2Q 2026 International Small Cap Equity Commentary

The Polen International Small Cap Equity Strategy (the "Portfolio") returned +14.97% (net of fees) in the second quarter of 2026, outperforming the MSCI ACWI ex-US Small Cap Index (the "Index") by over 500 basis points. Both stock selection and sector allocation were strong contributors to relative performance, adding 326 and 289 basis points, respectively. The Portfolio's overweight to Technology and underweights to Real Estate and Healthcare were significant contributors to the positive allocation effect.

The Portfolio's strong relative performance was primarily driven by holdings we believe are well positioned along shifting bottlenecks within the semiconductor supply chain and continued growth related to the global AI infrastructure buildout. Top contributors — Taiwan Union Technology, Technoprobe, and ASPEED Technology — added a combined 444 basis points.

What Shaped the International Small Cap Landscape in Q2 2026?

Global equity markets rallied sharply in the second quarter, supported by easing geopolitical risk following the US-Iran ceasefire, renewed enthusiasm for AI-linked growth, and resilient corporate earnings. Leadership was initially concentrated in large-cap growth stocks and US hyperscalers before broadening into small caps and cyclicals as the quarter progressed. Semiconductor companies — particularly memory-related businesses — were notable standouts, benefiting from capacity constraints, strengthening pricing power, and sustained demand tied to AI infrastructure buildouts.

Later in the quarter, the macro backdrop grew more complicated. Central banks maintained a generally hawkish posture, political realignments in key European countries introduced new sources of uncertainty, and the US Federal Reserve held rates steady as market expectations shifted toward a higher-for-longer rate environment. In our view, this backdrop raises the importance of durable earnings growth as a differentiator between resilient and vulnerable equities heading into the second half of the year.

Which Holdings Drove the Portfolio's 500+ Basis Points of Outperformance vs. the Index?

Top contributors to the Portfolio's relative performance included Taiwan Union Technology, Technoprobe, and ASPEED Technology, contributing a combined 444 basis points. Taiwan Union Technology, a Taiwanese manufacturer of copper-clad laminates used in AI servers, benefited from what we believe is strong demand, supply tightness, and meaningful margin expansion. The company is also in the midst of a capacity buildout, which we believe should allow it to further capture demand for its products. Technoprobe, an Italian manufacturer of probe cards used to test advanced logic devices including CPUs and AI GPUs, contributed meaningfully as demand for its testing solutions has been supported by both AI-related growth and rising test complexity, both of which we believe are sustainable over the long term. ASPEED Technology, a Taiwanese designer of baseboard management controller (BMC) chips used in AI and traditional servers, benefited from expanding AI server demand and progress resolving its glass substrate supply constraints, allowing it to capture additional market share.

The largest detractors from the Portfolio's relative performance were NexGen Energy, Nippon Avionics, and IHI Corporation, detracting a combined 68 basis points. NexGen Energy, a Canada-based uranium developer, continued to advance its uranium mining project following regulatory approval; however, its share price remained correlated with uranium prices, which were down to flat during the quarter. Nippon Avionics, a prime contractor to Japan's Defense Agency, continued to benefit from Japan's expanding defense budget but faced growing pains related to production capacity and labor shortages. IHI Corporation, a Japanese industrial conglomerate, was weighed down by market concerns that its commercial aerospace segment could be affected by a potential jet fuel shortage related to the Middle East conflict, which ultimately did not materialize. Although these stocks underperformed during the quarter, we continue to hold them because our longer-term investment case for each remains intact, and the valuation gap has become more favorable.

What Portfolio Activity Took Place During the Quarter?

During the quarter, we initiated positions in Asta Energy Solutions, Morinaga Milk Industry, Tokyo Tatemono, TBS Holdings, and Bird Construction. We exited positions in Sojitz Corporation, Rakuten Bank, Nippon Television Holdings, and Munters Group.

What Is the Team's Outlook for International Small Caps?

We remain focused on bottom-up stock selection and identifying companies we believe are undergoing sustainable positive fundamental inflections, where we see improving earnings power, returns, or competitive positioning that are not yet fully reflected in market expectations. While macro uncertainty remains elevated, we believe this environment supports our approach of seeking to invest in companies where company-specific change — rather than broad thematic or macro-driven positioning — drives long-term value creation.

Past performance does not guarantee future results. The commentary is not intended as a guarantee of profitable outcomes. Please see Important Disclosures in the full commentary.