Summary

• During the first quarter of 2026, market leadership shifted as small-cap stocks outperformed large caps amid a rotation away from crowded trades by investors.
• The Virtus KAR Small-Cap Core Fund returned 1.54% (Class I) in the quarter, outperforming the Russell 2000 Index, which returned 0.89%.
• The Toro Company saw its professional business continue to grow, which was due in part to healthy underground equipment sales, and the company's profitability continues to improve.
• Shares of CorVel Corporation lagged, driven by reports of slowed revenue growth, as well as broad-based investor fear of potential AI-driven disintermediation in the software segment.
• The Fund sold its position in Rightmove due to the threat that AI poses to the business, recognizing that its competitive position would be weakened if native AI tools become users' primary means.

Market Summary

During the first quarter of 2026, market leadership shifted as small-cap stocks outperformed large caps amid a rotation away from crowded trades by investors. The Russell 2000® small-cap benchmark surpassed the broader market, as measured

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