East Capital Balkans

The East Capital Balkans Fund returned 14.3% during the quarter, driven by strong performances across its key markets, including: Turkey (+3%), Greece (+21%), Hungary (+33%), Romania (+16%) and Slovenia (+10%).

Turkey, which accounts for 30.9% of Balkans fund, continues to balance disinflation with relatively strong economic growth, The country is defending the lira (-8.5% YTD against the US dollar) and navigating a complex geopolitical and domestic political environment. Despite recent challenges, disinflation remains the key priority for policymakers, with the June CPI expected to be below 1% month on month. GDP grew by 3.6% in 2025 and by 2.5% in 1Q 2026 and is forecast to expand by 3.4% in 2026. We remain focused on high-quality companies with structural real growth drivers. A key contributor during the quarter was Ronesans REIT, which returned 27%. In May, we participated in the company's accelerated bookbuild (ABB) and benefited from both the attractive 12.5% entry discount and a subsequent 6% increase in the share price in USD terms. We expect the company to deliver around 40% real EBITDA growth in 2026.

Greece, our second-largest country exposure (28.3%), contributed 18.9% to portfolio returns. The macroeconomic backdrop remains supportive, with GDP growth expected at 2.0% in 2026, underpinned by investment, EU fund absorption and resilient domestic demand. The planned MSCI developed market upgrade in May 2027 remains an important medium-term catalyst, supporting positioning in Greek banks. The sector continues to benefit from robust loan growth, higher fee income and elevated ECB interest rates, which creates scope for further upgrades to earnings expectations. Among the systemic banks, Piraeus remains our preferred holding, trading at 1.1x P/B and 9.6x P/E for 2026, while generating an estimated 15% RoTE. During our latest trip to Greece, we also participated selectively in Greek ABBs and met with companies including the four biggest Greek banks, Optima, Theon and Cenergy. Optima returned 19.2% this quarter, reflecting the factors outlined above, together with its strong RoTE and loan growth outlook. The bank trades at a 2.7x P/B and 10.3x P/E in 2026, while generating an estimated RoTE of 28%. In our view, the current valuation does not fully reflect the bank's superior growth profile and profitability, leaving the shares attractively valued. Cenergy, on the other hand, returned 20.3% this quarter as cable demand continued to strengthen, supported by increasing demand for subsea interconnections across the region. We continue to see strong capital expenditure on energy projects, particularly in Southeastern Europe, which is expected to drive a substantial increase in Cenergy's backlog this year. The company trades at a 12.8x EV/EBITDA with 21.3x P/E in 2026, with EBITDA expected to grow by 17% this year, while still trading at a discount to its European peers.

Elsewhere, our holdings in Hungary, Austria and Croatia also delivered strong returns. In Hungary, Magyar Telekom rose 38.2% while OTP Bank gained 41.0% following the election victory of the opposition Tisza Party. We believe that the improving political outlook strengthens Hungary's investment case. Hungary represents a rare political reset in Central and Eastern Europe. The Tisza Party’s supermajority marks the end of the Orbán era and could pave the way for the release of frozen EU funds equivalent to around 3% of GDP annually. The macroeconomic backdrop has already improved, with the Hungarian forint reaching a four-year high and the BUX index at record levels. The resumption of EU fund disbursements, together with the likely removal of windfall taxes, could lift GDP growth from below 1% to 3-4%. Despite the recent rally, the BUX continues to trade at a significant discount to the MSCI Emerging Markets Index, leaving scope for a multi-year re-rating.

In Austria, Raiffeisen saw a 53.4% increase, while the Croatian industrial company Končar returned 43.2%, both following strong first-quarter results. Končar continues to benefit from Europe's grid investment cycle, with its order backlog reaching a record EUR 2.9 billion in the first quarter of 2026, equivalent to around twice its annual revenue. The company's EUR 550 million self-funded investment programme is expected to increase transformer production capacity and support double-digit earnings growth from 2028. We expect that revenue and EPS will grow at a CAGR of around 10% through 2028. We continue to view Končar as attractively valued, trading at 10.0x EV/EBITDA and 16.5x P/E in 2026, with a significant discount compared to regional and global peers.

Our outlook on the region remains positive and we continue to focus on high-quality companies with resilient balance sheets and sustainable earnings growth. The Balkans fund continues to offer an attractive mix of valuation and growth, trading at a 9.8x P/E in 2026 with an expected earnings growth of 12%, reflecting the compelling investment opportunities across the region.

Performance in USD net of fees.

The information in this document should not be considered investment advice and should not be used as the sole basis for an investment decision. Please read the Prospectus and the KID, which are available on the fund page. This publication is not directed at you if we are prohibited by any law in any jurisdiction from making this information available to you and is not intended for any use that would be contrary to local laws or regulations. Every effort has been made to ensure the accuracy of the information, but it may be based on unaudited or unverified figures or sources.