In the fourth quarter of 2025, the Nomura Mid Cap Income Opportunities Fund's Institutional Class shares experienced a period of underperformance compared to its benchmark, the Russell Midcap Index. This occurred despite broader U.S. equity market gains, which were fueled by a combination of optimism surrounding artificial intelligence and increasing scrutiny over corporate profitability, expenditures, and macroeconomic uncertainties. The primary factors contributing to this shortfall were unfavorable stock selections within the industrials, consumer discretionary, and materials sectors. Looking ahead to 2026, the fund's strategy will emphasize companies demonstrating durable competitive advantages, robust balance sheets, and disciplined capital allocation practices, aiming to navigate persistent market volatility while balancing growth potential with valuation and risk.

During the fourth quarter of 2025, the United States equity markets saw an upswing, influenced by a dual narrative. On one hand, there was considerable excitement surrounding the potential of artificial intelligence to drive growth. On the other, investors expressed rising concerns about corporate earnings, spending habits, and the broader economic landscape. This complex environment presented both opportunities and challenges for investment funds.

The Nomura Mid Cap Income Opportunities Fund's underperformance was particularly pronounced due to its selections within specific sectors. The industrials sector, for instance, saw several holdings detract from overall returns. Similarly, stock choices in the consumer discretionary and materials sectors also negatively impacted the fund's relative performance. These specific investment decisions proved to be a drag on the fund's results, even as the overall market exhibited strength.

Despite these headwinds, the fund did experience some positive contributions. The healthcare and information technology sectors were notable bright spots, with certain holdings delivering strong relative performance. Among these, Cardinal Health Inc., a prominent distributor of pharmaceuticals and medical products, saw its growth accelerate, largely driven by the expanding specialty pharmaceutical markets. Seagate Technology also contributed positively, showcasing resilience in a volatile market.

As the market transitions into 2026, investor sentiment is expected to increasingly gravitate towards companies that can demonstrate strong profitability, efficient free cash flow generation, and prudent capital allocation. The fund is adapting its strategy to align with these evolving market preferences. The management team aims to identify and invest in businesses that possess sustainable competitive advantages and maintain healthy balance sheets, ensuring a strategic balance between pursuing growth opportunities and mitigating risks associated with market fluctuations.

The fourth quarter of 2025 proved challenging for the Nomura Mid Cap Income Opportunities Fund, which did not keep pace with the Russell Midcap Index. This disparity was mainly attributed to specific stock choices in industrial, consumer discretionary, and materials industries. However, contributions from healthcare and information technology sectors, including strong performances from Cardinal Health and Seagate Technology, offered some counterbalance. Moving forward, the fund will strategically focus on enterprises distinguished by solid fundamentals and sound capital management to navigate anticipated market volatility.