reported for master-feeder structures includes both the master fund and feeder funds while the corresponding total assets reported reflect the assets of the master fund only.

Conflicts of Interest of the Adviser

From time to time, potential conflicts of interest may arise between an Investment Committee Member’s management of the investments of the Fund, on the one hand, and the management of other registered investment companies, pooled investment vehicles and other accounts (collectively, “other accounts”), on the other. The other accounts might have similar investment objectives or strategies as the Fund, track the same index the Fund tracks or otherwise hold, purchase, or sell securities that are eligible to be held, purchased or sold by the Fund. The other accounts might also have different investment objectives or strategies than the Fund.

Knowledge and Timing of Fund Trades. A potential conflict of interest may arise as a result of the Investment Committee Member’s day-to-day management of a Fund. Because of their positions with the Fund, the Investment Committee Members know the size, timing and possible market impact of the Fund’s trades. It is theoretically possible that the Investment Committee Members could use this information to the advantage of other accounts they manage and to the possible detriment of the Fund.


Investment Opportunities. A potential conflict of interest may arise as a result of the Investment Committee Member’s management of a number of accounts with varying investment guidelines. Often, an investment opportunity may be suitable for both the Fund and other accounts managed by the Investment Committee Member, but may not be available in sufficient quantities for both the Fund and the other accounts to participate fully. Similarly, there may be limited opportunity to sell an investment held by the Fund and other accounts. The Adviser has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time.

Performance Fees. An Investment Committee Member may advise certain accounts with respect to which the advisory fee is based entirely or partially on performance. Performance fee arrangements may create a conflict of interest for the Investment Committee Member in that the Member may have an incentive to allocate the investment opportunities that he or she believes might be the most profitable to such other accounts instead of allocating them to the Fund.

Compensation to Investment Committee Members

Messrs. Partridge, Radcliffe, Enszer, Hunt and Guinn indirectly own equity interests in the Adviser. As it relates to the Fund and other funds within the Fund Complex, Messrs. Partridge, Radcliffe, Enszer, Hunt and Guinn receive all of their compensation based on the size of the Fund and the other funds within the Fund Complex and the management and servicing fees charged thereon. Accordingly, they believe that a significant driver of their compensation is the performance of the Fund and the Fund Complex, which has a significant bearing on the ability to raise additional assets. Messrs. Partridge, Radcliffe, Enszer, Hunt and Guinn also indirectly own equity in the advisers to other funds and are compensated based on the size of the funds’ asset bases and the management and servicing fees charged thereon. In addition, Messrs. Partridge and Radcliffe are partners and principal executive officers of Salient and related affiliates and subsidiaries (collectively, the “Salient Group”), which pays them a base salary (but no bonus) and is obligated to make distributions of profits to them, as well as the other partners, on an annual basis. These individuals are responsible for the investment processes and management of the Salient Group. Messrs. Partridge and Radcliffe believe that to the extent that they are successful in their investment endeavors, the greater the number of assets over time and the more significant their compensation from the Salient Group.

Securities Ownership of Investment Committee Members

The table below shows the dollar range of the interests of each Fund beneficially owned as of December 31, 2014 by each Investment Committee Member.

 

Investment Committee Member

   Master Fund      Registered Fund      Institutional Fund      TEI Fund      Institutional TEI W Fund  

Jeremy L. Radcliffe

     None         None       $ 500,001 to $750,000         None         None   

Lee G. Partridge

     None         None         None         None         None   

William K. Enszer

     None         None         None         None         None   

William B. Hunt

     None         None         None         None         None   

William R. Guinn

     None         None         None         None         None   

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.

Not applicable.


Item 11. Controls and Procedures.

The registrant’s principal executive officer and principal financial officer have concluded, based on their evaluation of the registrant’s disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures are adequately designed and are operating effectively to ensure that information required to be disclosed by the registrant on Form N-CSR is (i) accumulated and communicated to the investment company’s management, including its certifying officers, to allow timely decisions regarding required disclosure; and (ii) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the fourth fiscal quarter of the period covered by this report that have materially affected or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Exhibits.

(a)(1) Code of ethics that is subject to Item 2 is attached hereto.

(a)(2) Certifications pursuant to Rule 30a-2(a) are attached hereto.

(a)(3) Not applicable.

(a)(4) Proxy voting policies and procedures pursuant to Item 7 are attached hereto.

(b) Certifications pursuant to Rule 30a-2(b) are furnished herewith.


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) The Endowment Institutional TEI Fund W, L.P.

 

By (Signature and Title)   /s/ John A. Blaisdell
John A. Blaisdell
Co-Principal Executive Officer
Date: February 27, 2015                                        
By (Signature and Title)   /s/ Andrew B. Linbeck
Andrew B. Linbeck
Co-Principal Executive Officer
Date: February 27, 2015                                        

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/ John A. Blaisdell
John A. Blaisdell
Co-Principal Executive Officer
Date: February 27, 2015                                        
By (Signature and Title)   /s/ Andrew B. Linbeck
Andrew B. Linbeck
Co-Principal Executive Officer
Date: February 27, 2015                                        
By (Signature and Title)   /s/ John E. Price
John E. Price
Principal Financial Officer
Date: February 27, 2015                                        
EX-99.CODE 2 d857064dex99code.htm CODE OF ETHICS Code of Ethics

The Endowment Master Fund, L.P.

The Endowment Registered Fund, L.P.

The Endowment TEI Fund, L.P.

The Endowment Institutional Fund, L. P.

The Endowment Institutional TEI Fund W, L.P.

The Endowment PMF Master Fund, L. P.

PMF Fund, L.P.

PMF TEI Fund, L.P.

Code of Ethics (Rule 17j-1)

 

I. General

A. Statement of Purpose

The Endowment Master Fund, L.P., The Endowment Registered Fund, L.P., The Endowment TEI Fund, L.P., The Endowment Institutional Fund, L.P., The Endowment Institutional TEI Fund W, L.P., The Endowment PMF Master Fund, L.P., PMF Fund, L.P. and PMF TEI Fund, L.P. (each, a “Fund,” and, together, the “Funds”); and Salient Capital, L.P., the placement agent for each Fund (the “Placement Agent”) (the Funds and the Placement Agent are each a “Company” and together the “Companies”) each hold their directors, general partners, officers, employees and service providers to a high standard of integrity and business practices. The Companies strive to avoid conflicts of interest or the appearance of conflicts of interest in connection with transactions in securities for the Funds.

The Companies recognize that the knowledge of present or future portfolio transactions and, in certain instances, the power to influence portfolio transactions in securities that may be possessed by certain of their directors, general partners, officers and employees could place such individuals, if they engage in personal transactions in securities that are eligible for investment by a Fund, in a position where their personal interests may conflict with the interests of the Fund.

The Companies also recognize that The Endowment PMF Master Fund, L.P. (the “PMF Master Fund”), PMF Fund, L.P. and PMF TEI Fund, L.P. (collectively, the “PMF Funds”) will be managed in a passive manner whereby the PMF Master Fund will hold to self-liquidation private equity and other similarly illiquid interests in Investment Funds and oversee the liquidation of other Investment Funds that provide for redemption while managing the PMF Master Fund’s cash to ensure the Master Fund’s ability to satisfy outstanding capital commitments relating to such portfolio holdings.

In view of the foregoing and of the provisions of Rule 17j-1 under the Investment Company Act of 1940, as amended (“1940 Act”)1 each Company has determined to adopt this Code of Ethics (“Code”) to identify and prohibit certain types of transactions deemed to create conflicts of interest (or at least the potential for or the appearance of such a conflict) and to establish reporting requirements and enforcement procedures. This document constitutes the Code required by Rule 17j-1 for the Companies.

 

 

1  Rule 17j-1 under the 1940 Act makes it unlawful for investment company personnel and other “Access Persons” to engage in “fraudulent, deceptive or manipulative” practices in connection with their personal transactions in securities when those securities are held or to be acquired by an investment company. The Rule also requires every investment company, the investment company’s investment adviser, and, in certain cases, the investment company’s placement agent to adopt a Code of Ethics containing provisions “reasonably necessary to prevent” such prohibited practices.


B. Statement of General Principles

The following general principles should guide the actions of Access Persons (as defined below) in evaluating and engaging in personal securities transactions:

1. The interests of the Funds’ shareholders are paramount. Access Persons must conduct themselves and their operations to give maximum effect to this tenet by assiduously placing the interests of the shareholders before their own.

2. All personal transactions in securities by Access Persons must be accomplished so as to avoid even the appearance of a conflict with the interests of the Funds and their shareholders.

3. Access Persons must avoid actions or activities that allow (or appear to allow) a person to profit or benefit from his or her position with respect to the Funds, or that otherwise bring into question the person’s independence or judgment.

This Code does not attempt to identify all possible conflicts of interest, and literal compliance with each of the specific procedures will not shield a person from liability for personal trading or other conduct that violates any fiduciary duty to a Fund’s shareholders. In addition to the specific prohibitions contained in this Code, each person covered by this Code is subject to a general requirement not to engage in any act or practice that would defraud a Fund’s shareholders.

C. Applicability of Code

The requirements of this Code are not applicable to any Access Person of a Fund who is subject to a separate code of ethics adopted by the Adviser or a Sub-Adviser of the Fund, provided that: (1) such Code of Ethics complies with the requirements of Rule 17j-1 under the 1940 Act and has been approved by the Fund’s Board; and (2) such Adviser or Sub-Adviser has certified to the Board of the Fund that it has adopted procedures reasonably necessary to prevent Access Persons from violating such code of ethics.

 

II. Definitions

For purposes of this Code, the following terms have the meanings set forth as follows:

 

  A. “Access Person” means:

1. any director, officer or general partner of a Fund, and any Advisory Person of a Fund’s investment adviser (“Adviser”) or any sub-adviser (“Sub -Adviser”)2 and

 

 

2  If the Adviser or Sub-Adviser’s primary business is advising funds or advisory clients, all of the Adviser’s or Sub-Adviser’s directors, officers, and general partners are presumed to be Access Persons of the Fund. If the Adviser or a Sub-Adviser is primarily engaged in a business other than advising funds or advisory clients, “Access Person” means any director, officer, general partner or Advisory Person of the Adviser or a Sub-Adviser who, with respect to the Fund for which such entity acts as Adviser or Sub-Adviser, makes any recommendation, participates in determining which recommendations shall be made, or whose principal function or duties relate to determining which recommendations shall be made or who, in connection with his or her duties, obtains any information concerning securities recommendations being made by such Adviser or Sub-Adviser.


2. any director, officer or general partner of the Placement Agent who, in the ordinary course of business, makes, participates in or obtains information regarding a Purchase or Sale of Covered Securities for the Funds or whose functions or duties as part of the ordinary course of business relate to the making of any recommendation to the Funds regarding any Purchase or Sale of Covered Securities.

B. “Advisory Person” means:

1. any director, officer, general partner or employee of the Adviser or a Sub-Adviser (or of any company in a Control relationship to a Fund, the Adviser or a Sub-Adviser) who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the Purchase or Sale of a Covered Security by the Fund or whose functions relate to the making of any recommendations with respect to such Purchases or Sales; and

2. any natural person in a Control relationship to a Fund, Adviser or Sub-Adviser who obtains information concerning recommendations made to the Fund with regard to the Purchase or Sale of a Covered Security by the Fund.

3. For purposes of clarity, Unaffiliated Directors of a Fund are not Advisory Persons.

C. “Affiliated Person” of another person shall mean:

1. any person directly or indirectly owning, controlling, or holding with power to vote, 5 per centum or more of the outstanding voting securities of such other person;

2. any person 5 per centum or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such other person;

3. any person directly or indirectly controlling, controlled by, or under common control with, such other person;

4. any officer, director, partner, copartner, or employee of such other person; and

5. with respect to a Fund, the Adviser and any Sub-Adviser.

D. “Automatic Investment Plan” means a program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation. An Automatic Investment Plan includes a dividend reinvestment plan.

E. “Board” means a Fund’s Board of Directors.


F. “Beneficial Ownership” is to be determined in the same manner as it is determined for purposes of Rule 16a-1(a)(2) under the Securities Exchange Act of 1934. This means that a person should generally consider himself or herself the beneficial owner of any securities of which he or she shares in the profits, even if he or she has no influence on voting or disposition of the securities; but does not include securities held by limited partnerships where the person is not aware of such security holding and has no control or discretion as to its disposition.

G. “Control” shall have the same meaning as that set forth in Section 2(a)(9) of the 1940 Act. Section 2(a)(9) defines “control” as the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. Ownership of more than 25% of a company’s outstanding voting securities is presumed to give the holder thereof control over the company.

H. “Covered Security” has the same meaning as that set forth in Rule 17j-1(a)(4), which defines the term very broadly, but excludes direct obligations of the U.S. government, bankers’ acceptances, bank certificates of deposit, commercial paper, high quality short-term debt instruments (including repurchase agreements), and shares issued by a registered open-end investment company.

I. “Disinterested Director” means a director of a Fund who is not an “interested person” of the Fund within the meaning of Section 2(a)(19) of the 1940 Act.

J. “Initial Public Offering” means an offering of securities registered under the Securities Act of 1933, as amended (the “Securities Act”), the issuer of which, immediately before the registration, was not subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended.

K.“Investment Fund” has the same meaning as set forth in a Fund’s private placement memorandum.

L. “Investment Personnel” means:

1. Any employee of a Fund, the Adviser or a Sub-Adviser (or of any company in a Control relationship to the Fund, the Adviser or a Sub-Adviser) who, in connection with his or her regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities by the Fund.

2. Any natural person who controls a Fund, the Adviser or a Sub-Adviser and who obtains information concerning recommendations made to the Fund regarding the purchase or sale of securities by the Fund.

3. For purposes of clarity, Unaffiliated Directors of a Fund are not Investment Personnel.

M. “Limited Offering” means an offering that is exempt from registration under the Securities Act pursuant to section 4(2) or 4(6) or pursuant to rule 504, rule 505, or rule 506 under the Securities Act.

N. “Purchase or Sale of a Covered Security” means obtaining or disposing of Beneficial Ownership of that Covered Security and includes, among other things, the writing of an option to purchase or sell a Covered Security.


O. “Review Officer” shall mean the Fund’s Chief Compliance Officer (“CCO”), or any other person charged with the responsibility, at any given time, to pre-clear trades, grant exceptions to prohibitions under the Code, receive reports and notices required by this Code to be generated, and to accomplish any other requirement of this Code.

1. A person may be designated by a Board or the CCO as a Review Officer of a Fund (or the CCO may undertake the responsibility of serving as the Review Officer) for purposes of this Code without otherwise formally carrying that title or the responsibility for functions otherwise generally associated with the responsibilities of a compliance officer.

2. The Review Officer may delegate certain functions as appropriate.

P. “Security held or to be Acquired by a Fund” shall mean

1. Any Covered Security which, within the most recent 15 days:

(a) Is or has been directly held by the Fund; or

(b) Is being or has been considered by the Fund or the Adviser for purchase by the Fund; and

2. Any option to purchase or sell, and any security convertible into or exchangeable for, a Covered Security.

3. Specifically excluded from this definition are any Covered Securities in which the Fund has no investment discretion and that the Fund has no current knowledge are being held on its behalf (i.e., an investment by the Fund in an Investment Fund) for which the manager of the Investment Fund has full discretion to buy or sell securities without consultation or input from the Fund).

Q. “Unaffiliated Director” means a director of a Fund that is a Disinterested Director or a person that is not an affiliated person of the Adviser or the Placement Agent.

The CCO of the Funds may provide the Boards with a list of each Security held or to be Acquired by a Fund on not less than a quarterly basis. The Boards, Access Persons and Advisory Persons are entitled to rely on this list in conducting their personal and business affairs in compliance with the Code. In the event that any such person breaches the Code due to a misstatement or omission with respect to such list, such person shall not be deemed responsible for such breach, unless he or she had actual knowledge that his or her actions would result in a breach (i.e., knew that the security transaction being conducted by such person was a breach of the Code).

III.   Approval, Adoption and Administration of Code of Ethics

 

  A. Each Company must:

1. adopt a written Code containing provisions reasonably necessary to prevent Access Persons from violating the Code;

2. provide the written Code and any amendments thereto to the Boards; and


3. provide a written certification to the Boards that it has adopted procedures reasonably necessary to prevent Access Persons from violating the Code.

B. The Boards, including a majority of the Disinterested Directors, must approve this Code, as well as the applicable code of ethics of the Adviser and any Sub-Adviser to a Fund. The Boards must base their approval on a determination that the relevant Code contains provisions reasonably necessary to prevent Access Persons from violating the Code.

C. Following initial approval of this Code and the code of ethics of the Adviser or any Sub-Adviser to a Fund, any material change to a Code must be approved by the Board of the Fund, including a majority of the Disinterested Directors thereof and, in the case of the PMF Master Fund, unanimously, within six months of such amendment.

D. No less frequently than annually, each Fund, the Adviser, each Sub-Adviser and the Placement Agent must furnish to the Boards, and the Boards must consider, a written report that:

1. Describes any issues arising under the Code or a code of ethics applicable to the Adviser or Sub-Adviser since the last report to the Boards, including, but not limited to, information about material violations of the code or procedures and sanctions imposed in response to the material violations, summarizes any changes in the procedures made during the past year, and identifies any recommended changes in existing restrictions or procedures based upon the Funds’, the Adviser’s, the Sub-Adviser’s and the Placement Agent’s experience, evolving industry practice, or developments in applicable laws and regulations; and

2. Certifies that the Fund, the Adviser, the Sub-Adviser and the Placement Agent, as applicable, has adopted procedures reasonably necessary to prevent Access Persons from violating the Code or a code of ethics applicable to the Adviser or Sub-Adviser (as applicable).

 

IV. Legal Requirements

A. General Prohibitions

It is the policy of the Companies that no Access Person, any Affiliated Person of a Fund, or any Affiliated Person of the Adviser or the Placement Agent, shall engage in any act, practice or course of conduct that would violate the provisions of Rule 17j-1.

Rule 17j-1(b) under the 1940 Act provides that the Placement Agent, any Affiliated Person of a Fund, and any Affiliated Person of the Adviser or the Placement Agent, in connection with the purchase or sale, directly or indirectly, by such person of a Security Held or to be Acquired by the Fund shall not:

1. employ any device, scheme or artifice to defraud a Fund;

2. make to the Fund any untrue statement of a material fact or omit to state to the Fund a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;


3. engage in any act, practice or course of business that would operate as a fraud or deceit upon the Fund; or

4. engage in any manipulative practice with respect to the Fund.

 

  B. Reporting Obligations

Each Access Person shall file the following reports with the Review Officer. Please note that special provisions apply to Unaffiliated Directors, as detailed in paragraph B.5 below.

1. Initial Holdings Report. No later than ten (10) days after the person becomes an Access Person under this Code, each Access Person (other than a Fund’s Unaffiliated Directors) must provide to the Review Officer an initial holdings report, which is current as of a date no more than 45 days prior to the date the reporting person becomes an Access Person, containing the following information:

a. The title, number of shares and principal amount of each Covered Security in which the Access Person had any direct or indirect beneficial ownership when the person became an Access Person;

b. The name of any broker, dealer or bank with whom the Access Person maintained an account in which any securities were held for the direct or indirect benefit of the Access Person as of the date the person became an Access Person; and

c. The date that the report is submitted by the Access Person.

2. Quarterly Reports. Each Access Person (subject to paragraph B.5 with respect to a Fund’s Unaffiliated Directors) must provide to the Review Officer, on a quarterly basis, not later than thirty (30) days after the end of the calendar quarter, a report containing the following information:

a With respect to any transaction during the quarter in a Covered Security in which the Access Person had any direct or indirect beneficial ownership:

i. The date of the transaction, the title, the interest rate and maturity date (if applicable) and the number of shares and the principal amount of each Covered Security involved;

ii. The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);

iii. The price at which the transaction was effected;

iv. The name of the broker, dealer or bank with or through whom the transaction was effected; and

v. The date the report was submitted by the Access Person.


b. With respect to any account established by the Access Person in which any securities were held during the quarter for the direct or indirect benefit of the Access Person:

i. The name of the broker, dealer or bank with whom the Access Person established the account;

ii. The date that the report is submitted by the Access Person.

iii. The date the account was established; and

3. Annual Holdings Report. Each Access Person (other than a Fund’s Unaffiliated Directors) must annually provide to the Review Officer a complete listing of all Covered Securities owned by the Access Person, no later than February 14 of each year, which report must be current as of a date no more than 45 days before the report is submitted. The listing must contain the following information:

a. The title, number of shares and principal amount of each Covered Security in which the Access Person had any direct or indirect beneficial ownership;

b. The name of any broker, dealer or bank with whom the Access Person maintains an account in which any securities are held for the direct or indirect benefit of the Access Person; and

c. The date that the report is submitted by the Access Person.

4. Annual Certification. All Access Persons shall be required to certify annually that they have received, read and understand the Code. Further, all Access Persons are required to certify annually that they have complied with the requirements of the Code and that they have disclosed or reported all personal securities transactions required to be disclosed or reported pursuant to the Code.

5. Unaffiliated Directors. An Unaffiliated Director is required to complete a quarterly report only if (i) the Unaffiliated Director knew, or in the ordinary course of fulfilling his or her official duties as a Fund director should have known, that during the 15-day period immediately before or after his or her transaction, such Covered Security was Purchased or Sold, or considered for Purchase or Sale, by the Fund,3 or (ii) during the relevant quarter, the Unaffiliated Director has engaged in what he or she believes may be construed as short-term trading in the securities of a registered open-end investment company that is advised by the Adviser or an affiliate of the Adviser. The “should have known” standard implies no duty of inquiry, does not presume there should have been any deduction or extrapolation from discussions or memoranda dealing with tactics to be employed in meeting any of a Fund’s investment objectives, or that any knowledge is to be imputed because of prior knowledge of the Funds’ portfolio holdings, market considerations, or the Funds’ investment policies and objectives or investment restrictions.

 

 

3  This reporting requirement shall not be applicable to securities traded by passively managed index funds


C. Exceptions from Reporting Requirements

An Access Person need not submit:

1. Any report with respect to Covered Securities held in accounts over which the Access Person had no direct or indirect influence or control;

2. A quarterly report if the report would duplicate information contained in broker trade confirmations or account statements received by the Funds, the Adviser, the Sub-Adviser or the Placement Agent no later than 30 days after the end of each calendar quarter and/or information contained in the Adviser’s, Sub-Adviser’s, Placement Agent’s and/or the Funds’ records.

3. Reports otherwise required by this Section, if the Access Person is also an Access Person of the Adviser or a Sub-Adviser to the Funds, provided that either:

a. such person submits to the Adviser or Sub-Adviser forms prescribed by the code of ethics of such Adviser or Sub-Adviser containing substantially the same information as called for in the forms required by this Section; or

b. the information is such report would duplicate information required to be recorded under Rule 204-2(a)(13) under the Investment Advisers Act of 1940.

4. A quarterly report with respect to transactions effected pursuant to an Automatic Investment Plan.

 

V. Pre-Clearance of Securities Transactions

Investment Personnel must obtain approval from the CCO or the Review Officer before directly or indirectly acquiring Beneficial Ownership of any Covered Security as part of an Initial Public Offering or Limited Offering. Investment Personnel who are subject to the code of ethics of the Adviser or a Sub-Adviser need not submit to this procedure provided that such person is subject to a similar procedure under such other code of ethics.

 

VI. Confidentiality

All reports of securities transactions and any other information filed with a Fund pursuant to this Code shall be treated as confidential. Any such report may contain a statement that the report shall not be construed as an admission by the person making such report that he or she has any direct or indirect beneficial ownership in the security to which the report relates.

No Access Person shall reveal to any other person (except in the normal course of his or her duties on behalf of a Fund) any information regarding securities transactions made or being considered by or on behalf of the Funds.

 

VII. Review and Enforcement

A. The Review Officer for each Fund, in consultation with other Review Officers, shall compare all reported personal securities transactions with completed portfolio transactions of each Fund and a list of securities being considered for purchase or sale by each Fund to determine whether a violation of this Code may have occurred. One test that may be applied in determining whether a violation of the Code has occurred will be to review the securities transactions of Access Persons for patterns of transactions. For example:


1. Any pattern involving parallel transactions (for the Fund and the individual both buying or both selling the same Covered Security) or opposite transactions (buy/sell or sell/buy) may be analyzed to determine whether the individual’s transaction may have violated the Code.

2. Among the other factors that may be considered in the analysis are:

a. the number and dollar amount of the transactions;

b. the trading volume of the Covered Security in question;

c. the length of time the Covered Security has been held by the individual; and

d. the individual’s involvement in the investment process.

It should be noted, however, that a violation could be deemed to have resulted from a single transaction if the circumstances warrant a finding that the underlying principles of fair dealing have been violated. Before making any determination that a violation has been committed by any person, the Review Officer shall give such person an opportunity to supply additional explanatory material.

B. If the Review Officer determines that a violation of this Code may have occurred, the Review Officer shall submit his or her written determination, together with a confidential report and any additional explanatory material provided by the individual, to the CCO (if different from the Review Officer) or the CCO’s delegate and outside counsel to the Funds, who shall make an independent determination as to whether a violation has occurred.

C. If the CCO (or delegate) and outside counsel to the Funds find that a violation has occurred, the CCO, in consultation with the Fund’s President, shall impose upon the individual such sanctions as he or she deems appropriate and shall report the violation and the sanction imposed to the Funds’ Boards.

D. No person shall participate in a determination of (1) whether he or she personally has committed a violation of the Code, or (2) the imposition of any sanction in the event he or she committed a violation of the Code. If a Covered Securities transaction of the CCO is under consideration, the President of the Funds shall act in all respects in the manner prescribed in this Code for the CCO.

 

VIII.  Records

Each Fund shall maintain records in the manner and to the extent set forth below, which may be maintained on microfilm or by such other means permissible under the conditions described in Rule 31a-2 under the 1940 Act or under no-action letters or interpretations under that rule, and shall be available for examination by representatives of the Securities and Exchange Commission.

A. A copy of this Code shall be preserved in an easily accessible place (including for five (5) years after this Code is no longer in effect).

B. A record of any violation of this Code and of any action taken as a result of such violation shall be preserved in an easily accessible place for a period of not less than five (5) years following the end of the fiscal year in which the violation occurs.


C. A copy of each report to the Board and each report, including any information provided in lieu of the report, made by an Access Person pursuant to this Code shall be preserved for a period of not less than five (5) years from the end of the fiscal year in which it is made, the first two years in an easily accessible place.

D. A list of all Access Persons who are, or within the past five (5) years have been, required to make reports pursuant to this Code shall be maintained in an easily accessible place.

E. A record of any decision, and the reasons supporting the decision, to approve the acquisition by Investment Personnel of securities under Section V of this Code shall be preserved for at least five years after the end of the fiscal year in which the approval is granted, the first two years in an easily accessible place.

 

IX. Approval, Amendment and Interpretation of Provisions

A. This Code may be amended as necessary or appropriate with the approval of the Boards, including a majority of the Disinterested Directors thereof and, in the case of the PMF Master Fund, unanimously.

B. This Code is subject to interpretation by the Boards in their discretion.

Dated: January 16, 2004, as amended July 13, 2010, January 14, 2014 and February 18, 2014.


The Endowment Master Fund, L.P.

The Endowment Registered Fund, L.P.

The Endowment TEI Fund, L.P.

The Endowment Institutional Fund, L.P.

The Endowment Institutional TEI Fund W, L.P.

The Endowment PMF Master Fund, L.P.

PMF Fund, L.P.

PMF TEI Fund, L.P.

Code of Ethics (Rule 17j-1)

QUARTERLY SECURITIES TRANSACTION REPORT1

This report of personal securities transactions pursuant to the Code of Ethics is required by Rule 17j-1 of the Investment Company Act of 1940. The report must be completed, signed, and submitted not later than 30 days after the end of each calendar quarter. Refer to the Code of Ethics for further instructions. If you have no transactions to report, please check the box below and sign the Report.

 

Name of Reporting Person:

 

Date Became Subject to the Code’s

  For The Calendar Quarter

Reporting Requirements:

  Ended:                                                                     

Date Report Due (no later than 30 days                                

  Date Report Submitted:

after the end of a calendar quarter):

 

Securities Transactions During the Quarter

No Transactions to Report (check if applicable) [    ]

 

Date of

Transaction

    

Title of

Security

    

Nature of
Transaction
(Purchase/Sale

/Other2 )

    

No. of

Shares/

Securities

    

Principal
Amount,

Maturity Date
and Interest

Rate

(as applicable)

    

Price

    

Executing Broker,

Dealer or Other

Party Through

Whom

Transaction

Was Made

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

(Continue transaction record on next page if necessary.)

Securities Accounts Opened During the Quarter

If you have no new securities accounts to report, please check here. [    ]

 

 

1  This report must be completed in accordance with the Code of Ethics. Filing of this Report is required whether or not transactions occurred.
2  If the transaction is other than a straightforward sale or purchase of securities, mark it with an asterisk and explain the nature of the transaction on the reverse side. Describe the nature of each account in which the transaction is to take place, i.e., personal, spouse, children, charitable trust, etc. If you wish, you may attach a copy of your account statements as provided to you by your broker, bank or custodian.


Name of Broker, Dealer or Bank

  

 

 

 

 

 

I represent that I am not in possession of material non-public information concerning the securities listed above or their issues. If I am an Access Person charged with making recommendations concerning the portfolios of the Funds with respect to any of the securities listed above, I hereby represent that I have not determined or been requested to make a recommendation in any of the securities listed above except as permitted by the Code of Ethics. This report is not an admission that I have direct or indirect beneficial ownership of any of the securities reported above.

 

 

   

 

(Signature)

(Date)


(Transaction record continued from previous page.)

 

Date of

Transaction

    

Title of

Security

    

Nature of
Transaction
(Purchase/Sale

/Other2 )

    

No. of

Shares/

Securities

    

Principal
Amount,

Maturity Date
and Interest

Rate

(as applicable)

    

Price

    

Executing Broker,

Dealer or Other

Party Through

Whom

Transaction

Was Made

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

    

 

    

 

    

 

    

 

    

 

    

.


The Endowment Master Fund, L.P.

The Endowment Registered Fund, L.P.

The Endowment TEI Fund, L.P.

The Endowment Institutional Fund, L.P.

The Endowment Institutional TEI Fund W, L.P.

The Endowment PMF Master Fund, L.P.

PMF Fund, L.P.

PMF TEI Fund, L.P.

Code of Ethics (Rule 17j-1)

INITIAL HOLDINGS REPORT

This report shall set forth information on your securities holdings in which you have a direct or indirect beneficial interest, including holdings by a spouse, minor children, trusts, foundations, and any account for which trading authority has been delegated to you or any Fund, as required by the Funds’ Code of Ethics. In lieu of listing each security position below, you may instead authorize your broker to mail duplicate copies of your brokerage statements to the Funds’ CCO. (Please see the Code of Ethics for more information.)

Name of Reporting Person:

 

Date Became Subject to the Code’s

  Information in Report Dated

Reporting Requirements:

  As Of (must be current as of                                
  a date no more than 45 days
  before Date Became Subject
  to the Code’s Reporting
  Requirements):

Date Report Due (no later than 10 days                            

  Date Report Submitted:

after became Access Person):

 

Securities Holdings*

 

Title of Security

  

Number of Shares

  

Principal Amount

 

  

 

  

 

 

  

 

  

 

 

  

 

  

 

 

  

 

  

 

 

  

 

  

 

 

  

 

  

 

 

  

 

  

 

 

  

 

  

 

(Continue holdings record on next page if necessary.)

If you have no securities holdings to report, please check here. [     ]

Securities Accounts

Name of Broker, Dealer or Bank in which Securities are Held

 

 

 

 

 

 


If you have no securities accounts to report, please check here. [    ]

I certify that I have included on this report all securities holdings and accounts required to be reported pursuant to the Code of Ethics. This report is not an admission that I have direct or indirect beneficial ownership of any of the securities reported above.

 

 

   

 

(Signature)

(Date)

 

* Securities that are EXEMPT from being reported on this Form include: (i) securities that are direct obligations of the U. S. Government, such as Treasury bills, notes and bonds, and U.S. Savings Bonds and derivatives thereof; (ii) high quality short-term instruments (“money market instruments”) including but not limited to bankers’ acceptances, U.S. bank certificates of deposit; commercial paper; and repurchase agreements; (iii) shares of the registered open-end investment companies; and (iv) currencies.


(Holdings record continued from previous page.)

 

Title of Security

      

Number of Shares

       

Principal Amount

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 


The Endowment Master Fund, L.P.

The Endowment Registered Fund, L.P.

The Endowment TEI Fund, L.P.

The Endowment Institutional Fund, L.P.

The Endowment Institutional TEI Fund W, L.P.

The Endowment PMF Master Fund, L.P.

PMF Fund, L.P.

PMF TEI Fund, L.P.

Code of Ethics (Rule 17j-1)

ANNUAL HOLDINGS REPORT

This report shall set forth information on your securities holdings in which you have a direct or indirect beneficial interest, including holdings by a spouse, minor children, trusts, foundations, and any account for which trading authority has been delegated to you or any Fund, as required by the Funds’ Code of Ethics. In lieu of listing each security position below, you may instead authorize your broker to mail duplicate copies of your brokerage statements to the Funds’ CCO. (Please see the Code of Ethics for more information.)

Name of Reporting Person:

 

Date Became Subject to the Code’s

  Information in Report

Reporting Requirements:

  Dated As Of (must be
  current as of a date no
  more than 45 days before

For Year Ended: Securities Holdings*                            

  Date Report Submitted):
  Date Report Submitted:

 

Title of Security

  

No. of Shares

  

Principal Amount

 

  

 

  

 

 

  

 

  

 

 

  

 

  

 

 

  

 

  

 

 

  

 

  

 

 

  

 

  

 

(Continue holdings record on next page if necessary.)

If you have no securities holdings to report for the year, please check here. [    ]

Securities Accounts

Name of Broker, Dealer or Bank

 

 

 

 

If you have no securities accounts to report for the year, please check here. [    ]

I certify that I have included on this report all securities holdings and accounts required to be reported pursuant to the Code of Ethics. This report is not an admission that I have direct or indirect beneficial ownership of any of the securities reported above.


 

   

 

(Signature)

(Date)

 

* Securities that are EXEMPT from being reported on this Form include: (i) securities that are direct obligations of the U. S. Government, such as Treasury bills, notes and bonds, and U.S. Savings Bonds and derivatives thereof; (ii) high quality short-term instruments (“money market instruments”) including but not limited to bankers’ acceptances, U.S. bank certificates of deposit; commercial paper; and repurchase agreements; (iii) shares of the registered open-end investment companies; and (iv) currencies.


(Holdings record continued from previous page.)

 

Title of Security

      

Number of Shares

       

Principal Amount

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 

 

    

 

     

 


Exhibit D

The Endowment Master Fund, L.P.

The Endowment Registered Fund, L.P.

The Endowment TEI Fund, L.P.

The Endowment Institutional Fund, L.P.

The Endowment Institutional TEI Fund W, L.P.

The Endowment PMF Master Fund, L.P.

PMF Fund, L.P.

PMF TEI Fund, L.P.

Code of Ethics (Rule 17j-1)

ANNUAL CERTIFICATION OF COMPLIANCE

Name of Person Certifying:                                                                                                                                    

Access Persons shall complete this Code of Ethics Certification of Compliance upon the receipt and review of this Code of Ethics and on an annual basis thereafter.

I have read and understand the Code of Ethics referenced above and certify that I am in compliance with it and have disclosed or reported all personal securities transactions required to be disclosed or reported pursuant to the Code of Ethics.

 

 

   

 

(Signature)

(Date)
EX-99.PROXY 3 d857064dex99proxy.htm PROXY VOTING POLICIES AND PROCEDURES PURSUANT TO ITEM 7 Proxy voting policies and procedures pursuant to Item 7

THE ENDOWMENT MASTER FUND, L.P.

THE ENDOWMENT PMF MASTER FUND, L.P.

(the “Master Fund”)

THE ENDOWMENT REGISTERED FUND, L.P.

THE ENDOWMENT TEI FUND, L.P.

THE ENDOWMENT INSTITUTIONAL FUND, L.P.

THE ENDOWMENT INSTITUTIONAL TEI FUND W, L.P.

PMF FUND, L.P.

PMF TEI FUND, L.P.

(each, a “Feeder Fund”)

(collectively, the “Funds”)

PROXY VOTING POLICIES AND PROCEDURES

 

I. Statement of Principle

The Funds seek to assure that proxies received by the Funds are voted in the best interests of the Funds’ stockholders and have accordingly adopted these procedures.

 

II. Delegation of Proxy Voting/Adoption of Adviser and Sub-Adviser Policies

Except as provided in Section III below, each Fund delegates the authority to vote proxies related to portfolio securities to Endowment Advisers, L.P. (the “Adviser”), as investment adviser to each Fund. For each portion of the Fund’s portfolio managed by a sub-adviser retained to provide day-to-day portfolio management for that portion of the Fund’s portfolio (each, a “Sub-Adviser”), the Adviser in turn may delegate its proxy voting authority to the Sub-Adviser responsible for that portion of the Fund’s portfolio. The Board of Directors of each Fund adopts the proxy voting policies and procedures of the Adviser and Sub-Advisers as the proxy voting policies and procedures that will be used by each of these respective entities when exercising voting authority on behalf of the Fund. These policies and procedures are attached hereto.

 

III. Retention of Proxy Voting Authority

With respect to proxies issued by the Master Fund, the Feeder Funds do not delegate to the Adviser, but instead retain, their proxy voting authority. After receiving a proxy issued by the Master Fund, the Feeder Fund will hold a meeting of its Partners at which the Partners will vote their Interests to instruct the Feeder Fund to vote for or against the matter presented by the Master Fund. The Feeder Fund will then calculate the proportion of Interests voted for to those voted against (ignoring for purposes of this calculation the Interests for which it receives no voting instructions) and will subsequently vote its Interests in the Master Fund for or against the matter in the same proportion.

 

IV. Consent in the Event of a Conflict of Interest

If for a particular proxy vote the Adviser or Sub-Adviser seeks a Fund’s consent to vote because of a conflict of interest or for other reasons, any two independent directors of the Fund may provide the Fund’s consent to vote.

 

V. Annual Review of Proxy Voting Policies of Adviser and Sub-Advisers

The Board of Directors of each Fund will review on an annual basis the proxy voting policies of the Adviser and Sub-Advisers applicable to the Fund.

Dated: March 10, 2004, as revised October 18, 2011.


ENDOWMENT ADVISERS, L.P.

PROXY VOTING POLICIES AND PROCEDURES

The following are proxy voting policies and procedures (“Policies and Procedures”) adopted by Endowment Advisers, LP (“Endowment Advisers”), an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”) under the Investment Advisers Act of 1940, as amended (“Advisers Act”), with respect to voting securities held by client portfolios. These Policies and Procedures are adopted to ensure compliance by Endowment Advisers with Rule 206(4)-6 under the Advisers Act and other applicable fiduciary obligations under rules and regulations of the SEC and interpretations of its staff. Endowment Advisers follows these Policies and Procedures for each of its clients as required under the Advisers Act and other applicable law, unless expressly directed by a client in writing to refrain from voting that client’s proxies or to vote in accordance with the client’s proxy voting policies and procedures. With respect to the Funds, Endowment Advisers follows both these Policies and Procedures and the proxy voting policies and procedures adopted by the Funds and their Boards of Directors.

 

I. Definitions

A. “Best interest of clients”. In the view of Endowment Advisers, this means clients’ best economic interest over the long term — that is, the common interest that all clients share in seeing the value of a common investment increase over time. Clients may have differing political or social interests, but their best economic interest is generally uniform.

B. “Material conflict of interest”. Circumstances when Endowment Advisers, or any member of its senior management or any of its portfolio managers or portfolio analysts, knowingly does business with a particular proxy issuer or closely affiliated entity which may appear to create a material conflict between the interests of Endowment Advisers and the interests of its clients in how proxies of that issuer are voted.

 

II. General Policy

Where Endowment Advisers is given responsibility for voting proxies, we must take reasonable steps under the circumstances to ensure that proxies are received and voted with a view to enhancing the value of the shares of stock held in client accounts.

These Policies and Procedures expressly address the voting of proxies or securities with respect to which the issuers solicit proxies to vote on proposals that are put to a vote of shareholders. Each Fund may invest all or some portion of its assets in the securities of privately placed investment vehicles (“Private Investment Funds”), which do not typically convey traditional voting rights to the holder, and the occurrence of corporate governance or other notices for this type of investment is substantially less than that encountered in connection with registered equity securities. On occasion, however, each Fund or its general partner(s) may receive notices from the Private Investment Funds seeking the consent of holders in order to materially change certain rights within the structure of the security issued by the Private Investment Fund or change material terms of the Private Investment Fund’s constituent documents. Endowment Advisers


shall follow these Policies and Procedures, to the extent applicable, in exercising the rights of the Funds to vote or consent in connection with its investments in Private Investment Funds. The Advisor shall take such action as may be necessary to enable the Funds to comply with all disclosure and recordkeeping obligations imposed by applicable rules and regulations.

The financial interest of our clients is the primary consideration in determining how proxies should be voted. In the case of social and political responsibility issues that in our view do not primarily involve financial considerations, the diversity of our clients means that we are unable to represent each such view in each instance. Thus, Endowment Advisers exercises its vote on these issues in what it believes to be the best economic interests of its clients unless a private account client has provided specific instructions otherwise for its voting securities. When making specific proxy decisions, Endowment Advisers generally adheres to its specific voting policies contained in Section VI herein. The guidelines set forth positions of Endowment Advisers on recurring issues and criteria for addressing non-recurring issues. The general voting policies of Endowment Advisers are described below.

 

III. General Voting Policies

A. Client’s Best Interest. These Policies and Procedures are designed and implemented in a way that is reasonably expected to ensure that proxies are voted in the best interest of clients. Proxies will be voted with the aim of furthering the best economic interests of clients, promoting high levels of corporate governance and adequate disclosure of company policies, activities and returns, including fair and equal treatment of shareholders.

B. Shareholder Activism. Endowment Advisers seeks to develop relationships with the management of portfolio companies to encourage transparency and improvements in the treatment of owners and stakeholders. Thus, Endowment Advisers may engage in dialogue with the management of portfolio companies with respect to pending proxy voting issues.

C. Case-by-Case Basis. While these Policies and Procedures guide our decisions, each proxy vote is ultimately cast on a case-by-case basis, taking into consideration the contractual obligations under the advisory agreement or comparable document, and all other relevant facts and circumstances at the time of the vote. Endowment Advisers may cast proxy votes in favor of management proposals or seek to change the views of management, considering specific issues as they arise on their merits. Endowment Advisers may also join with other investment managers in seeking to submit a shareholder proposal to a company or to oppose a proposal submitted by the company. Any such action is primarily based on grounds of fundamental share value.

D. Individualized. These Policies and Procedures are tailored to suit the advisory business of Endowment Advisers and the types of securities portfolios it manages. To the extent that clients have adopted their own procedures, Endowment Advisers may vote the same securities differently depending upon clients’ directions.

E. Material Conflicts of Interest. Material conflicts are resolved in the best interest of clients. When a material conflict of interest between Endowment Advisers and its respective client(s) is identified, Endowment Advisers will choose among the procedures set forth in Section IV.B.2.b., below, to resolve such conflict.


F. Limitations. The circumstances under which Endowment Advisers may take a limited role in voting proxies, include the following.

1. No Responsibility. Endowment Advisers will not vote proxies for client accounts in which the client contract specifies that Endowment Advisers will not vote. Under such circumstances, the clients’ custodians (“Custodians”) are instructed to mail proxy material directly to such clients.

2. Limited Value. Endowment Advisers may abstain from voting a client proxy if the effect on shareholders’ economic interests or the value of the portfolio holding is indeterminable or insignificant.

3. Unjustifiable Costs. Endowment Advisers may abstain from voting a client proxy for cost reasons.

4. Securities Lending Arrangements. If voting securities are part of a securities lending program, Endowment Advisers may be unable to vote while the securities are on loan.

5. Special Considerations. The responsibilities of Endowment Advisers for voting proxies are determined generally by its obligations under each advisory contract or similar document. If a client requests in writing that Endowment Advisers vote its proxy in a manner inconsistent with these Policies and Procedures, Endowment Advisers may follow the client’s direction or may request that the client vote the proxy directly. As a courtesy to certain clients, Endowment Advisers may, from time to time, agree to vote proxies on securities over which Endowment Advisers holds no discretionary management authority. Endowment Advisers is under no obligation to vote these securities as they are not part of the clients’ managed accounts, Endowment Advisers exercises no discretion over such securities, and they are not generally included in the securities which Endowment Advisers follows as an investment adviser. To the extent that Endowment Advisers has agreed to perform the courtesy service of mechanically casting the vote on any such securities and no specific voting instructions are provided by the client(s), Endowment Advisers will not research the companies and will either vote with management or abstain unless the security being voted happens to be covered by Endowment Advisers in its capacity as investment adviser.

G. Sources of Information. Endowment Advisers may conduct research internally and/or use the resources of an independent research consultant. Endowment Advisers may consider legislative materials, studies of corporate governance and other proxy voting issues, and/or analyses of shareholder and management proposals by a certain sector of companies, e.g. small cap companies.

H. Availability of Policies and Procedures. Endowment Advisers will provide clients with a copy of these Policies and Procedures, as revised from time to time, upon request.


I. Disclosure of Vote. As described in Part 2A of Endowment Advisers Form ADV, a client may obtain information on how its proxies were voted by requesting such information from Endowment Advisers. Endowment Advisers does not generally disclose client proxy votes to third parties, other than as required for the Funds, unless specifically requested, in writing, by the client.

 

IV. Proxy Voting Procedures

A. General

1. Accounts for Which Endowment Advisers Has Proxy Voting Responsibility

Endowment Advisers is generally responsible for voting proxies with respect to securities held in client accounts unless the investment management agreement explicitly states that Endowment Advisers will not vote proxies for the account. Endowment Advisers is not responsible for voting client securities which are not part of the managed account. However, Endowment Advisers may, as a courtesy, vote certain client securities which are not part of the managed account at the request of its clients subject to the limitations described in Section III.F.5., above.

2. Adherence to Client Proxy Voting Policies

If a client has its own proxy voting policy, Endowment Advisers and the client will agree in writing on whether Endowment Advisers will vote in accordance with its own policy, whether Endowment Advisers will vote that client’s securities in accordance with the client’s policy or whether the client will vote its own securities.

3. Disclosure of Proxy Voting Intentions

Endowment Advisers personnel should not discuss with members of the public how Endowment Advisers intends to vote on any particular proxy proposal. This does not restrict communications in the ordinary course of business with other clients for which Endowment Advisers votes proxies. Disclosure of Endowment Advisers’ proxy voting intentions – especially where done with the purpose or effect of influencing the management or control of a company – could trigger various restrictions under the federal securities laws, including under the proxy solicitation, beneficial ownership and short-swing profit liability provisions of the Securities Exchange Act of 1934, as amended. In the event that Endowment Advisers wishes to discuss its voting intentions outside the firm, Endowment Advisers should consult with its counsel before any such discussions.

B. Operational Procedures

1. Role of the Proxy Administrator

Once a client account is established and the proxy voting responsibility is determined, the Proxy Administrator (“PA”), is responsible for receiving and processing proxies for securities held in the portfolios of our clients and ensuring that votes are cast. The PA is responsible for ensuring that the registered owners of record, e.g. the client, trustee or custodian bank, that receive proxy materials from the issuer or its information agent, forward proxy materials to Endowment Advisers. Proxies may also be delivered electronically through a proxy service. The PA logs in any proxy materials received, matches them to the securities to be voted and confirms that the correct amount of shares, as of the record date, is reflected on the proxy. Once the proxy statement is logged in, the PA gives it to a research analyst (“Analyst”) for consideration.


The PA also compiles and maintains information, for each client for which Endowment Advisers votes proxies, showing the issuer’s name, meeting date and manner in which it voted on each proxy proposal. The PA is also responsible for monitoring compliance with client proxy voting policies. A copy of each proxy statement is kept. Endowment Advisers generally seeks to vote proxies at least one (1) week prior to the deadline. Unfortunately, proxy materials are often received with less than a week’s time before the deadline, and in such cases, Endowment Advisers uses reasonable efforts to exercise its vote.

2. Material Conflicts of Interest

a. Endowment Advisers will take steps to identify the existence of any material conflicts of interest relating to the securities to be voted or the issue at hand. Senior management, portfolio managers and Analysts of Endowment Advisers are expected to disclose to the PA any personal conflicts such as officer or director positions held by them, their spouses or close relatives in the portfolio company. Conflicts based on business relationships or dealings of affiliates of Endowment Advisers will only be considered to the extent that the Endowment Advisers has actual knowledge of such business relationships.

b. When a material conflict of interest between Endowment Advisers’ interests and its clients’ interests appears to exist, Endowment Advisers may choose among the following options to eliminate such conflict: (1) vote in accordance with these Policies and Procedures if it involves little or no discretion; (2) vote as recommended by a third-party service if Endowment Advisers utilizes such a service; (3) “echo vote” or “mirror vote” the proxies in the same proportion as the votes of other proxy holders that are not clients of Endowment Advisers; (4) if possible, erect information barriers around the person or persons making voting decisions sufficient to insulate the decision from the conflict; (5) if practical, notify affected clients of the conflict of interest and seek a waiver of the conflict; or (6) if agreed upon in writing with the client, forward the proxies to affected clients allowing them to vote their own proxies.

3. Role of the Research Analysts

The PA ensures that each proxy statement is directed to the Analyst responsible for following the particular security or industry. The Analysts are responsible for considering the substantive issues relating to any vote, deciding how the shares will be voted, and instructing the PA how to vote the proxies. In determining how to vote a given proxy, Analysts will adhere to these Proxy Voting Policies and Procedures, as revised from time to time, except to the extent superseded by client proxy voting policies or to the extent that a material conflict of interest is identified. In the event of a personal material conflict of interest, the Analyst will refer the decision to another Endowment Advisers Analyst who has no such conflict. In the event of an organizational conflict, Endowment Advisers will follow the procedures outlined in Section IV.B.2.b., above. If there is no material conflict of interest, the vote recommendation will be forwarded to the PA to be cast. The Analyst may consult with the PA and/or Senior Management as necessary to identify and resolve conflicts. Analysts are responsible for documenting the rationale for any vote recommendation.


4. Role of the Third-Party Service Provider(s)

Endowment Advisers may engage a third-party service provider to provide notification of impending votes, including shareholder resolutions, which may be viewed on-line. In addition, Endowment Advisers may engage a third-party service provider to provide web-based proxy voting and recordkeeping services.

 

V. Documentation, Recordkeeping and Reporting Requirements

A. Documentation. The PA is responsible for:

1. implementing and updating these Policies and Procedures;

2. overseeing the proxy voting process;

3. consulting with Analysts for the relevant portfolio security; and

4. maintaining proxy voting records.

B. Recordkeeping.

1. Endowment Advisers will maintain records of all proxies voted.

2. As required by Rule 204-2(c), such records will include: (a) a copy of the Policies and Procedures; (b) a copy of any document created by Endowment Advisers that was material to making a decision how to vote proxies on behalf of a client or that memorializes the basis for that decision; and (c) each written client request for proxy voting records and Endowment Advisers’ written response to any (written or oral) client request for such records.

3. Endowment Advisers will maintain its own proxy statements and record of votes cast. As permitted by Rule 204-2(c), proxy statements and the record of each vote cast by each client account will be maintained by Broadridge. Endowment Advisers has obtained an undertaking from Broadridge to provide Endowment Advisers copies of proxy voting records and other documents promptly upon request. Endowment Advisers or Broadridge may rely on the SEC’s EDGAR system to keep records of certain proxy statements if the proxy statements are maintained by issuers on that system (e.g., large U.S.-based issuers).

4. Duration. Proxy voting books and records will be maintained in an easily accessible place for a period of five years, the first two in Endowment Advisers’ office.

C. Reporting. Endowment Advisers will initially inform clients of these Policies and Procedures and how a client may learn of the voting record for client’s securities through summary disclosure in Part 2A of Endowment Advisers’ Form ADV. Upon receipt of a client’s request for more information, Endowment Advisers will provide to the client a copy of these Policies and Procedures and/or, in accordance with the client’s stated requirements, how the client’s proxies were voted during the period requested subsequent to the adoption of these Policies and Procedures. Such periodic reports, other than those required for the Funds, will not be made available to third parties absent the express written request of the client.


Review of Policies and Procedures. These Policies and Procedures will be subject to period review as deemed appropriate by Endowment Advisers.

 

VI. Specific Voting Policies

A. Summary.

Endowment Advisers’ current policies with respect to a number of common issues are briefly summarized as follows:

 

    Endowment Advisers generally votes with the recommendations of a company’s Board of Directors on routine or non-controversial issues (see examples below).

 

    In general, Endowment Advisers opposes anti-takeover proposals, unless unusual circumstances dictate otherwise.

 

    In general, Endowment Advisers votes to support the elimination of anti-takeover policies, unless unusual circumstances dictate otherwise.

 

    On issues relating to social and/or political responsibility, Endowment Advisers votes all client shares in what we believe to be the best economic interests of our clients unless directed by a client to vote in a certain manner.

 

    Proposals not covered by the above-stated guidelines and contested situations are evaluated on a case-by-case basis by the Analyst principally responsible for the particular security.

B. Examples of Proxy Voting With Management On Non-Controversial Matters.

 

    Election of directors, in the absence of a contest or controversy.

 

    Ratification of selection of independent auditors, in the absence of controversy.

 

    Stock option plans for executives, employees or directors which would not increase the aggregate number of shares of stock available for grant under all currently active plans to over 10% of the total number of shares outstanding, and which Endowment Advisers does not oppose for other valid reasons.

 

    Stock splits, if not for anti-takeover purposes.

 

    Change of state of incorporation for specific corporate purposes and not for anti-takeover purposes.

 

    Employee stock purchase plans and employee stock ownership plans permitting purchase of company stock at 85% or more of fair market value.


C. Guidelines for Specific Proxy Voting Issues.

1. The Board of Directors

a. Voting on Director Nominees in Uncontested Elections

Votes on director nominees are made on a case-by-case basis, examining the following factors:

 

    Long-term corporate performance record relative to a market index;

 

    Composition of board and key board committees;

 

    Nominee’s attendance at meetings (past two years);

 

    Nominee’s investment in the company;

 

    Whether a retired CEO sits on the board; and

 

    Whether the chairman is also serving as CEO.

In cases of significant votes and when information is readily available, we also review:

 

    Corporate governance provisions and takeover activity;

 

    Board decisions regarding executive pay;

 

    Director compensation;

 

    Number of other board seats held by nominee; and

 

    Interlocking directorships.

b. Chairman and CEO are the Same Person

We vote on a case-by-case basis on shareholder proposals that would require the positions of chairman and CEO to be held by different persons.

c. Majority of Independent Directors

Shareholder proposals that request that the board be comprised of a majority of independent directors are evaluated on a case-by-case basis.

We vote for shareholder proposals that request that the board audit, compensation and/or nominating committees include independent directors exclusively.

d. Stock Ownership Requirements

We generally vote against shareholder proposals requiring directors to own a minimum amount of company stock in order to qualify as a director, or to remain on the board.

e. Term of Office

We generally vote against shareholder proposals to limit the tenure of outside directors.

f. Director and Officer Indemnification and Liability Protection

Proposals concerning director and officer indemnification and liability protection are evaluated on a case-by-case basis.


We generally vote against proposals to limit or eliminate entirely director and officer liability for monetary damages for violating the duty of care.

We generally vote against indemnification proposals that would expand coverage beyond just legal expenses to acts, such as negligence, that are more serious violations of fiduciary obligations than mere carelessness.

We generally vote for only those proposals that provide such expanded coverage in cases when a director’s or officer’s legal defense was unsuccessful if: (1) the director was found to have acted in good faith and in a manner that he reasonably believed was in the best interests of the company, and (2) only if the director’s legal expenses would be covered.

2. Charitable Contributions

We generally vote against shareholder proposals to eliminate, direct or otherwise restrict charitable contributions.

3. Proxy Contests

a. Voting for Director Nominees in Contested Elections

Votes in a contested election of directors are evaluated on a case-by-case basis, considering the following factors:

 

    Long-term financial performance of the target company relative to its industry;

 

    Management’s track record;

 

    Background to the proxy contest;

 

    Qualifications of director nominees (both slates);

 

    Evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met; and

 

    Stock ownership positions.

b. Reimburse Proxy Solicitation Expenses

Decisions to provide full reimbursement for dissidents waging a proxy contest are made on a case-by-case basis.

4. Auditors

We generally vote for proposals to ratify auditors, unless: an auditor has a financial interest in or association with the company, and is therefore not independent; or there is reason to believe that the independent auditor has rendered an opinion which is neither accurate nor indicative of the company’s financial position.

5. Proxy Contest Defenses

a. Board Structure: Staggered vs. Annual Elections


We generally vote against proposals to classify the board.

We vote for proposals to repeal classified boards and to elect all directors annually.

b. Shareholder Ability to Remove Directors

We vote against proposals that provide that directors may be removed only for cause.

We vote for proposals to restore shareholder ability to remove directors with or without cause.

We vote against proposals that provide that only continuing directors may elect replacements to fill board vacancies.

We vote for proposals that permit shareholders to elect directors to fill board vacancies.

c. Cumulative Voting

We vote against proposals to eliminate cumulative voting.

We vote for proposals to permit cumulative voting.

d. Shareholder Ability to Call Special Meetings

We vote against proposals to restrict or prohibit shareholder ability to call special meetings.

We vote for proposals that remove restrictions on the right of shareholders to act independently of management.

e. Shareholder Ability to Act by Written Consent

We vote against proposals to restrict or prohibit shareholder ability to take action by written consent.

We vote for proposals to allow or make easier shareholder action by written consent.

f. Shareholder Ability to Alter the Size of the Board

We review on a case-by-case basis proposals that seek to fix the size of the board.

We vote against proposals that give management the ability to alter the size of the board without shareholder approval.

6. Tender Offer Defenses

a. Poison Pills

We vote for shareholder proposals that ask a company to submit its poison pill for shareholder ratification.


We review on a case-by-case basis shareholder proposals to redeem a company’s poison pill.

We review on a case-by-case basis management proposals to ratify a poison pill.

b. Fair Price Provisions

We vote case-by-case on fair price proposals, taking into consideration whether the shareholder vote requirement embedded in the provision is no more than a majority of disinterested shares.

We vote for shareholder proposals to lower the shareholder vote requirement in existing fair price provisions.

c. Greenmail

We vote for proposals to adopt anti-greenmail charter or bylaw amendments or otherwise restrict a company’s ability to make greenmail payments.

We review on a case-by-case basis anti-greenmail proposals when they are bundled with other charter or bylaw amendments.

d. Pale Greenmail

We review on a case-by-case basis restructuring plans that involve the payment of pale greenmail.

e. Unequal Voting Rights

We vote against dual class exchange offers.

We vote against dual class recapitalizations.

f. Supermajority Shareholder Vote Requirement to Amend the Charter or Bylaws

We vote against management proposals to require a supermajority shareholder vote to approve charter and bylaw amendments.

We vote for shareholder proposals to lower supermajority shareholder vote requirements for charter and bylaw amendments.

g. Supermajority Shareholder Vote Requirement to Approve Mergers

We vote against management proposals to require a supermajority shareholder vote to approve mergers and other significant business combinations.

We vote for shareholder proposals to lower supermajority shareholder vote requirements for mergers and other significant business combinations.

h. White Squire Placements


We vote for shareholder proposals to require approval of blank check preferred stock issues for other than general corporate purposes.

7. Miscellaneous Governance Provisions

a. Confidential Voting

We vote for shareholder proposals that request corporations to adopt confidential voting, use independent tabulators and use independent inspectors of election as long as the proposals include clauses for proxy contests as follows: in the case of a contested election, management is permitted to request that the dissident group honor its confidential voting policy. If the dissidents agree, the policy remains in place. If the dissidents do not agree, the confidential voting policy is waived.

We vote for management proposals to adopt confidential voting.

b. Equal Access

We vote for shareholder proposals that would allow significant company shareholders equal access to management’s proxy material in order to evaluate and propose voting recommendations on proxy proposals and director nominees, and in order to nominate their own candidates to the board.

c. Bundled Proposals

We review on a case-by-case basis bundled or “conditioned” proxy proposals. In the case of items that are conditioned upon each other, we examine the benefits and costs of the packaged items. In instances when the joint effect of the conditioned items is not in shareholders’ best interest, we vote against the proposals. If the combined effect is positive, we support such proposals.

d. Shareholder Advisory Committees

We review on a case-by-case basis proposals to establish a shareholder advisory committee.

8. Capital Structure

a. Common Stock Authorization

We review on a case-by-case basis proposals to increase the number of shares of common stock authorized for issue.

We vote against proposed common stock authorizations that increase the existing authorization by more than 100 percent unless a clear need for the excess shares is presented by the company.

b. Stock Distributions: Splits and Dividends


We vote for management proposals to increase common share authorization for a stock split, provided that the split does not result in an increase of authorized but unissued shares of more than 100% after giving effect to the shares needed for the split.

c. Reverse Stock Splits

We vote for management proposals to implement a reverse stock split, provided that the reverse split does not result in an increase of authorized but unissued shares of more than 100% after giving effect to the shares needed for the reverse split.

d. Blank Check Preferred Authorization

We vote for proposals to create blank check preferred stock in cases when the company expressly states that the stock will not be used as a takeover defense or carry superior voting rights.

We review on a case-by-case basis proposals that would authorize the creation of new classes of preferred stock with unspecified voting, conversion, dividend and distribution, and other rights.

We review on a case-by-case basis proposals to increase the number of authorized blank check preferred shares.

e. Shareholder Proposals Regarding Blank Check Preferred Stock

We vote for shareholder proposals to have blank check preferred stock placements, other than those shares issued for the purpose of raising capital or making acquisitions in the normal course of business, submitted for shareholder ratification.

f. Adjust Par Value of Common Stock

We vote for management proposals to reduce the par value of common stock.

g. Pre-emptive Rights

We review on a case-by-case basis proposals to create or abolish pre-emptive rights. In evaluating proposals on preemptive rights, we look at the size of a company and the characteristics of its shareholder base.

h. Debt Restructurings

We review on a case-by-case basis proposals to increase common and/or preferred shares and to issue shares as part of a debt-restructuring plan. We consider the following issues:

Dilution – How much will ownership interest of existing shareholders be reduced, and how extreme will dilution be to any future earnings?

Change in Control – Will the transaction result in a change in control of the company?


Bankruptcy – Is the threat of bankruptcy, which would result in severe losses in shareholder value, the main factor driving the debt restructuring?

Generally, we approve proposals that facilitate debt restructurings unless there are clear signs of self-dealing or other abuses.

i. Share Repurchase Programs

We vote for management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms.

9. Executive and Director Compensation

In general, we vote on a case-by-case basis on executive and director compensation plans, with the view that viable compensation programs reward the creation of shareholder wealth by having a high payout sensitivity to increases in shareholder value.

Other factors, such as repricing underwater stock options without shareholder approval, would cause us to vote against a plan. Additionally, in some cases we would vote against a plan deemed unnecessary.

a. OBRA-Related Compensation Proposals

 

    Amendments that Place a Cap on Annual Grant or Amend Administrative Features

Vote for plans that simply amend shareholder-approved plans to include administrative features or place a cap on the annual grants any one participant may receive to comply with the provisions of Section 162(m) of the Omnibus Budget Reconciliation Act of 1993 (“OBRA”).

 

    Amendments to Add Performance-Based Goals

We vote for amendments to add performance goals to existing compensation plans to comply with the provisions of Section 162(m) of OBRA.

 

    Amendments to Increase Shares and Retain Tax Deductions Under OBRA

Votes on amendments to existing plans to increase shares reserved and to qualify the plan for favorable tax treatment under the provisions of Section 162(m) should be evaluated on a case-by-case basis.

 

    Approval of Cash or Cash-and-Stock Bonus Plans

We vote for cash or cash-and-stock bonus plans to exempt the compensation from taxes under the provisions of Section 162(m) of OBRA.

b. Shareholder Proposals to Limit Executive and Director Pay

We review on a case-by-case basis all shareholder proposals that seek additional disclosure of executive and director pay information.


We review on a case-by-case basis all other shareholder proposals that seek to limit executive and director pay.

c. Golden and Tin Parachutes

We vote for shareholder proposals to have golden and tin parachutes submitted for shareholder ratification.

We review on a case-by-case basis all proposals to ratify or cancel golden or tin parachutes.

d. Employee Stock Ownership Plans (ESOPs)

We vote for proposals that request shareholder approval in order to implement an ESOP or to increase authorized shares for existing ESOPs, except in cases when the number of shares allocated to the ESOP is “excessive” (i.e., generally greater than five percent of outstanding shares).

e. 401(k) Employee Benefit Plans

We vote for proposals to implement a 401(k) savings plan for employees.

10. State of Incorporation

a. Voting on State Takeover Statutes

We review on a case-by-case basis proposals to opt in or out of state takeover statutes (including control share acquisitions statutes, control share cash-out statutes, freeze-out provisions, fair price provisions, stakeholder laws, poison pill endorsements, severance pay and labor contract provisions, anti-greenmail provisions, and disgorgement provisions).

b. Voting on Reincorporation Proposals

Proposals to change a company’s state of incorporation are examined on a case-by-case basis.

11. Mergers and Corporate Restructurings

a. Mergers and Acquisitions

Votes on mergers and acquisitions are considered on a case-by-case basis, taking into account at least the following:

 

    Anticipated financial and operating benefits;

 

    Offer price (cost vs. premium);

 

    Prospects of the combined companies;

 

    How the deal was negotiated; and

 

    Changes in corporate governance and their impact on shareholder rights.


b. Corporate Restructuring

Votes on corporate restructuring proposals, including minority squeeze-outs, leveraged buyouts, spin-offs, liquidations, and asset sales are considered on a case-by-case basis.

c. Spin-offs

Votes on spin-offs are considered on a case-by-case basis depending on the tax and regulatory advantages, planned use of sale proceeds, market focus, and managerial incentives.

d. Asset Sales

Votes on asset sales are made on a case-by-case basis after considering the impact on the balance sheet/working capital, value received for the asset, and potential elimination of diseconomies.

e. Liquidations

Votes on liquidations are made on a case-by-case basis after reviewing management’s efforts to pursue other alternatives, appraisal value of assets, and the compensation plan for executives managing the liquidation.

f. Appraisal Rights

We vote for proposals to restore, or provide shareholders with, rights of appraisal.

g. Changing Corporate Name

We vote for changing the corporate name.

12. Mutual Fund Proxies

a. Election of Trustees

We vote on trustee nominees on a case-by-case basis.

b. Investment Advisory Agreement

We vote on investment advisory agreements on a case-by-case basis.

c. Fundamental Investment Restrictions

We vote on amendments to a fund’s fundamental investment restrictions on a case-by-case basis.

d. Distribution Agreements

We vote on distribution agreements on a case-by-case basis.


13. Social and Environmental Issues

We consider shareholder social and environmental proposals on a case-by-case basis.

Dated: January 16, 2004, as amended March 17, 2005 and June 20, 2007 and August 2010.

EX-99.CERT 4 d857064dex99cert.htm CERTIFICATIONS PURSUANT TO SECTION 302 Certifications Pursuant to Section 302

CERTIFICATIONS

I, Andrew B. Linbeck, certify that:

 

1. I have reviewed this report on Form N-CSR of The Endowment Institutional TEI Fund W, L.P. (the “registrant”);

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in partners’ capital, and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal year that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

February 27, 2015 /s/ Andrew B. Linbeck
Date Andrew B. Linbeck
Co-Principal Executive Officer


CERTIFICATIONS

I, John A. Blaisdell, certify that:

 

1. I have reviewed this report on Form N-CSR of The Endowment Institutional TEI Fund W, L.P. (the “registrant”);

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in partners’ capital, and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal year that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

February 24, 2015 /s/ John A. Blaisdell
Date John A. Blaisdell
Co-Principal Executive Officer


CERTIFICATIONS

I, John E. Price, certify that:

 

1. I have reviewed this report on Form N-CSR of The Endowment Institutional TEI Fund W, L.P. (the “registrant”);

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in partners’ capital, and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal year that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

February 24, 2015 /s/ John E. Price
Date John E. Price
Principal Financial Officer
EX-99.906 CERT 5 d857064dex99906cert.htm CERTIFICATIONS PURSUANT TO SECTION 906 Certifications Pursuant to Section 906

This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350, and accompanies the report on Form N-CSR for the period ended December 31, 2014 of the Endowment Institutional TEI Fund W, L.P. (the “registrant”).

I, John A. Blaisdell, the Co-Principal Executive Officer of the registrant, certify that, to the best of my knowledge:

 

1. The Form N-CSR fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78m(a) or 78o(d)); and

 

2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the registrant.

February 24, 2015                                                         

Date

 

/s/ John A. Blaisdell
John A. Blaisdell
Co-Principal Executive Officer

This certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of Form N-CSR or as a separate disclosure document. A signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.


This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350, and accompanies the report on Form N-CSR for the period ended December 31, 2014 of the Endowment Institutional TEI Fund W, L.P. (the “registrant”).

I, Andrew B. Linbeck, the Co-Principal Executive Officer of the registrant, certify that, to the best of my knowledge:

 

1. The Form N-CSR fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78m(a) or 78o(d)); and

 

2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the registrant.

February 27, 2015                                                         

Date

 

/s/ Andrew B. Linbeck
Andrew B. Linbeck
Co-Principal Executive Officer

This certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of Form N-CSR or as a separate disclosure document. A signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.


This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350, and accompanies the report on Form N-CSR for the period ended December 31, 2014 of the Endowment Institutional TEI Fund W, L.P. (the “registrant”).

I, John E. Price, the Principal Financial Officer of the registrant, certify that, to the best of my knowledge:

 

1. The Form N-CSR fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78m(a) or 78o(d)); and

 

2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the registrant.

February 24, 2015                                                         

Date

 

/s/ John E. Price
John E. Price
Principal Financial Officer

This certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of Form N-CSR or as a separate disclosure document. A signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.

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