Pear Tree Polaris Foreign Value Small Cap Fund

For the Quarter ended March 31, 2024

The Pear Tree Polaris Foreign Value Small Cap Fund’s Ordinary Shares (the “Fund”) underperformed its benchmark, the MSCI ACWI ex USA Small Cap Index (the “Index”). The Fund had a return of 1.72% at net asset value compared to 2.21% for the Index.

Market Conditions and Investment Strategies

The Fund outperformed in the majority of sectors, led by Consumer Discretionary, Utilities, Energy and Health Care. Gains were partially offset by lackluster returns in Information Technology, Communication Services and Financials. From a country perspective, the Fund outperformed in overweight France, United Kingdom, Ireland and Belgium, to name a few. Singapore, South Korea and Thailand dragged on performance, as did Equatorial Energia, the sole holding in Brazil.

Among Consumer Discretionary holdings, U.K.-based Vistry Group PLC continued its streak of strong performance, as the company exited private homebuilding in favor of housing partnerships with local governments. Following the business model switch, the company reported a strong outlook for deliveries. D’Ieteren Group, the Belgian auto distributor and vehicle glass repair business, posted strong results with a healthy free cash flow position.

Consumer Staples had barbell returns. Glanbia PLC announced strong full-year 2023 results, highlighting growth of its Optimum Nutrition brands. Orion Corp., a South Korean confectionary company, declined as investors questioned the synergies of a noncore $400 million acquisition of a pharmaceutical company. Lumpy returns could also define the Utilities sector, as Rubis stock jumped more than 40% on robust earnings and upbeat guidance. Investors lauded discussions about selling the remaining majority stake in Rubis’ terminals to private equity. At the other end of the spectrum was Equatorial Energia, which reported stable revenues and decent EPS, while alluding to a stable 2024 outlook. However, analysts downgraded the EPS estimates,
suggesting a decline in sentiment following the 2023 reporting season.

Semiconductor test solution provider, AEM Holdings, was the largest portfolio detractor for the quarter. AEM faced two headwinds: 1) a profit warning due to a $17-$25 million shortfall in its inventory and 2) a lack of strong catalysts, as its top customer chipmaker Intel provided guidance that fell short of expectations. In Financials, Ringkjoebing Landbobank and Mizuho Leasing Company both had returns in excess of 19% for the quarter; sector gains were eroded by OSB Group PLC and Tisco Financial.

Portfolio Changes

During the quarter, the Fund purchased Kingboard Laminates Holdings, an electronics manufacturer that specializes in the production of laminates (especially copper); and Krones AG, a market leader in the oligopolistic market for beverage filling equipment and warehouse automation. There were no complete sales.

Outlook

European markets rounded the corner with better inflation figures, while the U.S. continued its hot streak on the back of megacap tech stocks. Asian countries and select emerging markets also posted modestly positive returns, with a notable market re-rating in Japan as the country reevaluated its stance on deflation. China is showing early signs for recovery, weighed by deflation. Major central banks will continue to wrestle with the idea of rate cuts. In summary, markets remain mixed. On this backdrop, our research continues to identify any number of attractive investment prospects. In the coming quarters, we may replace a handful of portfolio holdings with new entrants based on better risk/return profiles.