High Income Bond Fund Accumulator

The Fund aims to maximise the total level of return for investors by investing, mainly in a diversified portfolio of bonds and other similar debt securities. In pursuing this objective, the Investment Manager shall invest primarily in a diversified portfolio of corporate & government bonds maturing in the medium term, with an average credit quality of “BB-” by S&P, although individual bond holdings may have higher or lower ratings. The Fund can also invest up to 10% of its assets in Non-Rated bond issues. The Fund is actively managed, not managed by reference to any index.

The Investment Manager of the CC High Income Bond Funds – EUR and USD has the duty to ensure that the underlying investments of the funds are well diversified. According to the prospectus, the investment manager has to abide by a number of investment restrictions to safeguard the value of the assets

• The fund may not invest more than 10% of its assets in the same company
• The fund may not keep more than 10% of its assets on deposit with any one credit institution. This limit may be increased to 30% in respect of deposits with an Approved Institution
• The fund may not invest more than 20% of its assets in any other other fund
• The fund may not carry out uncovered sales (naked short-selling) of securities or other financial instruments

August 2026

Introduction

Fixed income markets delivered mixed returns in August, with performance clearly differentiated across rating segments, extending the divergence observed on a year-to-date basis. Macroeconomic and geopolitical uncertainty remained elevated, shaping sovereign yields and broader market sentiment.

Ongoing tensions in the Middle East and Eastern Europe contributed to higher commodity prices, reinforcing concerns around inflation and its impact on consumer purchasing power. The US Treasury’s announcement to increase the pace of longer-dated government bond buybacks also revived discussion around the so-called “debasement trade”, contributing to broader commodity strength and further weighing on the US dollar. Agricultural commodities rose amid concerns over potential supply disruptions linked to the conflict in Ukraine. Energy markets were more mixed: oil remained broadly range-bound despite continued US-Iran tensions, while European wholesale natural gas prices reached a year-to-date high amid low inventories and ongoing disruptions to refining infrastructure across Russia and the Middle East.

Government bond markets were generally weaker, with US yields more stable than those in continental Europe.

In the US, front-end Treasury yields moved higher following comments from Fed Chair Warsh that recent inflation data had not shown meaningful improvement. At the long end, the 30-year Treasury yield reached its highest level since 2007, prompting the US Treasury to announce that it would at least double the size of its buyback operations for longer-dated Treasuries. European sovereign bonds underperformed, as market participants continued to price a rate hike at the ECB’s September meeting. Policymakers too maintained a hawkish tone. The benchmark 10-year German Bund yield rose 12bps from the previous month-end, reaching a high of 3.32%, while French government bonds underperformed the broader European market amid growing focus on the country’s 2027 budget discussions.

Credit markets delivered mixed returns. Investment-grade credit, particularly in Europe, remained under pressure as a result of the moves in underlying government bond yields, while US investment-grade credit proved more resilient despite elevated issuance expectations from US hyperscalers. High-yield credit continued to outperform, generating returns of 0.46% in Europe and 0.97% in the US. Performance was supported by a more constructive risk environment and continued investor demand for higher-yielding assets. High yield also benefited from its higher carry and shorter duration relative to investment grade, making the segment more resilient to rising underlying yields. Emerging-market debt also posted positive returns, supported in part by a weaker US dollar against several major emerging-market currencies.

Market environment and performance

The U.S. economy continued to demonstrate resilience, although second-quarter GDP growth was revised down to 1.5% from the Bureau of Economic Analysis’ advance estimate of 2.1%. The downward revision reflected weaker non-residential fixed investment and a larger drag from net trade as export growth slowed, while government spending also declined. Consumer spending, however, remained a key source of support, underscoring the continued strength of domestic demand.

Forward-looking indicators remained encouraging. The S&P Global U.S. Composite PMI rose to 56 in August from 54.5 in the previous month, signalling the strongest expansion in private sector activity since April 2022. Growth continued to be led by a revival in the services sector, where business activity continued to accelerate, and more than offset a slowdown in manufacturing growth. The improvement in activity also translated into stronger labour market sentiment, with employment growing at its fastest pace since early 2025 and business confidence rising to its highest level in nine months.

Headline inflation eased to 3.4% in July from 3.5%, marking a second successive decline as the impact of the energy shock caused by the war with Iran continued to ease. This moderation is however unlikely to prove sustained. Given the lag in inflation data and the subsequent re-escalation of geopolitical tensions, including renewed disruptions to shipping through the Strait of Hormuz, energy prices are expected to remain a source of upside inflation risk in the coming months.

In the euro area, economic activity showed further signs of improvement. Business surveys reinforced the improving outlook, with the S&P Global Eurozone Composite PMI rising to 52.1 in August from an upwardly revised 52.0 in July, reaching nine-month high and exceeding expectations of 51.7. Growth was supported by a stronger manufacturing performance. Germany was a major contributor, recording its strongest manufacturing expansion since January 2022.

Eurozone inflation edged higher to 3.3% in August from 2.9%, in line with market expectations and remaining well above the European Central Bank’s 2.0% target. The increase was primarily driven by a renewed rise in energy prices following the resumption of hostilities in the Middle East, reinforcing the view that disinflation may prove uneven in the near term.

Fund performance

The CC High Income Bond Fund posted a gain of 0.54% in August. The portfolio manager maintained an active strategy, continuing to gradually enhance the fund’s income profile by selectively capturing emerging opportunities while maintaining a close focus on duration.

During the month, the manager continued to selectively add to existing positions and rotate into issuers offering attractive relative value while maintaining a disciplined approach to credit quality. The fund increased its exposure to Webuild following the company’s strong second-quarter results, reinforcing our positive conviction in its credit profile. Additionally, we continued to rotate from Goodyear’s lower-coupon issue into its higher-coupon bond, while reducing our overall exposure to the issuer in light of the recent weakening in its credit metrics. This allowed us to lower our exposure to the name while maintaining the portfolio’s income yield, benefiting from the higher carry offered by the new issue.

Market and investment outlook

Geopolitical tensions in the Middle East remained elevated throughout August, with the conflict involving the US, Israel and Iran continuing to weigh on regional stability. Efforts to revive a ceasefire and advance diplomatic negotiations made limited progress. The continued uncertainty contributed to volatility in energy markets, particularly European natural gas, and remained a key upside risk to inflation.

Against this backdrop, a cautious yet proactive investment approach is warranted. While heightened uncertainty may limit the pace of new bond issuance, it could also create pockets of opportunity. At the time of writing, we maintain our view that fixed income returns are likely to be increasingly driven by income rather than capital appreciation, underscoring the importance of securing attractive coupons from issuers with strong credit fundamentals.