ANNUAL REPORT​

MARCH 31, 2020​

U.S. EQUITY FUNDS​

PEAR TREE POLARIS SMALL CAP FUND​

PEAR TREE QUALITY FUND​

INTERNATIONAL EQUITY FUNDS​

PEAR TREE AXIOM EMERGING MARKETS WORLD EQUITY FUND​

PEAR TREE POLARIS FOREIGN VALUE FUND​

PEAR TREE POLARIS FOREIGN VALUE SMALL CAP FUND​

PEAR TREE POLARIS INTERNATIONAL OPPORTUNITIES FUND*​

* Formerly Pear Tree PNC International Small Cap Fund 

See the inside front cover for important information about access to your fund’s annual and semiannual shareholder reports.

     

PEAR TREE FUNDS​

Important Information About Access to Shareholder Reports

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Pear Tree Funds’ shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from Pear Tree Funds or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.

If you already have elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from Pear Tree Funds or your financial intermediary electronically by contacting your financial intermediary or if you invest directly with Pear Tree Funds, by calling 1-800-326-2151 or logging on to www.peartreefunds.com

You may elect to receive all future reports in paper free of charge. You can inform Pear Tree Funds or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by contacting Pear Tree Funds at 1-800-326-2151 or your financial intermediary. Your election to receive reports in paper will apply to all funds held with Pear Tree Funds. 

PEAR TREE FUNDS​

Dear Fellow Shareholder,

We are pleased to provide you with the Pear Tree Funds’ Annual Report for the fiscal year ended March 31, 2020 and to update you on recent market conditions and the performance of the Pear Tree Funds.

For current performance information, please visit our website at www.peartreefunds.com. We thank you for your continued confidence in the Pear Tree Funds. Please feel free to e-mail us at info@peartreefunds.com or call us at 1-800-326-2151 with any questions or for assistance on your account.

Sincerely,

Willard Umphrey
President and Chairman

 

As used in this report; "Fund" refers to a Pear Tree Fund and "Funds" refers to more than one Pear Tree Fund or all Pear Tree Funds, depending on the context.

Any statements in this report regarding market or economic trends or the factors influencing the historical or future performance of the Pear Tree Funds are the views of the Funds’ Investment Manager and/or Sub-Advisers as of the date of this report. These views are subject to change at any time based upon market and other conditions, and Fund management and the subadvisers to the Funds disclaim any responsibility to update such views. These views may not be relied upon as investment advice or as an indication of trading intent on behalf of any Pear Tree Fund. Any references to specific securities are not recommendations to purchase, hold or sell such securities and may not be representative of any Pear Tree Fund’s current or future investments.

Past performance is no guarantee of future results, and there is no guarantee that market forecasts will be realized. 

1​

PEAR TREE FUNDS

FUND EXPENSES

We believe it’s important for Fund shareholders to have a clear understanding of fund expenses and the impact expenses have on investment returns. The following is important information about each Fund’s Expense Example, which appears below.

Expense Example

As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees, distribution (12b-1) fees (on Ordinary Shares) and other Fund expenses. The example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

Actual Expenses

The first line for each Share Class for each Fund in the table below provides information about actual account returns and actual expenses. You may use the information in this line, together with the amount you invested for that Fund and Share Class, to estimate the expenses that you paid over the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (e.g., an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line for each Share Class for each Fund in the table below shows you hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.

The hypothetical account values and hypothetical expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information only to compare the ongoing expenses of investing in the Fund with the ongoing expenses of other funds. To do so, compare the Fund’s 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

2

PEAR TREE FUNDS

 

4

This page intentionally left blank.

Pear Tree Polaris Small Cap Fund​

INVESTMENT PROFILE

All Data as of March 31, 2020

Investment Commentary

(prepared by Polaris Capital Management, LLC, sub-adviser to Pear Tree Polaris Small Cap Fund)

For the fiscal year ended March 31, 2020, the Pear Tree Polaris Small Cap Fund’s Ordinary Shares (the “Fund”) underperformed its benchmark, the Russell 2000 Total Return Index (the “Index”). The Fund had a return of (30.27%) at net asset value compared to (23.99%) for the Index.

Market Conditions and Investment Strategies

The U.S. small cap market fared well over the first three quarters of the annual period, with benign returns until a nearly 10% gain for the December quarter end. The Fund outperformed in two of those three periods. Gains were short-lived as U.S. markets felt the impact of COVID-19 and lower oil prices by the end of March 2020. Yearly performance results were skewed by the March quarter. Holdings in Consumer Staples, Consumer Discretionary and Health Care performed best, while the Fund’s exposure to Financials and Industrials detracted.

Some of the Fund’s defensive holdings offered stability in changing COVID-19 environs. Protein producer, Sanderson Farms, had relatively positive results as consumers stocked up their freezers and food supplies during the country lockdown. PetMed Express gained more than 30%, as people avoided their local veterinarian or pet store in favor of the contactless e-commerce site to order pets medication delivered through the mail. Knight-Swift Transportation was up, as the company shipped critical freight for grocery stores and pharmacies. COVID-19 had the opposite effect on many other companies, like theater operator Cinemark, which shuttered all of its movie theaters nationwide and Air Lease Corp, which saw dwindling demand for airplanes. Although BG Staffing reported strong quarterly results and gross margin improvement, the stock price took a hit as the labor market started to dry up.

In March, the Federal Reserve cut interest rates to essentially zero and launched a purchase program, buying Treasuries and mortgage-backed securities. Bank stocks declined sharply on expectations of lower interest margins and higher credit losses due to higher unemployment and companies likely entering financial distress. Lower oil prices impacted the likes of Diamondback Energy, the West Texas shale oil producer, which noted pressured cash flows.

Portfolio Changes

During the long bull market run, there was a dearth of undervalued investment opportunities in the U.S. small cap space. In the first three quarters of the year, the Fund purchased only four new companies; but the dramatic downturn in the March quarter opened up the opportunity set with investments into 15 new holdings for the Fund. Fund management bought into resilient, high quality companies at compelling valuations, many of which contributed positively by quarter end. During the year, the Fund sold its investments in nine companies, three of which were subject to premium-priced takeovers, allowing for healthy profits.

5​

 

 

The Fund’s lead portfolio manager is Bernard R. Horn, Jr., of Polaris Capital Management, LLC.

6

Pear Tree Polaris Small Cap Fund

 

8

This page intentionally left blank.

Pear Tree Quality Fund​

INVESTMENT PROFILE

All Data as of March 31, 2020

Investment Commentary

(prepared by Pear Tree Advisors, Inc., the Investment Manager to Pear Tree Quality Fund)

For the fiscal year ended March 31, 2020, the Pear Tree Quality Fund's Ordinary Shares (the "Fund") outperformed its benchmark, S&P 500 (the “Index"). The Fund achieved a return of (2.98%) at net asset value compared to (6.98%) for the Index.

Market Conditions and Investment Strategies

The Fund’s investment manager currently chooses securities for the Fund by periodically selecting a mutual fund (the “Target Portfolio”) and monitoring the Target Portfolio’s holdings. The Fund’s investment adviser, at the direction of the investment manager, rebalances the Fund’s portfolio to correspond to the Target Portfolio’s most recent holdings as publicly reported. From April 1, 2019 to March 31, 2020, the Fund’s Ordinary Shares, when compared to the Target Portfolio, had a tracking error of 0.23.

Over the previous twelve months, lack of exposure to the Energy sector was the largest positive contributor to the Fund’s performance compared to the benchmark. The Communication Services, Consumer Discretionary, Consumer Staples, Health Care, Information Technology, Materials and Real Estate sectors also contributed to performance.

The only sectors that detracted from performance were the Financials, Industrials and Utilities sectors. Overall, stock selection detracted from performance and sector selection was a large contributor to performance.

Portfolio Changes

We expect the Fund to continue to have a relatively low turnover rate given the historical stability and relatively low turnover rate of the current Target Portfolio.

For the twelve-month period ending March 31, 2020, the Fund rebalanced the holdings four times in response to the quarterly holdings report filed by the Target Portfolio. The four rebalances resulted in the sale of five positions. The Fund also opened new positions in three companies; two Health Care companies and one Information Technology company.

A Look Ahead

For at least the next fiscal year, the Fund’s investment manager expects the Target Portfolio to remain the same. For more information on the selection of the Target Portfolio(s), please see the Fund’s Prospectus.

 

 

Fund trading execution is overseen by Mark D. Tindall, CFA of Chartwell Investment Partners, LLC

9​

Pear Tree Quality Fund​

​

(1)

Institutional Shares may only be purchased by certain categories of investors and are not subject to sales charges or distribution (12b-1) fees.

​

(2)

The S&P 500 Index is an unmanaged index of stocks chosen for their size and industry characteristics. It is widely recognized as representative of stocks in the United States. Index returns assume the reinvestment of dividends and, unlike Fund returns, do not reflect any fees or expenses. You cannot invest directly in the Index. For comparative performance purposes the beginning date for the Index is 05/29/85. S&P 500 Index is a registered mark of Standard & Poor’s.

​

(3)

Pear Tree Advisors took over management of the Fund's portfolio and the Fund changed its strategy on 01/01/2011. Returns that cover periods prior to that date include performance information of other investment sub-advisers pursuing different strategies.

​

The Fund had no Class R6 Shares outstanding during the reporting period.

Past performance does not predict future performance. The graph and the table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

Securities issued by large-cap companies tend to be less volatile than securities issued by smaller companies. Larger companies, may not be able to attain the high growth rates of successful smaller companies, and may be unable to respond as quickly to competitive challenges.

Investing in foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market, or economic developments and can perform differently than the U.S. market.

The Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Therefore, the Fund is more exposed to individual stock volatility than diversified funds. As a result, a decline in the value of the securities of one issuer could have a significant negative effect on the Fund. The Fund may have significant investments in one or more specific industry sectors, subjecting it to risks greater than general market risk. For example, adverse news from just one or two companies in a particular industry can hurt the prices of all stocks in that industry. 

11​

Pear Tree Quality Fund

 

12

This page intentionally left blank.

Pear Tree Axiom Emerging Markets World Equity Fund (formerly Pear Tree PanAgora Emerging Markets Fund)​

Pear Tree Axiom Emerging Markets World Equity Fund (formerly Pear Tree PanAgora Emerging Markets Fund)

Top 10 Holdings							​
Percentage of total net assets	​	​	​	​	40.9 %	​	​
Alibaba Group Holding Ltd.	​	​	​	​	8.8 %	​	​
Taiwan Semiconductor Manufacturing Co., Ltd.	​	​	​	​	6.4 %	​	​
Samsung Electronics Company Limited	​	​	​	​	5.5 %	​	​
Tencent Holdings Limited	​	​	​	​	4.6 %	​	​
Naspers Limited N Shares	​	​	​	​	3.2 %	​	​
SK Hynix, Inc.	​	​	​	​	2.9 %	​	​
JD.com Inc.	​	​	​	​	2.7 %	​	​
Ping An Insurance Group H Share	​	​	​	​	2.6 %	​	​
iShares Core MSCI Emerging Markets ETF	​	​	​	​	2.2 %	​	​
Microsoft Corporation	​	​	​	​	2.0 %	​	​

Top 10 Country Allocations							​
Percentage of total net assets	​	​	​	​	90.9 %	​	​
China	​	​	​	​	40.5 %	​	​
Taiwan	​	​	​	​	13.2 %	​	​
South Korea	​	​	​	​	11.3 %	​	​
India	​	​	​	​	7.1 %	​	​
United States	​	​	​	​	5.6 %	​	​
Brazil	​	​	​	​	4.5 %	​	​
South Africa	​	​	​	​	3.6 %	​	​
Russia	​	​	​	​	2.0 %	​	​
Mexico	​	​	​	​	1.6 %	​	​
Japan	​	​	​	​	1.5 %	​	​

Value of a $10,000 Investment	​
Pear Tree Axiom Emerging Markets World Equity (PTEM) Ordinary Shares vs. MSCI EM Index	​
	​

14

Pear Tree Axiom Emerging Markets World Equity Fund (formerly Pear Tree PanAgora Emerging Markets Fund)​

(1)

Institutional Shares and R6 Shares may only be purchased by certain categories of investors and are not subject to sales charges or distribution (12b-1) fees.

​

(2)

The MSCI Emerging Markets (“MSCI EM”) Index is an unmanaged index composed of stocks located in countries other than the United States. It is widely recognized as representative of the general market for emerging markets. Index returns assume the reinvestment of dividends and, unlike Fund returns, do not reflect fees or expenses. You cannot invest directly in an Index. For comparative performance purposes, the beginning date for the Index is 09/30/94. The MSCI EM Index is maintained by MSCI Inc.

​

(3)

Axiom took over the management of the Fund's portfolio and the Fund changed its investment strategy on 01/01/2019. Returns that cover periods prior to that date include performance information of other investment sub-advisers pursuing different strategies.

​

Past performance does not predict future performance. The graph and the table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

Investing in foreign markets, particularly emerging markets, can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market or other economic developments and can perform differently than the U.S. market.

 

15​

Pear Tree Axiom Emerging Markets World Equity Fund (formerly Pear Tree PanAgora Emerging Markets Fund)

 

16

This page intentionally left blank.

Pear Tree Polaris Foreign Value Fund​

INVESTMENT PROFILE

All Data as of March 31, 2020

Investment Commentary

(prepared by Polaris Capital Management, LLC, subadviser to Pear Tree Polaris Foreign Value Fund)

For the fiscal year ended March 31, 2020, the Pear Tree Polaris Foreign Value Fund’s Ordinary Shares (the “Fund”) underperformed its benchmark, the MSCI EAFE Index (the “Index”). The Fund had a return of (27.75%) at net asset value compared to (13.92%) for the Index.

Market Conditions and Investment Strategies

Markets were relatively benign in the early part of 2019; by the December 2019 quarter, the MSCI EAFE gained more than 8%, while the Fund was up more than 9%. Those gains were short-lived as global markets tumbled in March 2020, reaching into bear market territory on the back of the COVID-19 crisis and supply-demand imbalances impacting oil prices. Few sectors were left unscathed, with defensives faring slightly better than cyclicals. The Fund’s overweight in underperforming Financials, Materials and Consumer Discretionary sectors hampered results. At the country level, the Fund’s Finnish and Austrian holdings outperformed, but couldn’t offset declines in the U.K., Canada and South Korea.

Three of the five largest detractors were based in the U.K., with homebuilders Taylor Wimpey and Bellway down as construction and home sales stalled. Cineworld Group faced similar customer headwinds, as the company had to shutter movie theaters. Lower oil prices impacted Methanex Corp and Sasol Ltd. However, there were some bright spots in the portfolio, with double-digit returns from Finnish elevator/escalator company, Kone OYJ. The company reported strong quarterly results, later guiding for slightly reduced sales (5%) for the rest of 2020, pointing to COVID-19 disruptions. Kone management reiterated its competitiveness and strong balance sheet, projecting a surge in activity once pandemic concerns dissipate. Japanese telecom, KDDI Corp., was up more than 40% on robust earnings, pointing to increasing operating revenue and profitability. The company also announced a new competitive Data Max 4G LTE and Netflix plan that is expected to entice new subscribers.

Portfolio Changes

In the three quarters of 2019, the Fund sold its interest in two companies, redeploying the proceeds to buy shares of Asahi Group Holdings, Toronto-Dominion Bank, Sparebanken Vest, Diacel Corp and Mondi PLC. Buys and sells were relatively anemic due to the long-standing bull market run and few undervalued investment opportunities. The March 2020 market downturn opened up a larger value set, with the Fund purchasing eight companies that had long been on the watchlist. Investments trended thematically into: 1) stocks down substantially that might rebound strongly within 12 to 24 months or 2) defensive names typically defined as “recession resistant”. The majority of new holdings already showed promise, with stock prices ticking higher after purchase.

A Look Ahead

We believe that the market bottomed out in the third week of March, with substantial volatility expected in ensuing months. While the market sell-off was quick and sharp, a recovery may be more protracted. The same could be said for the global economy. Recessions are likely in many countries; the timeline might extend as conditions normalize in the U.S. and Europe at a far slower pace than in China and South Korea. Conventional wisdom suggests that markets recover far in advance of broader economic trends. If the market has already troughed, we may see fits and spurts of growth and retraction in the coming months. Rapid portfolio adjustments may help returns and reposition the Fund for a market recovery.

17​

Pear Tree Polaris Foreign Value Fund

 

20

This page intentionally left blank.

Pear Tree Polaris Foreign Value Small Cap Fund​

INVESTMENT PROFILE

All Data as of March 31, 2020

Investment Commentary

(prepared by Polaris Capital Management, LLC, subadviser to Pear Tree Polaris Foreign Value Small Cap Fund)

For the fiscal year ended March 31, 2020, the Pear Tree Polaris Foreign Value Small Cap Fund’s Ordinary Shares (the “Fund”) underperformed its benchmark, the MSCI ACWI ex USA Small Cap Index (the “Index”). The Fund had a return of (23.73%) at net asset value compared to (20.84%) for the Index.

Market Conditions and Investment Strategies

Relatively benign results in the June and September quarters gave way to 10% gains for the Fund the December 2019 quarter. Those results were quickly erased by the steep market declines of more than 20% (considered bear market territory) in March 2020. No sector or country was left unscathed at the benchmark level, and annual results were skewed as a result.

One bright spot was the Fund’s absolute positive returns in Energy, Health Care and Real Estate sectors, which were unfortunately overshadowed by declines in Consumer Discretionary and Financials, where the Fund was overweight. At the country level, the Fund outperformed and was overweight in Scandinavian countries, as well as Thailand and Taiwan. Those gains were more than offset by losses in the U.K. and Norway. In fact, four of the five largest detractors came from the U.K., including car parts retailer, Halfords Group, homebuilders Vistry Group and Crest Nicholson, and theater operator, Cineworld Group.

While COVID-19 had an adverse impact on most global markets and companies, critical services boomed. Prima Meat Packers was up more than 20%, as consumers stocked up freezers; consumer electronics suppliers clamored for Taiwan Union Technology’s copper clad laminates; and UDG Healthcare was up after reporting strong semi-annual results in its two divisions, both of which are focused on the pharma industry. UDG’s pharma packaging business, Sharp, was considered an “essential service” with robust demand, although it has faced disruption to production schedules and capacity due to COVID-19 working protocols. Indian Financials, South Indian Bank Limited and LIC Housing Finance, declined on market liquidity issues, asset quality stress and interest margin compression.

Portfolio Changes

Few undervalued, fundamentally strong companies appeared on the 2019 radar, as the long bull market continued. In fact, the Fund purchased interests in only three companies over a nine-month period. However, the swift global market declines in 2020, precipitated on the COVID-19 pandemic and oil supply/demand imbalances, lent to new investment opportunities. Fund management purchased interests in 14 new holdings to the Fund in the March 2020 quarter, alternating between defensive sectors and high-quality cyclicals that may better navigate an economic downturn. The majority of new holdings already showed promise, with stock prices ticking higher after purchase. Additionally, the Fund added to existing portfolio holdings, overweighting defensives. The Fund completed seven sales during the year, most of which were exited due to concerns about changing business dynamics.

21​

Pear Tree Polaris Foreign Value Small Cap Fund

 

24

This page intentionally left blank.

Pear Tree Polaris International Opportunities Fund (Formerly Pear Tree PNC International Small Cap Fund)

growth profiles and reasonable valuations. The opportunity set widened by the end of March, as interest in eight more companies were purchased. Latin American and frontier markets also played a larger role in this Fund, as evidenced by purchases in Brazil, Peru, Mexico, Egypt, Kenya, South Africa and a handful of Asian countries.

A Look Ahead

While the March 2020 global market sell-off was quick and sharp, a recovery may be more protracted. The same could be said for the global economy. Recessions (two quarters of GDP decline) are likely in many countries; the timeline might extend as conditions normalize in the U.S. and Europe at a far slower pace than in China and South Korea. We believe that the opportunistic purchases made in late March will allow the Fund to participate in a market recovery, likely based on the availability of a treatment/vaccine for COVID-19. While volatility may persist in the coming quarters, we will continue making adjustments, increasing and diversifying holdings, and deploying cash to maintain the investment discipline.

Top 10 Holdings							​
Percentage of total net assets	​	​	​	​	32.5 %	​	​
POYA International Co., Ltd.	​	​	​	​	3.9 %	​	​
Groupe SEB	​	​	​	​	3.9 %	​	​
SINBON Electronics Co., Ltd.	​	​	​	​	3.8 %	​	​
Public Bank Bhd	​	​	​	​	3.2 %	​	​
Henkel AG & Company, KGaA	​	​	​	​	3.1 %	​	​
Bravida Holding AB	​	​	​	​	3.1 %	​	​
Ringkjoebing Landbobank A/S	​	​	​	​	3.0 %	​	​
Bunzl plc	​	​	​	​	2.9 %	​	​
BizLink Holding Inc.	​	​	​	​	2.9 %	​	​
Credicorp Ltd.	​	​	​	​	2.7 %	​	​