Pear Tree Polaris International Opportunities Fund

For the Quarter ended December 31, 2024

The Pear Tree Polaris International Opportunities Fund’s Ordinary Shares (the “Fund”) underperformed its benchmark, the MSCI ACWI ex USA Index (the “Index”). The Fund had a return of (10.84%) at net asset value compared to (7.50%) for the Index.

Market Conditions and Investment Strategies

After three quarters of market gains, the Index declined this quarter with all sectors suffering losses. The Fund was in a similar position, yet outperformed the Index in Health Care, Materials and Consumer Staples. Cyclicals declined including Consumer Discretionary, Information Technology (IT) and Financials. At the country level, the Fund had single-digit gains in Germany, Belgium, Singapore and a few other regions, offset by weakness in Taiwan, United Kingdom, China and Switzerland. Foreign exchange also impacted performance, as the U.S. dollar gained against most global currencies.

Barbell returns defined the Consumer Discretionary sector, with a handful of holdings in the top 10 and bottom 10 of the portfolio. Games Workshop Group was up more than 15%, after reporting strong core sales and operating profits; the company entered London’s FTSE 100 Index. Sony Group. posted solid gaming and music revenues, and also announced a strategic alliance with Kadokawa Corporation. Conversely, shares of Collins Foods fell on a weak outlook, strained by subdued consumer spending, rising wages and higher energy costs. Alibaba Group was down after announcing plans to sell its non-core investment in Sun Art
Retail Group to a private equity firm at a significant loss.

The IT sector struggled with Also Holding, Sesa SPA and Samsung Electronics down, the latter of which was due to proposed semiconductor chip trade restrictions from the U.S. Among other decliners, chocolatier Barry Callebaut encountered higher cocoa bean prices. Equatorial Energia’s underlying operations were solid; however, concerns arose that Brazil’s fiscal deficit may impact consumer demand.

We must also highlight a number of standout performers for the quarter: SIXT’s quarterly revenues reached an all-time high on strong operating performance and better vehicle procurement metrics. Among Financials, Singapore-based United Overseas Bank announced impressive earnings. Sparebanken Vest’s stock price climbed after the Norwegian government eased restrictions on mortgage lending requirements.

Portfolio Changes

The impetus for quarterly sales was two-fold: 1) to reduce exposure to cyclicals in favor of defensive names and 2) to reduce emphasis on European small cap names, as European markets continue to struggle. The vast majority of sales were made on an opportunistic basis, selling at a profit in advance of any potential slowdown going into 2025. Cash was redeployed to Health Care companies, Takeda Pharmaceutical and Sanofi; a few attractive buys in Information Technology, including CapGemini, Bechtle and the repurchase of TriChemical; and a new position in Sanyang Motor Co., a Taiwanese motorcycle company taking market share locally and in the greater China area.

Outlook

Growth projections for 2025 remain muted across most of Europe, as evidenced by the mere 0.3% annual growth estimate for Germany and 0.9% for France, among other nations. China’s stimulus measures met with some lopsided success (up 5% for 2024), as industry and exports gained but consumption lagged. Pending U.S. tariff hikes could cloud the outlook. Aware of these macro trends, we have reduced our small-cap exposure, added more defensive companies and sought to diversify geographically (especially in Southeast Asia) to position our portfolio for strong performance.