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The third quarter was a volatile period for international equities. Markets navigated changing expectations for interest rates, higher energy prices, geopolitical uncertainty and meaningful currency moves. These pressures were particularly evident among small and mid-cap companies, where shifts in investor sentiment can result in significant price movements over relatively short periods. Despite that volatility, the underlying economic and corporate backdrop remained more resilient than market movements might suggest.

This has been particularly evident in our conversations with management teams. While markets have reacted quickly to changes in rates, energy prices and geopolitical developments, many of the companies we follow continue to report healthy demand, improving order books and good visibility into their businesses. In several cases, the change in share price during the quarter was considerably greater than the change in the underlying earnings outlook. For a bottom-up investor, we believe that disconnect can create opportunity.

In the third quarter, the Hood River International Opportunity Fund Institutional Share Class lagged versus the MSCI All Country World ex USA Small Cap Index by -15.75%, posting a total return of -13.67% versus the benchmark’s +2.08%. Nearly every sector was impacted by the drawdown, with real estate (+0.52%), communication services (+0.15) and utilities (+0.08%) being the lone positive contributors. The largest detractors included information technology (-5.02%), industrials (-3.69%) and materials (-2.33%). Year-to-date, the Institutional Share Class maintains its lead versus the benchmark by +11.79%.  A table of longer-term performance is provided below.

Performance quoted represents past performance for the Fund’s institutional class shares and there is no guarantee of future results.  The investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than the original cost.  Current performance may be higher or lower than the performance data quoted above.  Please call 800-497-2960 to obtain current and the most recent month-end performance data.  The gross expense ratio: 2.12%; net expense ratio (contractual through 11/30/26): 1.25%. 

Economic activity outside the United States also remained relatively resilient. In Europe, business activity improved during the quarter, with September marking the strongest pace of expansion since early 2023. Japan continued to benefit from improving corporate activity and export demand, while conditions across emerging markets remained varied by country. Higher energy prices and global bond yields created pressure in some markets, including India, while other economies continued to benefit from improving manufacturing and trade.

The differences across countries remain particularly relevant for small and mid-cap investors. Our approach is less about making a broad call on Europe, Japan or emerging markets and more about understanding the individual businesses operating within them. A Spanish consumer company, an Australian defense supplier and an Indian financial company can have very different earnings drivers even when all are being influenced by the same global macroeconomic headlines. This dispersion continues to create an attractive environment for fundamental research and stock selection.

During the quarter, we took advantage of some of that volatility to broaden the portfolio. Technology and industrials remain overweight positions, but we reduced those overweights by approximately 300 and 500 basis points, respectively. Capital was redeployed across materials, financials, consumer and healthcare, where we identified a growing number of companies with attractive valuations and improving fundamental outlooks. Materials, financials and consumer sectors are now more evenly represented within the portfolio.

India is one area where recent volatility created new opportunities. While we currently have exposure to a single Indian financials company in the fund, Angel One Limited, our research has identified potential opportunities across both established and newer trading platforms. Regulatory changes are creating advantages for certain established businesses, while newer competitors continue to gain share through greater efficiency and improved customer offerings. Several of these businesses are growing faster than comparable U.S. companies while trading at lower valuations.

For the quarter, Australia provided opportunities across two very different industries. Electro Optic Systems is an Australian defense technology company with growing international exposure, including Europe, that develops remote weapon systems and counter-drone technology at a time when governments are increasing defense spending and placing greater emphasis on drone protection. EQ Resources represents a different opportunity through its operation of the Mt Carbine tungsten mine in Queensland and expanding exposure in Spain. Tungsten is critical across defense, industrial and technology applications, while governments and customers are increasingly focused on establishing reliable sources of supply outside of China. We believe Electro Optic Systems is positioned to benefit from rising demand for advanced defense technologies, while EQ Resources offers exposure to increasing production and the growing strategic importance of tungsten.

The third quarter reinforced why we believe international small and mid-cap markets remain particularly well suited to our investment process. These markets contain thousands of companies across very different countries, industries and economic environments. Research coverage is generally more limited than what we see in the U.S., while periods of broad market selling can create substantial price movements among companies whose underlying fundamentals have changed very little. Our ability to speak directly with management teams, customers, suppliers and other industry participants becomes, in our opinion, particularly valuable during these periods.

As we enter the final quarter of 2026, many of the factors that contributed to volatility during the third quarter remain in place. Interest rates, energy prices, currencies and geopolitical developments could continue to influence markets. At the company level, however, the conversations we are having remain generally constructive. Many management teams continue to express confidence in demand, order books and their longer-term growth opportunities, providing visibility that has at times contrasted with their underlying share prices.

We believe that combination creates an attractive setup heading into the end of the year and into 2027. Valuations remain attractive across portions of the international market, the opportunity set has broadened across sectors and geographies, and volatility has allowed us to establish or increase positions in companies where our confidence in the underlying fundamentals remains high. Rather than requiring a broad improvement in international markets, our opportunity continues to come from identifying individual businesses where our expectations differ compared to the markets.

The end of September also marks an important milestone for the International Opportunity Fund, which has now reached its five-year mark. The strategy was launched in September 2021 around the belief that international small and mid-cap markets offer an unusually broad and inefficient opportunity set for fundamental research process. That same philosophy continues to guide the portfolio today.

At its five-year mark, the fund’s institutional share class performance ranks in the first percentile of its Morningstar Foreign Small/Mid Growth universe over the five-year (out of 94 managers), three-year (106 managers), and one-year (110 managers) periods as of 9/30/2026. While we are pleased with what the strategy has accomplished during its first five years, our focus remains on the opportunity ahead. The volatility experienced during the third quarter, combined with the visibility we continue to gain from management teams and the breadth of opportunities we are finding across countries and sectors, gives us confidence in the portfolio’s positioning as we enter the fourth quarter and look toward 2027.

Lance Cannon, Brian Smoluch, David Swank

Investment Considerations:

All investing includes risk, including the loss of principal.  The Fund invests in small-cap securities which present a greater risk of loss than large-cap securities, and in growth companies which can be more sensitive to the company’s earnings and more volatile than the stock market in general.  The Fund also invests in foreign securities which are subject to risks including currency fluctuations, economic and political change and differing accounting standards.  The Fund may invest in derivatives and IPOs, which are highly volatile.  Additional risk information may be found in the prospectus.

*All information in this report is as of September 30, 2026, unless otherwise indicated.  The benchmark is the MSCI ACWI ex US Small-Cap Index, defined as a stock market index comprising of non-U.S. stocks from 22 of 23 developed markets and 26 emerging markets. The MSCI ACWI Ex-U.S. index is made up of 2,361 constituents, which is 85% of the global equity market aside from the U.S.  Investors cannot directly invest in an index.

Top ten holdings for the quarter ended September 30, 2026 comprise 21.40% of the portfolio.  Holdings are subject to change and should not be considered a recommendation to purchase or sell.   Please click here to view the Fund’s top ten holdings.

2026 Morningstar, Inc. All rights reserved.  The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely.  Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.  Past performance is no guarantee of future results.  Ratings reflect fee waivers in effect; in their absence, ratings may have been lower.  Rankings are the fund’s total return-percentile rank relative to all funds that have the same category for the same time period.  The highest (or most favorable) percentile rank is 1, and the lowest (or least favorable) percentile rank is 100.  The top-performing fund in a category will always receive a rank of 1.  The Fund does not pay Morningstar for ratings or rankings, but does pay a licensing fee for the use of this data.

Investors should carefully consider the Fund’s investment objective, risks, charges, and expenses before investing.  For a prospectus, which contains this and other important information about the Fund, please call 800-497-2960.  Please read the prospectus carefully before investing or sending money.

The Hood River International Opportunity Fund is distributed by Quasar Distributors, LLC.  Hood River Capital Management LLC serves as the advisor to the Hood River International Opportunity Fund.       

NOT FDIC INSURED-NO BANK GUARANTEE-MAY LOSE VALUE