MANAGEMENT OF PEAR TREE FUNDS
Pear Tree Advisors, Inc., 55 Old Bedford Road, Suite 202, Lincoln, MA 01773 (the “Manager”) is responsible for day-to-day management of the business and affairs of the Pear Tree Funds subject to oversight by the Board.
The Manager
The Manager is a privately held financial services firm providing Management and administrative services and facilities to the Pear Tree Funds. As of July 31, 2011, the firm had approximately $___ million in assets under management.
The Manager may, subject to the approval of the Board, choose the investments of the Pear Tree Funds itself orselect sub-advisers (each, a “Sub-Adviser”) to execute the day-to-day investment strategies of the Pear Tree Funds. The Manager currently employs the Sub-Advisers to make the investment decisions and portfolio transactions for each of the Pear Tree Funds and supervises the Sub-Advisers’ investment programs.
Day-to-day responsibility for investing Pear Tree Fund’ assets currently is provided by the Sub-Advisers described below. The Pear Tree Funds and the Manager have received an exemptive order from the Securities and Exchange Commission that permits the Manager, subject to certain conditions, to enter into or amend an advisory contract with unaffiliated sub-advisers with respect to any Pear Tree Fund without obtaining shareholder approval. With Board approval, the Manager may employ a new unaffiliated sub-adviser for the Fund, change the terms of the advisory contract with an unaffiliated sub-adviser, or enter into new advisory contracts with a sub-adviser. The Manager retains ultimate responsibility to oversee the sub-advisers to the Pear Tree Funds and to recommend their hiring, termination, and replacement. Shareholders of the Fund continue to have the right to terminate the advisory contract applicable to the Fund at any time by a vote of the majority of the outstanding voting securities of the Fund. Shareholders will be notified if the Sub-Adviser is removed or replaced or if there has been any material amendment to an advisory contract.
The Sub-Advisers and Portfolio Management
The Sub-Advisers provide portfolio management and related services to each Pear Tree Fund, including trade execution.
The Statement of Additional Information provides additional information about each portfolio manager’s compensation, other accounts managed by each portfolio manager and each portfolio manager’s ownership of shares of his or her Fund.
Pear Tree Columbia Small Cap Fund and Pear Tree Quality Fund
Sub-Adviser.
Columbia Partners, L.L.C., Investment Management (“Columbia”), 5425 Wisconsin Avenue, Suite 700, Chevy Chase, MD 20815 serves as the investment sub-adviser to Pear Tree Columbia Small Cap Fund and Pear Tree Quality Fund. As of June 30, 2011, Columbia had approximately $___ billion in assets under management for individual, pension plan and endowment accounts.
Portfolio Management.
Pear Tree Columbia Small Cap Fund is co-managed by Rhys Williams and Robert von Pentz.
|
Portfolio manager
|
Portfolio manager experience in this Fund
|
Primary title(s) with Sub-Adviser,
primary role and investment experience
|
|
Robert A. von Pentz, CFA
|
Since 1996
|
Chief Investment Officer and head of Equity Investments since 1996
Investment professional since 1984
|
|
Rhys Williams, CFA
|
Since 1997
|
Senior Equity Portfolio Manager since 1997
Investment professional since 1990
|
Pear Tree Quality Fund is managed by Robert von Pentz.
|
Portfolio manager
|
Portfolio manager experience in this Fund
|
Primary title(s) with Sub-Adviser,
primary role and investment experience
|
|
Robert A. von Pentz, CFA
|
Since 2011
|
Chief Investment Officer and head of Equity Investments since 1996
Investment professional since 1984
|
Pear Tree Emerging Markets Fund
Sub-Adviser.
PanAgora Asset Management, Inc. (“PanAgora”), 470 Atlantic Avenue, Boston, MA 02110, serves as the investment sub-adviser to Pear Tree Emerging Markets Fund. As of June 30, 2011, PanAgora had $___ billion in assets under management in portfolios of institutional pension and endowment funds, among others. Putnam Investments LLC is a control person of PanAgora.
Portfolio Management.
Pear Tree Emerging Markets Fund is managed by the following team.
|
Portfolio manager
|
Portfolio manager experience in this Fund
|
Primary title(s) with Sub-Adviser,
primary role and investment experience
|
|
Joel G. Feinberg
|
Since 2008
|
Director, Equity Investments
Investment professional since 2000; from 2002 to 2005 as Senior Associate of Operations at PanAgora; Research Associate in Macro Strategies in 2005 at PanAgora; Portfolio Manager, Equity Investment 2006 to 2008 with PanAgora.
|
|
Sanjoy Ghosh, Ph.D.
|
Since 2008
|
Director, Equity Investments
Dr. Ghosh is a Director responsible for managing the firm’s dynamic equity investments. Prior to joining PanAgora in 2004, he worked at Putnam Investments as a portfolio manager on the Structured Equity team and has over 6 years investment industry experience.
|
|
Ronald Hua, CFA
|
Since 2008
|
Chief Investment Officer and Head of Research, Equity Investments
Mr. Hua is Chief Investment Officer, Equity Investments, is responsible for all equity strategies at PanAgora. He is also a member of the firm’s Management, Operating and Investment Committees. Prior to joining PanAgora in 2004, Mr. Hua worked at Putnam Investments as the lead portfolio manager on the Structured Small Cap Equity team, as well as contributing to research on U.S. Large Cap and International strategies. Mr. Hua is a CFA charterholder with over 10 years investment industry experience.
|
|
Dmitri Kantsyrev, Ph.D., CFA
|
Since 2008
|
Portfolio Manager, Equity Investments
Dr. Kantsyrev is a Quantitative Analyst on the Dynamic Equity Modeling Team primarily responsible for conducting research for PanAgora’s Global and International Equity strategies. Dr. Kantsyrev joined PanAgora in 2007 from the University of Southern California, where he completed his studies in Finance. Dr. Kantsyrev is a CFA charterholder.
|
Pear Tree Polaris Foreign Value Fund and Pear Tree Polaris Foreign Value Small Cap Fund
Sub-Adviser.
Polaris Capital Management, LLC (“Polaris”), 125 Summer Street, Boston, MA 02110, serves as the investment sub-adviser to Pear Tree Polaris Foreign Value Fund and Pear Tree Polaris Foreign Value Small Cap Fund. As of June 30, 2011, Polaris had $__ billion in assets under management for institutional clients and affluent individuals.
Portfolio Management.
Bernard R. Horn, Jr. is the lead portfolio manager of Pear Tree Polaris Foreign Value Fund. Assistant Portfolio Manager Sumanta Biswas contributes to the day-to-day management of the Fund’s portfolio through such means as performing research and management of Polaris’ proprietary quantitative investment technology. Mr. Biswas may also provide advice on investment decisions during periods when Mr. Horn is unavailable, but does not generally make the final decision as to which securities to purchase or sell for the Fund. The extent to which Mr. Biswas may perform these functions, and the nature of the functions, may change from time to time.
|
Portfolio manager
|
Portfolio manager experience in this Fund
|
Primary title(s) with Sub-Adviser,
primary role and investment experience
|
|
Bernard R. Horn, Jr.
|
Since 1998 (Fund inception) Lead Portfolio Manager
|
Founder and Portfolio Manager since 1995.
Investment professional since 1980.
B.S. in business administration Northeastern University 1978. M.S. degree in management from the Alfred P. Sloan School of Management at M.I.T 1980.
|
|
Sumanta Biswas, CFA
|
Since 2004
|
Assistant Portfolio Manager since 2004.
Investment professional since 1996; 1996 to 2000 as an officer for the Securities and Exchange Board of India; in 2001 as an intern for Delta Partners; 2002 to 2004 as an Analyst for Polaris.
M.S. degree Boston College 2001, MBA Calcutta University in India 1996; undergraduate degree in engineering North Bengal University 1993, and a diploma in business finance from the Institute of Chartered Financial Analysts of India.
|
Bernard R. Horn, Jr. is the lead portfolio manager of Pear Tree Polaris Foreign ValueSmall Cap Fund. Sumanta Biswas and Bin Xiao contribute to the day-to-day management of the Fund’s portfolio through such means as performing research and management of Polaris’ proprietary quantitative investment technology. Mr. Biswas and Mr. Xiao may also provide advice on investment decisions during periods when Mr. Horn is unavailable, but does not generally make the final decision as to which securities to purchase or sell for the Fund. The extent to which Mr. Biswas and Mr. Xiao may perform these functions, and the nature of the functions, may change from time to time.
|
Portfolio manager
|
Portfolio manager experience in this Fund
|
Primary title(s) with Sub-Adviser,
primary role and investment experience
|
|
Bernard R. Horn, Jr.
|
Lead Portfolio Manager since 2008 (Fund inception)
|
Founder and Portfolio Manager since 1995.
Investment professional since 1980.
B.S. in business administration Northeastern University 1978. M.S. degree in management from the Alfred P. Sloan School of Management at M.I.T 1980.
|
|
Sumanta Biswas, CFA
|
Since 2008 (Fund inception) Assistant Portfolio Manager
|
Assistant Portfolio Manager since 2004.
Investment professional since 1996; 1996 to 2000 as an officer for the Securities and Exchange Board of India; in 2001 as an intern for Delta Partners; 2002 to 2004 as an Analyst for Polaris.
M.S. degree Boston College 2001, MBA Calcutta University in India 1996; undergraduate degree in engineering North Bengal University 1993, and a diploma in business finance from the Institute of Chartered Financial Analysts of India.
|
|
Bin Xiao, CFA
|
Analyst since 2008 (Fund inception)
|
Analyst with Polaris since 2006.
Internship at HSBC Global Investment Banking in 2005, internship at Polaris in 2004/2005. 2002 to 2004 as a software architect and project manager at PNC Financial Service Group (PFPC), following positions as an information systems engineer and software engineer at Vanguard Group and RIT Research Corporation respectively.
MBA MIT’s Sloan School of Management 2006; M.S. degree computer science Rochester Institute of Technology 2000; undergraduate degree Beijing Institute of Technology in China in 1998. Completed CFA Level III.
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Management and Advisory Fees
As compensation for services rendered for fiscal year ended March 31, 2011, each Pear Tree Fund paid the Manager a monthly fee at the annual rate of 1 percent of the average daily net assets. From the management fee, the Manager pays the expenses of providing investment advisory services to the Pear Tree Funds, including the fees of the Sub-Advisers of each individual Pear Tree Fund.
The Pear Tree Funds’ Semi-Annual report to be dated September 30, 2011 will contain a detailed discussion of the Board’ consideration of the management contract and advisory contracts approved for continuance at a meeting of the Trust’s Board in May 2011. The Pear Tree Funds’ Semi-annual report dated September 30, 2010 contains similar information for the prior year’s contract approvals.
Fee Waivers/Expense Limitation.
With respect to Pear Tree Quality Fund, the Manager has agreed until July 31, 2012 to waive 0.15 percent of its management fee if the Fund’s average daily net assets are up to $100 million and 0.25 percent of its management fee if the Fund’s average daily net assets are $100 million or more. [For the year ended March 30, 2011, the Manager waived fees or reimbursed the Fund in the aggregate amount of $__________.] These fee waivers only may be terminated with the approval of the Board.
Revenue Sharing Payments.
The Manager or its affiliates may make payments, out of their own assets to certain intermediaries or their affiliates (including the Distributor, U.S. Boston Capital Corporation) based on sales or assets attributable to the intermediary, or such other criteria agreed to by the Manager. Such payments will be paid by the Manager or its affiliates out of their profits or other available sources and will not impact the total operating expenses of any Pear Tree Fund. The intermediaries to which payments may be made are determined by the Manager. These payments, often referred to as “revenue sharing payments,”may be in addition to other payments such as Rule 12b-1 fees and may provide an incentive, in addition to any sales charge, to these firms to actively promote the Pear Tree Funds or to provide marketing or service support to the Pear Tree Funds.
In some circumstances, these payments may create an incentive for an intermediary or its employees or associated persons to recommend or sell shares of a Pear Tree Fund. Please contact your financial intermediary for details about revenue sharing payments it may receive.
Administrative and Processing Support Payments.
The Manager or its affiliates may make payments to certain financial intermediaries that sell Pear Tree Fund shares for certain administrative services, including record keeping and sub-accounting shareholder accounts, to the extent that the Pear Tree Funds do not pay for these costs directly. The Manager or its affiliates also may make payments to certain financial intermediaries that sell Pear Tree Fund shares in connection with client account maintenance support, statement preparation and transaction processing. The types of such payments may include, among others, payment of ticket charges per purchase or exchange order placed by a financial intermediary, payment of networking fees in connection with certain mutual fund trading systems, or one-time payments for ancillary services such as setting up funds on a financial intermediary’s mutual fund trading system.
Distributor and Distribution Plan
U.S. Boston Capital Corporation is the distributor of the Pear Tree Funds’ shares.
The Pear Tree Funds has adopted for each Fund a distribution plan under Rule 12b-1 to pay for the marketing and distribution of the Pear Tree Fund Ordinary Shares and for services provided to shareholders of the Pear Tree Funds’ Ordinary Shares as described above. Rule 12b-1 fees are paid on an on-going basis out of the Fund’s assets allocated to Ordinary Shares, which will increase the cost of your investment in Ordinary Shares and may cost more than other types of sales charges. The distribution fee is not directly tied to the Distributor’s expenses. If the Distributor’s expenses exceed the Distributor’s fee, the Pear Tree Funds are not required to reimburse the Distributor for the excess expenses; if the Distributor’s fee exceeds the Distributor’s expenses, the Distributor may realize a profit.
SHARE CLASS ELIGIBILITY
The Pear Tree Funds offer two classes of shares of each Pear Tree Fund through this prospectus: Ordinary Shares and Institutional Shares.
Ordinary Shares are available to all purchasers and are subject to a fee of 0.25 percent charged pursuant to Rule 12b-1 under the 1940 Act (“12b-1 fee”). Institutional Shares are available to limited classes of purchasers on a “no-load” basis, and they are not subject to a sales charge or 12b-1 fee.
At this time the Pear Tree Funds do not accept applications for purchases of shares from Foreign Persons (that is, persons who are not U.S. citizens or resident aliens).
Ordinary Shares
The minimum initial investment is generally $2,500. However, you may make a minimum investment of $1,000 if you:
• Participate in the Pear Tree Funds’ Automatic Investment Plan;
• Open a Uniform Gifts/Transfers to Minors account; or
• Open an Individual Retirement Account (“IRA”) or an account under a similar plan established under the Employee Retirement Income Security Act of 1974, as amended, or for any pension, profit sharing or other employee benefit plan or participant therein, whether or not the plan is qualified under Section 401 of the Internal Revenue Code of 1986, as amended, including any plan established under the Self-Employed Individuals Tax Retirement Act of 1962 (HR-10).
The Manager, at its discretion, may waive these minimums.
You may make subsequent purchases in any amount, although the Manager, at its discretion, reserves the right to impose a minimum at any time.
Institutional Shares
Institutional Shares are offered to clients who meet eligibility and minimum investment amount requirements. The minimum initial investment amount may be invested in one or more of the Pear Tree Funds that currently offer Institutional Shares. There is no minimum additional investment amount.
Institutional Shares are not subject to any sales charges or fees pursuant to the Pear Tree Funds’ 12b-1 Plan.
|
Minimum Initial
Investment
|
Eligible Classes of Institutional Share Investors
|
|
$1 million or more
|
(i) benefit plans with at least $10,000,000 in plan assets and 200 participants, that either have a separate trustee vested with investment discretion and certain limitations on the ability of plan beneficiaries to access their plan investments without incurring adverse tax consequences or which allow their participants to select among one or more investment options, including the Fund;
(ii) banks and insurance companies purchasing shares for their own account;
(iii) an insurance company separate account; or
(iv) a bank, trust company, credit union, savings institution or other depository institution, its trust departments or common trust funds purchasing for non-discretionary customers or accounts.
|
|
$1 million or more in the aggregate
|
If an account or group of accounts is (a) not represented by a broker/dealer, (b) the minimum initial investment is at least $1 million in the aggregate at the plan, group or organization level and (c) the investment is made by:
(1) A private foundation that meets the requirements of Section 501(c)(3) of the Internal Revenue Code;
(2) An endowment or organization that meets the requirements of Section 509(a)(1) of the Internal Revenue Code; or
(3) A group of accounts related through a family trust, testamentary trust or other similar arrangement purchasing Institutional Shares through or upon the advice of a single fee-paid financial intermediary other than the Manager or Distributor.
|
|
None
|
Investments made for an individual account or a group of accounts:
(i) through an eligible mutual fund wrap program. To be eligible, a mutual fund wrap program must offer allocation services, charge an asset-based fee to its participants for asset allocation and/or offer advisory services, and meet trading and operational requirements under an appropriate agreement with the Distributor or clearing entity; or
(ii) by registered investment Sub-Advisers who are (a) charging an asset based fee for their advisory services and (b) purchasing on behalf of their clients.
You should ask your investment firm if it offers and you are eligible to participate in such a mutual fund program and whether participation in the program is consistent with your investment goals. The intermediaries sponsoring or participating in these mutual fund programs also may offer their clients other classes of shares of the Pear Tree Funds and investors may receive different levels of services or pay different fees depending upon the class of shares included in the program. Investors should consider carefully any separate transaction and other fees charged by these programs in connection with investing in each available share class before selecting a share class. Neither the Fund, nor the Manager, nor the Distributor receives any part of the separate fees charged to clients of such intermediaries.
|
|
Minimum Initial
Investment
|
Eligible Classes of Institutional Share Investors
|
|
None
|
(i) any state, county, city, or any instrumentality, department, authority, or agency of these entities or any trust, pension, profit-sharing or other benefit plan for the benefit of the employees of these entities which is prohibited by applicable investment laws from paying a sales charge or commission when it purchases shares of any registered investment management company; or
(ii) officers, partners, trustees or directors and employees of the Pear Tree Funds, the Pear Tree Funds’ affiliated corporations, or of the Pear Tree Funds’ Sub-Advisers and their affiliated corporations (a “Fund Employee”), the spouse or child of a Pear Tree Fund Employee, a Pear Tree Fund Employee acting as custodian for a minor child, any trust, pension, profit-sharing or other benefit plan for the benefit of a Pear Tree Fund Employee or spouse and maintained by one of the above entities, the employee of a broker-dealer with whom the Distributor has a sales agreement or the spouse or child of such employee.
To qualify for the purchase of Institutional Shares, Fund Employees and other persons listed in section (ii) must provide Quantitative Institutional Services, a division of the Manager (“Transfer Agent”), with a letter stating that the purchase is for their own investment purposes only and that the shares will not be resold except to the Pear Tree Funds.
|
The Manager, at its sole discretion, may accept investments of $1 million or more in the aggregate from other classes of investors substantially similar to those listed above. In addition, the Manager may waive or lower initial investment amounts in other circumstances. Please call
1-800-326-2151
for more information.
HOW TO PURCHASE
Making an Initial Investment
You must provide the Pear Tree Funds with a completed Account Application for all initial investments, a copy of which may be obtained by calling
1-800-326-2151
, or online at
www.peartreefunds.com
.
Transaction Privileges.
If you wish to have telephone exchange or telephone redemption privileges for your account, you must elect these options on the Account Application.
You should carefully review the Application and particularly consider the discussion in this Prospectus regarding the Pear Tree Funds’ policies on exchanges of Fund shares and processing of redemption requests.
Some accounts, including IRA accounts, require a special Account Application. See
Investment Through Tax Deferred Retirement Plans
. For further information, including assistance in completing an Account Application, call the Pear Tree Funds’ toll-free number 1-800-326-2151.
Generally, shares may not be purchased by facsimile request or by electronic mail
.
Identity Verification.
Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. When you open an account, you will need to supply your name, address, date of birth, and other information that will allow the Fund to identify you. The Fund may close your account if it cannot adequately verify your identity. If your account must be closed, your redemption price will be the net asset value (less applicable sales charges) on the date of redemption.
Investments by Check.
You may purchase shares of the Pear Tree Funds by sending a check payable in U.S. dollars to the Pear Tree Funds specifying the name(s) of the Fund(s) and amount(s) of investment(s), together with the appropriate Account Application (in the case of an initial investment) to:
Pear Tree Funds
Attention: Transfer Agent
55 Old Bedford Road, Suite 202
Lincoln, Massachusetts 01773
If you buy shares with a check that does not clear, your account may be subject to extra charges to cover collection costs. Third party checks, cashier’s checks and money orders will not be accepted. Purchases made by check must wait 15 days prior to being liquidated.
Minimum Account Size
Each Pear Tree Fund requires that you maintain a minimum account size, currently 50 shares for Ordinary Shares and 5,000 shares for Institutional Shares. If you hold fewer than the required minimum number of shares in your account, the Fund reserves the right to notify you that it intends to sell your shares and close your account. You will be given 30 days from the date of the notice to make additional investments to avoid having your shares sold and your account closed. This policy does not apply to certain qualified retirement plan accounts.
Automatic Investment Plan
You may participate in the Automatic Investment Plan for the Pear Tree Funds by completing the appropriate section of the Account Application and enclosing a minimum investment of $1,000 per Fund. You must also authorize an automatic withdrawal of at least $100 per account from your checking or similar account each month to purchase shares of a Pear Tree Fund. You may cancel the Plan at any time, but your request must be received five business days before the next automatic withdrawal (generally the 20th of each month) to become effective for that withdrawal. Requests received fewer than five business days before a scheduled withdrawal will take effect with the next scheduled withdrawal. The Pear Tree Funds or the Transfer Agent may terminate the Automatic Investment Plan at any time.
Investments by Wire
If you wish to buy shares by wire, please contact the Transfer Agent at
1-800-326-2151
or your dealer or broker for wire instructions. For new accounts, you must provide a completed Account Application before, or at the time of, payment. To ensure that a wire is credited to the proper account, please specify your name, the name(s) of the Fund(s) and class of shares in which you are investing, and your account number. A bank may charge a fee for wiring funds.
Subsequent Investments
If you are buying additional shares in an existing account, you should identify the Fund and your account number. If you wish to make additional investments in more than one Fund, you should provide your account numbers and identify the amount to be invested in each Pear Tree Fund . You may pay for all purchases with a single check. Additional shares may be purchased by ACH payment as well.
Investments through Tax-Deferred Retirement Plans
Pear Tree Funds are available for investment through various tax-deferred retirement vehicles. Please call
1-800-326-2151
for assistance. These types of investments may be subject to specific fees.
Confirmation Statements
The transfer agent maintains an account for each investment firm or individual shareholder and records all account transactions. You will be sent confirmation statements showing the details of your transactions as they occur.
HOW TO EXCHANGE
You can exchange all or a portion of your shares between Funds within the same class, subject to the applicable minimum. You may not exchange from one class of shares to another class of shares of the same or a different Fund. There is no fee for exchanges.
The exchange privilege is available only in states where shares of the Fund being acquired may legally be sold. Individual Funds may not be registered in each state. You should be aware that exchanges might produce a gain or loss, as the case may be, for tax purposes.
You can make exchanges in writing or by telephone, if applicable. Exchanges will be made at the per share net asset value of shares of such class next determined after the exchange request is received in good order by the Fund. If exchanging by telephone, you must call prior to the close of regular trading on the NYSE (ordinarily 4:00 p.m., Eastern time). The Transfer Agent will only honor a telephone exchange if you have elected the telephone exchange option on your Account Application.
Generally, shares may not be exchanged by facsimile request or by electronic mail.
HOW TO REDEEM
Written Request for Redemption
You can redeem all or any portion of your shares by submitting a written request for redemption signed by each registered owner of the shares exactly as the shares are registered. The request must clearly identify the account number and the number of shares or the dollar amount to be redeemed.
If you redeem more than $100,000, or request that the redemption proceeds be paid to someone other than the shareholder of record, or sent to an address other than the address of record, your signature must be guaranteed
. The use of signature guarantees is designed to protect both you and the Pear Tree Funds from the possibility of fraudulent requests for redemption.
Generally, shares may not be redeemed by facsimile request or by electronic mail.
Requests should be sent to:
Pear Tree Funds
Attention: Transfer Agent
55 Old Bedford Road, suite 202
Lincoln, Massachusetts 01773
Telephone Redemption
If you have elected the telephone redemption option on your Account Application, you can redeem your shares by calling the Transfer Agent at
1-800-326-2151
provided that you have not changed your address of record within the last thirty days. You must make your redemption request prior to the close of regular trading on the NYSE (ordinarily 4:00 p.m., Eastern Time). Once you make a telephone redemption request, you may not cancel it. The Pear Tree Funds, the Manager, the Distributor, and the Transfer Agent will not be liable for any loss or damage for acting in good faith on exchange or redemption instructions received by telephone reasonably believed to be genuine. The Pear Tree Funds employ reasonable procedures to confirm that instructions communicated by telephone are genuine. It is the Pear Tree Funds’ policy to require some form of personal identification prior to acting upon instructions received by telephone, to provide written confirmation of all transactions effected by telephone, and to mail the proceeds of telephone redemptions only to the redeeming shareholder’s address of record.
Automatic Withdrawal Plan
If you have a minimum of $10,000 in your account, you may request withdrawal of a specified dollar amount (a minimum of $100) on either a monthly, quarterly or annual basis. You may establish an Automatic Withdrawal Plan by completing the Automatic Withdrawal Form, which is available by calling
1-800-326-2151
. You may stop your Automatic Withdrawal Plan at any time. Additionally, the Pear Tree Funds or the Transfer Agent may choose to stop offering the Automatic Withdrawal Plan.
You can directly redeem shares of a Pear Tree Fund by written request, by telephone (if elected in writing) and by automatic withdrawal. Redemptions will be made at the per share net asset value of such shares next determined after the redemption request is received in good order by the Fund.
Good order means that:
• You have provided adequate instructions
• There are no outstanding claims against your account
• There are no transaction limitations on your account
Medallion signature guarantees and other requirements
You are required to obtain a medallion signature guarantee when you are:
• Requesting certain types of transfers or exchanges or sales of fund shares in excess of $100,000
• Requesting a redemption within 30 days of changing your account registration or address
• Requesting a redemption, exchange or transfer to someone other than the account owner(s).
Please call
1-800-326-2151
if you have questions on whether a signature guarantee is needed.
You can obtain a signature guarantee from most broker-dealers, banks, credit unions (if authorized under state law) and federal savings and loan associations. You cannot obtain a signature guarantee from a notary public.
The Transfer Agent will accept redemption requests only on days the NYSE is open. The Transfer Agent will not accept requests for redemptions that are subject to any special conditions or which specify a future or past effective date, except for certain notices of redemptions exceeding $250,000 (see
Payment of Redemption Amount
).
Payment of Redemption Amount
The Pear Tree Funds will generally send redemption proceeds within three business days of the execution of a redemption request. However, if the shares to be redeemed represent an investment made by check or through the Automatic Investment Plan, the Pear Tree Funds reserve the right to hold the redemption check until monies have been collected by the Fund from the customers’ bank.
The Pear Tree Funds may suspend this right of redemption and may postpone payment for more than seven days only when the NYSE is closed for other than customary weekends and holidays, or if permitted by the rules of the Securities and Exchange Commission during periods when trading on the NYSE is restricted or during any emergency which makes it impracticable for the Pear Tree Funds to dispose of their securities or to determine fairly the value of their net assets, or during any other period permitted by order of the Securities and Exchange Commission. As set forth in the Prospectus, the Pear Tree Funds may also delay payment of redemption proceeds from shares purchased by check until the check clears, which may take seven business days or longer.
Redemptions In-Kind
For redemptions in excess of $250,000, or 1 percent of a Fund’s net assets, whichever is less, the Pear Tree Funds have reserved the right to pay redemption proceeds by a distribution in-kind of portfolio securities (rather than cash).
STATEMENT OF ADDITIONAL INFORMATION
[PEAR TREE FUNDS LOGO]
PEAR TREE COLUMBIA SMALL CAP FUND
PEAR TREE QUALITY FUND
PEAR TREE EMERGING MARKETS FUND
PEAR TREE POLARIS FOREIGN VALUE FUND
PEAR TREE POLARIS FOREIGN VALUE SMALL CAP FUND
Ordinary Shares and Institutional Shares
[_______________], 2011
This Statement of Additional Information (“
SAI
”) is not a prospectus. It should be read in conjunction with the Prospectus dated [__________, 2011]for the Ordinary Shares and Institutional Shares of the separate series identified above (collectively, the “
Pear Tree Funds
” and individually, a “
Pear Tree Fund
”)of Pear Tree Funds (formerly The Quantitative Group of Funds d/b/a Quant Funds) (the “
Trust
”), as supplemented or revised from time to time (the “
Prospectus
”). This SAI incorporates by reference the Pear Tree Funds’ Annual Report for the period ended March 31, 2011. A copy of the Prospectus and, as they become available, the Pear Tree Fund’s most recent annual and semi-annual reportsmay be obtained free of charge by calling 1-800-326-2151, by written request to the Pear Tree Funds at 55 Old Bedford Road, Suite 202, Lincoln, Massachusetts 01773 or from our website at:
www.peartreefunds.com
.
TABLE OF CONTENTS
PAGE
FUND HISTORY ..................................................................................... [3]
INVESTMENT POLICIES, RISKS AND RESTRICTIONS..................................................................... [3]
INVESTMENT RESTRICTIONS OF THE PEAR TREE FUNDS........................................................... [16]
TRUSTEES AND OFFICERS OF THE TRUST; FUND GOVERNANCE.............................................. [19]
PRINCIPAL SHAREHOLDERS......................................................................................................... [27]
THE MANAGER AND THE SUB-ADVISERS [28]
DISTRIBUTOR AND DISTRIBUTION PLAN....................................................................................... [38]
OTHER SERVICE PROVIDERS TO THE PEAR TREE FUNDS ........................................................... [41]
PORTFOLIO TRANSACTIONS................................................................................................................ [42]
DISCLOSURE OF PORTFOLIO HOLDINGS...................................................................................... [44]
SHARES OF THE TRUST............................................................................................................................ [47]
TAXATION................................................................................................................................... [54]
PROXY VOTING POLICIES………………………………………………………………………… [60]
FUND HISTORY
The Trust is a registered, open-end, management investment company that was established in 1983 as a business trust under Massachusetts law. A copy of the Second Amended and Restated Declaration of Trust dated May 25, 2011, is on file with the Secretary of the Commonwealth of the Commonwealth of Massachusetts.
Each Pear Tree Fund identified on the cover page of this SAI is a series of the Trust. Pear Tree Advisors, Inc.(the “
Manager
”) serves as the investment manager to each Pear Tree Fund, and for each Pear Tree Fund, there is an investment sub-adviser (each, an “
Sub-Adviser
”).
The Pear Tree Funds formerly were named The Quantitative Group of Funds and did business as “Quant Funds.”Each of the Pear Tree Funds formerly were referred to as follows:
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Current Fund Name
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Former Fund Name(s)
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Pear Tree Columbia Small Cap Fund
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Quant Small Cap Fund
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Pear Tree Quality Fund
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Quant Quality Fund (formerly Quant Long/Short Fund)
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Pear Tree Emerging Markets Fund
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Quant Emerging Markets Fund
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Pear Tree Polaris Foreign Value Fund
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Quant Foreign Value Fund
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Pear Tree Polaris Foreign Value Small Cap Fund
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Quant Foreign Value Small Cap Fund
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Pear Tree Advisors, Inc. formerly was named Quantitative Investment Advisors, Inc.On May __, 2011, each of the Trust, the Manager and each Pear Tree Fund changed its name to its current name.
Capitalized terms used in this SAI but not defined herein have the same meaning as in the Prospectus.
INVESTMENT POLICIES, RISKS AND RESTRICTIONS
The Prospectus presents the investment objective and the principal investment strategies and risks of each Pear Tree Fund. This section supplements the disclosure in the Prospectus and provides additional information on the Pear Tree Funds’ investment policies or restrictions. Investment policies or restrictions stated as a maximum percentage of the Pear Tree Fund’s assets are only applied immediately after a portfolio investment to which the policy or restriction is applicable. Accordingly, any later increase or decrease resulting from a change in values, net assets or other circumstances will not be considered in determining whether the investment complies with the Fund’s restrictions and policies. There is no assurance that the Pear Tree Funds’ objectives will be achieved.
Investment Policies and Risks
Convertible Securities.
Each Pear Tree Fund may invest in convertible securities, such as convertible debentures, bonds and preferred stock, which allow the holder thereof to convert the instrument into common stock at a specified share price or ratio. The price of the common stock may fluctuate above or below the specified price or ratio, which may allow thePear Tree Fund the opportunity to purchase the common stock at below market price or, conversely, render the right of conversion worthless. A Pear Tree Fund will invest in convertible securities primarily for their equity characteristics.
Other Investment Companies.
Each Pear Tree Fund may invest in the securities of other investment companies to the extent that such investments are consistent with thePear Tree Fund’s investment objective and policies and permissible under the Investment Company Act of 1940, as amended (the “
1940 Act
”). As required by the 1940 Act, aPear Tree Fund may not acquire the securities of other domestic or non-U.S. investment companies if, as a result, (i) more than 10 percent of the Pear Tree Fund’s total assets would be invested in securities of other investment companies, (ii) such purchase would result in more than 3 percent of the total outstanding voting securities of any one investment company being held by the Pear Tree Fund, or (iii) more than 5 percent of the Pear Tree Fund’s total assets would be invested in any one investment company.
The limitations on investments in other investment companies do not apply to the purchase of shares of any investment company in connection with a merger, consolidation, reorganization or acquisition of substantially all the assets of another investment company. APear Tree Fund, as a holder of the securities of other investment companies, will bear its pro rata portion of the other investment companies’ expenses, including advisory fees. These expenses are in addition to the direct expenses of the Pear Tree Fund’s own operations.
Exchange Traded Funds.
Subject to the limitations on investment in other investment companies, as described in “Investment Policies, Risks and Restrictions – Investment Policies and Risks – Other Investment Companies,” above, and as such may be modified by an exemptive order or exemptive rule from the Securities and Exchange Commission (the “
SEC
”) with respect to a particular exchange traded fund “ETF”, each Pear Tree Fund may invest in ETFs.
ETFs, such as Standard & Poor’s Corporation (“
S&P
”) depositary receipts (“
SPDRs
”), Nasdaq 100 Index Trading Stock (“
QQQs
”), iShares and various country index funds, are investment companies whose shares are traded on a national exchange or the National Association of Securities Dealers’ Automatic Quotation System “NASDAQ”. ETFs may be based on underlying equity or fixed income securities. SPDRs, for example, seek to provide investment results that generally correspond to the performance of the component common stocks of the S&P 500. ETFs do not sell individual shares directly to investors and only issue their shares in large blocks known as “creation units.” The investor purchasing a creation unit then sells the individual shares on a secondary market. Therefore, the liquidity of ETFs depends on the adequacy of the secondary market.
There can be no assurance that an ETF’s investment objective will be achieved. ETFs based on an index may not replicate and maintain exactly the composition and relative weightings of securities in the index. ETFs are subject to the risks of investing in the underlying securities. A Pear Tree Fund, as a holder of the securities of the ETF, will bear its pro rata portion of the ETF’s expenses, including advisory fees. These expenses are in addition to the direct expenses of the Pear Tree Fund’s own operations.
Exchange Traded Notes.
Consistent with its ability to invest in fixed income securities and to enter into derivatives contracts, Pear Tree Emerging Markets Fund may invest in exchange traded notes (“
ETNs
”). ETNs are unsecured, unsubordinated debt securities typically issued by an underwriting financial institution, which are designed to track the performance of a market index and may provide exposure to the returns of various market indices, including indices linked to stocks, bonds, commodities and currencies. ETNs combine certain aspects of bonds and ETFs. Similar to ETFs, ETNs are listed on an exchange and traded in the secondary market. However, unlike an ETF, an ETN can be redeemed at any time or can be held until the ETN’s maturity, at which time the issuer will pay a return linked to the performance of the specific index that the ETN is designed to track minus certain fees. Unlike fixed income bonds, ETNs do not make periodic interest payments, and the principal investment is not protected.
ETNs are subject to credit risk, including the risk that the issuer of the ETN may default on its obligations. The value of an ETN may vary and may be influenced by, among other things, the time to maturity, level of supply and demand for the ETN, volatility and lack of liquidity in underlying markets, changes in the applicable interest rates, changes in the issuer's credit rating, and economic, legal, political, or geographic events that affect the particular index. When Pear Tree Emerging Markets Fund invests in ETNs it will bear its proportionate share of any fees and expenses borne by the ETN. Additionally, the issuer may impose restrictions
on the Fund's right to redeem its investment in an ETN.
Real Estate Investment Trusts.
Real Estate Investment Trusts ("
REITs
") are companies which invest primarily in income producing real estate or real estate related loans or interests. REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. REITs are not taxed on income distributed to shareholders provided they comply with the applicable requirements of the Internal Revenue Code of 1986, as amended (the "
Code
"). In some cases, the Fund will indirectly bear its proportionate share of any management and other expenses paid by REITs in which it invests in addition to the expenses paid by the Fund.
Investing in REITs involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. An equity REIT may be affected by changes in the value of the underlying properties owned by the REIT. A mortgage REIT may be affected by changes in interest rates and the ability of the issuers of its portfolio mortgages to repay their obligations. REITs are dependent upon the skills of their managers and are not diversified. REITs are generally dependent upon maintaining cash flows to repay borrowings and to make distributions to shareholders and are subject to the risk of default by lessees or borrowers. REITs whose underlying assets are concentrated in properties used by a particular industry, such as health care, are also subject to risks associated with such industry.
REITs (especially mortgage REITs) are also subject to interest rate risks. When interest rates decline, the value of a REIT's investment in fixed rate obligations can be expected to rise. Conversely, when interest rates rise, the value of a REIT's investment in fixed rate obligations can be expected to decline. If the REIT invests in adjustable rate mortgage loans the interest rates on which are reset periodically, yields on a REIT's investments in such loans will gradually align themselves to reflect changes in market interest rates. This causes the value of such investments to fluctuate less dramatically in response to interest rate fluctuations than would investments in fixed rate obligations. REITs may have limited financial resources and may trade less frequently and in a more limited volume than larger company securities.
Investment in Initial Public Offerings.
To the extent consistent with its investment objective, each Pear Tree Fund may invest up to 5 percent of its total net assets (at time of purchase) in initial public offerings (“
IPO
”) of equity securities. The market for such securities may be more volatile and entail greater risk of loss than investments in more established companies. Many companies engaged in IPO’s are smaller capitalization companies that present the risks of such companies described in “Principal Risks for the Fund” in the Prospectus. Such risks may include limited operating histories, dependence on a limited number of management personnel, reliance on one or a small number of core businesses, including businesses for which there may not be well developed markets. Newly public companies may also have limited access to additional capital to finance operating needs and/or implementation of strategic plans. At times, investments in IPO’s could represent a significant portion of a Pear Tree Fund’s investment performance. A Pear Tree Fund cannot assure that investments in IPO’s will continue to be available to the Pear Tree Fund or, if available, will result in positive investment performance, particularly during times when the Fund is of smaller size. In addition, as the Pear Tree Fund’s assets increase, the impact of investments in IPO’s on the overall performance of the Pear Tree Fund is likely to decrease.
A Pear TreeFund may sell stocks purchased in IPO’s shortly after the time of the offering in order to realize a short-term profit. Such sales involve transaction costs and are taxable events that would give rise to short-term capital gains that are taxable at the less favorable rates applicable to ordinary income. Although opportunities may exist to realize a short-term profit on stocks purchased in IPO’s, the Pear Tree Fund may continue to hold such stocks for longer-term investment if the Pear Tree Fund’s Sub-Adviser believes this is appropriate. Holding stocks of newly public companies over the longer-term involves the risk that the prices of such stocks may depreciate substantially from the initial offering price and from higher trading prices that may exist in the markets shortly following the initial offering. In addition to buying stocks directly in an IPO, the Fund may purchase newly public stocks in the secondary market if thePear Tree Fund’s Sub-Adviser determines that this is an appropriate investment. Purchasing newly public stocks shortly after the offering may involve paying market prices significantly above the initial offering price. Active market activity in newly public stocks may diminish substantially over time creating the risk that such stocks purchased in the secondary market could depreciate substantially in value, including over a relatively short time period.
Derivatives.
Each Pear Tree Fund may invest in derivative instruments such as futures, options, warrants and swaps (“
Derivatives
”). Derivatives are financial instruments whose value depend upon, or are derived from, the value of something else, such as one or more underlying investments, indices or currencies. Derivatives may be traded on organized exchanges, or in individually negotiated transactions with other parties (these are known as “over the counter”). A Pear Tree Fund may use Derivatives both for hedging and non-hedging purposes. Derivatives involve special risks and costs and may result in losses to the Pear Tree Fund. The successful use of Derivatives requires sophisticated management and the Pear Tree Fund will depend on its Sub-Adviser’s ability to analyze and manage Derivatives transactions. The prices of Derivatives may move in unexpected ways, especially in abnormal or volatile market conditions. Some Derivatives may create “leverage” in the Pear Tree Fund and therefore may magnify or otherwise increase investment losses to the Pear Tree Fund. The Pear Tree Fund’s use of Derivatives may also increase the amount of taxes payable by shareholders. Other risks arise from the potential inability to terminate or sell Derivatives positions. A liquid secondary market may not always exist for the Pear Tree Fund’s Derivatives positions at any time. In fact, many over-the-counter instruments will not be liquid. Over-the-counter instruments also involve the risk that the other party will not meet its obligations to the Pear Tree Fund.
Participatory Notes.
Each of Pear Tree Emerging Markets Fund, Pear Tree Polaris Foreign Value Fund and Pear Tree Polaris Foreign Value Small Cap Fund may invest in participatory notes. Participatory notes are offshore derivative instruments issued to foreign investors against underlying Indian securities which are not registered with the Securities and Exchange Board of India. The risks of investing in participatory notes are similar to those risks of investing in foreign securities in general. See “Principal Risks for Each Fund” in the Prospectus for a discussion of the risks of investing in foreign securities. Participatory notes function similarly to depositary receipts except that brokers, not U.S. banks, are depositories for Indian-based securities on behalf of foreign investors. Brokers buy Indian-based securities and then issue participatory notes to foreign investors. Any dividends or capital gains collected from the underlying securities are remitted to the foreign investors. However, unlike depositary receipts, participatory notes are subject to credit risk based on the uncertainty of the counterparty’s (i.e., the broker’s) ability to meet its obligations.
Opals.
Each of Pear Tree Emerging Markets Fund, Pear Tree Polaris Foreign Value Fund and Pear Tree Polaris Foreign Value Small Cap Fund may each invest in optimized portfolio as listed securities (“
OPALS
”). OPALS represent an interest in a basket of securities of companies primarily located in a specific country generally designed to track an index for that country. Investments in OPALS are subject to the same risks inherent in directly investing in foreign securities and also have the risk that they will not track the underlying index. See “Principal Risks for Each Fund-Foreign Investments”in the Prospectus. In addition, because the OPALS are not registered under applicable securities laws, they may only be sold to certain classes of investors, and it may be more difficult for the Pear Tree Fund to sell OPALS than other types of securities. However, the OPALS may generally be exchanged with the issuer for the underlying securities, which may be more readily tradable.
Depository Receipts.
Each Pear Tree Fund may invest in American Depository Receipts (“
ADRs
”), European Depository Receipts (“
EDRs
”) and Global Depository Receipts (“
GDRs
”). ADRs, EDRs and GDRs (collectively, “
Depository Receipts
”) are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depository banks and generally trade on an established market in the United States or elsewhere. The underlying shares are held in trust by a custodian bank or similar financial institution in the issuer’s home country. The depository bank may not have physical custody of the underlying securities at all times and may charge fees for various services, including forwarding dividends and interest and corporate actions. ADRs are alternatives to directly purchasing the underlying foreign securities in their national markets and currencies. However, ADRs continue to be subject to many of the risks associated with investing directly in foreign securities. These risks include foreign exchange risk as well as the political and economic risks of the underlying issuer’s country. Depository Receipts may be sponsored or unsponsored. Unsponsored Depository Receipts are established without the participation of the issuer. Unsponsored Depository Receipts differ from Depository Receipts sponsored by an issuer in that they may involve higher expenses, they may not pass-through voting or other shareholder rights, and they may be less liquid.
Foreign Currency Transactions.
A forward foreign currency exchange contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are principally traded in the inter-bank market conducted directly between currency traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement, and no commissions are charged at any stage for trades.
Since investments in foreign companies will usually involve currencies of foreign countries, and since each of Pear Tree Polaris Foreign Value Fund, Pear Tree Emerging Markets Fund and Pear Tree Polaris Foreign Value Small Cap Fund may temporarily hold funds in bank deposits in foreign currencies during the completion of investment programs, the value of the assets of these Pear Tree Funds as measured in U.S. dollars may be affected favorably or unfavorably by changes in foreign currency exchange rates and exchange control regulations, and the Pear Tree Funds may incur costs in connection with conversions between various currencies. Each of Pear Tree Polaris Foreign Value Fund, Pear Tree Emerging Markets Fund and Pear Tree Polaris Foreign Value Small Cap Fund will conduct foreign currency exchange transactions either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market, or through entering into forward contracts to purchase or sell foreign currencies. Each of Pear Tree Polaris Foreign Value Fund, Pear Tree Emerging Markets Fund and Pear Tree Polaris Foreign Value Small Cap Fund will generally not enter into a forward contract with a term of greater than one year. the Pear Tree Funds’ Custodian (as defined below) will place cash or liquid securities into a segregated account of the series in an amount equal to the value of the Pear Tree Funds’ total assets committed to the consummation of forward foreign currency exchange contracts. If the value of the securities placed in the segregated account declines, additional cash or securities will be placed in the account on a daily basis so that the value of the account will equal the amount of the Funds’ commitments with respect to such contracts.
Each of Pear Tree Polaris Foreign Value Fund, Pear Tree Emerging Markets Fund and Pear Tree Polaris Foreign Value Small Cap Fund will generally enter into forward foreign currency exchange contracts under two circumstances. First, when a Pear Tree Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency, it may desire to “lock in” the U.S. dollar price of the security. By entering into a forward contract for the purchase or sale, for a fixed amount of U.S. dollars, of the amount of foreign currency involved in the underlying security transactions, the Pear Tree Fund will seek to protect itself against a possible loss resulting from an adverse change in the relationship between the U.S. dollar and the subject foreign currency during the period between the date the security is purchased or sold and the date on which payment is made or received.
Second, when a Pear Tree Fund’s Sub-Adviser believes that the currency of a particular foreign country may experience an adverse movement against the U.S. dollar, it may enter into a forward contract to sell an amount of the foreign currency approximating the value of some or all of the Pear Tree Fund’s portfolio securities denominated in such foreign currency. Alternatively, where appropriate, a Pear Tree Fund may hedge all or part of its foreign currency exposure through the use of a basket of currencies where certain of such currencies act as an effective proxy for other currencies. In such a case, the Pear Tree Fund may enter into a forward contract where the amount of the foreign currency to be sold exceeds the value of the securities denominated in such currency. The use of this basket hedging technique may be more efficient and economical than entering into separate forward contracts for each currency held in the Pear Tree Fund. The precise matching of the forward contract amounts and the value of the securities involved will not generally be possible since the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date the forward contract is entered into and the date it matures. The projection of short-term currency market movement is extremely difficult, and the successful execution of a short-term hedging strategy is highly uncertain. Under certain circumstances, the Fund may commit a substantial portion, or up to 75 percent of the value of its assets, to the consummation of these contracts. The Pear Tree Fund’s Sub-Adviser will consider the effect a substantial commitment of its assets to forward contracts would have on the investment program of the Fund and the flexibility of the Pear Tree Fund to purchase additional securities. Other than as set forth above, the Pear Tree Fund will not enter into such forward contracts or maintain a net exposure to such contracts where the consummation of the contracts would obligate the Pear Tree Fund to deliver an amount of foreign currency in excess of the value of the Pear Tree Fund’s portfolio securities or other assets denominated in that currency. Under normal circumstances, consideration of the prospect for currency parities will be incorporated into the longer-term investment decisions made with regard to overall diversification strategies. However, the Pear Tree Fund’s Sub-Adviser believes that it is important to have the flexibility to enter into such forward contracts when it determines that the best interests of the Pear Tree Fund will be served.
At the maturity of a forward contract, the Pear Tree Fund may either sell the portfolio security and make delivery of the foreign currency, or it may retain the security and terminate its contractual obligation to deliver the foreign currency by purchasing an “offsetting” contract obligating it to purchase, on the same maturity date, the same amount of the foreign currency.
As indicated above, it is impossible to forecast with absolute precision the market value of portfolio securities at the expiration of the forward contract. Accordingly, it may be necessary for aPear Tree Fund to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security is less than the amount of foreign currency the Pear Tree Fund is obligated to deliver and if a decision is made to sell the security and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the portfolio security if its market value exceeds the amount of foreign currency the Pear Tree Fund is obligated to deliver.
If a Pear Tree Fund retains the portfolio security and engages in an offsetting transaction, the Pear Tree Fund will incur a gain or a loss (as described below) to the extent that there has been movement in forward contract prices. If the Pear Tree Fund engages in an offsetting transaction, it may subsequently enter into a new forward contract to sell the foreign currency. Should forward prices decline during the period between the Pear Tree Fund’s entering into a forward contract for the sale of a foreign currency and the date it enters into an offsetting contract for the purchase of the foreign currency, the Pear Tree Fund will realize a gain to the extent the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to purchase. Should forward prices increase, the Pear Tree Fund will suffer a loss to the extent the price of the currency it has agreed to purchase exceeds the price of the currency it has agreed to sell.
A Pear Tree Fund is not required to enter into forward contracts with regard to their foreign currency-denominated securities and will not do so unless deemed appropriate by the relevant Pear Tree Fund’s Sub-Adviser. It also should be realized that this method of hedging against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange at a future date. Additionally, although such contracts tend to minimize the risk of loss due to a decline in the value of the hedged currency, at the same time, they tend to limit any potential gain that might result from an increase in the value of that currency.
Temporary Defensive Strategy.
The Fund may invest in cash, cash equivalents, and short-term debt obligations for temporary defensive purposes and for liquidity purposes (e.g., for redemption of shares, to pay expenses or pending other investments). Short-term debt obligations may include obligations of the U.S. government and (in the case of Pear Tree Polaris Foreign Value Fund, Pear Tree Emerging Markets Fund and Pear Tree Polaris Foreign Value Small Cap Fund securities of foreign governments). Short-term debt obligations may also include certificates of deposit and bankers’ acceptances issued by U.S. banks (and, in the case of Pear Tree Polaris Foreign Value Fund, Pear Tree Emerging Markets Fund and Pear Tree Polaris Foreign Value Small Cap Fund, foreign banks) having deposits in excess of $2 billion, commercial paper, short-term corporate bonds, debentures and notes and repurchase agreements, all with one year or less to maturity. Investments in commercial paper are limited to obligations (i) rated Prime-1 by Moody’s Investors Service, Inc.(“
Moody’s
”) or A-1 by S&P, or in the case of any instrument that is not rated, of comparable quality as determined by the Manager or the Fund’s Sub-Adviser, or (ii) issued by companies having an outstanding debt issue currently rated Aaa or Aa by Moody’s or AAA or AA by S&P. Investments in other corporate obligations are limited to those having maturity of one year or less and rated Aaa or Aa by Moody’s or AAA or AA by S&P. The value of fixed-income securities may fluctuate inversely in relation to the direction of interest rate changes.
Moody’s bond ratings cited above are as follows:
Aaa: Bonds that are rated “Aaa” are judged to be the best quality and to carry the smallest degree of investment risk. Interest payments are protected by a large or exceptionally stable margin and principal is secure.
Aa: Bonds that are rated “Aa” are judged to be of high quality by all standards. Together with the “Aaa” group, they comprise what are generally known as “high-grade” bonds. They are rated lower than the best bonds because margins of protection may not be as large as with “Aaa” securities or other elements may make long-term risks appear greater than those of “Aaa” securities.
The S&P Corporation bond ratings cited above are as follows:
AAA: “AAA” is the highest rating assigned to a debt obligation and indicates an extremely strong capacity to pay principal and interest.
AA: Bonds rated “AA” also qualify as high quality debt obligations. Capacity to pay principal and interest is very strong, and in the majority of instances they differ from “AAA” issues only in small degree.
Fixed Income Securities
.
Each Pear Tree Fund may invest in fixed income securities of any maturity. A Pear Tree Fund may not invest more than 10 percent of its net assets in fixed income securities, including convertible debt securities, rated below investment grade or in unrated securities of comparable quality.
Fixed income securities are subject to the risk of an issuer’s inability to meet principal or interest payments on its obligations. Factors which could contribute to a decline in the market value of debt securities in thePear Tree Fund’s portfolio include rising interest rates or a reduction in the perceived creditworthiness of the issuer of the securities. A fixed income security is considered investment grade if it is rated in one of the top four categories by a nationally recognized statistical rating organization or determined to be of equivalent quality by thePear Tree Fund’s Sub-Adviser. Fixed income securities rated below investment grade are commonly referred to as “junk bonds” and are considered speculative. Below investment grade fixed income securities involve greater risk of loss, are subject to greater price volatility and are less liquid, especially during periods of economic uncertainty or change, than higher grade fixed income securities.
Repurchase Agreements.
A repurchase agreement is a contract under which a Pear Tree Fund would acquire a security for a relatively short period (usually not more than one week), subject to the obligation of the seller to repurchase the security and the Pear Tree Fund to resell the security at a fixed time and price (representing the Pear Tree Fund’s cost plus interest). A Pear Tree Fund will enter into repurchase agreements only with (i) commercial banks or (ii) registered broker-dealers. Although a Pear Tree Fund may enter into repurchase agreements with respect to any securities which it may acquire consistent with its investment policies and restrictions, it is the Pear Tree Fund’s present intention to enter into repurchase agreements only with respect to obligations of the U.S. government or its agencies or instrumentalities. While the repurchase agreements entered into by thePear Tree Fund will provide that the underlying security at all times shall have a value at least equal to the resale price stated in the agreements (and, for this purpose, the underlying security will be marked to market daily), if the seller defaults, the Pear Tree Fund could realize a loss on the sale of the underlying security to the extent that the proceeds of the sale including accrued interest are less than the resale price provided in the agreement including interest. In addition, if the seller should be involved in bankruptcy or insolvency proceedings, the Pear Tree Fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if the Pear Tree Fund is treated as an unsecured creditor and required to return the underlying collateral to the seller’s estate.
No more than 5 percent of the value of a Pear Tree Fund’s total assets will be invested in repurchase agreements that have a maturity longer than seven (7) days. Investments in repurchase agreements which have a longer maturity are not considered to be readily marketable (see "- Illiquid Securities," below). In addition, a Pear Tree Fund will not enter into repurchase agreements with a securities dealer if such transactions constitute the purchase of an interest in such dealer under the 1940 Act.
Securities Loans.
Each Pear Tree Fund may make secured loans of its portfolio securities amounting to not more than 30 percent of its total assets. See “Investment Restrictions Of The Pear Tree Funds,” below. The risks in lending portfolio securities, as with other extensions of credit, consist of (1) possible delay in the recovery of the securities or loss of rights in the collateral should the borrower fail financially or (2) the risk that the underlying collateral will decrease in value. Securities loans are made to broker-dealers pursuant to agreements requiring that loans be continuously secured by collateral in cash or cash equivalents (such as U.S. Treasury bills) at least equal at all times to the market value of the securities lent. The borrower pays to the Fund an amount equal to any dividends or interest received on the securities lent. A Pear Tree Fund may invest the cash collateral received in interest-bearing, short-term securities or receive a fee from the borrower. Although voting rights, or rights to consent with respect to the loaned securities, pass to the borrower, thePear Tree Fund retains the right to call the loans at any time on reasonable notice, and it will do so in order that the securities may be voted by thePear Tree Fund if the holders of such securities are asked to vote upon or consent to matters materially affecting the investment. ThePear Tree Fund may also call such loans in order to sell the security involved.
Options.
Each Pear Tree Fund may write covered call options that are traded on national securities exchanges with respect to stocks in its portfolio (ensuring that the Pear Tree Fund at all times will have in its portfolios the securities which it may be obligated to deliver if the options are exercised). The “writer” of a call option gives to the purchaser of that option the right to buy the underlying security from the writer at the exercise price prior to the expiration date of the call. Call options are generally written for periods of less than six months. APear Tree Fund may write covered call options on securities in its portfolios in an attempt to realize a greater current return than would be realized on the securities alone or to provide greater flexibility in disposing of such securities. A Pear Tree Fund may also write call options to partially hedge a possible stock market decline. Covered call options generally would not be written by a Pear Tree Fund except at a time when it is believed that the price of the common stock on which the call is being written will not rise in the near future and the Pear Tree Fund does not desire to sell the common stock for tax or other reasons. The writer of a covered call option receives a premium for undertaking the obligation to sell the underlying security at a fixed price during the option period if the option is exercised. So long as a Pear Tree Fund remains obligated as a writer of covered calls, it foregoes the opportunity to profit from increases in the market prices of the underlying securities above the exercise prices of the options, except insofar as the premiums represent such profits, and retain the risk of loss should the value of the underlying securities decline. A Pear Tree Fund may also enter into “closing purchase transactions” in order to terminate its obligations as a writer of covered call options prior to the expiration of the options. Although limiting writing covered call options to those which are traded on national securities exchanges increases the likelihood of being able to make closing purchase transactions, there is no assurance that thePear Tree Fund will be able to effect such transactions at any particular time or at an acceptable price. If the Fund was unable to enter into a closing purchase transaction, the principal risks to thePear Tree Fund would be the loss of any capital appreciation of the underlying security in excess of the exercise price and the inability to sell the underlying security in a down market until the call option was terminated. The writing of covered call options could result in an increase in the portfolio turnover rate of the Fund, especially during periods when market prices of the underlying securities appreciate.
Short Sales.
Each Pear Tree Fund will limit short sales to selling securities "short against the box."No securities will be sold short if after giving effect to any short sales, the value of all securities sold short would exceed 25 percent of thePear Tree Fund’s net assets.
A short sale involves the Pear Tree Fund borrowing securities from a broker and selling the borrowed securities. The Pear Tree Fund has an obligation to return securities identical to the borrowed securities to the broker. In a short sale against the box, the Pear Tree Fund at all times own an equal amount of the security sold short or securities convertible into or exchangeable for, with or without payment of additional consideration, an equal amount of the security sold short. Each Pear Tree Fund intends to use such short sales against the box for hedging purposes. For example when a Pear Tree Fund believes that the price of a current portfolio security may decline, thePear Tree Fund may use a short sale against the box to lock in a sale price for a security rather than selling the security immediately. In such a case, any future losses in the Pear Tree Fund’s long position should be offset by a gain in the short position and, conversely, any gain in the long position should be reduced by a loss in the short position.
If a Pear Tree Fund effects such a short sale at a time when it has an unrealized gain on the security, it may be required to recognize that gain as if it had actually sold the security (a “
constructive sale
”) on the date it effects the short sale. However, such constructive sale treatment may not apply if the Pear Tree Fund closes out the short sale with securities other than the appreciated securities held at the time of the short sale provided that certain other conditions are satisfied. Uncertainty regarding the tax consequences of effecting short sales may limit the extent to which the Fund may make short sales against the box.
Asset Segregation.
The 1940 Act requires that each Pear Tree Fund segregate assets in connection with certain types of transactions that may have the effect of leveraging the Pear Tree Fund’s portfolio. If thePear Tree Fund enters into a transaction requiring segregation, such as a short sale, the Pear Tree Fund’s custodian or the Pear Tree Fund’s Sub-Adviser will segregate liquid assets in an amount required to comply with the 1940 Act. Such segregated assets will be valued at market daily. If the aggregate value of such segregated assets declines below the aggregate value required to satisfy the 1940 Act, additional liquid assets will be segregated.
Forward Commitments.
Each Pear Tree Fund may make contracts to purchase securities for a fixed price at a future date beyond customary settlement time (“
forward commitments
”), if the Pear Tree Fund holds, and maintains until the settlement date in a segregated account with the Pear Tree Funds’ custodian, cash or short-term debt obligations in an amount sufficient to meet the purchase price. These debt obligations will be marked to market on a daily basis and additional liquid assets will be added to such segregated accounts as required. Forward commitments may be considered securities in themselves. They involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in the value of the Pear Tree Fund’s other assets. Although thePear Tree Fund will generally enter into forward commitments with the intention of acquiring securities for its portfolio, thePear Tree Fund may dispose of a commitment prior to settlement if the Pear Tree Fund’s Sub-Adviser deems it appropriate to do so. A Pear Tree Fund may realize short-term profits or losses upon the sale of forward commitments.
Warrants.
Each Pear Tree Fund may invest in warrants purchased as units or attached to securities purchased by the Fund. Warrants provide a Pear Tree Fund with the right to purchase an equity security at specific prices valid for a specific period of time. Their prices do not necessarily move parallel to the prices of the underlying securities. Warrants have no voting rights, receive no dividends and have no rights with respect to the assets of the issuer.
Illiquid Securities.
Securities which do not trade on stock exchanges or in the over the counter market, or have restrictions on when and how they may be sold, are generally considered to be “illiquid.” An illiquid security is one that a Pear Tree Fund may have difficulty, or may even be legally precluded from, selling within a particular time. A Pear Tree Fund may invest in illiquid securities, including restricted securities and other investments that are not readily marketable. A Pear Tree Fund will not purchase any such security if the purchase would cause the Pear Tree Fund to hold more than 15 percent of its net assets, measured at the time of purchase, in illiquid securities. Repurchase agreements maturing in more than seven (7) days are considered illiquid for purposes of this restriction.
The principal risk of investing in illiquid securities is that thePear Tree Fund may be unable to dispose of them at the time desired or at a reasonable price. In addition, in order to resell a restricted security, theFund might have to bear the expense and incur the delays associated with registering the security with the SEC, and otherwise obtaining listing on a securities exchange or in the over the counter market.
Liquidity Risk.
Each Pear Tree Fund may make investments in securities that become less liquid in response to market developments or adverse investor perceptions. When there is no willing buyer and investments cannot be readily sold at the desired time or price, the Pear Tree Fund may have to accept a lower price or may not be able to sell the security at all. An inability to sell a portfolio position can adversely affect the Pear Tree Fund’s value or prevent the Pear Tree Fund from being able to take advantage of other investment opportunities. Additionally, in order to meet redemption requests, the Pear Tree Fund may be forced to sell liquid securities at an unfavorable time and on unfavorable conditions causing a loss to the Pear Tree Fund.
Alternative Strategies.
At times, theSub-Adviser may judge that market conditions make pursuing the Pear Tree Fund’s investment strategies inconsistent with the best interests of its shareholders. A Pear Tree Fund’sSub-Adviser may then temporarily use alternative strategies that are mainly designed to limit the Pear Tree Fund’s losses. These alternative strategies may include the purchase of debt, money market investments and other investments not consistent with the investment strategies of the Pear Tree Fund. Although thePear Tree Fund’s Sub-Adviser has the flexibility to use these strategies, it may choose not to for a variety of reasons, even in very volatile market conditions. These strategies may cause the Pear Tree Fund to miss out on investment opportunities, and may prevent the Pear Tree Fund from achieving its goal.
Portfolio Turnover.
A change in securities held by the Fund is known as “portfolio turnover” and almost always involves the payment by the Fund of brokerage commissions or dealer markups and other transaction costs on the sale of securities as well as on the reinvestment of the proceeds in other securities. High portfolio turnover involves correspondingly greater brokerage commissions and other transaction costs, which will be borne directly by the Fund and may affect taxes paid by shareholders to the extent short-term gains are distributed. Portfolio turnover is not a limiting factor with respect to investment decisions by the Fund.
The portfolio turnover rates for the Pear Tree Funds’ two most recently ended fiscal years were as follows:
|
|
Fiscal Years Ended March 31,
|
|
|
|
2010
|
2011
|
|
Pear Tree Columbia Small Cap Fund
|
50%
|
___%
|
|
Pear Tree Quality Fund*
|
191%
|
___%
|
|
Pear Tree Emerging Markets Fund
|
120%
|
___%
|
|
Pear Tree Polaris Foreign Value Fund
|
24%
|
___%
|
|
Pear Tree Polaris Foreign Value Small Cap Fund
|
14%
|
___%
|
* In January 2011, Pear Tree Quality Fund replaced its Sub-Adviser and began to pursue a different investment strategy. This Fund is expected to have low turnover.
INVESTMENT RESTRICTIONS OF PEAR TREE FUNDS
Fundamental Investment Restrictions.
Each Pear Tree Fund has adopted certain fundamental investment restrictions, as listed below, which may not be changed without the affirmative vote of the holders of a "majority of the outstanding voting securities" (as defined in the 1940 Act) of the Pear Tree Fund. For this purpose, a majority of the outstanding shares of the Fund means the vote of the lesser of:
1. 67 percent or more of the shares represented at a meeting, if the holders of more than 50 percent of the outstanding shares are present in person or by proxy, or
2. More than 50 percent of the outstanding shares of the Fund.
Pear Tree Quality Fund and Pear Tree Polaris Foreign Value Small Cap Fund
Each of Pear Tree Quality Fund and Pear Tree Polaris Foreign Value Small Cap Fund may not:
|
(1)
|
Issue senior securities, except to the extent permitted by applicable law, as amended and interpreted or modified form time to time by any regulatory authority having jurisdiction;
|
|
(2)
|
Borrow money, except on a temporary basis and except to the extent permitted by applicable law, as amended and interpreted or modified from time to time by any regulatory authority having jurisdiction;
|
|
(3)
|
Invest in real estate except (a) that the Fund may invest in securities of issuers that invest in real estate or interests therein, securities that are secured by real estate or interests therein, securities of real estate investment trusts, mortgage-backed securities and other securities that represent a similar indirect interest in real estate; and (b) the Fund may acquire real estate or interests therein through exercising rights or remedies with regard to an instrument or security;
|
|
(4)
|
Act as an underwriter, except insofar as the Fund technically may be deemed to be an underwriter in connection with the purchase or sale of its portfolio securities;
|
|
(5)
|
Make loans, except that the Fund may (i) lend portfolio securities in accordance with the Fund’s investment policies, (ii) enter into repurchase agreements, (iii) purchase all or a portion of an issue of publicly distributed debt securities, bank loan participation interests, bank certificates of deposit, bankers’ acceptances, debentures or other securities, whether or not the purchase is made upon the original issuance of the securities, (iv) participate in a credit facility whereby the Fund may directly lend to and borrow money from other affiliated Funds to the extent permitted under the 1940 Act or an exemption therefrom, and (v) make loans in any other manner consistent with applicable law, as amended and interpreted or modified from time to time by any regulatory authority having jurisdiction;
|
|
(6)
|
Concentrate its investments in securities of companies in any particular industry; or
|
|
(7)
|
Invest in commodities or commodity contracts, except that the Fund may invest in currency instruments and currency contracts and financial instruments and financial contracts that might be deemed to be commodities and commodity contracts in accordance with applicable law.
|
Pear Tree Columbia Small Cap Fund, Pear Tree Emerging Markets Fund and Pear Tree Polaris Foreign Value Fund
Each of Pear Tree Columbia Small Cap Fund, Pear Tree Emerging Markets Fund and Pear Tree Polaris Foreign Value Fund may not:
|
(1)
|
Purchase any security if as a result a Fund would then hold more than 10% of any class of securities of an issuer (taking all common stock issues of an issuer as a single class, all preferred stock issues as a single class, and all debt issues as a single class) or more than 10% of the outstanding voting securities of an issuer;
|
|
(2)
|
Purchase any security if as a result any Fund would then have more than 10% of the value of its net assets (taken at current value) invested in any of the following types of investment vehicles: in securities of companies (including predecessors) less than three years old, in securities which are not readily marketable, in securities which are subject to legal or contractual restrictions on resale (“restricted securities”) and in repurchase agreements which have a maturity longer than seven (7) days, provided, however, that no Fund may invest more than 15% of its assets in illiquid securities;
|
|
(3)
|
Make short sales of securities or maintain a short position unless at all times when a short position is open the particular Fund owns an equal amount of such securities or securities convertible into, or exchangeable without payment of any further consideration for, securities of the same issue as, and equal in amount to, the securities sold short, and unless not more than 10% of the Fund’s net assets (taken at current value) is held as collateral for such sales at any one time. Such sales of securities subject to outstanding options would not be made. A Fund may maintain short positions in a stock index by selling futures contracts on that index;
|
|
(4)
|
Issue senior securities, borrow money or pledge its assets except that a Fund may borrow from a bank for temporary or emergency purposes in amounts not exceeding 10% (taken at the lower of cost or current value) of its total assets (not including the amount borrowed) and pledge its assets to secure such borrowings. A Fund will not purchase any additional portfolio securities so long as its borrowings amount to more than 5% of its total assets. (For purposes of this restriction, collateral arrangements with respect to the writing of covered call options and options on index futures and collateral arrangements with respect to margin for a stock index future are not deemed to be a pledge of assets and neither such arrangements nor the purchase or sale of stock index futures or the purchase of related options are deemed to be the issuance of a senior security.);
|
|
(5)
|
Purchase or retain securities of any company if, to the knowledge of the Funds, officers and Trustees of the Funds or of the Manager or of the Sub-Adviser of the particular Funds who individually own more than 1/2 of 1% of the securities of that company together own beneficially more than 5% of such securities;
|
|
(6)
|
Buy or sell real estate or interests in real estate, although it may purchase and sell securities which are secured by real estate and securities of companies which invest or deal in real estate;
|
|
(7)
|
Act as underwriter except to the extent that, in connection with the disposition of Fund securities, it may be deemed to be an underwriter under certain provisions of the federal securities laws;
|
|
(8)
|
Make investments for the purpose of exercising control or management;
|
|
(9)
|
Participate on a joint or joint and several basis in any trading account in securities;
|
|
(10)
|
Write, purchase, or sell puts, calls or combinations thereof, except that the Fund may (i) write covered call options with respect to all of its portfolio securities; (ii) purchase put options and call options on widely recognized securities indices, common stock of individual companies or baskets of individual companies in a particular industry or sector; (iii) purchase and write call options on stock index futures and on stock indices; (iv) sell and purchase such options to terminate existing positions;
|
|
(11)
|
Invest in interests in oil, gas or other mineral exploration or development programs, although it may invest in the common stocks of companies that invest in or sponsor such programs;
|
|
(12)
|
Make loans, except (i) through the purchase of bonds, debentures, commercial paper, corporate notes and similar evidences of indebtedness of a type commonly sold privately to financial institutions, (ii) through repurchase agreements and loans of portfolio securities (limited to 30% of the value of a Fund’s total assets). The purchase of a portion of an issue of such securities distributed publicly, whether or not such purchase is made on the original issuance, is not considered the making of a loan;
|
|
(13)
|
Invest more than 25% of the value of its total assets in any one industry; or
|
|
(14)
|
Invest in commodities or commodity contracts or in puts, calls, or combinations of both, except interest rate futures contracts, options on securities, securities indices, currency and other financial instruments, futures contracts on securities, securities indices, currency and other financial instruments and options on such futures contracts, forward foreign currency exchange contracts, forward commitments, securities index put or call warrants and repurchase agreements entered into in accordance with the fund’s investment policies.
|
The following statements are not part of the investment restriction.
Although certain of these policies envision a Pear Tree Fund maintaining a position in a stock index by selling futures contracts on that index and also envision that under certain conditions one or more Pear Tree Funds may engage in transactions in stock index futures and related options, the Pear Tree Funds do not currently intend to engage in such transactions.
All percentage limitations on investments, except the percentage limitations with respect to borrowing in fundamental policy (4) above applicable to Pear Tree Columbia Small Cap Fund, Pear Tree Emerging Markets Fund and Pear Tree Polaris Foreign Value Fund, will apply at the time of the making of an investment and shall not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of such investment.
In the opinion of the SEC, investments are concentrated in a particular industry if such investments aggregate more than 25 percent of the fund’s total assets. When identifying industries for purposes of its concentration policy, the Fund will rely upon available industry classifications. The Pear Tree Funds’ policy on concentration does not apply to investments in U.S. government securities.
For purposes of fundamental policy 4 aboveapplicable to Pear Tree Columbia Small Cap Fund, Pear Tree Emerging Markets Fund and Pear Tree Polaris Foreign Value Fund, collateral arrangements with respect to the writing of covered call options and options on index futures and collateral arrangements with respect to margin for a stock index future are not deemed to be a pledge of assets and neither such arrangements nor the purchase or sale of stock index futures or the purchase of related options are deemed to be the issuance of a senior security
.
TRUSTEES AND OFFICERS OF THE TRUST; FUND GOVERNANCE
The tables below identify the current Trustees and officers of the Trust, their ages, their present positions with the Trust, terms of office with the Trust and length of time served, principal occupations over at least the last five years and other directorships/trusteeships held. Each Trustee and officer holds office for an indefinite term until his or her successor is chosen and qualified or until his or her earlier death, resignation, retirement or removal. The mailing address of each of the Trustees and Officers of the Trust is 55 Old Bedford Road, Suite 202, Lincoln, Massachusetts 01773.
Trustees who are not Interested Persons of the Trust
The following individuals are Trustees of the Trust (each, a “
Trustee
”), but not “interested persons” of the Trust, as that term is defined in the 1940 Act.
|
NAME AND AGE
|
POSITION HELD WITH TRUST
|
TERM OF OFFICE / LENGTH OF TIME SERVED
|
PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
1
|
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN
|
OTHER DIRECTORSHIPS HELD BY TRUSTEE IN PUBLIC COMPANIES
|
|
Robert M. Armstrong (72)
|
Trustee
|
Indefinite Term (1985 to present)
|
Independent Director and Consultant services (1998 – Present)
|
6
|
NewPage Corporation (2006- Present); NewPage Holding Corporation(2006- Present); NewPage Group, Inc. (2006- Present)
|
|
John M. Bulbrook
(68)
|
Trustee
|
Indefinite Term (1985 to present)
|
CEO and Treasurer, John M. Bulbrook Insurance Agency, Inc. (d/b/a Bulbrook/Drislane Brokerage) (distributor of financial products, including insurance) (1984 – Present);
|
6
|
None
|
|
William H. Dunlap (60)
|
Trustee
|
Indefinite Term (October 2006 to present)
|
Executive Director, New Hampshire Historical Society, (Feb. 2010 – Present); Principal, William H. Dunlap & Company (consulting firm)(2005 – Present); President, EQ Rider, Inc., (equestrian clothing sales) (1998 – 2008);
Director, Merrimack County Savings Bank (2005 – Present); Director, Merrimack Bank Corp. (2005 – Present)
|
6
|
None
|
|
Clinton S. Marshall (54)
|
Trustee
|
Indefinite Term (April 2003 to present)
|
Owner, Coastal CFO Solutions, outsource firm offering CFO solutions to businesses (1998 – Present);
CFO, Fore River Company (2002 – Present)
|
6
|
None
|
Trustees and Officers who are Interested Persons of the Trust
The following individuals are Trustees or officers of the Trust who are “interested persons” of the Trust, as that term is defined in the 1940 Act.
|
NAME AND AGE
|
POSITION HELD WITH TRUST
|
TERM OF OFFICE / LENGTH OF TIME SERVED
|
PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
1
|
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN
|
OTHER DIRECTORSHIPS HELD BY TRUSTEE/OFFICER IN PUBLIC COMPANIES
|
|
Willard L. Umphrey (69)
|
Trustee, President, Chairman (1985 to present)
|
Indefinite Term
(1985 to present)
|
Director, U.S. Boston Capital Corporation; President, Pear Tree Advisors, Inc.
|
6
|
U.S. Boston Corporation; U.S. Boston Asset Management Corporation; Pear Tree Advisors, Inc.; Pear Tree Partners Management LLC; USB Corporation; USB Greenville - 86, Inc.; USB Atlantic Associates, Inc.; U.S. Boston Insurance Agency, Inc.; U.S. Boston Capital Corporation
|
|
Leon Okurowski (67)
|
Vice President, Treasurer
(1985 to present)
|
(1985 to present)
|
Director and Vice President, U.S. Boston Capital Corporation; Treasurer, Pear Tree Advisors, Inc.; Trustee, Pear Tree Funds (4/17/1985 – 9/30/2004)
|
N/A
|
Everest USB Canadian
Storage, Inc.; Pear Tree Advisors, Inc.; U.S. Boston Corporation; U.S. Boston Asset Management Corporation; MedCool, Inc., USB Corporation; USB Everest Management, LLC; USB Everest Storage LLC; USB Greenville - 86, Inc.; USB Atlantic Associates, Inc.; U.S. Boston Insurance Agency, Inc.; U.S. Boston Capital Corporation
|
|
Deborah A. Kessinger (47)
|
Assistant Clerk and
Chief Compliance Officer
|
(April 2005 to Present)
|
Senior Counsel (since 9/04), President (since 8/07) and Chief Compliance Officer (since 12/05), U.S. Boston Capital Corporation; Senior Counsel (since 9/2004) and Chief Compliance Officer (since 10/2006), Pear Tree Advisors, Inc.; Chief Compliance Officer and General Counsel, Wainwright Investment Counsel, LLC (investment management firm) (2000-2004); Compliance Attorney, Forefield, Inc. (software provider) (2001-2004) and Compliance Consultant (2007 to present)
|
N/A
|
None
|
|
Diane Hunt (48)
|
Assistant Treasurer
|
(June 2010 to Present)
|
Controller (Since 3/2010) Pear Tree Advisors, Inc.; Accountant (Since 1984) U.S. Boston Capital Corporation
|
N/A
|
None
|
|
Kelly Lavari (43)
|
Clerk
|
(November 2010 to Present)
|
Regulatory Compliance Manager (since April 2008), Legal and Compliance Associate (4/2005-4/2008) Pear Tree Advisors, Inc.
|
N/A
|
None
|
Notes:
|
1.
|
The principal occupations of the Trustees and officers of the Trust for the last five years have been with the employers shown above; although in some cases they have held different positions with such employers.
|
|
2.
|
Mr. Umphrey is an “interested person” (as defined in the 1940 Act) of the Trust. Mr. Umphrey has been determined to be an “Interested Trustee” by virtue of, among other things, his affiliation with the Manager and the Pear Tree Funds’ distributor, U.S. Boston Capital Corporation (“
Distributor
”).
|
Leadership Structure, Qualifications and Responsibilities of the Board of Trusteesof the Trust
The Trustees of the Trust are responsible for the oversight of the business of the Trust. The Trustees meet periodically throughout the year to oversee the Pear Tree Funds’ activities, review contractual arrangements with companies that provide services to the Pear Tree Funds and review the Pear Tree Funds’ performance. The Trustees have the authority to take all actions necessary in connection with their oversight of the business affairs of the Trust, including, among other things, approving the investment objectives, policies and procedures for the Pear Tree Funds. The Trust enters into agreements with various entities to manage the day-to-day operations of the Pear Tree Funds, including the Manager and the Sub-Advisers, administrator, transfer agent, distributor and custodian. The Trustees are responsible for approving these service providers, approving the terms of their contracts with the Pear Tree Funds, and exercising general service provider oversight. The Trustees have engaged the Manager to manage each Pear Tree Fund on a day-to-day basis subject to their oversight.
Leadership Structure and the Board of Trustees.
The Board is currently composed of five (5) Trustees, including four (4) Trustees who are not “interested persons” of any Pear Tree Fund, as that term is defined in the 1940 Act (each an “
Independent Trustee
”). The other Trustee is affiliated with each of the Manager and the Distributor.
The Board has appointed Mr. Umphrey to serve in the role of Chairman. Mr. Umphrey is the President of the Manager and a director of the Distributor. The Independent Trustees have designated Mr. Bulbrook as the Lead Independent Trustee. The Lead Independent Trustee participates in the preparation of agendas for the Board meetings. The Lead Independent Trustee also acts as a liaison between meetings with the Trust’s officers, other Trustees, the Manager, other service providers and counsel to the Independent Trustees. The Lead Independent Trustee may also perform such other functions as may be requested by the other Independent Trustees from time to time. The Board has determined that the Board’s leadership and committee structure is appropriate because it provides a structure for the Board to work effectively with management and service providers and facilitates the exercise of the Board’s independent judgment. The Board’s leadership structure permits important roles for the President of the Manager, who serves as Chairman of the Trust and oversees the Manager’s day-to-day management of the Pear Tree Funds, and the Independent Trustees, through the designation of a Lead Independent Trustee and the participation of the other Independent Trustees. In addition, the Audit Committee provides for: (1) effective oversight of accounting and financial reporting responsibilities, and (2) the ability to meet independently with independent counsel and outside the presence of management on governance and related issues. Except for any duties specified herein or pursuant to the Trust’s Declaration of Trust or By-laws, the designation of Chairman or Lead Independent Trustee does not impose on such Trustee any duties, obligations or liability that is greater than the duties, obligations or liability imposed on such person as a member of the Board generally. The Board conducts an annual evaluation of the performance of the Board, including the effectiveness of (i) the Audit Committee and the structure of having a single committee, (ii) the Board’s oversight of the Pear Tree Funds, and (iii) the Board development and implementation governance policies. The leadership structure of the Board may be changed, at any time and in the discretion of the Board, including in response to changes in circumstances or the characteristics of the Pear Tree Funds.
Oversight of Risk.
The Board oversees risk as part of its general oversight of the Pear Tree Funds. The Pear Tree Funds are subject to a number of risks, including investment, compliance, financial, operational and valuation risks. The Pear Tree Funds’ officers, the Manager and other Fund service providers perform risk management as part of the day-to-day operations of the Pear Tree Funds. The Board recognizes that it is not possible to identify all risks that may affect the Pear Tree Funds, and that it is not possible to develop processes or controls to eliminate all risks and their possible effects. Risk oversight is addressed as part of various Board and Audit Committee activities, including the following: (1) at regular Board meetings, and on an ad hoc basis as needed, receiving and reviewing reports related to the performance and operations of the Pear Tree Funds; (2) reviewing the compliance policies and procedures of the Trust (including those policies and procedures of the Pear Tree Funds), the Manager and the Sub-Advisers; (3) meeting with investment personnel to review investment strategies, techniques and the processes used to manage related risks; (4) receiving and reviewing reports regarding key service providers; (5) receiving reports from the Chief Compliance Officer of the Pear Tree Funds and other senior officers of the Trust and the Manager regarding compliance matters affecting the Trust (including the Pear Tree Funds) and their service providers; and (6) meeting with the Manager’s personnel to discuss risks related to the Pear Tree Funds’ investments. The Board may, at any time and in its discretion, change the manner in which it conducts its risk oversight role.
The Board has established one standing committee, as described below:
Audit Committee.
The purpose of the Audit Committee is to oversee generally the Trust’s accounting and financial reporting policies and practices, internal controls and, as appropriate, the internal controls of certain service providers; to oversee generally the quality and objectivity of financial statements and the independent audit thereof; to appoint or replace the independent registered public accounting firm (the “
Auditor
”) for the Trust and to act as a liaison between the Auditor and the full Board. The Audit Committee is comprised of all of the Independent Trustees. Mr. Marshall is the Chairman of the Audit Committee. In performing its oversight function the Audit Committee has, among other things, specific power and responsibility to: (1) oversee the Trust’s accounting and financial reporting policies and practices, internal control over the Trust’s financial reporting and, as appropriate, the internal control over financial reporting of service providers; (2) to oversee the quality and objectivity of the Trust’s financial statements and the independent audit thereof; (3) to approve, prior to appointment by the Board, the engagement of the Trust’s independent auditors and, in connection therewith, to review and evaluate the qualifications, independence and performance of the Trust’s independent registered public accounting firm; and (4) to act as a liaison between the Auditor and the Board.
The Audit Committee also acts as a nominating committee, as necessary from time to time, to identify, interview and recommend to the full Board candidates for consideration as nominees to serve as Independent Trustees. Neither the Audit Committee nor the Trust has adopted procedures for shareholders to submit recommendations for nomination as a Trustee.
The Audit Committee meets as often as necessary or appropriate to discharge its functions and will meet at least once annually. During the fiscal year ended March 31, 2011, the Audit Committee met three times.
Trustees’ Qualifications and Experience.
The governing documents for the Trust do not set forth any specific qualifications to serve as a Trustee. As noted above, a majority of the Board are Independent Trustees. Among the attributes and skills common to all Trustees are the ability to review, evaluate and discuss information and proposals provided to them regarding the Pear Tree Funds, the ability to interact effectively with the Manager and other service providers, and the ability to exercise independent business judgment. Each Trustee’s ability to perform his duties effectively has been attained through: (1) the individual’s business and professional experience and accomplishments; (2) the individual’s experience working with the other Trustees and management; (3) the individual’s prior experience serving in executive positions and/or on the boards of other companies and organizations; and (4) the individual’s educational background, professional training, and/or other experiences. Generally, no one factor is decisive in determining that an individual should serve as a Trustee. Set forth below is a brief description of the specific experience of each Trustee. Additional details regarding the background of each Trustee are included in the chart earlier in this section.
Robert M. Armstrong.
Mr. Armstrong has served as a Trustee since 1985. Mr. Armstrong has more than 30 years of business experience in the real estate and consulting areas, including serving as a chief financial officer. Mr. Armstrong also serves on the board of a public company.
John M. Bulbrook
.
Mr. Bulbrook has served as a Trustee since 1985. He serves as the current Lead Independent Trustee. Mr. Bulbrook has more than 30 years of experience in the insurance and risk management industry, including serving as chief executive officer of a distributor of insurance products.
William H. Dunlap.
Mr. Dunlap has served as a Trustee since 2006. Mr. Dunlap has more than 30 years of experience in consumer sales, consulting and non-profit management, including senior management experience. Mr. Dunlap also serves on the board of directors of a bank holding company and its savings bank subsidiary.
Clinton S. Marshall.
Mr. Marshall has served as a Trustee since 2003. He currently serves as the Chairman of the Audit Committee. Mr. Marshall has over 30 years of business and financial experience, including time as Chief Financial Officer. Through his company Mr. Marshall serves as the chief financial officer and in other financial capacities for a number of startup and more established businesses throughout northern New England. Additionally, Mr. Marshall has also served on the board of directors of other corporations.
Willard L. Umphrey.
Mr. Umphrey has served as a Trustee since 1985. He is the President of the Manager and a director of the Distributor.
Trustee Compensation
For the fiscal year that commenced April 1, 2011, the Pear Tree Fundswill pay each Independent Trustee an annual retainer of $27,000. Additionally, the Pear Tree Fundswill pay each of the Lead Independent Trustee and the Chairperson of the Audit Committee an additional annual retainer of $3,000. The pro rata share of such compensation paid by the Fund is based on the Fund’s average net assets as a percentage of the average net assets of all of the Pear Tree Funds.
COMPENSATION TABLE
for the fiscal year ended March 31, 2011
|
Name of Trustee
|
Aggregate Compensation from
the Trust
|
Pension or Retirement Benefits Accrued As
Part of Fund Expenses
|
Estimated Annual Benefits Upon
Retirement
|
Total Compensation From the Trust and Fund Complex
Paid to Trustee
|
|
Robert M. Armstrong
|
$_________
|
N/A
|
N/A
|
$[_________]
|
|
John M. Bulbrook
|
$_________
|
N/A
|
N/A
|
$[_________]
|
|
William H. Dunlap
|
$_________
|
N/A
|
N/A
|
$[_________]
|
|
Clinton S. Marshall
|
$_________
|
N/A
|
N/A
|
$[_________]
|
|
Willard L. Umphrey
|
$_________
|
N/A
|
N/A
|
$[_________]
|
For the fiscal year ended March 31, 2011, each Independent Trustee was paid a retainer of $[_______] per annum. Additionally, the Chairman of the Audit Committee was paid an additional retainer of $[_________] per annum.
The Manager, not the Pear Tree Funds, paid Mr. Okurowski an annual fee of $[_________] for services rendered during the fiscal year ended March 31, 2011, as an officer of the Trust.
The Second Amended and Restated Agreement and Declaration of Trust of the Trust provides that the Pear Tree Funds will indemnify their Trustees and officers against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices with the Pear Tree Funds, except if it is determined in the manner specified in the Second Amended and Restated Agreement and Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the Trust or that such indemnification would relieve any officer or Trustee of any liability to the Trust or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of his or her duties. The Pear Tree Funds, at their expense, will provide liability insurance for the benefit of their Trustees and officers.
At [_____________], 2011, the officers and Trustees as a group owned in the aggregate the following percentages of outstanding Ordinary Shares and Institutional Shares.*
Ordinary Shares
Institutional Shares
Pear Tree Columbia Small Cap Fund ____% ____%
Pear Tree Quality Fund ____% ____%
Pear Tree Emerging Markets Fund ____% ____%
Pear Tree Polaris Foreign Value Fund ____% ____%
Pear Tree Polaris Foreign Value Small Cap Fund ____% ____%
* Reflects ownership by the Manager and Distributor. Mr. Okurowski and Mr. Umphrey are majority owners of the Manager and Distributor.
[TO BE COMPLETED BY AMENDMENT]
TRUSTEE SHARE OWNERSHIP TABLE
For the Calendar Year ended December 31, 2010
|
Name of Trustee
|
Dollar Range of Equity Securities in Small Cap
Fund
|
Dollar Range of Equity Securities in Quality
Fund
|
Dollar Range of Equity Securities in Emerging
Markets Fund
|
Dollar Range of Equity Securities in Foreign
ValueFund
|
Dollar Range of Equity Securities in Foreign Value Small
CapFund
|
Aggregate Dollar Range of Equity Securities in Pear Tree Fund
Complex
|
INDEPENDENT TRUSTEES:
|
Robert M. Armstrong
|
|
|
|
|
|
|
|
John M. Bulbrook
|
|
|
|
|
|
|
|
William H. Dunlap
|
|
|
|
|
|
|
|
Clinton S. Marshall
|
|
|
|
|
|
|
INTERESTED TRUSTEE:
.
.
PRINCIPAL SHAREHOLDERS
As of [_________], 2011, each of the following persons owned 5 percent or more of the classes of the following Funds. Beneficial owners of 25 percent or more of Class are presumed to be in control of the Class for the purposes of voting on certain matters submitted to shareholders.
[TO BE COMPLETED BY AMENDMENT]
|
PEAR TREE COLUMBIA SMALL CAP FUND
|
NAME AND ADDRESS
|
% OF OUTSTANDING ORDINARY SHARES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PEAR TREE COLUMBIA SMALL CAP FUND
|
NAME AND ADDRESS
|
% OF OUTSTANDING INSTITUTIONAL SHARES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PEAR TREE QUALITY FUND
|
NAME AND ADDRESS
|
% OF OUTSTANDING ORDINARY SHARE
S
|
|
|
|
|
|
PEAR TREE QUALITY FUND
|
NAME AND ADDRESS
|
% OF OUTSTANDING INSTITUTIONAL SHARES
|
|
PEAR TREE EMERGING
MARKETS FUND
|
NAME AND ADDRESS
|
% OF OUTSTANDING ORDINARY SHARES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PEAR TREE EMERGING
MARKETS FUND
|
NAME AND ADDRESS
|
% OF OUTSTANDING INSTITUTIONAL SHARES
|
|
|
|
|
|
|
|
|
|
|
|
|
PEAR TREE POLARIS FOREIGN VALUE FUND
|
NAME AND ADDRESS
|
% OF OUTSTANDING ORDINARY SHARES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PEAR TREE POLARIS FOREIGN VALUE FUND
|
NAME AND ADDRESS
|
% OF OUTSTANDING INSTITUTIONAL SHARES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PEAR TREE POLARIS FOREIGN VALUE SMALL CAP FUND
|
NAME AND ADDRESS
|
% OF OUTSTANDING ORDINARY SHARES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PEAR TREE POLARIS FOREIGN VALUE SMALL CAP FUND
|
NAME AND ADDRESS
|
% OF OUTSTANDING INSTITUTIONAL SHARES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE MANAGER AND THE SUB-ADVISERS
The Manager
The Manager is an affiliate of U.S. Boston Capital Corporation, the Pear Tree Funds’ Distributor, which is a wholly owned subsidiary of U.S. Boston Corporation. Willard L. Umphrey, CFA, President and Trustee of the Trust, Leon Okurowski, Treasurer of the Trust, individually and jointly with their spouses, together own 100 percent of the Manager’s outstanding voting securities. Messrs. Umphrey and Okurowski also are affiliates of U.S. Boston Capital Corporation.
The Management Contract
Under the terms of the management agreement (the “
Management Contract
”), the Manager may, subject to the approval of the Trustees, manage a Pear Tree Fund itself orselect a sub-adviser to manage the Fund. In the latter case, the Manager monitors the Sub-Advisers’ investment program and results, reviews brokerage matters, oversees compliance by the Pear Tree Funds with various federal and state statutes and the Pear Tree Funds’ own investment objectives, policies, and restrictions and carries out the directives of the Trustees. In each case, the Manager also provides the Pear Tree Funds with office space, office equipment, and personnel necessary to operate and administer the Pear Tree Funds’ business, and provides general management and administrative services to the Pear Tree Funds, including overall supervisory responsibility for the management and investment of the Pear Tree Funds’ securities portfolios and for the provision of services by third parties such as the Pear Tree Funds’ custodian.
The Management Contract continues in force from year to year, but only so long as its continuance is approved at least annually by (i) vote, cast in person at a meeting called for the purpose, of a majority of those Trustees who are not “interested persons” (as defined in the 1940 Act) of the Manager or the Pear Tree Funds, and by (ii) either the majority vote of all the Trustees or the vote of a majority of the outstanding voting securities of each Pear Tree Fund. The Management Contract automatically terminates on assignment, and is terminable on 60 days’ written notice by either party.
In addition to the management fee, the Pear Tree Funds pay all expenses not assumed by the Manager, including, without limitation, fees and expenses of the Trustees, interest charges, taxes, brokerage commissions, expenses of issue or redemption of shares, fees and expenses of registering and qualifying the Trust and shares of the respective the Pear Tree Funds for distribution under federal and state laws and regulations, charges of custodians, auditing and legal expenses, expenses of determining the net asset value of the Pear Tree Funds’ shares, reports to shareholders, expenses of meetings of shareholders, expenses of printing and mailing Prospectuses and proxies to existing shareholders, and their proportionate share of insurance premiums and professional association dues or assessments. All general Pear Tree Fund expenses are allocated among and charged to the assets of the respective Pear Tree Fund and class thereof in accordance with the Pear Tree Funds’ Multi-class Plan pursuant to Rule 18f-3 under the 1940 Act (the “18f-3 Plan”), which may be based on the relative net assets of each Pear Tree Fund and Class. In addition, the Board approves reimbursements to the Manager for certain costs associated with providing regulatory and compliance services to the Pear Tree Funds. For the twelve months ended March 31, 2011, the Trustees have approved reimbursements that amounted to $[_________]. The Pear Tree Funds are also responsible for such non-recurring expenses as may arise, including litigation in which the Pear Tree Funds may be a party, and other expenses as determined by the Trustees. The Pear Tree Funds may have an obligation to indemnify their officers and Trustees with respect to such litigation.
The Pear Tree Fundsand the Manager have received an exemptive order from the SEC that permits the Manager, subject to certain conditions, to enter into or amend an agreement with a Sub-Adviser (an “
Advisory Contract
”) without obtaining shareholder approval. With Trustee approval, the Manager may employ a new Sub-Adviser for a Pear Tree Fund, change the terms of the Advisory Contracts, or enter into new Advisory Contracts with an unaffiliated Sub-Adviser. The Manager retains ultimate responsibility to oversee the Sub-Advisers and to recommend their hiring, termination, and replacement. Shareholders of a Pear Tree Fund continue to have the right to terminate the Advisory Contract applicable to that Pear Tree Fund at any time by a vote of the majority of the outstanding voting securities of the Pear Tree Fund. Shareholders will be notified of any Sub-Adviser changes or other material amendments to an Advisory Contract that occurs under these arrangements.
As compensation for services rendered, each Pear Tree Fund pays the Manager a monthly management fee at the annual rate of: 1.00 percent of the average daily net assets.
The Manager received fees for services rendered for the three most recently ended fiscal years as follows:
|
|
Fiscal Years Ended March 31,
|
|
Fund Name
|
2009
|
2010
|
2011
|
|
Pear Tree Columbia Small Cap Fund
1
|
$1,114,281
|
$881,422
|
$____________
|
|
Pear Tree Quality Fund
|
$585,446
|
$515,394
|
$____________
|
|
Pear Tree Emerging Markets Fund
|
$3,532,156
|
$2,530,891
|
$____________
|
|
Pear Tree Polaris Foreign Value Fund
|
$5,330,934
|
$3,926,670
|
$____________
|
|
Pear Tree Polaris Foreign Value Small Cap Fund
|
$169,837
|
$759,908
|
$____________
|
A discussion regarding the basis for the Board’s approval of the Management Contract and each Advisory Contract relating to a Pear Tree Fund will be included inthe Fund's Semi-Annual report to shareholders for the period ended September 30, 2011. You can request the Pear Tree Fund’s most recent annual and semi-annual reports free of charge, by contacting your plan sponsor, broker-dealer, or financial intermediary, or by contacting a Pear Tree Fund representative at1-800-326-2151. The reports are also available, free of charge, on
www.peartreefunds.com/info
.
Fee Waivers/Expense Limitations.
Pear Tree Columbia Small Cap Fund
The Manager is contractually obligated to assume expenses of Pear Tree Columbia Small Cap Fund, if necessary, in order to reduce its total expenses to no more than 2.00 percent of average daily net assets for any fiscal year. This agreement limits expenses at the Fund level and not at the individual share class level. Accordingly, the fees of any individual class may be higher than the expense limitation because the expense limit calculation adds the expenses of the different classes together and then divides that number by the total average net assets of the Fund. Expenses eligible for reimbursement under all applicable expense limitations do not include interest, taxes, brokerage commissions or extraordinary expenses. As a result, and as indicated above, total expenses may be higher than the expense limitation applicable for the Fund. [No such reductions in compensation were necessary for the fiscal year ended March 31, 2011.]
Pear Tree Quality Fund
The Manager has agreed until July 31, 2012 to waive 0.15 percent of its management fee if Pear Tree Quality Fund’s average daily net assets are up to $100 million and 0.25 percent of its management fee if Pear Tree Quality Fund’s average daily net assets are $100 million or more. The Manager also has agreed until July 31, 2012 to waive or reimburse Pear Tree Quality Fund expenses relating to Institutional Shares such that the total annual fund operating expenses relating to Institutional Shares is not greater than 1.00 percent. These arrangements may be terminated only with the approval of theBoard.
For the fiscal year ended March 31, 2011 the Manager waived its management fee and reimbursed Pear Tree Quality Fund for its expenses in the aggregate amount of $____________.
The Sub-Advisers
Pear Tree Columbia Small Cap Fund and Pear Tree Quality Fund
Columbia Partners, L.L.C., Investment Management, (“
Columbia
”) 5425 Wisconsin Avenue, Suite 700, Chevy Chase, Maryland 20815 serves as the Sub-Adviser to each of Pear Tree Columbia Small Cap Fund and Pear Tree Quality Fund. As of March 31, 2011, Columbia had approximately $____ billion in assets under management for individual, pension plan and endowment accounts and other institutional accounts. Until January 27, 2011, Analytic Investors, LLC (“
Analytic
”), 555 West Fifth Street, 50
th
Floor, Los Angeles, California 90013, served as Sub-Adviser to Pear Tree Quality Fund.
Pear Tree Emerging Markets Fund
PanAgora Asset Management, Inc. (“
PanAgora
”), 470 Atlantic Avenue, 8
th
Floor, Boston, Massachusetts 02110 serves as Sub-Adviser to Pear Tree Emerging Markets Fund. As of March 31, 2011, PanAgora had approximately $___ billion in assets under management in portfolios of institutional pension and endowment funds, among others. Putnam Investments LLC, an investment Sub-Adviser which is a wholly owned subsidiary of Great West Lifeco, Inc., is a majority owner and thus a control person of PanAgora.
Pear Tree Polaris Foreign Value Fund and Pear Tree Polaris Foreign Value Small Cap Fund
Polaris Capital Management, LLC. (“
Polaris
”), 125 Summer Street, Boston, Massachusetts 02110 serves as Sub-Adviser to Pear Tree Polaris Foreign Value Fund and Foreign Value Small Cap Fund. As of March 31, 2011, Polaris had $___ billion under management for institutional clients and wealthy individuals. Bernard R. Horn, Jr. is the majority owner and is thus a control person of Polaris.
Advisory Contracts
The Manager has an Advisory Contract relating to a Pear Tree Fund with the Sub-Adviser to that Fund. The terms of each Advisory Contract generally are the same. Pursuant to each Advisory Contract, the Sub-Adviser to the Pear Tree Fund furnishes an investment program for the Fund (except in the case of Pear Tree Quality Fund, in which the Manager selects the target portfolio), makes investment decisions on behalf of the Fund, places all orders for the purchase and sale of portfolio investments for the Fund’s account with brokers or dealers selected by such Sub-Adviser and may perform certain limited, related administrative functions in connection therewith.
The Advisory Contract provides that it will continue in force for two years from its date, and from year to year thereafter, but only so long as its continuance is approved at least annually by (i) vote, cast in person at a meeting called for the purpose, of a majority of those Trustees who are not “interested persons” (as defined in the 1940 Act) of the Sub-Adviser, the Manager or the Pear Tree Funds, and by (ii) either the majority vote of all of the Trustees or the vote of a majority of the outstanding voting securities of the Fund. The Advisory Contract may be terminated without penalty by vote of the Trustees or the shareholders of the Fund, or by the Manager on not less than 30 days’ written notice or more than 60 days’ written notice or by the Sub-Adviser on not less than 30 days’ or more than 60 days’ written notice. The Advisory Contract may be amended without a vote of the shareholders of the Fund. The Advisory Contract also terminates without payment of any penalty in the event of its assignment and in the event that for any reason the Management Contract between the Trust and the Manager terminates generally or terminates with respect to the Fund.
The Advisory Contract provides that the Sub-Adviser shall not be subject to any liability to the Pear Tree Funds or to the Manager or to any shareholder of the Pear Tree Funds for any act or omission in the course of or connected with the rendering of services thereunder in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its duties on the part of the Sub-Adviser.
For services rendered, the Manager pays to the Sub-Adviser of the Fund a fee based on a percentage of the average daily total net assets of the Fund. The fee for each Pear Tree Fund is determined separately. Currently, the fees paid by the Manager to the Sub-Advisers are as follows:
|
|
Advisory Fee Rates
|
|
Pear Tree Columbia Small Cap Fund
|
0.47% of average daily total net assets
|
|
Pear Tree Quality Fund*
|
0.10% of the first $100 million,
0.08% of the next $150 million, and
0.06% of amounts in excess of $250 million, with a $100,000 annual minimum.
|
|
Pear Tree Emerging Markets Fund
|
0.40% of average daily total net assets;
|
|
Pear Tree Polaris Foreign Value Fund
|
0.35% of the first $35 million,
0.40% of amounts in excess of $35 million but less than $200 million and
0.50% of assets in excess of $200 million of average daily total net assets
|
|
Pear Tree Polaris Foreign Value Small Cap Fund
|
0.35% of the first $35 million and
0.40% of amounts in excess of $35 million but less than $200 million and
0.50% of amounts in excess of $200 million.
|
* Prior to January 27, 2011, this Fund was managed by Analytic, who was paid a fee based at the rates of (a) from January 1, 2009 through December 31, 2009 the fee paid is 0.425 percent of the first $100 million and 0.40 percent of amounts in excess of $100 million, and (b) after December 31, 2009, 0.45 percent of the first $100 million and 0.40 percent of amounts in excess of $100 million.
For services rendered for the three most recently ended fiscal years, the applicable Sub-Adviser received fees of, as follows:
[TO BE COMPLETED BY AMENDMENT]
|
|
Fiscal Years Ended March 31,
|
|
|
Sub-Adviser
|
2009
|
2010
|
2011
|
|
Pear Tree Columbia Small Cap Fund
|
Columbia
|
$551,990
|
$414,269
|
$__________
|
|
Pear Tree Quality Fund
|
Columbia*
|
$260,170
|
$219,042
|
$__________*
|
|
Pear Tree Emerging Markets Fund
|
PanAgora
|
$1,412,862
|
$1,012,356
|
$__________
|
|
Pear Tree Polaris Foreign Value Fund
|
Polaris
|
$2,432,872
|
$1,760,930
|
$__________
|
|
Pear Tree Polaris Foreign Value Small Cap Fund
|
Polaris
|
$59,443
|
$286,994
|
$__________
|
* Prior to January 27, 2011, this Fund was managed by Analytic. In the year ended March 31, 2011, Analytic received $__________ and Columbia received $__________.
Portfolio Managers
The portfolio managers for the Fund are listed below.In some instances a portfolio manager manages other investment companies and/or investment accounts in addition to the Pear Tree Fund for which he or she serves as portfolio manager. The following table show, as of March 31, 2011, the number of accounts each portfolio manager managed in each of the listed categories and the total assets in the accounts managed within each category. The table also shows the number of accounts with respect to which the advisory fee is based on the performance of the account, if any, and the total assets in those accounts.
[TO BE COMPLETED BY AMENDMENT]
Pear Tree Columbia Small Cap Fund – Columbia (as of March 31, 2011
)
|
Portfolio Manager:
|
Category
|
Number of All Accounts
|
Total Assets of All Accounts
|
Number of Accounts Paying a Performance Fee
|
Total Assets of Accounts Paying a Performance Fee
|
|
Robert A. von Pentz
|
Registered Investment Companies
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
Rhys Williams
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
*For registered investment companies, assets represent net assets of all open-end investment companies and gross assets of all closed-end investment companies.
Pear Tree Quality Fund – Columbia (as of March 31, 2011)
|
Portfolio Manager:
|
Category
|
Number of All Accounts
|
Total Assets of All Accounts*
|
Number of Accounts Paying a Performance Fee
|
Total Assets of Accounts Paying a Performance Fee
|
|
Robert A. von Pentz
|
Registered Investment Companies
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
* For registered investment companies, assets represent net assets of all open-end investment companies and gross assets of all closed-end investment companies.
Pear Tree Emerging Markets Fund – PanAgora (as of March 31, 2011)
|
Joel G. Feinberg
|
Registered Investment Companies
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
Dmitri Kantsyrev, Ph.D., CFA
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
Ronald Hua, CFA
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
Sanjoy Ghosh, Ph.D.
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
*
|
For registered investment companies, assets represent net assets of all open-end investment companies and gross assets of all closed-end investment companies.
|
Pear Tree Polaris Foreign Value Fund - Polaris (as of March 31, 2011)
|
Portfolio Manager:
|
Category
|
Number of All Accounts
|
Total Assets of All Accounts*
|
Number of Accounts Paying a Performance Fee
|
Total Assets of Accounts Paying a Performance Fee
|
|
Bernard R. Horn, Jr.
|
Registered Investment Companies
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
Sumanta Biswas, CFA
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
Pear Tree Polaris Foreign Value Small Cap Fund – Polaris (as of March 31, 2011)
|
Portfolio Manager:
|
Category
|
Number of All Accounts
|
Total Assets of All Accounts*
|
Number of Accounts Paying a Performance Fee
|
Total Assets of Accounts Paying a Performance Fee
|
|
Bernard R. Horn, Jr.
|
Registered Investment Companies
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
|
|
|
Sumanta Biswas, CFA
|
Registered Investment Companies
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
|
|
|
Bin Xiao, CFA
(Analyst)
|
Registered Investment Companies
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
|
|
* For registered investment companies, assets represent net assets of all open-end investment companies and gross assets of all closed-end investment companies excluding the Pear Tree Funds.
The following table shows the dollar range of shares of a Fund that were beneficially owned by each portfolio manager as of the Pear Tree Fund’s most recent fiscal year most recently ended.
|
Pear Tree Fund (Portfolio Manager)
|
Dollar Range of Equity Securities Owned
|
|
|
|
|
|
|
|
|
|
Pear Tree Columbia Small Cap Fund (Columbia)
|
$0 - $10,000
|
$10,001 -
$50,000
|
$50,001 - $100,000
|
$100,001 - $500,000
|
$100,001 - $500,000
|
Over $500,000
|
|
Robert A. von Pentz
|
|
|
|
|
|
|
|
Rhys Williams
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pear Tree Quality Fund (Columbia)
|
$0 - $10,000
|
$10,001 -
$50,000
|
$50,001 - $100,000
|
$100,001 - $500,000
|
$100,001 - $500,000
|
Over $500,000
|
|
Robert A. von Pentz
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pear Tree Emerging Markets Fund
(PanAgora)
|
$0 - $10,000
|
$10,001 -
$50,000
|
$50,001 - $100,000
|
$100,001 - $500,000
|
$100,001 - $500,000
|
Over $500,000
|
|
Joel G. Feinberg
|
|
|
|
|
|
|
|
Dmitri Kantsyrev, Ph.D., CFA
|
|
|
|
|
|
|
|
Ronald Hua, CFA
|
|
|
|
|
|
|
|
Sanjoy Ghosh, Ph.D.
|
|
|
|
|
|
|
|
Pear Tree Polaris Foreign Value Fund (Polaris)
|
$0 - $10,000
|
$10,001 -
$50,000
|
$50,001 - $100,000
|
$100,001 - $500,000
|
$100,001 - $500,000
|
Over $500,000
|
|
Bernard R. Horn, Jr.
|
|
|
|
|
|
X
|
|
Sumanta Biswas, CFA
|
|
|
|
|
|
|
|
Pear Tree Polaris Foreign Value Small Cap Fund (Polaris)
|
$0 - $10,000
|
$10,001 -
$50,000
|
$50,001 - $100,000
|
$100,001 - $500,000
|
$100,001 - $500,000
|
Over $500,000
|
|
Bernard R. Horn, Jr.
|
|
|
|
|
|
X
|
|
Sumanta Biswas, CFA
|
|
|
|
|
|
|
|
Bin Xiao
|
|
|
|
|
|
|
Conflicts of Interests
It is possible that conflicts of interest may arise in connection with a portfolio managers’ management of the Fund’s investments on the one hand and the investments of other accounts for which the portfolio manager is responsible on the other. For example, a portfolio manager may have conflicts of interest in allocating management time, resources and investment opportunities among the Fund and other accounts he or she advises. In addition, due to differences in the investment strategies or restrictions between the Fund and the other accounts, a portfolio manager may take action with respect to another account that differs from the action taken with respect to the Fund. In some cases, another account managed by a portfolio manager may compensate the investment sub-adviser based on the performance of the securities held by that account. The existence of such a performance based fee may create additional conflicts of interest for the portfolio manager in the allocation of management time, resources and investment opportunities. Whenever conflicts of interest arise, the portfolio manager will endeavor to exercise his or her discretion in a manner that he or she believes is equitable to all interested persons.
Sub-Adviser Compensation Structure and Method Used to Determine Compensation
Columbia
The portfolio managers are compensated with a base salary, bonus, and dividends from their ownership of Columbia. The base salary is fixed. The bonus is based on a formula which takes into account the revenues generated by each product category (based upon a fixed percentage of any applicable management fees received) and by the relative performance vs. comparable peer group managers. The universe of managers against which we measure our portfolio managers’ performance is the PSN Small Cap manager universe which we analyze using SPAR, a research tool made available to us through FactSet. The universe tracks the performance of institutional managers managing portfolios of a similar investment style and allows us to determine how our managers’ performance compares to other managers with similar styles. Our managers are incented to perform well over time and the weightings for performance – both against the benchmark and the peer group – are measured on the average of rolling 12 month and 36 month periods to ensure that short term results do not drive compensation. Mr. Williams manages certain hedged assets, including the Victor Equity Fund, all of which are eligible for performance fees as well as management fees, from which he receives a fixed percentage of any fees paid to Columbia. In addition, both receive income distributions based on a fixed formula of the profitability of Columbia in proportion to their ownership. Overall compensation is structured to reward employees for their individual and company accomplishments based on investment performance, effectiveness, and client satisfaction.
PanAgora
Portfolio managers at PanAgora for Pear Tree Emerging Markets Fund receive a fixed base salary and a discretionary bonus. Discretionary bonuses are based on total firm performance as well as individual employee objectives which may include investment performance as measured against the performance of the S&P 500 Index, the Russell 2000 Index, the MSCI EM Index and the MSCI EAFE and each portfolio manager’s role in raising or retaining assets. PanAgora may consider sharing a portion of a performance fee, if applicable received with the management team.
Polaris
All cash flow earned by the firm is distributed to personnel annually in the form of a salary, bonus, retirement plan contribution or equity compensation. Cash flow of the firm is a direct function of the amount of assets under management. At the senior level, bonus ranges from 0% to unlimited upside since base salary is kept at a minimum. The typical bonus range is more than 75% of base. At the junior level the bonus currently represents 0 – 50% of base. Overall compensation is based on annual firm profits which are a function of assets under management, and therefore, performance. There is no formal split between specific performance targets and subjective criteria.
DISTRIBUTOR AND DISTRIBUTION PLAN
Distributor.
U.S. Boston Capital Corporation, 55 Old Bedford Road, Lincoln, MA 01773 (“
Distributor
”), a Massachusetts corporation organized April 23, 1970, is a broker-dealer registered under the Securities Exchange Act of 1934, as amended (the “
1934 Act
”) and a member of the Financial Industry Regulatory Authority (“
FINRA
”). The Distributor is an affiliate of the Manager by virtue of being under common ownership with the Manager. The Distributor acts as the principal distributor of the Pear Tree Funds’ shares pursuant to a written agreement (“
Distribution Agreement
”). Under the Distribution Agreement, the Distributor is not obligated to sell any specific amount of shares of the Pear Tree Funds and will purchase shares for resale only against orders for shares. The Distribution Agreement requires the Distributor to use its best efforts to secure purchasers for shares of the Pear Tree Funds.
Distribution Plan.
Each Pear Tree Fund has adopted a distribution plan (the “
12b-1 Plan
”) on behalf of its Ordinary Shares pursuant to Rule 12b-1 under the 1940 Act to pay for the marketing and distribution of the Fund’s Ordinary Shares including all expenses of preparing, printing and distributing advertising and sales literature and for services provided to shareholders of the Fund’s Ordinary shares. The fee is not directly tied to the Distributor’s expenses. If expenses exceed the Distributor’s fees, the Fund is not required to reimburse the Distributor for excess expenses; if the Distributor’s fees exceed the expenses of distribution, the Distributor may realize a profit.
Each Pear Tree Fund pays the Distributor a monthly fee at the annual rate of 0.25 percent of the average daily net asset value of the Fund’s Ordinary Shares held in shareholder accounts opened during the period the 12b-1 Plan is in effect, as determined at the close of each business day during the month.
For the fiscal year ended March 31, 2011, the Pear Tree Funds paid to the Distributor fees pursuant to the 12b-1 Plan as follows:
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Ordinary Shares
|
|
Pear Tree Columbia Small Cap Fund
|
$_________
|
|
Pear Tree Quality Fund
|
$_________
|
|
Pear Tree Emerging Markets Fund
|
$_________
|
|
Pear Tree Polaris Foreign Value Fund
|
$_________
|
|
Pear Tree Polaris Foreign Value Small Cap Fund
|
$_________
|
Rule 12b-1 provides that any payments made by an investment company to a distributor must be made pursuant to a written plan describing all material aspects of the proposed financing of distributions and that all agreements with any person relating to implementation of the 12b-1 Plan must be in writing. Continuance of the 12b-1 Plan and the Distribution Agreement is subject to annual approval by a vote of the Trustees, including a majority of the Trustees who are not “interested persons” of the Pear Tree Funds and have no direct or indirect financial interest in the operation of the plan or related agreements (“
Qualified Trustees
”), cast in person at a meeting called for the purpose. The 12b-1 Plan may be terminated as to a Pear Tree Fund by the vote of a majority of the Qualified Trustees, or by the vote of a majority of the outstanding voting securities of the Pear TreeFund. All material amendments to the 12b-1 Plan as they relate to a Pear Tree Fund must be approved by the Qualified Trustees and any amendment to increase materially the amount to be spent pursuant to the 12b-1 Plan must be approved by the vote of a majority of the outstanding voting securities of the Pear Tree Fund. The Trustees review quarterly a written report of the amounts so expended and the purposes for which such expenditures were made. The 12b-1 Plans also terminate automatically upon assignment.
Marketing and Intermediary Support Payments/Revenue Sharing Arrangements
In addition to payments made by the Pear Tree Funds to the Distributor under the 12b-1 Plan, to support distribution and servicing efforts, the Manager may make payments to certain intermediaries or their affiliates (including the Pear Tree Funds’ Distributor) out of its own assets (and not the Funds’ assets).
In this regard, the Manager currently pays the Distributor a monthly fee at the annual rate of up to (a) 0.30 percent of the average net asset value of Institutional Shares of thePear Tree Funds held by shareholder accounts for which certain employee sales agents of the Distributor are named as broker-of-record, and (b) 0.25 percent of the average net asset value of Ordinary Shares of thePear Tree Funds held by shareholder accounts for which certain employee sales agents of the Distributor are named as broker-of-record. In addition, the Manager may pay, as needed, additional amounts to support distribution and servicing efforts.
The Manager also maintains the discretion to pay fees out of its own assets to unaffiliated brokers in excess of the amount paid out to such brokers by the Distributor pursuant to the 12b-1 Plan as a condition of such unaffiliated brokers agreeing to sell shares of the Pear Tree Funds. In this regard, the Manager has established arrangements for the Pear Tree Funds to be included on platforms or “supermarkets” sponsored by a number of unaffiliated brokers. Participation in these systems generally involves fixed set-up fees and ongoing fees based upon the higher of either a percentage of assets (up to 0.40 percent under certain current arrangements) in the subject Pear Tree Fund(s) maintained through the platform or a flat fee. Such fees are first paid out of fees received by the Distributor pursuant to the 12b-1 Plan, to the extent applicable to a class of the Pear Tree Funds, and any remainder is paid by the Manager out of its own assets (and not the Pear Tree Funds’ assets).
The Manager and the Distributor (“Pear Tree Affiliates”) make these payments from their own resources (and not out of the assets of the Pear Tree Funds), which include resources that derive from compensation for providing services to the Pear Tree Funds. Such additional payments are not reflected in and do not change the expenses paid by investors for the purchase of a share of the Pear Tree Funds as set forth in the “Fees and Expenses” table in the Prospectus. These additional payments are described below. The Pear Tree Funds, the Manager and the Sub-Advisers do not consider an intermediary’s sales of Pear Tree Fund shares as a factor when choosing brokers or dealers to effect portfolio transactions for the Pear Tree Funds.
A financial intermediary’s receipt of additional compensation may create conflicts of interest between the financial intermediary and its clients. Each type of payment discussed below may provide your financial intermediary with an economic incentive to actively promote the Pear Tree Funds over other mutual funds or cooperate with the Distributor’s promotional efforts. The receipt of additional compensation for Pear Tree Affiliates may be an important consideration in a financial intermediary’s willingness to support the sale of Pear Tree Fund shares through the financial intermediary’s distribution system. Pear Tree Affiliates are motivated to make the payments described above since they promote the sale of Fund shares and the retention of those investments by clients of financial intermediaries. In certain cases these payments could be significant to the financial intermediary. The financial intermediary may charge additional fees or commissions other than those disclosed in the Prospectus. Financial intermediaries may categorize and disclose these arrangements differently than Pear Tree Affiliates do. To the extent financial intermediaries sell more shares of the Pear Tree Funds or retain shares of the Pear Tree Funds in their clients’ accounts, Pear Tree Affiliates benefit from the incremental management and other fees paid to Pear Tree Affiliates by the Pear Tree Funds with respect to those assets.
Administrative and Processing Support Payments.
Pear TreeAffiliates also may make payments to certain financial intermediaries that sell Pear Tree Fund shares for certain administrative services, including record keeping and sub-accounting shareholder accounts, to the extent that the Pear Tree Funds do not pay for these costs directly. Pear Tree Affiliates also may make payments to certain financial intermediaries that sell Fund shares in connection with client account maintenance support, statement preparation and transaction processing. The types of payments that Pear Tree Affiliates may make under this category include, among others, payment of ticket charges per purchase or exchange order placed by a financial intermediary, payment of networking fees in connection with certain mutual fund trading systems, or one-time payments for ancillary services such as setting up funds on a financial intermediary’s mutual fund trading system.
The same financial intermediary may receive payments under more than one arrangement described herein. Many financial intermediaries that sell shares of the Fund receive one or more types of these payments. A Pear Tree Affiliate negotiates these arrangements individually with financial intermediaries and the amount of payments and the specific arrangements may differ significantly.
As of [__________], 2011, the Manager anticipates that the following financial intermediaries or their affiliates may receive revenue sharing payments as described in the Prospectus and this SAI:
[TO BE COMPLETED BY AMENDMENT]
Please contact your financial intermediary for details about any payments it receives from Pear Tree Affiliates or the Pear Tree Funds, as well as about fees and/or commissions it charges.
OTHER SERVICE PROVIDERS TO THE PEAR TREE FUNDS
Custodian
State Street Bank & Trust Company (the “Custodian”) is the custodian of thePear Tree Funds’ securities and cash. The Custodian’s responsibilities include safekeeping and controlling the Pear Tree Funds’ cash and securities, handling the receipt and delivery of securities, determining income and collecting interest and dividends on the Pear Tree Funds’ investments, maintaining books of original entry for portfolio and fund accounting and other required books and accounts, and calculating the daily net asset value of each class of shares of eachPear Tree Fund. The Custodian does not determine the investment policies of anyPear Tree Fund or decide which securities a Pear Tree Fund will buy or sell. The Pear Tree Funds may, however, invest in securities of the Custodian and may deal with the Custodian as principal in securities transactions. Custodial services are performed at the Custodian’s office at State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111.
Administrator
Pear Tree Advisors, Inc. (“Administrator”) provides certain administrative services to the Fund under an Administration Agreement. For the year ended March 31, 2011, the Administrator has received fees in the amount of $______________.
Transfer Agent
Quantitative Institutional Services (“Transfer Agent”), a division of the Manager, is the transfer agent and dividend disbursing agent for eachPear Tree Fund. Account balances and other shareholder inquiries can be directed to the Transfer Agent at 800-326-2151. The Transfer Agent received a base fee of 0.16 percent of average total net asset value of each class of shares of each Pear Tree Fund. The Transfer Agent is also reimbursed for out of pocket expenses and for other services approved by the Trustees.
All mutual fund transfer, dividend disbursing and shareholder services activities are performed at the offices of the Transfer Agent, 55 Old Bedford Road, Suite 202, Lincoln, Massachusetts 01773. In certain instances, other intermediaries may perform some or all of the transaction processing, recordkeeping or shareholder services which would otherwise be provided by Transfer Agent. The Transfer Agent or its affiliates may make payments, out of their own assets, to intermediaries, including those that sell shares of each Pear Tree Fund, for transaction processing, recordkeeping or shareholder services (up to 0.25 percent under certain current arrangements).
For example, Pear Tree Fund shares may be owned by certain intermediaries for the benefit of their customers. Because the Transfer Agent often does not maintain Pear Tree Fund accounts for shareholders in those instances, some or all of the recordkeeping services for these accounts may be performed by intermediaries. In addition, retirement plans may hold Fund shares in the name of the plan, rather than in the name of the participant. Plan record keepers, who may have affiliated financial intermediaries who sell shares of the Pear Tree Funds, may, at the discretion of a retirement plan’s named fiduciary or administrator, be paid for providing services that would otherwise have been performed by the Transfer Agent or an affiliate. Payments may also be made to plan trustees to defray plan expenses or otherwise for the benefit of plan participants and beneficiaries. For certain types of tax-exempt plans, payments may be made to a plan custodian or other entity which holds plan assets. Payments may also be made to offset charges for certain services such as plan participant communications, provided by the Transfer Agent or an affiliate or by an unaffiliated third party.
Further, subject to the approval of the Trustees, the Transfer Agent or the Pear Tree Funds may from time to time appoint a sub-transfer agent for the receipt of purchase and sale orders and funds from certain investors.
Independent Registered Public Accounting Firm
Tait, Weller & Baker LLP, 1818 Market Street, Suite 2400, Philadelphia, PA 19103, is the independent registered public accounting firm for each Pear Tree Fund. The independent registered public accounting firm conducts an annual audit of the Pear Tree Funds’ financial statements, assists in the preparation of federal and state income tax returns and consults with the Pear Tree Funds as to matters of accounting and federal and state income taxation.
[The Pear Tree Funds’ financial statements and financial highlights for the fiscal year ended March 31, 2011, and report of the independent registered public accounting firm in the Pear Tree Funds’ Annual Report are incorporated herein by reference.]
Fund Counsel
McLaughlin & Hunt LLP, Ten Post Office Square, 8
th
Floor, Boston, Massachusetts 02109, serves as counsel to thePear Tree Funds and the Manager.
Counsel to the Independent Trustees
Goodwin Procter, LLP, 901 New York Avenue, N.W., Washington, D.C. 20001, serves as counsel to the Independent Trustees.
PORTFOLIO TRANSACTIONS
Investment Decisions.
Investment decisions for each Pear Tree Fund are made by the Manager or the Sub-Adviserto such Fund with a view to achieving their respective investment objectives. Investment decisions are the product of many factors in addition to basic suitability for the particular client involved. Thus, a particular security may be bought or sold for certain clients even though it could have been bought or sold for other clients at the same time. Likewise, a particular security may be bought for one or more clients when one or more other clients are selling the security. In some instances, one client may sell a particular security to another client. It also happens that two or more clients simultaneously buy or sell the same security, in which event each day’s transactions in such security are, insofar as possible, allocated between such clients in a manner designed to be equitable to each, taking into account among other things the amount being purchased or sold by each. There may be circumstances when purchases or sales of portfolio securities for one or more clients will have an adverse effect on other clients.
Brokerage and Research Services.
Transactions on stock exchanges and other agency transactions involve the payment by a Pear Tree Fund of negotiated brokerage commissions. Such commissions vary among different brokers. Also, a particular broker may charge different commissions according to such factors as the difficulty and size of the transaction. There is generally no stated commission in the case of securities traded in the over-the-counter markets, but the price paid by a Pear Tree Fund usually includes an undisclosed dealer commission or mark-up. In underwritten offerings, the price paid includes a disclosed, fixed commission or discount retained by the underwriter or dealer.
All orders for the purchase and sale of portfolio securities for each Pear Tree Fund are placed, and securities for the Fund bought and sold, through a number of brokers and dealers. In so doing, the Manager or Sub-Adviserfor the Fund uses its best efforts to obtain for the Fund the most favorable price and execution available, except to the extent that it may be permitted to pay higher brokerage commissions as described below. In seeking the most favorable price and execution, the Manager or Sub-Adviser, having in mind the Fund’s best interests, considers all factors it deems relevant, including, by way of illustration, price, the size of the transaction, the nature of the market for the security, the amount of commission, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker-dealer involved and the quality of service rendered by the broker-dealer in other transactions.
It has for many years been common practice in the investment advisory business for sub-advisers of investment companies and other institutional investors to receive research, statistical and quotation services from broker-dealers which execute portfolio transactions for the clients of such sub-advisers. Consistent with this practice, eachSub-Adviser and the Manager may receive research, statistical and quotation services from certain broker-dealers with which the Manager or Sub-Adviser place aPear Tree Fund’s portfolio transactions. These services, which in some instances may also be purchased for cash, include such matters as general economic and securities market reviews, industry and company reviews, evaluations of securities and recommendations as to the purchase and sale of securities. Some of these services are of value to a Sub-Adviser or the Manager in advising various of their clients (including the Pear Tree Fund), although not all of these services are necessarily useful and of value in advising the Pear Tree Fund. The fees paid to the Sub-Adviser by the Manager or paid to the Manager by the Pear Tree Fund are not reduced because the Sub-Advisers or the Manager receive such services.
As permitted by Section 28(e) of the 1934 Act, and by each Advisory Contract, the Manager or Sub-Advisers may cause the Fund to pay a broker-dealer which provides “brokerage and research services” (as defined in that 1940 Act) to the Manager or Sub-Advisers an amount of disclosed commission for effecting a securities transaction for the Pear Tree Funds in excess of the commission which another broker-dealer would have charged for effecting that transaction. The Manager’s or Sub-Advisers’ authority to cause a Pear Tree Fund to pay any such greater commissions is subject to such written policies as the Trustees may adopt from time to time.
Consistent with the Conduct Rules of FINRA and with the requirements of Rule 12(b)-1(h)(1) of the 1940 Act, and, subject to seeking the most favorable price and execution available and such other policies as the Trustees may determine, the Manager or Sub-Advisers may use broker-dealers who sell shares of the Pear Tree Funds to execute portfolio transactions for the Pear Tree Funds.
Pursuant to conditions set forth in rules of the SEC, the Pear Tree Funds may purchase securities from an underwriting syndicate of which U.S. Boston Capital Corporation is a member (but not from U. S. Boston Capital Corporation itself). The conditions relate to the price and amount of the securities purchased, the commission or spread paid, and the quality of the issuer. The rules further require that such purchases take place in accordance with procedures adopted and reviewed periodically by the Trustees, particularly those Trustees who are not “interested persons” of the Fund.
Brokerage commissions paid by the Funds on portfolio transactions for the three most recently ended fiscal years as follows:
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Fiscal Year Ended March 31,
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2009
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2010
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2011
|
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Pear Tree Columbia Small Cap Fund
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$329,504
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$187,414
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$__________
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Pear Tree Quality Fund
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$183,708
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$132,712
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$__________
|
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Pear Tree Emerging Markets Fund*
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$347,040
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$419,940
|
$__________
|
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Pear Tree Polaris Foreign Value Fund
|
$541,826
|
$224,753
|
$__________
|
|
Pear Tree Polaris Foreign Value Small Cap Fund
|
$27,114
|
$94,176
|
$__________
|
*The increase in brokerage commissions was due to enhancements made to the quantitative model during the fiscal year ended March 31, 2009 which resulted in additional transactions that were subject to a commission.
None of such commissions was paid to a broker who was an affiliated person of the Pear Tree Funds or an affiliated person of such a person or, to the knowledge of the Pear Tree Funds, to a broker an affiliated person of which was an affiliated person of the Pear Tree Funds, the Manager or any Sub-Adviser.
DISCLOSURE OF PORTFOLIO HOLDINGS
The Board has adopted, on behalf of the Pear Tree Funds, policies and procedures relating to disclosure of the Pear Tree Funds’ portfolio securities. These policies and procedures are designed to protect the confidentiality of each Pear Tree Fund’s portfolio holdings and to prevent the selective disclosure of such information by providing a framework for disclosing information regarding portfolio holdings, portfolio composition or other portfolio characteristics consistent with applicable regulations of the federal securities laws and general principles of fiduciary duty relating to fund shareholders.
Confidential Dissemination to Outside Parties
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The Manager or a Sub-Adviser may disclose the Pear Tree Funds’ portfolio holdings information to unaffiliated parties prior to the time such information has been disclosed to the public through a filing with the SEC only if an Authorized Person (as defined below) determines that:
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o
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there is a legitimate business purpose for the disclosure; and
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o
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the recipient is subject to a confidentiality agreement or a duty not to trade on or disclose the nonpublic information.
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·
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A legitimate business purposeincludes disseminating or providing access to portfolio information to:
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o
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the Trust’s service providers (e.g., custodian, counsel, independent auditors) in order for the service providers to fulfill their contractual duties to the Trust;
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o
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a newly hired sub-adviser prior to the sub-adviser commencing its duties;
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o
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the sub-adviser of a Pear Tree Fund that will be the surviving Pear Tree Fund in a merger; and
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o
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firms that provide pricing services, proxy voting services and research and trading services.
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·
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The confidentiality agreement must contain the following provisions:
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o
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The Pear Tree Fund’s portfolio information is the confidential property of the Pear Tree Fund and may not be used for any purpose except in connection with the provision of services to the Pear Tree Fund;
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o
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The information may not be traded upon; and
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o
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The recipient agrees to limit access to the information to its employees and agents who shall be subject to a duty to keep and treat such information as confidential.
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Currently, arrangements are in place to make available portfolio holdings information to the following Service Providers.
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Name of Entity
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Type of Service
|
Frequency
|
Lag Time
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State Street Bank & Trust Company
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Custodian, Pricing Agent, Securities Lending
|
Daily
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None
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Tait Weller & Baker LLP
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Audit
|
As needed
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None
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McLaughlin & Hunt LLP
|
Legal
|
As needed
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None
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Goodwin Procter LLP
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Legal
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As needed
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None
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Securities Finance Trust Company
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Securities Lending
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Daily
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None
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Proxy Edge
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Proxy Voting
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Daily
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None
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Risk Metrics
|
Proxy Voting
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Daily
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None
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Advent
|
Portfolio Reconciliation
|
Daily
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None
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·
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The information that may be disseminated to such outside parties is limited to information that the Sub-Adviser believes is reasonably necessary in connection with the services to be provided by the recipient.
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·
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Non-public portfolio information may not be disseminated for compensation or other consideration.
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·
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Each of the Trust’s Chief Compliance Officer, General Counsel, principal executive or principal accounting officer, or persons designated by such officers, (each, an “Authorized Person”) is authorized to disseminate nonpublic portfolio information, but only in accordance with these procedures.
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Any exceptions to these procedures may be made only if approved by the Trust’s Chief Compliance Officer as in the best interests of the Trust, and only if such exceptions are reported to the Trust’s Board at its next regularly scheduled meeting.
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Dissemination within the Manager and Sub-Advisers
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·
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Dissemination of nonpublic portfolio information to employees of the Manager and Sub-Advisers shall be limited to those persons:
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o
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who are subject to a duty to keep such information confidential; and
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o
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who need to receive the information as part of their duties.
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Dissemination to Shareholders
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·
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As a general matter, the Pear Tree Fundsdisseminates portfolio holdings to shareholders only in the Annual or Semiannual Reports or in other formats that are generally available on a contemporaneous basis to all such shareholders or the general public.
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Shareholder Reports.
The Pear Tree Funds publicly discloses their portfolio holdings twice a year in the annual and semi-annual report to shareholders. These reports must be mailed within 60 days after the end of the reporting period. These reports are filed with the SEC.
Form N-Q
. The Pear Tree Fundsare required to file their complete portfolio holdings on Form N-Q as of the close of the first and third quarters of each year. The reports must be filed with the SEC not later than 60 days after the close of the quarter.
On the Trust’s website
www.peartreefunds.com
.
Pear Tree Funds’ full securities holdings are generally posted monthly, but at least quarterly, approximately 7 business days after month or quarter end.
Disclosures Required by Law
No provision of these procedures is intended to restrict or prevent the disclosure of portfolio holding information that may be required by applicable law or which are requested by governmental authorities.
Periodic Review
Compliance with the Trust’s portfolio holdings disclosure policy is subject to periodic review by the Board, including a review of any exceptions permitted under the policy.
SHARES OF THE TRUST
Pear Tree Fund Shares, Generally
The Trust has an unlimited authorized number of shares of beneficial interest that may, without shareholder approval, be divided into an unlimited number of series of such shares and an unlimited number of classes of shares of any such series. Shares are presently divided into six series of shares, the Pear Tree Funds (five of which are covered by this SAI), each comprised of two classes of shares: Ordinary Shares and Institutional Shares. There are no rights of conversion between shares of different Pear Tree Funds granted by the Second Amended and Restated Agreement and Declaration of Trust, but holders of shares of a class of a Pear Tree Fund may exchange all or a portion of their shares for shares of a like class in another Pear Tree Fund (subject to their respective minimums). No exchanges are permitted from one class of shares to different class of shares.
These shares are entitled to one vote per share (with proportional voting for fractional shares) on such matters as shareholders are entitled to vote, including the election of Trustees. Shares vote by individual Pear Tree Fund (or class thereof under certain circumstances) on all matters except that (i) when the 1940 so requires, shares shall be voted in the aggregate and not by individual Pear Tree Fund and (ii) when the Trustees of the Trust have determined that a matter affects only the interest of one or more the Pear Tree Funds, then only holders of shares of such Pear Tree Fund shall be entitled to vote thereon.
There will normally be no meetings of shareholders for the purpose of electing Trustees unless and until such time as less than a majority of the Trustees have been elected by the shareholders, at which time the Trustees then in office will call a shareholders’ meeting for the election of Trustees. In addition, Trustees may be removed from office by a written consent signed by the holders of two-thirds of the outstanding shares of each Pear Tree Fund and filed with the Pear Tree Fund or by a vote of the holders of two-thirds of the outstanding shares of each Pear Tree Fund at a meeting duly called for that purpose, which meeting shall be held upon the written request of the holders of not less than 10 percent of the outstanding shares. Upon written request by ten or more shareholders, who have been such for at least six months and who hold, in the aggregate, shares having a net asset value of at least $25,000, stating that such shareholders wish to communicate with the other shareholders for the purpose of obtaining the signatures necessary to demand a meeting to consider removal of a Trustee, the Pear Tree Funds have undertaken to provide a list of shareholders or to disseminate appropriate materials (at the expense of the requesting shareholders). Except as set forth above, the Trustees shall continue to hold office and may appoint their successors.
Shares are freely transferable, are entitled to dividends as declared by the Trustees, and in liquidation of the Pear Tree Fund or Trust are entitled to receive the net assets of their Pear Tree Fund, but not of the other Pear Tree Funds. Shareholders have no preemptive rights. The Pear Tree Funds’ fiscal year ends on the last day of March.
Under Massachusetts law, shareholders could, under certain circumstances, be held liable for the obligations of the Pear Tree Funds. However, the Amended or Restated Agreement and Declaration of Trust disclaims shareholder liability for acts or obligations of the Pear Tree Funds and requires notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Pear Tree Funds or the Trustees. The Agreement and Declaration of Trust provides for indemnification out of a Pear Tree Fund’s property for all loss and expense of any shareholder of that Pear Tree Fund held liable on account of being or having been a shareholder. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the Pear Tree Fund of which he was a shareholder would be unable to meet its obligations.
Code of Ethics
The Trust, the Manager, the Sub-Advisers and the Distributor each have adopted Codes of Ethics pursuant to Rule 17j-1 under the 1940 Act. The Codes of Ethics permit employees to invest in securities for their own accounts, including securities that may be purchased or held by the Pear Tree Funds. The Codes of Ethics are on public file with, and are available from, the Commission.
How to Invest
The procedures for purchasing shares of the Fund are summarized in the Prospectus under the caption HOW TO INVEST.
Pear Tree Funds have authorized one or more brokers to receive purchase and redemption orders on their behalf. Authorized brokers may designate other intermediaries to receive purchase and redemption orders on the Pear Tree Funds’ behalf. A Pear Tree Fund will be deemed to have received a purchase or redemption order when an authorized broker, or if applicable, a broker’s authorized designee, receives the purchase or redemption order. Purchase and redemption orders will be priced at the net asset value per share of the Pear Tree Fund next computed for the appropriate class of shares next computed after the purchase or redemption order is received in good order by an authorized broker or the broker’s authorized designee and accepted by the Pear Tree Fund.
Exchange of Securities for Shares of the Pear Tree Funds.
Applications to exchange common stocks for Pear Tree Fund shares must be accompanied by stock certificates (if any) and stock powers with signatures guaranteed by domestic banks, brokers, dealers, credit unions, national securities exchanges, registered securities associations, clearing agencies or savings associations. Securities accepted by a Pear Tree Fund will be valued as set forth under CALCULATION OF NET ASSET VALUE in the Prospectus as of the time of the next determination of net asset value after such acceptance. Shares of a Pear Tree Fund are issued at net asset value determined as of the same time. All dividends, subscription, or other rights which are reflected in the market price of accepted securities at the time of valuation become the property of the Pear Tree Funds and must be delivered to the Pear Tree Funds by the investor upon receipt from the issuer. A gain or loss for Federal income tax purposes would be realized by the investor upon the exchange depending upon the cost of the securities tendered.
Open Account System.
Under the Pear Tree Funds’ Open Account System all shares purchased are credited directly to your account in the designated Pear Tree Fund at the time of purchase. All shares remain on deposit with the Transfer Agent. No certificates are issued.
The following services are currently offered by the Open Account System:
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1.
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You may make additional investments in a Pear Tree Fund by sending a check in U.S. dollars (made payable to “Pear Tree Funds”) to the Pear Tree Funds, by wire, or by online ACH transactions, as described under HOW TO INVEST in the Prospectus.
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2.
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You may select one of the following distribution options which best fits your needs.
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* REINVESTMENT PLAN OPTION: Income dividends and capital gain distributions paid in additional shares at net asset value.
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* INCOME OPTION: Income dividends paid in cash, capital gain distributions paid in additional shares at net asset value.
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* CASH OPTION: Income dividends and capital gain distributions paid in cash.
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You should indicate the Option you prefer, as well as the other registration details of your account, on the Account Application. The Reinvestment Plan Option will automatically be assigned unless you select a different option. Dividends and distributions paid on a class of shares of a Pear Tree Fund will be paid in shares of such class taken at the per share net asset value of such class determined at the close of business on the ex-date of the dividend or distribution or, at your election, in cash.
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3. You will receive a statement setting forth the most recent transactions in your account after each transaction which affects your share balance.
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The cost of services rendered under the Open Account System to the holders of a particular class of shares of a Pear Tree Fund are borne by that class as an expense of all shareholders of that class. However, in order to cover additional administrative costs, any shareholder requesting a historical transcript of his account will be charged a fee based upon the number of years researched. There is a minimum fee of $5. The right is reserved on 60 days’ written notice to make charges to individual investors to cover other administrative costs of the Open Account System.
Tax Deferred Retirement Plans.
Accounts Offered by Pear Tree Funds. The Pear Tree Funds
offer tax-deferred accounts, for which State Street Bank and Trust Company acts as custodian, including:
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Traditional Individual Retirement Accounts (IRAs)
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Simplified Employee Pension Plans (SEP-IRAs)
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Agreements to establish these kinds of accounts and additional information about them, including information about fees and charges, are available from the Distributor. There are many detailed rules, including provisions of tax law, governing each of these kinds of accounts. Investors considering participation in any of these plans should consult with their attorneys or tax advisers with respect to the establishment and maintenance of any of these plans. The following is some very general information about them.
Contributions to a traditional IRA will generally be deductible if the individual for whom the account is established is not an active participant in an employer-sponsored plan; contributions may be deductible in whole or in part if the individual is such a participant, depending on the individual’s income. Distributions from traditional IRAs are generally taxable as ordinary income. Contributions to a Roth IRA are generally not deductible. However, withdrawals generally may not be taxable if certain requirements are met. In either case, capital gains and income earned on Pear Tree Fund shares held in an IRA are generally not taxable as long as they are held in the IRA.
Other Retirement Plans.
Pear Tree Fund shares also may be made available as an investment under other tax-favored retirement plans, such as qualified pension plans and qualified profit sharing plans, including 401(k) plans.
How to Exchange
The procedures for exchanging shares of one Pear Tree Fund for those of another Pear Tree Fund are also described in the Prospectus under HOW TO EXCHANGE.
An exchange involves a redemption of all or a portion of shares of one class of a Pear Tree Fund and the investment of the redemption proceeds in shares of a like class in another Pear Tree Fund. The redemption will be made at the per share net asset value of the particular class of shares of a Pear Tree Fund being redeemed which is next determined after the exchange request is received in proper order.
The shares of the particular class of shares of a Pear Tree Fund being acquired will be purchased when the proceeds from the redemption become available, normally on the day of the exchange request, at the per share net asset value of such class next determined after acceptance of the purchase order by the Pear Tree Fund being acquired in accordance with the customary policy of that Pear Tree Fund for accepting investments.
The exchange of shares of one class of a Pear Tree Fund for shares of a like class of another Pear Tree Fund will constitute a sale for federal income tax purposes on which the investor will realize a capital gain or loss.
The exchange privilege may be modified or terminated at any time, and the Pear Tree Funds may discontinue offering shares of any Pear Tree Fund or any class of any Pear Tree Fund generally or in any particular State without notice to shareholders.
How To Redeem
The procedures for redeeming shares of the Fund are described in the Prospectus under HOW TO REDEEM.
Proceeds will normally be forwarded on the second day on which the New York Stock Exchange is open after a redemption request is processed; however, the Pear Tree Funds reserve the right to take up to three (3) business days to make payment. This amount may be more or less than the shareholder’s investment and thus may involve a capital gain or loss for tax purposes. If the shares to be redeemed represent an investment made by check or through the automatic investment plan, the Pear Tree Funds reserve the right not to honor the redemption request until the check or monies have been collected.
The Pear Tree Funds will normally redeem shares for cash, however, the Pear Tree Funds reserve the right to pay the redemption price wholly or partially in kind if the Board determines it to be advisable and in the interest of the remaining shareholders of a Pear Tree Fund. The redemptions in kind will be selected by the Manager or Sub-Adviser in light of the Pear Tree Fund’s objective and will not generally represent a pro rata distribution of each security held in the Pear Tree Fund’s portfolio. If portfolio securities are distributed in lieu of cash, the shareholder will normally incur brokerage commissions upon subsequent disposition of any such securities. However, the Pear Tree Funds have elected to be governed by Rule 18f-1 under the 1940 Act, pursuant to which the Pear Tree Funds are obligated to redeem shares solely in cash for any shareholder during any 90-day period up to the lesser of $250,000 or 1 percent of the total net asset value of the Pear Tree Fund at the beginning of such period. A redemption constitutes a sale of shares for federal income tax purposes on which the investor may realize a long- or short-term capital gain or loss. See also “Taxation,” below.
Shareholders are entitled to redeem all or any portion of the shares credited to their accounts by submitting a written request for redemption to the Pear Tree Funds. Shareholders who redeem more than $100,000, or request that the redemption proceeds be paid to someone other than the shareholders of record or sent to an address other than the address of record, must have their signature(s) guaranteed by domestic banks, brokers, dealers, credit unions, national securities exchanges, registered securities associations, clearing agencies or savings associations. If the shareholder is a corporation, partnership, agent, fiduciary or surviving joint owner, the Pear Tree Funds may require additional documentation of a customary nature. Shareholders who have authorized the Pear Tree Funds to accept telephone instructions may redeem shares credited to their accounts by telephone. Once made, a telephone request may not be modified or canceled.
The Pear Tree Funds and the Transfer Agent will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. If the Pear Tree Funds and the Transfer Agent fail to do so, they may be liable for any losses due to unauthorized or fraudulent transactions. The Pear Tree Funds provide written confirmation of all transactions effected by telephone and will only mail the proceeds of telephone redemptions to the redeeming shareholder’s address of record.
The Transfer Agent will assess a fee for overnight delivery or to wire the proceeds of a redemption. Such fee will be subtracted from the net redemption amount.
Excessive Trading.
The Pear Tree Funds intend to deter market timing activities and do not have any agreements to permit any person to market time in the Pear Tree Funds. See “Excessive Trading
”
in the Prospectus for more information on the Pear Tree Funds’ policies.
Calculation of Net Asset Value
Portfolio securities are valued each business day at the last reported sale price up to the close of the New York Stock Exchange (ordinarily 4:00 p.m., Eastern Standard Time). Where applicable and appropriate, portfolio securities will be valued using the NASDAQ Official Closing Price. If there is no such reported sale, the securities generally are valued at the mean between the last reported bid and asked prices. For certain securities, where no such sales have been reported, the Pear Tree Fund may value such securities at the last reported bid price. In the event that there is information suggesting that valuation of such securities based upon bid and/or asked prices may not be accurate, a Pear Tree Fund may value such securities in good faith at fair value in accordance with procedures established by the trustees, which may include a determination to value such securities at the last reported sale price.
Securities quoted in foreign currencies are translated into U.S. dollars, based upon the prevailing exchange rate on each business day. Other assets and securities for which no quotations are readily available are valued at fair value as determined in good faith using procedures approved by the Trustees. The Pear Tree Fund translates prices for its investments quoted in foreign currencies into U.S. dollars at current exchange rates. As a result, changes in the value of those currencies in relation to the U.S. dollar may affect the Pear Tree Fund’s net asset value. Because foreign markets may be open at different times than the New York Stock Exchange, the value of the Pear Tree Fund’s shares may change on days when shareholders are not able to buy or sell them. If events materially affecting the values of the Pear Tree Fund’s foreign investments occur between the close of foreign markets and the close of regular trading on the New York Stock Exchange, these investments will be valued at their fair value.
The fair value of any restricted securities from time to time held by a Pear Tree Fund’s determined by its Sub-Adviser in accordance with procedures approved by the Trustees. Such valuations and procedures are reviewed periodically by the Trustees. The fair value of such securities is generally determined as the amount that the Pear Tree Fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. The valuation procedures applied in any specific instance are likely to vary from case to case. However, consideration is generally given to the financial position of the issuer and other fundamental analytical data relating to the investment and to the nature of the restrictions on disposition of the securities (including any registration expenses that might be borne by the Pear Tree Fund in connection with such disposition). In addition, such specific factors are also generally considered as the cost of the investment, the market value of any unrestricted securities of the same class (both at the time of purchase and at the time of valuation), the size of the holding, the prices of any recent transactions or offers with respect to such securities and any available analysts’ reports regarding the issuer. Short-term investments that mature in sixty-days (60) or less are valued at amortized cost.
Market quotations are not considered to be readily available for long-term corporate bonds, debentures and notes; such investments are stated at fair value on the basis of valuations furnished by a pricing service, approved by the Trustees, which determines valuations for normal, institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders.
For purposes of determining the net asset value per share of each class of a Pear Tree Fund, all assets and liabilities initially expressed in foreign currencies will be valued in U.S. dollars at the mean between the bid and asked prices of such currencies against U.S. dollars.
Generally, trading in foreign securities, as well as corporate bonds, U.S. government securities and money market instruments is substantially completed each day at various times prior to 4:15 p.m. Eastern time upon the close of business on the primary exchange for such securities. The values of such securities used in determining the net asset value of the Pear Tree Fund’s shares are computed as of such other times. Foreign currency exchange rates are also generally determined prior to 4:15 p.m. Eastern time. Occasionally, events affecting the value of such securities may occur between such times and 4:15 p.m. Eastern time which will not be reflected in the computation of the Pear Tree Funds’ net asset value. If events materially affecting the value of the Pear Tree Funds’ securities occur during such a period, then these securities will be valued at their fair value as determined in good faith by the Manager in accordance with procedures approved by the Trustees.
Expenses of the Pear Tree Funds directly charged or attributable to any Pear Tree Fund will be paid from the assets of that Pear Tree Fund. 12b-1 Plan expenses will be borne by holders of Ordinary Shares of the Pear Tree Funds in accordance with the 12b-1 Plan. General expenses of the Pear Tree Funds will be allocated among and charged to the assets of the respective Pear Tree Funds on the basis set forth in the 18f-3 Plan, which may be the relative assets of each Pear Tree Fund or Class.
Price of Shares
Orders received by an investment dealer or authorized designee, the Transfer Agent or a Pear Tree Fun dafter the time of the determination of the net asset value will be entered at the next calculated offering price. Note that investment dealers or other intermediaries may have their own rules about share transactions and may have earlier cut-off times than those of the Pear Tree Funds. For more information about how to purchase through your intermediary, contact your intermediary directly.
Prices that appear in the newspaper do not always indicate prices at which you will be purchasing and redeeming shares of a Pear Tree Fund, since such prices generally reflect the previous day’s closing price, while purchases and redemptions are made at the next calculated price. The price you pay for shares, the offering price, is based on the net asset value per share, which is calculated once daily as of approximately 4:00 p.m. Eastern time, which is the normal close of trading on the New York Stock Exchange, each day the Exchange is open. If, for example, the Exchange closes at 1:00 p.m., a Pear Tree Fund’s share price would still be determined as of 4:00 p.m. Eastern time.
Distributions
Each Pear Tree Fund will be treated as a separate entity for federal income tax purposes (see “Taxation,” below) with its net realized gains or losses being determined separately, and capital loss carryovers determined and applied on a separate Pear Tree Fund basis.
[TO BE UPDATED BY AMENDMENT]
TAXATION
The following discussion summarizes certain U.S. federal income tax considerations generally affecting the Pear Tree Funds and their shareholders, which includes the Fund and its shareholders. This discussion does not provide a detailed explanation of all tax consequences, and shareholders are advised to consult their own tax advisers with respect to the particular federal, state, local and foreign tax consequences to them of an investment in the Pear Tree Funds. This discussion is based on the Internal Revenue Code of 1986, as amended (the “
Code
”), Treasury Regulations issued thereunder, and judicial and administrative authorities as in effect on the date of this Statement of Additional Information, all of which are subject to change, which change may be retroactive. This summary addresses only the consequences to shareholders that are U.S. persons under the Code and does not apply to shareholders that are subject to special treatment under the Code.
Each Pear Tree Fund intends to qualify each year as a regulated investment company (“
RIC
”) under the Code.
To qualify as a RIC, a Pear Tree Fund must (a) derive in each taxable year at least 90 percent of its gross income from the following sources: (i) dividends, interest (including tax-exempt interest), payments with respect to certain securities loans, and gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including but not limited to gain from options, futures and forward contracts) derived with respect to its business of investing in such stock, securities or foreign currencies; and (ii) interests in “qualified publicly traded partnerships’’ (as defined in the Code); (b) diversify its holdings so that, at the end of each quarter of each taxable year (i) at least 50 percent of the market value of the Pear Tree Fund’s total assets is represented by cash and cash items, U.S. government securities, the securities of other regulated investment companies and other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5 percent of the value of the Pear Tree Fund’s total assets and not more than 10 percent of the outstanding voting securities of such issuer and (ii) not more than 25 percent of the market value of the Pear Tree Fund’s total assets is invested in the securities (other than U.S. government securities and the securities of other regulated investment companies) of (A) any one issuer, (B) any two or more issuers that the Pear Tree Fund controls and that are determined to be engaged in the same business or similar or related trades or businesses or (C) any one or more ‘‘qualified publicly traded partnerships’’ (as defined in the Code); and (c) distribute to its shareholders each taxable year at least the sum of (i) 90 percent of the Pear Tree Fund’s investment company taxable income (which includes, among other items, dividends, interest and the excess of any net short-term capital gain over net long-term capital loss and other taxable income, other than any net capital gain, reduced by deductible expenses) determined without regard to the deduction for dividends paid and (ii) 90 percent of the Pear Tree Fund’s net tax-exempt interest (the excess of its gross tax-exempt interest over certain disallowed deductions).
As a RIC, a Pear Tree Fund generally will not be subject to U.S. federal income tax on its investment company taxable income and net capital gains (the excess of net long-term capital gains over net short-term capital losses), if any, that it distributes to shareholders. Each Pear Tree Fund intends to distribute to its shareholders, at least annually, substantially all of its investment company taxable income and net capital gains. Amounts not distributed on a timely basis in accordance with a calendar year distribution requirement are subject to a nondeductible 4 percent excise tax. To prevent imposition of the excise tax, a Pear Tree Fund must distribute during each calendar year an amount equal to the sum of (1) at least 98 percent of its ordinary income (not taking into account any capital gains or losses) for the calendar year, (2) at least 98 percent of its capital gains in excess of its capital losses (adjusted for certain ordinary losses, as prescribed by the Code) for the one-year period ending on October 31 of the calendar year, and (3) any ordinary income and capital gains for previous years that was not distributed during those years. A distribution will be treated as paid on December 31 of the current calendar year if it is declared by the Pear Tree Fund in October, November or December with a record date in such a month and paid by a Pear Tree Fund during January of the following calendar year. Such distributions will be taxable to shareholders in the calendar year in which the distributions are declared, rather than the calendar year in which the distributions are received. To prevent application of the excise tax, each Pear Tree Fund intends to make its distributions in accordance with the calendar year distribution requirement.
If, in any taxable year, a Pear Tree Fund fails to qualify as a RIC accorded special tax treatment under the Code, it would be taxed in the same manner as an ordinary corporation and distributions to its shareholders would not be deductible by the Pear Tree Fund in computing its taxable income. In addition, the Pear Tree Fund’s distributions, to the extent derived from its current or accumulated earnings and profits, would constitute taxable dividends to shareholders. Moreover, the Pear Tree Fund would not be required to make any distributions to its shareholders. If a Pear Tree Fund fails to qualify as a RIC in any year, it must pay out its earnings and profits accumulated in that year in order to qualify again as a RIC. Moreover, if the Pear Tree Fund failed to qualify as a RIC for a period greater than one taxable year, the Pear Tree Fund may be required to recognize any net built-in gains with respect to certain of its assets (the excess of the aggregate gains, including items of income, over aggregate losses that would have been realized if the Pear Tree Fund had been liquidated) in order to qualify as a RIC in a subsequent year.
Distributions paid out of a Pear Tree Fund’s investment company taxable income will be taxable to a U.S. shareholder as ordinary income, except to the extent that certain distributions of “qualified dividend income” are taxable at reduced rates when received by individuals. Qualified dividend income generally includes dividends received during the taxable year from domestic corporations and qualified foreign corporations, provided that the Pear Tree Fund has held the stock in such corporation for more than 60 days during the 121 day period beginning on the date which is 60 days before the date on which such stock becomes ex-dividend with respect to such dividend. If a portion of a Pear Tree Fund’s income consists of dividends paid by U.S. corporations, a portion of the dividends paid by the Pear Tree Fund may be eligible for the corporate dividends-received deduction. Distributions of net capital gains, if any, designated as capital gain dividends are taxable to shareholders as long-term capital gains, regardless of how long the shareholder has held the Pear Tree Fund’s shares, and are not eligible for the dividends-received deduction. Shareholders receiving distributions in the form of additional shares, rather than cash, generally will have a cost basis in each such share equal to the net asset value of a share of the Pear Tree Fund on the reinvestment date.Shareholders will be notified annually as to the U.S. federal tax status of distributions and any tax withheld thereon and shareholders receiving distributions in the form of additional shares will receive a report as to the net asset value of those shares.
The taxation of equity options and over-the-counter options on debt securities is governed by Code section 1234. Pursuant to Code section 1234, the premium received by a Pear Tree Fund for selling a put or call option is not included in income at the time of receipt. If the option expires, the premium is short-term capital gain to the Pear Tree Fund. If a Pear Tree Fund enters into a closing transaction, the difference between the amount paid to close out its position and the premium received is short-term capital gain or loss. If a call option written by a Pear Tree Fundi’s exercised, thereby requiring the Pear Tree Fund to sell the underlying security, the premium will increase the amount realized upon the sale of such security and any resulting gain or loss will be a capital gain or loss, and will be long-term or short-term depending upon the holding period of the security. With respect to a put or call option that is purchased by a Pear Tree Fund, if the option is sold, any resulting gain or loss will be a capital gain or loss, and will be long-term or short-term, depending upon the holding period of the option. If the option that is purchased by a Pear Tree Fund expires, the resulting loss is a capital loss and is long-term or short-term, depending upon the holding period of the option. If the option that is purchased by a Pear Tree Fundi’s exercised, the cost of the option, in the case of a call option, is added to the basis of the purchased security and, in the case of a put option, reduces the amount realized on the underlying security in determining gain or loss.
Certain options and futures contracts in which a Pear Tree Fund may invest are “section 1256 contracts.” Gains or losses on section 1256 contracts generally are considered 60 percent long-term and 40 percent short-term capital gains or losses; however, foreign currency gains or losses (as discussed below) arising from certain section 1256 contracts may be treated as ordinary income or loss. Also, section 1256 contracts held by a Pear Tree Fund at the end of each taxable year (and, generally, for purposes of the 4 percent excise tax, on October 31 of each year) are “marked-to-market” (that is, treated as sold at fair market value), resulting in unrealized gains or losses being treated as though they were realized. Foreign taxes generally may not be deducted by a shareholder who is an individual in computing the alternative minimum tax.
Generally, the hedging transactions undertaken by the Pear Tree Fund may result in “straddles” for U.S. federal income tax purposes. The straddle rules may affect the character of gains (or losses) realized by a Pear Tree Fund. In addition, losses realized by the Pear Tree Fund on positions that are part of a straddle may be deferred under the straddle rules, rather than being taken into account in calculating the taxable income for the taxable year in which the losses are realized. Because only a few regulations implementing the straddle rules have been promulgated, the tax consequences to a Pear Tree Fund of engaging in hedging transactions are not entirely clear. Hedging transactions may increase the amount of short-term capital gain realized by a Pear Tree Fund which is taxed as ordinary income when distributed to shareholders. Each Pear Tree Fund may make one or more of the elections available under the Code which are applicable to straddles. If a Pear Tree Fund makes any of the elections, the amount, character and timing of the recognition of gains or losses from the affected straddle positions will be determined under rules that vary according to the election(s) made. The rules applicable under certain of the elections may operate to accelerate the recognition of gains or losses from the affected straddle positions. Because the application of the straddle rules may affect the character of gains or losses, defer losses and/or accelerate the recognition of gains or losses from the affected straddle positions, the amount that may be distributed to shareholders, and that will be taxed to them as ordinary income or long-term capital gain, may be increased or decreased as compared to a Pear Tree Fund that did not engage in such hedging transactions.
Notwithstanding any of the foregoing, a Pear Tree Fund may recognize gain (but not loss) from a constructive sale of certain “appreciated financial positions” if the Pear Tree Fund enters into a short sale, offsetting notional principal contract, futures or forward contract transaction with respect to the appreciated position or substantially identical property. Appreciated financial positions subject to this constructive sale treatment are interests (including options, futures and forward contracts and short sales) in stock, partnership interests, certain actively traded trust instruments and certain debt instruments. Constructive sale treatment does not apply to certain transactions closed on or before the 30th day after the close of the taxable year if the Pear Tree Fund holds the appreciated financial position unheeded throughout the 60-day period beginning with the day such transaction was closed.
Unless certain constructive sale rules (discussed above) apply, a Pear Tree Fund will not realize gain or loss on a short sale of a security until it closes the transaction by delivering the borrowed security to the lender. Pursuant to Code Section 1233, all or a portion of any gain arising from a short sale may be treated as short-term capital gain, regardless of the period for which the Pear Tree Fund held the security used to close the short sale. In addition, the Pear Tree Fund’s holding period of any security which is substantially identical to that which is sold short may be reduced or eliminated as a result of the short sale. Certain short sales against the box and other transactions, however, will be treated as a constructive sale of the underlying security held by the Pear Tree Fund, thereby requiring recognition of gain with respect to such securities and may result in long-term gain or loss if the underlying securities have been held for more than twelve months. Similarly, if a Pear Tree Fund enters into a short sale of property that becomes substantially worthless, the Pear Tree Fund will recognize gain at that time as though it had closed the short sale. Future Treasury regulations may apply similar treatment to other transactions with respect to property that becomes substantially worthless.
Under the Code, gains or losses attributable to fluctuations in exchange rates that occur between the time a Pear Tree Fund accrues receivables or liabilities denominated in a foreign currency, and the time the Pear Tree Fund actually collects such receivables or pays such liabilities, generally are treated as ordinary income or ordinary loss. Similarly, on disposition of debt securities denominated in a foreign currency and on disposition of certain options, futures and forward contracts, gains or losses attributable to fluctuations in the value of foreign currency between the date of acquisition of the security or contract and the date of disposition also are treated as ordinary gain or loss. These gains or losses, referred to under the Code as “section 988” gains or losses, may increase or decrease the amount of a Pear Tree Fund’s investment company taxable income to be distributed to its shareholders as ordinary income.
Upon the sale or other disposition of shares of a Pear Tree Fund, a shareholder may realize a capital gain or loss which may be long-term or short-term, generally depending upon the shareholder’s holding period for the shares. Any loss realized on a sale or exchange will be disallowed to the extent the shares disposed of are replaced (including shares acquired pursuant to a dividend reinvestment plan) within a period of 61 days beginning 30 days before and ending 30 days after disposition of the shares. In such a case, the basis of the shares acquired will be adjusted to reflect the disallowed loss. Any loss realized by a shareholder on a disposition of Pear Tree Fund shares held by the shareholder for six months or less will be treated as a long-term capital loss to the extent of any distributions of net capital gains received by the shareholder with respect to such shares.
If a Pear Tree Fund invests in stock of certain foreign companies that are classified as “passive foreign investment companies” (“PFICs”) under the Code, the Pear Tree Fund may be subject to U.S. federal income taxation on a portion of any “excess distribution” with respect to, or gain from the disposition of, such stock. The tax would be determined by allocating such distribution or gain ratably to each day of the Pear Tree Fund’s holding period for the stock. The distribution or gain so allocated to any taxable year of the Pear Tree Fund, other than the taxable year of the excess distribution or disposition, would be taxed to the Pear Tree Fund at the highest ordinary income tax rate in effect for such year, and the tax would be further increased by an interest charge to reflect the value of the tax deferral deemed to have resulted from the ownership of the foreign company’s stock. Any amount of distribution or gain allocated to the taxable year of the distribution or disposition would be included in the Pear Tree Fund’s investment company taxable income and, accordingly, would not be taxable to the Pear Tree Fund to the extent distributed by the Pear Tree Fund as a dividend to its shareholders. Alternatively, a Pear Tree Fund may elect to mark to market its passive foreign investment company stock, resulting in the stock being treated as sold at fair market value on the last business day of each taxable year. Any resulting gain would be reported as ordinary income; any resulting loss and any loss from an actual disposition of the stock would be reported as ordinary loss to the extent of any net mark-to-market gains previously included in income. A Pear Tree Fund also may elect, in lieu of being taxable in the manner described above, to include annually in income it’s pro rata share of the ordinary earnings and net capital gain of the foreign investment company.
Because the application of the PFIC rules may affect, among other things, the character of gains, the amount of gain or loss and the timing of the recognition of income with respect to PFIC stock, as well as subject each Pear Tree Fund itself to tax on certain income from PFIC stock, the amount that must be distributed to shareholders, and which will be taxed to shareholders as ordinary income or long-term capital gain, may be increased or decreased substantially as compared to a Pear Tree Fund that did not invest in PFIC stock. Note that distributions from a PFIC are not eligible for the reduced rate of tax on qualified dividend income.
Income received by a Pear Tree Fund from sources within foreign countries may be subject to withholding and other taxes imposed by such countries.
If more than 50 percent of the value of a Pear Tree Fund’s total assets at the close of its taxable year consists of securities of foreign corporations, the Pear Tree Fund will be eligible and may elect to “pass-through” to the Pear Tree Fund’s shareholders the amount of foreign income and similar taxes paid by the Pear Tree Fund. Pursuant to this election, if made, a shareholder will be required to include in gross income (in addition to taxable dividends actually received) his or her pro rata share of the foreign income and similar taxes paid by the Pear Tree Fund, and will be entitled either to deduct his or her pro rata share of foreign income and similar taxes in computing his taxable income or to use it as a foreign tax credit against his or her U.S. Federal income taxes, subject to limitations. No deduction for foreign taxes may be claimed by a shareholder who does not itemize deductions.
Generally, a credit for foreign taxes is subject to the limitation that the credit may not exceed the shareholder’s U.S. tax attributable to the shareholder’s total foreign source taxable income. For this purpose, if a Pear Tree Fund makes the election described in the preceding paragraph, the source of the Pear Tree Fund’s income flows through to its shareholders. With respect to the Pear Tree Fund, gains from the sale of securities generally will be treated as derived from U.S. sources and section 988 gains will be treated as ordinary income derived from U.S. sources. The limitation on the foreign tax credit is applied separately to foreign source passive income, including foreign source passive income received from the Pear Tree Fund. The foreign tax credit limitation rules do not apply to certain electing individual taxpayers who have limited creditable foreign taxes and no foreign source income other than passive investment-type income. The foreign tax credit is eliminated with respect to foreign taxes withheld on dividends if the dividend paying shares or the shares of a Pear Tree Fund are held by the Pear Tree Fund or the shareholder, as the case may be, for 15 days or less (45 days in the case of preferred shares) during the 31-day period (91-day period for preferred shares) beginning 15 days (45 days for preferred shares) before the shares become ex-dividend. In addition, if a Pear Tree Fund fails to satisfy these holding period requirements, it cannot elect under Section 853 to pass through to shareholders the ability to claim a deduction for the related foreign taxes. If a Pear Tree Fund fails to satisfy its holding period requirement, it cannot elect under section 853 to pass through to shareholders the ability to claim a deduction for the related foreign taxes.
The foregoing is only a general description of the foreign tax credit under current law. Because application of the credit depends on the particular circumstances of each shareholder, shareholders are advised to consult their own tax advisers.
A Pear Tree Fund may be required to withhold U.S. federal income tax at the rate of 28 percent of all taxable distributions payable to a shareholder who fails to provide the Pear Tree Fund with their correct taxpayer identification number or to make required certifications, or who have been notified by the Internal Revenue Service (the “IRS”) that they are subject to backup withholding or who has furnished an incorrect taxpayer identification number to the Pear Tree Fund and the Pear Tree Fund has been notified by the IRS of the error. Corporate shareholders and certain other shareholders specified in the Code generally are exempt from such backup withholding. Backup withholding is not an additional tax. Any amounts withheld may be credited against the shareholder’s U.S. federal income tax liability.
Pear Tree Fund shareholders may be subject to state, local and foreign taxes on their Pear Tree Fund distributions. In many states, Pear Tree Fund distributions that are derived from interest on certain U.S. Government obligations are exempt from taxation. The tax consequences to a foreign shareholder of an investment in the Pear Tree Fund may be different from those described herein. Foreign shareholders are advised to consult their own tax advisers with respect to the particular tax consequences to them of an investment in a Pear Tree Fund. U.S. Shareholders are advised to consult their own tax advisers with respect to the particular tax consequences to them of an investment in a Pear Tree Fund. Further, the Pear Tree Funds may from time-to-time make certain types of investments which are not addressed in this brief summary.
PROXY VOTING POLICIES
The Board has adopted Proxy Voting Policies and Procedures on behalf of the Pear Tree Funds which delegates responsibility for voting proxies to the Manager, subject to the Board’s continuing oversight. The Manager in turn has, where applicable, delegated responsibility for voting proxies to the Sub-Advisers that actually manage the assets of the Pear Tree Fund. The Manager and the Sub-Advisers have their own proxy voting policies and procedures, which the Board has reviewed. The Manager’s and the Sub-Advisers’ policies and procedures assure that all proxy voting decisions are made in the best interest of the Pear Tree Funds and that the Manager or the Sub-Advisers will act in a prudent and diligent manner for the benefit of the Pear Tree Funds. The Manager’s and the Sub-Advisers’ policies and procedures include specific provisions to determine when a conflict exists between the interests of a Pear Tree Fund and the interests of the Manager or the Sub-Advisers, as the case may be. Copies of the proxy voting policies and procedures are attached to this SAI as Appendix A. Information on how the Pear Tree Funds voted proxies relating to portfolio securities during the 12-month period ended [June 30, 2011] will be available without charge on the Pear Tree Funds website (
www.peartreefunds.com
), upon request by contacting the Pear Tree Funds or via the Securities and Exchange Commission web site at
www.sec.gov
.