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 March 31, 2016, the Feeder Fund represented 9.9% of the Master Fund's net assets. The Master Fund's investment objective is to seek long-term capital appreciation. The Master Fund commenced operations on January 1, 2014, after it acquired the net assets of Pine Grove Institutional Partners II Ltd. (the "Partnership").
The investment adviser of the Master Fund and the Feeder Fund is FRM Investment Management (USA) 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 Fund 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
These financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") and follow the accounting and reporting guidance in the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 946. GAAP requires 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 Master Fund:
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 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'
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Notes to Financial Statements
March 31, 2016
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 Private 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 a Private 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 Private Investment Fund based on the most recent final or estimated value reported by the Private 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 depreciation of investments." Fair value is the 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).
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 alternative valuation techniques are more appropriate for any of the Master Fund's investments in Private Investment Funds, such investments may be fair valued by the Valuation Committee using other suitable sources. The Valuation Committee did not fair value any investments during the reporting period ending March 31, 2016.
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Notes to Financial Statements
March 31, 2016
For investments other than Private Investment Funds for which the practical expedient is used for valuation, the Master Fund uses a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The objective of a fair value measurement is to determine 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 (an exit price). Accordingly, the fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1 – Unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities that the Master Fund has the ability to access at the measurement date;
Level 2 – Quoted prices which are not considered to be active, or inputs that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and
Level 3 – Prices, inputs or modeling techniques which are both significant to the fair value measurement and unobservable (supported by little or no market activity).
The following table sets forth information about the level within the fair value hierarchy at which the Master Fund's investments, other than Private Investment Funds, are measured at March 31, 2016:
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Mutual Fund | | $ | - | | | $ | 4,999,327 | | | $ | - | | | $ | 4,999,327 | |
There were no transfers between Level 1, Level 2 and Level 3 for the year ended March 31, 2016.
The following table outlines the redemption restriction period with regards to the Private Investment Funds' strategies.
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Notes to Financial Statements
March 31, 2016
| Strategy | | Fair Value1 | | | Liquidation and Underlying Fund Side Pocket Investment2 (A) | | | Redemptions in Restriction Period3 (B) | | | Maximum Redemption Restriction Period. (Months) | | | Total (A)+(B) | |
| Credit (a) | | $ | 37,867,432 | | | | 73,502 | | | | 4,197,473 | | | | 10 | | | | 4,270,975 | |
| Equity Long/Short(b) | | | 4,169,087 | | | | - | | | | - | | | | N/A | | | | - | |
| Relative Value (c) | | | 25,115,160 | | | | - | | | | 2,541,410 | | | | 5 | | | | 2,541,410 | |
| Other (d) | | | 34,219 | | | | 34,219 | | | | - | | | | N/A | | | | 34,219 | |
| Total | | $ | 67,185,898 | | | $ | 107,721 | | | $ | 6,738,883 | | | | | | | $ | 6,846,604 | |
| 1 | No unfunded commitments as of March 31, 2016. |
| 2 | 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. |
| 3 | 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. |
| (a) | Credit: 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. |
| (b) | Equity Long/Short: Equity Long/Short managers attempt to buy undervalued equities and short overvalued equities. Managers selected for investment by the Investment Adviser 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. |
| (c) | Relative Value: This class includes Portfolio Funds that focus on spread relationships between pricing components of financial assets or commodities. They seek to avoid assuming any outright market risk, although spread risk and tail risk may be significant. Relative Value sub-strategies may include volatility arbitrage, statistical arbitrage, event arbitrage, fixed income arbitrage and credit arbitrage. |
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Notes to Financial Statements
March 31, 2016
| (d) | 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. |
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. Dividend income is recorded on the ex-dividend date.
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.
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's tax year is October 31, 2015. 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 recognizes interest and penalties, if any, related to unrecognized tax positions as income tax expense in the statement of operations. During the year, the Master Fund did not incur any interest or penalties.
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
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Notes to Financial Statements
March 31, 2016
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 March 31, 2016 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 taxing authorities for the period since its inception.
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.
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 a Private Investment Fund promptly after it has made a decision to do so. This may result in a loss to
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March 31, 2016
the Master Fund and adversely affect its investment return. The Master Fund's inability to withdraw an investment in a Private 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 Board, 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 waive and/or reimburse the Master Fund's other expenses (excluding extraordinary expenses and the following investment related expenses: 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 year ended March 31, 2016, there were no expenses reimbursed.
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 | | $ | 40,106 | |
| March 31, 2015 | | | 224,255 | | March 31, 2018 | | | - | |
| March 31, 2016 | | | - | | March 31, 2019 | | | - | |
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Pine Grove Alternative Institutional FundNotes to Financial Statements
March 31, 2016
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 (d/b/a Atlantic Fund Services) ("Atlantic") or their affiliates.
Custodian – J.P. Morgan Chase Bank, N.A. (the "Custodian") serves as the Master Fund's independent custodian of its investments in underlying private investment companies. The Master Fund is subject to credit risk to the extent any custodian 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 custodians and does not anticipate any losses from the Custodian.
Administrator – Atlantic provides fund accounting, fund administration, and transfer agency services to the Master Fund. The Master Fund pays Atlantic a fee for its services (collectively, "Fund Services Fees") as provided in the administrative agreement.
Trustees and Officers – The Master Fund pays the Trustees, who are not "interested persons" (as defined in the 1940 Act) of the Master Fund or Feeder Fund (the "Independent Trustees"), each 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 an Independent 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 year ended March 31, 2016, were $45,691,794 and $58,015,135 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
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March 31, 2016
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.
Note 7. Line of Credit
The Master Fund has a committed $4 million secured line of credit agreement with J.P. Morgan Chase Bank, N.A. The Master Fund may temporarily borrow from the line of credit to address timing mismatches between the inflows of funds to and outflows of funds from the Master Fund in connection with (i) subscriptions and redemptions by investors of the Master Fund; (ii) subscriptions and redemptions by the Master Fund in Portfolio Funds; and (iii) payments in the ordinary course of business of fees, expenses and other obligations of the Master Fund. Interest is charged to the Master Fund based on its borrowings at an amount above the LIBOR rate. The line of credit is secured by the Master Fund's cash and investment securities. The Master Fund is required to pay a facility fee at a rate of 0.70% per annum on the unused portion of the line of credit. At March 31, 2016, the Master Fund did not have a balance outstanding pursuant to this line of credit. The average borrowings and average interest rate (based on days with outstanding balances) for the year ended March 31, 2016, were $120,760 and 2.11%, respectively. On March 24, 2016, the Board approved the termination of this agreement with J.P. Morgan Chase Bank, N.A on or around July 1, 2016.
Note 8. Related Party Transactions and Other
Affiliates of the Investment Adviser may have banking, underwriting, lending, brokerage or other business transactions with Private Investment Funds in which the Master Fund invests and with companies in which Private Investment Funds invest.
During the year ended March 31, 2016, the Master Fund purchased $700,000 of Tourbillon Global Equities Ltd, a Private Investment Fund that is related to an Independent Trustee of the Master Fund. The value of the Private Investment Fund as of March 31, 2016 is $587,564 with an unrealized loss of $(112,436).
Note 9. Federal Income Tax
Distributions during the tax year as noted were characterized for tax purposes as follows:
| | Ordinary Income | |
| October 31, 2015 | | $ | 1,649,994 | |
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Pine Grove Alternative Institutional Fund
Notes to Financial Statements
March 31, 2016
As of October 31, 2015, the components of distributable earnings were as follows:
| Undistributed ordinary income | | $ | 282,498 | |
| Capital and other losses | | | (999,728 | ) |
| Unrealized appreciation | | | (3,949,523 | ) |
| Total | | $ | (4,666,753 | ) |
The components of distributable earnings on a tax basis may differ from those reported for financial statement purposes. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax treatment.
Accordingly the following permanent differences, primarily due to tax adjustments related to passive foreign investment companies and non-deductible start-up costs, have been reclassified with the capital accounts during the tax year ended October 31, 2015. These reclassifications have no effect on net assets.
| Paid-in-Capital | | | Undistributed Net Investment Income | | | Accumulated Net Realized Gain (Loss) | |
| $ | (32,046 | ) | | $ | 1,946,226 | | | $ | (1,914,180 | ) |
Qualified late year losses are deemed to arise on the first business day of the Master Fund's next taxable year. For the taxable year ended October 31, 2015, the Master Fund incurred, and elected to defer late year ordinary losses of $660,438.
The Master Fund has $339,290 of available short-term capital loss carryforwards that have no expiration date.
As of March 31, 2016, the cost of investments for federal income tax purposes is $77,848,116. The related net unrealized appreciation consists of the following:
| Gross Unrealized Appreciation | | $ | 228,432 | |
| Gross Unrealized Depreciation | | | (5,891,323 | ) |
| Net Unrealized Depreciation | | $ | (5,662,891 | ) |
Note 10. Recent Accounting Pronouncement
In August 2014, the FASB issued ASU 2014-15 – Presentation of Financial Statements – Going Concern (Subtopic 205-40). The pronouncement determines management's responsibility regarding assessment of the Master Fund's ability to continue as a going concern, even if the Master Fund's liquidation is not imminent. Currently, no similar guidelines exists. Under this guidance, during each period in which financial statements are prepared, management needs to evaluate whether there are conditions or events that, in the aggregate, raise substantial doubt about the Master Fund's ability to
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Notes to Financial Statements
March 31, 2016
continue as a going concern within one year after the date the financial statements are issued. Substantial doubt exists if these conditions or events indicate that the Master Fund will be unable to meet its obligations as they become due. If such conditions or events exist, management should develop a plan to mitigate or alleviate these conditions or events. Regardless of management's plan to mitigate, certain disclosures must be made in the financial statements. ASU 2014-15 is effective for annual periods ending after December 15, 2016, however early adoption is permitted. The Investment Adviser is currently evaluating the impact the update will have on the Master Fund's financial statements.
Note 11. Subsequent Events
On May 11, 2016, the Board approved a Plan of Liquidation and Dissolution of the Feeder Fund (the "Plan"). In connection with the liquidation of the Feeder Fund, the Board has authorized a final tender wherein the Feeder Fund will offer to repurchase any outstanding shares in exchange for cash. The final tender offer commenced on May 23, 2016, with a valuation date of September 30, 2016. Shortly after September 30, 2016, the Feeder Fund intends to make an in-kind distribution to any remaining shareholders of the Feeder Fund's assets, which are expected to consist entirely of a new class of shares of beneficial interest of the Master Fund with the same fee structure as the Feeder Fund. Thereafter, the Feeder Fund will be terminated and dissolved.
On February 19, 2016, the Master Fund announced a tender offer (the "Offer") to purchase up to 20% of the net assets of the Master Fund from shareholders. The net asset value ("NAV") of the units will be calculated for this purpose as of June 30, 2016. The Offer expired on May 31, 2016. Approximately $5,896,711 (based on the April 30, 2016 NAV) was validly tendered and not withdrawn prior to the expiration of the Offer, and was accepted for purchase in accordance with the terms of the Offer by the Master Fund.
The Master Fund has evaluated all subsequent events through May 31, 2016, the date that these financial statements were issued. The Master Fund recorded $725,000 in subscriptions, which is reflected on the Statement of Assets and Liabilities as subscriptions received in advance, as of March 31, 2016 for a subscription date of April 1, 2016. In addition, the Master Fund received $175,000 in subscriptions related to a June 1, 2016 subscription date.
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Report of Independent Public Accounting Firm
The Board of Trustees and Shareholders of Pine Grove Alternative Institutional Fund
We have audited the accompanying statement of assets and liabilities of Pine Grove Alternative Institutional Fund (the Master Fund), including the schedule of investments, as of March 31, 2016, and the related statements of operations and cash flows for the year then ended, and the statement of changes in net assets and the financial highlights for each of the two years in the 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 audit. The financial highlights for the period from January 1, 2014 (commencement of operations) through March 31, 2014, were audited by other auditors whose report dated May 28, 2014, expressed an unqualified opinion on such financial highlights.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Master Fund's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Master Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of investments in investment funds as of March 31, 2016, by correspondence with management of the underlying investment funds or by other appropriate auditing procedures. We believe that our audit provides 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 Pine Grove Alternative Institutional Fund at March 31, 2016, the results of its operations and its cash flows for the year then ended, and the changes in its net assets and financial highlights for each of the two years in the period then ended in conformity with U.S. generally accepted accounting principles.
Grand Cayman, Cayman Islands
May 31, 2016
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Pine Grove Alternative Institutional Fund
Additional Information (Unaudited)
March 31, 2016
