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.

May 2025

Introduction

In 2025, Malta’s economy sustained its growth trajectory, albeit noting a marginal slowdown in household consumption (0.8% vs. 2.5% in Q4), and government spending (0.6% vs. 2.2%). On the trade side, both exports and imports grew, yet at a slower pace. In numbers, GDP expanded by 3.0% year-on-year (annualized) in the first quarter of 2025, slowing from an upwardly revised 3.1% increase in the previous three-month period, and marking the weakest economic growth since the third quarter of 2022.

Inflationary pressures on consumers intensified, as the annual inflation rate climbed to 2.6% in April from 2.1% in March—the highest level since March 2024. This rise was largely driven by accelerated price increases in food and non-alcoholic beverages, transportation, housing and utilities, and the hospitality sector including restaurants and hotels.

Market environment and performance

The Eurozone economy expanded by 0.6% in the first quarter of 2025, twice the initially reported 0.3%, representing its strongest growth since Q3 2022. This upswing was largely propelled by Ireland’s remarkable 9.7% increase and a better-than-expected performance from Germany. Among the major economies, Spain and Germany led with growth rates of 0.6% and 0.4%, respectively. Italy grew by 0.3%, while France and the Netherlands recorded modest increases of 0.1% each.

Business activity, as portrayed by the HCOB Composite PMI reading, continued to expand for a fifth consecutive month, though the pace of growth was only marginal, the weakest since February. Manufacturing was the main driver of output, offsetting the first decline in services activity since November. Among the euro area’s four largest economies, Italy and Spain recorded solid expansions, France moved closer to stabilization, and Germany remained in contraction. New business inflows continued to decline, while job creation remained modest.

Inflation across the bloc also moderated, easing to 1.9% year-on-year in May 2025 from 2.2% in April and falling below market expectations of 2.0%, according to a preliminary estimate. This marks the first time inflation has dipped below the European Central Bank’s 2.0% target since September 2024, reinforcing expectations of a 25bps rate cut at the ECB’s upcoming June meeting.

Fund performance

In May, the Malta High Income Fund registered a loss of 0.69% for the month.

Market and investment outlook

The credit market narrative that began the year – with a focus on political uncertainty and central bank policy – remained prominent into Q2. Political tensions escalated as former President Trump adopted a more aggressive stance on tariffs, though this was later moderated with a 90-day pause. Meanwhile, central bank policies diverged: the Federal Reserve kept rates steady amid persistent inflation and signs of slowing growth, while the ECB cut its benchmark rate by 25bps to 2.25%, citing weakening euro area growth and a disinflation trend supported by a stronger euro, lower energy prices, and rising U.S. tariffs.

These monetary shifts led to divergence in bond markets, with European sovereign debt outperforming as yields tightened significantly. Malta’s yield curve followed suit, particularly on the long end, which saw a marked decline.

Looking ahead, Malta’s economy is expected to remain robust through 2025. Inflation remains low despite a slight uptick, and recent tax cuts are likely to support domestic consumption. The anticipated rise in tourist arrivals heading into peak season also bodes well for continued economic momentum.