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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and Board of Trustees
Pear Tree Funds
Lincoln, Massachusetts 01773
In planning and performing our audits of the financial statements of the Pear Tree Polaris Small Cap Fund, Pear Tree Quality Fund, Pear Tree Essex Environmental Opportunities Fund, Pear Tree Polaris Foreign Value Fund, Pear Tree Polaris Foreign Value Small Cap Fund, and Pear Tree Polaris International Opportunities Fund (the “Funds”), each a series of the Pear Tree Funds, as of and for the year ended March 31, 2024, in accordance with the standards of the Public Company Accounting Oversight Board (United States), we considered the Funds’ internal control over financial reporting, including controls over safeguarding securities, as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements and to comply with the requirements of Form N-CEN, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion.
The management of the Funds is responsible for establishing and maintaining effective internal control over financial reporting. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of controls. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of a company’s assets that could have a material effect on the financial statements.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Funds’ annual or interim financial statements will not be prevented or detected on a timely basis.
Shareholders and Board of Trustees
Pear Tree Funds
Page Two
Our consideration of the Funds’ internal control over financial reporting was for the limited purpose described in the first paragraph and would not necessarily disclose all deficiencies in internal control that might be material weaknesses under standards established by the Public Company Accounting Oversight Board (United States). However, we noted no deficiencies in the Funds’ internal control over financial reporting and its operation, including controls over safeguarding securities that we consider to be material weaknesses as defined above as of March 31, 2024.
This report is intended solely for the information and use of management, the Board of Trustees of the Pear Tree Funds and the Securities and Exchange Commission, and is not intended to be and should not be used by anyone other than these specified parties.
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
May 24, 2024
We are pleased to enclose your 2023 Form 1099-DIV with respect to your investment in one or more of the Pear Tree Funds. This insert provides you with important tax information relating to the distributions you received or re-invested during the calendar year 2023. Because tax laws vary among states, you should consult your personal tax adviser about the specific rules in the state(s) in which you pay income taxes and how the enclosed information relates to the preparation of your tax return(s).
This letter is for informational purposes only and has not been furnished to the Internal Revenue Service. Please retain this information for preparation of your tax return(s).
Distributions of Ordinary Dividends
As a result of the Jobs and Growth Tax Relief Reconciliation Act of 2003 a portion of the total ordinary dividends (box la on Form 1099-DIV) paid by your fund during 2023 may be designated as qualified dividends (box lb on Form 1099 - DIV). Qualified dividends are dividends received by your fund (and paid to shareholders) from domestic corporations or qualified foreign corporations that the fund has also met the required holding period (the fund must hold the security for greater than 60 days during the 121 day period beginning 60 days before the ex-dividend date). The qualified dividends are subject to a maximum tax rate of 15% for most taxpayers (For 2023 you will not need to pay any taxes on qualified dividends as long as you have $41,675 or less of ordinary income. If you have between $41,676 and $459,750 of ordinary income, then you will pay a tax rate of 15% on qualified dividends. The rate for $459,751 or more is 20 %.). In order for the individual to report the amount of qualified dividends in box 1b as qualified dividend income the shareholder must also satisfy the holding period requirement mentioned above with respect to his/her mutual fund shares. If the holding period requirement is not satisfied, the qualified dividends will be taxed as ordinary dividend income.
Fund | Percentage | |||
Pear Tree Essex Environmental Opportunities Fund | 0.00 | % | ||
Pear Tree Quality Fund | 100.00 | % | ||
Pear Tree Polaris Foreign Value Fund | 100.00 | % | ||
Pear Tree Axiom Emerging Markets World Equity Fund | 100.00 | % | ||
Pear Tree Polaris International Opportunities Fund | 100.00 | % | ||
Pear Tree Polaris Small Cap Fund | 100.00 | % | ||
Pear Tree Polaris Foreign Value Small Cap Fund | 100.00 | % |
Distributions from Capital Gains
Long-term capital gain dividends paid by the funds during 2023 will be taxed at the 15% capital gain tax rate for most taxpayers (For 2023 you will not need to pay any taxes on qualified dividends as long as you have $41,675 or less of ordinary income. If you have between $41,676 and $459,750 of ordinary income, then you will pay a tax rate of 15% on qualified dividends. The rate for $459,751 or more is 20 %.). The amount of total capital gain distributions are shown in Box 2a of Form 1099-DIV.
If applicable, amounts taxed at 28% (gain on collectibles) are shown in Box 2d and amounts taxed at 25% (unrecaptured Section 1250 gain) are shown in Box 2b of Form 1099-DIV.
55 Old Bedford Road, Lincoln, MA 01773 ■ 800-326-2151 ■ fax 781-676-5943 ■ www.peartreefunds.com
Distributed by U.S. Boston Capital Corporation, Member FINRNSIPC
Foreign Taxes
You are allowed to claim a tax credit or an itemized deduction on your federal income tax return for your share of foreign taxes paid by a mutual fund during 2023. In most cases, you will receive more benefit by claiming a tax credit.
The amount reported in Box 7 of Form 1099-DIV represents the amount of creditable foreign taxes paid by the mutual fund. The information below will assist you in calculating the information necessary to claim either a credit or itemized deduction
To calculate your total foreign source income passed through from the mutual fund multiply your total ordinary dividends (Box la of Form 1099-DIV) by the foreign source income factor shown in the Total Foreign Source Income Factor column below for the appropriate fund (s).
Fund | Total Foreign Source Income Factor | |||
Pear Tree Polaris Foreign Value Fund | 100.00 | % | ||
Pear Tree Axiom Emerging Markets World Equity Fund | 97.53 | % | ||
Pear Tree Polaris Foreign Value Small Cap Fund | 99.08 | % | ||
Pear Tree Polaris International Opportunities Fund | 99.72 | % |
In order to claim a foreign tax credit shareholders must also satisfy certain holding period requirements with respect to his/her mutual fund shares. If the holding period requirements are not satisfied, the foreign taxes will qualify as itemized deductions. Please consult your tax adviser to determine whether the foreign taxes passed through to you by the fund are either creditable or qualify as an itemized deduction, and whether to make the election to exempt you from the foreign tax credit limitation and the filing requirement of Form 1116.
On December 2, 2019, the Internal Revenue Services issued final regulations (IR-2019-193) which included several foreign tax credit provisions changing as a result of The Tax Cut and Jobs Act (TCJA) passed in December 2017. Please review the instructions to Form 1116 and consult with your tax adviser.
Additional Information
Corporate Dividend Received Deduction
The following percentages of the ordinary dividends received during 2023 qualify for the 50% corporate dividend received deduction. To determine the amount of dividends that qualify, corporate shareholders should multiply the total ordinary dividends received during 2023 by the percentages noted below for each fund in which you are invested.
Fund | Percentage | |||
Pear Tree Axiom Emerging Markets World Equity Fund | 7.83 | % | ||
Pear Tree Polaris Small Cap Fund | 100.00 | % | ||
Pear Tree Quality Fund | 100.00 | % |
Nontaxable Distributions
The amount included in Box 3 of Form 1099-DIV represents amounts distributed as return capital, which for tax purposes, are nontaxable. The amount included in Box 3 as non-dividend distributions should reduce the cost basis of your shares. Once you have received return of capital distributions equivalent to your cost basis, any additional return of capital distributions received will be taxable to you as capital gain even though they will be reported as nontaxable distributions on Form 1099-DIV.
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