Malta High Income Fund Accumulator

The Fund aims to maximise the total level of return through investment, primarily in debt securities and money market instruments issued by the Government of Malta, and equities and corporate bonds issued and listed on the MSE.

The Investment Manager may also invest directly or indirectly up to 15% of its assets in “Non- Maltese Assets”. The Investment Manager will maintain an exposure to local debt securities of at least 55% of the value of the Net Assets of the Fund.

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 Investment Manager may invest up to 10% of the net assets of the Sub-Fund in un-listed Maltese and/or Non-Maltese Assets. As far as the “Non-Maltese Assets” segment of the Sub-Fund is concerned, the Investment Manager will not be targeting any international debt securities of any particular duration or coupon. However, the Sub-Fund is generally not expected to hold investments that, at the time of investment, are rated below “B3” by Moody’s or below “B-“ by S&P or in bonds determined to be of comparable quality by the Investment Manager.
• The Investment Manager will not be targeting any local debt securities (debt securities and money market instruments issued or guaranteed by the Government of Malta and/or local corporate bonds issued and listed on the Malta Stock Exchange) of any particular duration or coupon.
• The Investment Manager will, at all times, maintain a direct exposure to local debt securities (debt securities and money market instruments issued or guaranteed by the Government of Malta and/or issued and listed on the Malta Stock Exchange) of at least 55% of the value of the Net Assets of the Sub-Fund.
• The Sub-Fund may also invest in term deposits held with credit institutions regulated in Malta and other EU, EEA and OECD Member States.
• This Sub-Fund shall not invest, in the aggregate, more than 10% of the Net Assets of the Sub-Fund in units or shares of other UCITS or other CISs.

February 2026

Introduction

Malta’s economy grew by 2.1% YoY in the fourth and final quarter of 2025, slowing modestly from 3.0% in Q3. Growth continued to significantly outperform the Eurozone, where GDP expanded by just 0.2% which came in below earlier estimates of 0.3%. The region’s largest economy, Germany, expanded by 0.3% in the same quarter, confirming preliminary estimates and marking a clear rebound from the stagnation recorded in the previous quarter.

Malta’s annual inflation rate slowed to 2.3% in January, from 2.5% in the previous month. This also marked the lowest reading since March 2025, as prices pressures eased across several categories, including transport, housing and utilities, furnishings and household equipment, routine household maintenance, and alcoholic beverages and tobacco. Meanwhile, costs remained stable for food and non-alcoholic beverages as well as for health services. In contrast, inflation picked up in areas such as recreation and culture, education, restaurants and hotels, and miscellaneous goods and services.

Market environment and performance

In the Eurozone, economic momentum remained resilient through the first two months of 2026, extending the expansionary trend established during the second half of 2025. The flash Eurozone Composite PMI rose to 51.9 in February, marking the strongest pace of private sector expansion in three months and signalling firmer growth across the single currency area. The improvement was supported by stronger manufacturing and services activity, with Germany leading the recovery.

Consumer price inflation rose to 1.9% in February 2026, up from January’s 16-month low of 1.7% and above market expectations of 1.7%, according to a preliminary estimate. The reading, though comparably higher, remained below the ECB’s 2.0% target.

On the monetary front, the European Central Bank (ECB) kept interest rates unchanged at its first policy meeting of 2026, reiterating that inflation is expected to stabilize at its 2% target over the medium term. The ECB said the euro area economy remains resilient, but cautioned that the outlook remains uncertain, particularly due to global trade policy risks and ongoing geopolitical tensions. Speaking at the ECB press conference, President Lagarde reiterated that both the central bank and the euro area inflation outlook are in a “good place.”

Fund performance

In February, the Malta High Income Fund posted a gain of 3.27%.

Throughout the year, the portfolio manager maintained a proactive approach, in line with the fund’s mandate to enhance income generation. This was achieved by further reducing the fund’s exposure to local equities and low-coupon bonds. On the buy side, we continued to capitalize on opportunities as they arose, particularly in the IPO space across both local and international markets.

Market and investment outlook

In Europe, sovereign bond yields headed lower in the month but underperformed U.S. Treasuries, as safe-haven demand for U.S. assets proved stronger. This was driven by ongoing policy uncertainty surrounding President Trump’s trade agenda, escalating tensions in the Middle East, and growing concerns about the resilience of the U.S. economy.

Looking ahead, the outlook remains uncertain. The escalation of the Iran conflict (which began on 28 February, after markets had already closed for the reporting period) could influence the trajectory of European sovereign yield curves. Its broader economic implications will depend largely on the duration and scale of the conflict. For Europe in particular, the impact could be significant given the region’s reliance on imported energy, with any sustained increase in energy prices likely to feed through to inflation.

This dynamic could well shape the European Central Bank’s policy response. Should inflationary pressures prove persistent, the ECB may be required to adjust its policy stance accordingly. Conversely, if the impact on prices is deemed temporary, policymakers may choose to maintain the current policy setting. Against this backdrop, maintaining a vigilant and flexible approach will be essential at fund level. Close monitoring of geopolitical developments, their implications for Europe’s economic outlook, and the ECB’s forthcoming policy decisions will be key in determining the appropriate duration positioning within the portfolio.

From a macroeconomic perspective, Malta’s economy is expected to remain resilient through 2026, supported by relatively contained inflation, recently announced tax cuts taking effect as of January, and a robust tourism sector. These factors should continue to underpin domestic demand and overall economic growth.

With respect to the fund’s composition, we will continue to adjust the portfolio’s allocations as needed, with the goal of enhancing income yield through higher coupon bonds. This will also involve utilizing the allowed 15% allocation for non-Maltese assets.