Pine Grove Alternative Fund NCSRS Certified semi-annual shareholder report (management investment company)

As filed with the Securities and Exchange Commission on December 1, 2014

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT

INVESTMENT COMPANIES

Investment Company Act file number 811-22861

PINE GROVE ALTERNATIVE FUND

25 DeForest Avenue

Summit, NJ 07901

908-273-6321

Matthew Stadtmauer, Chief Executive Officer

Pine Grove Alternative Fund

25 DeForest Avenue

Summit, NJ 07901

Date of fiscal year end: March 31

Date of reporting period: April 1, 2014 – September 30, 2014

ITEM 1. REPORT TO STOCKHOLDERS.

PINE GROVE ALTERNATIVE FUND

STATEMENT OF ASSETS AND LIABILITIES

AS OF SEPTEMBER 30, 2014

ASSETS

Total investments in Pine Grove Alternative Institutional Fund (“Master Fund”), at fair value (Cost $4,906,215)	$	4,931,400
Cash		5,096
Receivable from shareholder subscriptions received in advance		1,110,000
Expense reimbursement from Investment Adviser		65,702
Prepaid expenses		11,077
Offering costs		16,002
Total Assets		6,139,277

LIABILITIES

Accrued Liabilities:
Trustees’ fees and expenses		1,000
Fund services fees		100
Other expenses		33,378
Total Liabilities		34,478

NET ASSETS	$	6,104,799

COMPONENTS OF NET ASSETS
Paid-in capital	$	6,094,215
Accumulated net investment loss		(14,601	)
Net unrealized appreciation on investment in Master Fund		25,185
NET ASSETS	$	6,104,799


SHARES OUTSTANDING (200,000 shares authorized, $0.001 par value)		5,892.42

NET ASSET VALUE PER SHARE	$	1,036.04

See Accompanying Notes to Financial Statements and Master Fund Financial Statements. 1

PINE GROVE ALTERNATIVE FUND

STATEMENT OF OPERATIONS

FOR THE SIX MONTHS SEPTEMBER 30, 2014

Investment income
Interest income	$	4

Expenses
Offering costs amortized		32,005
Insurance expense		7,976
Trustees’ fees and expenses		2,000
Custodian fees		3,000
Professional fees		10,791
Shareholder servicing fee		14,288
Fund services fees		300
Registration fees		3,611
Shareholder report expense		5,975
Miscellaneous expenses		45
Total expenses		79,991
Expenses reimbursed by Investment Adviser		(65,702	)
Net expenses		14,289

NET INVESTMENT LOSS		(14,285	)

NET UNREALIZED GAIN FROM INVESTMENT IN MASTER FUND
Net change in unrealized appreciation on investment in Master Fund		19,288

NET INCREASE IN NET ASSETS FROM OPERATIONS	$	5,003

See Accompanying Notes to Financial Statements and Master Fund Financial Statements. 2

PINE GROVE ALTERNATIVE FUND

STATEMENTS OF CHANGES IN NET ASSETS

	Six Months Ended September 30, 2014			January 1, 2014* through March 31, 2014
OPERATIONS
Net investment loss	$	(14,285	)	$	(316	)
Net change in unrealized appreciation on investment in Master Fund		19,288			5,897
Increase in net assets resulting from operations		5,003			5,581

CAPITAL SHARE TRANSACTIONS
Sale of shares		5,544,215			450,000
Reinvestment of distributions		-			-
Repurchase of shares		-			-
Increase in net assets resulting from capital share transactions		5,544,215			450,000
Increase in net assets		5,549,218			455,581

NET ASSETS
Beginning of period		555,581			100,000
End of period (including accumulated net investment loss of $14,601 and $316, respectively)	$	6,104,799		$	555,581

SHARE TRANSACTIONS
Beginning of period		540.64			100.00
Sale of shares		5,351.78			440.64
Reinvestment of distributions		-			-
Repurchase of shares		-			-
End of period		5,892.42			540.64

See Accompanying Notes to Financial Statements and Master Fund Financial Statements. 3

PINE GROVE ALTERNATIVE FUND

STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS SEPTEMBER 30, 2014

Cash Flows From Operating Activities
Net increase in net assets from operations				$	5,003
Adjustments to reconcile net increase in net assets from
operations to net cash used in operating activities:
Purchase of Master Fund	$	(4,356,215	)
Net change in unrealized appreciation on investment in Master Fund		(19,288	)
Increase in operating assets and liabilities:
Receivable for shareholder subscriptions received in advance		(1,110,000	)
Prepaid expenses		(11,077	)
Expense reimbursement from Investment Adviser		(65,702	)
Offering costs		32,005
Due to Investment Adviser		(33,124	)
Accrued liabilities:
Trustees’ fees and expenses payable		(1,210	)
Fund services fees payable		50
Other expenses payable		20,436
		(5,544,125	)
Total Adjustments					(5,544,125	)

Net Cash Used In Operating Activities					(5,539,122	)

Cash Flows From Financing Activities
Sale of shares		5,544,215

Net Cash Provided By Financing Activities					5,544,215

Net Decrease in Cash				$	5,093

Cash - Beginning of Period					3

Cash - End of Period				$	5,096

See Accompanying Notes to Financial Statements and Master Fund Financial Statements. 4

PINE GROVE ALTERNATIVE FUND

FINANCIAL HIGHLIGHTS

These financial highlights reflect selected data for a share outstanding throughout each period.

	Six Months Ended September 30, 2014		January 1, 2014(a) through March 31, 2014
NET ASSET VALUE, Beginning of Period	$ 1,027.64		$ 1,000.00
INVESTMENT OPERATIONS
Net investment loss (b)	(4.32)		(1.28)
Net change in unrealized appreciation on investment in Master Fund	12.72		28.92
Total from investment operations	8.40		27.64

NET ASSET VALUE, End of Period	$ 1,036.04		$ 1,027.64

TOTAL RETURN	0.82	%(c)	2.76	%(c)

RATIOS/SUPPLEMENTARY DATA
Net Assets at End of Period (000's omitted)	$ 6,105		$ 556
Ratios to Average Net Assets:
Net investment loss (e)(f)	(0.83)	%(d)	(0.50)	%(d)
Net expense (e)	0.83	%(d)	0.50	%(d)
Gross expense (e)(g)	4.65	%(d)	66.52	%(d)
PORTFOLIO TURNOVER RATE(h)	0	%(c)	0	%(c)

(a)	Commencement of operations.
(b)	Calculated based on average shares outstanding during each period.
(c)	Not annualized.
(d)	Annualized.
(e)	Does not include the expenses of the Master Fund in which the Feeder Fund invests.
(f)	The net expenses of the Master Fund, which are paid by the Master Fund, represents 1.50% of average net assets for the Feeder Fund. The net expense ratio for the Feeder Fund, including the applicable Master Fund expenses is 2.00%.
(g)	Reflects the expense ratio excluding expense reimbursements by the Investment Adviser.
(h)	The Feeder Fund is invested solely in the Master Fund, therefore this ratio reflects the turnover of the Master Fund.

See Accompanying Notes to Financial Statements and Master Fund Financial Statements. 5

PINE GROVE ALTERNATIVE FUND

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

Note 1. Organization

Pine Grove Alternative Fund (the “Feeder Fund”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended, as a non-diversified, closed end management investment company, formed on June 21, 2013 (the “Trust”). The Feeder Fund is offering on a continuous basis up to 200,000 shares of beneficial interest at net asset value per share. The Feeder Fund’s investment objective is to seek long-term capital appreciation. The Feeder Fund pursues its investment objective through investing substantially all of its assets in Pine Grove Alternative Institutional Fund (the “Master Fund”). As of September 30, 2014, the Feeder Fund represented 7.3% of the Master Fund’s equity. On October 9, 2013, the Feeder Fund was initially seeded through the sale of 100 shares for $100,000. The Feeder Fund commenced operations on January 1, 2014.

The investment adviser of the Feeder and the Master Fund is Pine Grove Asset Management LLC (the “Investment Adviser”), a registered investment adviser with the U.S. Securities Exchange Commission (“SEC”) and a registered commodity pool operator with the Commodity Futures Trading Commission (“CFTC”). The Board of Trustees (the “Board” and each member a “Trustee”) of the Feeder and the Master Fund supervises the conduct of the Feeder Fund’s and Master Fund’s affairs and pursuant to an investment advisory agreement, has engaged the Investment Adviser to manage the Feeder Fund’s and Master Fund’s day-to-day investment activities.

Note 2. Summary of Significant Accounting Policies

These financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of increase and decrease in net assets from operations during the fiscal period. Actual amounts could differ from those estimates. The following summarizes the significant accounting policies of the Feeder Fund:

Investment in Master Fund – The Feeder Fund records its investment in the Master Fund at fair value which is represented by the Feeder Fund’s shares held in the Master Fund valued at the net asset value per share. Valuation of the investments held by the Master Fund is discussed in the notes to the Master Fund’s financial statements which are attached and are an integral part of these financial statements. Please refer to the accounting policies disclosed in the financial statements of the Master Fund for additional information regarding significant policies that affect the Feeder Fund.

Investment Transactions, Investment Income and Realized and Unrealized Gain and Loss – Investment transactions are accounted for on a trade date basis. Income and expense, including interest, are recorded on an accrual basis.

Distributions to Shareholders – Distributions to shareholders of net investment income and net capital gains, if any, are declared and paid at least annually. Distributions paid by the Feeder Fund will be reinvested in additional shares of the Feeder Fund unless a shareholder elects not to reinvest its shares. Distributions are based on amounts calculated in accordance with applicable federal income tax regulations, which may differ from GAAP. These differences are due primarily to differing treatments of income and gain on various investment securities held by the Feeder Fund, timing differences and differing characterizations of distributions made by the Feeder Fund.

Federal Taxes – The Feeder Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code and distribute all of its taxable income to shareholders. In addition, by distributing in each calendar year substantially all its net investment income and capital gains, if any, the Feeder Fund will not be subject to a Federal excise tax. Therefore, no Federal income or excise tax provision is required.

PINE GROVE ALTERNATIVE FUND

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

The Feeder Fund is required to determine whether its tax positions are more likely than not to be sustained upon examination by the applicable taxing authority, based on the technical merits of the position. The tax benefit recognized is measured as the largest amount of benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authorities. Based on its analysis, the Feeder Fund has determined that it has not incurred any liability for unrecognized tax benefits as of September 30, 2014 that would require recognition, de-recognition or disclosure. The Feeder Fund does not expect that its assessment regarding unrecognized tax benefits will materially change over the next twelve months. However, the Feeder Fund’s conclusions may be subject to review and adjustment at a later date based on factors including, but not limited to, questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions, compliance with U.S. federal, U.S. state and foreign tax laws, and changes in the administrative practices and precedents of the relevant taxing authorities. Generally, the Feeder Fund is subject to income tax examinations by major taxing authorities during the period since its inception.

Offering Costs – Expenses incurred in connection with establishing the Feeder Fund aggregated $73,920. Offering costs incurred by the Feeder Fund are treated as deferred charges until operations commenced and thereafter are amortized over a twelve-month period using the straight line method.

Commitments and Contingencies – In the normal course of business, the Feeder Fund enters into contracts that provide general indemnifications by the Feeder Fund to the counterparty to the contract. The Feeder Fund’s maximum exposure under these arrangements is dependent on future claims that may be made against the Feeder Fund and, therefore, cannot be estimated; however, based on experience, the risk of loss from such claims is considered remote.

Note 3. Advisory Fees, Shareholder Servicing Fees and Other Expenses

Management Fees – The Feeder Fund does not incur a separate management fee, but is subject to the Master Fund’s management fee. The Investment Adviser receives a fee, accrued monthly and paid quarterly in arrears, of 0.225% (0.90% on an annualized basis) of the Master Fund’s month-end net asset value.

Shareholder Servicing Fees – The Feeder Fund pays Atlantic (as defined below) and Atlantic pays each broker-dealer that is a member of the Financial Industry Regulatory Authority (“FINRA”) and enters into a shareholder servicing agreement with Atlantic (collectively, “Service Agents”), a monthly shareholder servicing fee of 0.070833% (0.85% on an annualized basis) of the net asset value of the outstanding shares attributable to the clients of the Service Agent who are invested in the Feeder Fund through the Service Agent. The shareholder servicing fees expense for the six-months ended September 30, 2014 was $14,288.

Expenses – The Investment Adviser has agreed to reimburse the Feeder Fund’s and the Master Fund’s other expenses (other than shareholder servicing fees, extraordinary expenses and investment related expenses such as foreign country tax expense and interest expense on amounts borrowed by the Master Fund and the Feeder Fund) to the extent necessary in order to cap the Feeder Fund’s other expenses at 0.60%. For the period ended September 30, 2014, expenses reimbursed by Investment Adviser were as follows:

Expenses Reimbursed by Investment Adviser

$65,702

For a period of five years subsequent to the Feeder Fund’s commencement of operations, the Investment Adviser may recover from the Feeder Fund expenses reimbursed during the prior three years if the Feeder Fund’s other expenses, including the recovered expenses, fall below the expense cap.

PINE GROVE ALTERNATIVE FUND

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

Period Ended	Amount of Fees Waived and/or Expenses Reimbursed	Expiration Date to Recoup Fees Waived and/or Expenses Reimbursed	Fees Recouped
March 31, 2014	$41,747	March 31, 2017	$ -
September 30, 2014	65,702	March 31, 2018	-

Distribution – Foreside Fund Services, LLC serves as the Feeder Fund’s distributor (the “Distributor”). The Distributor is not affiliated with the Investment Adviser or with Atlantic Fund Administration, LLC (“Atlantic”) or their affiliates.

Custodian – BNP Paribas Financial Services, LLC (the “Custodian”) serves as the Feeder Fund’s independent custodian of substantially all of its investments in the Master Fund. The Feeder Fund is subject to credit risk to the extent any broker with which it conducts business is unable to fulfill contractual obligations on its behalf. The Feeder Fund’s management monitors the financial condition of such brokers and does not anticipate any losses from the custodian.

Administrator – The Feeder Fund does not incur an administrative fee, but the Feeder Fund, as an investor in the Master Fund, will bear its proportionate share of the Master Fund’s administrative fee. Atlantic provides fund accounting, fund administration, and transfer agency services (collectively, “Fund Services Fees”) to the Master Fund and the Feeder Fund.

Trustees and Officers – The Feeder Fund pays each independent trustee (the “Trustee”) an annual retainer fee of $2,000 for services to the Feeder Fund. Each Trustee is also reimbursed for all reasonable out-of-pocket expenses incurred in connection with their duties as a Trustee, including travel and related expenses incurred in attending Board of Trustee (the “Board”) meetings. No officer of the Feeder Fund is compensated by the Feeder Fund.

Note 4. Security Transactions

The cost of purchases and proceeds from sales of investments in the Master Fund during the period ended September 30, 2014, were $4,356,215 and $0, respectively.

Note 5. Offering of Fund Shares; Repurchase Offers

Feeder Fund shares may be purchased by investors who meet certain eligibility requirements set forth in the Feeder Fund's current prospectus as of the first business day of each calendar month; however, Feeder Fund shares may be offered more or less frequently as determined by the Board in its sole discretion. Feeder Fund shares are sold at the current net asset value per share. Generally, the minimum initial investment in the Feeder Fund is $25,000 and the minimum additional investment is $10,000. The Feeder Fund may accept investments for lesser amounts under certain circumstances, including where a shareholder has significant assets under the management of the Investment Adviser or an affiliate and other special circumstances that may arise. There are no initial or subsequent investment minimums for accounts maintained by financial institutions for the benefit of their clients who purchase shares through investment programs such as employee benefit plans. Certain selling broker-dealers and financial advisers may impose higher minimums.

The Feeder Fund may repurchase Feeder Fund shares from shareholders from time to time as determined by the Board in its sole discretion. A summary of the tender offers for the period ended September 30, 2014 is as follows:

PINE GROVE ALTERNATIVE FUND

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

Effective Date		Amount of Tender Offer		Dollar Amount of Shares Tendered
September 30, 2014		$499,480		$-

Note 6. Federal Income Tax

As of March 31, 2014, the components of distributable earnings on a tax basis were substantially the same as for financial statement purposes:

Undistributed ordinary income		$	-
Unrealized appreciation			5,897

Note 7. Change in Independent Registered Public Accounting Firm

The Board, with the approval and recommendation of the Audit Committee, selected Ernst & Young (“E&Y”) to replace Rothstein Kass (“RK”), as the Feeder Fund’s independent registered public accounting firm for the Feeder Fund’s fiscal year ending March 31, 2015. Throughout RK’s tenure, including the Feeder Fund’s most recent fiscal period, the Feeder Fund had no disagreements with RK on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, and there were no reportable events of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchanges Act of 1934. With respect to the Feeder Funds, RK’s audit opinion, including the past fiscal period, has not contained either an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. Further, there were no disagreements between the Feeder Fund and RK on accounting principles, financial statement disclosure or audit scope, which, if not resolved to the satisfaction of RK would have caused RK to make reference to the disagreement in RK’s report. Since the appointment of E&Y, neither the Feeder Fund nor anyone on its behalf has consulted E&Y on items concerning the application of accounting principles to a specified transaction (either completed or proposed) or the type of audit opinion that might be rendered on the Feeder Fund’s financial statements, or concerning the subject of a disagreement of the kind described in Item 304(a)(1)(iv) of Regulation S-K or reportable events of the kind described in Item 304(a)(1)(v) of Regulation S-K.

Note 8. Subsequent Events

From October 1, 2014 through November 21, 2014, the Feeder Fund received an additional $685,800 in subscriptions.

PINE GROVE ALTERNATIVE FUND

ADDITIONAL INFORMATION

SEPTEMBER 30, 2014

Proxy Voting Information

A description of the policies and procedures that the Feeder Fund uses to determine how to vote proxies relating to securities held in the Feeder Fund’s portfolio is available, without charge and upon request, by calling (855) 699-3103 and on the U.S. Securities and Exchange Commission’s (the “SEC”) website at www.sec.gov. The Feeder Fund’s proxy voting record for the most recent period ended June 30, 2014 will be available, without charge and upon request by calling (855) 699-3103 and on the SEC’s website at www.sec.gov.

Availability of Quarterly Portfolio Schedules

The Feeder Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. These filings are available on the SEC’s website at www.sec.gov or may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.

PINE GROVE ALTERNATIVE INSTITUTIONAL FUND

STATEMENT OF ASSETS AND LIABILITIES

AS OF SEPTEMBER 30, 2014

ASSETS

Total investments in Private Investment Funds, at fair value (Cost $75,035,284)	$	77,867,231
Cash		661,426
Receivable from shareholder subscriptions received in advance		5,089,900
Receivable from investments sold		2,272,790
Prepaid expenses		29,630
Offering costs		60,060
Total Assets		85,981,037

LIABILITIES

Repurchase of shares payable		2,135,401
Accrued Liabilities:
Management fees		136,273
Fund services fees		8,089
Trustees’ fees and expenses		68
Other expenses		45,986
Total Liabilities		2,325,817

NET ASSETS	$	83,655,220

COMPONENTS OF NET ASSETS
Paid-in capital	$	81,418,203
Accumulated net investment loss		(729,694	)
Accumulated net realized gain on investments in Private Investment Funds		134,764
Net unrealized appreciation on investments in Private Investment Funds		2,831,947
NET ASSETS	$	83,655,220


SHARES OUTSTANDING (200,000 shares authorized, $0.001 par value)		80,328.10

NET ASSET VALUE PER SHARE	$	1,041.42

See Accompanying Notes to Financial Statements. 1

PINE GROVE ALTERNATIVE INSTITUTIONAL FUND

SCHEDULE OF INVESTMENTS

AS OF SEPTEMBER 30, 2014

							Fair Value			Redemptions
Portfolio Funds	Shares		Cost		Fair Value		as a % of Net Assets			Permitted	Notice Period (Days)

Private Investment Funds
Convertible Arbitrage
Aristeia International, Ltd.		4,128	$	4,542,245	$	4,573,142		5.5	%	Quarterly		60
Basso Investors, Ltd.		2,366		4,540,704		4,595,476		5.5		Quarterly		60
Whitebox Concentrated Convertible Arbitrage Fund, Ltd.		3,466		4,136,614		4,342,319		5.2		Quarterly		60
				13,219,563		13,510,937		16.2
Distressed - Corporate
Contrarian Capital Senior Secured Offshore Fund, Ltd.		13,990		4,051,129		4,129,517		4.9		Quarterly		90
Halycon Senior Loan Fund II Offshore, Ltd.		1,378		1,423,728		1,483,611		1.8		Quarterly		90
Serengeti Segregated Portfolio Company, Ltd.		569		598,858		682,068		0.8		Annually		85
Silver Point C&I Opportunity Fund II, Ltd.		39		49,073		55,406		0.1		Other*
Silver Point Capital Offshore Fund, Ltd.		217		2,171,482		2,284,572		2.7		Annually		90
Sound Point Beacon Offshore Fund, Ltd.		833		899,996		1,091,948		1.3		Semi-Annually		90
				9,194,266		9,727,122		11.6
Distressed - Structured Products
Candlewood Structured Credit Harvest Fund, Ltd.		285		3,507,778		3,808,670		4.5		Quarterly		90
DoubleLine Opportunistic Income Fund, Ltd.		3,664		4,156,043		4,501,147		5.4		Monthly		45
Halcyon Offshore Asset-Backed Value Fund Ltd.		2,477		3,322,325		3,447,859		4.1		Quarterly		90
Libremax Offshore Fund, Ltd.		3,587		4,274,452		4,600,680		5.5		Quarterly		90
Metacapital Mortgage Value Fund, Ltd.		3,258		3,562,067		3,779,167		4.5		Quarterly		60
Tilden Park Offshore Investment Fund, Ltd.		2,604		3,155,721		3,502,226		4.2		Quarterly		90
Tourmalet Matawin Offshore Fund, LP		74,088		73,022		71,863		0.1		Other*
				22,051,408		23,711,612		28.3
Hedged Credit
Anchorage Capital Partners Offshore, Ltd.		3,942		4,036,302		4,274,735		5.1		Annually		90
Fir Tree Capital Opportunity Fund II, Ltd.		299		2,984,866		3,144,817		3.8		Quarterly/ Annually		60
King Street Capital, Ltd.		14,493		2,235,304		2,370,904		2.8		Quarterly		65
Luxor Capital Partners Offshore, Ltd.		2,691		2,942,887		2,857,528		3.4		Quarterly		90
Reef Road Fund, Ltd.		1,750		1,750,000		1,722,498		2.1		Quarterly		90
Saba Capital Offshore Fund, Ltd.		1,632		1,655,843		1,514,996		1.8		Quarterly		65
Southpaw Credit Opportunity Fund (FTE), Ltd.		19,622		2,561,786		2,652,365		3.2		Quarterly		60
Whitebox Credit Arbitrage Fund, Ltd.		2,601		3,043,269		3,199,849		3.8		Quarterly		60
Wingspan Overseas Fund, Ltd.		2,750		2,750,000		2,669,839		3.2		Quarterly		90
				23,960,257		24,407,531		29.2

See Accompanying Notes to Financial Statements. 2

PINE GROVE ALTERNATIVE INSTITUTIONAL FUND

SCHEDULE OF INVESTMENTS

AS OF SEPTEMBER 30, 2014

								Redemptions
Portfolio Funds	Shares		Cost		Fair Value	Fair Value as a % of Net Assets		Permitted	Notice Period (Days)


Long/Short Equity
Dirigo, Ltd.	27,862	$	3,121,080	$	3,066,648	3.7	%	Quarterly	45
Rosemont Offshore Fund, Ltd.	2,703		3,436,687		3,390,435	4.0		Quarterly	60
			6,557,767		6,457,083	7.7

Other
Halcyon Structured Opportunities Offshore Fund, Ltd.	14		5,683		6,268	-		Other*
Harbringer Class L Holdings (Cayman), Ltd.	1		4,018		4,254	-		Other*
Harbringer Class PE Holdings (Cayman), Ltd.	107		40,108		40,144	0.1		Other*
Longacre International II, Ltd.	1		1,509		1,405	-		Other*
Marathon Overseas Liquidating Fund	215		705		875	-		Other*
			52,023		52,946	0.1

Total Private Investment Funds		$	75,035,284	$	77,867,231	93.1	%
Other Assets & Liabilities, Net					5,787,989	6.9	%
Net Assets				$	83,655,220	100.0	%

*	The private investment funds do not have set redemption time frames but are liquidating investments and making distributions as underlying investments are sold.

Portfolio Holdings (% of Net Assets)
Private Investment Funds
Convertible Arbitrage	16.2	%
Distressed – Corporate	11.6
Distressed - Structured Products	28.3
Hedged Credit	29.2
Long/Short Equity	7.7
Other	0.1
Other Assets and Liabilities, Net	6.9
Total	100.0	%

See Accompanying Notes to Financial Statements. 3

PINE GROVE ALTERNATIVE INSTITUTIONAL FUND

STATMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2014

Investment Income
Interest income	$	1,264

Expenses
Management fees		316,596
Offering costs amortized		120,121
Fund services fees		44,715
Trustees’ fees and expenses		18,126
Professional fees		44,677
Custodian fees		20,092
Registration fees		8,262
Miscellaneous expenses		41,779
Total expenses		614,368
Expenses reimbursed by Investment Adviser		(86,708	)
Net expenses		527,660

NET INVESTMENT LOSS		(526,396	)

NET REALIZED AND UNREALIZED GAIN FROM INVESTMENTS IN PRIVATE INVESTMENT FUNDS
Net realized gain on investments in Private Investment Funds		52,782
Net change in unrealized appreciation on investments in Private Investment Funds		1,222,812
Net realized and unrealized gain from investments in Private Investment Funds		1,275,594

NET INCREASE IN NET ASSETS FROM OPERATIONS	$	749,198

See Accompanying Notes to Financial Statements. 4

PINE GROVE ALTERNATIVE INSTITUTIONAL FUND

STATEMENTS OF CHANGES IN NET ASSETS

	Six Months Ended September 30, 2014			January 1, 2014* through March 31, 2014
OPERATIONS
Net investment loss	$	(526,396	)	$	(203,298	)
Net realized gain on investments in Private Investment Funds		52,782			81,982
Net change in unrealized appreciation on investments in Private Investment Funds		1,222,812			1,609,135
Increase in net assets resulting from operations		749,198			1,487,819

CAPITAL SHARE TRANSACTIONS
Shares issued in conversion (Note 1)		-			44,760,197
Sale of shares		26,776,907			11,916,500
Reinvestment of distributions		-			-
Repurchase of shares		(2,135,401	)		-
Increase in net assets resulting from capital share transactions		24,641,506			56,676,697
Increase in net assets		25,390,704			58,164,516

NET ASSETS
Beginning of period		58,264,516			100,000
End of period (including accumulated net investment loss of $729,694 and $203,298, respectively)	$	83,655,220		$	58,264,516

SHARE TRANSACTIONS
Beginning of period		56,665.80			100.00
Shares issued in conversion (Note 1)		-			44,760.20
Sale of shares		25,712.77			11,805.60
Reinvestment of distributions		-			-
Repurchase of shares		(2,050.47	)		-
End of period		80,328.10			56,665.80

* Commencement of operations.

See Accompanying Notes to Financial Statements. 5

PINE GROVE ALTERNATIVE INSTITUTIONAL FUND

STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2014

Cash Flows From Operating Activities
Net increase in net assets from operations				$	749,198
Adjustments to reconcile net increase in net assets from
operations to net cash used in operating activities:
Purchase of investments	$	(23,062,421	)
Proceeds from sale of investments		804,397
Net realized gain from sale of investments		(52,782	)
Net change in unrealized appreciation on investments		(1,222,812	)
Increase in operating assets and liabilities:
Receivable from shareholder subscriptions received in advance		(5,089,900	)
Receivable from investments sold		(516,882	)
Prepaid expenses		(15,887	)
Expense reimbursement from Investment Adviser		62,159
Offering costs		120,121
Repurchase of shares payable		2,135,401
Management fees payable		14,133
Fund services fees payable		872
Trustees’ fees and expenses payable		68
Other expenses payable		2,160
		(26,821,373	)
Total Adjustments					(26,821,373	)

Net Cash Used In Operating Activities					(26,072,175	)

Cash Flows From Financing Activities
Sale of shares		26,776,907
Repurchase of shares		(2,135,401	)
		24,641,506

Net Cash Provided By Financing Activities					24,641,506

Net Decrease in Cash				$	(1,430,669	)

Cash - Beginning of Period					2,092,095

Cash - End of Period				$	661,426

See Accompanying Notes to Financial Statements. 6

PINE GROVE ALTERNATIVE INSTITUTIONAL FUND

FINANCIAL HIGHLIGHTS

These financial highlights reflect selected data for a share outstanding throughout the period.

	Six Months Ended September 30, 2014		January 1, 2014* through March 31, 2014
NET ASSET VALUE, Beginning of Period	$ 1,028.21		$ 1,000.00
INVESTMENT OPERATIONS
Net investment loss (b)	(7.80)		(3.82)
Net realized and unrealized gain	21.01		32.03
Total from investment operations	13.21		28.21

NET ASSET VALUE, End of Period	$ 1,041.42		$ 1,028.21

TOTAL RETURN	1.28	%(c)	2.82	%(c)

RATIOS/SUPPLEMENTARY DATA
Net Assets at End of Period (000's omitted)	$ 83,655		$ 58,265
Ratios to Average Net Assets:
Net investment loss (e)	(1.50)	%(d)	(1.50)	%(d)
Net expense (e)	1.50	%(d)	1.50	%(d)
Gross expense (e)(f)	1.75	%(d)	2.36	%(d)
PORTFOLIO TURNOVER RATE	1	%(c)	3	%(c)

(a)	Commencement of operations.
(b)	Calculated based on average shares outstanding during the period.
(c)	Not annualized.
(d)	Annualized.
(e)	Does not include the expenses of other Private Investment Funds in which the Master Fund invests.
(f)	Reflects the expense ratio excluding any expense reimbursements by Investment Adviser.

See Accompanying Notes to Financial Statements. 7

PINE GROVE ALTERNATIVE INSTITUTIONAL FUND

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

Note 1. Organization

Pine Grove Alternative Institutional Fund (the “Master Fund”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended, as a non-diversified, closed end management investment company (the “Trust”), formed on June 21, 2013. The Master Fund is offering on a continuous basis up to 200,000 shares of beneficial interest at net asset value per share. Pine Grove Alternative Fund (the “Feeder Fund”) invests substantially all of its assets in the Master Fund. As of September 30, 2014, the Feeder Fund represented 7.3% of the Master Fund’s net assets. The Master Fund’s investment objective is to seek long-term capital appreciation. On October 9, 2013, the Fund was initially seeded through the sale of 100 shares for $100,000. The Master Fund commenced operations on January 1, 2014, after it acquired the net assets of Pine Grove Institutional Partners II Ltd. (the “Partnership”), in exchange for Master Fund shares in the amount of $44,760,197.

The investment adviser of the Master and the Feeder Fund is Pine Grove Asset Management LLC (the “Investment Adviser”), a registered investment adviser with the U.S. Securities Exchange Commission (“SEC”) and a registered commodity pool operator with the Commodity Futures Trading Commission (“CFTC”). The Board of Trustees (the “Board” and each member a “Trustee”) of the Master and the Feeder Fund supervises the conduct of the Master Fund’s and Feeder Fund’s affairs and pursuant to an investment advisory agreement, has engaged the Investment Adviser to manage the Master Fund’s and Feeder Fund’s day-to-day investment activities.

Note 2. Summary of Significant Accounting Policies

Security Valuation – The valuation of the Master Fund’s investments is reviewed monthly by the valuation committee (“Valuation Committee”). The value of the Master Fund’s net assets is determined as of the close of the Master Fund’s business at the end of each month. The Board of Trustees (the “Board”) has approved procedures pursuant to which the Master Fund values its investments in private investment funds (commonly referred to as hedge funds) (“Private Investment Funds”) at fair value, which ordinarily will be the value provided to the Master Fund by the Private Investment Funds’ administrators or investment managers from time to time, usually monthly. In accordance with these procedures, fair value as of each month-end ordinarily will be the value determined as of such month-end for each Investment Fund in accordance with the Investment Fund’s valuation policies and reported at the time of the Master Fund’s valuation. Because most Private Investment Funds’ administrators or investment managers will provide the Master Fund with their determinations of the month-end net asset value of their Private Investment Funds after the relevant month-end, the Master Fund expects to calculate its month-end net asset value and net asset value per share within 30 calendar days following the relevant month-end. In the event that an Investment Fund does not report a month-end value to the Master Fund on a timely basis, the Master Fund would determine the fair value of such Investment Fund based on the most recent final or estimated value reported by the Investment Fund, as well as any other relevant information available at the time the Master Fund values its portfolio.

The Master Fund accounts for its investments in Private Investment Funds in accordance with relevant authoritative guidance, which defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The Master Fund’s investments in Private Investment Funds are reflected in the Statement of Assets and Liabilities at fair value, with changes in unrealized gains (losses) resulting from changes in fair value reflected on the Statement of Operations as “Net change in unrealized appreciation of investments in Private Investment Funds.” Fair value is the

PINE GROVE ALTERNATIVE INSTITUTIONAL FUND

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants (i.e., the exit price). Transfers of investments in Private Investment Funds between different levels of the fair value hierarchy are recorded based on the fair value of such investments as of the end of the reporting period.

Relevant authoritative guidance permits the Master Fund, as a practical expedient, to measure the fair value of its investments in Private Investment Funds on the basis of the net asset value per share of such investments (or the equivalent) if the net asset value per share of such investments (or the equivalent) is calculated in a manner consistent with the measurement principles of applicable authoritative guidance as of the Master Fund’s reporting date. The fair value of the Master Fund’s investments in Private Investment Funds is based on the information provided by such Private Investment Funds’ management, which reflects the Master Fund’s share of the fair value of the net assets of such Private Investment Funds (i.e., the practical expedient is used). If the Valuation Committee determines, based on its own due diligence and investment valuation procedures, that the valuation for any of the Master Fund’s investments in Private Investment Funds shall no represent value, such investment may be fair valued by the Valuation Committee using other suitable independent sources. As of September 30, 2014, no investments were internally fair valued by the Valuation Committee.

The Master Fund has a three-tier fair value hierarchy. The basis of the tiers is dependent upon the various “inputs” used to determine the value of the Master Fund’s investments. These inputs are summarized in the three broad levels listed below:

Level 1 — quoted prices in active markets for identical assets

Level 2 — Inputs are quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, and inputs other than quoted prices that are observable (such as models or other valuation methodologies). The Master Fund’s investments in Private Investment Funds which are generally included in this category include investments in Private Investment Funds where the Master Fund has the ability to withdraw at the net asset value per share (or its equivalent) at September 30, 2014 or within three months thereafter, under normal market conditions, and there are no other potential liquidity restrictions, such as redemption gates or suspensions.

Level 3 – Inputs are unobservable for the asset and include situations where there is little, if any, market activity for the asset as of the measurement date. Investments in Private Investment Funds that are currently subject to liquidity restrictions that will not be lifted within three months of the measurement date will be considered level 3.

	Level 1		Level 2		Level 3		Total
Private Investment Funds
Convertible Arbitrage (a)	$	-	$	11,339,778	$	2,171,159	$	13,510,937
Distressed – Corporate (b)		-		3,215,566		6,511,556		9,727,122
Distressed - Structured Products (c)		-		10,693,035		13,018,577		23,711,612
Hedged Credit (d)		-		3,930,168		20,477,363		24,407,531
Long/Short Equity (e)		-		6,457,083		-		6,457,083
Other (f)		-		-		52,946		52,946
Total	$	-	$	35,635,630	$	42,231,601	$	77,867,231

PINE GROVE ALTERNATIVE INSTITUTIONAL FUND

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

(a)	Convertible Arbitrage: Convertible Arbitrage is a strategy that entails purchasing convertible securities (convertible bonds or preferred stock) and hedging the equity risk by shorting the underlying common stock. Some managers attempt to hedge other risks associated with Convertible Arbitrage, such as interest rate risk and credit risk. One of the main risks in this strategy is the possibility of losses in the portfolio of long (or short) positions that are not offset by corresponding gains in the portfolio of short (or long) positions.
(b)	Distressed – Corporate: Distressed Corporate managers typically invest in the senior, secured, and/or liquidating debt of companies in financial distress and/or those entering or exiting bankruptcy. These investments can result in substantial or total loss due to business and financial risks but this is often mitigated by collateral coverage. Distressed investing is often associated with relative illiquidity, reduced transparency, and valuation involving significant management judgment.
(c)	Distressed – Structured Products: Distressed Structured Products managers buy pools of assets that have been securitized (bonds backed by the cashflows from these assets). Often this includes pools of mortgages that are not guaranteed by the government. It may also include pools of leveraged loans, commercial real estate, student loans and other kinds of assets. Usually the pools were once rated investment grade but the assets turned out to be of worse quality than the first investors originally thought they would be. Some managers may also buy agency derivatives. One of the main risks in this strategy is the possibility of losses in the portfolio of long positions if the manager assumptions regarding prepayments, defaults, recovery, etc. prove to be too aggressive. Also, agency derivatives in particular are very sensitive to borrower prepayment rates as well as the level of short term interest rates.
(d)	Hedged Credit: Hedged Credit managers typically take long and short positions in fixed income instruments of companies across the credit spectrum. Some also buy Structured Products. These managers may also buy equities, usually in companies that have some issue (e.g., they just came out of bankruptcy) or are otherwise difficult to understand. These managers hedge by shorting stocks and bonds that they think have a lot more downside than upside, even if only during a crisis. One of the main risks in this strategy is the possibility of losses in the portfolio of long (or short) positions that are not offset by corresponding gains in the portfolio of short (or long) positions due to incorrect analysis of idiosyncratic factors.
(e)	Long/Short Equity: Long/Short Equity managers attempt to buy undervalued equities and short overvalued equities. Managers selected for investment by the Investment Manager typically attempt to be either market neutral or have low net exposure to the equity markets. In this way, the manager is not relying on the market going up or down to make money. One of the main risks in this strategy is the possibility of losses in the portfolio of long (or short) positions that are not offset by corresponding gains in the portfolio of short (or long) positions. Short selling creates additional risk of limited upside and unlimited downside.
(f)	Other: Other represents investments in private investment funds for which the Master Fund expects to receive the redemption proceeds upon sale of the underlying investments. The Master Fund has redeemed from these private investment funds and has received a majority of the redemption proceeds. The current portfolio of underlying investments held by such private investment companies is illiquid in nature and is not necessarily indicative of the active investment strategies of such private investment funds.

PINE GROVE ALTERNATIVE INSTITUTIONAL FUND

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value.

	Private Investment Funds
	Convertible Arbitrage		Distressed - Corporate			Distressed - Structured Products			Hedged Credit			Other
Balance as of 03/31/14	$	1,639,429	$	5,524,710		$	7,908,797		$	10,141,397		$	68,081
Purchases		500,000		1,064,141			6,025,000			6,736,209			-
Sales		-		(327,852	)		(4,116	)		(584	)		(15,977	)
Net Realized Gain/Loss		-		23,618			(1,446	)		136			(407	)
Transfers into Level 3		-		-			-			2,745,385			-
Transfers out of Level 3		-		-			(1,422,858	)		(81,459	)		-
Change in Unrealized Appreciation/ Depreciation1		31,730		226,939			513,200			936,279			1,249
Balance as of 09/30/14	$	2,171,159	$	6,511,556		$	13,018,577		$	20,477,363		$	52,946

The change in unrealized appreciation/(depreciation) also represents the change in unrealized appreciation/(depreciation) for investments still held at September 30, 2014 as reflected in net change in unrealized appreciation on investments in Private Investment Funds in the accompanying statement of operations.

There were no transfers between Level 1 and Level 2 for the period ended September 30, 2014. Transfers in and transfers out are generally due to the change in liquidity terms of Private Investment Funds and are recognized as of the end of the reporting period.

Strategy	Fair Value2		Liquidation and Underlying Fund Side Pocket Investment3 (A)		Redemptions in Restriction Period4 (B)		Range of Redemption Restriction Period. (Months)		Total (A)+(B)
Convertible Arbitrage	$	2,171,159	$	-	$	2,171,159		N/A	$	2,171,159
Distressed – Corporate		6,511,556		70,041		6,441,515		3 – 17		6,511,556
Distressed - Structured Products		13,018,577		71,863		12,946,714		3 – 11		13,018,577
Hedged Credit		20,477,363		-		20,477,363		3 – 11		20,477,363
Other		52,946		52,946		-		N/A		52,946
Total	$	42,231,601	$	194,850	$	42,036,751			$	42,231,601

2	No unfunded commitments as of September 30, 2014.

Amounts represent Private Investment Funds which are in liquidation/harvest period and side pocket investments in certain underlying investment funds. For such investments, redemptions are permitted only upon liquidation or deemed realization of the underlying assets of the Private Investment Funds.

Investments in Private Investment Funds that cannot be redeemed and the range of remaining redemption restriction period as per the Private Investment Fund's governing legal documents is disclosed. The remaining restriction period for various investments may be less than as noted above depending on the investment timing.

Investment Transactions, Investment Income and Realized and Unrealized Gain and Loss – Investment transactions are accounted for on a trade date basis. Income and expenses, including interest, are recorded on an accrual basis.

The net realized gain or losses from investments in Private Investment Funds are recorded when the Master Fund redeems or partially redeems its interest in the Private Investment Funds or receives distributions in excess of return of capital. Realized gains and losses from redemptions of investments are calculated using the identified cost of investments sold.

PINE GROVE ALTERNATIVE INSTITUTIONAL FUND

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

Distributions to Shareholders – Distributions to shareholders of net investment income and net capital gains, if any, are declared and paid at least annually. Distributions paid by the Master Fund will be reinvested in additional shares of the master Fund unless a shareholder elects not to reinvest its shares. Distributions are based on amounts calculated in accordance with applicable federal income tax regulations, which may differ from GAAP. These differences are due primarily to differing treatments of income and gain on various investment securities held by the Master Fund, timing differences and differing characterizations of distributions made by the Master Fund.

Federal Taxes – The Master Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code and distribute all of its taxable income to shareholders. In addition, by distributing in each calendar year substantially all its net investment income and capital gains, if any, the Master Fund will not be subject to a Federal excise tax. Therefore, no Federal income or excise tax provision is required.

The Master Fund is required to determine whether its tax positions are more likely than not to be sustained upon examination by the applicable taxing authority, based on the technical merits of the position. The tax benefit recognized is measured as the largest amount of benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authorities. Based on its analysis, the Master Fund has determined that it has not incurred any liability for unrecognized tax benefits as of September 30, 2014 that would require recognition, de-recognition or disclosure. The Master Fund does not expect that its assessment regarding unrecognized tax benefits will materially change over the next twelve months. However, the Master Fund’s conclusions may be subject to review and adjustment at a later date based on factors including, but not limited to, questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions, compliance with U.S. federal, U.S. state and foreign tax laws, and changes in the administrative practices and precedents of the relevant taxing authorities. Generally, the Master Fund is subject to income tax examinations by major taxing authorities during the period since its inception.

Offering Costs – Expenses incurred in connection with establishing the Master Fund aggregated $281,476. Offering costs incurred by the Master Fund are treated as deferred charges until operations commenced and thereafter are amortized over a twelve-month period using the straight line method.

Commitments and Contingencies – In the normal course of business, the Master Fund enters into contracts that provide general indemnifications by the Master Fund to the counterparty to the contract. The Master Fund’s maximum exposure under these arrangements is dependent on future claims that may be made against the Master Fund and, therefore, cannot be estimated; however, based on experience, the risk of loss from such claims is considered remote.

Note 3. Risks

An investment in the Master Fund should be considered a speculative investment that entails a high degree of risk. It is possible that an investor may lose some or all of its investment and that the Master Fund may not achieve its investment objective. The Master Fund is classified as non-diversified and may invest a significant portion of its assets in Private Investment Funds and the Master Fund may be susceptible to the economic and regulatory factors affecting these Private Investment Funds and/or the fund industry.

The Private Investment Funds invest in a variety of different assets and employ a number of different strategies which in turn subject their investors, including the Master Fund, to certain risks including those associated with: (1) investing in equities, fixed income securities, convertible securities, derivatives, commodities, mortgage-backed securities, currencies and foreign securities; (2) participating in short sale transactions; and (3) employing arbitrage and leverage. The Master Fund may also implement leverage and invest directly in derivatives which will directly expose the Master Fund to the risks associated with the employment of leverage and investments in derivatives.

PINE GROVE ALTERNATIVE INSTITUTIONAL FUND

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

The Master Fund may make additional investments and effect withdrawals from the Private Investment Funds only at certain specific times and may not be able to withdraw its investment in an Investment Fund promptly after it has made a decision to do so. This may result in a loss to the Master Fund and adversely affect its investment return. The Master Fund's inability to withdraw an investment in an Investment Fund may also prevent the Master Fund from making an offer to repurchase shares. Master Fund shareholders do not have the right to require the Master Fund to redeem or repurchase its shares and may not have access to the money they invested for an indefinite period of time. Repurchases will be made at such times, and in such amounts, and on such terms as may be determined by the Master Fund’s Board of Trustees, in its sole discretion.

The shares are not, and are not expected to be, listed for trading on any securities exchange and, to the Master Fund’s knowledge, there is no, nor will there be, a secondary trading market for the shares. Shares are subject to substantial restrictions on transferability and resale, and may not be transferred or resold except as permitted under the Master Fund’s Agreement and Declaration of Trust, as may be amended or amended and restated from time to time. A shareholder should not expect to be able to sell its shares regardless of how the Master Fund performs. Because a shareholder may be unable to sell its shares, the shareholder will be unable to reduce its exposure on any market downturn.

Note 4. Management Fees and Other Expenses

Management fees – The Investment Adviser receives a fee, accrued monthly and paid quarterly in arrears, of 0.225% (0.90% on an annualized basis) of the Master Fund’s month-end net asset value.

Expenses – The Investment Adviser has agreed to reimburse the Master Fund’s expenses (other than acquired fund fees and expenses, shareholder servicing fees, and extraordinary expenses and the investment related expenses, such as foreign country tax expense and interest expense on amounts borrowed by the Master Fund) to the extent necessary in order to cap the Master Fund’s other expenses at 0.60%. For the period ended September 30, 2014, expenses reimbursed were as follows:

Expenses Reimbursed by Investment Adviser

$86,708

For a period of five years subsequent to the Master Fund’s commencement of operations, the Investment Adviser may recover from the Master Fund expenses reimbursed during the prior three years if the Master Fund’s other expenses, including the recovered expenses, fall below the expense cap.

Period Ended	Amount of Fees Waived and/or Expenses Reimbursed	Expiration Date to Recoup Fees Waived and/or Expenses Reimbursed	Fees Recouped
March 31, 2014	$117,099	March 31, 2017	$ -
September 30, 2014	86,708	March 31, 2018	$ -

Distribution – Foreside Fund Services, LLC serves as the Master Fund’s distributor (the “Distributor”). The Distributor is not affiliated with the Investment Adviser or with Atlantic Fund Administration, LLC (“Atlantic”) or their affiliates.

Custodian – BNP Paribas Financial Services, LLC (the “Custodian”) serves as the Master Fund’s independent custodian of substantially all of its investments in underlying private investment companies. The Master Fund is subject to credit risk to the extent any broker with which it conducts business is unable to fulfill contractual obligations on its behalf. The Master Fund’s management monitors the financial condition of such brokers and does not anticipate any losses from the custodian.

PINE GROVE ALTERNATIVE INSTITUTIONAL FUND

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

Administrator – Atlantic provides fund accounting, fund administration, and transfer agency services to the Master Fund.

Trustees and Officers – The Master Fund pays each independent trustee an annual retainer fee of $18,000 for service to the Master Fund. Each independent trustee is also reimbursed for all reasonable out-of-pocket expenses incurred in connection with their duties as a Trustee, including travel and related expenses incurred in attending Board meetings. No officer of the Master Fund is compensated by the Master Fund.

Note 5. Security Transactions

The cost of purchases and proceeds from sales of investments (including maturities), other than short-term investments during the period ended September 30, 2014, were $23,062,421 and $804,397 respectively.

Note 6. Offering of Fund Shares; Repurchase Offers

Master Fund shares may be purchased by investors who meet certain eligibility requirements set forth in the Master Fund's current prospectus as of the first business day of each calendar month; however, Master Fund shares may be offered more or less frequently as determined by the Board in its sole discretion. Master Fund shares are sold at the current net asset value per share. Generally, the minimum initial investment in the Master Fund is $25,000 and the minimum additional investment is $10,000. The Master Fund may accept investments for lesser amounts under certain circumstances, including where a shareholder has significant assets under the management of the Investment Adviser or an affiliate and other special circumstances that may arise. There are no initial or subsequent investment minimums for accounts maintained by financial institutions for the benefit of their clients who purchase shares through investment programs such as employee benefit plans. Certain selling broker-dealers and financial advisers may impose higher minimums.

The Master Fund may repurchase Master Fund shares from shareholders from time to time as determined by the Board in its sole discretion. A summary of the tender offers for the period ended September 30, 2014 is as follows:

Effective Date		Amount of Tender Offer		Dollar Amount of Shares Tendered
September 30, 2014		$8,070,072		$2,135,401

Note 7. Federal Income Tax

As of March 31, 2014, the components of distributable earnings on a tax basis were substantially the same as for financial statement purposes:

Undistributed ordinary income		$	-
Unrealized appreciation			1,609,135

Cost for federal income tax purposes is substantially the same as for financial statement purposes and net unrealized appreciation consists of:

Gross Unrealized Appreciation	$	3,330,515
Gross Unrealized Depreciation		(498,568	)
Net Unrealized Appreciation	$	2,831,947

PINE GROVE ALTERNATIVE INSTITUTIONAL FUND

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

Note 8. Change in Independent Registered Public Accounting Firm

The Board, with the approval and recommendation of the Audit Committee, selected Ernst & Young (“E&Y”) to replace Rothstein Kass (“RK”), as the Master Fund’s independent registered public accounting firm for the Master Fund’s fiscal year ending March 31, 2015. Throughout RK’s tenure, including the Master Fund’s most recent fiscal period, the Master Fund had no disagreements with RK on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, and there were no reportable events of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchanges Act of 1934. With respect to the Master Funds, RK’s audit opinion, including the past fiscal period, has not contained either an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. Further, there were no disagreements between the Master Fund and RK on accounting principles, financial statement disclosure or audit scope, which, if not resolved to the satisfaction of RK would have caused RK to make reference to the disagreement in RK’s report. Since the appointment of E&Y, neither the Master Fund nor anyone on its behalf has consulted E&Y on items concerning the application of accounting principles to a specified transaction (either completed or proposed) or the type of audit opinion that might be rendered on the Master Fund’s financial statements, or concerning the subject of a disagreement of the kind described in Item 304(a)(1)(iv) of Regulation S-K or reportable events of the kind described in Item 304(a)(1)(v) of Regulation S-K.

Note 9. Subsequent Events

From October 1, 2014 through November 21, 2014, the Master Fund received an additional $2,444,500 in subscriptions.

PINE GROVE ALTERNATIVE INSTITUTIONAL FUND

ADDITIONAL INFORMATION

SEPTEMBER 30, 2014

Investment Advisory Agreement Approval

At the June 5, 2014 Board meeting, the Board, including the Independent Trustees, considered the approval of the investment advisory agreement pertaining to the Master Fund (the “Advisory Agreement”). In evaluating the Advisory Agreement for the Master Fund, the Board reviewed materials furnished by the Investment Adviser and Atlantic, including information regarding the Investment Adviser, its personnel, operations and financial condition. Specifically, the Board considered, among other matters: (1) the nature, extent and quality of the services to be provided to the Master Fund by the Investment Adviser, including information on the investment performance of the Master Fund; (2) the costs of the services to be provided and profitability to the Investment Adviser with respect to its relationship with the Master Fund; (3) the advisory fee and the total expense ratio of the Master Fund compared to relevant peer groups of funds; (4) the extent to which economies of scale would be realized as the Master Fund grows and whether the advisory fee would enable the Fund’s investors to share in the benefits of economies of scale; and (5) other benefits received by the Investment Adviser from its relationship with the Master Fund. In their deliberations, the Board did not identify any particular information that was all important or controlling and attributed different weights to the various factors. In particular, the Board focused on the factors discussed below.

Nature, Extent and Quality of Services

With respect to the nature, extent and quality of the services to be provided by the Investment Adviser under the Advisory Agreement, the Board considered and reviewed information concerning the services proposed to be provided under the Advisory Agreement, the proposed investment strategies and limitations of the Master Fund, information describing the Investment Adviser’s current organizations and the background and experience of the persons who would be responsible for the day-to-day management of the Master Fund, the nature and quality of services provided to other privately offered funds by the Investment Adviser. The Board also considered the expertise of the Investment Adviser in supervising third party service providers to the Master Fund, such as the administrator and custodian. The Board further considered the compliance program of the Investment Adviser which supports the Master Fund’s compliance program. Based upon its review, the Board concluded that the Investment Adviser was qualified to oversee the services to be provided by other service providers and that the services to be provided by the Investment Adviser to the Master Fund were expected to be satisfactory.

In connection with the assessment of the ability of the Investment Adviser to perform its duties under the Advisory Agreement, the Board considered the Investment Adviser’s financial condition and whether it had the resources necessary to carry out its functions. The Board concluded that the Investment Adviser had the financial resources necessary to perform its obligations under the Advisory Agreement.

Costs of Services and Profitability; Compensation

With respect to the costs of services to be provided and profits to be realized by the Investment Adviser, the Board considered the resources involved in managing the Master Fund as well as the fact that the Investment Adviser agreed to waive and/or reimburse the Master Fund’s other expenses (excluding “acquired fund fees and expenses” and “extraordinary expenses” and the following investment related expenses: foreign country tax expense and interest expense on amounts borrowed by the Master Fund) (“Other Expenses”) to the extent necessary in order to cap Other Expenses at 0.60% per year. The Board also considered the asset levels at which the Investment Adviser expected to “break even” on managing the Master Fund. Based on its review, the Board concluded that the expected profitability of the Master Fund to the Investment Adviser was not unreasonable.

The Independent Trustees reviewed the comparative fee information, including a peer group analysis prepared by the Investment Adviser. The Board noted that the proposed advisory fee under the Advisory Agreement was lower than virtually all of the peer funds identified by the Investment Adviser, and that the Master Fund’s estimated total expense ratio was lower than most of the peer funds identified by the

PINE GROVE ALTERNATIVE INSTITUTIONAL FUND

ADDITIONAL INFORMATION

SEPTEMBER 30, 2014

Investment Adviser. The Board also considered the fees charged by the Investment Adviser to other private funds with substantially similar investment strategies to those of the Master Fund, and noted that the advisory fee was the same or lower than the management fees charged to the Investment Adviser’s private funds and that the Master Fund’s expected overall expense ratio was expected to be the same or lower than that of the Investment Adviser’s other private funds. Based on its review, the Board concluded that the advisory fee of 0.90% for the Master Fund was acceptable.

Performance

The Board considered the Investment Adviser’s performance in managing the Master Fund. In addition, given that the Master Fund has operated for less than one year, the Board also considered the Investment Adviser’s management of the private fund with substantially similar investment strategies to those of the Master Fund that was reorganized into the Master Fund. The Board concluded that the Investment Adviser’s performance in managing the Master Fund was satisfactory.

Economies of Scale

The Board considered the extent to which economies of scale would be realized as the Master Fund grows and whether fee level reflects a reasonable sharing of such economies of scale for the benefit of the Master Fund’s investors. Because the Master Fund was recently organized, the Board reviewed the advisory fee and expenses of the Master Fund and determined to review economies of scale in the future when the Master Fund had attracted additional assets.

Other Benefits

The Board also considered other benefits that may be realized by the Investment Adviser from its relationship with the Master Fund. The Board did not identify any such other benefits.

Conclusions

In voting to approve the Advisory Agreement, the Trustees, including the Independent Trustees, concluded that the terms of the Advisory Agreement are reasonable and fair in light of the services to be performed, the fees paid by certain other funds, expenses to be incurred and such other matters as the Trustees considered relevant in the exercise of their reasonable business judgment.

Proxy Voting Information

A description of the policies and procedures that the Master Fund uses to determine how to vote proxies relating to securities held in the Master Fund’s portfolio is available, without charge and upon request, by calling (855) 699-3103 and on the U.S. Securities and Exchange Commission’s (the “SEC”) website at www.sec.gov. The Master Fund’s proxy voting record for the most recent period ended June 30, 2014 will be available, without charge and upon request by calling (855) 699-3103 and on the SEC’s website at www.sec.gov.

Availability of Quarterly Portfolio Schedules

The Master Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. These filings are available on the SEC’s website at www.sec.gov or may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.

ITEM 2. CODE OF ETHICS.

Not applicable.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

Not applicable.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not applicable.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable

ITEM 6. INVESTMENTS.

(a)	Included as part of the report to shareholders under Item 1.

(b)	Not applicable.

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

MANAGEMENT INVESTMENT COMPANIES.

Not applicable

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

Not applicable.

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)	(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
April 1, 2014 to April 30, 2014	-	N/A	-	-
May 1, 2014 to May 31, 2014	-	N/A	-	-
June 1, 2014 to June 30, 2014	-	N/A	-	-
July 1, 2014 to July 31, 2014	-	N/A	-	-
August 1, 2014 to August 31, 2014	-	N/A	-	-
September 1, 2014 to September 30, 2014	-	N/A	-	-
Total	-	N/A	-	-

a.	The date each plan or program was announced – June 22, 2014, pursuant to a tender offer.
b.	The dollar amount (or share or unit amount) approved – $499,480.
c.	The expiration date (if any) of each plan or program – August 31, 2014 at 12:00am Eastern time
d. e.	Each plan or program expired during the period covered by the table. Each plan or program the Registrant has determined to terminate prior to expiration, or under which the Registrant does not intend to make further purchases – None.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Registrant does not accept nominees to the Board of Trustees from shareholders.

ITEM 11. CONTROLS AND PROCEDURES

(a) The Registrant’s Principal Executive Officer and Principal Financial Officer have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) are effective, based on their evaluation of the controls and procedures required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as of a date within 90 days of the filing date of this report.

(b) There were no changes in the Registrant’s internal control over financial reporting (as defined in

Rule 30a-3(d) under the Act) that occurred during the second 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) Not applicable.

(a)(2) Certifications pursuant to Rule 30a-2(a) of the Act, and Section 302 of the Sarbanes-Oxley Act of 2002 (Exhibits filed herewith).

(a)(3) Not applicable.

(b) Certifications pursuant to Rule 30a-2(b) of the Act, and Section 906 of the Sarbanes-Oxley Act of 2002 (Exhibit filed 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 Pine Grove Alternative Fund

By /s/ Matthew Stadtmauer

Matthew Stadtmauer, Chief Executive Officer

Date November 25, 2014

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 /s/ Matthew Stadtmauer

Matthew Stadtmauer, Chief Executive Officer

Date November 25, 2014

By /s/ Michael J. McKeen

Michael J. McKeen, Chief Financial Officer

Date November 25, 2014

Pine Grove Alternative Fund Inactive N-CSRSCertified semi-annual shareholder report (management investment company)