Pear Tree Polaris International Opportunities Fund

For the Quarter ended September 30, 2024

The Pear Tree Polaris International Opportunities Fund’s Ordinary Shares (the “Fund”) outperformed its benchmark, the MSCI ACWI ex USA Index (the “Index”). The Fund had a return of 9.15% at net asset value compared to 8.17% for the Index.

Market Conditions and Investment Strategies

All sectors in which the Fund invested had absolute positive gains, led by outperformance in overweight Consumer Discretionary, Financials and Consumer Staples. An underweight in benchmark-lagging Materials and Utilities barely dampened results. From a country perspective, the Fund had outsized gains in China, as well as Australia, Taiwan, Japan and Malaysia. Sweden, Mexico, Hong Kong and South Korea detracted, the latter of which suffered on the semiconductor industry slowdown and AI normalization.

China pushed through aggressive stimulus measures to boost its local economy, including an interest rate cut, mortgage rate cuts and reduced commercial bank cash reserves. The Chinese stock market reacted with one of the best rallies in more than a decade in late September, and all of our local holdings got swept up in the fervor. Alibaba Group Holding was the top overall portfolio contributor, up more than 50%, while other local Consumer Discretionary stocks including China Meidong Auto, Midea Group, Zhejiang Supor and Zhongsheng Group each posted gains in excess of 20%. Another sector outperformer was Australia’s Accent Group Ltd., which announced good earnings at a time when U.K. retail conglomerate Frasers Group acquired a 15.65%
stake in the company. Conversely, NextAge Co. declined after putting out a profit warning, following a slide in the past few quarters.

In Consumer Staples, Cranswick PLC reported strong half-year results, with a nearly 12% jump in sales on higher volumes. The company attributed the performance to its ongoing investment in feed milling and pig farming operations. AVI Ltd, the South African food and beverage brand, beat gross margin expectations, pointing to efficiency gains. Flush with cash, the company announced a special dividend and resumption of its buyback program.

Information Technology sector gains were muted, due to Samsung Electronics, SeSa S.p.A. and Computacenter PLC. Samsung Electronics faced headwinds related to declining commodity dynamic random-access memory (DRAM) prices, inventory buildup and increased Chinese competition. While AI related memory demand and high-end DRAM prices have been firm, delayed approval of high bandwidth memory (HBM) 3E qualification from Nvidia and drag on the foundry business also pressured the stock. Italy’s SeSa closed their July quarter with revenues down slightly from the comparable 2023 quarter, but earnings-pershare were in line with expectations. Concerns remain about weak demand and customers delaying purchase. The same issues
weighed down the order books for U.K.-based Computacenter.

Portfolio Changes

During the quarter, the Fund sold Toronto-Dominion Bank given the ongoing anti-money laundering investigation, which may hamper the future profitability and growth of the Canadian bank. Capital was re-allocated to VSTECS Holdings, a Hong Kong IT company, and Teleperformance, the French digital business/telemarketing/customer experience firm.

Outlook

As global central banks lower interest rates, economies should begin to recover on the back of consumer and industry spending; cyclicals typically do well in such macroeconomic conditions. Our portfolio remains overweight select cyclicals, while we seek to increase exposure in under-represented Fund sectors like Communication Services, Energy and Health Care. These opportunities present worldwide, with a keen focus on Asia and China in light of corporate governance and policy change.